1.Case Title : MYRON C. PAPA, Administrator of the Testate Estate of Angela M. Butte, petitioner, vs. A.U.

VALENCIA and CO., INC., FELIX PEARROYO, SPS. ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO, respondents. Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negotiable Instruments|Actions|Checks|Presumptions|Obligations|Parties|Settlement of Estates Syllabi: 1. Negotiable Instruments; Checks; Presumptions; After more than ten (10) years from the payment in part by cash and in part by check, the presumption is that the check had been encashed.It is an undisputed fact that respondents Valencia and Pearroyo had given petitioner Myron C. Papa the amounts of Five Thousand Pesos (P5,000.00) in cash on 24 May 1973, and Forty Thousand Pesos (P40,000.00) in check on 15 June 1973, in payment of the purchase price of the subject lot. Petitioner himself admits having received said amounts, and having issued receipts therefor. Petitioner s assertion that he never encashed the aforesaid check is not substantiated and is at odds with his statement in his answer that he can no longer recall the transaction which is supposed to have happened 10 years ago. After more than ten (10) years from the payment in part by cash and in part by check, the presumption is that the check had been encashed. As already stated, he even waived the presentation of oral evidence. 2. Negotiable Instruments; Checks; Failure of a payee to encash a check for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay.Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. 3. Negotiable Instruments; Checks; Obligations; The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given.While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor s unreasonable delay in presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given. It has, likewise, been held that if no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused. This is in harmony with Article 1249 of the Civil Code under which payment by way of check or other negotiable instrument is conditioned on its being cashed, except when through the fault of the creditor, the instrument is impaired. The payee of a check would be a creditor under this provision and if its non-payment is caused by his negligence, payment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged. 4. Actions; Parties; Settlement of Estates; An executor or administrator may sue or be sued without joining the party for whose benefit the action is presented or defended.The estate of Angela M. Butte is not an indispensable party. Under Section 3 of Rule 3 of the Rules of Court, an executor or administrator may sue or be sued without joining the party for whose benefit the action is presented or defended. Division: FIRST DIVISION Docket Number: G.R. No. 105188 Counsel: Quijano & Padilla, Jimenez, Kintanar & Asuncion Law Offices Ponente: KAPUNAN Dispositive Portion: WHEREFORE, the petition for review is hereby DENIED and the Decision of the Court of Appeals, dated 27 January 1992 is AFFIRMED. 2. Case Title : CEBU INTERNATIONAL FINANCE CORPORATION, petitioner, vs. COURT OF APPEALS, VICENTE ALEGRE, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals.

Syllabi Class : Civil Law|Commercial Law|Loan|Check|Actions|Compromise Agreement|Nature of Compromise Agreement|Garnishment|Litis Pendentia|Res Judicata Syllabi: 1. Civil Law; Commercial Law; Loan; In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer.Considering the nature of a money market transaction, the above-quoted provision should be applied in the present controversy. As held in Perez vs. Court of Appeals, a money market is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but through a middle man or dealer in open market. In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer. 2. Civil Law; Commercial Law; Loan; Check; A check is not a legal tender, and therefore cannot constitute valid tender of payment.In a loan transaction, the obligation to pay a sum certain in money may be paid in money, which is the legal tender or, by the use of a check. A check is not a legal tender, and therefore cannot constitute valid tender of payment. In the case of Philippine Airlines, Inc. vs. Court of Appeals, this Court held: Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment (citation omitted). A check, whether a manager s check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3.) 3. Civil Law; Actions; Compromise Agreement; Nature of Compromise Agreement; The compromise agreement could not bind a party who did not sign the compromise agreement nor avail of its benefits.A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. It is an agreement between two or more persons who, for preventing or putting an end to a lawsuit, adjust their difficulties by mutual consent in the manner which they agree on, and which everyone of them prefers in the hope of gaining, balanced by the danger of losing. The compromise agreement could not bind a party who did not sign the compromise agreement nor avail of its benefits. Thus, the stipulations in the compromise agreement is unenforceable against Vicente Alegre, not a party thereto. His money could not be the subject of an agreement between CIFC and BPI. Although Alegre s money was in custody of the bank, the bank s possession of it was not in the concept of an owner. BPI cannot validly appropriate the money as its own. 4. Civil Law; Actions; Garnishment; Garnishment is an attachment by means of which the plaintiff seeks to subject to his claim the property of the defendant in the hands of a third person or money owed to such third person or a garnishee to the defendant; Tender of payment 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 that the latter accept the same.BPI s confiscation of Alegre s money constitutes garnishment without the parties going through a valid proceeding in court. Garnishment is an attachment by means of which the plaintiff seeks to subject to his claim the property of the defendant in the hands of a third person or money owed to such third person or a garnishee to the defendant. The garnishment procedure must be upon proper order of RTC-Makati, Branch 62, the court who had jurisdiction over the 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 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 that the latter accept the same. Tender of payment cannot be presumed by a mere inference from surrounding circumstances. 5. Civil Law; Actions; Litis Pendentia; Requisites for litis pendentia to be a ground for the dismissal of an action.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 least such as to represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same acts; and (c) 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 judicata in the other. 6. Civil Law; Actions; Res Judicata; The general rule is that a compromise has 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 judicially approved.The compromise agreement between CIFC and BPI, categorically provided that In case plaintiff is adjudged liable to Vicente Alegre in Civil Case No. 92-515 arising from the alleged dishonor of BPI Check No. 513397, plaintiff (CIFC) cannot go after the defendant (BPI); otherwise stated, the defendant shall not be liable to the plaintiff. Clearly, this stipulation expressed that CIFC had already abandoned any further claim against BPI with respect to the value of BPI Check No. 513397. To ask this Court to allow BPI to be a party in the case at bar, would amount to res judicata and would violate terms of the compromise agreement between CIFC and BPI. The general rule is that a compromise has 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. This holds true even if the agreement has not been judicially approved. Division: SECOND DIVISION Docket Number: G.R. No. 123031 Counsel: Villanueva, Pacis, Mondragon & Cana Law Offices, Marlito C. Altuna Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the instant petition is hereby DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 44085 is AFFIRMED. Costs against petitioner.

3. Case Title : JUAN A. RUEDA, JR., petitioner, vs. HONORABLE SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari of a decision of the Sandiganbayan. Syllabi Class : Courts|Criminal Law|Sandiganbayan|Evidence|Malversation|Public Officers|Words and Phrases|Presumption of Innocence Syllabi: 1. Courts; Sandiganbayan; Evidence; Generally, the factual findings of the Sandiganbayan are conclusive on the Supreme Court, but in instances where the exceptions obtain, the Supreme Court is bound to review the facts in order to avoid a miscarriage of justice.Generally, the factual findings of the Sandiganbayan are conclusive on the Court. However, there are established exceptions to that rule, such as, sans preclusion, when (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the inference made is manifestly an error or founded on a mistake; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; and (5) the findings of fact are premised on the absence of evidence and are contradicted by evidence on record. In these instances, this Court is bound to review the facts in order to avoid a miscarriage of justice. The instant case falls within such exceptions. 2. Criminal Law; Malversation; Public Officers; The mere fact that a public officer signed the report of cash examination is not an admission of shortgage his signature is only evidence that he received a copy of the report; When absence of funds was not due to personal use, the presumption that the public officer put public funds to personal use is completely destroyed.After an assiduous scrutiny, we find petitioner not guilty of malversation of public funds. The Sandiganbayan found that petitioner admitted his accountability and failed to have duly forthcoming his cash shortage in the amount of P107,299.02 with which he is chargeable, and that he did not tender the required written explanation as to why the shortage was incurred. His failure to do so instantly created a prima facie evidence pursuant to the last paragraph of Article 217 of the Revised Penal Code that he had put such missing funds to personal use. We disagree. Petitioner did not admit any shortage. The mere fact that he signed the dorsal side of the report of cash examination is not an admission of shortage. His signature was only evidence that he received a copy of the report. Thus, it is incorrect to say that petitioner admitted his shortage when he signed the audit report prepared by the audit team. For one thing, he was made to sign it right away; for another, his signature only meant an acknowledgment that a demand from him to produce all his cash, money and paid vouchers had been made. It did not mean that he admitted any shortage. In fact, subsequent events showed that he had fully explained his accountability. Thus, he satisfactorily explained the shortage. In other words, there was no direct evidence or proof that he put public funds to personal use. When absence of funds was not due to personal use, the presumption is completely destroyed.

The taking or conversion of public funds for personal use must be affirmatively proved. When there is no shortage, taking, appropriation, conversion or loss, there is no malversation. 3. Criminal Law; Malversation; Elements.The elements of malversation, essential for the conviction of an accused, under the above penal provision are that: (a) the offender is a public officer; (b) he has the custody or control of funds or property by reason of the duties of his office; (c) the funds or property involved are public funds or property for which he is accountable; and (d) he has appropriated, taken or misappropriated, or has consented to, or through abandonment or negligence permitted, the taking by another person of, such funds or property. 4. Criminal Law; Malversation; Words and Phrases; Standard text in accounting defines Cash as consisting of those items that serve as a medium of exchange and provide a basis for accounting measurement, and to be reported as cash, an item must be readily available and not restricted for use in the payment of current obligations.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 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 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 accepted auditing principle that cash means cash on hand or in bank. Standard text in accounting defines Cash as consisting of those items that serve as a medium of exchange and provide a basis for accounting measurement. To be reported as cash, an item must be readily available and 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 on hand, and unrestricted funds available on deposit in a bank, which are often called demand deposits since they can be withdrawn upon demand. Petty cash funds or change funds and negotiable instruments, such as personal checks, travelers checks, cashiers checks, bank drafts, and money orders are also items commonly reported as cash. The total of these items plus undeposited coin and currency is sometimes called cash on hand. Interest-bearing accounts, or time deposits, also are usually classified as cash, even though a bank legally can demand prior notification before a withdrawal can be made. In practice, banks generally do not exercise this legal right. 5. Criminal Law; Malversation; It is a mistake for auditors to include as cash items collectibles in the form of vales and chits and disbursement vouchers for legitimate expenses of the municipality.There was no shortage on peti-tioner s cash accountability. Evidence of shortage is necessary before there could be any taking, appropriation, conversion, or loss of public funds that would amount to malversation. The law requires that the shortage must be clearly established as a fact that over and above the funds found by the auditors in the actual possession of the accountable officers, there is an additional amount which could not be produced or accounted for at the time of audit. In this case, there was absolutely no shortage as to petitioner s cash accountability. The auditors mistakenly included as cash items collectibles in the form of vales and chits and disbursement vouchers for legitimate expenses of the municipality. 6. Criminal Law; Malversation; To be held accountable the public officer must receive the money or property, and later fails to account for it.An accountable officer under Article 217 of the Revised Penal Code must receive money or property of the government which he is bound to account for. It is the nature of the duties of, not the nomenclature used for, or the relative significance of the title to, the position, which controls in that determination. Based on this definition, to be held accountable the public officer must receive the money or property, and later fails to account for it. When a public officer is asked to account for the cash in his accountability, this necessarily means that he has to produce the cash in bills and coins and other cash items that he received. It does not include collectibles and receivables or even promissory notes. 7. Criminal Law; Malversation; Words and Phrases; Liquidation simply means the settling of indebtedness it does not necessarily signify payment, and to liquidate an account, can mean to ascertain the balance due, to whom it is due, and to whom it is payable; hence, an account that has been liquidated can also mean that the item has been made certain as to what, and how much, is deemed to be owing.An important moiety in the instant case is that petitioner did not grant the cash advances or vales to the municipal officials. They took the cash advances from the collections of the municipal collectors. However, they restored or liquidated 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 respective debtors. Liquidation simply means the settling of indebtedness. Liquidation does not necessarily signify payment, and to liquidate an account, can mean to ascertain the balance due, to whom it is due, and to whom it is payable; hence, an account that has been liquidated can also mean that the item has been made certain as to what, and how much, is deemed to be owing. 8. Criminal Law; Malversation; Presumption of Innocence; The prima facie evidence that public funds have been put to the personal use of a municipal treasurer is obliterated by the fact that he did not receive the money; The Court must not reject arbitrarily an explanation consistent with the presumption of innocence.The prima facie evidence that public funds have been put to the personal use of petitioner has been obliterated by the fact that he did not receive the money as municipal treasurer. In Zambrano v. Sandiganbayan, we said that if the accused did not receive the public funds, there was no malversation. In Diaz vs. Sandiganbayan, we held that when the absence of funds is not due to the personal use thereof by the accused, the presumption is completely destroyed; in fact, the presumption is deemed never to have existed at all. In malversation, it is necessary to prove that the accused received public funds, and that he could not account for them and did not have them in his possession and that he could not give a reasonable excuse for the disappearance of the same. In this case, the prosecution failed to establish this important element of malversation. In fact, it did not really exist. Petitioner gave a reasonable and satisfactory explanation of his cash accountability of public funds that were duly liquidated. The Court must not reject arbitrarily an explanation consistent with the presumption of innocence. 9. Criminal Law; Presumption of Innocence; In our criminal justice system, the overriding consideration is not whether the court doubts the innocence of the accused but whether it entertains a reasonable doubt as to his guilt.In our criminal justice system, the overriding consideration is not whether the court doubts the innocence of the accused but whether it entertains a reasonable doubt as to his guilt. This determinant, with the constitutional presumption of innocence which can be overthrown only by the strength of the prosecution s own evidence proving guilt beyond reasonable doubt, irresistibly dictate an exoneration in this case. The evidence against petitioner is not enough to engender moral certainty of his guilt. This moral certainty is that which convinces and satisfies the conscience of those who are to act upon it. Accordingly, the presumption of innocence which the Constitution guarantees the petitioner has remained untarnished in this case for want of proof to the contrary. It is safely entrenched in our jurisprudence that unless the prosecution discharges its burden to prove the guilt of an accused beyond reasonable doubt, the latter need not even offer evidence in his behalf. Division: EN BANC Docket Number: G.R. No. 129064 Counsel: Benito P. Fabie Ponente: PARDO Dispositive Portion: WHEREFORE, the petition is GRANTED and the decision of respondent SANDIGANBAYAN promulgated on March 19, 1996 and the resolution adopted on May 7, 1997 are REVERSED and SET ASIDE. Petitioner JUAN A. RUEDA, JR. is hereby ACQUITTED on reasonable doubt of the charge of malversation of public funds, defined and penalized under Article 217 (4) of the Revised Penal Code. His bail bond is ordered cancelled.

Final and executory decisions, more so with those already executed, may no longer be amended except only to correct errors which are clerical in nature. They become the law of the case and are immutable and unalterable regardless of any claim of error or incorrectness. Amendments or alterations which substantially affect such judgments as well as the entire proceedings held for that purpose are null and void for lack of jurisdiction. The reason lies in the fact that public policy dictates that litigations must be terminated at some definite time and that the prevailing party should not be denied the fruits of his victory by some subterfuge devised by the losing party. 2. Negotiable Instruments; Checks; Obligations; While delivery of a check produces the effect of payment only when it is encashed, the rule is otherwise if the debtor was prejudiced by the creditor s unreasonable delay in presentments acceptance of a check implies an undertaking of due diligence in presenting it for payment.Clearly then respondent Judge Laguio no longer had any jurisdiction whatsoever to act on, much less grant, the motion for execution and supplement thereto filed by Moslares on 17 September 1993 or more than three (3) years later, claiming that he had already bought the lots. The fact that the check paid to him by Barretto Realty was never encashed should not be invoked against the latter. As already stated, Moslares never questioned the tender done three (3) years earlier. Besides, while delivery of a check produces the effect of payment only when it is encashed, the rule is otherwise if the debtor was prejudiced by the creditor s unreasonable delay in presentment. Acceptance of a check implies an undertaking of due diligence in presenting it for payment. If no such presentment was made, the drawer cannot be held liable irrespective of loss or injury sustained by the payee. Payment will be deemed effected and the obligation for which the check was given as conditional payment will be discharged. 3. Judgments; Laches; Estoppel; The principle of laches does not attach when the judgment is null and void for want of jurisdiction; Estoppel, being an equitable doctrine, cannot be invoked to perpetuate an injustice.The principle of laches does not attach when the judgment is null and void for want of jurisdiction. The fact that petitioner invoked par. 3 of the Order of 11 February 1994 praying that its P1,000,000.00 check still in Moslares possession be considered sufficient payment of the disputed lots, could not be cited against it. For one thing, petitioner from the very start had always consistently questioned and assailed the jurisdiction of the trial court to entertain respondent s motion for execution filed three (3) years after the case had in fact been executed. Secondly, estoppel being an equitable doctrine cannot be invoked to perpetuate an injustice. Division: SECOND DIVISION Docket Number: G.R. No. 132362 Counsel: Encarnacion, Fernandez, Associates, Angeles & Associates Ponente: BELLOSILLO Dispositive Portion: WHEREFORE, the questioned Decision and Resolution of the Court of Appeals dated 30 June 1997 and 14 January 1998, respectively, are REVERSED and SET ASIDE. The Order of respondent Judge Perfecto A.S. Laguio, Jr. dated 11 February 1994 in Civil Case No. 84-27008, setting aside his earlier ruling of 7 December 1993 which had declared petitioner Pio Barretto Realty Development Corporation as the absolute owner of the real properties in question, and all subsequent proceedings culminating in the Order of 12 October 1994 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 Realty Development Corporation is declared the absolute owner of the disputed properties subject matter of the Compromise Agreement dated 2 May 1986 as fully implemented by the Deputy Sheriff, RTC-Br. 18, Manila, pursuant to the final and executory Order dated 14 June 1990 of its Presiding Judge Perfecto A.S. Laguio, Jr.

4. Case Title : PIO BARRETTO REALTY DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, JUDGE PERFECTO A.S. LAGUIO, JR., RTC-Branch 18, Manila, and HONOR P. MOSLARES, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Judgments|Negotiable Instruments|Checks|Obligations|Laches|Estoppel Syllabi: 1. Judgments; Final and executory decisions, more so with those already executed, may no longer be amended except only to correct errors which are clerical in nature amendments or alterations which substantially affect such judgments as well as the entire proceedings held for that purpose are null and void for lack of jurisdiction.-

5. Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. SPOUSES REYNALDO AND VICTORIA ROYECA, respondentsCase Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Banks and Banking ; Payment ; Syllabi:

1. Civil Procedure; Burden of Proof; In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence, or evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto.In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence, or evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto. Thus, the party, whether plaintiff or defendant, who asserts the affirmative of an issue has the onus to prove his assertion in order to obtain a favorable judgment. For the plaintiff, the burden to prove its positive assertions never parts. For the defendant, an affirmative defense is one which is not a denial of an essential ingredient in the plaintiff s cause of action, but one which, if established, will be a good defense i.e. an avoidance of the claim. 2. Banks and Banking; Payment; Reasonable banking practice and prudence dictates that, when a check given to a creditor bank in payment of an obligation is dishonored, the bank should immediately return it to the debtor and demand its replacement or payment lest itcauses any prejudice to the drawer.The Court cannot ignore what the respondents have consistently raised that they were not notified of the non-payment of the checks. Reasonable banking practice and prudence dictates that, when a check given to a creditor bank in payment of an obligation is dishonored, the bank should immediately return it to the debtor and demand its replacement or payment lest it causes any prejudice 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 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 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 equitably reduced by the courts if it is iniquitous or unconscionable, or if the principal obligation has been partly or irregularly complied with. 3. Laches; Laches cannot, as a rule, abate a collection suit filed within the prescriptive period mandated by the New Civil Code.The respondents posit that the petitioner s claim is barred by laches since it has been three years since the checks were issued. We do not agree. Laches is a recourse in equity. Equity, however, is applied only in the absence, never in contravention, of statutory law. Thus, laches cannot, as a rule, abate a collection suit filed within the prescriptive period mandated by the New Civil Code. The petitioner s action was filed within the ten-year prescriptive period provided under Article 1144 of the New Civil Code. Hence, there is no room for the 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.In all, we find that the evidence at hand preponderates in favor of the petitioner. The petitioner s possession of the documents pertaining to the obligation strongly buttresses its claim that the obligation has not been extinguished. The creditor s possession of the evidence of debt is proof that the debt has not been discharged by payment. A promissory note in the hands of the creditor is a proof of indebtedness rather than proof of payment. In an action for replevin by a mortgagee, it is prima facie evidence that the promissory note has not been paid. Likewise, an uncanceled mortgage in the possession of the mortgagee gives rise to the presumption that the mortgage debt is unpaid. 5. Same; A notice of dishonor is required only to preserve the right of the payee to recover on the check.It should be noted that thepetitioner, as payee, did not have a legal obligation to inform the respondents of the dishonor of the checks. A notice of dishonor is required only to preserve the right of the payee to recover on the check. It preserves the liability of the drawer and the indorsers on the check. Otherwise, if the payee fails to give notice to them, they are discharged from their liability thereon, and the payee is precluded from enforcing payment on the check. The respondents, therefore, cannot fault the petitioner for not notifying them of the non-payment of the checks because whatever rights were transgressed by such omission belonged only to the petitioner. 6. Same; Because of this failure of the respondents to present sufficient proof of payment, it was no longer necessary for the petitioner to prove non-payment, particularly proof that the checks were dishonored.Because of this failure of the respondents to present sufficient proof of payment, it was no longer necessary for the petitioner to prove non-payment, particularly proof that the checks were dishonored. The burden of evidence is shifted only if the party upon whom it is lodged was able to adduce preponderant evidence to prove its claim. 7. Same; Settled is the rule that payment must be made in legal tender.Settled is the rule that payment must be made in legal tender. A check is not legal tender and, therefore, cannot constitute a valid tender of payment. Since a

negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized. 8. Payment; As a general rule, one who pleads payment has the burden of proving it.In Jimenez v. National Labor Relations Commission (NLRC), 256 SCRA 84 (1996), cited by both the Regional Trial Court and the Court of Appeals, the Court elucidated on who, between the plaintiff and defendant, has the burden to prove the affirmative defense of payment: As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege nonpayment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment. When the existence of a debt is fully established by the evidence contained in the record, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of the creditor. Where the debtor introduces some evidence of payment, the burden of going forward with the evidence as distinct from the general burden of proof shifts to the creditor, who is then under a duty of producing some evidence to show non-payment. Division: THIRD DIVISION Docket Number: G.R. No. 176664 Counsel: Benedictine Law Center Ponente: NACHURA Dispositive Portion: WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated July 12, 2006, and Resolution dated February 13, 2007, are REVERSED and SET ASIDE. The Decision of the Regional Trial Court, dated August 11, 2005, is REINSTATED with the MODIFICATION that respondents are ordered to deliver the possession of the subject vehicle, or in the alternative, pay the petitioner P48,084.00 plus late penalty charges/interest thereon at the rate of 12% per annum from May 18, 1997 until fully paid.

Case Title : EUMELIA R. MITRA, petitioner, vs. PEOPLE OF THE PHILIPPINES and FELICISIMO S. TARCELO, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Criminal Law|Bouncing Checks Law|Batas Pambansa Blg. 22|Checks|Elements Syllabi: 1. Criminal Law; Bouncing Checks Law; Batas Pambansa Blg. 22; Checks; Negotiable Instruments; A check is a negotiable instrument that serves as a substitute for money and as a convenient form of payment in financial transactions and obligations.A check is a negotiable instrument that serves as a substitute for money and as a convenient form of payment in financial transactions and obligations. The use of checks as payment allows commercial and banking transactions to proceed without the actual handling of money, thus, doing away with the need to physically count bills and coins whenever payment is made. It permits commercial and banking transactions to be carried out quickly and efficiently. But the convenience afforded by checks is damaged by unfunded checks that adversely affect confidence in our commercial and banking activities, and ultimately injure public interest. 2. Same; Same; Same; Same; Elements.To reiterate the elements of a violation of BP 22 as contained in the abovequoted provision, a violation exists where: 1. a person makes or draws and issues a check to apply on account or for value; 2. the person who makes or draws and issues the check knows at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the full payment of the check upon its presentment; and 3. the check is subsequently dishonored by the drawee bank 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 payment. 3. Same; Same; Same; Same; The purpose of Batas Pambansa Blg. 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 committing the

offense, to isolate him from society, to reform and rehabilitate him, and to maintain social order.BP 22 or the Bouncing Checks Law was enacted for the specific purpose of addressing the problem of the continued issuance and circulation of unfunded checks by irresponsible persons. To stem the harm caused by these bouncing 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 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 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 of imprisonment for at least 30 days or a fine of up to double the amount of the check or both imprisonment and fine. Division: SECOND DIVISION Docket Number: G.R. No. 191404 Counsel: M.C. Santos Law Office Ponente: MENDOZA Dispositive Portion: WHEREFORE, the July 31, 2009 Decision and the February 11, 2010 Resolution of the Court of Appeals in CA-G.R. CR No. 31740 are hereby AFFIRMED.

Thus, the courts always presume good faith, and for that reason accord prime importance to the separate personality of the corporation, disregarding the corporate personality only after the wrongdoing is first clearly and convincingly established. It thus behooves the courts to be careful in assessing the milieu where the piercing of the corporate veil shall be done. Division: THIRD DIVISION Docket Number: G.R. No. 157549 Counsel: Carlo Magno Verzo PonenteJ. : BERSAMIN, Dispositive Portion: ACCORDINGLY, we deny the petition for review on certiorari; and affirm with 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% per annum to be computed from February 8, 1990 until full payment. The petitioner shall pay cost of suit in this appeal.

Case Title : DONNINA C. HALLEY, petitioner, vs. PRINTWELL, INC., respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Corporation Law|Trust Fund Doctrine Syllabi: 1. Judges; A trial or appellate judge may occasionally view a party s memorandum or brief as worthy of due consideration either entirely or partly.It is to be observed in this connection that a trial or appellate judge may occasionally view a party s memorandum or brief as worthy of due consideration either entirely or partly. When he does so, the judge may adopt and incorporate in his adjudication the memorandum or the parts of it he deems suitable, and yet not be guilty of the accusation of lifting or copying from the memorandum. This is because of the avowed objective of the memorandum to contribute in the proper illumination and correct determination of the controversy. 2. Same; The prevailing rule is that a stockholder is personally liable for the financial obligations of the corporation to the extent of his unpaid subscription.The prevailing rule is that a stockholder is personally liable for the financial obligations of the corporation to the extent of his unpaid subscription. In view of the petitioner s unpaid subscription being worth P262,500.00, she was liable up to that amount. 3. Same; Trust Fund Doctrine; Under the trust fund doctrine, a corporation has no legal capacity to release an original subscriber to its capital stock from the obligation of paying for his shares, in whole or in part, without a valuable consideration, or fraudulently, to the prejudice of creditors.Under the trust fund doctrine, a corporation has no legal capacity to release an original subscriber to its capital stock from the obligation of paying for his shares, in whole or in part, without a valuable consideration, or fraudulently, to the prejudice of creditors. The creditor is allowed to maintain an action upon any unpaid subscriptions and thereby steps into the shoes of the corporation for the satisfaction of its debt. 4. Corporation Law; Piercing the Veil of Corporate Fiction; The corporate personality may be disregarded, and the individuals composing the corporation will be treated as individuals, if the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong;as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders.Although a corporation has a personality separate and distinct from those of its stockholders, directors, or officers, such separate and distinct personality is merely a fiction created by law for the sake of convenience and to promote the ends of justice. The corporate personality may be disregarded, and the individuals composing the corporation will be treated as individuals, if the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders. As a general rule, a corporation is looked upon as a legal entity, unless and until sufficient reason to the contrary appears.

Case Title : PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROBERTO TONGKO, accused-appellant.Case Nature : APPEAL from a decision of the Regional Trial Court of Pasig City, Br. 156. Syllabi Class : Criminal Law|Estafa|Checks|Penalties|Constitutional Law|Cruel and Unusual Punishments Syllabi: 1. Criminal Law; Estafa; Elements of Estafa under Article 315, paragraph 2(d) of the Revised Penal Code.Estafa, under Article 315, paragraph 2(d) of the Revised Penal Code, as amended by Republic Act No. 4885, has the following elements: (1) postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) lack of sufficiency of funds to cover the check; and (3) damage to the payee thereof. 2. Same; Same; Same; Same; The legislature was not thoughtless in imposing severe penalties for violation of paragraph 2(d) of Article 315 of the Revised Penal Code. The history of the law will show that the severe penalties were intended to stop the upsurge of swindling by issuance of bouncing checks.The legislature was not thoughtless in imposing severe penalties for violation of par. 2(d) of Article 315 of the Revised Penal Code. The history of the law will show that the severe penalties were intended to stop the upsurge of swindling by issuance of bouncing checks. It was felt that unless aborted, this kind of estafa . . . would erode the people s confidence in the use of negotiable instruments as a medium of commercial transaction and consequently result in the retardation of trade and commerce and the undermining of the banking system of the country. The Court cannot impugn the wisdom of Congress in setting this policy. 3. Same; Same; Same; Penalties; Constitutional Law; Cruel and Unusual Punishments; The prohibition of cruel and unusual punishments is generally aimed at the form or character of the punishment rather than its severity in respect of duration or amount, and apply to punishments which never existed in America or which public sentiment has regarded as cruel or obsolete.Appellant contends that the penalty of twenty seven (27) years of reclusion perpetua is too harsh and out of proportion to the crime he committed. He submits that his sentence violates Section 19(1), Article III of the Constitution which prohibits the infliction of cruel, degrading or inhuman punishment. We are not persuaded. In People v. de la Cruz, we held that x x x the prohibition of cruel and unusual punishments is generally aimed at the form or character of the punishment rather than its severity in respect of duration or amount, and apply to punishments which never existed in America or which public sentiment has regarded as cruel or obsolete x x x for instance those inflicted at the whipping post, or in the pillory, burning at the stake, breaking on the wheel, disemboweling, and the like. . . 4. Same; Same; Checks; The postdating of checks simply means that on the date indicated the checks would be properly funded, not that the checks should be deemed as issued only then.There is likewise no merit to the submission of appellant that his postdated checks were in payment of a pre-existing obligation. Again, we note appellant s change of theory in foisting this argument. In the trial court, appellant testified that he issued the postdated checks, thru Bo-ot, a day or two after he obtained the P100,000.00 loan from Santos. The falsity of the uncorroborated claim, 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 her to grant the loans. A look at the two promissory notes will show that they bear the date August 20, 1993 and they referred to the postdated checks issued by the appellant. There could be no reference to the postdated checks if they were issued a day or two after the loans. In this appeal, however, appellant offers the new thesis that since the checks were postdated December 1993, ergo, they were issued in payment of the P100,000.00 he got from Santos on August 20, 1993. The postdating of the checks to December 1993 simply means that on said date the checks would be properly funded. It does not mean that the checks should be deemed as issued only on December 1993. Division: SECOND DIVISION Docket Number: G.R. No. 123567 Counsel: The Solicitor General, M.B. Tomacruz Law Office Ponente: PUNO Dispositive Portion: IN VIEW WHEREOF, the Decision dated January 16, 1996 of the RTC of Pasig City, Br. 156 in Criminal Case No. 106614 convicting appellant is affirmed. Costs against appellant.

Case Title : ERNESTO T. PACHECO and VIRGINIA O. PACHECO, petitioners, vs. HON. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Estafa (Swindling)|Bouncing Checks|Negotiable Instruments|Words and Phrases|Evidence Syllabi: 1. Criminal Law; Estafa (Swindling); Bouncing Checks; Elements.The essential elements in order to sustain a conviction under the above paragraph are: 1. that the offender postdated or issued a check in payment of an obligation contracted at the time the check was issued; 2. that such postdating or issuing a check was done when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check; 3. deceit or damage to the payee thereof. 2. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable Instruments; Words and Phrases; A check has the character of negotiability and at the same time it constitutes an evidence of indebtedness; A drawer who issues a check as security or evidence of investment is not liable for estafa.The first and third elements are not present in this case. A check has the character of negotiability and at the same time it constitutes an evidence of indebtedness. By mutual agreement of the parties, the negotiable character of a check may be waived and the instrument may be treated simply as proof of an obligation. There cannot be deceit on the part of the obligor, petitioners herein, because they agreed with the obligee at the time of the issuance and postdating of the checks that the same shall not be encashed or presented to the banks. As per assurance of the lender, the checks are nothing but evidence of the loan or security thereof in lieu of and for the same purpose as a promissory note. By their own covenant, therefore, the checks became mere evidence of indebtedness. It has been ruled that a drawer who issues a check as security or evidence of investment is not liable for estafa. 3. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable Instruments; In the absence of the essential element of deceit, no estafa is committed.Mrs. Vicencio could not have been deceived nor defrauded by petitioners in order to obtain the loans because she was informed that they no longer have funds in their RCBC accounts. In 1992, when the Vicencio family asked Virginia to place a date on the check, the latter again informed Mrs. Vicencio that their account with RCBC was already closed as early as August 1989. With the assurance, however, that the check will only stand as a firm evidence of indebtedness, Virginia placed a date on the check. Under these circumstances, Mrs. Vicencio cannot claim that she was deceived or defrauded by petitioners in obtaining the loan. In the absence of the essential element of deceit, no estafa was committed by petitioners. 4. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable Instruments; A person in possession of a check has prima facie authority to complete it by filling up the blanks therein.Both courts below relied so much on the fact that Mrs. Vicencio s husband is a former Judge who knows the law. He should have known, then, that he need not even ask the petitioners to place a date on the check, because as holder of the

check, he could have inserted the date pursuant to Section 13 of the Negotiable Instruments Law (NIL). Moreover, as stated in Section 14 thereof, complainant, as the person in possession of the check, has prima facie authority to complete it by filling up the blanks therein. Besides, pursuant to Section 12 of the same law, a negotiable instrument is not rendered invalid by reason only that it is antedated or postdated. 5. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable Instruments; Where the complainant knows that the drawer does not have sufficient funds in the bank at the time the check was issued to him, there is no estafa through bouncing checks.The allegation of Mrs. Vicencio that the date to be placed by Virginia was 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 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 time it was issued to him does not give rise to a case for estafa through bouncing checks. 6. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable Instruments; A check must be presented within a reasonable time from issue.A check must be presented within a reasonable time from issue. By current banking practice, a check becomes stale after more than six (6) months. In fact a check long overdue for more than two and one-half years is considered stale. In 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 petitioners issued the checks. The evidence on record, however, does not support the theory of the crime. 7. Criminal Law; Estafa (Swindling); Bouncing Checks; Awareness by the complainant of the fictitious nature of the pretense cannot give rise to estafa by means of deceit.Following complainant s theory that he would not have sold the jewelries had not petitioners issued postdated checks, still no estafa can be imputed to petitioners. It is clear that the checks were not intended for encashment with the bank, but were delivered as mere security for the payment of the loan and under an agreement that the checks would be redeemed with cash as they fell due. Hence, the checks were not intended by the parties to be modes of payment but only as promissory notes. Since complainant and his wife were well aware of that fact, they cannot now complain there was deception on the part of petitioners. Awareness by the complainant of the fictitious nature of the pretense cannot give rise to estafa by means of deceit. When the payee was informed by the drawer that the checks are not covered by adequate funds it does not give rise to bad faith or estafa. 8. Criminal Law; Estafa (Swindling); Bouncing Checks; Persons are presumed to have taken care of their business.Complainant s allegations that the two subject checks were issued in 1992 as payment for the jewelry he allegedly sold to petitioners is belied by the evidence on record. First, com-plainant is not engaged in the sale of jewelry. Neither are petitioners. If the pieces of jewelry were important to complainant considering that they were with him for more than twenty-five years already, he would not have easily parted with them in consideration for unfunded personal checks in favor of persons whose means of living or source of income were unknown to him. Applicable here is the legal precept that persons are presumed to have taken care of their business. 9. Criminal Law; Estafa (Swindling); Bouncing Checks; Evidence; Factual findings of the trial court bind the Supreme Court; Exceptions.The rule that factual findings of the trial court bind this court is not absolute but admits of exceptions such as when the conclusion is a finding grounded on speculation, surmise, and conjecture and when the findings of the lower court is premised on the absence of evidence and is contradicted by the evidence on record. Based on the foregoing discussions, this Court is constrained to depart from the general rule. Equally applicable is what Vice-Chancellor Van Fleet once said: Evidence to be believed must not only proceed from the mouth of a credible witness but must be credible in itself such as the common experience and observation of mankind can approve as probable under the circumstances. We have no test of the truth of human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous, and is outside of judicial cognizance. 10. Criminal Law; Estafa (Swindling); Bouncing Checks; An accused acquitted of a criminal charge may nevertheless be held civilly liable in the same case where the facts established by the evidence so warrant.Petitioners, however, are not without liability. An accused acquitted of a criminal charge may nevertheless be held civilly liable in the same case where 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 was mention that the loan shall earn interests. However, an agreement as to 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 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 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) Circular No. 416. Division: FIRST DIVISION Docket Number: G.R. No. 126670 Counsel: Acerey C. Pacheco Ponente: YNARES-SANTIAGO Dispositive Portion: WHEREFORE, the assailed Decision is REVERSED and SET ASIDE. Petitioners are ACQUITTED of the charge of estafa but they are ORDERED to pay Mrs. Vicencio the amount of P15,000.00 without interest. However, from the time this judgment becomes final and executory, the amount due shall earn legal interest of twelve percent (12%) per annum until full payment.

the obligations through the coprax delivered to petitioner s father; and (2) that petitioner owed and subsequently paid respondent P214,000. Division: THIRD DIVISION Docket Number: G.R. No. 159048 Counsel: Leonardo D. Suario, Cariaga Law Offices Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the Petition is hereby DENIED,and the assailed Decision and Resolution AFFIRMED.

Case Title : BENNY GO, petitioner, vs. ELIODORO BACARON, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Civil Law|Evidence|Mortgages|Loans|Sales|Words and Phrases|Checks Syllabi: 1. Civil Law; Mortgages; Loans; Sales; Article 1602 of the Civil Code cites 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 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 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 otherwise; (3) When upon or after the expiration of the right to repurchase 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 of the parties is that the transaction shall secure the payment of a debt or the 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 considered as interest which shall be subject to the usury laws. 2. Civil Law; Mortgages; Loans; Sales; That the parties intended to enter into an equitable mortgage is bolstered by respondent s continued payment of the real property taxes subsequent to the alleged sale.That the parties intended to enter into an equitable mortgage is bolstered by respondent s continued payment of the real property taxes subsequent to the alleged sale. Payment of those taxes is a usual burden attached to ownership. Coupled with continuous possession of the property, it constitutes evidence of great weight that a person under whose name the realty taxes were declared has a valid and rightful claim over the land. 3. Civil Law; Mortgages; Loans; Sales; Words and Phrases; An equitable mortgage has been defined as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. An equitable mortgage has been defined as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. 4. Evidence; Checks; Checks presented by petitioner may indeed evince respondent s indebtedness to him in the amounts stated on the faces of those instruments.Checks have the character of negotiability. At the same time, they may constitute evidence of indebtedness. Those presented by petitioner may indeed evince respondent s indebtedness to him in the amounts stated on the faces of those instruments. He, however, acknowledges (1) that respondent paid some of

Case Title : SPOUSES ANTONIO and LOLITA TAN, petitioners, vs. CARMELITO VILLAPAZ, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Obligations and Contracts|Statute of Frauds|Negotiable Instruments|Checks Syllabi: 1. Obligations and Contracts; Statute of Frauds; Negotiable 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 for the requirement that contracts where the amount involved exceeds P500.00 must appear in writing is only for convenience. At all events, a check, the entries of which are no doubt in writing, could prove a loan transaction. Division: THIRD DIVISION Docket Number: G.R. No. 160892 Counsel: Dominguez, Paderna & Tan Law Offices, Rodolfo Ta-asan Ponente: CARPIO-MORALES Dispositive Portion: WHEREFORE, the present petition is DENIED.

CONCEPCION CHUA GAW, petitioner, vs. SUY BEN CHUA and FELISA CHUA, respondents. Remedial Law; Evidence; Adverse Witnesses; The rule is that the plaintiff must rely on the strength of his own evidence and not upon the weakness of the defendant s evidence; Preponderance of evidence is determined by considering all the facts and circumstances of the case, culled from the evidence regardless of who actually presented it. The delineation of a piece of evidence as part of the evidence of one party or the other is only significant in determining whether the party on whose shoulders lies the burden of proof was able to meet the quantum of evidence needed to discharge the burden. In civil cases, that burden devolves upon the plaintiff who must establish her case by preponderance of evidence. The rule is that the plaintiff must rely on the strength of his own evidence and not upon the weakness of the defendant s evidence. Thus, it barely matters who with a piece of evidence is credited. In the end, the court will have to consider the entirety of the evidence presented by both parties. Preponderance of evidence is then determined by considering all the facts and circumstances of the case, culled from the evidence, regardless of who actually presented it. Same; Same; Same; Under a rule permitting the impeachment of an adverse witness, although the calling party does not vouch for the witness veracity, he is nonetheless bound by his testimony if it is not contradicted or remains unrebutted. That the witness is the adverse party does not necessarily mean that the calling party will not be bound by the former s testimony. The fact remains that it was at his instance that his adversary was put on the witness stand. Unlike an ordinary witness, the calling party may impeach an adverse witness in all respects as if he had been called by the adverse party, except by evidence of his bad character. Under a rule permitting the impeachment of an adverse witness, although the calling party does not vouch for the witness

veracity, he is nonetheless bound by his testimony if it is not contradicted or remains unrebutted. Same; Same; Same; A party who calls his adversary as a witness is not bound by 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 witness testifies on. A party who calls his adversary as a witness is, therefore, not bound by 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 witness testifies on. A rule that provides that the party calling an adverse witness shall not be bound by his testimony does not mean that such testimony may not be given its proper weight, but merely that the calling party shall not be precluded from rebutting his testimony or from impeaching him. This, the petitioner failed to do. Same; Same; Best Evidence Rule; A notarized document carries evidentiary 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 before a Notary Public. The notarization of a private document converts it into a public document, and makes it admissible in court without further proof of its authenticity. It is entitled to full faith and credit upon its face. A notarized document carries evidentiary weight as to its due execution, and documents acknowledged before a notary public have in their favor the presumption of regularity. Such a document must be given full force and effect absent a strong, complete and conclusive proof of its falsity or nullity on account of some flaws or defects recognized by law. A public document executed and attested through the intervention of a notary public is, generally, evidence of the facts therein express in clear unequivocal manner. Same; Same; Same; The best evidence rule as encapsulated in Rule 130, Section 3 of the Revised Rules of Civil Procedure applies only when the content of such document is the subject of the inquiry. The best evidence rule as encapsulated in Rule 130, Section 3, of the Revised Rules of Civil Procedure applies only when the content of such document is the subject of the inquiry. Where the issue is only as to whether such document was actually executed, or exists, or on the circumstances relevant to or surrounding its execution, the best evidence rule does not apply and testimonial evidence is admissible. Any other substitutionary evidence is likewise admissible without need to account for the original. Moreover, production of the original may be dispensed with, in the trial court s discretion, whenever the opponent does not bona fide dispute the contents of the document and no other useful purpose will be served by requiring production. [Gaw vs. Chua, 551 SCRA 505(2008)]

Counsel: Dario, Reyes, Hocson & Viado Ponente: ABAD Dispositive Portion: WHEREFORE, the Court GRANTS the petition, SETS ASIDE the Court of Appeals decision in CA-G.R. CV 88782 dated May 30, 2008 and resolution dated October 10, 2008 and the Regional Trial Court order in Civil Case 93-64350 dated October 30, 2006, REMANDS the case to the same Regional Trial Court of Manila for the reception of such evidence as may be needed to determine the actual amount of indebtedness of respondents Monet s Export and Manufacturing Corp. and the spouses Vicente V. Tagle, Sr. and Ma. Consuelo G. Tagle and adjudicate petitioner Land Bank of the Philippines claims as such evidence may warrant.

Case Title : LAND BANK OF THE PHILIPPINES, petitioner, vs. MONET S EXPORT AND MANUFACTURING CORP., VICENTE V. TAGLE, SR. and MA. CONSUELO G. TAGLE, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Evidence|Banks and Banking Syllabi: 1. Evidence; Documentary Evidence; Entries in the course of business are accorded unusual reliability because their regularity and continuity are calculated to discipline record keepers in the habit of precision.Under Section 43, Rule 130 of the Rules of Court, entries prepared in the regular course of business are prima facie evidence of the truth of what they state. The billing statement reconciles the transaction entries entered in the bank records in the regular course of business and shows the net result of such transactions. Entries in the course of business are accorded unusual reliability because their regularity and continuity are calculated to discipline record keepers in the habit of precision. If the entries are financial, the records are routinely balanced and audited. In actual experience, the whole of the business world function in reliance of such kind of records. 2. Same; Banks and Banking; The bank does not have to present all the receipts of payment it issued to all its clients during the entire year.The bank does not have to present all the receipts of payment it issued to all its clients during the entire year, thousands of them, merely to establish the fact that only five of them, rather than ten, pertains to the borrower. The original documents need not be presented in evidence when it is numerous, cannot be examined in court without great loss of time, and the fact sought to be established from them is only the general result. Division: SECOND DIVISION Docket Number: G.R. No. 184971

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 193479 October 19, 2011 PEOPLE OF THE PHILIPPINES, plaintiff-appellee vs. BERNARD G. MIRTO, accusedappellant. DECISION VELASCO, JR., J.: The Case This is an appeal from the Decision1 dated August 24, 2009 of the Court of Appeals (CA) in CA-G.R. CR-H.C. No. 03444, which affirmed the March 24, 2008 Decision2 in Criminal Case Nos. 9034, 9115, 9117 and 9130 of the Regional Trial Court (RTC), Branch 5 in Tuguegarao City, Cagayan. The RTC found accused Bernard G. Mirto guilty beyond reasonable doubt of the crime of Qualified Theft. The Facts Seven Informations for Qualified Theft were filed against the accused, docketed as Criminal Case Nos. 9034, 9115, 9117, 9120, 9123, 9126, and 9130. The Informations similarly show how the offenses were allegedly committed, differing only as to the dates of the commission, the number of bags of cement involved, the particulars of the checks paid by the cement purchasers, the amounts involved, and the depositary accounts used by accused. The 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 310, in relation to Articles 308 and 309 of the Revised Penal Code, committed as follows: That on June 21, 2001, in the City of Tuguegarao, Province of Cagayan and within the jurisdiction of this Honorable Court, said accused BERNARD G. MIRTO, being the Branch Manager of UCC-Isabela (Tuguegarao Area), with intent to gain but without violence against or intimidation of persons nor force upon things, did then and there willfully, unlawfully and feloniously, with grave abuse of confidence and without the consent and knowledge of complainant, UNION CEMENT CORPORATION, a duly organized Corporation operating under existing laws, represented by REYNALDO S. SANTOS, Assistant Vice President Marketing/North Luzon, whose business address is located at 5th Floor Kalayaan Building, 164 Salcedo Street, Makati, Metro Manila, take, steal and deposit into his personal Security Bank & Trust Co. (Tuguegarao Branch) Account No. 0301261982001, the proceeds of 4,600 bags of Portland cement, owned by herein complainant-Corporation, paid to him by the Philippine Lumber located at Bonifacio Street, this City, in the form of Checks, namely: METROBANK CHECK NOS. 103214898 and 1032214896, for P67,000.00 & P241,200.00, respectively, in the total amount of P308,200.00, which accused is obligated to convey to the complainant-Union Cement Corporation represented by its Vice-President-Marketing, REYNALDO S. SANTOS, to its loss, damage and prejudice, in the aforesaid amount of THREE HUNDRED EIGHT THOUSAND TWO HUNDRED PESOS, (P308,200.00) Philippine Currency. Contrary to law.3 To summarize, the seven Informations showed the following details: Criminal Case Date of offense Cement bags Purchaser/Buyers Check payments Amount (PhP) Checks deposited In

Total Amount (PhP) 9034 June 21, 2001 67,000.00 241,200.00 308,200.00 9115 May 25, 2001 116,000.00

4,600 Philippine Lumber MBTC 103214898 SBTC 0301-261982-001 MBTC 1032214896 SBTC 0301-261982-001

4,750 out Philippine Lumber MBTC 1030214835 SBTC 0301-261982-001 of 5,850 MBTC 1030214833 116,000.00 SBTC 0301-261982-001 MBTC 1030214836 116,000.00 SBTC 0301-261982-001 MBTC 1030214834 79,750.00 SBTC 0301-261982-001 MBTC 1030214849 58,000.00 MBTC 124-5 [Magno Lim] MBTC 1030214848 87,000.00 MBTC 124-5 [Magno Lim] MBTC 1030214847 116,000.00 MBTC 124-5 [Magno Lim] 688,750.00 9117 May 22, 2001 9,950 Mapalo Trucking PNB 0015659 616,100.00 SBTC 0301-261982-001 PNB 0015661 597,800.00 SBTC 0301-261982-001 1,213,900.00 9120 June 6, 2001 900 out of 5,100 Alonzo Trucking MBTC 1140171726 113,400.00 MBTC 124-5 [Magno Lim] 113,400.00 9123 June 22, 2001 2,700 out of 7,100 Mapalo Trucking [no details] 123,300.00 [no details] [no details] 246,600.00 [no details] 369,900.00 9126 June 19, 2001 1,800 out of 7,100 Alonzo Trucking MBTC 114071731 244,800.00 EPCIB 71820-8 [Magno Lim] 244,800.00 9130 June 27, 2001 500 Rommeleens Enterprises DBP 0000155348 68,500.00 SBTC 0301-261982-001 68,500.00 Per records,4 the accused was branch manager of Union Cement Corporation (UCC) for the Tuguegarao City area. At the UCC office in Isabela, he shared an office room with Restituto P. Renolo, Branch Manager for the province. On June 29, 2001, at about noon, the accused confided to Renolo that he had misappropriated company funds. Renolo advised him to explain his misdeeds in writing to Assistant Vice-President and Head of UCC-North Luzon Reynaldo S. Santos (AVP Santos). Later that day, at about 5:00 p.m., the accused told Renolo that he would be going to Tuguegarao City. Just before Renolo left the office, he saw on the accused s table a piece of partly-folded paper, which turned out to be a handwritten letter of the accused to AVP Santos, in which he admitted taking company funds and enumerated the particular accounts and amounts involved. Renolo took the letter home, read it over the phone to AVP Santos at about 7:00 p.m., and faxed it to AVP Santos the following day. AVP Santos, in turn, sent a copy of the letter to the top management of UCC, which then instructed the Group Internal Audit of the Phinma Group of Companies to conduct a special audit of the UCC-Tuguegarao City Branch. Antonio M. Dumalian, AVP and Head of the Group Internal Audit, organized the audit team composed of Onisimo Prado, as head, with Emmanuel R. Reamico, Adeodato M. Logronio, and Glenn Agustin, as members. The audit team conducted the special audit of the UCC-Tuguegarao City Branch from July 3 to July 25, 2001. They interviewed several cement buyers/dealers, among them Wilma Invierno of Rommeleen s Enterprises, Arthur Alonzo of Alonzo Trucking, Robert Cokee of Philippine Lumber, and Russel Morales of Mapalo Trucking. All four executed affidavits attesting that UCC cement bags

were sold directly to them instead of to dealers with credit lines and that, as payment, they issued Pay to Cash checks pursuant to the instruction of the accused. AVP Santos and Dr. Francis Felizardo, Senior Vice-President (SVP) and Head of the Marketing Group of UCC, met with the accused at the UCC Sales Office in Poro Point, San Fernando City, La Union. In that meeting, the accused admitted misusing company money, but pleaded to them not to terminate him as he was willing to pay back the amount from his salary on installment. He also asked them not to file charges against him. In a Report dated August 8, 2001, the Group Internal Audit confirmed the veracity of the June 29, 2001 handwritten admission letter of the accused and his July 20, 2001 Certification enumerating the names of the specific bank accounts, specific bank holders, and the banks wherein he had deposited the funds of UCC-Tuguegarao City Branch. It appeared that the total unremitted collections of the accused from May 25, 2001 to June 23, 2001 amounted to PhP 6,572,750. UCC found that the accused gravely abused the trust and confidence reposed on him as Branch Manager and violated company policies, rules, and regulations. Specifically, he used the credit line of accredited dealers in favor of persons who either had no credit lines or had exhausted their credit lines. He diverted cement bags from the company s Norzagaray Plant or La Union Plant to truckers who would buy cement for profit. In these transactions, he instructed the customers that payments be made in the form of Pay to Cash checks, for which he did not issue any receipts. He did not remit the checks but these were either encashed or deposited to his personal bank account at Security Bank & Trust Co. (SBTC)-Tuguegarao City Branch with Account No. 0301-261982-001 or to the accounts of a certain Magno Lim at MetroBank and Equitable PCIBank, both in Tuguegarao City. Conchito Dayrit, Customer Service Officer and Representative of SBTC-Tuguegarao City, confirmed the findings of the UCC internal auditors through the accused s Statement of Account showing the various checks deposited to his account, and which subsequently cleared. Upon arraignment on August 6, 2002, the accused entered a plea of not guilty to the seven separate charges of qualified theft.5 Trial on the merits ensued. The Ruling of the RTC On March 24, 2008, the RTC rendered its Decision, acquitting the accused in Criminal Case Nos. 9120, 9123, and 9126, but finding him guilty beyond reasonable doubt of committing Qualified Theft in Criminal Case Nos. 9034, 9115, 9117, and 9130. The dispositive portion reads: WHEREFORE, premises considered, the Court renders judgment thus: 1.In Criminal Case No. 9034: finding the accused GUILTY BEYOND REASONABLE DOUBT of the crime of qualified theft; 2.In Criminal Case No. 9115: finding the accused GUILTY BEYOND REASONABLE DOUBT of the crime of qualified theft; 3.In Criminal Case No. 9117: finding the accused GUILTY BEYOND REASONABLE DOUBT of the crime of qualified theft; 4.In Criminal Case No. 9120: finding the accused NOT GUILTY, as there is no showing how he profited from deposits he made to the account of Mr. Magno Lim; 5.In Criminal Case No. 9123: finding the accused NOT GUILTY by reason of insufficiency of evidence; 6.In Criminal Case No. 9126: finding the accused NOT GUILTY BEYOND REASONABLE DOUBT of the crime of qualified theft; 7.In Criminal Case No. 9130: finding the accused GUILTY BEYOND REASONABLE DOUBT of the crime of qualified theft. In view of the foregoing, in the imposition of the penalties upon the accused, this Court is guided by the following doctrinal pronouncement of the Supreme Court in People v. [Mercado], G.R. No. 143676, February 12, 2003: Appellant asserts that the trial court erred in applying the proper penalty. As reasoned by appellant, the penalty for Qualified Theft under Article 310 of the Revised Penal Code is prision mayor in its minimum and medium periods, raised by two degrees. Hence, the penalty high by two degrees should be reclusion temporal in its medium and maximum periods and not reclusion perpetua as imposed by the trial court. Being a divisible penalty, the Indeterminate Sentence Law could then be applied. On the other hand, [appellee] cites the cases of People v. Reynaldo Bago and People v. Cresencia C. Reyes to show that the trial court properly imposed the penalty of reclusion perpetua. We agree with the appellee that the trial court imposed the proper penalty. In accordance with the doctrine laid down in People v. Mercado, the accused is hereby sentenced to suffer the penalty of RECLUSION PERPETUA. Accused is ordered to restitute the private complainant the total amount of TWO MILLION TWO HUNDRED SEVENTY NINE THOUSAND THREE HUNDRED FIFTY PESOS (Php

2,279,350.00) covering the amount represented by the checks involved in these cases. Set the promulgation of this Decision on 15 April 2008, at 8:30 o clock in the morning. SO ORDERED.6In convicting the accused, the RTC relied on his admission when he testified on February 15, 2007 and his Memorandum of the fact of his having deposited the checks payments from UCC cement sales in his personal account with SBTC, Tuguegarao City Branch. Contrary to the accused s argument, the RTC found that he did not hold his collections in trust for UCC, since he was never authorized by UCC to retain and deposit checks, as testified to by AVP Santos. Moreover, the RTC found fatal to accused s defense his handwritten letter, dated June 29, 2001, addressed to AVP Santos, which reads in part, Sir, I regret to say that a total amount of PhP 6,380,650.00 was misused by me for various reasons, 7 which the accused admitted to in open court during his testimony on February 15, 2007. Aggrieved, accused appealed his conviction before the CA. The Ruling of the CA On August 24, 2009, the appellate court rendered the appealed decision, affirming the findings of the RTC and the conviction of accused-appellant. The fallo reads: WHEREFORE, premises considered, the Decision of the Regional Trial Court of Tuguegarao City, Cagayan, Branch 5, in Criminal Case Nos. 9034, 9115, 9117 and 9130, dated March 24, 2008 and promulgated on April 15, 2008, finding accused-appellant guilty beyond reasonable doubt of the crime of Qualified Theft is hereby AFFIRMED and UPHELD. With costs against the accused-appellant. SO ORDERED.8 Accused-appellant argued that, first, the Informations indicting him for Qualified Theft did not adequately inform him of the nature of the offense charged against him; and second, he had juridical possession of the subject checks, not merely material possession; hence, the qualifying circumstance of grave abuse of confidence cannot be appreciated against him. The CA, however, found that accused-appellant only had material possession of the checks and not juridical possession9 as these checks payments were made to UCC by its customers and accused-appellant had no right or title to possess or retain them as against UCC. The fact that accused-appellant was obliged, as per company policy, to immediately turn over to UCC the payments he received from UCC customers was attested to by the prosecution witness, UCC Branch Manager Renolo. Thus, the CA concluded that there was neither a principalagent relationship between UCC and accused-appellant nor was accusedappellant allowed to open a personal account where UCC funds would be deposited and held in trust for UCC. Hence, We have this appeal. The Office of the Solicitor General, representing the People of the Philippines, submitted a Manifestation and Motion,10 opting not to file any supplemental brief, there being no new issues raised nor supervening events transpired. Accused-appellant manifested also not to file a supplemental brief.11 Thus, in resolving the instant appeal, We consider the sole issue and arguments accused-appellant earlier raised in his Brief for the Accused-Appellant before the CA.Accused-appellant raises the same sole assignment of error already passed upon and resolved by the CA, in that THE TRIAL COURT ERRED IN CONCLUDING THAT, BASED ON THE EVIDENCE, THE ACCUSED IS GUILTY OF QUALIFIED THEFT. 12 The Court s Ruling The appeal is bereft of merit. Accused-appellant argues that the prosecution failed: (a)To establish that he had material possession of the funds in question; (b)To refute the authority given to him by UCC; (c)To establish the element of taking under Art. 308 of the Revised Penal Code (RPC); (d)To establish that the funds were taken without the consent and knowledge of UCC; (e)To establish the element of personal property under Art. 308 of the RPC; and (f)To establish, in sum, the ultimate facts constitutive of the crime of Qualified Theft under Art. 310, in relation to Art. 308, of the RPC. For being closely related, We will discuss together the arguments thus raised. Article 308 of the Revised Penal Code (RPC), which defines Theft, provides: ART. 308. Who are liable for theft. Theft is committed by any person who, with intent to gain but without violence, against, or intimidation of persons nor force upon things, shall take personal property of another without the latter s consent. Theft is likewise committed by:

1.Any person who, having found lost property, shall fail to deliver the same to the local authorities or to its owner; 2.Any person who, after having maliciously damaged the property of another, shall remove or make use of the fruits or objects of the damage caused by him; and 3.Any person who shall enter an enclosed estate or a field where trespass is forbidden or which belongs to another and without the consent of its owner, shall hunt or fish upon the same or shall gather fruits, cereals, or other forest or farm products. Thus, the elements of the crime of Theft are: (1) there was a taking of personal property; (2) the property belongs to another; (3) the taking was without the consent of the owner; (4) the taking was done with intent to gain; and (5) the taking was accomplished without violence or intimidation against the person or force upon things.13 Theft is qualified under Art. 310 of the RPC, when it is, among others, committed with grave abuse of confidence, thus: ART. 310. Qualified Theft. The crime of theft shall be punished by the penalties next higher by two degrees than those respectively specified in the next preceding article, if committed by a domestic servant, or with grave abuse of confidence, or if the property stolen is motor vehicle, mail matter or large cattle or consists of coconuts taken from the premises of a plantation, fish taken from a fishpond or fishery or if property is taken on the occasion of fire, earthquake, typhoon, volcanic eruption, or any other calamity, vehicular accident or civil disturbance. (Emphasis supplied.) The elements of Qualified Theft committed with grave abuse of confidence are as follows: 1.Taking of personal property; 2. That the said property belongs to another; 3.That the said taking be done with intent to gain; 4.That it be done without the owner s consent; 5.That it be accomplished without the use of violence or intimidation against persons, nor of force upon things; 6. That it be done with grave abuse of confidence.14 (Emphasis supplied.) All of the foregoing elements for Qualified Theft are present in this case. First. The presence of the first and second elements is abundantly clear. There can be no quibble that the fund collections through checks payments all issued payable to cash are personal properties belonging to UCC. These funds through checks were paid by UCC clients for the deliveries of cement from UCC. One with the courts a quo, We will not belabor this point in the fifth argument raised by accused-appellant. Second. The third element is likewise abundantly clear. The collected amounts subject of the instant case belonged to UCC and not to accused-appellant. When accused-appellant received them in the form of Pay to Cash checks from UCC customers, he was obliged to turn them over to UCC for he had no right to retain them. That he kept the checks and deposited them in his account and in the accounts of Magno Lim knowing all the while that these checks and their proceeds were not his only proves the presence of unlawful taking. As the trial court aptly pointed out, accused-appellant s theory that he only kept the funds in trust for UCC with the elaborate explanation that once the checks cleared in his account then he remits them to UCC is completely incredulous. For one, accused-appellant has not adduced evidence that he indeed remitted the funds once the corresponding checks were cleared. For another, accusedappellant could not explain why he deposited some of the checks he collected in the accounts of Magno Lim in MetroBank (MBTC Account No. 124-5) and Equitable PCIBank (EPCIB Account No. 71820-8). Moreover, accused-appellant s contention of such alleged management practice15 is unsupported by any evidence showing that prior to the events in mid-2001 there was indeed such a practice of depositing check collections and remitting the proceeds once the checks cleared. Third. The element of intent to gain is amply established through the affidavit16of Wilma Invierno of Rommeleen s Enterprises, one of UCC s customers, who confirmed that she had been sold cement bags instead of to dealers with credit lines and she was required by accused-appellant to issue pay to cash checks as payment. The affidavits of Arthur Alonzo17 of Alonzo Trucking, Robert Cokee18 of Philippine Lumber, and Russel Morales19 of Mapalo Trucking similarly attested to the same type of sale and payment arrangement. In so doing, accused-appellant facilitated the collection of pay to cash checks which he deposited in his bank account and in the bank accounts of Magno Lim. Thus, the fourth element of intent to gain is duly proved. Fourth. Equally clear and undisputed is the presence of the fifth element. Accused-appellant admitted having received these checks and depositing them 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 persons, nor of force upon things. Fifth. That UCC never consented to accused-appellant s depositing the checks he collected in his or other accounts is demonstrated by the immediate action UCC took upon being apprised of the misappropriation and accused-appellant s confession letter. UCC lost no time in forming a special audit group from the Group Internal Audit of Phinma Group of Companies. The special audit group conducted an internal audit from July 3 to 25, 2001 and submitted a Special Audit Report20 dated August 8, 2001, showing that the total unremitted collections of accused-appellant from the period covering May 25, 2001 through June 23, 2001 amounted to PhP 6,572,750.AVP Santos and UCC SVP and Head of Marketing Group Dr. Felizardo met with accused-appellant who admitted misappropriating company funds. AVP Santos testified21in open court on what transpired in that meeting and accused-appellant s verbal admission/confession. And with the findings of the auditors that not only did accused-appellant unlawfully take UCC funds but he also committed the offense of violating company policies, rules, and regulations, UCC was compelled to file seven criminal complaints against accused-appellant. This swift and prompt action undertaken by UCC argues against the notion that it consented to accused-appellant s act of depositing of check proceeds from company sales of 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. As gathered from the nature of his position, accused-appellant was a credit and collection officer of UCC in the Cagayan-Isabela area. His position entailed a high degree of confidence, having access to funds collected from UCC clients. In People v. Sison,22 involving a Branch Operation Officer of Philippine Commercial International Bank (PCIB), the Court upheld the appellant s conviction of Qualified Theft, holding that the management of the PCIB reposed its trust and confidence in the appellant as its Luneta Branch Operation Officer, and it was this trust and confidence which he exploited to enrich himself to the damage and prejudice of PCIB x x x. 23 In People v. Mercado,24 involving a manager of a jewelry store, the Court likewise affirmed the appellant s conviction of Qualified Theft through grave abuse of confidence. In the instant case, it is clear how accused-appellant, as Branch Manager of UCC who was authorized to receive payments from UCC customers, gravely abused the trust and confidence reposed upon him by the management of UCC. Precisely, by using that trust and confidence, accused-appellant was able to perpetrate the theft of UCC funds to the grave prejudice of the latter. To repeat, the resulting report of UCC s internal audit showed that accusedappellant unlawfully took PhP 6,572,750 of UCC s funds. The courts a quo s finding that accused-appellant admitted misappropriating UCC s funds through the appropriation of the subject checks is buttressed by the testimonies of Renolo and Santos,25 who heard and understood accusedappellant s extrajudicial confession. True enough, they were competent to testify as to the substance of what they heard from accused-appellant his declaration expressly acknowledging his guilt to the offense that may be given in evidence against him.26That he deposited most of the subject checks in his account was proved by accused-appellant s statement of account with SBTC (Account No. 0301-261982-001) through the testimony of Conchito Dayrit, the Customer Service Officer and representative of SBTC-Tuguegarao City Branch.27Moreover, accused-appellant issued a written certification28 dated July 20, 2001, attesting to the fact of the ownership of the bank accounts where he deposited the checks he collected from UCC clients, which reads: 07/20/01 To whom it may concern: This is to certify that to my knowledge, the owner of the following bank accounts are as follows: Bank accountOwner SBC TUG 0301261982001B. G. Mirto MBTC TUG 124-5Magno Lim EPCI TUG 71320-8Magno Lim This certification is issued for whatever purpose it may serve. (Sgd.) Bernard G. Mirto7/20/01 Signature over printed name date Further, as can be amply gleaned from accused-appellant s handwritten admission and duly borne out by the internal audit team s findings, he deliberately used a scheme to perpetrate the theft. This was aptly pointed out by the CA, which We reproduce for clarity: UCC found that accused-appellant gravely abused the trust and confidence reposed on him as Branch Manager and violated company policies, rules and regulations. He did not remit collections from customers who paid Pay to Cash checks. He used the credit line of accredited dealers in favor of persons who did not have credit lines or other dealers who had exhausted their credit

line. He diverted cement bags from Norzagaray Plant or La Union Plant to truckers who would buy cement for profit. In these transactions, he instructed dealers that check be made in the form of pay to cash . He did not issue them receipts. The checks were either encashed or deposited to accused-appellant s personal account No. 0301-261982-001 at Security Bank & Trust Co. (SBTC) Tuguegarao Branch or deposited to the accounts of a certain Mr. Magno Lim maintained at MetroBank and EquitablePCIBank, both located at Tuguegarao City.29 (Emphasis supplied.) It is, thus, clear that accused-appellant committed Qualified Theft. And as duly pointed out above, even considering the absence of the handwritten extrajudicial admission of accused-appellant, there is more than sufficient evidence adduced by the prosecution to uphold his conviction. As aptly pointed out by the trial court, the prosecution has established the following: 1.That checks of various customers of UCC were written out as bearer instruments. Payments in cash were also made. 2.These were received by the accused Mirto who deposited them in his personal account as well as in the account of Mr. Magno Lim. 3.The monies represented by the checks and the case payments were consideration for bags of cement purchased from the UCC, the complainantcorporation. 4.The accused Mirto was never authorized nor was it part of his duties as branch manager to deposit these proceeds in his account or in the account of Mr. Magno Lim.30 Defense of Agency Unavailing As his main defense, accused-appellant cites the testimonies of prosecution witnesses Restituto Renolo and Reynaldo Santos to impress upon the Court that he is an agent of UCC. And as an agent, so he claims, an implied trust is constituted by his juridical possession of UCC funds from the proceeds of cement sales: ATTY. CARMELO Z. LASAM: Mr. Renolo, can you tell us the specific duties and responsibilities of your area sales managers? RESTITUTO RENOLO: The duties and responsibilities of an area sales officer, we are in charge of the distribution of our products, cement and likewise its collection of its sales.31 xxxx ATTY. RAUL ORACION: Okay, now as Assistant Vice-President for Marketing and supervisor of all area sales offices and branch managers, could you tell the duties and responsibilities of the accused Bernard Mirto at that time? REYNALDO SANTOS: x x x, also collect sales and for the cash for the collection of our sales.32 To accused-appellant, he had authority to collect and accept payments from customers, and was constituted an agent of UCC. As collection agent of UCC, he asserts he can hold the collections in trust and in favor of UCC; and that he is a trustee of UCC and, therefore, has juridical possession over the collected funds. Consequently, accused-appellant maintains there was no unlawful taking, for such taking was with the knowledge and consent of UCC, thereby negating the elements of taking personal property and without the owner s consent necessary in the crime of Qualified Theft. This contention fails. The duty to collect payments is imposed on accused-appellant because of his position as Branch Manager. Because of this employer-employee relationship, he cannot be considered an agent of UCC and is not covered by the Civil Code provisions on agency. Money received by an employee in behalf of his or her employer is considered to be only in the material possession of the employee.33 The fact that accused-appellant had authority to accept payments from customers does not give him the license to take the payments and deposit them to his own account since juridical possession is not transferred to him. On the contrary, the testimony he cites only bolsters the fact that accused-appellant is an official of UCC and had the trust and the confidence of the latter and, therefore, could readily receive payments from customers for and in behalf of said company. Proper Penalty The trial court, as affirmed by the appellate court, sentenced accused-appellant to restitute UCC the aggregate amount of PhP 2,279,350, representing the amount of the checks involved here. The trial court also imposed the single penalty of reclusion perpetua. Apparently, the RTC erred in imposing said single penalty, and the CA erred in affirming it, considering that accused-appellant had been convicted on four (4) counts of qualified theft under Criminal Case Nos. 9034, 9115, 9117 and 9130. Consequently, accused-appellant should have been accordingly sentenced to imprisonment on four counts of qualified theft with

the appropriate penalties for each count. Criminal Case No. 9034 is for PhP 308,200, Criminal Case No. 9115 is for PhP 688,750, Criminal Case No. 9117 is for PhP 1,213,900, and Criminal Case No. 9130 is for 68,500 for the aggregate amount of PhP 2,279,350. Now to get the proper penalty for each count, We refer to People v. Mercado,34 where We established that the appropriate penalty for Qualified Theft is reclusion perpetua based on Art. 310 of the RPC, which provides that [t]he crime of [qualified] theft shall be punished by the penalties next higher by two degrees than those respectively specified in [Art. 309] x x x. (Emphasis supplied.) Applying the computation made in People v. Mercado to the present case to arrive at the correct penalties, We get the value of the property stolen as determined by the trial court, which are PhP 308,200, PhP 688,750, PhP 1,213,900 and PhP 68,500. Based on Art. 30935 of the RPC, since the value of the items exceeds P22,000.00, the basic penalty is prision mayor in its minimum and medium periods to be imposed in the maximum period, which is 8 years, 8 months and 1 day to 10 years of prision mayor. 36 And in order to determine the additional years of imprisonment, following People v. Mercado, We deduct PhP 22,000 from each amount and each difference should then be divided by PhP 10,000, disregarding any amount less than PhP 10,000. We now have 28 years, 66 years, 119 years and 4 years, respectively, that should be added to the basic penalty. But the imposable penalty for simple theft should not exceed a total of 20 years. Therefore, had accused-appellant committed simple theft, the penalty for each of Criminal Case Nos. 9034, 9115 and 9117 would be 20 years of reclusion temporal; while Criminal Case No. 9130 would be from 8 years, 8 months and 1 day of prision mayor, as minimum, to 14 years of reclusion temporal, as maximum, before the application of the Indeterminate Sentence Law. However, as the penalty for Qualified Theft is two degrees higher, the correct imposable penalty is reclusion perpetua for each count. In fine, considering that accused-appellant is convicted of four (4) counts of Qualified Theft with corresponding four penalties of reclusion perpetua, Art. 70 of the RPC on successive service of sentences shall apply. Art. 70 pertinently provides that the maximum duration of the convict s sentence shall not be more than threefold the length of time corresponding to the most severe of the penalties imposed upon him. No other penalty to which he may be liable shall be inflicted after the sum total of those imposed equals the said maximum period. Such maximum period shall in no case exceed forty years. Applying said rule, despite the four penalties of reclusion perpetua for four counts of Qualified Theft, accused-appellant shall suffer imprisonment for a period not exceeding 40 years. WHEREFORE, the appeal is hereby DENIED. The appealed CA Decision dated August 24, 2009 in CA-G.R. CR-H.C. No. 03444 is AFFIRMED with MODIFICATION in that accused-appellant Bernard G. Mirto is convicted of four (4) counts of Qualified Theft and accordingly sentenced to serve four (4) penalties of reclusion perpetua. But with the application of Art. 70 of the RPC, accusedappellant shall suffer the penalty of imprisonment for a period not exceeding 40 years. Costs against accused-appellant. SO ORDERED. VELASCO, JR., J., Chairperson, PERALTA, ABAD, MENDOZA, and PERLASBERNABE, JJ.

G.R. No. 109595, April 27, 2000, 331 SCRA 1, 13, cited in Matrido v. People, G.R. No. 179061, July 13, 2009, 592 SCRA 534, 544). 10 Rollo, pp. 25-27, dated January 6, 2011. 11 Id. at 39-40, Manifestation and Motion dated April 18, 2011. 12 Id. at 41. 13 Cruz v. People, G.R. No. 176504, September 3, 2008, 564 SCRA 99, 110; citing People v. Bago, G.R. No. 122290, April 6, 2000, 330 SCRA 115, 138-139. 14 People v. Puig, G.R. Nos. 173654-765, August 28, 2008, 563 SCRA 564, 570; Roque v. People, G.R. No. 138954, November 25, 2004, 444 SCRA 98, 120. 15 Rollo, p. 61. 16 Records, Folder of Formal Offer of Prosecution s Evidence, p. 39, Exhibit N. 17 Id. at 35, Exhibit K. 18 Id. at 253-254, Exhibit Z. 19 Id. at 264-265, Exhibit II. 20 Id. at 39-50, Exhibit O. 21 TSN, November 17, 2004. 22 G.R. No. 123183, January 19, 2000, 322 SCRA 345. 23 Id. at 364-365. 24 G.R. No. 143676, February 19, 2003, 397 SCRA 746. 25 Testimony of Restituto Renolo, TSN, September 23, 2003; testimony of Reynaldo Santos, TSN, November 17, 2004. 26 People v. Mercado, supra note 24, at 752-753; citing People v. Maqueda, G.R. No. 112983, March 22, 1995, 242 SCRA 565, 590. 27 TSN, July 27, 2006, pp. 28-29. 28 Records, Folder of Formal Offer of Prosecution s Evidence, p. 28, Exhibit B. 29 Rollo, pp. 4-5. 30 CA rollo, pp. 25-26. 31 TSN, September 23, 2003, p. 26. 32 TSN, November 17, 2004, p. 27. 33 Matrido v. People, G.R. No. 179061, July 13, 2009, 592 SCRA 534, 543. 34 Supra note 24. 35 Art. 309(1) of the RPC on simple theft provides: 1. The penalty of prision mayor in its minimum and medium periods, if the value of the thing stolen is more than 12,000 pesos but does not exceed 22,000 pesos; but if the value of the thing stolen exceeds the latter amount, the penalty shall be the maximum period of the one prescribed in this paragraph, and one year for each additional ten thousand pesos, but the total of the penalty which may be imposed shall not exceed twenty years. In such cases, and in connection with the accessory penalties which may be imposed and for the purpose of the other provisions of this Code, the penalty shall be termed prision mayor or reclusion temporal, as the case may be. 36 People v. Mercado, supra note 24, at 758. [People vs. Mirto, G.R. No. 193479(2011)]

_____________________ 1 Rollo, pp. 2-14. Penned by Associate Justice Martin S. Villarama, Jr. (now a member of this Court) and concurred in by Associate Justices Magdangal M. de Leon and Ricardo R. Rosario. 2 CA rollo, pp. 15-28. Penned by Presiding Judge Jezarene C. Aquino. 3 Records, Vol. 1, p. 1. 4 Rollo, pp. 3-5. 5 Records, Vol. 1, p. 38. 6 CA rollo, pp. 26-28. 7 Records, Folder of Formal Offer of Prosecution s Evidence, pp. 27-28, Exhibit A. 8 Rollo, p. 14. 9 [It is well-settled that when the money, goods, or any other personal property is received by the offender from the offended party in trust or on commission or for administration, the offender acquires both material or physical possession and juridical possession of the thing received.] Juridical possession means a possession which gives the transferee a right over the thing which the transferee may set up even against the owner (Chua-Burce v. Court of Appeals,

Case Title : TRADERS ROYAL BANK, petitioner, vs. COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari of a decision of the 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 and Phrases; A certificate of indebtedness which pertains to certificates for the creation and maintenance of a permanent improvement revolving fund, is similar to a bond. Properly understood, a certificate of indebtedness pertains to certificates for the creation and maintenance of a permanent improvement revolving fund, and is similar to a bond, (82 Minn. 202). Being equivalent to a bond, it is properly understood as an acknowledgment of an obligation to pay a fixed sum of money. It is usually used for the purpose of long term loans. 2. Loans; Negotiable Instruments; Certificates of Indebtedness; The language of negotiability which characterizes a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money.The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchstone relating to the protection of holders in due course, and the freedom of negotiability is the foundation for the protection which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This 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 period of time. 3. Corporation Law; Piercing the Veil of Corporate Fiction; Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its stockholders from liabilities that ordinarily, they could be subject to, or distinguishes one corporation from a seemingly separate one, were it not for the existing corporate fiction.Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this is merely an equitable remedy, and may be awarded only in cases when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is a mere alter ego or business conduit of a person. Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its stockholders from liabilities 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 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, 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 doctrine. 4. Corporation Law; Piercing the Veil of Corporate Fiction; Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the 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 stockholders and from other corporations may be disregarded, in the absence of such grounds, the general rule must be upheld. The fact that Philfinance owns majority shares in Filriters is not by itself a ground to disregard the independent corporate status of Filriters. In Liddel Co., Inc. vs. Collector of Internal Revenue, the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities. 5. Corporation Law; Piercing the Veil of Corporate Fiction; An entity which deals with corporate agents within circumstances showing that the agents are acting in excess of corporate authority may not hold the corporation liable.Petitioner, being a commercial bank, cannot feign ignorance of Central Bank Circular 769, and its requirements. An entity which deals with corporate agents within circumstances showing that the agents are acting in excess of corporate authority, may not hold the corporation liable. This is only fair, as everyone must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. 6. Sales; Where the sale from one person to another was fictitious, as there was no consideration, and therefore void and inexistent, the latter has no title to convey to third persons.The transfer made by Filriters to Philfinance did not conform to the said Central Bank Circular, which for all intents, is considered part of the law. As found by the courts a quo, Alfredo O. Banaria, who had signed the deed of assignment from Filriters to Philfinance, purportedly for and in favor of Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to act for 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 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 potest no man can do anything except what he can do lawfully. Division: SECOND DIVISION Docket Number: G.R. No. 93397 Counsel: Gonzales, Sinense, Jimenez & Associates, Jaime M. Cabiles, Ruben L. Almadro Ponente: TORRES, JR. Dispositive Portion: ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated January 29, 1990 is hereby AFFIRMED.

respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Commercial Law|Banks and Banking Syllabi: 1. Commercial Law; Banks and Banking; A bank is under obligation to treat the accounts of its depositors with meticulous care, whether such account consists only of a few hundred pesos or of millions of pesos.A bank is under obligation to treat the accounts of its depositors with meticulous care, whether such account consists only of a few hundred pesos or of millions of pesos. The fact that the other withdrawal slips were honored and paid by respondent bank was no license for Citibank to presume that subsequent slips would be honored and paid immediately. By doing so, it failed in its fiduciary duty to treat the accounts of its clients with the highest degree of care. Docket Number: G.R No. 113236 Counsel: Sycip, Salazar, Hernandez & Gatmaitan, Cao Law Office Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-G.R. CV No. 29546 is AFFIRMED. Costs against petitioner.

Case Title : ASTRO ELECTRONICS CORP. and PETER ROXAS, petitioners, vs. PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negotiable Instruments Law|Civil Law|Promissory Note|Parties|Maker|Obligations|Subrogation|Legal Subrogation Syllabi: 1. Negotiable Instruments Law; Promissory Note; Parties; Maker; Persons writing their names on face of promissory notes are makers.Under the Negotiable Instruments Law, persons who write their names on the face of promissory notes are makers, promising that they will pay to the order of the payee or any holder according to its tenor. 2. Civil Law; Obligations; Subrogation; Legal Subrogation; Legal subrogation is that which takes place by operation of law.Subrogation is the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights. It may either be legal or conventional. Legal subrogation is that which takes place without agreement but by operation of law because of certain acts. Instances of legal subrogation are those provided in Article 1302 of the Civil Code. Conventional subrogation, on the other hand, is that which takes place by agreement of the parties. 3. Civil Law; Obligations; Subrogation; Legal Subrogation; Knowledge of debtor not necessary.Roxas acquiescence is not necessary for subrogation to take place because the instant case is one of legal subrogation that occurs by operation of law, and without need of the debtor s knowledge. Division: SECOND DIVISION Docket Number: G.R. No. 136729 Counsel: Manuel Q. Molina, Office of the Government Corporate Counsel, Isabelo G. Gumaru Ponente: AUSTRIA-MARTINEZ Dispositive Portion: WHEREFORE, finding no error with the decision of the Court of Appeals dated December 10, 1998, the same is hereby AFFIRMED in toto.

Case Title : FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and LUZON DEVELOPMENT BANK,

Case Title : ROMEO C. GARCIA, petitioner, vs. DIONISIO V. LLAMAS, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Civil Law|Commercial Law|Actions|Obligations|Extinguishment|Novation|Kinds|Elements|Proof|Ne gotiable Instruments Law|Promissory Notes|Accommodation Party|Pleadings and Practice|Summary Judgment|Judgment on the Pleadings Syllabi:

1. Civil Law; Obligations; Extinguishment; Novation; Definition.Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor. Article 1293 of the Civil Code defines novation. 2. Civil Law; Obligations; Extinguishment; Novation; Kinds; In general, there are two (2) modes of substituting the person of the debtor: (1) expromision and (2) delegacion.In general, there are two modes of substituting the person of the debtor: (1) expromision and (2) delegacion. In expromision, the initiative for the change does not come from and may even be made without the knowledge of the debtor, since it consists of a third person s assumption of the obligation. As such, it logically requires the consent of the third person and the creditor. In delegacion, the debtor offers, and the creditor accepts, a third person who consents to the substitution and assumes the obligation; thus, the consent of these three persons are necessary. Both modes of substitution by the debtor require the consent of the creditor. 3. Civil Law; Obligations; Extinguishment; Novation; Kinds; Novation may also be extinctive and modificatory.Novation may also be extinctive or modificatory. It is extinctive when an old 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 that it remains compatible with the amendatory agreement. Whether extinctive or modificatory, novation is made either by changing the object or the principal 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, an act known as subjective or personal novation. 4. Civil Law; Obligations; Extinguishment; Novation; Kinds; Elements; For novation to take place, the following requisites must concur.For novation to take place, the following requisites must concur: 1) There must be a previous valid obligation. 2) The parties concerned must agree to a new contract. 3) The old contract must be extinguished. 4) There must be a valid new contract. 5. Civil Law; Obligations; Extinguishment; Novation; Kinds; Novation may also be express or implied.Novation may also be express or implied. It is express when the new obligation declares in unequivocal terms that the old obligation is extinguished. It is implied when the new obligation is incompatible with the old one on every point. The test of incompatibility is whether the two obligations can stand together, each one with its own independent existence. 6. Civil Law; Obligations; Extinguishment; Novation; Proof; Well-settled is the rule that nova-tion is never presumed.Well-settled is the rule that novation is never presumed. Consequently, that which arises from a purported change in the person of the debtor must be clear and express. 7. Commercial Law; Negotiable Instruments Law; Promissory Notes; As the note was made payable to a specific person, it is covered by the general provisions of the Civil Code, not the NIL.By its terms, the note was made payable to a specific person rather than to bearer or to order a requisite for negotiability under Act 2031, the Negotiable Instruments Law (NIL). Hence, petitioner cannot avail himself of the NIL s provisions on the liabilities and defenses of an accommodation party. Besides, a non-negotiable note is merely a simple contract in writing and is evidence of such intangible rights as may have been created by the assent of the parties. The promissory note is thus covered by the general provisions of the Civil Code, not by the NIL. 8. Commercial Law; Negotiable Instruments Law; Promissory Notes; Accommodation Party; Under Article 29 of Act 2031, an accommodation party is liable for the instrument to a holder for value.Under Article 29 of Act 2031, an accommodation party is liable for the instrument to a holder for value even if, at the time of its taking, the latter knew the former to be only an accommodation party. The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety the accommodation party being the surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promissor and debtor from the beginning. The liability is immediate and direct. 9. Actions; Pleadings and Practice; Summary Judgment; A summary judgment is a procedural device designed for the prompt disposition of actions in which the pleadings raise only a legal, not a genuine, issue regarding any material fact.Under Section 3 of Rule 35 of the Rules of Court, a summary judgment may be rendered after a summary hearing if the pleadings, supporting affidavits,

depositions and admissions on file show that (1) except as to the amount of damages, there is no genuine issue regarding any material fact; and (2) the moving party is entitled to a judgment as a matter of law. A summary judgment is a procedural device designed for the prompt disposition of actions in which the pleadings raise only a legal, not a genuine, issue regarding any material fact. Consequently, facts are asserted in the complaint regarding which there is yet no admission, disavowal or qualification; or specific denials or affirmative defenses are set forth in the answer, but the issues are fictitious as shown by the pleadings, depositions or admissions. A summary judgment may be applied for by either a claimant or a defending party. 10. Actions; Pleadings and Practice; Judgment on the Pleadings; A judgment on the pleadings is proper when an answer fails to render an issue or otherwise admits the material allegations of the adverse party s pleading.On the other hand, under Section 1 of Rule 34 of the Rules of Court, a judgment on the pleadings is proper when an answer fails to render an issue or otherwise admits the material allegations of the adverse party s pleading. The essential question is whether there are issues generated by the pleadings. A judgment on the pleadings may be sought only by a claimant, who is the party seeking to recover upon a claim, counterclaim or cross-claim; or to obtain a declaratory relief. Division: FIRST DIVISION Docket Number: G.R. No. 154127 Counsel: Carlos G. Nery, Jr., Felipe N. Egargo, Jr. Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, this Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

Case Title : TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON HYDRO CORPORATION, AUSTRALIA and NEW ZEALAND BANKING GROUP LIMITED and SECURITY BANK CORPORATION, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Commercial Law|Actions|Banks and Banking|Letters of Credit|Standby Credits|Words and Phrases|Uniform Customs and Practice (UCP) for Documentary Credits| Independence Principle |Guarantee|Contracts|Injunction|Requisites|Actions|Appeals|Pleadi ngs and Practice|Obligations and Contracts|Forum Shopping Syllabi: 1. Commercial Law; Banks and Banking; Letters of Credit; Standby Credits; Words and Phrases; In commercial transactions, a letter of credit is a financial device developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying; Generally, credits in non-sale settings have come to be known as standby credits.The letter of credit evolved as a mercantile specialty, and the only way to understand all its facets is to recognize that it is an entity unto itself. The relationship between the beneficiary and the issuer of a letter of credit is not strictly contractual, because both privity and a meeting of the minds are lacking, yet strict compliance with its terms is an enforceable right. Nor is it a third-party beneficiary contract, because the issuer must honor drafts drawn against a letter regardless of problems subsequently arising in the underlying contract. Since the bank s customer cannot draw on the letter, it does not function as an assignment by the customer to the beneficiary. Nor, if properly used, is it a contract of suretyship or guarantee, because it entails a primary liability following a default. Finally, it is not in itself a negotiable instrument, because it is not payable to order or bearer and is generally conditional, yet the draft presented under it is often negotiable. In commercial transactions, a letter of credit is a financial device developed by merchants as a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of a seller, who refuses to part with his goods before he is paid, and a buyer, who wants to have control of the goods before paying. The use of credits in commercial transactions serves to reduce the risk of nonpayment of the purchase price under the contract for the sale of goods. However, credits are also used in non-sale settings where they serve to reduce the risk of nonperfor- mance. Generally, credits in the non-sale settings have come to be known as standby credits.

2. Commercial Law; Banks and Banking; Letters of Credit; Standby Credits; Commercial Credits and Standby Credits, Distinguished.There are three significant differences between commercial and standby credits. First, commercial credits involve the payment of money under a contract of sale. Such credits become payable upon the presentation by the seller-beneficiary of documents that show he has taken affirmative steps to comply with the sales agreement. In the standby type, the credit is payable upon certification of a party s nonperformance of the agreement. The documents that accompany the beneficiary s draft tend to show that the applicant has not performed. The beneficiary of a commercial credit must demonstrate by documents that he has performed his contract. The beneficiary of the standby credit must certify that his obligor has not performed the contract. 3. Commercial Law; Banks and Banking; Letters of Credit; A letter of credit changes its nature as different transactions occur and if carried through to completion ends up as a binding contract between the issuing and honoring banks without any regard or relation to the underlying contract or disputes between the parties thereto.By definition, a letter of credit is a written instrument whereby the writer requests or authorizes the addressee to pay money or deliver goods to a third person and assumes responsibility for payment of debt therefor to the addressee. A letter of credit, however, changes its nature as different transactions occur and if carried through to completion ends up as a binding contract between the issuing and honoring banks without any regard or relation to the underlying contract or disputes between the parties thereto. 4. Commercial Law; Banks and Banking; Letters of Credit; Uniform Customs and Practice (UCP) for Documentary Credits; Since letters of credit have gained general acceptability in international trade transactions, the International Chamber of Commerce (ICC) has published from time to time updates on the Uniform Customs and Practice for Documentary Credits to standardize practices in the letter of credit area; The observance of the UCP is justified by Article 2 of the Code of Commerce which provides that in the absence of any particular provision in the Code of Commerce, commercial transactions shall be governed by usages and customs generally observed.Since letters of credit have gained general acceptability in international trade transactions, the ICC has published from time to time updates on the Uniform Customs and Practice (UCP) for Documentary Credits to standardize practices in the letter of credit area. The vast majority of letters of credit incorporate the UCP. First published in 1933, the UCP for Documentary Credits has undergone several revisions, the latest of which was in 1993. In Bank of the Philippine Islands v. De Reny Fabric Industries, Inc., this Court ruled that the observance of the UCP is justified by Article 2 of the Code of Commerce which provides that in the absence of any particular provision in the Code of Commerce, commercial transactions shall be governed by usages and customs generally observed. More recently, in Bank of America, NT SA v. Court of Appeals, this Court ruled that there being no specific provisions which govern the legal complexities arising from transactions involving letters of credit, not only between or among banks themselves but also between banks and the seller or the buyer, as the case may be, the applicability of the UCP is undeniable. 5. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; Under the independence principle, banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers, or the insurers of the goods, or any other person whomsoever.Article 3 of the UCP provides that credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s), even if any reference whatsoever to such contract(s) is included in the credit. Consequently, the undertaking of a bank to pay, accept and pay draft(s) or negotiate and/or fulfill any other obligation under the credit is not subject to claims or defenses by the applicant resulting from his relationships with the issuing bank or the beneficiary. A beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the applicant and the issuing bank. Thus, the engagement of the issuing bank is to pay the seller or beneficiary of the credit once the draft and the required documents are presented to it. The so-called independence principle assures the seller or the beneficiary of prompt payment independent of any breach of the main contract and precludes the issuing bank from determining whether the main contract is actually accomplished or not. Under this principle, banks assume no liability or

responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions stipulated in the documents or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any documents, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers, or the insurers of the goods, or any other person whomsoever. 6. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; The independent nature of the letter of credit may be: (a) independence in toto where the credit is independent from the justification aspect and is a separate obligation from the underlying agreement; or (b) independence may be only as to the justification aspect, though in both cases the payment may be enjoined if in the light of the purpose of the credit the payment of the credit would constitute fraudulent abuse of the credit.The independent nature of the letter of credit may be: (a) independence in toto where the credit is independent from the justification aspect and is a separate obligation from the underlying agreement like for instance a typical standby; or (b) independence may be only as to the justification aspect like in a commercial letter of credit or repayment standby, which is identical with the same obligations under the underlying agreement. In both cases the payment may be enjoined if in the light of the purpose of the credit the payment of the credit would constitute fraudulent abuse of the credit. 7. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; The independence principle liberates the issuing bank from the duty of ascertaining compliance by the parties in the main contract; As it is, the independence doctrine works to the benefit of both the issuing bank and the beneficiary.As discussed above, in a letter of credit transaction, such as in this case, where the credit is stipulated as irrevocable, there is a definite undertaking by the issuing bank to pay the beneficiary provided that the stipulated documents are presented and the conditions of the credit are complied with. Precisely, the independence principle liberates the issuing bank from the duty of ascertaining compliance by the parties in the main contract. As the principle s nomenclature clearly suggests, the obligation under the letter of credit is independent of the related and originating contract. In brief, the letter of credit is separate and distinct from the underlying transaction. Given the nature of letters of credit, petitioner s argument that it is only the issuing bank that may invoke the independence principle on letters of credit does not impress this Court. To say that the independence principle may only be invoked by the issuing banks would render nugatory the purpose for which the letters of credit are used in commercial transactions. As it is, the independence doctrine works to the benefit of both the issuing bank and the beneficiary. 8. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; Guarantee;Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in that the settlement of a dispute between the parties is not a prerequisite for the release of funds under a letter of credit.Petitioner s argument that any dispute must first be resolved by the parties, whether through negotiations or arbitration, before the beneficiary is entitled to call on the letter of credit in essence would convert the letter of credit into a mere guarantee. Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in that the settlement of a dispute between the parties is not a pre-requisite for the release of funds under a letter of credit. In other words, the argument is incompatible with the very nature of the letter of credit. If a letter of credit is drawable only after settlement of the dispute on the contract entered into by the applicant and the beneficiary, there would be no practical and beneficial use for letters of credit in commercial transactions. 9. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; Owing to the nature and purpose of standby letters of credit, banks are left with little or no alternative but to honor the credit or the call for payment.While it is the bank which is bound to honor the credit, it is the beneficiary who has the right to ask the bank to honor the credit by allowing him to draw thereon. The situation itself emasculates petitioner s posture that LHC cannot invoke the independence principle and highlights its puerility, more so in this case where the banks concerned were impleaded as parties by petitioner itself. Respondent banks had squarely raised the independence principle to justify their releases of the amounts due under the Securities. Owing to the nature and purpose of the standby letters of credit, this Court rules that the respondent banks were left with little or no alternative but to honor the credit and both of them in fact submitted that it was ministerial for them to honor the call for payment.

10. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; Contracts; A contract once perfected, binds the parties not only to the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature, may be in keeping with good faith, usage, and law.A contract once perfected, binds the parties not only to the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature, may be in keeping with good faith, usage, and law. A careful perusal of the Turnkey Contract reveals the intention of the parties to make the Securities answerable for the liquidated damages occasioned by any delay on the part of petitioner. The call upon the Securities, while not an exclusive remedy on the part of LHC, is certainly an alternative recourse available to it upon the happening of the contingency for which the Securities have been proffered. Thus, even without the use of the independence principle, the Turnkey Contract itself bestows upon LHC the right to call on the Securities in the event of default. 11. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; Injunction;Requisites; Most writers agree that fraud is an exception to the independence principle; The remedy for fraudulent abuse is an injunction.Most writers agree that fraud is an exception to the independence principle. Professor Dolan opines that the untruthfulness of a certificate accompanying a demand for payment under a standby credit may qualify as fraud sufficient to support an injunction against payment. The remedy for fraudulent abuse is an injunction. However, injunction should not be granted unless: (a) there is clear proof of fraud; (b) the fraud constitutes fraudulent abuse of the independent purpose of the letter of credit and not only fraud under the main agreement; and (c) irreparable injury might follow if injunction is not granted or the recovery of damages would be seriously damaged. 12. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; Injunction; The issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case, the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law.Generally, injunction is a preservative remedy for the protection of one s substantive right or interest; it is not a cause of action in itself but merely a provisional remedy, an adjunct to a main suit. The issuance of the writ of preliminary injunction as an ancillary or preventive remedy to secure the rights of a party in a pending case is entirely within the discretion of the court taking cognizance of the case, the only limitation being that this discretion should be exercised based upon the grounds and in the manner provided by law. Before a writ of preliminary injunction may be issued, there must be a clear showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of the said right. It must be shown that the invasion of the right sought to be protected is material and substantial, that the right of complainant is clear and unmistakable and that there is an urgent and paramount necessity for the writ to prevent serious damage. Moreover, an injunctive remedy may only be resorted to when there is a pressing necessity to avoid injurious consequences which cannot be remedied under any standard compensation. 13. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; It is premature and absurd to conclude that the draws on the Securities were outright fraudulent where the International Chamber of Commerce and the Construction Industry Authority Commission have not ruled with finality on the existence of default.The pendency of the arbitration proceedings would not per se make LHC s draws on the Securities wrongful or fraudulent for there was nothing in the Contract which would indicate that the parties intended that all disputes regarding delay should first be settled through arbitration before LHC would be allowed to call upon the Securities. It is therefore premature and absurd to conclude that the draws on the Securities were outright fraudulent given the fact that the ICC and CIAC have not ruled with finality on the existence of default. 14. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; Actions;Appeals; Pleadings and Practice; Matters, theories or arguments not brought out in the proceedings below will ordinarily not be considered by a reviewing court as they cannot be raised for the first time on appeal.Nowhere in its complaint before the trial court or in its pleadings filed before the appellate court, did petitioner invoke the fraud exception rule as a ground to justify the issuance of an injunction. What petitioner did assert before the courts 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 not be allowed in this instance to bring into play the fraud exception rule to

sustain its claim for the issuance of an injunctive relief. Matters, theories or arguments not brought out in the proceedings below will ordinarily not be considered by a reviewing court as they cannot be raised for the first time on appeal. The lower courts could thus not be faulted for not applying the fraud exception rule not only because the existence of fraud was fundamentally interwoven with the issue of default still pending before the arbitral tribunals, but more so, because petitioner never raised it as an issue in its pleadings filed in the courts below. At any rate, petitioner utterly failed to show that it had a clear and unmistakable right to prevent LHC s call upon the Securities. 15. Commercial Law; Banks and Banking; Letters of Credit; Independence Principle ; Obligations and Contracts; Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.Prudence should have impelled LHC to await resolution of the pending issues before the arbitral tribunals prior to taking action to enforce the Securities. But, as earlier stated, the Turnkey Contract did not require LHC to do so and, therefore, it was merely enforcing its rights in accordance with the tenor thereof. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. More importantly, pursuant to the principle of autonomy of contracts embodied in Article 1306 of the Civil Code, petitioner could have incorporated in its Contract with LHC, a proviso that only the final determination by the arbitral tribunals that default had occurred would justify the enforcement of the Securities. However, the fact is petitioner did not do so; hence, it would have to live with its inaction. 16. Actions; Injunction; Settled is the rule that injunction would not lie where the acts sought to be enjoined have already become fait accompli or an accomplished or consummated act.In a Manifestation, dated 30 March 2001, LHC informed this Court that the subject letters of credit had been fully drawn. This fact alone would have been sufficient reason to dismiss the instant petition. Settled is the rule that injunction would not lie where the acts sought to be enjoined have already become fait accompli or an accomplished or consummated act. In Ticzon v. Video Post Manila, Inc. this Court ruled that where the period within which the former employees were prohibited from engaging in or working for an enterprise that competed with their former employer the very purpose of the preliminary injunction has expired, any declaration upholding the propriety of the writ would be entirely useless as there would be no actual case or controversy between the parties insofar as the preliminary injunction is concerned. In the instant case, the consummation of the act sought to be restrained had rendered the instant petition moot for any declaration by this Court as to propriety or impropriety of the non-issuance of injunctive relief could have no practical effect on the existing controversy. The other issues raised by petitioner particularly with respect to its right to recover the amounts wrongfully drawn on the Securities, according to it, could properly be threshed out in a separate proceeding. 17. Actions; Pleadings and Practice; Forum Shopping; Considering the seriousness of the charge of forum shopping and the severity of the sanctions for its violation, the Court will refrain from making any definitive ruling on the issue until the party alleged to have committed forum shopping has been given ample opportunity to respond to the charge.Forum Shopping is a very serious charge. It exists when a party repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in, or already resolved adversely, by some other court. It may also consist in the act of a party against whom an adverse judgment has been rendered in one forum, of seeking another and possibly favorable opinion in another forum other than by appeal or special civil action of certiorari, or the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court might look with favor upon the other party. To determine whether a party violated the rule against forum shopping, the test applied is whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another. Forum Shopping constitutes improper conduct and may be punished with summary dismissal of the multiple petitions and direct contempt of court. Considering the seriousness of the charge of forum Shopping and the severity of the sanctions for its violation, the Court will refrain from making any definitive ruling on this issue until after petitioner has been given ample opportunity to respond to the charge. Division: SECOND DIVISION

Docket Number: G.R. No. 146717 Counsel: Romulo, Mabanta, Buenaventura, Sayoc and Delos Angeles, M. B. Tomacruz & Associates Law Offices, Castro, Yan Binas, Ortile, Samillano & Mangrobang, Quasha, Ancheta, Pea & Nolasco, Sycip, Salazar, Hernandez & Gatmaitan Ponente: TINGA Dispositive Portion: WHEREFORE, the instant petition is DENIED, with costs against petitioner.

Case Title : PEOPLE OF THE PHILIPPINES, appellee, vs. ALOMA REYES and TRICHIA MAE REYES (AT LARGE), accused. ALOMA REYES, appellant.Case Nature : APPEAL from a decision of the Regional Trial Court of Davao City, Br. 11. Syllabi Class : Criminal Law|Appeals|Estafa|Bouncing Checks Law|Banks and Banking|Words and Phrases|Presumption of Innocence|Evidence|Remand of Cases Syllabi: 1. Criminal Law; Estafa; Bouncing Checks Law; Elements.Under Article 315, paragraph 2(d) of the Revised Penal Code, estafa is committed by any person who shall defraud another by false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud. It is committed with the following essential elements which must be proved to sustain a conviction: 1. postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; 2. lack of 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 Phrases; Negotiable Order of Withdrawal (NOW) Accounts are defined as interest-bearing deposit accounts that combine the payable on demand feature 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 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 through bouncing checks it is the fraud or deceit employed by the accused in issuing a worthless check that is penalized.Section X223 of the Manual of Regulations for Banks defines Negotiable Order of Withdrawal (NOW) Accounts as interest-bearing deposit accounts that combine the payable on demand feature 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 made payable to BEARER or to CASH or when indorsed by the payee to another person, is inconsequential. The same restriction is produced when a check is crossed: only the payee named in the 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 crossing is to ensure that the check will be encashed by the rightful payee only. Yet, despite the restriction on the negotiability of cross checks, we held that they are negotiable instruments. To be sure, negotiability is not the gravamen of the crime of estafa through bouncing checks. It is the fraud or deceit employed by the accused in issuing a worthless check that is penalized. 3. Criminal Law; Estafa; Bouncing Checks Law; Deceit, to constitute estafa, should be the efficient cause of defraudation a check issued in payment of a preexisting obligation does not constitute estafa even if there is no fund in the bank to cover the amount of the check.Deceit, to constitute estafa, should be the efficient cause of defraudation. It must have been committed either prior or simultaneous with the defraudation complained of. There must be concomitance: the issuance of a check should be the means to obtain money or property from the payee. Hence, a check issued in payment of a pre-existing obligation does not constitute estafa even if there is no fund in the bank to cover the amount of the check. 4. Appeals; The rule that findings of facts of trial courts are accorded not only respect, but at times, finality, admits of exceptions, as when there is a misapprehension of facts.While findings of fact of trial courts are accorded not only respect, but at times, finality, this rule admits of exceptions, as when there is a misappreciation of facts. 5. Criminal Law; Estafa; Bouncing Checks; There is no estafa through bouncing checks when it is shown that private complainant knew that the drawer did not have sufficient funds in the bank at the time the check was issued to him.-

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 have sufficient funds in the bank at the time the check was issued to him. Such knowledge negates the element of deceit and constitutes a defense in estafa through bouncing checks. 6. Criminal Law; Estafa; Bouncing Checks; Presumption of Innocence; As a matter of right, the constitutional presumption of innocence of the accused must be favored regardless of the inconsistencies in her testimony or the weakness of her own testimony.Despite the inconsistencies in the testimony of appellant, these were minor and 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 must be favored regardless of the inconsistencies in her testimony or the weakness of her own defense. 7. Criminal Law; Estafa; Bouncing Checks; An accused acquitted of estafa may be held civilly liable in the same case where the facts established by the evidence so warrant.Appellant, however, is not without liability. An accused acquitted of estafa may be held civilly liable in the same case where the facts established by the evidence so warrant. In the case at bar, the records lack sufficient evidence to determine the amount of her remaining obligation. 8. Appeals; Evidence; Remand of Cases; Where the evidence is not sufficient to warrant a conclusion, the case should be remanded to the court a quo for reception of further evidence.This Court is not a trier of facts and where the evidence on record is not sufficient to warrant a conclusion, the case should be remanded to the court a quo for reception of further evidence. Division: SECOND DIVISION Docket Number: G.R. No. 154159 Counsel: The Solicitor General, Marissa Grace L. Corrales Ponente: PUNO Dispositive Portion: IN VIEW WHEREOF, appellant Aloma Reyes is ACQUITTED of estafa under Article 315, paragraph 2(d) of the Revised Penal Code, as amended. The assailed Sentence of the Regional Trial Court of Davao City, Branch 11, dated March 13, 2002 is REVERSED and SET ASIDE. The case is REMANDED to the court a quo for the determination of appellant s civil liability. The Director of the Bureau of Corrections is DIRECTED to release her IMMEDIATELY unless she is being lawfully held for another offense.

Case Title : NOE S. ANDAYA, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Criminal Procedure|Criminal Law|Appeals|Falsification of Private Documents|Falsification of Commercial Documents|Criminal Procedure|Pleadings and Practice|Disbursement Vouchers|Words and Phrases|Presumption of Innocence|Right to be Informed Syllabi: 1. Criminal Procedure; Appeals; An appeal in a criminal case opens the whole action for review on any question including those not raised by the parties.Time honored is the principle that an appeal in a criminal case opens the whole action for review on any question including those not raised by the parties. After a careful and thorough review of the records, we are convinced that petitioner should be acquitted based on reasonable doubt. 2. Criminal Procedure; Pleadings and Practice; Public prosecutors must carefully study the evidence on record before filing the corresponding information in courts of law and must be vigilant in identifying and rectifying errors made.It is an opportune time to remind public prosecutors of their important duty to carefully study the evidence on record before filing the corresponding information in our courts of law and to be vigilant in identifying and rectifying errors made. Mistakes in filing the proper information and in the ensuing prosecution of the case serve only to frustrate the State s interest in enforcing its criminal laws and adversely affect the administration of justice. 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 voucher that a person was entitled to a finder s fee when in truth and in fact the entity owed no such amount to said person but the proof adduced during trial showed that the acts of the accused were designed to lower the tax base of another person and aid the latter in evading payment of taxes on the finder s fee, the accused cannot be convicted of falsifying the voucher with criminal intent to cause damage to the government.As in the Burgos case, the information in the case at bar is valid, however, there is a variance between the allegation in the information and proof adduced during trial with respect to the third essential element of falsification of private document, i.e., the falsification caused damage or was committed with intent to cause damage to a third party. To reiterate, petitioner was charged in the information with causing damage to AFPSLAI in the amount of P21,000.00 because he caused it to appear in the disbursement voucher that Guilas was entitled to a P21,000.00 finder s fee when in truth and in fact AFPSLAI owed no such amount to Guilas. However, he was convicted by the trial court of falsifying the voucher with criminal intent to cause damage to the government because the trial court found that petitioner s acts were designed to lower the tax base of Hernandez and aid the latter in evading payment of taxes on the finder s fee. We find this variance material and prejudicial to petitioner which, perforce, is fatal to his conviction in the instant case. By the clear and unequivocal terms of the information, the prosecution endeavored to prove that the falsification of the voucher by petitioner caused damage to AFPSLAI in the amount of P21,000.00 and not that the falsification of the voucher was done with intent to cause damage to the government. It is apparent that this variance not merely goes to the identity of the third party but, more importantly, to the nature and extent of the damage done to the third party. Needless to state, the defense applicable for each is different. 4. Same; Same; Same; The main purpose of requiring the various elements of a crime to be set out in the information is to enable the accused to suitably prepare his defense because he is presumed to have no independent knowledge of the facts that constitute the offense; To convict an accused of a ground not alleged while he is concentrating his defense against the ground alleged would plainly be unfair and underhanded.It is fundamental that every element constituting the offense must be alleged in the information. The main purpose of requiring the various elements of a crime to be set out in the information is to enable the accused to suitably prepare his defense because he is presumed to have no independent knowledge of the facts that constitute the offense. The allegations of facts constituting the offense charged are substantial matters and an accused s right to question his conviction based on facts not alleged in the information cannot be waived. No matter how conclusive and convincing the evidence of guilt may be, an accused cannot be convicted of any offense unless it is charged in the information on which he is tried or is necessarily included therein. To convict him of a ground not alleged while he is concentrating his defense against the ground alleged would plainly be unfair and underhanded. 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 prejudicial to the accused so much so that it affects his substantial rights. 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 information to warrant a finding of guilt for the said crime or for any other crime necessarily included therein.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 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 included therein. However, in the case at bar, the prosecution failed to prove the third essential element of the crime charged in the information. Thus, petitioner should be acquitted due to insufficiency of evidence. 6. Same; Same; Same; Same; Disbursement Vouchers; Words and Phrases; A disbursement voucher is a private document onlyit is not a commercial document because it is not a document used by merchants or businessmen to promote or facilitate trade or credit transactions nor it is defined and regulated by the Code of Commerce or other commercial law; A private document is a deed or instrument executed by a private person without the intervention of a public notary or of other person legally authorized, by which some disposition or agreement is proved, evidenced or set forth. The second element of the offense charged in the information, i.e., the falsification was committed in Disbursement Voucher No. 58380, a private document, is likewise present. It appears that the public prosecutor erroneously characterized the disbursement voucher as a commercial document so that he designated the offense as estafa through falsification of commercial document in the preamble

of the information. However, as correctly ruled by the trial court, the subject 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 nor is it defined and regulated by the Code of Commerce or other commercial law. Rather, it is a private document, which has been defined as a deed or instrument executed by a private person without the intervention of a public notary or of other person legally authorized, by which some disposition or agreement is proved, evidenced or set forth, because it acted as the authorization for the release of the P21,000.00 finder s fee to Guilas and as the receipt evidencing the payment of this finder s fee. 7. Same; Same; Falsification of Commercial Documents; Criminal Procedure; Pleadings and Practice;Although the public prosecutor designated the offense charged in the information as estafa through falsification of commercial document, the accused could be convicted of falsification of private document, had it been proper, 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 by the public prosecutor in the preamble of the information.Although the public prosecutor designated the offense charged in the information as estafa through falsification of commercial document, petitioner could be convicted of falsification of private document, had it been proper, 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 by the public prosecutor in the preamble of the information. We explained this principle in the case of U.S. v. Lim San in this wise: From a legal point of view, and in a very real sense, it is of no concern to the accused what is the technical name of the crime of which he stands charged. It in no way aids him in a defense on the merits. x x x That to which his attention should be directed, and in which he, above all things else, should be most interested, are the facts alleged. The real question is not did he commit a crime given in the law some technical and specific name, but did he perform the acts alleged in the body of the information in the manner therein set forth. x x x The real and important question to him is, Did you perform the acts alleged in the manner alleged? not, Did you commit a crime named murder? If he performed the acts alleged, in the manner stated, the law determines what the name of the crime is and fixes the penalty therefor. x x x If the accused performed the acts alleged in the manner alleged, then he ought to be punished and punished adequately, whatever may be the name of the crime which those acts constitute. 8. Criminal Law; Falsification of Private Documents; Elements.The elements of falsification of private document under Article 172, paragraph 2 in relation to Article 171 of the Revised Penal Code are: (1) the offender committed any of the acts of falsification under Article 171 which, in the case at bar, falls under paragraph 2 of Article 171, i.e., causing it to appear that persons have participated in any act or proceeding when they did not in fact so participate; (2) the falsification was committed on a private document; and (3) the falsification caused damage or was committed with intent to cause damage to a third party. Division: FIRST DIVISION Docket Number: G.R. No. 168486 Counsel: Luis S. Salas, The Solicitor General Ponente: YNARES-SANTIAGO Dispositive Portion: WHEREFORE, the petition is GRANTED. The September 29, 2004 Decision and April 26, 2005 Resolution of the Court Appeals in CA-G.R. CR No. 26556 are REVERSED and SET ASIDE. Petitioner is ACQUITTED based on reasonable doubt. The Bail Bond is CANCELLED.

Case Title : LEONILA BATULANON, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Criminal Law|Falsification|Estafa|Pleadings and Practice|Handwriting|Compromise|Words and Phrases Syllabi: 1. Criminal Law; Falsification; Estafa; Pleadings and Practice; Although the offense charged in the information is estafa through falsification of commercial document, the accused could be convicted of falsification of private document 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 preamble of the information.Although the offense charged in the information is estafa through falsification of commercial document, appellant could be convicted of falsification of private document 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 preamble of the information. In Andaya v. People, 493 SCRA 539 (2006), we held: From a legal point of view, and in a very real sense, it is of no concern to the accused what is the technical name of the crime of which he stands charged. It in no way aids him in a defense on the merits. x x x That to which his attention should be directed, and in which he, above all things else, should be most interested, are the facts alleged. The real question is not did he commit a crime given in the law some technical and specific name, but did he perform the acts alleged in the body of the information in the manner therein set forth. x x x The real and important question to him is, Did you perform the acts alleged in the manner alleged? not, Did you commit a crime named murder? If he performed the acts alleged, in the manner stated, the law determines what the name of the crime is and fixes the penalty therefor. x x x If the accused performed the acts alleged in the manner alleged, then he ought to be punished and punished adequately, whatever may be the name of the crime which those acts constitute. 2. Same; Same; Elements of Estafa Through Conversion or Misappropriation.The elements of estafa through conversion or misappropriation under Art. 315 (1) (b) of the Revised Penal Code are: (1) that money, goods or other personal property is received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; (2) that there be misappropriation or conversion of such money or property by the offender or denial on his part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice of another; (4) that there is a demand made by the offended party on the offender. (Note: The 4th element is not necessary when there is evidence of misappropriation of the goods by the defendant) 3. Same; Same; The essence of falsification is the act of making untruthful or false statements.In Criminal Case No. 3627, the trial court convicted petitioner Batulanon for falsifying Dennis Batulanon s signature in the cash voucher based on the Information charging her of signing the name of her 3 year old son, Dennis. The records, however, reveal that in Cash Voucher No. 374A, petitioner Batulanon did not falsify the signature of Dennis. What she did was to sign: by: lbatulanon to indicate that she received the proceeds of the loan in behalf of Dennis. Said act does not fall under any of the modes of falsification under Article 171 because there in nothing untruthful about the fact that she used the name of Dennis and that as representative of the latter, obtained the proceeds of the loan from PCCI. The essence of falsification is the act of making untruthful or false statements, which is not attendant in this case. As to whether, such 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 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 involving the cash voucher of Dennis. 4. Same; Same; Estafa; There is no complex crime of estafa through 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 falsification; If the estafa can be committed without the necessity of falsifying a document, the proper crime to be charged is estafa.As there is no complex crime of estafa through falsification of private document, it is important to ascertain whether the offender is to be charged 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 necessity of falsifying a document, the proper crime to be charged is estafa. Thus, in People v. Reyes, 56 Phil. 286 (1931), the accused made it appear in the 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 days, and then charged the offended party, the Calamba Sugar Estate, the wages of the laborer for 21 days. The accused misappropriated the wages during which the laborer did not work for which he was convicted of falsification of private document. 5. Same; Same; Words and Phrases; Vouchers are private documents and not commercial documents because they are not documents used by merchants or businessmen to promote or facilitate trade or credit transactions, nor are they defined and regulated by the Code of Commerce or other commercial law; Private documents are deeds or instruments executed by a private person

without the intervention of a public notary or of other person legally authorized, by which some disposition or agreement is proved, evidenced or set forth.The Court of Appeals correctly ruled that the subject vouchers are private documents and not commercial documents because they are not documents used by merchants or businessmen to promote or facilitate trade or credit transactions nor are they defined and regulated by the Code of Commerce or other commercial law. Rather, they are private documents, which have been defined as deeds or instruments executed by a private person without the intervention of a public notary or of other person legally authorized, by which some disposition or agreement is proved, evidenced or set forth. 6. Same; Same; Compromise; In criminal cases, except those involving quasioffenses or criminal negligence or those allowed by law to be compromised, an offer of compromise by the accused may be received in evidence as an implied admission of guilt.The claim that Batulanon s letter to the cooperative asking for a compromise was not an admission of guilt is untenable. Section 27, Rule 130 of the Rules of Court provides that in criminal cases, except those involving quasi-offenses or criminal negligence or those allowed by law to be compromised, an offer of compromise by the accused may be received in evidence as an implied admission of guilt. 7. Same; Same; Handwriting; The handwriting of a person may be proved by any witness who believes it to be the handwriting of such person because he has seen the person write, or has seen writing purporting to be his upon which the witness has acted or been charged, and has thus acquired knowledge of the handwriting of such person.Medallo categorically declared that she saw Batulanon forge the signatures of Oracion and Arroyo in the vouchers and made it appear that the amounts stated therein were actually received by these persons. As to the signature of Arroyo, Medallo s credible testimony and her familiarity with the handwriting of Batulanon proved that it was indeed the latter who signed the name of Arroyo. Contrary to Batulanon s contention, the prosecution is not duty-bound to present the persons whose signatures were forged as Medallo s eyewitness account of the incident was sufficient. Moreover, under Section 22, Rule 132 of the Rules of Court, the handwriting of a person may be proved by any witness who believes it to be the handwriting of such person because he has seen the person write, or has seen writing purporting to be his upon which the witness has acted or been charged, and has thus acquired knowledge of the handwriting of such person. 8. Same; Same; Elements of Falsification of Private Documents.The elements of falsification of private document under Article 172, paragraph 2 of the Revised Penal Code are: (1) that the offender committed any of the acts of falsification, except those in paragraph 7, Article 171; (2) that the falsification was committed in any private document; and (3) that the falsification caused damage to a third party or at least the falsification was committed with intent to cause such damage. Division: FIRST DIVISION Docket Number: G.R. No. 139857 Counsel: Acharon, Alconera & Associates, The Solicitor General Ponente: YNARES-SANTIAGO Dispositive Portion: WHEREFORE, the Decision appealed from is AFFIRMED with the following MODIFICATIONS:

Republic of the Philippines Supreme Court Manila SECOND DIVISION PENTACAPITAL INVESTMENT CORPORATION, Petitioner, - versus MAKILITO B. MAHINAY, Respondent. x--------------------------------------------------x

G.R. No. 1

PENTACAPITAL INVESTMENT CORPORATION, Petitioner,

G.R. No. 181482 Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: July 5, 2010

- versus -

MAKILITO B. MAHINAY, Respondent.

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) [1] [2] Decision dated December 20, 2005 and Resolution dated March 1, 2006 in CA-G.R. SP No. 74851; while in G.R. No. 181482, it assails the CA [3] [4] Decision dated October 4, 2007 and Resolution dated January 21, 2008 in CAG.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 [5] notes dated February 23, 1996. Despite repeated demands, respondent failed [6] to pay the loans, hence, the complaint. In his Answer with Compulsory Counterclaim, respondent claimed that petitioner had no cause of action because the promissory notes on which its [8] complaint was based were subject to a condition that did not occur. 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 [9] indebtedness. By way of counterclaim, respondent prayed for the payment of [10] moral and exemplary damages plus attorney s fees.
[7]

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 [11] It was further agreed that the thus received a check worth P1,715,156.90. balance would be payable upon the submission of an Entry of Judgment showing that the case involving the Molino Properties had been decided in [12] favor of CRDI. 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 of respondent, the Regional Trial Court (RTC) allowed [14] him to file a Third Party Complaint against CRDI, subject to the payment of [15] docket fees.
[13]

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 [16] [17] Properties. In an Amended Complaint, 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 [18] dismissed the case for lack of cause of action. The dismissal became final and executory. With the dismissal of the aforesaid case, respondent filed a Motion [19] to Permit Supplemental Compulsory Counterclaim. 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 [20] principal claim. 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 [21] Group of Companies. Over the opposition of petitioner, the RTC, in an Order dated August 22, 2002, allowed the filing of the supplemental counterclaim. Aggrieved, petitioner sought recourse in the CA through a special
[22]

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 [23] rendered the assailed Decision dismissing the petition. The appellate court sustained the allowance of the supplemental compulsory counterclaim based on the allegations in respondent s pleading. The CA further concluded that there was a logical relationship between the claims of petitioner in its complaint and those of respondent in his supplemental compulsory counterclaim. The CA declared that it was inconsequential that respondent did not clearly allege the facts required to pierce the corporate separateness of petitioner and its [24] subsidiary, the Pentacapital Realty. Petitioner now comes before us in G.R. No. 171736, raising the following issues: A. WHETHER RESPONDENT MAHINAY IS BARRED FROM ASSERTING THE CLAIM CONTAINED IN HIS SUPPLEMENTAL COMPULSORY COUNTERCLAIM ON THE GROUNDS OF (1) RES JUDICATA, (2) WILLFUL AND DELIBERATE FORUM SHOPPING, AND (3) FAILURE TO INTERPOSE SUCH CLAIM ON TIME PURSUANT TO SECTION 2 OF RULE 9 OF THE RULES OF COURT; B. WHETHER RESPONDENT MAHINAY S SUPPLEMENTAL COMPULSORY COUNTERCLAIM IS ACTUALLY A THIRD-PARTY COMPLAINT AGAINST PENTACAPITAL REALTY, THE INTRODUCTION OF WHICH REQUIRES THE PAYMENT OF THE NECESSARY DOCKET FEES; C. ASSUMING FOR THE SAKE OF PURE ARGUMENT THAT IT IS PROPER TO PIERCE THE CORPORATE VEIL AND TO ALLOW RESPONDENT MAHINAY TO LODGE A SUPPLEMENTAL COMPULSORY COUNTERCLAIM AGAINST HEREIN PETITIONER PENTACAPITAL INVESTMENT FOR AN ALLEGED OBLIGATION OF ITS SUBSIDIARY, PENTACAPITAL REALTY, ON THE THEORY THAT THEY ARE ONE AND THE SAME COMPANY, WHETHER PENTACAPITAL REALTY SHOULD HAVE AT LEAST BEEN MADE A PARTY TO THE CASE AS RULED BY THIS HONORABLE COURT IN FILMERCO COMMERCIAL CO., INC. VS. INTERMEDIATE APPELLATE COURT; D. WHETHER RESPONDENT MAHINAY SHOULD BE ALLOWED TO PRESENT EVIDENCE ON HIS SO-CALLED SUPPLEMENTAL COMPULSORY COUNTERCLAIM INASMUCH AS (1) RESPONDENT MAHINAY S PLEADINGS ARE BEREFT OF ANY ALLEGATIONS TO BUTTRESS THE MERGING OF PENTACAPITAL REALTY AND PENTACAPITAL INVESTMENT INTO ONE ENTITY AND THE CONSEQUENT IMPUTATION ON THE LATTER OF THE FORMER S SUPPOSED LIABILITY ON RESPONDENT MAHINAY S SUPPLEMENTAL COMPULSORY COUNTERCLAIM, AND (2) THE INCIDENTS ALLEGEDLY PERTAINING TO, AND WHICH WOULD THEREBY SUPPORT, THE PIERCING OF CORPORATE VEIL ARE NOT EVIDENTIARY MATTERS MATERIAL TO THE PROCEEDINGS BEFORE THE COURT A QUO CONSIDERING THAT THE SAME ARE BEYOND THE SCOPE OF THE PLEADINGS; E. WHETHER THE DOCTRINE OF PIERCING THE CORPORATE VEIL MAY BE INVOKED AND APPLIED IN ORDER TO EVADE AN OBLIGATION AND FACILITATE PROCEDURAL WRONGDOING; AND

F. WHETHER PETITIONER PENTACAPITAL INVESTMENT COMMITTED FORUM SHOPPING WHEN IT FILED THE PRESENT PETITION DURING THE PENDENCY OF THE MOTION FOR RECONSIDERATION IT FILED BEFORE THE COURT A QUO AND, SUBSEQUENTLY, OF THE APPEAL BEFORE THE COURT OF APPEALS TO QUESTION THE [25] JUDGMENT OF THE COURT A QUO.

There being no writ of injunction or Temporary Restraining Order (TRO), the proceedings before the RTC continued and respondent was allowed to present his evidence on his supplemental compulsory counterclaim. After [26] trial on the merits, the RTC rendered a decision dated March 20, 2006, the dispositive portion of which reads: WHEREFORE, PREMISES CONSIDERED, plaintiff s complaint is hereby ordered dismissed for lack of merit. This court, instead, finds that defendant was able to prove by a clear preponderance of evidence his cause of action against plaintiff as to defendant s compulsory and supplemental counterclaims. That, therefore, this court hereby orders the plaintiff to pay unto defendant the following sums, to wit: 1. P1,715,156.90 representing the amount plaintiff is obligated to pay defendant as provided for in the deed of sale and the supplemental agreement, plus interest at the rate of 16% per annum, to be computed from September 23, 1998 until the said amount shall have been fully paid; 2. Php 10,316,640.00 representing defendant s share of the proceeds of the sale of the Molino property (defendant s charging lien) plus interest at the rate of 16% per annum, to be computed from September 23, 1998 until the said amount shall have been fully paid; 3. Php 50,000.00 as attorney s fees based on quantum meruit; 4. Php 50,000.00 litigation expenses, plus costs of suit. This court finds it unnecessary to rule on the third party complaint, the relief prayed for therein being dependent on the possible award by this court of the [27] relief of plaintiff s complaint. On appeal, the CA, in CA-G.R. CV No. 86939, affirmed in toto the above decision. The CA found no basis for petitioner to collect the amount demanded, there being no perfected contract of loan for lack of [28] consideration. As to respondent s supplemental compulsory counterclaim, quoting the findings of the RTC, the appellate court held that respondent was able to prove by preponderance of evidence that it was the intent of Pentacapital Group of Companies and CRDI to give him P10,316,640.00 [29] andP1,715,156.90. The CA likewise affirmed the award of interest at the rate [30] of 16% per annum, plus damages. Unsatisfied, petitioner moved for reconsideration of the aforesaid [31] Decision, but it was denied in a Resolution dated January 21, 2008. Hence, the present petition in G.R. No. 181482, anchored on the following arguments: A. Considering that the inferences made in the present case are manifestly absurd, mistaken or impossible, and are even contrary to the admissions of respondent Mahinay, and inasmuch as the judgment is premised on a misapprehension of facts, this Honorable

Court may validly take cognizance of the errors relative to the findings of fact of both the Honorable Court of Appeals and the court a quo. B. Respondent Mahinay is liable to petitioner PentaCapital Investment for the PhP1,936,800.00 loaned to him as well as for damages and attorney s fees. 1. The Honorable Court of Appeals erred in concluding that respondent Mahinay failed to receive the money he borrowed when there is not even any dispute as to the fact that respondent Mahinay did indeed receive the PhP1,936,800.00 from petitioner PentaCapital Investment. 2. The Promissory Notes executed by respondent Mahinay are valid instruments and are binding upon him. C. Petitioner PentaCapital Investment cannot be held liable on the supposed supplemental compulsory counterclaim of respondent Mahinay. 1. The findings of fact as well as the conclusions arrived at by the Court of Appeals in its decision were based on mistaken assumptions and on erroneous appreciation of the evidence on record. 2. There is no evidence on record to support the merging of PentaCapital Realty and petitioner PentaCapital Investment into one entity and the consequent imputation on the latter of the former s supposed liability on respondent Mahinay s supplemental compulsory counterclaim. 3. Inasmuch as the claim of respondent Mahinay is supposedly against PentaCapital Realty, and considering that petitioner PentaCapital Investment is a separate, distinct entity from PentaCapital Realty, the latter should have been impleaded as it is an indispensable party. D. Assuming for the sake of pure argument that it is proper to disregard the corporate fiction and to consider herein petitioner PentaCapital Investment and its subsidiary, PentaCapital Realty, as one and the same entity, respondent Mahinay s supplemental compulsory counterclaim must still necessarily fail. 1.

The cause of action of respondent Mahinay, as contained in his supplemental compulsory counterclaim, is already barred by a prior judgment (res judicata). 2. Considering that the dismissal on the merits by the RTC Cebu of respondent Mahinay s complaint against PentaCapital Realty for attorney s fees has attained finality, respondent Mahinay committed a willful act of forum shopping when he interposed the exact same claim in the proceedings a quo as a supposed supplemental compulsory counterclaim against what he claims to be one and the same company. 3. Respondent Mahinay s supplemental compulsory counterclaim is actually a third party complaint against PentaCapital Realty; the filing thereof therefore requires the payment of the necessary docket fees. E. The doctrine of piercing the corporate veil is an equitable remedy which cannot and should not be invoked, much less applied, in order to evade an [32] obligation and facilitate procedural wrongdoing.

Simply put, the issues for resolution are: 1) whether the admission of respondent s supplemental compulsory counterclaim is proper; 2) whether respondent s counterclaim is barred by res judicata; and (3) whether petitioner is guilty of forum-shopping. The Court s Ruling Admission of Respondent s Supplemental Compulsory Counterclaim

The pertinent provision of the Rules of Court is Section 6 of Rule 10, which reads: Sec. 6. Supplemental pleadings. Upon motion of a party, the court may, upon reasonable notice and upon such terms as are just, permit him to serve a supplemental pleading setting forth transactions, occurrences or events which have happened since the date of the pleading sought to be supplemented. The adverse party may plead thereto within ten (10) days from notice of the order admitting the supplemental pleading. As a general rule, leave will be granted to a party who desires to file a supplemental pleading that alleges any material fact which happened or came within the party s knowledge after the original pleading was filed, such being the office of a supplemental pleading. The application of the rule would ensure that the entire controversy might be settled in one action, avoid unnecessary repetition of effort and unwarranted expense of litigants, broaden the scope of 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 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 [33] end to litigation. In his Motion to Permit Supplemental Compulsory Counterclaim, 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, [34] and founded on the same cause of action. Supplemental pleadings must state transactions, occurrences or events which took place since the time the [35] pleading sought to be supplemented was filed. 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 [36] they transacted with each other, and the event did not happen. 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 [37] obligation which is established. 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 [38] exists and is lawful unless the debtor proves the contrary. 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 [39] consideration for a contract. 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

prevail. The burden of proof remains where it is, but by the presumption, the 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 [40] place of evidence unless rebutted.

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 added that he did not apply for a loan and that when he signed the promissory notes, they were all blank forms and all the blank spaces were to be filled up only if the sale transaction over the subject properties would not push through because of a possible adverse decision in the civil cases involving them (the properties). He thus posits that since the sale pushed through, the promissory notes did not become effective. Contrary to the conclusions of the RTC and the CA, we find such proof insufficient to overcome the presumption of consideration. The presumption that a contract has sufficient consideration cannot be overthrown by the bare, uncorroborated and self-serving assertion of respondent that it has no [41] consideration. The alleged lack of consideration must be shown by [42] preponderance of evidence. 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 [43] conditions and/or agreements, if truly there were such. 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]

Lastly, respondent promised to pay 25% of his outstanding obligations as attorney s fees in case of non-payment thereof. Attorney s fees here are in the nature of liquidated damages. As long as said stipulation does not contravene law, morals, or public order, it is strictly binding upon respondent. Nonetheless, courts are empowered to reduce such rate if the same is iniquitous or [49] unconscionable pursuant to the above-quoted provision. This sentiment is echoed in Article 2227 of the Civil Code, to wit: Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.
[50]

Hence, we reduce the stipulated attorney s fees from 25% to 10%.

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 [45] In this case, 12% interest is reasonable. equity demand. 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 [46] fulfilled or is irregularly or inadequately fulfilled. However, a penalty charge [47] of 3% per month is unconscionable; 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 [48] the courts if it is iniquitous or unconscionable.

Respondent s Counterclaim

Counterclaim

and

Supplemental

The RTC, affirmed by the CA, granted respondent s counterclaims as it applied the doctrine of piercing the veil of corporate fiction. It is undisputed that the parties to the contract of sale of the subject properties are Pentacapital Realty as the buyer, CRDI as the seller, and respondent as the agent of CRDI. 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 that it was the former who paid the consideration of the sale. Hence, they concluded that the two corporations should be treated as one entity. Petitioner assails the CA Decision sustaining the grant of respondent s counterclaim and supplemental counterclaim on the following grounds: first, respondent s claims are barred by res judicata, the same having been adjudicated with finality by the RTC-Cebu in Civil Case No. CEB25032; second, piercing the veil of corporate fiction is without basis; third, the case is dismissible for failure to implead Pentacapital Realty as indispensable party; and last, respondent s supplemental counterclaim is actually a third party complaint against Pentacapital Realty, the filing thereof requires the payment of the necessary docket fees. Petitioner s contentions are meritorious. Res judicata means a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment. It lays the rule that an existing final judgment or decree rendered on the merits, without fraud or collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction, is 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 [51] points and matters in issue in the first suit. The requisites of res judicata are: (1) final; (2) It must be a judgment on the merits; The former judgment or order must be

conclusion that Pentacapital Realty is not a privy to the contract between 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. With these findings, and considering that petitioner s alleged liability stems from its supposed relation with Pentacapital Realty, logic dictates that the findings of the RTC-Cebu, which had become final and executory, should bind petitioner. It is well-settled that when material facts or questions in issue in a former action were conclusively settled by a judgment rendered therein, such 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 [54] form of the latter. Absolute identity of parties is not required, and where a shared identity of interest is shown by the identity of the relief sought by one person in a prior case and the second person in a subsequent case, such was [55] deemed sufficient. There is identity of parties not only when the parties in the cases are the same, but also between those in privity with them. No other procedural law principle is indeed more settled than that once a judgment becomes final, it is no longer subject to change, revision, 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 where the judgment itself is void. The underlying reason for the rule is twofold: (1) to avoid delay in the administration of justice and thus make orderly the discharge of judicial business; and (2) to put judicial controversies to an end, at the risk of occasional errors, inasmuch as controversies cannot be allowed to drag on indefinitely and the rights and obligations of every litigant must not [56] hang in suspense for an indefinite period of time. In view of the foregoing disquisitions, we find no necessity to discuss the other issues raised by petitioner. Forum Shopping For his part, respondent adopts the conclusions made by the RTC 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 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. 171736 assailing the CA Decision dated December 20, 2005. We do not agree with respondent. Forum-shopping is the act of a litigant who repetitively availed of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues, either pending in or already resolved adversely by some other court, to increase his chances of [57] obtaining a favorable decision if not in one court, then in another. What is important in determining whether forum-shopping exists is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon [58] the same issues. Forum-shopping can be committed in three ways: (1) by filing multiple cases based on the same cause of action and with the same prayer, the previous case not having been resolved yet (where the ground for dismissal is litis pendentia); (2) by filing multiple cases based on the same cause of action and with the same prayer, the previous case having been finally resolved (where the ground for dismissal is res judicata); and (3) by filing multiple cases 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 [59] judicata). More particularly, the elements of forum-shopping are: (a) identity of parties or at least such parties that represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the relief being founded on the same facts; (c) identity of the two preceding particulars, such that any judgment rendered in the other action will, regardless of which party is [60] successful, amount to res judicata in the action under consideration.

(3) It must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) There must be between the first and second actions, identity of parties, subject [52] matter, and cause of action. These requisites are present in the instant case. It is undisputed that respondent instituted an action for Preliminary Mandatory Injunction against 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, 2001, the court dismissed the complaint on two grounds: 1) non-payment of the correct filing fee considering that the complaint was actually a collection of sum of money although denominated as Preliminary Mandatory Injunction; and 2) lack of cause of action. The court treated the complaint as a collection suit because respondent was seeking the payment of his unpaid commission or 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 being no privity of contract between them. Lastly, the court held that it was CRDI which agreed that 20% of the total consideration of the sale be paid and [53] delivered to respondent. Instead of assailing the said Order, respondent filed his supplemental compulsory counterclaim, demanding again the payment of his commission, this time, against petitioner in the instant case. The Order, therefore, became final and executory. Respondent s supplemental counterclaim against petitioner is 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 against petitioner, through a counterclaim, on the basis of the same cause of action. Thus, if we follow respondent s contention that petitioner and Pentacapital Realty are one and the same entity, the latter being a subsidiary of the former, respondent is barred from instituting the present case based on the principle of bar by prior judgment. The RTC-Cebu already made a definitive

These elements are not present in this case. In G.R. No. 171736, petitioner assails the propriety of the admission of respondent s supplemental compulsory counterclaim; while in G.R. No. 181482, petitioner assails the grant of respondent s supplemental compulsory counterclaim. In other words, the first case originated from an interlocutory order of the RTC, while the second case is an appeal from the decision of the court on the merits of the case. There is, therefore, no forum-shopping for the simple reason that the petition and the appeal involve two different and distinct issues. WHEREFORE, premises considered, the petitions are hereby GRANTED. The Decisions and Resolutions of the Court of Appeals dated December 20, 2005 and March 1, 2006, in CA-G.R. SP No. 74851, and October 4, 2007 and January 21, 2008, in CA-G.R. CV No. 86939, are REVERSED and SET ASIDE. Respondent Makilito B. Mahinay is ordered to pay petitioner Pentacapital Investment Corporation P1,936,800.00 plus 12% interest per annum, and 12% per annum penalty charge, starting February 17, 1997. He is likewise ordered to pay 10% of his outstanding obligation as attorney s fees. No pronouncement as to costs. SO ORDERED. Case Title : BIBIANO V. BAAS, JR., petitioner, vs. COURT OF APPEALS, AQUILINO T. LARIN, RODOLFO TUAZON AND PROCOPIO TALON, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Appeals|Negotiable Instruments Law|Taxation|Actions|Evidence|Promissory Notes|Words and Phrases|Tax Amnesty|Statutory Construction|Sales|Installment Method|Although the proceed of a discounted promissory note is not considered part of the initial payment|it is still taxable income for the year it was converted into cash|Libel|Damages|Public Officers|Taxation Syllabi: 1. Appeals; Evidence; Findings of fact by the Court of Appeals especially if they affirm factual findings of the trial court will not be disturbed by the Supreme Court, unless these findings are not supported by evidence.As repeatedly held, findings of fact by the Court of Appeals especially if they affirm factual findings of the trial court will not be disturbed by this Court, unless these findings are not supported by evidence. Similarly, neither should we disturb a finding of the trial court and appellate court that an allegation is not supported by evidence on record. Thus, we agree with the conclusion of respondent court that herein private respondents, on the basis of evidence, could not be held liable for extortion. 2. Negotiable Instruments Law; Promissory Notes; Words and Phrases; Ordinarily, when a bill is discounted, the lender (e.g. banks, financial institution) charges or deducts a certain percentage from the principal value as its compensation.It will be recalled that petitioner entered into a deed of sale purportedly on installment. On the same day, he discounted the promissory note covering the future installments. The discounting seems questionable because ordinarily, when a bill is discounted, the lender (e.g. banks, financial institution) charges or deducts a certain percentage from the principal value as its compensation. Here, the discounting was done by the buyer. 3. Taxation; Tax Amnesty; The mere filing of tax amnesty return under Presidential Decrees 1740 and 1840 does not ipso facto shield the taxpayer from immunity against prosecution to avail of a tax amnesty granted by the government, and to be immune from suit on its delinquencies, the taxpayer must have voluntarily disclosed his previously untaxed income and must have paid the corresponding tax on such previously untaxed income.On July 2, 1981, two weeks after the filing of the tax evasion complaint against him by respondent Larin on June 17, 1981, petitioner availed of the tax amnesty under P.D. No. 1740. His amended tax return for the years 1974-1979 was filed with the BIR office of Valenzuela, Bulacan, instead of Manila where the petitioner s principal office was located. He again availed of the tax amnesty under P.D. No. 1840. His disclosure, however, did not include the income from his sale of land to AYALA on cash basis. Instead he insisted that such sale was on installment. He did not amend his income tax return. He did not pay the tax which was considerably increased by the income derived from the discounting. He did not meet the twin requirements of P.D. 1740 and 1840, declaration of his untaxed income and full payment of tax due thereon. Clearly, the petitioner is not entitled to the benefits of P.D. Nos. 1740 and 1840. The mere filing of tax

amnesty return under P.D. 1740 and 1840 does not ipso facto shield him from immunity against prosecution. Tax amnesty is a general pardon to taxpayers who want to start a clean tax slate. It also gives the government a chance to collect uncollected tax from tax evaders without having to go through the tedious process of a tax case. To avail of a tax amnesty granted by the government, and to be immune from suit on its delinquencies, the taxpayer must have voluntarily disclosed his previously untaxed income and must have paid the corresponding tax on such previously untaxed income. 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, the terms of the amnesty like that of a tax exemption must be construed strictly against the taxpayer and liberally in favor of the taxing authority.It also bears noting that a tax amnesty much like a tax exemption, is never 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 liberally in favor of the taxing authority. Hence, on this matter, it is our view that petitioner s claim of immunity from prosecution under the shield of availing tax amnesty is untenable. 5. Taxation; Sales; Installment Method; Words and Phrases; Initial payment under Section 43 of the 1977 National Internal Revenue Code and Section 175 of Revenue Regulation No. 2 means the payment received in cash or property excluding evidences of indebtedness due and payable in subsequent years, like 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 from the disposition to a third person of notes given by the vendee as part of the purchase price which are due and payable in subsequent years.Section 43 and Sec. 175 says that among the entities who may use the abovementioned installment method is a seller of real property who disposes his property on installment, provided that the initial payment does not exceed 25% of the selling price. They also state what may be regarded as installment payment and what constitutes initial payment. Initial payment means the payment received in cash or property excluding evidences of indebtedness due and payable in subsequent years, like promissory notes or mortgages, given of the purchaser during the taxable year of sale. Initial payment does not include amounts received by the vendor in the year of sale from the disposition to a third person of notes given by the vendee as part of the purchase price which are due and payable in subsequent years. Such disposition or discounting of receivable is material only as to the computation of the initial payment. If the initial payment is within 25% of total contract price, exclusive of the proceeds of discounted notes, the sale qualifies as an installment sale, otherwise it is a deferred sale. 6. Taxation; Sales; Installment Method; Although the proceed of a discounted promissory note is not considered part of the initial payment, it is still taxable income for the year it was converted into cash;If the seller disposes the entire installment obligation by discounting the bill or the promissory note, he necessarily must report the balance of the income from the discounting not only income from the initial install-ment paymentAlthough the proceed of a discounted promissory note is not considered part of the initial payment, it is still taxable income for the year it was converted into cash. The subsequent payments or liquidation of certificates of indebtedness is reported using the installment method in computing the proportionate income to be returned, during the respective year it was realized. Non-dealer sales of real or personal property may be reported as income under the installment method provided that the obligation is still outstanding at the close of that year. If the seller disposes the entire installment obligation by discounting the bill or the promissory note, he necessarily must report the balance of the income from the discounting not only income from the initial installment payment. 7. Taxation; Sales; Installment Method; Where the seller has the promissory notes covering the succeeding installment payments of the land issued by the buyer, discounted by said buyer itself, on the same day of the sale, he loses entitlement to report the sale as a sale on installment since a taxable disposition results and the seller is required by law to report in his returns the income derived from the discounting.Where an installment obligation is discounted at a bank or finance company, a taxable disposition results, even if the seller guarantees its payment, continues to collect on the installment obligation, or handles repossession of merchandise in case of default. This rule prevails in the United States. Since our income tax laws are of American origin, interpretations by American courts on our parallel tax laws have persuasive effect on the interpretation of these laws. Thus, by analogy, all the more would a taxable disposition result when the discounting of the promissory note is done by the seller himself. Clearly, the indebtedness of the buyer is discharged, while the seller acquires money for the settlement of his 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 increase of wealth. Although the proceeds of a discounted promissory note is not considered initial payment, still it must be included as taxable income on the year it was converted to cash. When petitioner had the promissory notes covering the succeeding installment payments of the land issued by AYALA, discounted by AYALA itself, on the same day of the sale, he lost entitlement to report the sale as a sale on installment since, a taxable disposition resulted and petitioner was required by law to report in his returns the income derived from the discounting. What petitioner did is tantamount to an attempt to circumvent the rule on payment of income taxes gained from the sale of the land to AYALA for the year 1976. 8. Actions; Libel; Damages; Actual damages cannot be allowed unless supported by evidence on the record the court cannot rely on speculation, conjectures or guesswork as to the fact and amount of damages.The records of the case contain no statement whatsoever of the amount of the actual damages sustained by the respondents. Actual damages cannot be allowed unless supported by evidence on the record. The court cannot rely on speculation, conjectures or guesswork as to the fact and amount of damages. To justify a grant of actual or compensatory damages, it is necessary to prove with 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 counter-claimed by respondent Larin, the award of such damages should be deleted. 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 he proves that the statement was made with actual malice.Moral damages may be recovered in cases involving acts referred to in Article 21 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 was made with actual malice. In Babst, et al. vs. National Intelligence Board, et al., 132 SCRA 316, 330 (1984), we reiterated the test for actual malice as set forth in the landmark American case of New York Times vs. Sullivan, which we have long adopted, in defamation and libel cases, viz.: . . . with knowledge that it was false or with reckless disregard of whether it was false or not. 10. Actions; Libel; Damages; Public Officers; Taxation; There is sufficient basis 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.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 land, in installment. We can further grant that the pertinent tax laws needed construction, as we have earlier done. That petitioner was offended by the 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 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 tax investigation against the petitioner started, Larin was not yet the Regional Director of BIR Region IV-A, Manila. On respondent Larin s instruction, petitioner s tax assessment was considered one involving a sale of capital asset, the income from which was subjected to only fifty percent (50%) assessment, thus reducing the original tax assessment by half. These circumstances may be taken to show that Larin s involvement in extortion was not indubitable. Yet, 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 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 there is sufficient basis for the award of moral and exemplary damages in favor of respondent Larin. The appellate court believed respondent Larin when he said he suffered anxiety and humiliation because of the unfounded charges against him. Petitioner s actions against Larin were found unwarranted and baseless, and the criminal charges filed against him in the Tanodbayan and City Fiscal s Office were all dismissed. Hence, there is adequate support for respondent court s conclusion that moral damages have been proved. 11. Actions; Libel; Damages; Public Officers; Considering that in the instant case the award is in favor of a government official in connection with his official function, it is with caution that the Supreme Court affirms granting moral damages, for it might open the floodgates for government officials counterclaiming damages in suits filed against them in connection with their functions.It will be noted that in above cases, the parties who were awarded moral damages were not public officials. Considering that here, the award is in favor of a government official in connection with his official function, it is with caution that we affirm granting moral damages, for it might open the floodgates for government officials counter-claiming damages in suits filed against them in

connection with their functions. Moreover, we must be careful lest the amounts awarded make citizens hesitate to expose corruption in the government, for fear of lawsuits from vindictive government officials. Thus, conformably with our declaration that moral damages are not intended to enrich anyone, we hereby reduce the moral damages award in this case from two hundred thousand (P200,000.00) pesos to seventy five thousand (P75,000.00) pesos, while the exemplary damage is set at P25,000.00 only. 12. Actions; Libel; Damages; The law allows the award of attorney s fees when exemplary damages are awarded, and when the party to a suit was compelled to incur expenses to protect his interest.The law allows the award of attorney s fees when exemplary damages are awarded, and when the party to a suit was compelled to incur expenses to protect his interest. Though government officers are usually represented by the Solicitor General in cases connected with the performance of official functions, considering the nature of the charges, herein respondent Larin was compelled to hire a private lawyer for the conduct of his defense as well as the successful pursuit of his counterclaims. In our view, given the circumstances of this case, there is ample ground to award in his favor P50,000.00 as reasonable attorney s fees. Division: SECOND DIVISION Docket Number: G.R. No. 102967 Counsel: Cuevas, De la Cuesta & De las Alas, Francisco Malate, Ramon U. Ampil Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the assailed decision of the Court of Appeals dated November 29, 1991, is hereby AFFIRMED with MODIFICATION so that the award of actual damages are deleted; and that petitioner is hereby ORDERED to pay to respondent Larin moral damages in the amount of P75,000.00, exemplary damages in the amount of P25,000.00, and attorney s fees in the amount of P50,000.00 only.

[G.R. No. 117319. July 19, 2006] BPI FAMILY BANK versus COURT OF APPEALS, COURT OF TAX APPEALS AND COMMISSIONER OF INTERNAL REVENUE Third Division Sirs/Mesdames: Quoted hereunder, for your information, is a resolution of this Court dated JULY 19, 2006. G.R. No. 117319 (BPI Family Bank versus Court of Appeals, Court of Tax Appeals and Commissioner of Internal Revenue) x ------------------------------------------------------------------------------------------------------------------------ x RESOLUTION From April 28, 1986 to December 19, 1986, petitioner affixed and paid the documentary stamps on its confirmations of sale of T-bills and Central Bank bills. On April 6, 1987, the Bureau of Internal Revenue (BIR) issued Revenue [1] Memorandum Circular No. 13-87 stating among others that no documentary stamp tax shall be imposed on documents of conveyance of instruments [2] enumerated in Section 229, presently Section 180 of the National Internal Revenue Code (NIRC). Pursuant thereto, petitioner filed with the BIR a claim for refund, amounting to P1,116,612, alleging among others that T-bills and Central Bank bills fall within the purview of the instruments enumerated in Section 229 (now Section 180) of the National Internal Revenue Code. On April 15, 1988, petitioner filed a petition for review with the respondent Court of Tax Appeals. The Court of Tax Appeals denied the claim for refund, and later on, the motion for reconsideration. On appeal, the Court of Appeals ruled that, procedurally, the petitioner failed to attach in its petition the proof of service and the duplicate original of the Court of Tax Appeals' decision; and on the substantial merits of the appeal, the sale and transfer of Tbills and Central Bank bills are subject to documentary stamp tax under Section

225 (now Section 176) of the NIRC. The dispositive portion of the Court of Appeals' decision reads as follows: WHEREFORE, the instant petition is hereby DISMISSED and the decision under review AFFIRMED. Costs against petitioner. SO ORDERED.
[4]

[3]

A perusal of Section 225 shows that on all sales, or agreements to sell, 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 transfer or sale whether entitling the holder in any manner to the benefit of 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 are covered by the said provision. Under Section 1 of Republic Act No. 245, as amended by P.D. No. 142, 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 noncompetitive 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 [13] Bank conformably with Section 98 of R.A. No. 265, which authorizes the Central Bank to issue and negotiate Central Bank obligations, and to place, buy, and sell freely its negotiable evidence of indebtedness. Contrary to petitioner's argument, a certificate of indebtedness is different from ordinary debt instruments such as promissory notes and deposit substitutes. A certificate of indebtedness includes only instruments having the general character of investment securities as distinguished from instruments [14] evidencing debts arising in ordinary transactions between individuals. As distinguished from a promissory note which is an unconditional promise in writing made 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, [15] to order or bearer, T-bills and Central Bank bills are investment securities of a public character, issued by the Philippine Government, thru the Central Bank of the Philippines. On the other hand, the chief feature of a deposit substitute is [16] borrowing. In this case, petitioner sells government securities to private individuals/entities, in which its confirmations of sale are being subjected to documentary stamp tax. There is no borrowing or debt instrument involved in this case. Here, the petitioner, as the seller, simply conveys through sale, specific government securities to the buyer, who thereby acquires title thereto, including the plenary right of disposal. As there is no borrowing, there is no debt with respect to which the seller can be primarily bound. Nor is the seller subsidiarily bound to respond in case the issuer of the said securities defaults, hypothetically assuming that the Philippine Government, as issuer of the securities sold, could default. Precisely, the sale of said government securities is always "without recourse." Both the respondent courts correctly held that whether T-bills and Central Bank bills are denominated as certificates of obligations, certificates of indebtedness or evidence of indebtedness, they bear the same meaning. Section 225 is clear. On all sales, or agreements to sell, 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 transfer or sale whether entitling the holder in any manner to the benefit of such certificates of obligation, there shall be collected a documentary stamp tax. The nomenclatures, i.e., evidence of indebtedness, certificate of obligation and certificate of indebtedness, bear the same meaning and although their various appellations are used interchangeably by law, they all refer to the subject securities, i.e., T-bills and Central Bank bills. Rules and regulations issued by the administrative officials to implement [17] a law cannot go beyond the terms and provisions of the latter. While the 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 judicially found to be erroneous. Administrative rulings have been aptly described as follows: "They are the best guess of the moment and incidentally often contain such well considered and sound law; but the courts have held that they do not prevent an entire change of front at any time and are merely advisory - sort of an information service to the taxpayer." Moreover, administrative rulings of previous Commissioners are not conclusive and [18] binding upon their successors if the latter become convinced that a law warrants a different construction. Therefore, courts will not countenance administrative rulings that are not consistent and in harmony with the law they seek to apply and implement. Therefore, the confirmations of sale of government securities made by the petitioner to private individuals/entities are subject to documentary stamp tax pursuant to Section 225 of the NIRC.
[12]

[11]

Hence, this petition, raising the following issues: From the foregoing it is clear that there is a procedural as well as substantive issue that presents itself in this case. The procedural issue is whether the 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 committed reversible error in not ruling that Treasury Bills and Central [Bank] Bills are promissory notes or are included in the definition of deposit substitutes [5] under sec. 180 of the NIRC. (Stress supplied.) Simply, the issue on the substantive aspect is, Are T-bills and Central Bank bills subject to documentary stamp tax under Section 225 of the NIRC? On the procedural aspect, the issue is: Did the Court of Appeals err in dismissing the petition for failure to attach the proof of service and the duplicate original of the Court of Tax Appeals' decision? Before us, petitioner now submits that said government securities do not fall under Section 225. Also, petitioner claims that those cited government securities are deemed as promissory notes and/or deposit substitutes enumerated under Section 229 (now Section 180), hence, by virtue of Revenue Memorandum Circular No. 13-87, they are not subject to documentary stamp tax. Petitioner also contends that: (1) in BIR Ruling No. 036 dated February 10, 1988, the then Commissioner has issued an opinion addressed to the Chief of the Banks, Financing & Insurance Division of the BIR that, since treasury bills are considered as deposit substitutes, they are subject to documentary stamp tax under Section 229 of [6] the NIRC; (2) Revenue Regulations No. 17-84, Section 2(h)(b) provided that, the following borrowings shall be considered as deposit substitutes, ". . .(b) All borrowings of the national and local government and its instrumentalities including the Central Bank of the Philippines, evidenced by debt instruments denoted as treasury bonds, bills, notes, certificates of [7] indebtedness and similar instruments;" (3) Revenue Memorandum Circular No. 13-87, stated that, since Section 225 of the NIRC applies only to documents of conveyances covering instruments stated in Sections 223 and 224 (now Secs. 174 and 175) of the NIRC, it follows that documents of conveyance covering instruments stated in [8] Section 229 are not subject to DST. Therefore, according to petitioner, the subject government securities are exempt from documentary stamp taxes. The tax court and the appellate court, however, held that T-bills and Central Bank bills, under its governing laws, Republic Act No. 245, as amended [9] [10] by Presidential Decree No. 142, and R.A. No. 265, are denominated as evidence of indebtedness, hence, are deemed the same as certificates of obligations or certificates of indebtedness. They added that the issuance of said government securities falls within the purview of Sections 222 (now Section 173) and 223 (now Section 174), while its sale, transfer or conveyance is under Section 225 (now Section 176) of the NIRC. We agree with the ruling of both the tax and appellate courts. It bears stressing that the main issue raised before us is: Are confirmations of sale of the subject government securities, between herein petitioner and private individuals/entities, subject to documentary stamp tax?

We see no need to rule on the procedural issues, since the Court of Appeals, despite pronouncement of the alleged procedural defects, nevertheless, ruled on the merits of the case. WHEREFORE, the instant petition is DENIED. The Court of Appeals' decision dated September 19, 1994 in CA-G.R. SP No. 29853 isAFFIRMED. No pronouncement as to costs. SO ORDERED. Very truly yours, (Sgd.) LUCITA ABJELINA-SORIANO Clerk of Court Supplementary Revenue Memorandum Circular to Revenue Memorandum Circular No. 33-86, Publishing Questions and Answers to Documentary Stamp Tax. [2] SEC. 229. Stamp Tax on negotiable promissory notes, bills of exchange, drafts, certificates of deposit bearing interest and others not payable on sight or demand. - On all bills of exchange (between points within the Philippines), drafts or certificates of deposit drawing interest, or orders for the payment of any sum of money otherwise than at sight or on demand, on all negotiable 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, deliveries or transfer of bonds, due bills, certificate of obligation, or shares or certificates of stock. - On all sales, or agreements to sell, or memoranda of sales, or deliveries, or transfer of bonds, dues-bills, certificates of obligation, or shares or certificates of stock, in any association, company, or corporation, or transfer of such securities by assignment in blank, or by delivery, 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 certificate of obligation . . . or for the future transfer of any . . . certificate of obligation . . . there shall be collected a documentary stamp tax . . . [4] Rollo, p. 100. [5] Id. at 189. [6] Id. at 22-23. [7] Id. at 23. [8] Id. at 21. [9] AMENDING REPUBLIC ACT NO. 245 ENTITLED "AN ACT AUTHORIZING THE SECRETARY OF FINANCE TO BORROW TO MEET PUBLIC EXPENDITURES AUTHORIZED BY LAW AND FOR OTHER PURPOSES. [10] AN ACT ESTABLISHING THE CENTRAL BANK OF THE PHILIPPINES, DEFINING ITS POWERS IN THE ADMINISTRATION OF THE MONETARY AND BANKING SYSTEM, AMENDING THE PERTINENT PROVISIONS OF THE ADMINISTRATIVE CODE WITH RESPECT TO THE CURRENCY AND THE BUREAU OF BANKING, AND FOR OTHER PURPOSES. [11] Supra, note 3. [12] Section 1. In order to meet public expenditures authorized by law or to provide for the purchase, redemption, or refunding of any obligations, either direct or guaranteed, of the Philippine Government, the Secretary of Finance, with the approval of the President of the Philippines, after consultation with the Monetary Board, is authorized to borrow from time to time on the credit of the Republic of the Philippines such sum or sums as in his judgment may be necessary, and to issue therefore evidences of indebtedness of the Philippine Government. Such evidences of indebtedness may be of the following types: a. Treasury bills issued on a discount basis or at par and payable at maturity without interest. Treasury bills may be offered for sale either on a competitive basis or at a fixed rate of discount or at par and may be made payable at any date not later than one year from the date of issue; x x x x [13] SEC. 98. Issue and negotiation of Central Bank obligations. - In order to provide the Central Bank with effective instruments for open market operations, the Bank may, subject to such rules and regulations as the Monetary Board may prescribe and in accordance with the principles stated in Section 96 of this Act, issue, place, buy and sell freely negotiable evidences of indebtedness of the Bank. Said evidences of indebtedness may be issued directly against the international reserve of the Bank or against the securities which it has acquired under the provisions of Section 97 of this Act, or may be issued without relation to specific types of assets of the Bank. x x x x [14] The Revised Documentary Stamp Tax Regulation, promulgated by the Department of Finance on September 16, 1924. XXII O.G. 112, p. 2335.
[1]

ACT No. 2031, Sec. 184. Promissory note defined. - A negotiable promissory note within the meaning of this Act is an unconditional promise in writing made 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 bearer. Where a note is drawn to the maker's own order, it is not complete until indorsed by him. [16] Revenue Memorandum Circular No. 62-2003 provides, [T]he chief feature of a deposit substitute is "borrowing." Without borrowing, 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 whatever name it is called and whatever be its form. The liability may be either 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 the seller in case the person primarily liable under the underlying instrument fails to pay. For this reason, "deposit substitutes" include certificates of assignment or participation "with recourse." Of course, if the seller is, by stipulation, already primarily liable - as where he has the firm obligation to buy back the very same debt paper he has sold - it is superfluous to talk of transfer "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 a deposit substitute . . . [17] People v. Lim, 108 Phil. 1091, 1094 (1960). [18] Hilado v. Coll. Of Internal Rev. and Ct. of Tax Appeals, 100 Phil. 288, 294 (1956). Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent. Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Documentary Stamp Tax|Bills of Exchange|Letters of Credit|Taxation|Excise Tax|Negotiable Instruments Law (Act No. 2031|Word and Phrases|Documentary Stamp Tax| Draft and Bank Draft| Explained|Words and Phrases;|Interests Syllabi: 1. Documentary Stamp Tax; Section 195 (now Section 182) of the National Internal Revenue Code (NIRC) imposes a documentary stamp tax on (1) foreign bills of exchange, (2) letters of credit, and (3) orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons.The first issue raised by the petitioner is whether BPI is liable for documentary stamp taxes in connection with its sale of foreign exchange to the Central Bank in 1986 under Section 195 (now Section 182) of the NIRC, quoted hereunder: Sec. 182. Stamp tax on foreign bills of exchange and letters of credit. On all foreign bills of exchange and letters of credit (including orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons) drawn in but payable out of the Philippines in a set of three or more according to the custom of merchants and bankers, there shall be collected a documentary stamp tax of thirty centavos on each two hundred pesos, or fractional part thereof, of the face value of such bill of exchange or letter of credit, or the Philippine equivalent of such face value, if expressed in foreign country. To determine what is being taxed under this section, a discussion on the nature of the acts covered by Section 195 (now Section 182) of the NIRC is indispensable. This section imposes a documentary stamp tax on (1) foreign bills of exchange, (2) letters of credit, and (3) orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by any person or persons. This enumeration is further limited by the qualification that they should be drawn in the Philippines and payable outside of the Philippines. 2. Same; Collecting charges incident to tax delinquency is mandatory.Based on established doctrine, these charges incident to delinquency are compensatory in nature and are imposed for the taxpayers use of the funds at the time when the State should have control of said funds. Collecting such charges is mandatory. Therefore, the Decision of the Court of Appeals imposing a 20% delinquency interest over the assessment reduced by the CTA was justified and in accordance with Section 249(c)(3) of the NIRC. 3. Taxation; Interests; Even if an assessment is later reduced by the courts, a delinquency interest should still be imposed from the time demand was made by the Commissioner of Internal Revenue;The intention of the law is precisely to discourage delay in the payment of taxes due to the State and, in this sense, the surcharge and interest charged are not penal but compensatory in naturethey are compensation to the State for the delay in payment, or for the concomitant use of the funds by the taxpayer beyond the date he is supposed to have paid them to the State. In the case of Philippine Refining Company v.

[15]

Court of Appeals, 256 SCRA 667 (1996), this Court categorically ruled that even if an assessment was later reduced by the courts, a delinquency interest should still be imposed from the time demand was made by the CIR. As correctly pointed out by the Solicitor General, the deficiency tax assessment in this case, which was the subject of the demand letter of respondent Commissioner dated April 11, 1989, should have been paid within thirty (30) days from receipt thereof. By reason of petitioner s default thereon, the delinquency penalties of 25% surcharge and interest of 20% accrued from April 11, 1989. The fact that petitioner appealed 4. Excise Tax; The power to levy an excise upon the performance of an act or the engaging in an occupation does not depend upon the domicile of the person subject to the excise, nor upon the physical location of the property and in connection with the act or occupation taxed, but depends upon the place in which the act is performed or occupation engaged in; Section 195 (now Section 182) of the NIRC would be rendered invalid if the fact that the payment was made outside of the country can be used as a basis for nonpayment of the tax.BPI argues that the foreign exchange sold was deposited and 5. Bills of Exchange; Draft and Bank Draft, Explained; Words and Phrases; In the case of a bill of exchange, the funds may belong to the drawer and need not be advanced by the drawee, as in the case of a check or a draft; A draft is a form of a bill of exchange used mainly in transactions between persons physically remote from each other, an order made by one person, say the buyer of goods, addressed to a person having in his possession funds of such buyer ordering the addressee to pay the purchase price to the seller of the goods, and where the order is made by one bank to another, it is referred to as a bank draft.The fact that the funds belong to BPI and were not advanced by the correspondent bank will not remove the transaction from the coverage of Section 195 (now Section 182) of the NIRC. There are transactions covered by this section wherein funds belonging to the drawer are used for payment. A bill of exchange, when drawn in the Philippines but payable in another country, would surely be covered by this section. And in the case of a bill of exchange, the funds may belong to the drawer and need not be advanced by the drawee, as in the case of a check or a draft. In the description of a draft provided hereunder, the drawee is in possession of funds belonging to the drawer of the bill: A draft is a form of a bill of exchange used mainly in transactions between persons physically remote from each other. It is an order made by one person, say the buyer of goods, addressed to a person having in his possession funds of such buyer ordering the addressee to pay the purchase price to the seller of the goods. Where the order is made by one bank to another, it is referred to as a bank draft. 6. Same; Same; Credit and Deposit, Defined; Words and Phrases; By the definition of credit being equated with the term deposits, BPI s deposit account with its correspondent bank is much the same as the credit referred to in Section 51 of Regulations No. 26the fact that the funds transferred to the Central Bank s account with the Federal Reserve Bank are from BPI s deposit account with the correspondent bank can only underline that the present case is the same situation described under Section 51 of Regulations No. 26. BPI further alleges that since the funds transferred to the Federal Reserve Bank were taken from BPI s account with the correspondent bank, this is not the transaction contemplated under Section 51 of Regulations No. 26. BPI argues that Section 51 of Regulations No. 26, in using the phrase with which local bank has credit, involves transactions wherein the drawee bank pays with its own funds and excludes from the coverage of the law situations wherein the funds paid out by the correspondent bank are owned by the drawer. In the case of Republic of the Philippines v. Philippine National Bank, 3 SCRA 851 (1961), the Court equated credit with the term deposits, and identified the depositor as the creditor and the bank as the debtor. And as correctly stated by the trial court, the term credit in its usual meaning is a sum credited on the books of a company to a person who appears to be entitled to it. It presupposes a creditordebtor relationship, and may be said to imply ability, by reason of property or estates, to make a promised payment. It is the correlative to debt or indebtedness, and that which is due to any person, as distinguished from that which he owes. The same is true with the term deposits in banks where the relationship created between the depositor and the bank is that of creditor and debtor. By this definition of credit, BPI s deposit account with its correspondent bank is much the same as the credit referred to in Section 51 of Regulations No. 26. Thus, the fact that the funds transferred to the Central Bank s account with the Federal Reserve Bank are from BPI s deposit account with the correspondent bank can only underline that the present case is the same situation described under Section 51 of Regulations No. 26.

7. Same; What is being taxed is the facility that allows a party to draw the draft or make the order to pay within the Philippines and have the payment made in another country.BPI alleges that the assailed decision must be reversed since the sale between BPI and the Central Bank of foreign exchange, as distinguished from foreign bills of exchange, is not subject to the documentary stamp taxes prescribed in Section 195 (now Section 182) of the NIRC. This argument leaves much to be desired. In this case, it is not the sale of foreign exchange per se that is being taxed under Section 195 of the NIRC. This section refers to a documentary stamp tax, which is an excise upon the facilities used in the transaction of the business separate and apart from the business itself. It is not a tax upon the business itself which is so transacted, but it is a duty upon the facilities made use of and actually employed in the transaction of the business, and separate and apart from the business itself. Section 195 (now Section 182) of the NIRC covers foreign bills of exchange, letters of credit, and orders of payment for money, drawn in Philippines, but payable outside the Philippines. From this enumeration, two common elements need to be present: (1) drawing the instrument or ordering a drawee, within the Philippines; and (2) ordering that drawee to pay another person a specified amount of money outside the Philippines. What is being taxed is the facility that allows a party to draw the draft or make the order to pay within the Philippines and have the payment made in another country. 8. Taxation; Documentary Stamp Tax; The phrase orders, by telegraph or otherwise, for the payment of money used in reference to documentary stamp taxes may be found in an earlier documentary tax provision, Section 1449(i) of the Administrative Code of 1917, which was substantially reproduced in Section 195 (now Section 182) of the NIRC.The phrase orders, by telegraph or otherwise, for the payment of money used in reference to documentary stamp taxes may be found in an earlier documentary tax provision, Section 1449(i) of the Administrative Code of 1917, which was substantially reproduced in Section 195 (now Section 182) of the NIRC. Regulations No. 26, which provided the rules and guidelines for the documentary stamp tax imposed under the Administrative Code of 1917, contains an explanation for the phrase orders, by telegraph or otherwise, for the payment of money : What may be regarded as telegraphic transfer. A local bank cables to a certain bank in a foreign country with which bank said local bank has a credit, and directs that foreign bank to pay to another bank or person in the same locality a certain sum of money, the document for and in respect such transaction will be regarded as a telegraphic transfer, taxable under the provisions of Section 1449(i) of the Administrative Code. 9. Letters of Credit; Word and Phrases; A letter of credit is one whereby one person requests some other person to advance money or give credit to a third person, and promises that he will repay the same to the person making the advancement, or accept the bill drawn upon himself for the like amount.The Code of Commerce loosely defines a letter of credit and provides for its essential conditions, thus: Art. 567. Letters of credit are those issued by one merchant to another or for the purpose of attending to a commercial transaction. Art. 568. The essential conditions of letters of credit shall be: 1. To be issued in favor of a definite person and not to order. 2. To be limited to a fixed and specified amount, or to one or more undetermined amounts, but within a maximum the limits of which has to be stated exactly. A more explicit definition of a letter of credit can be found in the commentaries: A letter of credit is one whereby one person requests some other person to advance money or give credit to a third person, and promises that he will repay the same to the person making the advancement, or accept the bills drawn upon himself for the like amount. A bill of exchange and a letter of credit may differ as to their negotiability, and as to who owns the funds used for the payment at the time payment is made. However, in both bills of exchange and letters of credit, a person orders another to pay money to a third person. 10. Same; A foreign bill of exchange may be drawn outside the Philippines, payable outside the Philippines, or both drawn and payable outside of the Philippines.Section 129 of the same law classifies bills of exchange as inland and foreign, the distinction is laid down by where the bills are drawn and paid. Thus, a foreign bill of exchange may be drawn outside the Philippines, payable outside the Philippines, or both drawn and payable outside of the Philippines. Sec. 129. Inland and foreign bills of exchange. An inland bill of exchange is a bill which is, or on its face purports to be, both drawn and payable within the Philippines. Any other bill is a foreign bill. x x x 11. Bills of Exchange; Negotiable Instruments Law (Act No. 2031); Words and Phrases; Bills of Exchange, Defined.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 bill of exchange denotes checks, drafts, and all Division: FIRST DIVISION Docket Number: G.R. No. 137002 Counsel: Padilla Law Office, The Solicitor General Ponente: CHICO-NAZARIO Dispositive Portion: WHEREFORE, premises considered, this Court DENIES this petition and AFFIRMS the Decision of the Court of Appeals in CA-G.R. SP No. 57362 dated 14 August 1998, ordering that petitioner Bank of the Philippine Islands to pay Respondent Commissioner of Internal Revenue the deficiency documentary stamp tax in the amount of P690,030.00 inclusive of surcharge and compromise penalty, plus 20% annual interest from 7 June 1990 until fully paid. Costs against the petitioner.

Case Title : SECURITY BANK CORPORATION (formerly SECURITY BANK AND TRUST COMPANY), petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Taxation|Documentary Stamp Tax (DST)|Administrative Law|Court of Tax Appeals|Compromise Agreements|Words and Phrases|The issue of DST assessment on sales of securities with repurchase agreement|which was the 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 promissory notes the Court simply cannot agree with the petitioner that securities and promissory notes for purposes of the subject Compromise Agreement are one and the thing|The BIR Commissioner has the sole power and authority to compromise taxes Syllabi: 1. Taxation; Documentary Stamp Tax (DST); It is clear from the plain language of the law that all sales of securities, without making any distinction as to the nature or type of the sale, i.e., whether it be with a repurchase agreement or not, are taxable.The NIRC levies DST upon documents, instruments and papers as follows: SEC. 173. Stamp taxes upon documents, instruments, and papers Upon documents, instruments, and papers, and upon acceptances, assignments, sales, and transfers of the obligation, right, or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following sections of this Title, by the person making, signing, issuing, accepting, or transferring the same, and at the same time such act is done or transaction had: Provided,That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party to thereto who is not exempt shall be the one directly liable for the tax. (Emphasis supplied.) Particularly covering sales of securities, which SBC has been assessed by the BIR in this case, and the corresponding DST rates due thereon at the time the said tax accrued, the former Section 225 (now Section 176) of the NIRC provides: It is clear from the plain language of the law that all sales of securities, without making any distinction as to the nature or type of the sale, i.e., whether it be with a repurchase agreement or not, are taxable. On the other hand, all securities consisting of bonds, due-bills, certificates of obligation, or shares or certificates of stock in any association, company or corporation, of whatever type or nature are within the scope of this section. 2. Same; Same; Same; The BIR Commissioner has the sole power and authority to compromise taxes;Ultra vires acts of revenue officials cannot have any valid and binding legal effect upon the BIR so as to proscribe the latter from issuing reassessment of unpaid DST on the sales of securities.As regards SBC s contention that the BIR, through its various officials, accepted its offer to settle its entire DST deficiency assessment for 1983 which included the DST assessment for securities with repurchase agreement in the tax 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 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 specifically authorized those revenue officials, who purportedly accepted and approved SBC s offer of payment, to compromise the DST on sale of securities, which, to stress, were not included in the Compromise Agreement of August 15,

1988 by delegating his power to compromise said DST assessment on securities. 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 reassessment of unpaid DST on the sales of securities under repurchase agreements for the year 1983. 3. Same; Same; Compromise Agreements; Words and Phrases; The issue of DST assessment on sales of securities with repurchase agreement, which was the 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 promissory notesthe Court simply cannot agree with the petitioner that securities and promissory notes for purposes of the subject Compromise Agreement are one and the same thing; The term promissory note has a definite meaning under the negotiable instruments law, which does not include securities. The issue of DST assessment on sales of securities with repurchase agreement, which was the 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 promissory notes issued prior to October 15, 1984. The DST assessed on the 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 governing the two that the law treats these two instruments differently. This Court simply cannot agree with SBC that securities and promissory notes for purposes of the subject Compromise Agreement are one and the same thing. Besides, even assuming, in gratia argumenti, that promissory notes may be included under the generic term securities, securities cannot be included under the specific term promissory notes so as to be deemed within the scope of the same compromise agreement. To be sure, the term promissory note has a definite meaning under the negotiable instruments law, which does not include securities, and this definite meaning is what is deemed incorporated in the compromise agreement entered into by and between SBC and the BIR, unless a different definition is therein expressly agreed upon, which is not the case. 4. Same; Same; Court of Tax Appeals; As a matter of principle, the Supreme Court will not set aside the conclusion reached by the Court of Tax Appeals which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject unless there has been an abuse or improvident exercise of authority.The Court has no basis to rule in the present petition for review on certiorari, which by its very nature is limited to questions of law and not of facts, whether the securities subject of the tax assessment in this case in fact fall within the ambit of said revenue memorandum circulars. This Court is bound by the factual findings by the CTA, which did not rule that the subject securities, because of what type these were, fall under Section 229 (now Section 180) instead of 225 (now Section 176) of the NIRC. In Commissioner of Internal Revenue v. Court of Appeals, the Court ruled: x x x the Court of Tax Appeals is a highly specialized body specifically created for the purpose of reviewing tax cases. Through its expertise, it is undeniably competent to determine the issue of whether. x x x Consequently, as a matter of principle, this Court will not set aside the conclusion reached by the Court of Tax Appeals which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject unless there has been an abuse or improvident exercise of authority. This point becomes more evident in the case before us where the unanimous findings and conclusions of both the Court of Tax Appeals and the Court of Appeals appear untainted by any abuse of authority, much less grave abuse of discretion. 5. Same; Same; Administrative Law; BIR circulars and rulings cannot prevail over the clear and plain language of the Tax Code.SBC contends, however, that the sales of securities being levied upon are not covered by Section 225 (now Section 176), but instead fall under Section 229 (now Section 180) of the Tax Code. In this respect, SBC invokes Revenue Memorandum Circulars No. 13-87 and No. 33-86 and BIR Ruling No. 119-91. We are not persuaded for the simple reason that the BIR circulars and ruling relied upon were all issued after 1983, the tax period involved in this case. Those circulars and ruling cannot prevail over the clear and plain language of the Tax Code. Division: SECOND DIVISION Docket Number: G.R. No. 130838 Counsel: Castro, Bias, Ortile, Samillano & Mangrobang, The Solicitor General

Ponente: GARCIA Dispositive Portion: WHEREFORE, the petition is DENIED and the assailed CA Decision dated August 29, 1997 is AFFIRMED in toto.

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 DST. 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 certiorari of a decision of the Court of Tax Appeals. Syllabi Class : Taxation|Documentary Stamp Tax (DST)|Banks and Banking|Words and Phrases|Tax Avoidance Syllabi: 1. Taxation; Documentary Stamp Tax (DST); Banks and Banking; A passbook 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 earning deposit account issued by a bank qualifies as a certificate of deposit drawing interest. A document to be deemed a certificate of deposit requires no specific form as long as there is some written memorandum that the bank accepted a deposit of a sum of money from a depositor. What is important and controlling is the nature or meaning conveyed by the passbook and not the particular label or nomenclature attached to it, inasmuch as substance, not form, is paramount. 2. Same; Same; Same; Tax Avoidance; While tax avoidance schemes and arrangements are not prohibited, tax laws cannot be circumvented in order to evade payment of just taxes.While tax avoidance schemes and arrangements are not prohibited, tax laws cannot be circumvented in order to evade payment of just taxes.To claim that time deposits evidenced by passbooks should not be subject to DST is a clear evasion of the rule on equality and uniformity in taxation that requires the imposition of DST on documents evidencing transactions of the same kind, in this particular case, on all certificates of deposits drawing interest. 3. Same; Same; Same; Words and Phrases; The Documentary Stamp Tax (DST) is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments.It bears emphasis that DST is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments. It is an excise upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. 4. Same; Same; Same; A Fixed Savings Deposit (FSD), like a time deposit, provides for a higher interest rate when the deposit is not withdrawn within the required fixed period, otherwise, it earns interest pertaining to a regular savings deposit; Having a fixed term and the reduction of interest rate in case of pre-termination are essential features of a time deposit.As for petitioner s argument that its FSD is similar to a regular savings deposit because it is evidenced by a passbook, and that based on the legislative deliberations on the bill which was to become R.A. 9243 which amended Section 180 of the NIRC (which is to a large extent the same as Section 180 of the Tax Code, as amended by R.A. 7660), Congress admitted that deposits evidenced by passbooks which have features akin to time deposits are not subject to DST, the same does not lie. The FSD, like a time deposit, provides for a higher interest rate when the deposit is not withdrawn within the required fixed period; otherwise, it earns interest pertaining to a regular savings deposit. Having a fixed term and the reduction of interest rates in case of pre-termination are essential features of a time deposit. 5. Same; Same; Same; A regular savings account with a passbook which is withdrawable at any time is not subject to Documentary Stamp Tax (DST), unlike a time deposit which is payable on a fixed maturity date.Orders for the payment of sum of money payable at sight or on demand are of course explicitly exempted from the payment of DST. Thus, a regular savings account with a passbook which is withdrawable at any time is not subject to DST, unlike a time deposit which is payable on a fixed maturity date. 6. Same; Same; Same; A certificate of deposit may or may not be negotiablea certificate of deposit may be payable to the depositor, to the order of the depositor, or to some other person or his order; The negotiable character of any and all documents under Section 180 of the National Internal Revenue Code (NIRC). Contrary to petitioner s claim, not all certificates of deposit are negotiable. A certificate of deposit may or may not be negotiable as gathered from the use of the conjunction or, instead of and, in its definition. A certificate of deposit may be payable to the depositor, to the order of the depositor, or to

Counsel: Enrico G. Valdez, Rhodora J. Corcuera-Menzon Ponente: CARPIO-MORALES Dispositive Portion: WHEREFORE, the petition is DENIED.

Case Title : NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC. (NSBCI) and Spouses EDUARDO R. DEE and ARCELITA M. DEE, petitioners, vs. PHILIPPINE NATIONAL BANK, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions|Obligations and Contracts|Mortgages|Appeals|Loans|Promissory Notes|Interest Rates|Escalation Clauses|Principle of Mutuality of Contracts|Usury Law|Banks and Banking|Words and Phrases|Credit Lines|Contract Clause|Disclosure Statements|Truth in Lending Act|Damages|Novation|Attorney s Fees|Notarial Law|Legal Ethics|Act 496 has repealed the Spanish Notarial Law|Evidence|Entries in Ledgers|Presumptions|Foreclosure of Mortgage Syllabi: 1. Actions; Appeals; As a rule, questions of fact cannot be the subject of a petition for review on certiorari, but as an exception, factual findings of the Court of Appeals may be reviewed on appeal when, inter alia, the factual inferences are manifestly mistaken, the judgment is based on a misapprehension of facts, or the Court of Appeals manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different legal conclusion.It must be stressed that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. As a rule, questions of fact cannot be the subject of this mode of appeal, for [t]he Supreme Court is not a trier of facts. As exceptions to this rule, however, factual findings of the CA may be reviewed on appealwhen, inter alia, the factual inferences are manifestly mistaken;the judgment is based on a misapprehension of facts; or the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different legal conclusion. In the present case, these exceptions exist in various instances, thus prompting us to take cognizance of factual issues and to decide upon them in the interest of justice and in the exercise of our sound discretion. Indeed, Petitioner NSBCI s loan accounts with respondent appear to be bloated with some iniquitous imposition of interests, penalties, other charges and attorney s fees. To demonstrate this point, the Court shall take up one by one the promissory notes, the credit agreements and the disclosure statements. 2. Obligations and Contracts; Loans; Promissory Notes; Interest Rates; Escalation Clauses; Principle of Mutuality of Contracts; A borrower s accessory duty to pay interest does not give the lender unrestrained freedom to charge any rate other than that which was agreed upon it would be the zenith of farcicality to specify and agree upon rates that could be subsequently upgraded at whim by only one party to the agreement; The unilateral determination and imposition of increased rate is violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code.In each drawdown, the Promissory Notes specified the interest rate to be charged: 19.5 percent in the first, and 21.5 percent in the second and again in the third. However, a uniform clause therein permitted respondent to increase the rate within the limits allowed by law at any time depending on whatever policy it may adopt in the future x x x, without even giving prior notice to petitioners. The Court holds that petitioners accessory duty to pay interest did not give respondent unrestrained freedom to charge any rate other than that which was agreed upon. No interest shall be due, unless expressly stipulated in writing. It would be the zenith of farcicality to specify and agree upon rates that could be subsequently upgraded at whim by only one party to the agreement. The unilateral determination and imposition of increased rates is violative of the principle of mutuality of contracts ordained in Article 1308 of the Civil Code. One-sided impositions do not have the force of law between the parties, because such impositions are not based on the parties essential equality.

3. Obligations and Contracts; Loans; Promissory Notes; Interest Rates; Escalation Clauses; Principle of Mutuality of Contracts; Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving the lender an unbridled right to adjust the interest independently and upwardly would completely take away from the borrower the right to assent to an important modification in their agreement and would also negate the element of mutuality in their contracts.Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving respondent an unbridled right to adjust the interest independently and upwardly would completely take away from petitioners the right to assent to an important modification in their agreement and would also negate the element of mutuality in their contracts. The clause cited earlier made the fulfillment of the contracts dependent exclusively upon the uncontrolled will of respondent and was therefore void. Besides, the pro forma promissory notes have the character of a contract d adhsion, where the parties do not bargain on equal footing, the weaker party s [the debtor s] participation being reduced to the alternative to take it or leave it. 4. Obligations and Contracts; Loans; Promissory Notes; Interest Rates; Escalation Clauses; Usury Law;While the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. 905, nothing in the said Circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.While the Usury Law ceiling on interest rates was lifted by [Central Bank] Circular No. 905, nothing in the said Circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. In fact, we have declared nearly ten years ago that neither this Circular nor PD 1684, which further amended the Usury Law, authorized either party to unilaterally raise the interest rate without the other s consent. 5. Obligations and Contracts; Loans; Promissory Notes; Interest Rates; Escalation Clauses; Usury Law;Rates found to be iniquitous or unconscionable are void, as if there were no express contract thereon.A similar case eight years ago pointed out to the same respondent (PNB) that borrowing signified a capital transfusion from lending institutions to businesses and industries and was done for the purpose of stimulating their growth; yet respondent s continued unilateral and lopsided policy of increasing interest rates without the prior assent of the borrower not only defeats this purpose, but also deviates from this pronouncement. Although such increases are not usurious, since the Usury Law is now legally inexistent the interest ranging from 26 percent to 35 percent in the statements of account must be equitably reduced for being iniquitous, unconscionable and exorbitant. Rates found to be iniquitous or unconscionable are void, as if it there were no express contract thereon. Above all, it is undoubtedly against public policy to charge excessively for the use of money. 6. Obligations and Contracts; Loans; Promissory Notes; Interest Rates; Escalation Clauses; A borrower s request for restructuring does not indicate any agreement to an interest increase there can be no implied waiver of a right when there is no clear, unequivocal and decisive act showing such purpose; No one receiving a proposal to modify a loan contract, especially interest a vital component is obliged to answer the proposal.It cannot be argued that assent to the increases can be implied either from the June 18, 1991 request of petitioners for loan restructuring or from their lack of response to the statements of account sent by respondent. Such request does not indicate any agreement to an interest increase; there can be no implied waiver of a right when there is no clear, unequivocal and decisive act showing such purpose. Besides, the statements were not letters of information sent to secure their conformity; and even if we were to presume these as an offer, there was no acceptance. No one receiving a proposal to modify a loan contract, especially interest a vital component is obliged to answer the proposal. 7. Obligations and Contracts; Loans; Promissory Notes; Banks and Banking; Words and Phrases; Credit Lines; Revolving Credit Line, Explained.Banks give credit lines to businessmen in order to assist them in the operation of their business. A fixed limit or ceiling may be placed on the account, provided its balance does not exceed such stipulated limit or ceiling. The balance may perhaps never be cleared, since the credit revolves round and round; hence, the title revolving credit. Miranda, Essentials of Money, Credit and Banking (5th rev. ed., 1981), pp. 96-99. Moreover, a revolving credit line is a formal commitment by a bank to lend a borrower up to a specified amount of money over a given period of time. The actual notes evidencing the debt are short-term; but the borrower may renew them up to a specified maximum throughout the duration of such commitment. The bank, in turn, is legally bound under the loan agreement to have funds available whenever money is borrowed. At the

maturity of the commitment, borrowings then owing can be converted into a term loan. Van Horne, Financial Management and Policy (5th ed., 1980), pp. 520-521. Thus, when a borrower needs money, it makes a drawdown or availment on the credit line in the form of a note or promise to pay a certain principal amount. The balance of all unpaid principals, otherwise known as outstanding drawdowns or availments, at any given time, should not exceed the ceiling or limit. After due payment of any drawdown or availment, the borrower can make succeeding drawdowns or availments within the maximum amount committed, provided the line has not yet expired. 8. Obligations and Contracts; Loans; Promissory Notes; Banks and Banking; Words and Phrases; Gross or Intermediation Spread, Explained.The difference between the interest and other service fees charged by a bank to its borrowers and clients and the interest it pays to its depositors and other suppliers of funds is the gross or intermediation spread. IBON Databank Phils., Inc., The Philippine Financial System A Primer (1983), p. 36. 9. Obligations and Contracts; Loans; Promissory Notes; Banks and Banking; Where the disclosure statements, as well as the credit agreements, do not provide for any increase in the specified interest rates, none would be permitted.In sum, the three disclosure statements, as well as the two credit agreements considered by this Court, did not provide for any increase in the specified interest rates. Thus, none would now be permitted. When cross-examined, Julia AngLopez, Finance Account Analyst II of PNB, Dagupan Branch, even testified that the bases for computing such rates were those sent by the head office from time to time, and not those indicated in the notes or disclosure statements. 10. Obligations and Contracts; Loans; Promissory Notes; Banks and Banking; Contract Clause; The sole purpose of the impairment clause of the Constitution is to safeguard the integrity of valid contractual agreements against unwarranted interference by the State in the form of laws private individuals intrusions on interest rates is governed by statutory enactments like the Civil Code.In addition to the preceding discussion, it is then useless to belabor the point that the increase in rates violates the impairment clause of the Constitution, because the sole purpose of this provision is to safeguard the integrity of valid contractual agreements against unwarranted interference by the State in the form of laws. Private individuals intrusions on interest rates is governed by statutory enactments like the Civil Code. 11. Obligations and Contracts; Loans; Promissory Notes; Banks and Banking; Disclosure Statements;Truth in Lending Act; The effect, when the borrower is not clearly informed of the Disclosure Statements prior to the consummation of the availment or drawdown is that the lender will have no right to collect upon such charge or increases thereof, even if stipulated in the Notes; The time is now ripe to give teeth to the often ignored forty-one-year old Truth in Lending Act and thus transform it from a snivelling paper tiger to a growling financial watchdog of hapless borrowers.No penalty charges or increases thereof appear either in the Disclosure Statements or in any of the clauses in the second and the third Credit Agreements earlier discussed. While a standard penalty charge of 6 percent per annum has been imposed on the amounts stated in all three Promissory Notes still remaining unpaid or unrenewed when they fell due, there is no stipulation therein that would justify any increase in that charges. The effect, therefore, when the borrower is not clearly informed of the Disclosure Statements prior to the consummation of the availment or drawdown is that the lender will have no right to collect upon such charge or increases thereof, even if stipulated in the Notes. The time is now ripe to give teeth to the often ignored forty-oneyear old Truth in Lending Act and thus transform it from a snivelling paper tiger to a growling financial watchdog of hapless borrowers. 12. Obligations and Contracts; Loans; Promissory Notes; Banks and Banking; Disclosure Statements;Damages; Liquidated damages intended as penalty shall be equitably reduced to zilch where iniquitous or unconscionable.We have earlier said that the Notes are contracts of adhesion; although not invalid per se, any apparent ambiguity in the loan contracts taken as a whole shall be strictly construed against respondent who caused it. Worse, in the statements of account, the penalty rate has again been unilaterally increased by respondent to 36 percent without petitioners consent. As a result of its move, such liquidated damages intended as a penalty shall be equitably reduced by the Court to zilch for being iniquitous or unconscionable. 13. Obligations and Contracts; Loans; Promissory Notes; Banks and Banking; Disclosure Statements;Novation; Novation can never be presumed, and the animus novandi must appear by express agreement of the parties, or by their acts that are too clear and unequivocal to be mistaken.Although the first Disclosure Statement was furnished Petitioner NSBCI prior to 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 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 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 lack of awareness of the true cost of credit. 14. Obligations and Contracts; Loans; Promissory Notes; Attorney s Fees; Attorney s fees are not an integral part of the cost of borrowing, but arise only when collecting upon the Notes becomes necessary.We affirm the equitable reduction in attorney s fees. These are not an integral part of the cost of borrowing, but arise only when collecting upon the Notes becomes necessary. The purpose of these fees is not to give respondent a larger 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 has the power to determine their reasonableness based on quantum meruit and to reduce the amount thereof if excessive. 15. Obligations and Contracts; Loans; Promissory Notes; Attorney s Fees; Notarial Law; Legal Ethics;Act 496 has repealed the Spanish Notarial Law; A party s engagement of his counsel in another capacity concurrent with the practice of law is not prohibited, so long as the roles being assumed by such counsel is made clear to the client.The disqualification argument in the Affidavit of Publication raised by petitioners no longer holds water, inasmuch as Act 496 has repealed the Spanish Notarial Law.In the same vein, their engagement of their counsel in another capacity concurrent with the practice of law is not prohibited, so long as the roles being assumed by such counsel is made clear to the client. The only reason for this clarification requirement is that certain ethical considerations operative in one profession may not be so in the other. 16. Obligations and Contracts; Loans; Evidence; Entries in Ledgers; Presumptions; Without a doubt, the subsidiary ledgers in a manual accounting system are mere private documents that support and are controlled by the general ledger; We go by the presumption that the recording of private transactions has been fair and regular, and that the ordinary course of business has been followed.Contrary to petitioners assertions, the subsidiary ledgers of respondent properly reflected all entries pertaining to Petitioner NSBCI s loan accounts. In accordance with the Generally Accepted Accounting Principles (GAAP) for the Banking Industry, all interests accrued or earned on such loans, except those that were restructured and non-accruing, have been periodically taken into income. Without a doubt, the subsidiary ledgers in a manual accounting system are mere private documents that support and are controlled by the general ledger. Such ledgers are neither foolproof nor standard in format, but are periodically subject to audit. Besides, we go by the presumption that the recording of private transactions has been fair and regular, and that the ordinary course of business has been followed. 17. Obligations and Contracts; Loans; Evidence; Words and Phrases; General Ledgers, and Subsidiary Ledgers, Explained.A general ledger, on the one hand, is a summary or repository of accounts to which debits and credits resulting from financial transactions are posted from journals or books of original entry; a subsidiary ledger, on the other, is a special type of ledger confined chiefly to a particular account. 18. Mortgages; Foreclosure of Mortgage; No personal notice is required in an extrajudicial foreclosure since such action is in rem, requiring only notice by publication and posting, in order to bind parties interested in the foreclosed property.In the accessory contract of real mortgage, in which immovable property or real rights thereto are used as security for the fulfillment of the principal loan obligation,the bid price may be lower than the property s fair market value. In fact, the loan value itself is only 70 percent of the appraised value. As correctly emphasized by the appellate court, a low bid price will make it easier for the owner to effect redemption by subsequently reacquiring the property or by selling the right to redeem and thus recover alleged losses. Besides, the public auction sale has been regularly and fairly conducted, there has been ample authority to effect the sale,and the Certificates of Title can be relied upon. No personal notice is even required, because an extrajudicial foreclosure is an action in rem, requiring only notice by publication and posting, in order to bind parties interested in the foreclosed property. Division: THIRD DIVISION Docket Number: G.R. No. 148753

Counsel: Cesar M. Cario, Dinah B. Tabada Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, this Petition is hereby PARTLY GRANTED. The Decision of the Court of Appeals is AFFIRMED, with the MODIFICATION that PNB is ORDERED to refund the sum of P3,686,101.52 representing the overcollection computed above, plus interest thereon at the legal rate of six percent (6%) per annum from the filing of the Complaint until the finality of this Decision. After this Decision becomes final and executory, the applicable rate shall be twelve percent (12%) per annum until its satisfaction. No costs.

Case Title : BANK OF THE PHILIPPINE ISLANDS, INC., petitioner, vs. SPS. NORMAN AND ANGELINA YU and TUANSON BUILDERS CORPORATION represented by PRES. NORMAN YU, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Loans|Penalty Charges Syllabi: 1. Remedial Law; Civil Procedure; Summary Judgments; A summary judgment is apt when the essential facts of the case are uncontested or the parties do not raise any genuine issue of fact.A summary judgment is apt when the essential facts of the case are uncontested or the parties do not raise any genuine issue of fact. Here, to resolve the issue of the excessive charges allegedly incorporated into the auction bid price, the RTC simply had to look at a) the pleadingsof the parties; b) the loan agreements, the promissory note, and the real estate mortgages between them; c) the foreclosure and bidding documents; and d) the admissions and other disclosures between the parties during pre-trial. Since the parties admitted not only the existence, authenticity, and genuine execution of these documents but also what they stated, the trial court did not need to hold a trial for the reception of the evidence of the parties. 2. Same; Penalty Charges; Courts have authority to reduce penalty charges when these are unreasonable and iniquitous.Nonetheless, the courts have authority to reduce penalty charges when these are unreasonable and iniquitous. Considering that BPI had already received over P2.7 million in interest and that it seeks to impose the penalty charge of 3% per month or 36% per annum on the total amount due principal plus interest, with interest not paid when due added to and becoming part of the principal and also bearing interest at the same rate the Court finds the ruling of the RTC in its original decision reasonable and fair. Thus, the penalty charge of 12% per annum or 1% per month is imposed. 3. Same; Same; Penalty charges stipulated in the promissory notes declared valid.The ruling that is more in point is that laid down in The Consolidated Bank and Trust Corporation v. Court of Appeals, 246 SCRA 193 (1995) a case cited in New Sampaguita. The Consolidated Bank ruling declared valid the penalty charges that were stipulated in the promissory notes. What the Court disallowed in that case was the collection of a handling charge that the promissory notes did not contain. 4. Same; Promissory Notes; A promissory note is an acknowledgment of a debt and commitment to repay it on the date and under the conditions that the parties agreed on; It is a valid contract absent proof of acts which might have vitiated consent.In this case, although BPI failed to state the penalty charges in the disclosure statement, the promissory note that the Yus signed, on the same date as the disclosure statement, contained a penalty clause that said: I/We jointly and severally, promise to further pay a late payment charge on any overdue amount herein at the rate of 3% per month. The promissory note is an acknowledgment of a debt and commitment to repay it on the date and under the conditions that the parties agreed on. It is a valid contract absent proof of acts which might have vitiated consent. 5. Loans; Words and Phrases; Finance Charge ; A finance charge represents the amount to be paid by the debtor incident to the extension of credit.Penalty charge, which is liquidated damages resulting from a breach, falls under item (6) or finance charge. A finance charge represents the amount to be 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 conditions under which it is to be paid are disclosed to the borrower before he enters into the credit agreement. Division: SECOND DIVISION

87/98/100 Docket Number: G.R. No. 184122 87/98/197 87/97/761 Republic of the Philippines Supreme Court Manila 87/97/768 87/97/767 87/97/970 87/97/747 UNION BANK OF THE PHILIPPINES, Petitioner, G.R. Nos. 173090-91 Present: CORONA, C.J., Chairperson, LEONARDO-DE CASTRO, BERSAMIN, DEL CASTILLO, and VILLARAMA, JR., JJ. TIU AND Promulgated: 87/96/944 87/98/191 87/98/198 87/98/090

75,000.00 195,000.00 60,000.00 30,000.00 180,000.00 110,000.00 50,000.00 605,000.00 470,000.00 505,000.00 449,000.00 US$3,632,000.00
[4]

02/12/98 03/19/98 09/26/97 09/29/97 09/29/97 12/29/97 09/22/97 12/19/97 03/16/98 03/19/98 02/09/98

FIRST DIVISION

- versus -

SPOUSES RODOLFO T. VICTORIA N. TIU, Respondents.

September 7, 2011 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

On June 23, 1998, Union Bank advised the spouses Tiu through a [5] letter 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 [6] latter to redenominate the loans at the rate of US$1=P41.40 with interest of [7] 19% for one year. On December 21, 1999, Union Bank and the spouses Tiu entered into [8] a Restructuring Agreement. The Restructuring Agreement contains a clause wherein the spouses Tiu confirmed their debt and waived any action on account thereof. To quote said clause: 1. Confirmation of Debt The BORROWER hereby confirms and accepts that as of December 8, 1999, its outstanding principal indebtedness to the BANK under the Agreement and the Notes amount to ONE HUNDRED FIFTY[-]FIVE MILLION THREE HUNDRED SIXTY[-]FOUR THOUSAND EIGHT HUNDRED PESOS (PHP 155,364,800.00) exclusive of interests, service and penalty charges (the Indebtedness ) and further confirms the correctness, legality, collectability and enforceability of the Indebtedness. The BORROWER unconditionally waives any action, demand or claim that they may otherwise have to dispute the amount of the Indebtedness as of the date specified in this Section, or the collectability and enforceability thereof. It is the understanding of the parties that the BORROWER s acknowledgment, affirmation, and waiver herein are material considerations for the BANK s agreeing to restructure the Indebtedness which would have already become due and payable as of the above date under the terms of the [9] Agreement and the Notes.

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari seeking to reverse the Joint [1] Decision of the Court of Appeals dated February 21, 2006 in CA-G.R. CV No. [2] 00190 and CA-G.R. SP No. 00253, as well as the Resolution dated June 1, 2006 denying the Motion for Reconsideration. The factual and procedural antecedents of this case are as follows: On November 21, 1995, petitioner Union Bank of the Philippines (Union Bank) and respondent spouses Rodolfo T. Tiu and Victoria N. Tiu (the spouses Tiu) entered into a Credit Line Agreement (CLA) whereby Union Bank agreed to make available to the spouses Tiu credit facilities in such amounts as [3] may be approved. From September 22, 1997 to March 26, 1998, the spouses Tiu took out various loans pursuant to this CLA in the total amount of three million six hundred thirty-two thousand dollars (US$3,632,000.00), as evidenced by promissory notes: PN No. 87/98/111 87/98/108 87/98/152 87/98/075 87/98/211 87/98/071 87/98/107 Amount in US$ 72,000.00 84,000.00 320,000.00 150,000.00 32,000.00 110,000.00 135,000.00 Date Granted 02/16/98 02/13/98 03/02/98 01/30/98 03/26/98 01/29/98 02/13//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 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 [10] spouses Tiu to update their interest payments.

Under the same Restructuring Agreement, the parties declared that the loan obligation to be restructured (after deducting thedacion price of 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 in Payment; and [2] other fees and charges incurred by the Indebtedness) is one hundred four million six hundred sixty-eight thousand seven hundred forty-one [11] pesos (P104,668,741.00) (total restructured amount). The Deeds of Dation in Payment referred to are the following: 1. Dation of the Labangon properties Deed executed by Juanita Tiu, the mother of respondent Rodolfo Tiu, involving ten parcels of land with improvements located in Labangon, Cebu City and with a total land area of 3,344 square meters, for the amount of P25,130,000.00. The Deed states that these properties shall be leased to the Tiu spouses at a monthly rate [12] ofP98,000.00 for a period of two years. Dation of the Mandaue property Deed executed by the spouses Tiu involving one parcel of land with improvements located in A.S. Fortuna St., Mandaue City, covered by TCT No. T-31604 and with a land area of 2,960 square meters, for the amount of P36,080,000.00. The Deed states that said property shall be leased to the Tiu spouses at a monthly rate [13] ofP150,000.00 for a period of two years.

because the real owners thereof are their co-petitioners, Juanita T. Tiu, [19] Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu. The spouses Tiu further claim that prior to the signing of the Restructuring Agreement, they entered into a Memorandum of Agreement with Union Bank whereby the former deposited with the latter several certificates of shares of stock of various companies and four certificates of title of various 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 continues to hold on to these properties and has not returned the same to the [20] former. On the other hand, Union Bank claims that the Restructuring Agreement was voluntarily and validly entered into by both parties. Presenting as evidence the Warranties embodied in the Real Estate Mortgage, Union Bank contends that the foreclosure of the mortgage on the residential property of the spouses Tiu was valid and that the improvements thereon were absolutely owned by them. Union Bank denies receiving certificates of shares of stock of various companies or the four certificates of title of various parcels of land from the spouses Tiu. However, Union Bank also alleges that even if said certificates were in its possession it is authorized under the Restructuring Agreement to [21] retain any and all properties of the debtor as security for the loan. The RTC issued a Temporary Restraining Order and, eventually, a [23] Writ of Preliminary Injunction preventing the sale of the residential property [24] of the spouses Tiu. On December 16, 2004, the RTC rendered its Decision in Civil Case No. MAN-4363 in favor of Union Bank. The dispositive portion of the Decision read: WHEREFORE, premises considered, judgment is hereby rendered dismissing the Complaint and lifting and setting aside the Writ of Preliminary Injunction. No pronouncement as to damages, attorney s fees and costs [26] of suit.
[25] [22]

2.

As likewise provided in the Restructuring Agreement, the spouses Tiu executed a Real Estate Mortgage in favor of Union Bank over their residential property inclusive of lot and improvements located at P. Burgos St., Mandaue City, covered by TCT No. T-11951 with an area of 3,096 square [14] meters. The spouses Tiu undertook to pay the total restructured amount (P104,668,741.00) via three loan facilities (payment schemes). The spouses Tiu claim to have made the following payments: (1) P15,000,000.00 on August 3, 1999; and (2) anotherP13,197,546.79 as of May 8, 2001. Adding the amounts paid under the Deeds of Dation in Payment, the [15] spouses Tiu postulate that their payments added up to P89,407,546.79. Asserting that the spouses Tiu failed to comply with the payment schemes set up in the Restructuring Agreement, Union Bank initiated extrajudicial foreclosure proceedings on the residential property of the spouses Tiu, covered by TCT No. T-11951. The property was to be sold at public auction on July 18, 2002. The spouses Tiu, together with Juanita T. Tiu, Rosalinda T. King, 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 Foreclosure declared null and void. The case was docketed as Civil Case No. [16] MAN-4363. Named as defendants were Union Bank and Sheriff IV Veronico C. Ouano (Sheriff Oano) of Branch 55, RTC, Mandaue City. Complainants therein prayed for the following: (1) that the spouses Tiu be declared to have fully paid their obligation to Union Bank; (2) that defendants be permanently enjoined from proceeding with the auction sale; (3) that Union Bank be ordered to return to the spouses Tiu their properties as listed in the Complaint; (4) that Union Bank be ordered to pay the plaintiffs the sum of P10,000,000.00 as moral damages, P2,000,000.00 as exemplary damages,P3,000,000.00 as attorney s fees and P500,000.00 as expenses of litigation; and (5) a writ of preliminary injunction or temporary restraining order be issued enjoining the public auction [17] sale to be held on July 18, 2002. The spouses Tiu claim that from the beginning the loans were in pesos, not in dollars. Their office clerk, Lilia Gutierrez, testified that the spouses Tiu merely received the peso equivalent of their US$3,632,000.00 loan at the rate of US$1=P26.00. The spouses Tiu further claim that they were merely forced to sign the Restructuring Agreement and take up an additional loan ofP5,000,000.00, the proceeds of which they never saw because this amount [18] was immediately applied by Union Bank to interest payments. The spouses Tiu allege that the foreclosure sale of the mortgaged 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

In upholding the validity of the Restructuring Agreement, the RTC held that the spouses Tiu failed to present any evidence to prove either fraud or intimidation or any other act vitiating their consent to the same. The exact obligation of the spouses Tiu to Union Bank is therefore P104,668,741.00, as agreed upon by the parties in the Restructuring Agreement. As regards the 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 [27] amount they have paid after the execution of the Restructuring Agreement. On January 4, 2005, Union Bank filed a Motion for Partial [28] Reconsideration, protesting the finding in the body of the December 16, 2004 Decision that the residential house on Lot No. 639 is not owned by the spouses Tiu and therefore should be excluded from the real properties covered by the real estate mortgage. On January 6, 2005, the spouses Tiu filed their own [29] Motion for Partial Reconsideration and/or New Trial. They alleged that the trial court failed to rule on their fourth cause of action wherein they mentioned that they turned over the following titles to Union Bank: TCT Nos. 30271, 116287 and 116288 and OCT No. 0-3538. They also prayed for a partial new trial and for a declaration that they have fully paid their obligation to Union [30] Bank. 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 on February 3, 2005. To prevent the same, the Tiu spouses filed with the Court of Appeals a Petition for Prohibition and Injunction with Application for [31] TRO/Writ of Preliminary Injunction. The petition was docketed as CA-G.R. SP No. 00253. The Court of Appeals issued a Temporary Restraining Order on [32] January 27, 2005. On January 19, 2005, the RTC issued an Order denying Union Bank s Motion for Partial Reconsideration and the Tiu spouses Motion for Partial [33] Reconsideration and/or New Trial. Both the spouses Tiu and Union Bank appealed the case to the Court [34] of Appeals. 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 [35] Appeals consolidatedCA-G.R. SP No. 00253 with CA-G.R. CEB-CV No. 00190. On April 19, 2005, the Court of Appeals issued a Resolution finding that there was no need for the issuance of a Writ of Preliminary Injunction as the judgment of the lower court has been stayed by the perfection of the [36] appeal therefrom. On May 9, 2005, Sheriff Oano proceeded to conduct the extrajudicial [37] sale. Union Bank submitted the lone bid ofP18,576,000.00. On June 14, 2005, Union Bank filed a motion with the Court of Appeals praying that Sheriff [38] Oano be ordered to issue a definite and regular Certificate of Sale. On July 21, 2005, the Court of Appeals issued a Resolution denying the Motion and suspending the auction sale at whatever stage, pending resolution of the appeal and conditioned upon the filing of a bond in the amount of P18,000,000.00 by [39] [40] the Tiu spouses. The Tiu spouses failed to file said bond. On February 21, 2006, the Court of Appeals rendered the assailed Joint Decision in CA-G.R. CV No. 00190 and CA-G.R. SP No. 00253. The Court of Appeals dismissed the Petition for Prohibition, CA-G.R. SP No. 00253, on the [41] ground that the proper venue for the same is with the RTC. On the other hand, the Court of Appeals ruled in favor of the spouses Tiu in CA-G.R. CV No. 00190. The Court of Appeals held that the loan transactions were in pesos, since there was supposedly no stipulation the loans will be paid in dollars and since no dollars ever exchanged hands. Considering that the loans were in pesos from the beginning, the Court of Appeals reasoned that there is no need to convert the same. By making it appear that the loans were originally in dollars, Union Bank overstepped its rights as creditor, and made unwarranted interpretations of the original loan agreement. According to the Court of Appeals, the Restructuring Agreement, which purportedly attempts to create a novation of the original loan, was not clearly authorized by the debtors and was not supported by any cause or consideration. Since the Restructuring Agreement is void, the original loan of P94,432,000.00 (representing the amount received by the spouses Tiu of US$3,632,000.00 using the US$1=P26.00 exchange rate) should subsist. The Court of Appeals likewise invalidated (1) the P5,000,000.00 charge for interest in the Restructuring Agreement, for having been unilaterally imposed by Union Bank; and (2) the lease of the properties conveyed in dacion en pago, for being against public [42] policy. In sum, the Court of Appeals found Union Bank liable to the spouses Tiu in the amount of P927,546.79. For convenient reference, we quote relevant portion of the Court of Appeal s Decision here: To summarize the obligation of the Tiu spouses, they owe Union Bank P94,432,000.00. The Tiu spouses had already paid Union Bank the amount of P89,407,546.79. On the other hand, Union Bank must return to the Tiu spouses the illegally collected rentals in the amount ofP5,952,000.00. Given these findings, the obligation of the Tiu spouses has already been fully paid. In fact, it is the Union Bank that must return to the Tiu spouses the amount of NINE HUNDRED TWENTY[]SEVEN THOUSAND FIVE HUNDRED FORTY[-]SIX PESOS [43] AND SEVENTY[-]NINE CENTAVOS (P927,546.79).

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 guise of benevolence, saddling borrowers with loans that ballooned twice or thrice their original loans. The Court of Appeals, noting the cavalier way with [47] which banks exploited and manipulated the situation, held Union Bank liable to the spouses Tiu for P100,000.00 in moral damages, P100,000.00 in exemplary [48] damages, and P50,000.00 in attorney s fees. The Court of Appeals disposed of the case as follows: WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us permanently enjoining Union Bank from foreclosing the mortgage of the 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 properties of the Tiu spouses for the abovelitigated debt that has already been fully paid. If a foreclosure sale has already been made over such properties, this Court orders the cancellation of such foreclosure sale and the Certificate of Sale thereof if any has been issued. This Court orders Union Bank to return to the Tiu spouses the amount of NINE HUNDRED TWENTY[-]SEVEN THOUSAND FIVE HUNDRED FORTY[-]SIX PESOS AND SEVENTY[-]NINE CENTAVOS (P927,546.79) representing illegally collected rentals. This Court also orders Union Bank to return to the Tiu spouses all the certificates of shares of stocks and titles to real properties of the Tiu spouses that were deposited to it or, in lieu thereof, to pay the cost for the replacement and issuance of new certificates and new titles over the said properties. This Court finally orders Union Bank to pay the Tiu spouses ONE HUNDRED THOUSAND PESOS (P100,000.00) in moral damages, ONE HUNDRED THOUSAND PESOS (P100,000.00) in exemplary damages, FIFTY THOUSAND PESOS (P50,000.00) in attorney s fees and cost, both in the lower court and in [49] this Court.

On June 1, 2006, the Court of Appeals rendered the assailed Resolution denying Union Bank s Motion for Reconsideration. Hence, this Petition for Review on Certiorari, wherein Union Bank submits the following issues for the consideration of this Court: 1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT CONCLUDED THAT THERE WERE NO DOLLAR LOANS OBTAINED BY [THE] TIU SPOUSES FROM UNION BANK DESPITE [THE] CLEAR ADMISSION OF INDEBTEDNESS BY THE BORROWER-MORTGAGOR TIU SPOUSES. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT NULLIFIED THE RESTRUCTURING AGREEMENT BETWEEN TIU SPOUSES AND UNION BANK FOR LACK OF CAUSE OR CONSIDERATION DESPITE THE ADMISSION OF THE BORROWER-MORTGAGOR TIU SPOUSES OF THE DUE AND VOLUNTARY EXECUTION OF SAID RESTRUCTURING AGREEMENT. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT PERMANENTLY ENJOINED UNION BANK FROM FORECLOSING THE MORTGAGE ON THE RESIDENTIAL PROPERTY OF THE TIU SPOUSES DESPITE THE ADMISSION OF NON-PAYMENT OF THEIR OUTSTANDING LOAN TO THE BANK BY THE BORROWER-MORTGAGOR TIU SPOUSES;

2.

With regard to the ownership of the improvements on the subject mortgaged property, the Court of Appeals ruled that it belonged to respondent Rodolfo Tiu s father, Jose Tiu, since 1981. According to the Court of Appeals, Union Bank should not have relied on warranties made by debtors that they are the owners of the property. The appellate court went on to permanently enjoin 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 [44] spouses Tiu. The Court of Appeals likewise found Union Bank liable to return the certificates of stocks and titles to real properties of the spouses Tiu in its possession. The appellate court held that Union Bank made judicial admissions [45] of such possession in its Reply to Plaintiff s Request for Admission. In the event that Union Bank can no longer return these certificates and titles, it was [46] mandated to shoulder the cost for their replacement.

3.

4.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT FIXED THE AMOUNT OF THE OBLIGATION OF RESPONDENT SPOUSES CONTRARY TO THE PROVISIONS OF THE PROMISSORY NOTES, RESTRUCTURING AGREEMENT AND [THE] VOLUNTARY ADMISSIONS BY BORROWERMORTGAGOR TIU SPOUSES; WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT RULED ON THE ALLEGED RENTALS PAID BY RESPONDENT SPOUSES WITHOUT ANY FACTUAL BASIS; WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT HELD WITHOUT ANY FACTUAL BASIS THAT THE LOAN OBLIGATION OF TIU SPOUSES HAS BEEN FULLY PAID; WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR WHEN IT HELD WITHOUT ANY FACTUAL BASIS THAT THE HOUSE INCLUDED IN THE REAL ESTATE MORTGAGE DID NOT BELONG TO THE TIU SPOUSES. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN ORDERING UNION BANK TO RETURN THE CERTIFICATES OF SHARES OF STOCK AND TITLES TO REAL PROPERTIES OF TIU SPOUSES ALLEGEDLY IN THE POSSESSION OF UNION BANK. WHETHER OR NOT THE COURT OF APPEALS VIOLATED THE DOCTRINES AND PRINCIPLES ON APPELLATE JURISDICTION.

5.

6.

likely defer to the latter s esteemed opinion, representations and interpretations. It has been often stated in our jurisprudence that banks have a fiduciary duty to their depositors. According to the case of Bank of the Philippine Islands vs. IAC (G.R. No. 69162, February 21, 1992), as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. Such fiduciary relationship should also extend to the bank s borrowers who, more often than not, are also depositors of the bank. Banks are in the business of lending while most borrowers hardly know the basics of such business. When transacting with a bank, most borrowers concede to the expertise of the bank and consider their procedures, pronouncements and representations as unassailable, whether such be true or not. Therefore, when there is a doubtful banking transaction, this Court will tip the scales in favor of the borrower. Given the above ruling, the Restructuring Agreement, therefore, between the Tiu spouses and Union Bank does not operate to supersede all previous loan documents, as claimed by Union Bank. But the said Restructuring Agreement, as it was crafted by Union Bank, does not merely confirm the original loan of the Tiu spouses but attempts to create a novation of the said original loan that is not clearly authorized by the debtors and that is not supported by any cause or consideration. According to Article 1292 of the New Civil Code, in order that an obligation may by extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other. Such is not the case in this instance. No valid novation of the original obligation took place. Even granting arguendo that there was a novation, the sudden change in the original amount of the loan to the new amount declared in the Restructuring Agreement is not 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 whose cause did not exist at the time of the transaction is void. Accordingly, Article 1297 of the New Civil Code mandates that, if the new obligation is void, the original one shall subsist, unless the parties intended that the former relation should be extinguished at any event. Since the Restructuring Agreement is void and since there was no intention to extinguish the original [52] loan, the original loan shall subsist. 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 [53] prevailing exchange rate of US$1=P26. However, Union Bank claims that this [54] does not change the true nature of the loan as a foreign currency loan, and proceeded to illustrate in its Memorandum that the spouses Tiu obtained favorable interest rates by opting to borrow in dollars (but receiving the [55] equivalent peso amount) as opposed to borrowing in pesos. We agree with Union Bank on this point. Although indeed, the spouses Tiu received peso equivalents of the borrowed amounts, the loan [56] documents presented as evidence, i.e., the promissory notes, expressed the amount of the loans in US dollars and not in any other currency. This clearly indicates that the spouses Tiu were bound to pay Union Bank in dollars, the amount stipulated in said loan documents. Thus, before the Restructuring Agreement, the spouses Tiu were bound to pay Union Bank the amount of US$3,632,000.00 plus the interest stipulated in the promissory notes, without converting the same to pesos. The spouses Tiu, who are in the construction business and appear to be dealing primarily in Philippine currency, should therefore purchase the necessary amount of dollars to pay Union Bank, who could have justly refused payment in any currency other than that which was stipulated in the promissory notes.

7.

8.

9.

10. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN [50] AWARDING DAMAGES AGAINST UNION BANK.

Validity of the Restructuring Agreement As previously discussed, the Court of Appeals declared that the Restructuring Agreement is void on account of its being a failed novation of the original loan agreements. The Court of Appeals explained that since there was no stipulation that the loans will be paid in dollars, and since no dollars ever [51] exchanged hands, the original loan transactions were in pesos. Proceeding from this premise, the Court of Appeals held that the Restructuring Agreement, which was meant to convert the loans into pesos, was unwarranted. Thus, the Court of Appeals reasoned that: Be that as it may, however, since the loans of the Tiu spouses from Union Bank were peso loans from the very beginning, there is no need for conversion thereof. A Restructuring Agreement should merely confirm the loans, not add thereto. By making it appear in the Restructuring Agreement that the loans were originally dollar loans, Union Bank overstepped its rights as a creditor and made unwarranted interpretations of the original loan agreement. This Court is not bound by such interpretations made by Union Bank. When one party makes an interpretation of a contract, he makes it at his own risk, subject to a subsequent challenge by the other party and a modification by the courts. In this case, that party making the interpretation is not just any party, but a well entrenched and highly respected bank. The matter that was being interpreted was also a financial matter that is within the profound expertise of the bank. A normal person who does not possess the same financial proficiency or acumen as that of a bank will most

We disagree with the finding of the Court of Appeals that the testimony of Lila Gutierrez, which merely attests to the fact that the spouses Tiu received the peso equivalent of their dollar loan, proves the intention of the parties that such loans should be paid in pesos. If such had been the intention of the parties, the promissory notes could have easily indicated the same. Such stipulation of payment in dollars is not prohibited by any prevailing law or jurisprudence at the time the loans were taken. In this regard, Article 1249 of the Civil Code provides: Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

cost of purchasing the required currency was likewise swiftly increasing. If the parties did not enter into the Restructuring Agreement in December 1999 and the peso continued to deteriorate, the ability of the spouses Tiu to pay and the ability of Union Bank to collect would both have immensely suffered. As shown by the evidence presented by Union Bank, the peso indeed continued to [69] deteriorate, climbing to US$1=P50.01 on December 2000. Hence, in order to ensure the stability of the loan agreement, Union Bank and the spouses Tiu agreed in the Restructuring Agreement to peg the principal loan at P150,364,800.00 and the unpaid interest at P5,000,000.00. Before this Court, the spouses Tiu belatedly argue that their consent to the Restructuring Agreement was vitiated by fraud and mistake, alleging that (1) the Restructuring Agreement did not take into consideration their substantial payment in the amount ofP40,447,185.60 before its execution; and (2) the dollar [70] loans had already been redenominated in 1997 at the rate of US$1=P26.34. We have painstakingly perused over the records of this case, but failed to find any documentary evidence of the alleged payment of P40,447,185.60 before the execution of the Restructuring Agreement. In paragraph 16 of their Amended Complaint, the spouses Tiu alleged payment [71] This of P40,447,185.60 for interests before the conversion of the dollar loan. was specifically denied by Union Bank in paragraph 5 of its Answer with [72] Counterclaim. Respondent Rodolfo Tiu testified that they made 50 million [73] and identified plus in cash payment plus other monthly interest payments, [74] a computation of payments dated July 17, 2002 signed by himself. Such computation, however, was never formally offered in evidence and was in any event, wholly self-serving. As regards the alleged redenomination of the same dollar loans in 1997 at the rate of US$1=P26.34, the spouses Tiu merely relied on the following direct testimony of Herbert Hojas, one of the witnesses of Union Bank: Q: Could you please describe what kind of loan was the loan of the spouses Rodolfo Tiu, the plaintiffs in this case? It was originally an FCDU, meaning a dollar loan. What happened to this FCDU loan or dollar loan? The dollar loan was re-denominated in view of the very unstable exchange of the dollar and the peso at that time, Could you still remember what year this account was re-denominated from dollar to peso? I think it was on the year 1997. Could [you] still remember what was then the prevailing exchange rate between the dollar and the peso at that year 1997? Yes. I have here the list of the dollar exchange rate from January 1987 (sic). It was P26.34 per [75] dollar.

Although the Civil Code took effect on August 30, 1950, jurisprudence had [57] upheld the continued effectivity of Republic Act No. 529, which took effect [58] earlier on June 16, 1950. Pursuant to Section 1 of Republic Act No. 529, any agreement to pay an obligation in a currency other than the Philippine currency is void; the most that could be demanded is to pay said obligation in Philippine currency to be measured in the prevailing rate of exchange at the time the [59] obligation was incurred. On June 19, 1964, Republic Act No. 4100 took effect, modifying Republic Act No. 529 by providing for several exceptions to the nullity [60] of agreements to pay in foreign currency. On April 13, 1993, Central Bank Circular No. 1389 was issued, lifting foreign exchange restrictions and liberalizing trade in foreign currency. In cases of foreign borrowings and foreign currency loans, however, prior Bangko Sentral approval was required. On July 5, 1996, Republic Act No. 8183 took [62] [63] effect, expressly repealing Republic Act No. 529 in Section 2 thereof. The same statute also explicitly provided that parties may agree that the obligation or transaction shall be settled in a currency other than Philippine currency at the [64] time of payment. Although the Credit Line Agreement between the spouses Tiu and [65] Union Bank was entered into on November 21, 1995, when the agreement to pay in foreign currency was still considered void under Republic Act No. 529, the [66] actual loans, as shown in the promissory notes, were taken out from September 22, 1997 to March 26, 1998, during which time Republic Act [67] No. 8183 was already in effect. In United Coconut Planters Bank v. Beluso, we held that: [O]pening a credit line does not create a credit transaction of loan or mutuum, since the former is merely a preparatory contract to the contract of loan or mutuum. Under such credit line, the bank is merely obliged, for the considerations specified therefor, to lend to the other party amounts not exceeding the limit provided. The credit transaction thus occurred not when the credit line was opened, but rather when the credit [68] line was availed of. x x x.
[61]

A: Q: A:

Q:

A: Q:

A: Having established that Union Bank and the spouses Tiu validly 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. Similarly, the Court of Appeals pronouncement that the novation was not supported by any cause or consideration is likewise incorrect. This conclusion suggests that when the parties signed the Restructuring Agreement, 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 advantage of by the bank. It is important to note at this point that in the determination of the nullity of a contract based on the lack of consideration, the debtor has the burden to prove the same. Article 1354 of the Civil Code provides that [a]though the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary. In the case at bar, the Restructuring Agreement was signed at the height of the financial crisis when the Philippine peso was rapidly depreciating. Since the spouses Tiu were bound to pay their debt in dollars, the

Neither party presented any documentary evidence of the alleged redenomination in 1997. Respondent Rodolfo Tiu did not even mention it in his testimony. Furthermore, Hojas was obviously uncertain in his statement that said redenomination was made in 1997. As pointed out by the trial court, the Restructuring Agreement, being notarized, is a public document enjoying a prima faciepresumption of authenticity and due execution. Clear and convincing evidence must be [76] presented to overcome such legal presumption. The spouses Tiu, who attested before the notary public that the Restructuring Agreement is their [77] own free and voluntary act and deed, failed to present sufficient evidence to prove otherwise. It is difficult to believe that the spouses Tiu, veteran businessmen who operate a multi-million peso company, would sign a very important document without fully understanding its contents and consequences.

This Court therefore rules that the Restructuring Agreement is valid 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 US$3,632,000.00. Validity of the Foreclosure of Mortgage The spouses Tiu challenge the validity of the foreclosure of the mortgage on two grounds, claiming that: (1) the debt had already been fully paid; and (2) they are not the owners of the improvements on the mortgaged property. (1) Allegation of full payment of the mortgage debt In the preceding discussion, we have ruled that the Restructuring Agreement is a valid and binding novation of loans of the spouses Tiu entered into from September 22, 1997 to March 26, 1998 in the total amount of US$3,632,000.00. Thus, in order that the spouses Tiu can be held to have fully paid their loan obligation, they should present evidence showing their payment of the total restructured amount under the Restructuring Agreement which was P104,668,741.00. As we have discussed above, however, while respondent Rodolfo Tiu appeared to have identified during his testimony a computation [78] dated July 17, 2002 of the alleged payments made to Union Bank, the same [79] was not formally offered in evidence. Applying Section 34, Rule 132 of the Rules of Court, such computation cannot be considered by this Court. We have held that a formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. It has several functions: (1) to enable the trial judge to know the purpose or purposes for which the proponent is presenting the 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 required to review documents not previously scrutinized by the trial [80] Moreover, even if such computation were admitted in evidence, the court. same is self-serving and cannot be given probative weight. In the case at bar, the records do not contain even a single receipt evidencing payment to Union Bank. The Court of Appeals, however, held that several payments made by the spouses Tiu had been admitted by Union Bank. Indeed, Section 11, Rule 8 of the Rules of Court provides that an allegation not specifically denied is deemed admitted. In such a case, no further evidence would be required to prove the antecedent facts. We should therefore examine which of the [81] payments specified by the spouses Tiu in their Amended Complaint were not specifically denied by Union Bank. The allegations of payment are made in paragraphs 16 to 21 of the Amended Complaint: 16. Before conversion of the dollar loan into a peso loan[,] the spouses Tiu had already paid the defendant bank the amount of P40,447,185.60 for interests; 17. On August 3, 1999 and August 12, 1999, plaintiffs made payments in the amount of P15,000,000.00; 18. In order to lessen the obligation of plaintiffs, the mother of plaintiff Rodolfo T. Tiu, plaintiff Juanita T. Tiu, executed a deed of dacion in payment in favor of defendant involving her 10 parcels of land located in Labangon, Cebu City for the amount of P25,130,000.00. Copy of the deed was attached to the original complaint as Annex C ; 19. For the same purpose, plaintiffs spouses Tiu also executed a deed of dacion in payment of their property located at A.S. Fortuna St., Mandaue City for the amount of P36,080,000.00. Copy of the deed was attached to the original complaint as Annex D ;

20. The total amount of the two dacions in payment made by the plaintiffs was P61,210,000.00; 21. Plaintiffs spouses Tiu also made other payment of the amount of P13,197,546.79 as of May 8, [82] 2001;

In paragraphs 4 and 5 of their Answer with Counterclaim, Union Bank specifically denied the allegation in paragraph 9 of the Complaint, but admitted the allegations in paragraphs 17, 18, 19, 20 and 21 thereof. Paragraphs 18, 19 and 20 allege the two deeds of dacion. However, these instruments were already incorporated in the computation of the 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: a.) The loan obligation to the BANK to be restructured herein after deducting from the Indebtedness of the BORROWER the dacion price of the properties subject of the Deeds of Dacion and adding to the Indebtedness all the taxes, registration fees and other expenses advanced by the bank in registering the Deeds of Dacion, and also adding to the Indebtedness the interest, and other fees and charges incurred by the Indebtedness, amounts to ONE HUNDRED FOUR MILLION SIX HUNDRED SIXTYEIGHT THOUSAND SEVEN HUNDRED FORTYONE PESOS (PHP104,668,741.00) (the TOTAL [84] RESTRUCTURED AMOUNT ).

[83]

As regards the allegations of cash payments in paragraphs 17 and 21 of the Amended Complaint, the date of the alleged payment is critical as to whether they were included in the Restructuring Agreement. The payment of P15,000,000.00 alleged in paragraph 17 of the Amended Complaint was supposedly made on August 3 and 12, 1999. This payment was before the date of execution of the Restructuring Agreement on December 21, 1999, and is therefore already factored into the restructured obligation of the [85] spouses. On the other hand, the payment of P13,197,546.79 alleged in paragraph 21 of the Amended Complaint was dated May, 8, 2001. Said payment cannot be deemed included in the computation of the spouses Tiu s debt in the Restructuring Agreement, which was assented to more than a year [86] earlier. This amount (P13,197,546.79) is even absent in the computation of Union Bank of the outstanding debt, in contrast with the P15,000,000.00 [87] payment which is included therein. Union Bank did not explain this discrepancy and merely relied on the spouses Tiu s failure to formally offer supporting evidence. Since this payment ofP13,197,546.79 on May 8, 2001 was 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 we subtract this figure from the total restructured amount (P104,668,741.00) in the Restructuring Agreement, the result is that the spouses Tiu still owe Union Bank P91,471,194.21. (2) Allegation of third party ownership of the improvements on the mortgaged lot The Court of Appeals, taking into consideration its earlier ruling that the loan was already fully paid, permanently enjoined Union Bank from foreclosing the mortgage on the property covered by Transfer Certificate of Title No. 11951 (Lot No. 639) and from pursuing other foreclosure of mortgages over any other properties of the spouses Tiu. The Court of Appeals ruled: The prayer, therefore, of the Tiu spouses to enjoin the foreclosure of the real estate mortgage over their residential property has merit. The loan has already been fully paid. It should also be noted that the house constructed on the residential property of the Tiu spouses is not registered in the name of the Tiu spouses, but in the name of Jose Tiu (Records, pp. 127-132), the father of appellant and petitioner Rodolfo Tiu, since 1981. It had 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 the house (Records, p. 116). This allegation has not been substantially denied by Union Bank. All that the Union Bank presented to refute this allegation are a Transfer Certificate of Title and a couple of Tax Declarations which do not indicate that a residential house is titled in the name of the Tiu spouses. In fact, in one of the Tax Declarations, the market value of the improvements is worth only P3,630.00. Certainly, Union Bank should have been aware that this Tax Declaration did not cover the residential house. Union Bank should also not rely on warranties made by debtors that they are the owners of the property. They should investigate such representations. The courts have made consistent rulings that a bank, being in the business of lending, is obligated to verify the true ownership of the properties mortgaged to them. Consequently, this Court permanently enjoins Union Bank from foreclosing the mortgage of the 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 properties of the Tiu spouses. If a foreclosure sale has already been made over such properties, this Court orders the cancellation of such foreclosure sale and the Certificate of Sale thereof if any has been issued, and the [88] return of the title to the Tiu spouses.

For the Labangon property, the Tiu spouses paid rentals in the amount of P98,000.00 per month for two years, or a total amount ofP2,352,000.00. For the A.S. Fortuna property, the Tiu spouses paid rentals in the amount of P150,000.00 per month for two years, or a total amount of P3,600,000.00. The total amount in rentals paid by the Tiu spouses to Union Bank is FIVE MILLION NINE HUNDRED FIFTY- TWO THOUSAND PESOS (P5,952,000.00). This Court finds that the return of this amount to the Tiu spouses is called for since it will better serve public policy. These properties that were given by the Tiu spouses to Union Bank as payment should not be used by the latter to extract more money from the former. This situation is analogous to having a debtor pay interest for a debt already paid. Instead of leasing the properties, Union Bank should have instructed the Tiu spouses to vacate the said properties so that it could [94] dispose of them.

The Court of Appeals committed a serious error in this regard. As pointed out by petitioner Union Bank, the spouses Tiu did not present any proof of the alleged rental payments. Not a single receipt was formally offered in evidence. The mere stipulation in a contract of the monthly rent to be paid by the lessee is certainly not evidence that the same has been paid. Since the 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. Even assuming arguendo that the spouses Tiu had duly proven that it had paid rent to Union Bank, we nevertheless disagree with the finding of the Court of Appeals that it is against public policy for banks to enter into two-year contracts of lease of properties ceded to them through dacion en pago. The provisions of law cited by the Court of Appeals, namely Sections 51 and 52 of the General Banking Law of 2000, merely provide: SECTION 51. Ceiling on Investments in Certain Assets. Any bank may acquire real estate as shall be necessary for its own use in the conduct of its business: Provided, however, That the total investment in such real estate and improvements thereof, including bank equipment, shall not exceed fifty percent (50%) of combined capital accounts: Provided, further, That the equity investment of a bank in another corporation engaged primarily in real estate shall be considered as part of the bank's total investment in real estate, unless otherwise provided by the Monetary Board. SECTION 52. Acquisition of Real Estate by Way of Satisfaction of Claims. Notwithstanding the limitations of the preceding Section, a bank may acquire, hold or convey real property under the following circumstances: 52.1. Such as shall be mortgaged to it in good faith by way of security for debts; 52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings; or 52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it and such as it shall purchase to secure debts due it. Any real property acquired or held under the circumstances enumerated in the above paragraph shall be disposed of by the bank within a period of five (5) years or as may be prescribed by the Monetary Board: Provided, however, That the bank may, after said period, continue to hold the property for its own use, subject to the limitations of the preceding Section.

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 improvements on Lot No. 639, despite having such improvements included in the mortgage is on the spouses Tiu themselves. The fundamental rule is that [89] he who alleges must prove. The allegations of the spouses Tiu on this matter, [90] which are found in paragraphs 35 to 39 of their Amended Complaint, were [91] specifically denied in paragraph 9 of Union Bank s Answer with Counterclaim. Upon careful examination of the evidence, we find that the spouses Tiu failed to prove that the improvements on Lot No. 639 were owned by third persons. In fact, the evidence presented by the spouses Tiu merely attempt to prove that the improvements on Lot No. 639 were declared for taxes in the name of respondent Rodolfo Tiu s father, Jose Tiu, who allegedly died on December 18, 1983. There was no effort to show how their co-plaintiffs in the original complaint, namely Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu, became co-owners of the house. The spouses Tiu did not present evidence as to (1) who the heirs of Jose Tiu are; (2) if Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu are indeed included as heirs; and (3) why petitioner Rodolfo Tiu is not included as an 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 extrajudicial settlement of the estate of Jose Tiu was presented. In light of the foregoing, this Court therefore sets aside the ruling of the Court of Appeals permanently enjoining Union Bank from foreclosing the mortgage on Lot No. 639, including the improvements thereon. Validity of Alleged Rental Payments on the Properties Conveyed to the Bank via Dacion en Pago The Court of Appeals found the lease contracts over the properties conveyed to Union Bank via dacion en pago to be void for being against public policy. The appellate court held that since the General Banking Law of [92] 2000 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 enter into two-year contracts of lease over properties paid to them [93] through dacion. The Court of Appeals thus ordered Union Bank to return the rentals it collected. To determine the amount of rentals paid by the spouses Tiu to Union Bank, the Court of Appeals simply multiplied the monthly rental stipulated in the Restructuring Agreement by the stipulated period of the lease agreement:

Section 52.2 contemplates a dacion en pago. Thus, Section 52 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 another period is prescribed by the Monetary Board. Furthermore, there appears to be no legal impediment for a bank to lease the real properties it has received in satisfaction of debts, within the five-year period that such bank is allowed to hold the acquired realty. We do not dispute the interpretation of the Court of Appeals that the purpose of the law is to prevent the concentration of land holdings in a few 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 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 dispose of the property can only be done if said banks fail to dispose of the same within the period provided. Such inquiry is furthermore irrelevant to the issues in the case at bar. Order to Certificates in Union Possession Return Allegedly Bank s

replacement and issuance of new certificates and new [99] titles over the said properties. As regards Union Bank s argument that it has the right to retain said documents pursuant to the Restructuring Agreement, it is referring to paragraph 11(b), which provides that: 11. Effects of Default When the BORROWER is in default, such default shall have the following effects, alternative, concurrent and cumulative with each other: xxxx (b) The BANK shall be entitled to all the remedies provided for and further shall have the right to effect or apply against the partial or full payment of any and all obligations of the BORROWER under this Restructuring Agreement any and all moneys or other properties of the BORROWER which, for any reason, are or may hereafter come into the possession of the Bank or the Bank s agent. All such moneys or properties shall be deemed in the BANK s possession as soon [100] as put in transit to the BANK by mail or carrier.

In the Amended Complaint, the spouses Tiu alleged that they 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 to said properties. The RTC failed to rule on this issue. The Court of Appeals, tackling this issue for the first time, ruled in favor of the Tiu spouses and ordered the return of these certificates and titles. The appellate court added that if Union Bank can no longer return these certificates or titles, it should shoulder the cost [96] for their replacement. Union Bank, asserting that the Memorandum of Agreement did not, in fact, push through, denies having received the subject certificates and titles. Union Bank added that even assuming arguendo that it is in possession of [97] said documents, the Restructuring Agreement itself allows such possession. The evidence on hand lends credibility to the allegation of Union Bank that the Memorandum of Agreement did not push through. The copy of the Memorandum of Agreement attached by the spouses Tiu themselves to their original complaint did not bear the signature of any representative from [98] Union Bank and was not notarized. We, however, agree with the finding of the Court of Appeals that despite the failure of the Memorandum of Agreement to push through, the certificates and titles mentioned therein do appear to be in the possession of Union Bank. As held by the Court of Appeals: Lastly, this Court will order, as it hereby orders, Union Bank to return to the Tiu spouses all the certificates of shares of stocks and titles to real properties of the Tiu spouses in its possession. Union Bank cannot deny possession of these items since it had made judicial admissions of such possession in their document entitled Reply to Plaintiffs request for Admission (records, pp. 216-217). While in that document, Union Bank only admitted to the possession of four real estate titles, this Court is convinced that all the certificates and titles mentioned in the unconsummated Memorandum of Agreement (Records, pp. 211-213) were given by the Tiu spouses to Union Bank for appraisal. This finding is further bolstered by the admission of the Union Bank that it kept the titles for safekeeping after it rejected the Memorandum of Agreement. Since Union Bank rejected these certificates and titles of property, it should return the said items to the Tiu spouses. If Union Bank can no longer return these certificates and titles or if it has misplaced them, it shall shoulder the cost for the

[95]

In the first place, notwithstanding the foregoing provision, there is no 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 terms of the Memorandum of Agreement, these certificates were surrendered to Union Bank in order that the said properties described therein be given their corresponding loan values required for the restructuring of the spouses Tiu s outstanding obligations. However, in the event the parties fail to agree on the valuation of the subject properties, Union Bank agrees to release the [101] As Union Bank itself vehemently alleges, the Memorandum of same. Agreement was not consummated. Moreover, despite the fact that the Bank [102] at the time of execution of was aware, or in possession, of these certificates, the Restructuring Agreement, only the mortgage over the real property covered by TCT No. T-11951 was expressly mentioned as a security in the Restructuring [103] Union Bank Agreement. In fact, in its Reply to Request for Admission, admitted that (1) the titles to the real properties were submitted to it for appraisal but were subsequently rejected, and (2) no real estate mortgages were executed over the said properties. There being no agreement that these properties shall secure respondents obligation, Union Bank has no right to retain said certificates. Assuming arguendo that paragraph 11(b) of the Restructuring Agreement indeed allows the retention of the certificates (submitted to the Bank ostensibly for safekeeping and appraisal) as security for spouses Tiu s debt, 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 partial payment of the latter s obligations, the same appears to impliedly allow Union Bank to appropriate these properties for such purpose. However, said provision cannot be validly applied to the subject certificates and titles without violating the prohibition against pactum commissorium contained in Article 2088 of the Civil Code, to the effect that [t]he creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to the contrary is null and void. Applicable by analogy to the present case is our [104] ruling in Nakpil v. Intermediate Appellate Court, wherein property held in trust was ceded to the trustee upon failure of the beneficiary to answer for the amounts owed to the former, to wit: For, there was to be automatic appropriation of the property by Valdes in the event of failure of petitioner to pay the value of the advances. Thus, contrary to respondent's manifestations, all the elements of a pactum commissorium were present: there was a creditor-debtor relationshipbetween the parties; the property was used as security for the loan; and, there was automatic appropriation by respondent of Pulong [105] Maulap in case of default of petitioner. (Emphases supplied.)

This Court therefore affirms the order of the Court of Appeals for Union Bank to return to the spouses Tiu all the certificates of shares of stock and titles to real properties that were submitted to it or, in lieu thereof, to pay the cost for the replacement and issuance of new certificates and new titles over the said properties. Validity of the Award of Damages The Court of Appeals awarded damages in favor of the spouses Tiu based on its taking judicial notice of the alleged exploitation by many banks of the Asian financial crisis, as well as the foreclosure of the mortgage of the home of the spouses Tiu despite the alleged full payment by the latter. As regards the alleged manipulation of the financial crisis, the Court of Appeals held: As a final note, this Court observes the irregularity in the circumstances [surrounding] dollar loans granted by banks right before or during the Asian financial crisis. It is of common knowledge that many 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 interest rate of dollar loans. This is a highly suspect behavior on the part of the banks because it is irrational for the banks to voluntarily and actively proffer a conversion that would give them substantially less income. In the guise of benevolence, many banks were able to convince borrowers to make dollar loans or to convert their peso loans to dollar loans. Soon thereafter, the Asian financial crisis hit, and many borrowers were saddled with loans that ballooned to twice or thrice the amount of their original loans. This court takes judicial notice of these events or matters which are of public knowledge. It is inconceivable that the banks were unaware of the looming Asian financial crisis. Being in the forefront of the financial world and having access to financial data that were not available to the average borrower, the banks were in such a position that they had a higher vantage point with respect to the financial landscape over their average clients. The cavalier way with which banks exploited and manipulated the situation is almost too palpable that they openly and unabashedly struck heavy blows on the Philippine economy, industries and businesses. The banks have a fiduciary duty to their clients and to the Filipino people to be transparent in their dealings and to make sure that the latter s interest are not prejudiced by the former s interest. Article 1339 of the New Civil Code provides that the failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. Undoubtedly, the banks and their clients are bound by confidential relations. The almost perfect timing of the banks in convincing their clients to shift to dollar loans just when the Asian financial crisis struck indicates that the banks not only failed to disclose facts to their clients of the looming crisis, but also suggests of the insidious design to take advantage of these undisclosed [106] facts.

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. 00253 dated February 21, 2006 is hereby AFFIRMED insofar as it ordered petitioner Union Bank of the Philippines to return to the respondent spouses Rodolfo T. Tiu and Victoria N. Tiu all the certificates of shares of stock and titles to real properties that were submitted to it or, in lieu thereof, to pay the cost for 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 permanently enjoined Union Bank of the Philippines from foreclosing the mortgage of the residential property of respondent spouses Rodolfo T. Tiu and Victoria N. Tiu which is covered by Transfer Certificate of Title No. 11951; (2) insofar as it ordered Union Bank of the Philippines to return to the respondent spouses Rodolfo T. Tiu and Victoria N. Tiu the amount of P927,546.79 representing illegally collected rentals; and (3) insofar as it 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 damages, P50,000.00 in attorney s fees and cost, both in the lower court and in this Court. No further pronouncement as to costs. SO ORDERED.
[1]

[2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35]

We have already held that the foreclosure of the mortgage was warranted under the circumstances. As regards the alleged exploitation by many banks of the Asian financial crisis, this Court rules that the generalization made by the appellate court is unfounded and cannot be the subject of judicial notice. It is axiomatic that good faith is always presumed unless convincing evidence to the contrary is adduced. It is incumbent upon the party alleging bad faith to sufficiently prove such allegation. Absent enough proof thereof, the [107] The alleged insidious design of many presumption of good faith prevails. banks to betray their clients during the Asian financial crisis is certainly not of public knowledge. The deletion of the award of moral and exemplary damages in favor of the spouses Tiu is therefore in order.

[36] [37] [38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48]

Rollo, pp. 74-96; penned by Associate Justice Isaias P. Dicdican with Associate Justices Ramon M. Bato, Jr. and Apolinario D. Bruselas, Jr., concurring. Id. at 97-100. Records, pp. 12-13. Id. at 14. Id. Written in the document as @ 41.40% . Records, p. 333. Id. at 334-344. Id. at 335. Id. at 115. Id. at 335. Id. at 354-357. Id. at 350-353. Id. at 339. Id. at 114. Id. at 2-11. Id. at 10. Rollo, pp. 163-164. Id. at 169. Id. at 168. Id. at 42-61. Records, pp. 97-98. Id. at 420-423. Rollo, pp. 75-78. Id. at 101-120. Id. at 120. Id. at 117-118. Records, pp. 787-794. Id. at 799-815. Id. at 814-815. CA rollo (CA-G.R. SP No. 00253), pp. 2-8. Id. at 90-91. Records, p. 828. Id. at 830-831, 836-837. CA rollo (CA-G.R. SP No. 00253), pp. 140-141. CA rollo (CA-G.R. SP No. 00190), pp. 92-95. Id. at 253. Id. at 250-256. Id. at 305-307. Rollo, p. 78. Id. at 79. Id. at 83-91. Id. at 92. Id. at 92-93. Id. at 91. Id. at 91-92. Id. at 93. Id. at 93-95.

[49] [50] [51] [52] [53] [54] [55] [56] [57]

[58]

[59] [60]

declared by the Government of the Philippines shall be legal tender Id. at 95-96. for all debts, public and private. Id. at 282-283. [61] Id. at 83. Otherwise known as the Consolidated Foreign Exchange Rules and Regulations. Id. at 85-87. [62] Id. at 292. Republic Act No. 8183 provides that it shall take effect fifteen (15) Id. at 293. days after its publication in the Official Gazette or in two (2) national newspapers of general circulation. It was published in Malaya and Id. at 293-295. Records, pp. 252-278. the Manila Times on June 20, 1996. [63] Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., 102 Phil. 1, 9 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. [64] SECTION 1. Every provision contained in, or made with respect 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 TCT number Registry of Deeds Location against public policy, and null, void and of no effect, and no such 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 Panganiban St., Cebu City OCT No. 0-3538 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] TSN, October 8, 2004, pp. 8-9. loan made in a foreign currency stipulated to be payable in the same [70] Rollo, pp. 247-248. currency in which case the rate of exchange prevailing at the time of [71] Records, p. 114. the stipulated date of payment shall prevail. All coin and currency, [72] Id. at 232. including Central Bank notes, heretofore or hereafter issued and [73] TSN, October 1, 2002, pp. 38-39. declared by the Government of thePhilippines shall be legal tender [74] Id. at 18-19. for all debts, public and private. [75] TSN, October 8, 2004, pp. 4-5. Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., supra note 57. [76] Domingo v. Robles, 493 Phil. 916, 921 (2005). 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 which has not been formally offered. The purpose for which the other than Philippine currency or in an amount of money of the evidence is offered must be specified. Philippines measured thereby, be as it is hereby declared against [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 SCRA 410, 416. shall be contained in, or made with respect to, any obligation [81] Records, pp. 110-119. hereafter incurred. The above prohibition shall not apply to (a) [82] Id. at 114. transactions where the funds involved are the proceeds of loans or [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] 35. That in 1983, the Spouses Jose Tiu and Juanita Council which are financed by or through foreign funds; (c) forward Tiu, and during the existence of their marriage, exchange transactions entered into between banks or between constructed their house on Lot No. 639 and declared the banks and individuals or juridical persons; (d) import-export and same for taxation purposes in the name of Jose Tiu; other international banking, financial investment and industrial 36. That Jose Tiu died on December 18, 1983; transactions. With the exception of the cases enumerated in items 37. That consequently upon his death, the (a), (b), (c) and (d) in the foregoing provision, in which bases the plaintiffs Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, terms of the parties' agreement shall apply, every other domestic Rosalie T. Young and Rosenda T. Tiu became owners of obligation heretofore or hereafter incurred, whether or not any such the aforesaid house; provision as to payment is contained therein or made with respect 38. That the herein plaintiffs have not thereto, shall be discharged upon payment in any coin or currency executed any real estate mortgage on their house which at the time of payment is legal tender for public and private constructed on plaintiffs spouses Tiu s lot in favor of debts: Provided, That if the obligation was incurred prior to the defendant bank; enactment of this Act and required payment in a particular kind of 39. Consequently, the extra-judicial coin or currency other than Philippine currency, it shall be foreclosure sale of said house is null and void as the real discharged in Philippine currency measured at the prevailing rates of owners of the same have not mortgaged the said house exchange at the time the obligation was incurred, except in case of a to defendant bank; (Records, p. 116.) loan made in a foreign currency stipulated to be payable in the same [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]

[96] [97] [98] [99] [100] [101] [102] [103] [104] [105] [106] [107]

40. Before the execution of the restructuring agreement, the plaintiffs and the defendant bank entered into a memorandum of agreement, whereby the plaintiffs turned over to defendant bank in the meanwhile the following real and personal properties: a) Shares of stock of the Borrower/Mortgagor in Grand Convention Center, Cebu Country Club, Subic Bay Yacht Club, Alta Vista Golf and Country Club and Cebu Grand Salinas Development Corporation, b) Real Estate properties: Copy of the memorandum of agreement was attached to the original complaint as Annex I ; 41. As can be seen from the Restructuring Agreement, only the lot subject of the sheriff s notice of extrajudicial foreclosure sale was mortgaged to guarantee plaintiff s obligation; 42. None of the properties mentioned in paragraph 40 hereof have been subjected to any lien in favor of defendant bank but the defendant bank continues to hold on to said properties and has not returned the same to the plaintiffs spouses Tiu (Records, p. 117). Rollo, pp. 91-92. Id. at 317. Records, pp. 41-42. Rollo, pp. 91-92. Records, p. 341. Id. at 41. Id. at 209; see Acknowledgement Receipt dated November 24, 1999. Id. at 216-217. G.R. No. 74449, August 20, 1993, 225 SCRA 456. Id. at 467-468. Rollo, pp. 93-94. Pacific Basin Securities Co., Inc. v. Oriental Petroleum And Minerals Corp., G.R. Nos. 143972, 144056 and 144056, August 31, 2007, 531 SCRA 667, 689.

Case Title : THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE PHILIPPINES), petitioner, vs. SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Appeals|Obligations and Contracts|Banks and Banking|Evidence|Fraud|Words and Phrases|Checks|Negotiable Instruments Syllabi: 1. Appeals; Evidence; It is well settled that the findings of fact of the lower court, especially when affirmed by the Court of Appeals, are binding upon the Supreme Court.As to the first issue, we find for the respondents. The issue as to what constitutes the terms of the oral compromise or any subsequent novation is a question of fact that was resolved by the Regional Trial Court and the Court of Appeals in favor of respondents. It is well settled that the findings of fact of the lower court, especially when affirmed by the Court of Appeals, are binding upon this Court. While there are exceptions to this rule, the present case does not fall under any one of them, the petitioner s claim to the contrary, notwithstanding. 2. Obligations and Contracts; Fraud; Words and Phrases; Fraud is the deliberate intention to cause damage or prejudice, the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission; The fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of an obligation.Fraud has been defined as the deliberate intention to cause damage or prejudice. It is the voluntary execution of a wrongful act, or a willful omission, knowing and intending the effects which naturally and necessarily arise from such act or omission; the fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of obligation. We fail to see how the act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could constitute as fraud. True, petitioner may have been remiss in informing Dr. Gueco that the signing of a joint motion to dismiss is a standard operating procedure of petitioner bank. However, this cannot in anyway have prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of Dr. Gueco, as the case filed by petitioner against it before the lower court would be dismissed with prejudice. The whole point of the parties

entering into the compromise agreement was in order that Dr. Gueco would pay his outstanding account and in return petitioner would return the car and drop the case for money and replevin before the Metropolitan Trial Court. The joint motion to dismiss was but a natural consequence of the compromise agreement and simply stated that Dr. Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioner s act of requiring Dr. Gueco to sign the joint motion to dismiss cannot be said to be a deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties. It should, likewise, be noted that in cases of breach of contract, moral damages may only be awarded when the breach was attended by fraud or bad faith. The law presumes good faith. 3. Banks and Banking; Checks; Negotiable Instruments; Words and Phrases; A stale check is one which has not been presented for payment within a reasonable time after its issue.A stale check is one which has not been presented for payment within a reasonable time after its issue. It is valueless and, therefore, should not be paid. Under the negotiable instruments law, an instrument not payable on demand must be presented for payment on the day it falls due. When the instrument is payable on demand, presentment must be made within a reasonable time after its issue. In the case of a bill of exchange, presentment is sufficient if made within a reasonable time after the last negotiation thereof. 4. Banks and Banking; Checks; Negotiable Instruments; A check must be presented for payment within a reasonable time after its issue, and in determining what is a reasonable time, regard is to be had to the nature of the instrument, the usage of trade or business with respect to such instruments, and the facts of the particular case.A check must be presented for payment within a reasonable time after its issue, and in determining what is a reasonable time, regard is to be had to the nature of the instrument, the usage of trade or business with respect to such instruments, and the facts of the particular case. The test is whether the payee employed such diligence as a prudent man exercises in his own affairs. This is because the nature and theory behind the use of a check points to its immediate use and payability. In a case, a check payable on demand which was long overdue by about two and a half (2-1/2) years was considered a stale check. Failure of a payee to encash a check for more than ten (10) years undoubtedly resulted in the check becoming stale. Thus, even a delay of one (1) week or two (2) days, under the specific circumstances of the cited cases constituted unreasonable time as a matter of law. 5. Banks and Banking; Checks; Negotiable Instruments; Words and Phrases; A manager s check is one drawn by the bank s manager upon the bank itself, and it is similar to a cashier s check both as to effect and use. A cashier s check is a check of the bank s cashier on his own or another check it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance.In the case at bar, however, the check involved is not an ordinary bill of exchange but a manager s check. A manager s check is one drawn by the bank s manager upon the bank itself. It is similar to a cashier s check both as to effect and use. A cashier s check is a check of the bank s cashier on his own or another check. In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance. It is really the bank s own check and may be treated as a promissory note with the bank as a maker. The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof. If treated as promissory note, the drawer would be the maker and in which case the holder need not prove presentment for payment or present the bill to the drawee for acceptance. 6. Banks and Banking; Checks; Negotiable Instruments; Even assuming that presentment is needed, failure to present a manager s check for payment within a reasonable time will result to the discharge of the drawer only to the extent of the loss caused by the delay.Even assuming that presentment is needed, failure to present for payment within a reasonable time will result to the discharge of the drawer only to the extent of the loss caused by the delay. Failure to present on time, thus, does not totally wipe out all liability. In fact, the legal situation amounts to an acknowledgment of liability in the sum stated in the check. In this case, the Gueco spouses have not alleged, much less shown that they or the bank which issued the manager s check has suffered damage or loss caused by the delay or non-presentment. Definitely, the original obligation to pay certainly has not been erased. Division: FIRST DIVISION Docket Number: G.R. No. 141968

Counsel: Tomas R. Leonidas, Estrella, Estrella & Associates Ponente: KAPUNAN Dispositive Portion: WHEREFORE, premises considered, the petition for review is given due course. The decision of the Court of Appeals affirming the decision of the Regional Trial Court is SET ASIDE. Respondents are further ordered to pay the original obligation amounting to P150,000.00 to the petitioner upon surrender or cancellation of the manager s check in the latter s possession, afterwhich, petitioner is to return the subject motor vehicle in good working condition.

adequate to support a conclusion, even if other equally reasonable minds might conceivably opine otherwise. Division: SECOND DIVISION Docket Number: G.R. No. 153166 Counsel: Glenn G. Hao, Horacio R. Makalintal, Jr. Ponente: PUNO 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 are AFFIRMED.

Case Title : TERESITA L. VERTUDES, petitioner, vs. JULIE BUENAFLOR and 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 Crossexamination|Certiorari Syllabi: 1. Constitutional Law; Due Process; Right to Cross-examination; Where a party has had the opportunity to cross-examine a witness but failed to avail himself of it, he necessarily forfeits the right to cross-examine and the testimony given on direct examination of the witness will be received or allowed to remain in the record.We have explained the meaning of the right to cross-examination as a vital element of due process as follows: The right of a party to confront and crossexamine opposing witnesses in a judicial litigation, be it criminal or civil in nature, or in proceedings before administrative tribunals with quasi-judicial powers, is a fundamental right which is part of due process. However, the right is a personal one which may be waived expressly or impliedly by conduct amounting to a renunciation of the right of cross-examination. Thus, where a party has had the opportunity to cross-examine a witness but failed to avail himself of it, he necessarily forfeits the right to cross-examine and the testimony given on direct examination of the witness will be received or allowed to remain in the record. 2. Constitutional Law; Due Process; It is well-settled that the essence of due process in administrative proceedings is an opportunity to explain one s side or an opportunity to seek reconsideration of the action or ruling complained of.It is well-settled that the essence of due process in administrative proceedings is an opportunity to explain one s side or an opportunity to seek reconsideration of the action or ruling complained of. This was clearly satisfied in the case at bar. Records show that petitioner not only gave her sworn written explanation of the charges against her during the initial stage of the investigation, she also submitted: a) a sworn counter-affidavit refuting the charges against her, with all the attached annexes as evidence; b) a Motion to Re-open the case with the BI; c) a Motion for Reconsideration and/or New Trial with the BI; d) an Appeal to the CSC; e) a Motion for Reconsideration with the CSC; f) an Appeal to the CA; g) a Motion for Reconsideration with the CA; and h) the instant petition for review. 3. Constitutional Law; Due Process; What due process demands is for the chief of the bureau to personally weigh and assess the evidence which the subordinate has gathered and not merely to rely on the recommendation of said investigating officer.There is nothing essentially wrong in the head of a bureau adopting the recommendation of a subordinate. Section 47, Book V of the Administrative Code of 1987 gives the chief of bureau or office or department the power to delegate the task of investigating a case to a subordinate. What due process demands is for the chief of the bureau to personally weigh and assess the evidence which the subordinate has gathered and not merely to rely on the recommendation of said investigating officer. 4. Remedial Law; Certiorari; It is settled that only questions of law are entertained in petitions for review on certiorari under Rule 45 of the Rules of Court; Findings of fact of quasi-judicial agencies, like the Bureau of Immigration (BI) and the Civil Service Commission (CSC), are accorded not only respect but even finality if such findings are supported by substantial evidence.It is settled that only questions of law are entertained in petitions for review on certiorari under Rule 45 of the Rules of Court. It is not the function of this Court, in a petition under Rule 45, to scrutinize, weigh and analyze evidence all over again. Well-settled is the rule that the findings of fact of quasi-judicial agencies, like the BI and the CSC, are accorded not only respect but even finality if such findings are supported by substantial evidence. Substantial evidence is such amount of relevant evidence which a reasonable mind might accept as

G.R. No. 170325. September 26, 2008.* PHILIPPINE NATIONAL BANK, petitioner, vs. ERLANDO T. RODRIGUEZ and NORMA RODRIGUEZ, respondents. Courts; Judgments; Amendment of decisions is more acceptable than an erroneous judgment attaining finality to the prejudice of innocent parties; The Court does not sanction careless disposition of cases by courts of justice the highest degree of diligence must go into the study of every controversy submitted for decision by litigants. Prefatorily, amendment of decisions is more acceptable than an erroneous judgment attaining finality to the prejudice of innocent parties. A court discovering an erroneous judgment before it becomes final may, motu proprio or upon motion of the parties, correct its judgment with the singular objective of achieving justice for the litigants. However, a word of caution to lower courts, the CA in Cebu in this particular case, is in order. The Court does not sanction careless disposition of cases by courts of justice. The highest degree of diligence must go into the study of every controversy submitted for decision by litigants. Every issue and factual detail must be closely scrutinized and analyzed, and all the applicable laws judiciously studied, before the promulgation of every judgment by the court. Only in this manner will errors in judgments be avoided. Negotiable Instruments Law; Checks; Fictitious Payee Rule; As a rule, when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is considered as a bearer instrument. As a rule, when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is considered as a bearer instrument. A check is a bill of exchange drawn on a bank payable on demand. It is either an order or a bearer instrument. Same; Same; Same; Bearer and Order Instruments; Words and Phrases; An order instrument requires an indorsement from the payee or holder before it may be validly negotiated while a bearer instrument is negotiable by mere delivery. The distinction between bearer and order instruments lies in their manner of negotiation. Under Section 30 of the NIL, an order instrument requires an indorsement from the payee or holder before it may be validly negotiated. A bearer instrument, on the other hand, does not require an indorsement to be validly negotiated. It is negotiable by mere delivery. The provision reads: SEC. 30. What constitutes negotiation. An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder completed by delivery. Same; Same; Same; Same; Under Section 9(c) of the Negotiable Instruments Law (NIL), a check payable to a specified payee may nevertheless be considered as a bearer instrument if it is payable to the order of a fictitious or non-existing person, and such fact is known to the person making it so payable. A check that is payable to a specified payee is an order instrument. However, under Section 9(c) of the NIL, a check payable to a specified payee may nevertheless be considered as a bearer instrument if it is payable to the order of a fictitious or non-existing person, and such fact is known to the person making it so payable. Thus, checks issued to Prinsipe Abante or Si Malakas at si Maganda, who are well-known characters in Philippine mythology, are bearer instruments because the named payees are fictitious and non-existent. Same; Same; Same; Same; Words and Phrases; Legal Research; In discussing the broader meaning of the term fictitious as used in the Negotiable Instruments Law (NIL), court rulings in the United States are a logical starting point since our law on negotiable instruments was directly lifted from the Uniform Negotiable Instruments Law of the United States; A review of US jurisprudence yields that 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, the payee is considered a fictitious payee and the check is a bearer instrument; In a fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the loss, the underlying theory being that one cannot expect a fictitious payee to negotiate the check by placing his indorsement thereon. We have yet to discuss a broader meaning of the term fictitious as used in the NIL. It is for this reason that We look elsewhere for guidance. Court rulings in the United States are a logical starting point since our law on negotiable instruments was directly lifted from the Uniform Negotiable Instruments Law of the United States. A review of US jurisprudence yields that 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. This usually occurs when the maker places a name of an existing payee on the check for convenience or to cover up an illegal activity. Thus, a check made expressly payable to a non-fictitious and existing person is not necessarily an order instrument. If the payee is not the intended recipient of the proceeds of the check, the payee is considered a fictitious payee and the check is a bearer instrument. In a fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the loss. When faced with a check payable to a fictitious payee, it is treated as a bearer instrument that can be negotiated by delivery. The underlying theory is that one cannot expect a fictitious payee to negotiate the check by placing his indorsement thereon. And since the maker knew this limitation, he must have intended for the instrument to be negotiated by mere delivery. Thus, in case of controversy, the drawer of the check will bear the loss. This rule is justified for otherwise, it will be most convenient for the maker who desires to escape payment of the check to always deny the validity of the indorsement. This despite the fact that the fictitious payee was purposely named without any intention that the payee should receive the proceeds of the check. Same; Same; Same; Under the commercial bad faith exception to the fictitiouspayee rule, a showing of commercial bad faith on the part of the drawee bank, or any transferee of the check for that matter, will work to strip it of this defense. There is a commercial bad faith exception to the fictitious-payee rule. A showing of commercial bad faith on the part of the drawee bank, or any transferee of the check for that matter, will work to strip it of this defense. The exception will cause it to bear the loss. Commercial bad faith is present if the transferee of the check acts dishonestly, and is a party to the fraudulent scheme. Said the US Supreme Court in Getty: Consequently, a transferee s lapse of wary vigilance, disregard of suspicious circumstances which might have well induced a prudent banker to investigate and other permutations of negligence are not relevant considerations under Section 3-405 x x x. Rather, there is a commercial bad faith exception to UCC 3-405, applicable when the transferee acts dishonestly where it has actual knowledge of facts and circumstances that amount to bad faith, thus itself becoming a participant in a fraudulent scheme. x x x Such a test finds support in the text of the Code, which omits a standard of care requirement from UCC 3-405 but imposes on all parties an obligation to act with honesty in fact. x x x 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 part of the payees of the existence of the checks is not tantamount to a lack of intention on the part of maker that the payees would not receive the checks proceeds; It is a requisite condition of a fictitious-payee situation that the maker of the check intended for the payee to have no interest in the transaction. For the fictitious-payee rule to be available as a defense, PNB must show that the makers did not intend for the named payees to be part of the transaction involving the checks. At most, the bank s thesis shows that the payees did not have knowledge of the existence of the checks. This lack of knowledge on the part of the payees, however, was not tantamount to a lack of intention on the part of respondents-spouses that the payees would not receive the checks proceeds. Considering that respondents-spouses were transacting with PEMSLA and not the individual payees, it is understandable that they relied on the information given by the officers of PEMSLA that the payees would be receiving the checks. Verily, the subject checks are presumed order instruments. This is because, as found by both lower courts, PNB failed to present sufficient evidence to defeat the claim of respondents-spouses that the named payees were the intended recipients of the checks proceeds. The bank failed to satisfy a requisite condition of a fictitious-payee situation that the maker of the check intended for the payee to have no interest in the transaction. Because of a failure to show that the payees were fictitious in its broader sense, the fictitious-payee rule does not apply. Thus, the checks are to be deemed payable to order. Consequently, the drawee bank bears the loss.

Same; Same; Same; Banks and Banking; A bank that regularly processes checks that are neither payable to the customer nor duly indorsed by the payee is apparently grossly negligent in its operations. PNB was remiss in its duty as the drawee bank. It does not dispute the fact that its teller or tellers accepted the 69 checks for deposit to the PEMSLA account even without any indorsement from the named payees. It bears stressing that order instruments can only be negotiated with a valid indorsement. A bank that regularly processes checks that are neither payable to the customer nor duly indorsed by the payee is apparently grossly negligent in its operations. This Court has recognized the unique public interest possessed by the banking industry and the need for the people to have full trust and confidence in their banks. For this reason, banks are minded to treat their customer s accounts with utmost care, confidence, and honesty. Same; Same; Same; Same; In a checking transaction, the drawee bank has the duty to verify the genuineness of the signature of the drawer and to pay the check strictly in accordance with the drawer s instructions, i.e., to the named payee in the check. In a checking transaction, the drawee bank has the duty to verify the genuineness of the signature of the drawer and to pay the check strictly in accordance with the drawer s instructions, i.e., to the named payee in the check. It should charge to the drawer s accounts only the payables authorized by the latter. Otherwise, the drawee will be violating the instructions of the drawer and it shall be liable for the amount charged to the drawer s account. Banks and Banking; The trustworthiness of bank employees is indispensable to maintain the stability of the banking industry banks are enjoined to be extra vigilant in the management and supervision of their employees. PNB was negligent in the selection and supervision of its employees. The trustworthiness of bank employees is indispensable to maintain the stability of the banking industry. Thus, banks are enjoined to be extra vigilant in the management and supervision of their employees. In Bank of the Philippine Islands v. Court of Appeals, 216 SCRA 51 (1992), this Court cautioned thus: Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and employees. For obvious reasons, the banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees. Actions; Default; Failure to file an answer is a ground for a declaration that defendant is in default. We note that the RTC failed to thresh out the merits of PNB s cross-claim against its co-defendants PEMSLA and MPC. The records are bereft of any pleading filed by these two defendants in answer to the complaint of respondents-spouses and cross-claim of PNB. The Rules expressly provide that failure to file an answer is a ground for a declaration that defendant is in default. Yet, the RTC failed to sanction the failure of both PEMSLA and MPC to file responsive pleadings. Verily, the RTC dismissal of PNB s cross-claim has no basis. Thus, this judgment shall be without prejudice to whatever action the bank might take against its co-defendants in the trial court. [Philippine National Bank vs. Rodriguez, 566 SCRA 513(2008)]

Case Title : SAN MIGUEL CORPORATION, petitioner, vs. BARTOLOME PUZON, JR., respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Criminal Law|Theft|Negotiable Instruments Law|Checks|Words and Phrases Syllabi: 1. Criminal Procedure; Preliminary Investigation; Probable Cause; The determination of the existence or absence of probable cause lies within the discretion of the prosecuting officers after conducting a preliminary investigation upon complaint of an offended party.Probable cause is defined as such facts and circumstances that will engender a well-founded belief that a crime has been committed and that the respondent is probably guilty thereof and should be held for trial. On the fine points of the determination of probable cause, Reyes v. Pearlbank Securities, Inc. (560 SCRA 518 [2008]) comprehensively elaborated that: The determination of [the existence or absence of probable cause] lies within the discretion of the prosecuting officers after conducting a preliminary investigation upon complaint of an offended party. Thus, the decision whether to dismiss a complaint or not is dependent upon the sound discretion of the prosecuting fiscal. He may dismiss the complaint forthwith, if he finds the charge insufficient in form or substance or without any ground. Or he may proceed with the investigation if the complaint in his view is sufficient and in proper form. To emphasize, the 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 of the corresponding information or move for the dismissal of the case. Ultimately, whether or not a complaint will be dismissed is dependent on the sound discretion of the Secretary of Justice. And unless made with grave abuse of discretion, findings of the Secretary of Justice are not subject to review. For this reason, the Court considers it sound judicial policy to refrain from interfering in the conduct of preliminary investigations and to leave the Department of Justice ample latitude of discretion in the determination of what constitutes sufficient evidence to establish probable cause for the prosecution of supposed offenders. Consistent with this policy, courts do not reverse the Secretary of Justice s findings and conclusions on the matter of probable cause except in clear cases of grave abuse of discretion. 2. Same; Same; Negotiable Instruments Law; Checks; Words and Phrases; Delivery as the term is used in Section 12 of the Negotiable Instruments Law means that the party delivering did so for the purpose of giving effect thereto.Considering that the second element is that the thing taken belongs to another, it is relevant to determine whether ownership of the subject check was transferred to petitioner. On this point the Negotiable Instruments Law provides: Sec. 12. Antedated and postdated. The instrument is not invalid for the reason only that it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery. (Underscoring supplied.) Note however that delivery as the term is used in the aforementioned provision means that the party delivering did so for the purpose of giving effect thereto. Otherwise, it cannot be said that there has been delivery of the negotiable instrument. Once there is delivery, the person to whom the instrument is delivered gets the title to the instrument completely and irrevocably. If the subject check was given by Puzon to SMC in payment of the obligation, the purpose of giving effect to the instrument is evident thus title to or ownership of the check was transferred upon delivery. However, if the check was not given as payment, there being no intent to give effect to the instrument, then ownership of the check was not transferred to SMC. 3. Criminal Law; Theft; Elements.[T]he essential elements of the crime of theft are the following: (1) that there 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 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. Division: FIRST DIVISION Docket Number: G.R. No. 167567 Counsel: Castell & Bermejo Ponente: DEL CASTILLO Dispositive Portion: WHEREFORE, the petition is DENIED. The December 21, 2004 Decision and March 28, 2005 Resolution of the Court of Appeals in CA-G.R. SP. No. 83905 are AFFIRMED.

Law where the blanks may be filled up by the holder, the signing in blank being with the assumed authority to do so.That the Deed of Assignment is dated January 16, 1974 while the questioned signature was found to be circa 1954-1957, and not that of 1974, is of no moment. It does not necessarily mean, that the deed is a forgery. Pertinent records reveal that the subject Deed of Assignment is embodied in a blank form for the assignment of shares with authority to transfer such shares in the books of the corporation. It was clearly intended to be signed in blank to facilitate the assignment of shares from one person to another at any future time. This is similar to Section 14 of the Negotiable Instruments Law where the blanks may be filled up by the holder, the signing in blank being with the assumed authority to do so. Indeed, as the shares were registered in the name of Federico O. Borromeo just to give him personality and standing in the business community, private respondent had to have a counter evidence of ownership of the shares involved. Thus, the execution of the deed of assignment in blank, to be filled up whenever needed. The same explains the discrepancy between the date of the deed of assignment and the date when the signature was affixed thereto. 3. Evidence; Handwritings; Expert Witnesses; Courts may place whatever weight is due on the testimony of an expert witness.Petitioners, however, question the Report of the document examiner on the ground that they were not given an opportunity to cross-examine the Philippine Constabulary document examiner; arguing that they never waived their right to question the competency of the examiner concerned. While the Court finds merit in the contention of petitioners, that they did not actually waive their right to cross-examine on any aspect of subject Report of the Philippine Constabulary Crime Laboratory, the Court discerns no proper basis for deviating from the findings of the Court of Appeals on the matter. It is worthy to stress that courts may place whatever weight is due on the testimony of an expert witness. Conformably, in giving credence and probative value to the said Report of the Philippine Constabulary Crime Laboratory, corroborating the findings of the trial Court, the Court of Appeals merely exercised its discretion. There being no grave abuse in the exercise of such judicial discretion, the findings by the Court of Appeals should not be disturbed on appeal. Division: THIRD DIVISION Docket Number: G.R. No. 75908 Counsel: Angara, Abello, Concepcion, Regala & Cruz, Villamor, Laxa & Associates Ponente: PURISIMA Dispositive Portion: WHEREFORE, the Petition is DISMISSED for lack of merit and the assailed Resolution, dated March 13, 1986, AFFIRMED. No pronouncement as to costs.

Case Title : FEDERICO O. BORROMEO, LOURDES O. BORROMEO and FEDERICO O. BORROMEO, INC, petitioners, vs. AMANCIO SUN and the COURT OF APPEALS, respondents.Case Nature : PETITION for review on certiorari of a resolution of the then Intermediate Appellate Court. Syllabi Class : Courts|Evidence|Evidence|Handwritings|Assignments|Negotiable Instruments Law|Expert Witnesses Syllabi: 1. Courts; Evidence; Appeals.Well-settled is the rule that factual findings of the Court of Appeals are conclusive on the parties and not reviewable by the Supreme Court and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court. 2. Evidence; Handwritings; Assignments; Negotiable Instruments Law; The fact that a Deed of Assignment is dated January 16, 1974 while the questioned signature was found to be circa 1954-1957, and not that of 1974, does not necessarily mean that the deed is a forgery, as where it was clearly intended to 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

Case Title : QUIRINO GONZALES LOGGING CONCESSIONAIRE, QUIRINO GONZALES and EUFEMIA GONZALES, petitioners, vs. THE COURT OF APPEALS (CA) and REPUBLIC PLANTERS BANK, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Remedial Law|Actions|Prescription Syllabi: 1. Remedial Law; Actions; Prescription; 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.The Civil Code provides that an action upon a written contract, an obligation created by law, and a judgment must be brought within ten years from the time the right of action accrues. x x x 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. 2. Remedial Law; Actions; Prescription; A mortgage action prescribes after ten years from the time the right of action accrued.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. A mortgage action prescribes after ten years from the time the right of action accrued. Division: THIRD DIVISION

Docket Number: G.R. No. 126568 Counsel: Mariano R. Riva, The Chief Legal Counsel Ponente: CARPIO-MORALES Dispositive Portion: WHEREFORE, the CA Decision is hereby AFFIRMED with MODIFICATION.Republic Bank s Complaint with respect to its first to sixth causes of action is hereby DISMISSED. Its complaint with respect to its seventh to ninth causes of action is REMANDED to the court of origin, the Manila Regional Trial Court, Branch 36, for it to determine the amounts due the Bank thereunder.

[G.R. No. 142047. July 10, 2006] SPS. SERGIO AND MILAGROS OJEDA versus ANDRELINA ORBETA Third Division Sirs/Mesdames: Quoted hereunder, for your information, is a resolution of this Court dated JULY 10, 2006. G.R. No. 142047 (Sps. Sergio and Milagros Ojeda versus Andrelina Orbeta) Petitioner spouses Sergio Ojeda and Milagros Ojeda seek a reversal of [1] the February 24, 2000 Decision rendered by the Court of Appeals in CA-G.R. CV No. 59985 entitled Andrelina Orbeta v. Sps. Sergio Ojeda and Milagros [2] Ojeda. The questioned decision affirmed the February 23, 1995 Decision of the Regional Trial Court, Branch 106 of Quezon City in Civil Case No. Q-91-7794. The facts of this case are not complicated. From 1986 to 1989, the spouses Ojeda obtained various loans they would use as additional capital from Andrelina Orbeta, a general merchandiser and former market stall holder. Over time, Orbeta extended a total of 18 loans to [3] the spouses. Although the couple failed to pay their obligations on time, Orbeta continued to accommodate them, and lent them more money on the assurance that they would soon pay all their debts. Every time Orbeta would verbally demand payment, she was told that payment was forthcoming and there was nothing to worry about since the spouses' business was doing well and the couple had a daughter based in Japan who always sent them money. To their sincerity, they aver, they even delivered a copy of the registration papers of one of their vehicles to Orbeta. Notwithstanding all their promises, however, the spouses' obligations remained unpaid. Orbeta made numerous demands but all attempts to collect from the couple proved futile. Frustrated by their failure to pay, Orbeta through her lawyer sent a demand letter to the spouses on March [4] 1989. Eventually, on July 1989, after an accounting of all outstanding loans due, Milagros Ojeda issued Security Bank and Trust Company Check No. 027836 dated September 1, 1989 for P487,133.87, representing full settlement of all obligations due in favor of Orbeta. When presented for payment, however, the check was dishonored for having been drawn against an account already closed. Consequently, Orbeta filed Criminal Case No. Q-90-10226 for violation of Batas Pambansa Bilang 22 against Milagros Ojeda with the Regional Trial [5] Court of Quezon City. After a plea of guilty, judgment was rendered against [6] the accused in a decision dated October 11, 1990. The dispositive portion of the decision read: WHEREFORE, considering the plea of Guilty entered by accused Milagros Ojeda this morning, the Court hereby renders judgment: 1. Finding said accused GUILTY beyond reasonable doubt of the offense charged; 2. Sentencing her to suffer the penalty of ONE (1) YEAR imprisonment; and 3. To pay costs. The decision was promulgated in open Court this morning in the presence of the accused herself, Assistant City Prosecutor Perpetuo LB Alonzo and Atty. Renerio S. Payumo. SO ORDERED. Consistent with the reservation made by Ojeda in the BP 22 case, Civil Case No. Q-91-7794 was subsequently filed against the spouses to collect on the civil aspect of the BP 22 case. In the civil case, the Regional Trial Court ruled as follows: WHEREFORE, finding no cogent reason to deny the relief being prayed for, the cause of action of plaintiff having been fully established and proven by preponderant evidence, judgment is hereby rendered ordering defendants to pay plaintiff:

1. The amount of Four Hundred Eighty Seven Thousand One Hundred Thirteen and 87/100 (P487,113.87) pesos with 12% interest from filing of the case until fully paid. 2. 25% of the principal obligation as and by way of attorney's fees. 3. Cost of suit. [7] SO ORDERED. Aggrieved, the spouses brought their case to the Court of Appeals where the Regional Trial Court's judgment was affirmed, to wit: WHEREFORE, with the sole modification that the award for attorney's fee[s] is hereby eliminated, the Judgment appealed from is in all other respectsAFFIRMED, with the costs of this instance to be taxed against the defendants-appellants. [8] SO ORDERED. 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 separately from the BP 22 case? To justify their prayer for a reversal of the Court of Appeals' decision, the spouses insist that there are special and important reasons present in the case which constitute a question of law and there was a misapprehension of facts committed by the Court of Appeals which must be rectified. Petitioners maintain that any obligation arising from Security Bank and Trust Company Check No. 027836 is invalid and illegal since the same was issued in blank except for the signature of Milagros Ojeda. They further claim that they already paid P55,000 to satisfy their obligation to Orbeta of P30,000 only. The couple also aver that the motion of Orbeta to file a separate civil action was merely noted by the Regional Trial Court in the BP 22 case and there was no order granting the institution of a separate civil action. Respondent Orbeta, on the other hand, counters that the errors raised by the spouses deal with questions of fact which have already been passed upon and decided by the Regional Trial Court and the Court of Appeals and cannot now be raised in this petition for review. Orbeta also contends that, the couple cannot assert for the first time that the motion to file a separate civil action was merely noted and no order was issued by the Regional Trial Court granting the same since a full blown trial had been conducted without the said issue having been raised by the spouses, hence, they are barred from doing so, since they are considered to have waived any objection they may have had on the subject. Finally, Orbeta points out that the judgment in the BP 22 case did not contain an award for civil liability which is tantamount to the Regional Trial [9] Court's approval of the motion. To resolve the first issue, we must here emphasize that the jurisdiction of this Court in a petition such as this is limited to reviewing errors of law that might have been committed by the lower court. The allegation of the spouses that Security Bank and Trust Company Check No. 027836 was delivered to Orbeta in blank except for the signature of Milagros Ojeda and the amount of P10,000 annotated at the back of the check, and their contention that they cannot be held liable for the face value of the check since Milagros Ojeda was not the one who filled up the date, name of the payee and the amount appearing on the check, are questions of fact that require us to re-examine the evidence presented by the contending parties during trial. This cannot be done in a petition for review. Under Rule 45, only questions of law may be raised in a petition for review, except in very few specified instances, e.g. where there is variance in the factual findings of the trial and appellate courts. Since both the Regional Trial Court and the Court of Appeals agree on the cited facts, we are bound by their factual findings. In any event, the spouses do not deny that the check was delivered to Orbeta and that the signature appearing on the check belongs to Milagros Ojeda. Even if the check was delivered to Orbeta in blank, we must stress that the presumption is that the latter had prima facieauthority to complete the check by filling up the same. Here, the provision of Section 14 of the Negotiable Instruments Law is pertinent: SEC. 14. Blanks; when may be filled. - Where the instrument is wanting in any material particular, the person in possession thereof has a prima facieauthority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument, when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it

had been filled up strictly in accordance with the authority given and within a reasonable time. (Emphasis supplied.) The law merely requires that the instrument be in the possession of a person other than the drawer or maker, and from such possession, together with the fact that the instrument is wanting in a material particular, the law [10] presumes agency to fill up the blanks. Because of the presumption of authority, the burden of proving that there was no authority or that the authority granted was exceeded is placed on the person questioning such [11] authority. There is nothing on record to show that the prima facie presumption created by the afore-quoted section was successfully refuted by the spouses. Therefore, the couple's stance that they cannot be held liable for the check because they were not the ones who wrote the date, the name of the payee and the amount, is untenable. On the second issue, it appears that an urgent motion to file a separate civil action was filed by Orbeta on October 11, 1990, which motion was [12] correspondingly noted by the Regional Trial Court in its decision. Since the civil liability involved in this case is one that arises from a crime, the rule is that the same is impliedly instituted with the criminal action unless the offended 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 [13] case. The purpose of the rule requiring reservation is to prevent the [14] offended party from recovering damages twice for the same act or omission. Orbeta's intention to reserve her right to recover the civil liability arising [15] from the BP 22 case is clear from the time she filed the urgent motion. The fact that the Regional Trial Court did not provide for an award of damages in its decision is also a clear recognition of Orbeta's reservation. Contrary to the spouses' argument, an order by the Regional Trial Court granting the urgent motion to file a separate civil action is not necessary since the rules only require that the offended party make the reservation before the prosecution starts to present its evidence and under circumstances affording the offended party a reasonable opportunity to make such reservation. Lastly, we agree with respondent that it is now too late for the spouses to question the institution of the civil case separately from the BP 22 case. A full blown trial was conducted in the civil case with the participation of the spouses, but they never raised any objection thereto, and they cannot be allowed here and now to raise this issue for the first time. WHEREFORE, the instant petition is DENIED. The February 24, 2000 Decision of the Court of Appeals sustaining the February 23, 1995 Decision of the Regional Trial Court is AFFIRMED. Costs against petitioners. SO ORDERED. Rollo, pp. 12-24. Penned by Associate Justice Renato C. Dacudao, with Associate Justices Quirino D. Abad Santos, Jr., and B.A. Adefuin-De la Cruz concurring. [2] Id. at 25-31. [3] Id. at 19. [4] Id. at 18. [5] Id. at 16. [6] Id. at 51-52. [7] Id. at 31. [8] Id. at 23. [9] Id. at 45-46. [10] A-F. Agbayani, COMMENTARIES AND JURISPRUDENCE ON THE COMMERCIAL LAWS OF THE PHILIPPINES, Vol. I, 168 (1987 ed.). [11] J.C. Campos, Jr. & M.C. Lopez-Campos, NOTES AND SELECTED CASES ON rd NEGOTIABLE INSTRUMENTS Law, 351 (3 ed., 1971) (citations omitted). [12] Rollo, p. 52. [13] The Rules of Criminal Procedure prevailing then provides: SECTION 1. Institution of criminal and civil actions. - When a criminal action is instituted, the civil action for the recovery of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his right to institute it separately, or institutes the civil action prior to the criminal action. Such civil action includes recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34 and 2176 of the Civil Code of the Philippinesarising from the same act or omission of the accused. A waiver of any of the civil actions extinguishes the others. The institution of, or the reservation of the right to file, any of said civil actions separately waives the others. The reservation of the right to institute the separate civil actions shall be made before the prosecution starts to present its evidence and under
[1]

circumstances affording the offended party a reasonable opportunity to make such reservation. In no case may the offended party recover damages twice for the same act or omission of the accused. When the offended party seeks to enforce civil liability against the accused by way of moral, nominal, temperate or exemplary damages, the filing fees for such civil action as provided in these Rules shall constitute a first lien on the judgment except in an award for actual damages. In cases wherein the amount of damages, other than actual, is alleged in the complaint or information, the corresponding filing fees shall be paid by the offended party upon the filing thereof in court for trial. [14] Yakult Philippines v. Court of Appeals, G.R. No. 91856, October 5, 1990, 190 SCRA 357, 361. [15] Under the present Section 1(b), Rule 111 of the Revised Rules of Criminal Procedure: (b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the corresponding civil action. No reservation to file such civil action separately shall be allowed. Case Title : SAMSON CHING, petitioner, vs. CLARITA NICDAO and HON. COURT OF APPEALS, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions|Burden of Proof|Interests|Criminal Procedure|Civil Liability|Appeals|Estoppel Syllabi: 1. Actions; Criminal Procedure; Civil Liability; The civil liability is not extinguished by acquittal: (a) where the acquittal is based on reasonable doubt; (b) where the court expressly declares that the liability of the accused is not criminal but only civil in nature; and (c) where the civil liability is not derived from or based on the criminal act of which the accused is acquitted.In Sapiera v. Court of Appeals, 314 SCRA 370 (1999), the Court enunciated that the civil liability is not extinguished by acquittal: (a) where the acquittal is based on reasonable doubt; (b) where the court expressly declares that the liability of the accused is not criminal but only civil in nature; and (c) where the civil liability is not derived from or based on the criminal act of which the accused is acquitted. Thus, under Article 29 of the Civil Code ART. 29. When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted. Such action requires only a preponderance of evidence. Upon motion of the defendant, the court may 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 based upon reasonable doubt, the court shall so declare. In the absence of any declaration to that effect, it may be inferred from the text of the decision whether or not the acquittal is due to that ground. 2. Same; Estoppel; Estoppel cannot give validity to an act that is prohibited by law or one that is against public policyclearly, the collection of interests without any stipulation therefor in writing is prohibited by law. Neither could respondent Nicdao be considered to be estopped from denying the validity of these interests. Estoppel cannot give validity to an act that is prohibited by law or one that is against public policy. Clearly, the collection of interests without any stipulation therefor in writing is prohibited by law. Consequently, the daily payments made by respondent Nicdao amounting to P5,780,000.00 were properly considered by the CA as applying to the principal amount of her loan obligations. 3. Interests; Under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing. The Court agrees with the CA that the daily payments made by respondent Nicdao amounting to P5,780,000.00 cannot be considered as interest payments only. Even respondent Nicdao testified that the daily payments that she made to Nuguid were for the interests due. However, as correctly ruled by the CA, no interests could be properly collected in the loan transactions between petitioner Ching and respondent Nicdao because there was no stipulation therefor in writing. To reiterate, under Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in writing. 4. Burden of Proof; It is a basic rule in evidence that the burden of proof lies on the party who makes the allegationset 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 who denies a fact cannot produce any proof). It is a basic rule in evidence that the burden of proof lies on the 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 who denies a fact cannot produce any proof). In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be synonymous with the term greater weight of evidence or greater weight of the credible evidence. Preponderance of evidence is a phrase which, in the last analysis, means probability of the truth. It is evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto. Section 1, Rule 133 of the Revised Rules of Court offers the guidelines in determining preponderance of evidence: SEC. 1. Preponderance of evidence, how determined. In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all the facts and circumstances of the case, the witnesses manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the greater number. 5. Same; Same; Same; Appeals; The appeal period accorded to the accused should also be available to the offended party who seeks redress of the civil aspect of the decisionthe period to appeal granted to the offended party is the same as that granted to the accused. Following the long recognized rule that the appeal period accorded to the accused should also be available to the offended party who seeks redress of the civil aspect of the decision, the period to appeal granted to petitioner Ching is the same as that granted to the accused. With petitioner Ching s timely filing of the instant petition for review of the civil aspect of the CA s decision, the Court thus has the jurisdiction and authority to determine the civil liability of respondent Nicdao notwithstanding her acquittal. In order for the petition to prosper, however, it must establish that the judgment of the CA acquitting respondent Nicdao falls under any of the three categories enumerated in Salazar and Sapiera, to wit: (a) where the acquittal is based on reasonable doubt as only preponderance of evidence is required; (b) where the 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 which the accused is acquitted. Division: THIRD DIVISION

Since 1998, this Court has held that it would best serve the ends of criminal justice if, in fixing the penalty to be imposed for violation of B.P. 22, the same philosophy underlying the Indeterminate Sentence Law be observed, i.e., that of redeeming valuable human material and preventing unnecessary deprivation of personal liberty and economic usefulness with due regard to the protection of the social order. This policy was embodied in Supreme Court Administrative Circular No. 12-2000, authorizing the non-imposition of the penalty of imprisonment in B.P. 22 cases. We also clarified in Administrative Circular No. 13-2001, as explained in Tan v. Mendez, 383 SCRA 202 (2002), that we are not decriminalizing B.P. 22 violations, nor have we removed imprisonment as an alternative penalty. Needless to say, the determination of whether the circumstances warrant the imposition of a fine alone rests solely upon the judge. Should the judge decide that imprisonment is the more appropriate penalty, Administrative Circular No. 12-2000 ought not to be deemed a hindrance. 3. Same; Same; Checks; The lack of criminal intent on the part of the accused is irrelevant; The law has made the mere act of issuing a worthless check a malum prohibitum; The gravamen of the offense under this law is the act of issuing a worthless check or a check that is dishonored upon its presentment for payment, not the nonpayment of the obligation.It bears repeating that the lack of criminal intent on the part of the accused is irrelevant. The law has made the mere act of issuing a worthless check a malum prohibitum, an act proscribed by legislature for being deemed pernicious and inimical to public welfare. In fact, even in cases where there had been payment, through compensation or some other means, there could still be prosecution for violation of B.P. 22. The gravamen of the offense under this law is the act of issuing a worthless check or a check that is dishonored upon its presentment for payment, not the nonpayment of the obligation. 4. Criminal Law; Bouncing Checks Law; Elements of the Crime.We have gone over the records and find no error in the decision ofthe appellate court holding that the elements of the crime have been established by the prosecution, i.e., (1) the 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 he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. Division: FIRST DIVISION Docket Number: G.R. No. 160127 Counsel: Benjamin C. Santos & Ray Montri C. Santos Law Offices

Docket Number: G.R. No. 141181 PonenteC.J. : PUNO, Counsel: Abao, Pamfilo, Paras, Pineda and Agustin Law Offices, Villaraza and Angangco Ponente: CALLEJO, SR. Dispositive Portion: WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Dispositive Portion: IN VIEW WHEREOF, the petition is DENIED and the Decision of the Court of 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 cost of suit, with legal interest from date of judicial demand. The sentence of 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. Syllabi Class : Criminal Law ; Bouncing Checks Law ; Checks ; Penalties ; Syllabi: 1. Remedial Law; Appeals; Certiorari; The jurisdiction of the Supreme Court is confined to reviews of errors of law ascribed to the Court of Appeals (CA).At the outset, the first and second grounds raised by petitioner are essentially factual in nature, impugning the finding of guilt by both the CA and the RTC. Petitioner would have this court re-evaluate and re-assess the facts, when it is beyond cavil that in an appeal by certiorari, the jurisdiction of this Court is confined to reviews of errors of law ascribed to the CA. This Court is not a trier of facts, and the findings of fact by the CA are conclusive, more so when it concurs with the factual findings of the RTC. Absent any showing that such findings are devoid of any substantiation on record, the finding of guilt is conclusive on us. 2. Same; Same; Same; Penalties; Supreme Court Administrative Circular No. 12-2000, authorizing the non-imposition of the penalty of imprisonment in B.P. 22 cases; Court has not decriminalized B.P. 22 violations, nor have removed imprisonment as an alternative penalty.-

Case Title : JOHN DY, petitioner, vs. PEOPLE OF THE PHILIPPINES and The HONORABLE COURT OF APPEALS, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Criminal Law ; Estafa (Art. 315, 2[d]) ; Penalties ; Syllabi: 1. Estafa; Bouncing Checks Law; Negotiable Instruments Law; Words and Phrases; Elements of Estafa under Art. 315, par. 2(d) of the Rev. Penal Code; Section 191 of the Negotiable Instruments Law defines issue as the first delivery of an instrument, complete in form, to a person who takes it as a holder; Delivery denotes physical transfer of the instrument by the maker or drawer coupled with an intention to convey title to the payee and recognize him as a holder.Before an accused can be held liable for estafa under Article 315, paragraph 2(d) of the Revised Penal Code, as amended by Republic Act No. 4885, the following elements must concur: (1) postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) 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 Instruments Law defines issue as the first delivery of an instrument, complete in form, to a person who takes it as a holder. Significantly, delivery is the final act essential to the negotiability of an instrument. Delivery denotes physical transfer of the instrument by the maker or drawer coupled with an intention to convey title to the payee and recognize him as a holder. It means more than handing over to another; it imports such transfer of the instrument to another as to enable the latter to hold it for himself. 2. Criminal Law; Estafa (Art. 315, 2[d]); Penalties; If the amount of the fraud exceeds 22,000, the penalty of reclusin temporal is imposed in its maximum period, adding one year for each additional P10,000 but the total penalty shall not exceed thirty (30) years, which shall be termed reclusin perpetua, merely to describe the penalty actually imposed on account of the amount of the fraud involved.Under Section 1 of P.D. No. 818, if the amount of the fraud exceeds P22,000, the penalty of reclusin temporal is imposed in its maximum period, adding one year for each additional P10,000 but the total penalty shall not exceed thirty (30) years, which shall be termed reclusin perpetua. Reclusin perpetua is not the prescribed penalty for the offense, but merely describes the penalty actually imposed on account of the amount of the fraud involved. 3. Same; Same; Like Article 315 of the Revised Penal Code, B.P. Blg. 22 also speaks only of insufficiency of funds and does not treat of uncollected deposits.Like Article 315 of the Revised Penal Code, B.P. Blg. 22 also speaks only of insufficiency of funds and does not treat of uncollected deposits. To repeat, we cannot interpret the law in such a way as to expand its provision to encompass the situation of uncollected deposits because it would make the law more onerous on the part of the accused. Again, criminal statutes are strictly construed against the Government and liberally in favor of the accused. 4. Same; Same; To be liable under Section 1 of B.P. Blg. 22, the check must be dishonored by the drawee bank for insufficiency of funds or credit or dishonored for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.In Tan v. People, 349 SCRA 777 (2001), this Court acquitted the petitioner therein who was indicted under B.P. Blg. 22, upon a check which was dishonored for the reason DAUD, among others. We observed that: In the second place, even without relying on the credit line, petitioner s bank account covered the check she issued because even though there were some deposits that were still uncollected the deposits became good and the bank certified that the check was funded. To be liable under Section 1 of B.P. Blg. 22, the check must be dishonored by the drawee bank for insufficiency of funds or credit or dishonored for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. 5. Same; Same; Estafa; What the law punishes is simply the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating theretothe only valid query, then, is whether the law has been breached, i.e., by the mere act of issuing a bad check, without so much regard as to the criminal intent of the issuer. During the joint pre-trial conference of this case, Dy admitted that he issued the checks, and that the signatures appearing on them were his. The facts reveal that the checks were issued in blank because of the uncertainty of the volume of products to be retrieved, the discount that can be availed of, and the deduction for bad orders. Nevertheless, we must stress that what the law punishes is simply the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating thereto. If inquiry into the reason for which the checks are issued, or the terms and conditions of their issuance is required, the public s faith in the stability and commercial value of checks as currency substitutes will certainly erode. Moreover, the gravamen of the offense under B.P. Blg. 22 is the act of making or issuing a worthless check or a check that is dishonored upon presentment for payment. The act effectively declares the offense to be one of malum prohibitum. The only valid query, then, is whether the law has been breached, i.e., by the mere act of issuing a bad check, without so much regard as to the criminal intent of the issuer. Indeed, non-fulfillment of the obligation is immaterial. Thus, petitioner s defense of failure of consideration must likewise fall. This is especially so since as stated above, Dy has acknowledged receipt of the goods. 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 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 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 check by the drawee bank for insufficiency of funds or credit or dishonor for the

same reason had not the drawer, without any valid cause, ordered the bank to stop payment. The case at bar satisfies all these elements. 7. Same; Same; Same; Uncollected deposits are not the same as insufficient fundsthe prima facie presumption of deceit arises only when a check has been dishonored for lack or insufficiency of funds; Clearly, the estafa punished under Article 315, paragraph 2(d) of the Revised Penal Code is committed when a check is dishonored for being drawn against insufficient funds or closed account, and not against uncollected deposit. The same, however, does not hold true with respect to FEBTC Check No. 553602 for P106,579.60. This check was dishonored for the reason that it was drawn against uncollected deposit. Petitioner had P160,659.39 in his savings deposit account ledger as of July 22, 1992. We disagree with the conclusion of the RTC that since the balance included a regional clearing check worth P55,000 deposited on July 20, 1992, which cleared only five (5) days later, then petitioner had inadequate funds in this instance. Since petitioner technically and retroactively had sufficient funds at the time Check No. 553602 was presented for payment then the second element (insufficiency of funds to cover the check) of the crime is absent. Also there is no prima facie evidence of deceit in this instance because the check was not dishonored for lack or insufficiency of funds. Uncollected deposits are not the same as insufficient funds. The prima facie presumption of deceit arises only when a check has been dishonored for lack or insufficiency of funds. Notably, the law speaks of insufficiency of funds but not of uncollected deposits. Jurisprudence teaches that criminal laws are strictly construed against the Government and liberally in favor of the accused. Hence, in the instant case, the law cannot be interpreted or applied in such a way as to expand its provision to encompass the situation of uncollected deposits because it would make the law more onerous on the part of the accused. Clearly, the estafa punished under Article 315, paragraph 2(d) of the Revised Penal Code is committed when a check is dishonored for being drawn against insufficient funds or closed account, and not against uncollected deposit. Corollarily, the issuer of the check is not liable for estafa if the remaining balance and the uncollected deposit, which was duly collected, could satisfy the amount of the check when presented for payment. 8. Same; Same; Same; Words and Phrases; Deceit as an element of estafa is a specie of fraudit is actual fraud which consists in any misrepresentation or contrivance where a person deludes another, to his hurt. We are not swayed by petitioner s arguments that the single incident of dishonor and his absence when the checks were delivered belie fraud. Indeed damage and deceit are essential elements of the offense and must be established with satisfactory proof to warrant conviction. Deceit as an element of estafa is a specie of fraud. It is actual fraud which consists in any misrepresentation or contrivance where a person deludes another, to his hurt. There is deceit when one is misled by guile, trickery or by other means to believe as true what is really false. 9. Same; Same; Same; Even if the checks were given to the payee in blank, this alone did not make their issuance invalid.In this case, even if the checks were given to W.L. Foods in blank, this alone did not make its issuance invalid. When the checks were delivered to Lim, through his employee, he became a holder with prima facie authority to fill the blanks. This was, in fact, accomplished by Lim s accountant. The pertinent provisions of Section 14 of the Negotiable Instruments Law are instructive: SEC. 14. Blanks; when may be filled. Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. . (Emphasis supplied.) Hence, the law merely requires that the instrument be in the possession of a person other than the drawer or maker. From such possession, together with the fact that the instrument is wanting in a material particular, the law presumes agency to fill up the blanks. Because of this, the burden of proving want of authority or that the authority granted was exceeded, is placed on the person questioning such authority. Petitioner failed to fulfill this requirement. Division: SECOND DIVISION Docket Number: G.R. No. 158312 Counsel: M.A. Obias & Associates Ponente Actg. C.J. : QUISUMBING,

Dispositive Portion: Notes. B.P. Blg. 22 does not appear to concern itself with what might actually be envisioned by the parties, its primordial intention being to instead ensure the stability and commercial value of checks as being vital substitutes for currency. (Meriz vs. People, 368 SCRA 524 [2001]) Conviction for violation of B.P. Blg. 22 imports deceit and certainly relates to and affects the good moral character of a person a drawer who issues an unfunded check deliberately reneges on his private duties he owes his fellow men or society in a manner contrary to accepted and customary rule of right and duty, justice, honesty or good morals. (Villaber vs. Commission on Elections, 369 SCRA 126 [2001])

Case Title : BANK OF AMERICA NT & SA, petitioner, vs. PHILIPPINE RACING CLUB, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Attorney s Fees Syllabi: 1. Banks and Banking; Negotiable Instruments Law; If the signatures are genuine, the bank has the unavoidable legal and contractual duty to pay.Petitioner insists that it merely fulfilled its obligation under law and contract when it encashed the aforesaid checks. Invoking Sections 126 and 185 of the Negotiable Instruments Law (NIL), petitioner claims that its duty as a drawee bank to a drawer-client maintaining a checking account with it is to pay orders for checks bearing the drawer-client s genuine signatures. The genuine signatures of the client s duly authorized signatories affixed on the checks signify the order for payment. Thus, pursuant to the said obligation, the drawee bank has the duty to determine whether the signatures appearing on the check are the drawer-client s or its duly authorized signatories. If the signatures are genuine, the bank has the unavoidable legal and contractual duty to pay. If the signatures are forged and falsified, the drawee bank has the corollary, but equally unavoidable legal and contractual, duty not to pay. 2. Attorney s Fees; An adverse decision does not ipso facto justify an award of attorney s fees to the winning party.We find that the awards of attorney s fees and litigation expenses in favor of 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 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 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 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 his cause. 3. Damages; Following established jurisprudential precedents, we believe the allocation of sixty percent (60%) of the actual damages, involved in this case (represented by the amount of the checks with legal interest) to petitioner is proper under the premises.Following established jurisprudential precedents, we believe the allocation of sixty percent (60%) of the actual damages involved in this case (represented by 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. 4. Same; Doctrine of Last Clear Chance; In instances where both parties are at fault, this Court has consistently applied the doctrine of last clear chance in order to assign liability.Even if we assume that both parties were guilty of negligent acts that led to the loss, petitioner will still emerge as the party foremost liable in this case. In instances where both parties are at fault, this Court has consistently applied the doctrine of last clear chance in order to assign liability. In Westmont Bank v. Ong, 375 SCRA 212 (2002), we ruled: [I]t is petitioner [bank] which had the last clear chance to stop the fraudulent encashment of the subject checks had it exercised due diligence and followed the proper and regular banking procedures in clearing checks. As we had earlier ruled, the one who had a last clear opportunity to avoid the impending harm but failed to do so is chargeable with the consequences thereof. 5. Same; Every client should be treated equally by a banking institution regardless of the amount of his deposits and each client has the right to expect that every centavo he entrusts to a bank would be handled with the same degree of care as the accounts of other clients.Taking this with the testimony of petitioner s operations manager that in case of an irregularity on the face of the check (such as when blanks were not properly filled out) the bank may or may not call the client depending on how

busy the bank is on a particular day, we are even more convinced that petitioner s safeguards to protect clients from check fraud are arbitrary and subjective. Every client should be treated equally by a banking institution regardless of the amount of his deposits and each client has the right to expect that every centavo he entrusts to a bank would be handled with the same degree of care as the accounts of other clients. Perforce, we find that petitioner plainly failed to adhere to the high standard of diligence expected of it as a banking institution. 6. Same; 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 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 who transact business with them. They have the obligation to treat their client s account meticulously and with the highest degree of care, considering the fiduciary nature of their relationship. The diligence required of banks, therefore, is more than that of a good father of a family. 7. Same; Same; A material alteration is defined in Section 125 of the Negotiable Instruments Law (NIL) to be one which changes the date, the sum payable, the time or place of payment, the number or relations of the parties, the currency in which payment is to be made or one which adds a place of payment where no place of payment is specified, or any change or addition which alters the effect of the instrument in any respect.Petitioner maintains that there exists a duty on the drawee bank to inquire from the drawer before encashing a check only when the check bears a material alteration. A material alteration is defined in Section 125 of the NIL to be one which changes the date, the sum payable, the time or place of payment, the number or relations of the parties, the currency in which payment is to be made or one which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect. With respect to the checks at issue, petitioner points out that they do not contain any material alteration. This is a fact which was affirmed by the trial court itself. Division: FIRST DIVISION Docket Number: G.R. No. 150228 Counsel: Sycip, Salazar, Hernandez & Gatmaitan Ponente: LEONARDO-DE CASTRO Dispositive Portion: WHEREFORE, the Decision of the Court of Appeals dated July 16, 2001 and its Resolution dated September 28, 2001 are AFFIRMED with the following MODIFICATIONS: (a) petitioner Bank of America NT & SA shall pay to respondent Philippine Racing Club sixty percent (60%) of the sum of Two Hundred Twenty Thousand Pesos (P220,000.00) with legal interest as awarded by the trial court and (b) the awards of attorney s fees and litigation expenses in favor of respondent are deleted. Proportionate costs.

Case Title : PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. MARTIN L. ROMERO and ERNESTO C. RODRIGUEZ, accused-appellants.Case Nature : APPEAL from a decision of the Regional Trial Court of Butuan City, Br. 2. Syllabi Class : Criminal Law|Estafa Syllabi: 1. Criminal Law; Estafa; Elements of Estafa.Under paragraph 2 (d) of Article 315, as amended by R.A. 4885, the elements of estafa are: (1) a check was postdated or issued in payment of an obligation contracted at the time it was issued; (2) lack or insufficiency of funds to cover the check; (3) damage to the payee thereof. The prosecution has satisfactorily established all these elements. 2. Criminal Law; Estafa; What fraud deem to comprise.Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust, or confidences justly reposed, resulting in damage to another, or by which an undue and unconscientious advantage is taken of another. It is a generic term embracing all multifarious means which human ingenuity can device, and which are resorted to by one individual to secure an advantage over another by false suggestions or by suppression of truth and includes all surprise, trick, cunning, dissembling and any unfair way by which another is cheated.

3. Criminal Law; Estafa; There is deceit when one is misled, either by guide or trickery or by other means, to believe to be true what is really false.Deceit is a specie of fraud. It is actual fraud, and consists in any false representation or contrivance whereby one person overreaches and misleads another, to his hurt. Deceit excludes the idea of mistake. There is deceit when one is misled, either by guide or trickery or by other means, to believe to be true what is really false. In this case, there was deception when accused fraudulently represented to complainant that his investment with the corporation would have an 800% return in 15 or 21 days. 4. Criminal Law; Estafa; Failure to cover the amount of the check within three days after notice creates a rebuttable presumption of fraud.Even assuming for the sake of argument that the check was dishonored without any fraudulent pretense or fraudulent act of the drawer, the latter s failure to cover the amount within three days after notice creates a rebuttable presumption of fraud. Division: FIRST DIVISION Docket Number: G.R. No. 112985 Counsel: The Solicitor General, Public Attorney s Office Ponente: PARDO Dispositive Portion: WHEREFORE, the Court hereby AFFIRMS WITH MODIFICATION the appealed judgment. The Court hereby sentences accused-appellant Martin Romero to suffer an indeterminate penalty of ten (10) years and one (1) day of prision mayor, as minimum, to sixteen (16) years and one (1) day of reclusion temporal, as maximum, to indemnify Ernesto A. Ruiz in the amount of one hundred fifty thousand pesos (P150,000.00) with interest thereon at six (6%) per centum per 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 exemplary damages, and the costs.

declaration from the court that the fact from which the civil action might arise did not exist. An accused acquitted of estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant. The accused should be adjudged liable for the unpaid value of the checks signed by her in favor of the complainant. 4. Criminal Law; Damages; Rationale behind the award of civil indemnity despite a judgment of acquittal when evidence is sufficient to sustain the award.The rationale behind the award of civil indemnity despite a judgment of acquittal when evidence is sufficient to sustain the award was explained by the Code Commission in connection with Art. 29 of the Civil Code, to wit: The old rule that the acquittal of the accused in a criminal case also releases him from civil liability is one of the most serious flaws in the Philippine legal system. It has given rise to numberless instances of miscarriage of justice, where the acquittal 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 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 to unfortunate and deplorable consequences. Such reasoning fails to draw a clear line of demarcation between criminal liability and civil responsibility, and 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 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 proper that for the purposes of imprisonment of or fine upon the accused, the offense should be proved beyond reasonable doubt. But for the purpose of indemnifying the complaining party, why should the offense also be proved beyond reasonable doubt? Is not the invasion or violation of every private right to be proved only by preponderance of evidence? Is the right of the aggrieved person any less private because the wrongful act is also punishable by the criminal law? Division: SECOND DIVISION Docket Number: G.R. No. 128927

Case Title : REMEDIOS NOTA SAPIERA, petitioner, vs. COURT OF APPEALS and RAMON SUA, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions|Negotiable Instruments Law|Criminal Law|Damages|Criminal Procedure|Criminal Law|Estafa Syllabi: 1. Actions; Damages; Criminal Procedure; The civil liability is not extinguished by acquittal where: (a) the acquittal is based on reasonable doubt; (b) where the court expressly declares that the liability of the accused is not criminal but only civil in nature; and, (c) where the civil liability is not derived from or based on the 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 might arise did not exist. Thus, the civil liability is not extinguished by acquittal where: (a) the acquittal is based on reasonable doubt; (b) where the court expressly declares that the liability of the accused is not criminal but only civil in nature; and, (c) where the civil liability is not derived from or based on the criminal act of which the accused is acquitted. 2. Negotiable Instruments Law; Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is deemed an indorser.We affirm the findings of the Court of Appeals that despite the conflicting versions of the parties, it is undisputed that the four (4) checks issued by de Guzman were signed by petitioner at the back without any indication as to how she should be bound thereby and, therefore, she is deemed to be an indorser thereof. The Negotiable Instruments Law clearly provides Sec. 17. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous, or there are admissions therein, the following rules of construction apply: x x x x (f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is deemed an indorser. x x x x 3. Negotiable Instruments Law; Damages; Criminal Law; Estafa; An accused acquitted of estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant she may be adjudged liable for the unpaid value of the checks signed by her in favor of the complainant.The dismissal of the criminal cases against petitioner did not erase her civil liability since the dismissal was due to insufficiency of evidence and not from a

Counsel: Tanopo & Serafica, Hermogenes S. Decano Ponente: BELLOSILLO Dispositive Portion: WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated 22 January 1996 as amended by its Resolution dated 19 March 1997 ordering petitioner Remedios Nota Sapiera to pay private respondent Ramon Sua the remaining amount of P210,150.00 as civil liability, is AFFIRMED. Costs against petitioners.

Case Title : SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. EVANGELISTA, petitioners, vs. MERCATOR FINANCE CORP., LYDIA P. SALAZAR, LAMEC S REALTY AND DEVELOPMENT CORP. and the REGISTER OF DEEDS OF BULACAN, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Civil Procedure|Civil Law|Motions|Summary Judgment| Genuine Issue |Contracts|Suretyship|Liability Syllabi: 1. Civil Procedure; Motions; Summary Judgment; The crucial question in a motion for summary judgment is where the issues raised in the pleadings are genuine or fictitious.Summary judgment is a procedural technique aimed at weeding out sham claims or defenses at an early stage of the litigation. The crucial question in a motion for summary judgment is whether the issues raised in the pleadings are genuine or fictitious, as shown by affidavits, depositions or admissions accompanying the motion. 2. Civil Procedure; Motions; Summary Judgment; Genuine Issue ; The proper inquiry would therefore be whether the affirmative defenses offered by petitioners constitute genuine issue of fact requiring a full-blown trial.A genuine issue means an issue of fact which calls for the presentation of evidence, as distinguished from an issue which is fictitious or contrived so as not to constitute a genuine issue for trial. To forestall summary judgment, it is essential for the non-moving party to confirm the existence of genuine issues where he has substantial, plausible and fairly arguable defense, i.e., issues of 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 therefore be whether the affirmative defenses offered by petitioners constitute genuine issue of fact requiring a full-blown trial. 3. Civil Law; Contracts; Suretyship; Liability; A surety is bound by the same consideration that makes the contract effective between the parties thereto.A surety is one who is solidarily liable with the principal. Petitioners cannot claim that they did not personally receive any consideration for the contract for wellentrenched is the rule that the consideration necessary to support a surety obligation need not pass directly to the surety, a consideration moving to the principal alone being sufficient. A surety is bound by the same consideration that makes the contract effective between the principal parties thereto. Division: THIRD DIVISION Docket Number: G.R. No. 148864 Counsel: Wilfredo O. Arceo, Cases, Corpus and Associates Law Offices, Evelyn B. Esparrago Piollo Ponente: PUNO Dispositive Portion: IN VIEW WHEREOF, the petition is dismissed. Treble costs against the petitioners.

Case Title: Adalia Francisco vs. CA Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Remedial Law|Negotiable Instruments Law|Civil Law|Evidence|Indorsement|Damages Syllabi: 1. Remedial Law; Evidence; Well-entrenched is the rule that findings of trial 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 is supported by substantial evidence on record.As regards the forgery, we concur with the lower courts finding that Francisco forged the signature of Ong on the checks to make it appear as if Ong had indorsed said checks and that, after indorsing the checks for a second time by signing her name at the back of the checks, Francisco deposited said checks in her savings account with IBAA. The forgery was satisfactorily established in the trial court upon the strength of the findings of the NBI handwriting expert. Other than petitioner s self-serving denials, there is nothing in the records to rebut the NBI s findings. Well-entrenched is the rule that findings of trial 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 is supported by substantial evidence on record, as it is in the case at bench. 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 liability.Petitioner claims that she was, in any event, authorized to sign Ong s name on the checks by virtue of the Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the GSIS, including the questioned checks. Petitioner s alternative defense must similarly fail. 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 liability. An agent, when so signing, should indicate that he is merely signing in behalf of the principal and must disclose the name of his principal; otherwise he shall be held personally liable. Even assuming that Francisco was authorized by HCCC to sign Ong s name, still, Fran- cisco did not indorse the instrument in accordance with law. Instead of signing Ong s name, Francisco should have signed her own name and expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate her act of forgery. 3. Civil Law; Damages; Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.Due to her forgery of Ong s signature which enabled her to deposit the checks in her own account, Francisco deprived HCCC of the money due it from the GSIS pursuant to the Land Development and Construction Contract. Thus, we affirm respondent court s award of compensatory damages in the amount of P370,475.00, but with a

modification as to the interest rate which shall be six percent (6%) per annum, to be computed from the date of the filing of the complaint since the amount of damages was alleged in the complaint;however, the rate of interest shall be twelve percent (12%) per annum from the time the judgment in this case becomes final and executory until its satisfaction and the basis for the computation of this twelve percent (12%) rate of interest shall be the amount of P370,475.00. 4. Civil Law; Damages; Court sustains the award of exemplary damages in the amount of P50,000.00.We also sustain the award of exemplary damages in the amount of P50,000.00. 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, liquidated or compensatory damages. Considering petitioner s fraudulent act, we hold that an award of P50,000.00 would be adequate, fair and reasonable. 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. 5. Civil Law; Damages; Appellate court s award of P50,000.00 in moral damages is warranted.The appellate court s award of P50,000.00 in moral damages is warranted. Under Article 2217 of the Civil Code, moral damages may be granted upon proof of physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Ong testitified that he suffered sleepless nights, embarrassment, humiliation 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 operations. Division: THIRD DIVISION Docket Number: G.R. No. 116320 Counsel: Enrique Agana & Associates, Nelson A. Loyola, Eliseo P. Vencer II Ponente: GONZAGA-REYES Dispositive Portion: WHEREFORE, we AFFIRM the respondent court s decision promulgated on June 29, 1992, upholding the February 16, 1988 decision of the trial court in favor of private respondents, with the modification that the interest upon the actual damages awarded shall be at six percent (6%) per annum, which interest rate shall be computed from the time of the filing of the complaint on November 19, 1979. However, the interest rate shall be twelve percent (12%) per annum from the time the judgment in this case becomes final and executory and until such amount is fully paid. The basis for computation of the six percent and twelve percent rates of interest shall be the amount of P370,475.00. No pronouncement as to costs.

Case Title : SOLIDBANK CORPORATION, petitioner, vs. MINDANAO FERROALLOY CORPORATION, Spouses JONG-WON HONG and SOO-OK KIM HONG, TERESITA CU, and RICARDO P. GUEVARA and Spouse, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Corporation Law|Civil Law|Piercing the Veil of Corporate Fiction|Obligations and Contracts|Damages|Fraud|Malicious Prosecution|Attorney s Fees Syllabi: 1. Corporation Law; Corporate officers cannot be held personally liable for the consequences of their acts, for as long as these are for and on behalf of the corporation, within the scope of their authority and in good faith.Basic is the principle that a corporation is vested by law with a personality separate and distinct from that of each person composing or representing it. Equally fundamental is the general rule that corporate officers cannot be held personally liable for the consequences of their acts, for as long as these are for and on behalf of the corporation, within the scope of their authority and in good faith. The separate corporate personality is a shield against the personal liability of corporate officers, whose acts are properly attributed to the corporation. 2. Corporation Law; Piercing the Veil of Corporate Fiction; To disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established; it cannot be presumed.Under certain circumstances, courts may treat a corporation as a mere aggroupment of persons, to whom liability will directly attach. The distinct and

separate corporate personality may be disregarded, inter alia, when the corporate identity is used to defeat public convenience, justify a wrong, protect 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 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 disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established; it cannot be presumed. 3. Civil Law; Obligations and Contracts; It is axiomatic that solidary liability 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 so states, or when the law or the nature of the obligation requires solidarity. Since solidary liability is not clearly expressed in the Promissory Note and is not required by law or the nature of the obligation in this case, no conclusion of solidary liability can be made. 4. Civil Law; Damages; Fraud; Fraud must be established by clear and convincing evidence, mere preponderance of evidence is not adequate.Fraud must be established by clear and convincing evidence; mere preponderance of evidence is not adequate. Bad faith, on the other hand, imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, not simply bad judgment or negligence. It is synonymous with fraud, in that it involves a design to mislead or deceive another. 5. Civil Law; Damages; The exercise of a right, though legal by itself, must nonetheless be done in accordance with the proper norm; When the right is exercised arbitrarily, unjustly or excessively and results in damage to another, a legal wrong is committed for which the wrongdoer must be held responsible.Article 19 of the Civil Code expresses the fundamental principle of law on human conduct that a person must, in the exercise of his rights and in the performance of his duties, act with justice, give every one his due, and observe honesty and good faith. Under this basic postulate, the exercise of a right, though legal by itself, must nonetheless be done in accordance with the proper norm. When the right is exercised arbitrarily, unjustly or excessively and results in damage to another, a legal wrong is committed for which the wrongdoer must be held responsible. 6. Civil Law; Damages; Elements to be Liable under the Abuse-of-Rights Principle.To be liable under the abuse-of-rights principle, three elements must concur: a) a legal right or duty, b) its exercise in bad faith, and c) the sole intent of prejudicing or injuring another. Needless to say, absence of good faith must be sufficiently established. 7. Civil Law; Damages; Malicious Prosecution; To justify an award of damages for malicious prosecution, one must prove two elements: malice or sinister design to vex or humiliate and want of probable cause.For damages to be properly awarded under the above provisions, it is necessary to demonstrate by clear and convincing evidence that the action instituted by petitioner was clearly so unfounded and untenable as to amount to gross and evident bad faith. To justify an award of damages for malicious prosecution, one must prove two elements: malice or sinister design to vex or humiliate and want of probable cause. 8. Civil Law; Damages; Attorney s Fees; In the absence of a stipulation, attorney s fees cannot be recovered, exceptions.For the same reason, attorney s fees cannot be granted. Article 2208 of the Civil Code states that in the absence of a stipulation, attorney s fees cannot be recovered, except in any of the following circumstances: (1) When exemplary damages are awarded; (2) When the defendant s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff s plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen s compensation and employer s liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorney s fees and expenses of litigation should be recovered. Division: THIRD DIVISION Docket Number: G.R. No. 153535

Counsel: De los Reyes, Banaga, Briones & Associates, Quasha, Ancheta, Pena & Nolasco, Pacis & Reyes Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, this Petition is PARTIALLY GRANTED. The assailed Decision is AFFIRMED, but the award of moral and exemplary damages as well as attorney s fees is DELETED. No costs.

Case Title : ATRIUM MANAGEMENT CORPORATION, petitioner, vs. COURT OF APPEALS, E.T. HENRY AND CO., LOURDES VICTORIA M. DE LEON, RAFAEL DE LEON, JR., AND HI-CEMENT CORPORATION, respondents., LOURDES M. DE LEON, petitioner, vs. COURT OF APPEALS, ATRIUM MANAGEMENT CORPORATION, AND HI-CEMENT CORPORATION, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Corporation Law|Negotiable Instrument Law|Ultra Vires Acts|Checks|Words and Phrases Syllabi: 1. Corporation Law; Ultra Vires Acts; Checks; The act of issuing checks for the purpose of securing a loan to finance the activities of the corporation is well within the ambit of a valid corporate act, hence, not an ultra vires act.Hi-Cement, however, maintains that the checks were not issued for consideration and that Lourdes and E.T. Henry engaged in a kiting operation to raise funds for E.T. Henry, who admittedly was in need of financial assistance. The Court finds that there was no sufficient evidence to show that such is the case. Lourdes M. de Leon is the treasurer of the corporation and is authorized to sign checks for the corporation. At the time of the issuance of the checks, there were sufficient funds in the bank to cover payment of the amount of P2 million pesos. It is, however, our view that there is basis to rule that the act of issuing the checks was well within the ambit of a valid corporate act, for it was for securing a loan to finance the activities of the corporation, hence, not an ultra vires act. 2. Corporation Law; Ultra Vires Acts; Words and Phrases; Ultra Vires Acts, Explained.An ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the power conferred upon it by law. The term ultra vires is distinguished from an illegal act for the former is merely voidable which may be enforced by performance, ratification, or estoppel, while the latter is void and cannot be validated. 3. Corporation Law; Ultra Vires Acts; Instances when personal liability of corporate directors, trustees or officers may validly attach.The next question to determine is whether Lourdes M. de Leon and Antonio de las Alas were personally liable for the checks issued as corporate officers and authorized signatories of the check. Personal liability of a corporate director, trustee or officer along (although not necessarily) with the corporation may so validly attach, as a rule, only when: 1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons; 2. He consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto; 3. He agrees to hold himself personally and solidarily liable with the corporation; or 4. He is made, by a specific provision of law, to personally answer for his corporate action. 4. Corporation Law; Ultra Vires Acts; Checks; A treasurer of a corporation whose negligence in signing a confirmation letter for rediscounting of crossed checks, knowing fully well that the checks were strictly endorsed for deposit only to the payee s account and not to be further negotiated, resulting in damage to the corporation may be personally liable therefor.In the case at bar, Lourdes M. de Leon and Antonio de las Alas as treasurer and Chairman of HiCement were authorized to issue the checks. However, Ms. de Leon was negligent when she signed the confirmation letter requested by Mr. Yap of Atrium and Mr. Henry of E.T. Henry for the rediscounting of the crossed checks issued in favor of E.T. Henry. She was aware that the checks were strictly 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 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 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 due course. The Negotiable Instruments Law, Section 52 defines a holder in due course, thus: A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. 6. Negotiable Instrument Law; Checks; A person to whom a crossed check was endorsed by the payee of said check could not be considered a holder in due course.In the instant case, the checks were crossed checks and specifically indorsed for deposit to payee s account only. From the beginning, Atrium was aware of the fact that the checks were all for deposit only to payee s account, meaning E.T. Henry. Clearly, then, Atrium could not be considered a holder in due course. 7. Negotiable Instrument Law; Checks; A holder not in due course may still recover on the instrument.It does not follow as a legal proposition that simply because petitioner Atrium was not a holder in due course for having taken the instruments in question with notice that the same was for deposit only to the account of payee E.T. Henry that it was altogether precluded from recovering on the instrument. The Negotiable Instruments Law does not provide that a holder not in due course can not recover on the instrument. 8. Negotiable Instrument Law; Checks; The disadvantage of a holder not in due course is that the negotiable instrument is subject to defenses as if it were nonnegotiable, such as absence or failure of consideration.The disadvantage of Atrium in not being a holder in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable. One such defense is absence or failure of consideration. Division: FIRST DIVISION Docket Number: G.R. No. 109491, G.R. No. 121794 Counsel: Meer, Meer & Meer, Castillo, Laman, Tan, Pantaleon & San Jose Ponente: PARDO Dispositive Portion: WHEREFORE, the petitions are hereby DENIED. The decision and resolution of the Court of Appeals in CA-G.R. CV No. 26686, are hereby AFFIRMED in toto.

Case Title : ASSOCIATED BANK, petitioner, vs. HON. COURT OF APPEALS, PROVINCE OF TARLAC and PHILIPPINE NATIONAL BANK, respondents., PHILIPPINE NATIONAL BANK, petitioner, vs. HONORABLE COURT OF APPEALS, PROVINCE OF TARLAC, and ASSOCIATED BANK, respondents.Case Nature : PETITIONS for review of a decision of the Court of Appeals. Syllabi Class : Commercial Law|Negotiable Instruments Law|Forgery Syllabi: 1. Commercial Law; Negotiable Instruments Law; Forgery; A person whose signature to an instrument was forged was never a party and never consented to the contract which allegedly gave rise to such instrument.A forged signature, whether it be that of the drawer or the payee, is wholly inoperative and no one can gain title to the instrument through it. A person whose signature to an instrument was forged was never a party and never consented to the contract which allegedly gave rise to such instrument. Section 23 does not avoid the instrument but only the forged signature. Thus, a forged indorsement does not operate as the payee s indorsement. 2. Same; Same; Same; Rule mandates that the checks be returned within twenty-four hours after discovery of the forgery but in no event beyond the period fixed by law for filing a legal action.The rule mandates that the checks be returned within twenty-four hours after discovery of the forgery but in no event beyond the period fixed by law for filing a legal action. The rationale of the rule is to give the collecting bank (which indorsed the check) adequate opportunity to proceed against the forger. If prompt notice is not given, the collecting bank may be prejudiced and lose the opportunity to go after its depositor. 3. Same; Same; Same; Drawee bank has the duty to promptly inform the presentor of the forgery upon discovery.Hence, the drawee bank can recover the amount paid on the check bearing a forged indorsement from the collecting bank. However, a drawee bank has the

duty to promptly inform the presentor of the forgery upon discovery. If the drawee bank delays in informing the presentor of the forgery, thereby depriving said presentor of the right to recover from the forger, the former is deemed negligent and can no longer recover from the presentor. 4. Same; Same; Same; Drawee banks not similarly situated as the collecting bank.The drawee bank is not similarly situated as the collecting bank because the former makes no warranty as to the genuineness of any indorsement. The drawee bank s duty is but to verify the genuineness of the drawer s signature and not of the indorsement because the drawer is its client. 5. Same; Same; Same; A collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements including the forged indorsement.More importantly, by reason of the statutory warranty of a general indorser in Section 66 of the Negotiable Instruments Law, a collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement. It warrants that the instrument is genuine, and that it is valid and subsisting at the time of his indorsement. Because the indorsement is a forgery, the collecting bank commits a breach of this warranty and will be accountable to the drawee bank. 6. Same; Same; Same; Drawee bank can seek reimbursement or a return of the amount it paid from the presentor bank or person.In cases involving checks with forged indorsements, such as the present petition, the chain of liability does not end with the drawee bank. The drawee bank may not debit the account of the drawer but may generally pass liability back through the collection chain to the party who took from the forger and, of course, to the forger himself, if available. In other words, the drawee bank can seek reimbursement or a return of the amount it paid from the presentor bank or person. Theoretically, the latter can demand reimbursement from the person 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. 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 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 exercise ordinary care that substantially contributed to the making of the forged signature, the drawer is precluded from asserting the forgery. 8. Same; Same; Same; Payment under a forged indorsement is not to the drawer s order.The bank on which a check is drawn, known as the drawee bank, is under strict liability to pay the check to the order of the payee. The drawer s 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 check and violates its duty to charge its customer s (the drawer) account only for properly payable items. Since the drawee bank did not pay a holder or other person entitled to receive payment, it has no right to reimbursement from the drawer. The general rule then is that the drawee bank may not debit the drawer s account and is not entitled to indemnification from the drawer. The risk of loss must perforce fall on the drawee bank. 9. Same; Same; Same; A collecting bank where a check is deposited and which indorses the check upon presentment with the drawee bank is such an indorser.A collecting bank where a check is deposited and which indorses the check upon presentment with the drawee bank, is such an indorser. So even if the indorsement on the check deposited by the bank s client is forged, the collecting bank is bound by his warranties as an indorser and cannot set up the defense of forgery as against the drawee bank. 10. Same; Same; Same; Indorser cannot interpose the defense that signatures prior to him are forged.An indorser of an order instrument warrants that the instrument is genuine and in all respects what it purports to be; that he has a good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his indorsement valid and subsisting. He cannot interpose the defense that signatures prior to him are forged. 11. Same; Same; Same; When the holder s indorsement is forged, all parties prior to the forgery may raise the real defense of forgery against all parties subsequent thereto.Where the instrument is payable to order at the time of the forgery, such as the checks in this case, the signature of its rightful holder (here, the payee hospital) is essential to transfer title to the same instrument. When the holder s indorsement is forged, all parties prior to the forgery may raise the real defense of forgery against all parties subsequent thereto.

12. Same; Same; Same; When the indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery against a holder in due course.In bearer instruments, the signature of the payee or holder is unnecessary to pass title to the instrument. Hence, when the indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery against a holder in due course. 13. Same; Same; Same; Parties who warrant or admit the genuineness of the signature in question and those who, by their acts, silence or negligence are estopped from setting up the defense of forgery, are precluded from using this defense.The exception to the general rule in Section 23 is where a party against whom it is sought to enforce a right is precluded from setting up the forgery or want of authority. Parties who warrant or admit the genuineness of the signature in question and those who, by their acts, silence or negligence are estopped from setting up the defense of forgery, are precluded from using this defense. Indorsers, persons negotiating by delivery and acceptors are warrantors of the genuineness of the signatures on the instrument. Division: SECOND DIVISION Docket Number: G.R. No. 107382, G.R. No. 107612 Counsel: Jose A. Soluta, Jr. and Associates, Santiago, Jr., Vidad, Corpus & Associates Ponente: ROMERO Dispositive Portion: IN VIEW OF THE FOREGOING, the petition for review filed by the Philippine National Bank (G.R. No. 107612) is hereby PARTIALLY GRANTED. The petition for review filed by the Associated Bank (G.R. No. 107382) is hereby DENIED. The decision of the trial court is MODIFIED. The Philippine National Bank shall pay fifty percent (50%) of P203,300.00 to the Province of Tarlac, with legal interest from March 20, 1981 until the payment thereof. Associated Bank shall pay fifty percent (50%) of P203,300.00 to the Philippine National Bank, likewise, with legal interest from March 20, 1981 until payment is made.

[G.R. No. 140980. March 1, 2000] SPS. FRANCISCO S. ANTONIO, et al. vs. SPS. TEODORICO C. OMNES, et al. SECOND DIVISION Gentlemen: Quoted hereunder, for your information, is a resolution of this Court dated MAR 1 2000. G.R. No. 140980 (SPS. Francisco S. Antonio and Amor W. Antonio vs. Sps. Teodorico C. Omnes and Alice Omnes and the Standard Chartered Bank.) This is a petition for review on certiorari of the decision, dated February 26, 1999, of the Court of Appeals. It appears that in 1988, Rarecrafts Philippines (Rarecrafts), a handicrafts export business owned by petitioners, hired respondent Alice Omnes as its accountant-bookkeeper. Her duties included the preparation of checks for the payment of bills to the suppliers of rarecrafts. Sometime in July 1991, petitioner Francisco S. Antonio received a telephone call from respondent Standard Chartered Bank seeking confirmation of the issuance of a check for P105,750.00 payable to cash. He then asked Mrs. Omnes about the check in question, after which he went back to his office, while she went to her desk, presumably to verify the issuance of the check from the records. When Mrs. Omnes failed to return after some time, Mr. Antonio decided to follow up the matter with her. As he was going out of his office, Mr. Antonio saw Mrs. Omnes crossing the street and taking a jeepney bound for Pasig. Alarmed, Mr. Antonio looked for the stub to the check, which he found and saw that the amount indicated therein was P335.15. Later on the same day, respondent bank called Mr. Antonio regarding a check for P97,500.00 payable to cash. Upon verification, Mr. Antonio found that the stub of the check indicated a different amount. It was found that the two checks were credited to the savings account of Mrs. Omnes at the Far East Bank and Trust Company, Tanay Branch. At the request of Mr. Antonio, respondent bank furnished him with photocopies of the two checks, which he denied having signed. Subsequently, Mr. Antonio conducted an examination of the records pertaining to the issuance of checks from the time Mrs. Omnes was employed by Rarecrafts. He found that 70 checks, involving a total amount of

P4,720,600.00, were issued for amounts different from those indicated in the corresponding stubs. Petitioners (Mr. Antonio and his wife Amor) filed an action against respondents with the trial court, and judgment was rendered in their favor. The dispositive portion of the trial court's decision reads: WHEREFORE, appreciating the preponderance of evidence sufficient to warrant favorable action on plaintiffs-spouses Francisco and Amor Antonio's stand, defendants Alice Omnes and the Standard Chartered Bank are hereby ordered to pay unto the herein plaintiffs, jointly and severally: 1. The amount of P3,349,550.00 with 12% interest thereon computed from the date of filing of the complaint, i.e., July 29, 1991 until the said sum is fully paid; 2. The sum of P200,000.00 as moral damages; 3. The sum of P100,000.00 as exemplary damages; 4. The sum of P100,000.00 as attorney's fees; and 5. Costs of suit. On the cross-claim, cross-defendant Spouses Teodoro and Alice Omnes are hereby ordered to pay cross-plaintiff the Standard Chartered Bank the above-enumerated amounts. The counterclaims at the bar are hereby ordered DISMISSED for lack of factual basis. The writ of attachment is hereby made permanent. The 'Motion and Claim for Damages Against The Bond' filed by defendant Teodoro Omnes through counsel is hereby DENIED for lack of merit. On appeal, however, the Court of Appeals reversed the decision on the following grounds: (a) in concluding that the signatures in the checks and the standard signatures of Mr. Antonio were written by the same person, the 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 petitioners confined themselves to general statements regarding their alleged differences; and (b) the negligence of petitioners was the proximate cause of the loss. Petitioners now raise the following assignment of errors: a. The Court of Appeals had committed grave abuse of discretion in its appreciation of facts in the instant case. b. The findings of facts of the Court of Appeals, especially on the question of forgery of the drawer's signature on the questioned checks, are at variance with that [of] the lower court, calling for review of the evidence to arrive at the correct findings based on the record, pursuant to the rule enunciated in the case of Roblesa v. Court of Appeals, 174 SCRA 354, 362 (1989), as an exception to the rule that findings of fact of the Court of Appeals are generally not subject to review on certiorari. c. And on the assumption that there was forgery, the Court of Appeals erred in its conclusion that respondent drawee bank was not liable when it honored the forged checks of petitioner Francisco Antonio as drawer therein under Section 23 of the Negotiable Instruments Law and pertinent jurisprudence in relation thereto. The petition is without merit. First. The Court of Appeals properly gave credence to Atty. Desiderio Paqui, the handwriting expert of respondent bank, rather than to the handwriting experts of petitioners. In his report, Atty. Paqui indicated in detail the similarities and the difference between the signatures in the checks and the standard signatures of Mr. Antonio. He cited eight important similarities and only one significant difference between the signatures in the checks and the standard signatures of Mr. Antonio. In contrasts, the handwriting experts of petitioners supported their finding that the signatures in the checks and the standard signatures of Mr. Antonio were written by different persons with mere

generalizations, such as alleged differences in "manner of execution of strokes," "structural patterns of letters," and "minute identifying details." Thus, petitioners failed to meet the quantum of proof necessary to establish forgery, the existence of which cannot be presumed. (Metropolitan Waterworks and Sewerage System v. Court of Appeals, 143 SCRA 20 (1986)) Second. The Court of Appeals correctly observed that the failure of Mr. Antonio for over three years to detect the repeated commission of fraud within his business, which he claims eventually involved the total amount of P4,720,600.00, despite the fact that respondent bank sent monthly statements to Rarecrafts, is indicative of his extreme negligence. It appears that Mr. Antonio completely left to Mrs. Omnes the management of such an important aspect of his business. While the general rule is that a drawee bank which clears a forged check for payment should reimburse the drawer, this does not apply when the failure of the latter to exercise ordinary care made the loss possible. Hence, even is the signatures in the checks were forged, petitioners have no right of recourse against respondent bank. (Associated Bank v. Court of Appeals, 252 SCRA 620 (1996)) It is settled that if the factual conclusions of the Court of Appeals are borne out by the records, the same are binding on this Court, even when such are contrary to the findings of the trial court. (Uniland Resources v. Development Bank of the Philippines, 200 SCRA 751 (1991)) In the instant case, petitioners failed to show that the Court of Appeals committed a reversible error in the appreciation of the evidence presented by the parties. WHEREFORE, the petition is DENIED for lack of showing that the Court of Appeals committed a reversible error.

[G.R. No. 145916. January 29, 2001] MBTC vs. SANVAR DEV T CORP. SECOND DIVISION Gentlemen: Quoted hereunder, for your information, is a resolution of this Court dated JAN 29 2001. G.R. No. 145916 (Metropolitan Bank & Trust Company vs. Sanvar Development Corp.) Isabela State University issued two Development Bank of the Philippines (DBP) checks to respondent Sanvar Development Corp. ( Sanvar c/o Engineer Jesus Urrea ) as final payment for respondent s construction of the school s farm structures in Cabagan, Isabela. The two checks, amounting to P207,428.26 andP161,567.80, dated July 8, 1992 and July 10, 1992 respectively, were given to respondent s representative, Engr. Jesus Urrea, who in turn entrusted them to one Eduardo Talaue. Talaue was supposed to bring the two checks to respondent in order to enable him (Talaue) to clarify the alleged obligation one Isidro Calueng (respondent s sub-contractor) owed him. However, instead of forwarding the checks to respondent, Eduardo Talaue forged the indorsements of Engr. Jesus Urrea and deposited the checks with petitioner Metropolitan Bank & Trust Company (Metrobank) under the account of Lily Ballesteros. For failure of petitioner to pay the two checks amounting to P368,996.06, respondent filed a case for collection against petitioner and Eduardo Talaue with the Regional Trial Court, Branch 92, Quezon City. Respondent prayed that petitioner and Talaue be held jointly and severally liable for the amounts of P368,996.06, with interest thereon from September 1992 until fully paid, P50,000.00 as attorney s fees, and P100,000.00 as exemplary damages. Petitioner moved to dismiss respondent s complaint on the ground that it did not state a cause of action against it (petitioner bank). The trial court granted the motion, holding that petitioner credited the two checks to the 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 checks. However, on appeal to the Court of Appeals, the decision was reversed and the case was remanded to the trial court for further proceedings. Hence, this present petition for review on certiorari. The issue in this case is whether respondent s complaint states a cause of action against petitioner bank, the collecting bank, as to the two checks. The answer is in the affirmative. Respondent s complaint alleges that Eduardo Talaue, instead of bringing the same to respondent s office in Quezon City and contrary to his representation, deposited the checks to Account No. 680867803-0 (account of Lily Ballesteros) with petitioner bank, by falsifying the indorsements of Engr. Urrea; that petitioner bank, despite the falsification of the indorsements of Engr. Urrea and the obvious irregularity of his alleged indorsements, accepted the deposit of the two checks to the account of Lily

Ballesteros; and that by virtue of the negligent acts of petitioner bank, together with that of Eduardo Talaue, respondent had been damaged and prejudiced in the total amount of P368,996.06. Petitioner contends that respondent s complaint does not state a cause of action against it, since the same does not allege that petitioner committed any wrongdoing or fraud but only alleges that petitioner agreed to act as collecting bank and did not honor the checks. This contention is without merit. Section 23 of the Negotiable Instruments Law provides that when a signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative and no right to retain the instrument or to give a discharge therefor or to enforce payment thereof against any party thereto can be acquired through or under such signature unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. In this case, it appears that Isabela State University issued two checks to Sanvar c/o Engineer Jesus Urrea which were later entrusted to Eduardo Talaue by Engr. Jesus Urrea. Eduardo Talaue, however, forged the indorsements of Engr. Urrea which allowed the former to deposit the checks to the account of Lily Ballesteros. The checks were then indorsed by petitioner Metrobank (as collecting bank) to DBP, as drawee bank. Petitioner acted as a general indorser when it stamped all prior indorsements and/or lack of indorsements guaranteed because it thereby warranted the genuineness of all prior indorsenients. Petitioner is thus liable to DBP for the two checks as a forged indorsement does not operate as the payee s indorsement. The appellate court 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 66 of the Negotiable Instruments Law, a collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement. It warrants that the instrument is genuine, and that it is valid and subsisting at the time of his indorsement. Because the indorsement is a forgery, the collecting bank commits a breach of this warranty and will be accountable to the drawee bank. This liability scheme operates without regard to fault on the part of the collecting/presenting bank. Even if the latter bank was not negligent, it would still be liable to the drawee bank because of its indorsement. The Court has consistently ruled that "the collecting bank or last indorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment had done its duty to ascertain the genuineness of the indorsements. The drawee bank is not similarly situated as the collecting bank because the former makes no warranty as to the genuineness of any indorsement. The drawee bank s duty is but to verify the genuineness of the drawer s signature and not of the indorsement because the drawer is its client. Moreover, the collecting bank is made liable because it is privy to the depositor who negotiated the check. The bank knows him, his address and history because he is a client. It has taken a risk on his deposit. The bank is also in a better position to detect forgery, fraud or irregularity in the indorsement. Petitioner alleges that the foregoing ruling does not apply where, as in this case, DBP, the drawee bank, failed to return the checks with the forged indorsements within the 24-hour clearing period. By reason thereof, petitioner should be absolved from liability pursuant to 4(c) of Central Bank Circular No. 9. The argument, however, is a matter of defense which is better threshed out in the proceedings before the trial court. For the foregoing reasons, the petition is DENIED for lack of showing that the Court of Appeals committed reversible error.

Case Title : WESTMONT BANK (formerly ASSOCIATED BANKING CORP.), petitioner, vs. EUGENE ONG, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Remedial Law|Banks and Banking|Civil Law|Action|Definition of a cause of action|Laches Syllabi: 1. Remedial Law; Action; Definition of a cause of action; Essential elements of a cause of action.As defined, a cause of action is the act or omission by which a party violates a right of another. The essential elements of a cause of action are: (a) a legal right or rights of the plaintiff, (b) a correlative obligation of the defendant, and (c) an act or omission of the defendant in violation of said legal right.

2. Banks and Banking; The collecting bank is liable to the payee and must bear the loss because it is its legal duty to ascertain that the payee s endorsement was genuine before the check.The collecting bank is liable to the payee and must bear the loss because it is its legal duty to ascertain that the payee s endorsement was genuine before cashing the check. As a general rule, a bank or corporation who has obtained possession of a check upon an unauthorized or forged indorsement of the payee s signature and who collects the amount of the check other from the drawee, is liable for the proceeds thereof to the payee or other owner, notwithstanding that the amount has been paid to the person from whom the check was obtained. 3. Banks and Banking; The position of the bank taking the check on the forged or unauthorized indorsement is the same as if it had taken the check and collected the money without indorsement at all and the act of the bank amounts to conversion of the check.The theory of the rule is that the possession of the check on the forged or unauthorized indorsement is wrongful, and when the money had been collected on the check, the bank or other person or corporation can be held as for moneys had and received, and the proceeds are held for the rightful owners who may recover them. The position of the bank taking the check on the forged or unauthorized indorsement is the same as if it had taken the check and collected the money without indorsement at all and the act of the bank amounts to conversion of the check. 4. Banks and Banking; Banks are engaged in a business impressed with public interest, and it is their duty to protect in return their many clients and depositors who transact business with them.Admittedly, respondent Eugene Ong at the time the fraudulent transaction took place was a depositor petitioner bank. Banks are engaged in a business impressed with public interest, and it is their duty to protect in return their many clients and depositors who transact business with them. They have the obligation to treat their client s account meticulously and with the highest degree of care, considering the fiduciary nature of their relationship. The diligence required of banks, therefore, is more than that of a good father of a family. 5. Civil Law; Laches; Laches is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled thereto has either abandoned or declined to assert it.Laches may be defined as the failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled thereto has either abandoned or declined to assert it. It concerns itself with whether or not by reason of long inaction or inexcusable neglect, a person claiming a right should be barred from asserting the same, because to allow him to do so would be unjust to the person against whom such right is sought to be enforced. Division: SECOND DIVISION Docket Number: G.R. No. 132560 Counsel: Villanueva, Caa & Associates Law Offices, Alberto, Salazar & Associates Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of the Court of Appeals, sustaining the judgment of the Regional Trial Court of Manila, is AFFIRMED.

Case Title : TRADERS ROYAL BANK, petitioner, vs. RADIO PHILIPPINES NETWORK, INC., INTERCONTINENTAL BROADCASTING CORPORATION and BANAHAW BROADCASTING CORPORATION, through the BOARD OF ADMINISTRATORS, and SECURITY BANK AND TRUST COMPANY, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Banks and Banking|Negotiable Instruments|Checks|Crossed Checks|The crossing of a check should put a bank on guard Syllabi:

1. Banks and Banking; Negotiable Instruments; Checks; When a bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount so paid to the account of the depositor.When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature. Consequently, if a bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount so paid to the account of the depositor. 2. Banks and Banking; Negotiable Instruments; Checks; Where a check is drawn payable to the order of one person and is presented for payment by another and purports upon its face to have been duly indorsed by the payee of the check, it is the primary duty of the bank to know that the check was duly indorsed by the original payee and, where it pays the amount of the check to a third person who has forged the signature of the payee, the loss falls on such bank who cashed the check.In the instant case, the 3 checks were payable to the BIR. It was established, however, that said checks were never delivered or paid to the payee BIR but were in fact presented for payment by some unknown persons who, in order to receive payment therefor, forged the name of the payee. Despite this fraud, petitioner TRB paid the 3 checks in the total amount of P9,790,716.87. Petitioner ought to have known that, where a check is drawn payable to the order of one person and is presented for payment by another and purports upon its face to have been duly indorsed by the payee of the check, it is the primary duty of petitioner to know that the check was duly indorsed by the original payee and, where it pays the amount of the check to a third person who has forged the signature of the payee, the loss falls upon petitioner who cashed the check. Its only remedy is against the person to whom it paid the money. 3. Banks and Banking; Negotiable Instruments; Checks; Crossed Checks; The crossing of a check should put a bank on guard; The effects of a crossed check are that (a) the check may not be encashed but only deposited in the bank, (b) the check may be negotiated only once to one who has an account with a bank, and, (c) the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course.It should be noted further that one of the subject checks was crossed. The crossing of one of the subject checks should have put petitioner on guard; it was duty-bound to ascertain the indorser s title to the check or the nature of his possession. Petitioner should have known the effects of a crossed check: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once to one who has an account with a bank and (c) the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check 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 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 unauthorized or wrongful endorsement. In this light, petitioner TRB cannot exculpate itself from liability by claiming that respondent networks were themselves negligent. 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 clients and depositors who transact business with it.A bank is engaged in a business impressed with public interest and it is its duty to protect its many clients and depositors who transact business with it. It is under the obligation to treat the accounts of the depositors and clients with meticulous care, whether such accounts consist only of a few hundreds or 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 bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately should be held liable therefor.A collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately should be held liable therefor. However, it is doubtful if the subject checks were ever presented to and accepted by SBTC so as to hold it liable as a collecting bank, as held by the Court of Appeals. 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 receive payment, it has no right to reimbursement. Petitioner TRB was remiss in its duty and obligation, and must therefore suffer the consequences of its own negligence and disregard of established banking rules and procedures. Division: THIRD DIVISION Docket Number: G.R. No. 138510 Counsel: Herrera, Teehankee, Faylona, Cabrera Law Offices, Mercado, Aguillardo & Aceron Law Firm, Castro, Yan, Bias, Ortile, Samillano & Mangrobang Ponente: CORONA Dispositive Portion: WHEREFORE, the appealed decision is MODIFIED by deleting the award of exemplary damages. Further, respondent networks are granted the amount of P100,000 as attorney s fees. In all other respects, the Court of Appeals decision is hereby AFFIRMED.

payment thereof against any party, can be acquired through or under such signature. However, the rule does provide for an exception, namely: unless the party against whom it is sought to enforce such right is precluded from setting 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, assuming there is forgery, due to his own negligence in entrusting to his secretary his credit cards and checkbook including the verification of his statements of account. 5. Civil Law; Estoppel; Petitioner cannot hold private respondent in estoppel for the latter is not the actual party to the criminal action.On the second issue, the fact that Manila Bank had filed a case for estafa against Eugenio would not estop it from asserting the fact that forgery has not been clearly established. Petitioner cannot hold private respondent in estoppel 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 State. Thus, under Section 2, Rule 110 of the Rules of Court the complaint or information filed in court is required to be brought in the name of the People of the Philippines. 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 review on certiorari of a decision of the Court of Appeals. Syllabi Class : Civil Law|Damages|Negligence|Criminal Law|Forgery|Estoppel Syllabi: 1. Civil Law; Damages; Negligence; 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.On the first issue, we find that petitioner has no cause of action against Manila 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 forgery, i.e., by submitting his specimen signatures and comparing them with those on the questioned checks. Curiously though, petitioner failed to submit additional specimen signatures as requested by the National Bureau of Investigation from which to draw a conclusive finding regarding forgery. The Court of Appeals found that petitioner, by his own inaction, was precluded from setting up forgery. 2. Civil Law; Damages; Negligence; Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs would do, or the doing of something which a prudent and reasonable man would do.As borne by the records, it was petitioner, not the bank, who was negligent. Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do.In the present case, it appears that petitioner accorded his secretary unusual degree of trust and unrestricted access to his credit cards, passbooks, check books, bank statements, including custody and possession of cancelled checks and reconciliation of accounts. 3. Civil Law; Damages; Negligence; Petitioner s failure to examine his bank statements appears as the proximate cause of his own damage; Proximate Cause Defined.Petitioner s failure to examine his bank statements appears as the proximate cause of his own damage. Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the 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 statements to petitioner so that any error or discrepancy in the entries therein could be brought to the bank s attention at the earliest opportunity. But, petitioner failed to examine these bank statements not because he was 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 anomaly committed against him. 4. Civil Law; Criminal Law; Forgery; When a signature is forged or made without the authority of the person whose signature it purports to be, the check 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 of the person whose signature it purports to be, the check is wholly inoperative. No right to retain the instrument, or to give a discharge therefor, or to enforce

Counsel: People s Law Office, Puyat, Jacinto & Santos, Asedillo and Associates Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of the Court of Appeals dated January 28, 1999 in CA-G.R. CV No. 47942, is AFFIRMED.

Case Title : MICHAEL A. OSMEA, petitioner, vs. CITIBANK, N.A., ASSOCIATED BANK and FRANK TAN, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Commercial Law|Banks and Banking|Negotiable Instruments Law Syllabi: 1. Commercial Law; Banks and Banking; Negotiable Instruments Law; The Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or hampering transactions in commercial paper.The petitioner cites the ruling of the Court in Associated Bank v. Court of Appeals, in which we outlined the respective responsibilities and liabilities of a drawee bank, such as the respondent Citibank, and a collecting bank, such as the defendant Associated Bank, in the event that payment of a check to a person not designated as the payee, or who is not a holder in due course, had been made. However, the ruling of the Court therein does not apply to the present case for, as has been amply demonstrated, the petitioner failed to establish that the proceeds of the check was indeed wrongfully paid by the respondents Banks to a person other than the intended payee. In addition, the Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or hampering transactions in commercial paper. Thus, the said statute should not be tampered with haphazardly or lightly. Nor should it be brushed aside in order to meet the necessities in a single case. Division: SECOND DIVISION Docket Number: G.R. No. 141278 Counsel: Castillo, Laman, Tan, Pantaleon & San Jose, Agcaoili and Associates, Guerrero, Cabalum, Rabuya, Divina & Associates Ponente: CALLEJO, SR. Dispositive Portion: IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision dated November 26, 1999 of the Court of Appeals in CA-G.R. CV No. 49529 is hereby AFFIRMED. Costs against the petitioner.

Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA MONTESSORI INTERNATIONALE and LEONARDO T. YABUT, respondents., CASA MONTESSORI INTERNATIONALE, petitioner, vs. BANK OF THE PHILIPPINE

ISLANDS, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Negotiable Instruments Law|Administrative Investigations|Banks and Banking|Accountants and Auditors|Damages|Rights of Suspects|SelfIncrimination|Bill of Rights|Checks|Evidence|Best Evidence Rule|Audit Procedures|Estoppel|Words and Phrases|Proximate Cause|Negligence|Forgery|Negligence is not presumed|but proven by whoever alleges it|Attorney s Fees|Interest Rates|Negotiable Instruments Law|Code of Commerce Syllabi: 1. Negotiable Instruments Law; A forged signature is a real or absolute defense, and a person whose signature on a negotiable instrument is forged is deemed to have never become a party thereto and to have never consented to the contract that allegedly gave rise to it.Section 23 of the NIL provides: Section 23. Forged signature; effect of. When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right x x x to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. Under this provision, a forged signature is a real or absolute defense, and a person whose signature on a negotiable instrument is forged is deemed to have never become a party thereto and to have never consented to the contract that allegedly gave rise to it. The counterfeiting of any writing, consisting in the signing of another s name with intent to defraud, is forgery. 2. Administrative Investigations; Rights of Suspects; The mantle of protection under Section 12 of Article III of the 1987 Constitution covers only the period from the time a person is taken into custody for investigation of his possible participation in the commission of a crime or from the time he is singled out as a suspect in the commission of a crime although not yet in custody to fall within the ambit of Section 12, there must be an arrest or a deprivation of freedom, with questions propounded on him by the police authorities for the purpose of eliciting admissions, confessions, or any information. In the first place, he was not under custodial investigation. His Affidavit was executed in private and before private individuals. The mantle of protection under Section 12 of Article III of the 1987 Constitution covers only the period from the time a person is taken into custody for investigation of his possible participation in the commission of a crime or from the time he is singled out as a suspect in the commission of a crime although not yet in custody. Therefore, to fall within the ambit of Section 12, quoted above, there must be an arrest or a deprivation of freedom, with questions propounded on him by the police authorities for the purpose of eliciting admissions, confessions, or any information. The said constitutional provision does not apply to spontaneous statements made in a voluntary manner whereby an individual orally admits to authorship of a crime. What the Constitution proscribes is the compulsory or coercive disclosure of incriminating facts. 3. Administrative Investigations; Self-Incrimination; The right against selfincrimination, which is ordinarily available only in criminal prosecutions, extends to all other government proceedings including civil actions, legislative investigations, and administrative proceedings that possess a criminal or penal aspect but not to private investigations done by private individuals.The right against self-incrimination under Section 17 of Article III of the Constitution, which is ordinarily available only in criminal prosecutions, extends to all other government proceedings including civil actions, legislative investigations, and administrative proceedings that possess a criminal or penal aspect but not to private investigations done by private individuals. Even in such government proceedings, this right may be waived, provided the waiver is certain; unequivocal; and intelligently, understanding and willingly made. If in these government proceedings waiver is allowed, all the more is it so in private investigations. It is of no moment that no criminal case has yet been filed against Yabut. The filing thereof is entirely up to the appropriate authorities or to the private individuals upon whom damage has been caused. As we shall also explain later, it is not mandatory for CASA the plaintiff below to implead Yabut in the civil case before the lower court. 4. Administrative Investigations; Bill of Rights; The Bill of Rights does not concern itself with the relation between a private individual and another individual the Bill of Rights is a charter of liberties for the individual and a limitation upon the power of the State. Under these two constitutional provisions, [t]he Bill of Rights does not concern itself with the relation between a private individual and another individual. It governs the relationship between the individual and the State. Moreover, the Bill of Rights is a charter of liberties for the individual and a limitation upon the power of the [S]tate. These rights are guaranteed to preclude the slightest

coercion by the State that may lead the accused to admit something false, not prevent him from freely and voluntarily telling the truth. 5. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Under the best evidence rule as applied to documentary evidence, like the checks in question, no secondary evidence or substitutionary evidence may inceptively be introduced, as the original writing itself must be produced in court, but when, without bad faith on the part of the offeror, the original checks have already been destroyed or cannot be produced in court, secondary evidence, like microfilm copies, may be produced.Forgery cannot be presumed. It must be established by clear, positive and convincing evidence. Under the best evidence rule as applied to documentary evidence like the checks in question, no secondary or substitutionary evidence may inceptively be introduced, as the original writing itself must be produced in court. But when, without bad faith on the part of the offeror, the original checks have already been destroyed or cannot be produced in court, secondary evidence may be produced. Without bad faith on its part, CASA proved the loss or destruction of the original checks through the Affidavit of the one person who knew of that fact Yabut. He clearly admitted to discarding the paid checks to cover up his misdeed. In such a situation, secondary evidence like microfilm copies may be introduced in court. 6. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Even with respect to documentary evidence, the best evidence rule applies only when the contents of the document such as the drawer s signature on a check is the subject of inquiry.Even with respect to documentary evidence, the best evidence rule applies only when the contents of a document such as the drawer s signature on a check is the subject of inquiry. As to whether the document has been actually executed, this rule does not apply; and testimonial as well as any other secondary evidence is admissible. Carina Lebron herself, the drawer s authorized signatory, testified many times that she had never signed those checks. Her testimonial evidence is admissible; the checks have not been actually executed. The genuineness of her handwriting is proved, not only through the court s comparison of the questioned hand-writings and admittedly genuine specimens thereof, but above all by her. 7. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Of no consequence is the fact that the depositor did not present the signature card containing the signatures with which those on the checks were compared specimens of standard signatures are not limited to such a card.The failure of CASA to produce the original checks neither gives rise to the presumption of suppression of evidence nor creates an unfavorable inference against it. Such failure merely authorizes the introduction of secondary evidence in the form of microfilm copies. Of no consequence is the fact that CASA did not present the signature card containing the signatures with which those on the checks were compared. Specimens of standard signatures are not limited to such a card. Considering that it was not produced in evidence, other documents that bear the drawer s authentic signature may be resorted to. Besides, that card was in the possession of BPI the adverse party. 8. Banks and Banking; Checks; Since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general the highest degree of diligence is expected, and high standards of integrity and performance are even required of it; A bank is bound to know the signatures of its customers, and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged.We have repeatedly emphasized that, since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required, of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. BPI contends that it has a signature verification procedure, in which checks are honored only when the signatures therein are verified to be the same with or similar to the specimen signatures on the signature cards. Nonetheless, it still failed to detect the eight instances of forgery. Its negligence consisted in the omission of that degree of diligence required of a bank. It cannot now feign ignorance, for very early on we have already ruled that a bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. In fact, BPI was the same bank involved when we issued this ruling seventy years ago.

9. Banks and Banking; Checks; Audit Procedures; The notice in the monthly statements issued by the bank that if no error is reported in ten (10) days, the account will be correct cannot be considered a waiver, even if the depositor failed to report the error, and neither is it estopped from questioning the mistake after the lapse of the ten-day period such notice is a simple confirmation or circularization, in accounting parlance, that requests clientdepositors to affirm the accuracy of items recorded by the banks.The monthly statements issued by BPI to its clients contain a notice worded as follows: If no error is reported in ten (10) days, account will be correct. Such notice cannot be considered a waiver, even if CASA failed to report the error. Neither is it estopped from questioning the mistake after the lapse of the tenday period. This notice is a simple confirmation or circularization in accounting parlance that requests client-depositors to affirm the accuracy of items recorded by the banks. Its purpose is to obtain from the depositors a direct corroboration of the correctness of their account balances with their respective banks. Internal or external auditors of a bank use it as a basic audit procedure the results of which its client-depositors are neither interested in nor privy to to test the details of transactions and balances in the bank s records. Evidential matter obtained from independent sources outside a bank only serves to provide greater assurance of reliability than that obtained solely within it for purposes of an audit of its own financial statements, not those of its client-depositors. 10. Banks and Banking; Checks; Audit Procedures; Banks have no right to impose a condition unilaterally and thereafter consider failure to meet such condition a waiver, and neither may a depositor renounce a right it never possessed.There is always the audit risk that errors would not be detected for various reasons. One, materiality is a consideration in audit planning; and two, the information obtained from such a substantive test is merely presumptive and cannot be the basis of a valid waiver. BPI has no right to impose a condition unilaterally and thereafter consider failure to meet such condition a waiver. Neither may CASA renounce a right it has never possessed. 11. Banks and Banking; Checks; Audit Procedures; Every right has subjects active and passive, the active subject being entitled to demand its enforcement while the passive one being duty-bound to suffer such enforcement; The bank could not have been an active subject, because it could not have demanded from the depositor a response to its notice, while, on the other hand, the depositor could not have been a passive subject because it had no obligation to respond.Every right has subjects active and passive. While the active subject is entitled to demand its enforcement, the passive one is duty-bound to suffer such enforcement. On the one hand, BPI could not have been an active subject, because it could not have demanded from CASA a response to its notice. Besides, the notice was a measly request worded as follows: Please examine x x x and report x x x. CASA, on the other hand, could not have been a passive subject, either, because it had no obligation to respond. It could as it did choose not to respond. 12. Banks and Banking; Checks; Estoppel; Words and Phrases; Estoppel precludes individuals from denying or asserting, by their own deed or representation, anything contrary to that established as the truth, in legal contemplation; Estoppel will not arise from a conduct due to ignorance founded upon an innocent mistake.Estoppel precludes individuals from denying or asserting, by their own deed or representation, anything contrary to that established as the truth, in legal contemplation. Our rules on evidence even make a juris et de jure presumption that whenever one has, by one s own act or omission, intentionally and deliberately led another to believe a particular thing to be true and to act upon that belief, one cannot in any litigation arising from such act or omission be permitted to falsify that supposed truth. In the instant case, CASA never made any deed or representation that misled BPI. The former s omission, if any, may only be deemed an innocent mistake oblivious to the procedures and consequences of periodic audits. Since its conduct was due to such ignorance founded upon an innocent mistake, estoppel will not arise. A person who has no knowledge of or consent to a transaction may not be estopped by it. Estoppel cannot be sustained by mere argument or doubtful inference x x x. CASA is not barred from questioning BPI s error even after the lapse of the period given in the notice. 13. Banks and Banking; Checks; For allowing payment on the checks to a wrongful and fictitious payee, the drawee bank becomes liable to its depositordrawer.For allowing payment on the checks to a wrongful and fictitious payee, BPI the drawee bank becomes liable to its depositor-drawer. Since the encashing bank is one of its branches, BPI can easily go after it and hold it liable for reimbursement. It may not debit the drawer s account and is not entitled to

indemnification from the drawer. In both law and equity, when one of two innocent persons must suffer by the wrongful act of a third person, the loss must be borne by the one whose negligence was the proximate cause of the loss or who put it into the power of the third person to perpetrate the wrong. 14. Banks and Banking; Checks; Proximate Cause; Words and Phrases; Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred.Proximate cause is determined by the facts of the case. It is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. Pursuant to its prime duty to ascertain well the genuineness of the signatures of its client-depositors on checks being encashed, BPI is expected to use reasonable business prudence. In the performance of that obligation, it is bound by its internal banking rules and regulations that form part of the contract it enters into with its depositors. 15. Banks and Banking; Checks; Proximate Cause; Negligence; Forgery; In this jurisdiction, the negligence of the party invoking forgery is recognized as an exception to the general rule that a forged signature is wholly inoperative.In this jurisdiction, the negligence of the party invoking forgery is recognized as an exception to the general rule that a forged signature is wholly inoperative. Contrary to BPI s claim, however, we do not find CASA negligent in han- dling its financial affairs. CASA, we stress, is not precluded from setting up forgery as a real defense. 16. Accountants and Auditors; The major purpose of an independent audit is to investigate and determine objectively if the financial statements submitted for audit by a corporation have been prepared in accordance with the appropriate financial reporting practices of private entities.The major purpose of an independent audit is to investigate and determine objectively if the financial statements submitted for audit by a corporation have been prepared in accordance with the appropriate financial reporting practices of private entities. The relationship that arises therefrom is both legal and moral. It begins with the execution of the engagement letter that embodies the terms and conditions of the audit and ends with the fulfilled expectation of the auditor s ethical and competent performance in all aspects of the audit. The financial statements are representations of the client; but it is the auditor who has the responsibility for the accuracy in the recording of data that underlies their preparation, their form of presentation, and the opinion expressed therein. The auditor does not assume the role of employee or of management in the client s conduct of operations and is never under the control or supervision of the client. 17. Accountants and Auditors; Negligence; Nothing could be more horrible to a client than to discover later on that the person tasked to detect fraud was the same one who perpetrated it.Yabut was an independent auditor hired by CASA. He handled its monthly bank reconciliations and had access to all relevant documents and checkbooks. In him was reposed the client s trust and confidence that he would perform precisely those functions and apply the appropriate procedures in accordance with generally accepted auditing standards. Yet he did not meet these expectations. Nothing could be more horrible to a client than to discover later on that the person tasked to detect fraud was the same one who perpetrated it. 18. Accountants and Auditors; Negligence; Awareness is not equipollent with discernment.It is a non sequitur to say that the person who receives the monthly bank statements, together with the cancelled checks and other debit/credit memoranda, shall examine the contents and give notice of any discrepancies within a reasonable time. Awareness is not equipollent with discernment. 19. Accountants and Auditors; Negligence; A preschool teacher charged with molding the minds of the youth cannot be burdened with the intricacies or complexities of corporate existence.Moreover, there was a time gap between the period covered by the bank statement and the date of its actual receipt. Lebron personally received the December 1990 bank statement only in January 1991 when she was also informed of the forgery for the first time, after which she immediately requested a stop payment order. She cannot be faulted for the late detection of the forged December check. After all, the bank account with BPI was not personal but corporate, and she could not be expected to monitor closely all its finances. A preschool teacher charged with molding the minds of the youth cannot be burdened with the intricacies or complexities of corporate existence. 20. Accountants and Auditors; Negligence; The depositor could only be blamed, if at all, for its unintelligent choice in the selection and appointment of an auditor a fault that is not tantamount to negligence.-

There is also a cutoff period such that checks issued during a given month, but not presented for payment within that period, will not be reflected therein. An experienced auditor with intent to defraud can easily conceal any devious scheme from a client unwary of the accounting processes involved by manipulating the cash balances on record especially when bank transactions are numerous, large and frequent. CASA could only be blamed, if at all, for its unintelligent choice in the selection and appointment of an auditor a fault that is not tantamount to negligence. 21. Accountants and Auditors; Negligence; Negligence is not presumed, but proven by whoever alleges it; The Professional Regulation Commission, through the Board of Accountancy, now requires not only accreditation for the practice of public accountancy, but also the registration of firms in the practice thereof.Negligence is not presumed, but proven by whoever alleges it. Its mere existence is not sufficient without proof that it, and no other cause, has given rise to damages. In addition, this fault is common to, if not prevalent among, small and medium-sized business entities, thus leading the Professional Regulation Commission (PRC), through the Board of Accountancy (BOA), to require today not only accreditation for the practice of public accountancy, but also the registration of firms in the practice thereof. In fact, among the attachments now required upon registration are the code of good governance and a sworn statement on adequate and effective training. 22. Accountants and Auditors; Negligence; If auditors may be held liable for breach of contract and negligence, with all the more reason may they be charged with the perpetration of fraud upon an unsuspecting client.Clearly then, Yabut was able to perpetrate the wrongful act through no fault of CAS A. If auditors may be held liable for breach of contract and negligence, with all the more reason may they be charged with the perpetration of fraud upon an unsuspecting client. CASA had the discretion to pursue BPI alone under the NIL, by reason of expediency or munificence or both. Money paid under a mistake may rightfully be recovered, and under such terms as the injured party may choose. 23. Damages; The adverse result of an action does not per se make the action wrongful, or the party liable for it.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 make the action wrongful, or the party liable for it. One may err, but error alone 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 discretion the claimant must nonetheless satisfactorily prove the existence of its factual basis and causal relation to the claimant s act or omission. 24. Damages; As a general rule, a corporation is not entitled to moral damages because it cannot experience physical suffering and mental anguish, but, for breach of the fiduciary duty required of a bank, a corporate client may claim such damages when its good reputation is besmirched by such breach, and social humiliation results therefrom.As a general rule, a corporation being an artificial person without feelings, emotions and senses, and having existence only in legal contemplation is not entitled to moral damages, because it cannot experience physical suffering and mental anguish. However, for breach of the fiduciary duty required of a bank, a corporate client may claim such damages when its good reputation is besmirched by such breach, and social humiliation results therefrom. CASA was 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. 25. Damages; Attorney s Fees; When the act or omission of the defendant has compelled the plaintiff to incur expenses to protect the latter s interest, or where the court deems it just and equitable, attorney s fees may be recovered.Although it is a sound policy not to set a premium on the right to litigate, we find that CASA is entitled to reasonable attorney s fees based on factual, legal, and equitable justification. When the act or omission of the defendant has compelled the plaintiff to incur expenses to protect the latter s interest, or where the court deems it just and equitable, attorney s fees may be recovered. In the present case, BPI persistently denied the claim of CASA under the NIL to recredit the latter s account for the value of the forged checks. This denial constrained CASA to incur expenses and exert effort for more than ten years in order to protect its corporate interest in its bank account. Besides, we have already cautioned BPI on a similar act of negligence it had committed seventy years ago, but it has remained unrelenting. Therefore, the Court deems it just and equitable to grant ten percent (10%) of the total value adjudged to CASA as attorney s fees. 26. Damages; Interest Rates; Since a court judgment is not a loan or a forbearance of recovery, the legal interest shall be at six percent (6%) per annum.-

For the failure of BPI to pay CASA upon demand and for compelling the latter to resort to the courts to obtain payment, legal interest may be adjudicated at the discretion of the Court, the same to run from the filing of the Complaint. Since a court judgment is not a loan or a forbearance of recovery, the legal interest shall be at six percent (6%) per annum. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of x x x legal interest, which is six percent per annum. The actual base for its computation shall be on the amount finally adjudged, compounded annually to make up for the cost of money already lost to CASA. 27. Damages; Negotiable Instruments Law; Code of Commerce; Under Section 196 of the NIL, any case not provided for shall be governed by the provisions of existing legislation or, in default thereof, by the rules of the law merchant, and, since damages are not provided for in the NIL, resort is had to the Code of Commerce and the Civil Code.Moreover, the failure of the CA to award interest does not prevent us from granting it upon damages awarded for breach of contract. Because BPI evidently breached its contract of deposit with CASA, we award interest in addition to the total amount adjudged. Under Section 196 of the NIL, any case not provided for shall be governed by the provisions of existing legislation or, in default thereof, by the rules of the law merchant. Damages are not provided for in the NIL. Thus, we resort to the Code of Commerce and the Civil Code. Under Article 2 of the Code of Commerce, acts of commerce shall be governed by its provisions and, in their absence, by the usages of commerce generally observed in each place; and in the absence of both rules, by those of the civil law. This law being silent, we look at Article 18 of the Civil Code, which states: In matters which are governed by the Code of Commerce and special laws, their deficiency shall be supplied by its provisions. A perusal of these three statutes unmistakably shows that the award of interest under our civil law is justified. Division: FIRST DIVISION Docket Number: G.R. No. 149454, G.R. No. 149507 Counsel: Benedicto, Verzosa, Geslogo, Burkley & Associates, Oscar F. Martinez, Mauricio Law Office Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the Petition in G.R. No. 149454 is hereby DENIED, and that in G.R. No. 149507 PARTLY GRANTED. The assailed Decision of the Court of Appeals is AFFIRMED with modification: BPI is held liable for P547,115, the total value of the forged checks less the amount already recovered by CASA from Leonardo T. Yabut, plus interest at the legal rate of six percent (6%) per annum compounded annually, from the filing of the complaint until paid in full; and attorney s fees of ten percent (10%) thereof, subject to reimbursement from Respondent Yabut for the entire amount, excepting attorney s fees. Let a copy of this Decision be furnished the Board of Accountancy of the Professional Regulation Commission for such action as it may deem appropriate against Respondent Yabut. No costs.

Case Title : SAMSUNG CONSTRUCTION COMPANY PHILIPPINES, INC., petitioner, vs. FAR EAST BANK AND TRUST COMPANY AND COURT OF APPEALS, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negotiable Instruments Law|Checks|Forgery|Negligence Syllabi: 1. Negotiable Instruments Law; Checks; A forged signature is wholly inoperative and payment made through or under such signature is ineffectual or does not discharge the instrument.The general rule is to the effect that a forged signature is wholly inoperative, and payment made through or under such signature is ineffectual or does not discharge the instrument. If payment is made, the drawee cannot charge it to the drawer s account. The traditional justification for the result is that the drawee is in a superior position to detect a forgery because he has the maker s signature and is expected to know and compare it. The rule has a healthy cautionary effect on banks by encouraging care in the comparison of the signatures against those on the signature cards they have on file. Moreover, the very opportunity of the drawee to insure and to distribute the cost among its customers who use checks makes the drawee an ideal party to spread the risk to insurance.

2. Negotiable Instruments Law; Checks; Forgery; Forgery is a real or absolute defense by the party whose signature is forged.Under Section 23 of the Negotiable Instruments Law, forgery is a real or absolute defense by the party whose signature is forged. On the premise that Jong s signature was indeed forged, FEBTC is liable for the loss since it authorized the discharge of the forged check. Such liability attaches even if the bank exerts due diligence and care in preventing such faulty discharge. Forgeries often deceive the eye of the most cautious experts; and when a bank has been so deceived, it is a harsh rule which compels it to suffer although no one has suffered by its being deceived. The forgery may be so near like the genuine as to defy detection by the depositor himself, and yet the bank is liable to the depositor if it pays the check. 3. Negotiable Instruments Law; Checks; Forgery; A document formally presented is presumed to be genuine until it is proved to be fraudulent.Thus, the first matter of inquiry is into whether the check was indeed forged. A document formally presented is presumed to be genuine until it is proved to be fraudulent. In a forgery trial, this presumption must be overcome but this can only be done by convincing testimony and effective illustrations. 4. Negotiable Instruments Law; Checks; Forgery; Bare fact that the forgery was committed by an employee of the party whose signature was forged cannot necessarily imply that such party s negligence was the cause for the forgery.The bare fact that the forgery was committed by an employee of the party whose signature was forged cannot necessarily imply that such party s negligence was the cause for the forgery. Employers do not possess the preternatural gift of cognition as to the evil that may lurk within the hearts and minds of their employees. 5. Negotiable Instruments Law; Checks; Forgery; If a bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount so paid to the account of the depositor.Still, even if the bank performed with utmost diligence, the drawer whose signature was forged may still recover from the bank as long as he or she is not precluded from setting up the defense of forgery. After all, Section 23 of the Negotiable Instruments Law plainly states that no right to enforce the payment of a check can arise out of a forged signature. Since the drawer, Samsung Construction, is not precluded by negligence from setting up the forgery, the general rule should apply. Consequently, if a bank pays a forged check, it must be considered as paying out of its funds and cannot charge the amount so paid to the account of the depositor. A bank is liable, irrespective of its good faith, in paying a forged check. 6. Negotiable Instruments Law; Checks; Forgery; Negligence; The presumption remains that every person takes ordinary care of his concerns, and that the ordinary course of business has been followed; Negligence is not presumed but must be proven by him who alleges it.Still, in the absence of evidence to the contrary, we can conclude that there was no negligence on Samsung Construction s part. The presumption remains that every person takes ordinary care of his concerns, and that the ordinary course of business has been followed. Negligence is not presumed, but must be proven by him who alleges it. While the complaint was lodged at the instance of Samsung Construction, the matter it had to prove was the claim it had alleged whether the check was forged. It cannot be required as well to prove that it was not negligent, because the legal presumption remains that ordinary care was employed. Division: SECOND DIVISION Docket Number: G.R. No. 129015 Counsel: Alan A. Leynes, Angara, Abello, Concepcion, Regala & Cruz Ponente: TINGA Dispositive Portion: 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 Court of Manila, Branch 9, dated 25 April 1994 is REINSTATED. Costs against respondent.

Syllabi Class : Remedial Law|Civil Law|Actions|Party-in-Interest|Banks|Forgery Syllabi: 1. Remedial Law; Actions; Party-in-Interest; It is elementary that it is only in the name of a real party-in-interest that a civil suit may be prosecuted; To qualify a person to be a real party-in-interest in whose name an action must be prosecuted, he must appear to be the present real owner of the right sought to be enforced.It is elementary that it is only in the name of a real party-in-interest that a civil suit may be prosecuted. Under Section 2, Rule 3 of the Rules of Civil Procedure, a real party-in-interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Interest within the meaning of the rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. One having no right or interest to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action. To qualify a person to be a real party-in-interest in whose name an action must be prosecuted, he must appear to be the present real owner of the right sought to be enforced. Since a contract may be violated only by the parties thereto as against each other, in an action upon that contract, the real parties-in-interest, either as plaintiff or as defendant, must be parties to the said contract. 2. Remedial Law; Actions; A court may grant relief to a party even if the party awarded did not pray for it in his pleadings.There is no merit to the claim that the CA erred in affirming the RTC s order directing BPI-FB to pay the balance of their account plus interest although the prayer was only to reinstate their Current Account. The complaint does contain a general prayer for such other relief as may be just and equitable in the premises. And this general prayer is broad enough to justify extension of a remedy different from or together with the specific remedy sought. Indeed, a court may grant relief to a party, even if the party awarded did not pray for it in his pleadings. 3. Civil Law; Banks; The contract between a bank and its depositors is governed by the provisions of the Civil Code on simple loan.The contract between a bank and its depositor is governed by the provisions of the Civil Code on simple loan. Thus, there is a debtor-creditor relationship between a bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings or current deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties. 4. Civil Law; Banks; Forgery; Unless a forgery or alteration is attributable to 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 party responsible for the forgery or alteration, otherwise it bears the loss.Every bank that issues checks for the use of its customers should know whether or not the drawer s signature thereon is genuine, whether there are sufficient funds in the drawers account to cover checks issued, and it should be able to detect alterations, erasures, superimpositions or intercalations thereon, for these instruments are prepared, printed and issued by itself, it has control of the drawer s account, and it is supposed to be familiar with the drawer s signature. It should possess appropriate detecting devices for uncovering forgeries and/or alterations on these instruments. Unless a forgery or alteration is attributable to 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 party responsible for the forgery or alteration, otherwise, it bears the loss. Division: SECOND DIVISION Docket Number: G.R. No. 148196, G.R. No. 148259 Counsel: Bargas, Benedicto, Tale, Verzosa & Associates, Ernesto L. Pineda Ponente: AUSTRIA-MARTINEZ Dispositive Portion: WHEREFORE, the petition in G.R. No. 148196 is DENIED and the petition in G.R. 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 Court, Branch 25, Manila, dated August 11, 1995 in Civil Case No. 90-53154, are hereby AFFIRMED with the MODIFICATION that BPI Family Bank is directed to pay Buenaventura, et al. the amount of P50,000.00 as exemplary damages. Costs against BPI Family Bank.

Case Title : BPI FAMILY BANK, petitioner, vs. EDGARDO BUENAVENTURA, MYRNA LIZARDO and YOLANDA TICA, respondents., EDGARDO BUENAVENTURA, MYRNA LIZARDO and YOLANDA TICA, petitioners, vs. BPI FAMILY BANK, respondent.Case Nature : PETITIONS for review on certiorari of the decision and resolution of the Court of Appeals.

Case Title : ALLIED BANKING CORPORATION, petitioner, vs. LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK, respondents Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class :Banks and Banking ; Unjust Enrichment ; Words and Phrases ; Division: SECOND DIVISION Docket Number: G.R. No. 133179 Counsel: Ocampo, Tejada, Guevarra & Associates Ponente: VELASCO, JR. Dispositive Portion: WHEREFORE, premises considered, the decision appealed from is MODIFIED. Judgment is rendered ordering and sentencing defendant-appellant Allied Banking Corporation to pay sixty (60%) percent and defendant-appellee Metropolitan Bank and Trust Company forty (40%) of the amount of P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully paid. The moral damages, attorney s fees and costs of suit adjudged shall likewise be paid by defendant-appellant Allied Banking Corporation and defendant-appellee Metropolitan Bank and Trust Company in the same proportion of 60-40. Except as thus modified, the decision appealed from is AFFIRMED. Banks and Banking; Fundamental and familiar is the doctrine that the relationship between a bank and a client is one of debtor-creditor. As to the liability of the parties, we find that Allied is liable to Lim Sio Wan. Fundamental and familiar is the doctrine that the relationship between a bank and a client is one of debtor-creditor. Articles 1953 and 1980 of the Civil Code provide: Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality. Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. Same; Money Market Transactions; Words and Phrases; A money market is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but through a middle man or dealer in open market in a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer; The creditor of the bank for her money market placement is entitled to payment upon her request, or upon the maturity of the placement, or until the bank is released from its obligation as debtor. We have ruled in a line of cases that a bank deposit is in the nature of a simple loan or mutuum. More succinctly, in Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, 504 SCRA 378 (2006), this Court ruled that a money market placement is a simple loan or mutuum. Further, we defined a money market in Cebu International Finance Corporation v. Court of Appeals, 316 SCRA 488 (1999), as follows: [A] money market is a market dealing in standardized shortterm credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but through a middle man or dealer in open market. In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer. In the case at bar, the money market transaction between the petitioner and the private respondent is in the nature of a loan. Lim Sio Wan, as creditor of the bank for her money market placement, is entitled to payment upon her request, or upon maturity of the placement, or until the bank is released from its obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains unextinguished. Same; Same; Payment made by the debtor to a wrong party does not extinguish the obligation as to the creditor, if there is no fault or negligence which can be imputed to the latter. From the factual findings of the trial and appellate courts that Lim Sio Wan did not authorize the release of her money market placement to Santos and the bank had been negligent in so doing, there is no question that the obligation of Allied to pay Lim Sio Wan had not been extinguished. Art. 1240 of the Code states that payment shall be made to the person in whose favor the obligation has been 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 negligence which can be imputed to the latter. Even when the debtor acted in utmost good faith and by mistake as to the person of his creditor, or through error induced by the fraud

of a third person, the payment to one who is not in fact his creditor, or authorized to receive such payment, is void, except as provided in Article 1241. Such payment does not prejudice the creditor, and accrual of interest is not suspended by it. (Emphasis supplied.) Same; Proximate Cause; Words and Phrases; Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred ; To determine the proximate cause of a controversy, the 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. Proximate cause is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without 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 the ultimate result. To determine the proximate cause of a controversy, the 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. Same; Negotiable Instruments; Checks; An exception to the rule that the collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately should be held liable therefor is when the issuance of the check itself was attended with negligence. The warranty that the instrument is genuine and in all respects what it purports to be covers all the defects in the instrument affecting the validity thereof, including a forged indorsement. Thus, the last indorser will be liable for the amount indicated in the negotiable instrument even if a previous indorsement was forged. We held in a line of cases that a collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement itself, and ultimately should be held liable therefor. However, this general rule is subject to exceptions. One such exception is when the issuance of the check itself was attended with negligence. Thus, in the cases cited above where the collecting bank is generally held liable, in two of the cases where the checks were negligently issued, this Court held the institution issuing the check just as liable as or more liable than the collecting bank. Same; Same; Same; Given the relative participation of two banks to the instant case, both banks cannot be adjudged as equally liable hence, the 60:40 ratio of the liabilities. In the instant case, the trial court correctly found Allied negligent in issuing the manager s check and in transmitting it to Santos without even a written authorization. In fact, Allied did not even ask for the certificate evidencing the money market placement or call up Lim Sio Wan at her residence or office to confirm her instructions. Both actions could have prevented the whole fraudulent transaction from unfolding. Allied s negligence must be considered as the proximate cause of the resulting loss. To reiterate, had Allied exercised the diligence due from a financial institution, the check would not have been issued and no loss of funds would have resulted. In fact, there would have been no issuance of indorsement had there been no check in the first place. The liability of Allied, however, is concurrent with that of Metrobank as the last indorser of the check. When Metrobank indorsed the check in compliance with the PCHC Rules and Regulations without verifying the authenticity of Lim Sio Wan s indorsement and when it accepted the check despite the fact that it was cross-checked payable to payee s account only, its negligent and cavalier indorsement contributed to the easier release of Lim Sio Wan s money and perpetuation of the fraud. Given the relative participation of Allied and Metrobank to the instant case, both banks cannot be adjudged as equally liable. Hence, the 60:40 ratio of the liabilities of Allied and Metrobank, as ruled by the CA, must be upheld. Same; Quasi-Delicts; Art. 2180 of the Civil Code pertains to the vicarious liability of an employer for quasi-delicts that an employee has committed such provision of law does not apply to civil liability arising from delict. As to Producers Bank, Allied Bank s argument that Producers Bank must be held liable as employer of Santos under Art. 2180 of the Civil Code is erroneous. Art. 2180 pertains to the vicarious liability of an employer for quasi-delicts that an employee has committed. Such provision of law does not apply to civil liability arising from delict. One also cannot apply the principle of subsidiary liability in Art. 103 of the Revised Penal Code in the instant case. Such liability on the part of the employer for the civil aspect of the criminal act of the employee is based on the conviction of the employee for a crime. Here, there has been no conviction for any crime. Same; Unjust Enrichment; Words and Phrases; There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of

justice, equity and good conscience. As to the claim that there was unjust enrichment on the part of Producers Bank, the same is correct. Allied correctly claims in its petition that Producers Bank should reimburse Allied for whatever judgment that may be rendered against it pursuant to Art. 22 of the Civil Code, which provides: Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just cause or legal ground, shall return the same to him. The above provision of law was clarified in Reyes v. Lim, 408 SCRA 560 (2003), where we ruled that [t]here is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. In Tamio v. Ticson, 443 SCRA 44 (2004), we further clarified the principle of unjust enrichment, thus: Under Article 22 of the Civil Code, there is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or with damages to another. [Allied Banking Corporation vs. Lim Sio Wan, 549 SCRA 504(2008)] Excerpt : 1. SCRA 360 [2007]) o0o G.R. No. 133179. March 27, 2008. [*] ALLIED BANKING CORPORATION, petitioner, vs . LIM SIO WAN , METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK, respondents. Banks and Banking ; Fundamental and familiar is the doctrine that the relationship between a bank and a client is one of debtor-creditor. As to the liability of the parties, we find that Allied is liable to Lim Sio Wan . Fundamental and familiar is the doctrine that the relationship between a bank and a client is one of debtor-creditor. Articles 1953 and 1980 of the Civil Code provide: Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay 2. middle man or dealer in open market. In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer. In the case at bar, the money market transaction between the petitioner and the private respondent is in the nature of a loan. Lim Sio Wan , as creditor of the bank for her money market placement, is entitled to payment upon her request, or upon maturity of the placement, or until the bank is released from its obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains unextinguished. Same; Same; Payment made by the debtor to a wrong party does not extinguish the obligation as to the creditor, if there is no 3. fault or negligence which can be imputed to the latter. From the factual findings of the trial and appellate courts that Lim Sio Wan did not authorize the release of her money market placement to Santos and the bank had been negligent in so doing, there is no question that the obligation of Allied to pay Lim Sio Wan had not been extinguished. Art. 1240 of the Code states that payment shall be made to the person in whose favor the obligation has been 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 4. ...Page Edit Line Top SO ORDERED. Quisumbing (Chairperson), CarpioMorales, Chico-Nazario and Velasco, Jr., JJ., concur. Judgment modified. Notes. Prosecutors designated by the COMELEC to prosecute the cases act as its deputies. They derive their authority from it and not from their offices. (Commission on Elections vs . Silva, Jr., 286 SCRA 177 [1998]) It is a jurisprudential rule that the testimony of a self-confessed accomplice or coconspirator imputing the blame to or implicating his co-accused cannot, by itself and without corroboration, be regarded as proof with a moral certainty that the latter committed or participated in the commission of the crime. (People vs . Farjardo, Jr., 512 5. request, or upon the maturity of the placement, or until the bank is released from its obligation as debtor. We have ruled in a line of cases that a bank deposit is in the nature of a simple loan or mutuum. More succinctly, in Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, 504 SCRA 378 (2006), this Court ruled that a money market placement is a simple loan or mutuum. Further, we defined a money market in Cebu International FinanceCorporation v. Court of Appeals, 316 SCRA 488 (1999), as follows: [A] money market is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but through a 6. The above provision of law was clarified in Reyes v. Lim , where we ruled that [t]here is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. [58] In Tamio v. Ticson, we further clarified the principle of unjust enrichment, thus: Under Article 22 of the Civil Code, there is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or

with damages to another. [59] In the instant case, Lim Sio Wan s money market placement in Allied Bank was pre-terminated and withdrawn without her 7. consent. Moreover, the proceeds of the placement were deposited in Producers Bank s account in Metrobank without any justification. In other words, there is no reason that the proceeds of Lim Sio Wans placement should be deposited in FCC s account purportedly as payment for FCC s money market placement and interest in Producers Bank. With such payment, Producers Bank s indebtedness to FCC was extinguished, thereby benefitting the former. Clearly, Producers Bank was unjustly enriched at the expense of Lim Sio Wan . Based on the facts and circumstances of the case, Producers Bank should reimburse Allied and Metrobank for the amounts the two latter banks are ordered to pay Lim Sio Wan . It cannot be 8. jurisdiction over her. [60] We, therefore, cannot ascribe to her liability in the instant case. Clearly, Producers Bank must be held liable to Allied and 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 adjudged to pay Lim Sio Wan based on a proportion of 60:40. WHEREFORE, the petition is PARTLY GRANTED. The March 18, 1998 CA Decision in CA-G.R. CV No. 46290 and the November 15, 1993 RTC Decision in Civil Case No. 6757 are AFFIRMED with MODIFICATION. Thus, the CA Decision is AFFIRMED, the fallo of which is reproduced, as follows: WHEREFORE, premises considered, the decision appealed from is MODIFIED 9. . Judgment is rendered ordering and sentencing defendantappellant Allied Banking Corporation to pay sixty (60%) percent and defendantappellee Metropolitan Bank and Trust Company forty (40%) of the amount of P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully paid. The moral damages, attorney s fees and costs of suit adjudged shall likewise be paid by defendant-appellant Allied Banking Corporation and defendant-appellee Metropolitan Bank and Trust Company in the same proportion of 60-40. Except as thus modified, the decision appealed from is AFFIRMED. SO ORDERED. Additionally and by way of MODIFICATION, Producers Bank is hereby ordered to pay Allied and Metrobank the 10. aforementioned amounts. The liabilities of the parties are concurrent and independent of each other. SO ORDERED. Quisumbing (Chairperson), CarpioMorales, Tinga and Chico-Nazario, [**] JJ., concur. Petition partly granted, judgment affirmed with modification. Notes. A money market transaction partakes of the nature of a loan and nonpayment thereof would not give rise to criminal liability for estafa through misappropriation or conversion. (Sesbreno vs . Court of Appeals, 240 SCRA 606 [1995]) The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. (Moreo-Lentfer vs . Wolff, 441 SCRA 584 [2004])

Case Title : TERESITA VILLALUZ, CHIT ILAGAN, Spouses ADOR and TESS TABERNA and MARIO LLAMAS, petitioners, vs. THE HONORABLE COURT OF APPEALS and SPOUSES REYNALDO AND ZENAIDA ANZURES, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Remedial Law|B.P. 22|Appeal|Ejectment Syllabi: 1. Criminal Law; B.P. 22; Appeal; It is well-settled that cases brought to the Supreme Court from the CA are limited to a review of questions of law, as the factual findings thereon are conclusive on the Court.The contention of petitioner Villaluz essentially strikes at a factual question. It is well-settled, however, that cases brought to this Court from the CA are limited to a review of questions of law, as the factual findings thereon are conclusive on this Court. In addition, it is also well-settled that the factual findings of the trial court if supported by substantial evidence on record are likewise conclusive on this Court and even carries more weight when affirmed by the CA. These doctrines find applicability in this case considering that the assailed findings do not fall under any of the recognized exceptions where the lower courts factual findings are not binding on this Court. 2. Same; Same; Petitioners are not lessees but their 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.In this case, although possession by petitioners (other than Villaluz) lasted beyond March 31, 1988 (the date they were supposed to vacate the premises in accordance with the agreement between petitioner Villaluz and private respondents), nevertheless their continued possession from April 1, 1988 up to the time they received the demand to vacate on February 23, 1989, is considered as possession by tolerance. Said petitioners are not lessees but their 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 possession of the said property stems from their being employees of petitioner Villaluz who only allowed them to occupy the premises for a certain period. As such, their possession depends upon the possession of petitioner Villaluz. Having merely stepped 3. Remedial Law; Ejectment; The one-year reglementary period under Section 1, Rule 70 for filing an unlawful detainer case is counted from the time of the unlawful deprivation or withholding of possession.Anent the ejectment case, the one-year reglementary period under Section 1, Rule 70 for filing an unlawful detainer case is counted from the time of the unlawful deprivation or withholding of possession. Such unlawful deprivation occurs upon expiration or termination of the right to hold possession. And such right legally expires or terminates upon receipt of the last demand to vacate. 4. Same; Same; Though petitioner was acquitted of the criminal offense, she may still be held civilly liable for the checks she issued.Moreover, it is totally misleading for petitioner Villaluz s to say that the trial court found that she has no liability to private respondents. The mere fact that 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 such a huge amount to private respondents had this not been for the satisfaction of a monetary obligation. It is well to emphasize at this point, that though petitioner was acquitted of the criminal offense, she may still be held civilly liable for the checks she issued. Such pronouncement as to her civil liability is sanctioned under Section 2 of Rule 120 which provides in part: In case of acquittal, unless there is a clear showing that the act from which the civil liability might arise did not exist, the judgment shall make a finding on the civil liability of the accused in favor of the offended party. Division: THIRD DIVISION Docket Number: G.R. No. 106214 Counsel: Jaime S. Linsangan, Jaime V. Villanueva Ponente: FRANCISCO Dispositive Portion: WHEREFORE, premises considered, the decision of the Court of Appeals in the assailed consolidated case is hereby AFFIRMED in toto. Same; Same; Though petitioner was acquitted of the criminal offense, she may still be held civilly liable for the checks she issued. Moreover, it is totally misleading for petitioner Villaluz s to say that the trial court found that she has no liability to private respondents. The mere fact that 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 such a huge amount to private respondents had this not been for the satisfaction of a monetary obligation. It is well to emphasize at this point, that though petitioner was acquitted of the criminal offense, she may still be held civilly liable for the checks she issued. Such pronouncement as to her civil liability is sanctioned under Section 2 of Rule 120 which provides in part: In case of acquittal, unless there is a clear showing that the act from which the civil liability might arise did not exist, the judgment shall make a finding on the civil liability of the accused in favor of the offended party. Remedial Law; Ejectment; The one-year reglementary period under Section 1, Rule 70 for filing an unlawful detainer case is counted from the time of the unlawful deprivation or withholding of possession. Anent the ejectment case, the one-year reglementary period under Section 1, Rule 70 for filing an unlawful detainer case is counted from the time of the unlawful deprivation or withholding of possession. Such unlawful deprivation occurs upon expiration or termination of the right to hold possession. And such right legally expires or terminates upon receipt of the last demand to vacate. Same; Same; Petitioners are not lessees but their 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. In this case, although possession by petitioners (other than Villaluz) lasted beyond March 31, 1988 (the date they were supposed to vacate the premises in accordance with the agreement between petitioner Villaluz and private respondents), nevertheless their continued possession from April 1, 1988 up to the time they received the demand to vacate on February 23, 1989, is considered as possession by tolerance. Said petitioners are not lessees but their 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 possession of the said property stems from their being employees of petitioner Villaluz who only allowed them to occupy the premises for a certain period. As such, their possession depends upon the possession of petitioner Villaluz. Having merely stepped into the shoes of the latter, said petitioners cannot acquire superior rights than that of petitioner Villaluz. It has been ruled, that the person who occupies the land of another at the latter s tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate the same upon demand, otherwise the remedy of ejectment may be availed to oust him from the premises. In such case, the one year prescriptive period for filing the appropriate action to remedy the unlawful withholding of possession is to be counted from the date of receipt of the last demand to vacate because it is only from that time that possession becomes illegal. Accordingly, since the complaint for ejectment was instituted on July 12, 1989, or a mere four (4) months from the time of the last demand to vacate, the same was timely filed within the prescriptive period. [Villaluz vs. Court of Appeals, 278 SCRA 540(1997)] Case Title : REMIGIO S. ONG, petitioner, vs. PEOPLE OF THE PHILIPPINES and COURT OF APPEALS (EIGHTH DIVISION), respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law||Negotiable Instruments Law|Witnesses|Indeterminate Sentence Law Syllabi: 1. Criminal Law; Bouncing Checks (Batas Pambansa Blg. 22); The gravamen of the offense punished by 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 obligation which the law punishes.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. 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 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 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 obligation which the law punishes. The law is not intended or designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the making of worthless checks and putting them in circulation. 2. Criminal Law; Negotiable Instruments Law; In actions based upon a negotiable instrument, it is unnecessary to aver or prove consideration, for consideration is important and presumed from the fact that it is a negotiable instrument. Petitioner s argument that the subject check was issued without consideration is inconsequential. The law invariably declares the mere act of issuing a worthless check as malum prohibitum. We quote with approval the appellate court s findings on this matter: In actions based upon a negotiable instrument, it is unnecessary to aver or prove consideration, for consideration is important and presumed from the fact that it is a negotiable instrument. The presumption exists whether the words value received appear on the instrument or not (Agbayani, A.F Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1989 Ed., Vol. 1, p. 227, emphasis supplied). Furthermore, such contention is also inconsequential in Batas Pambansa Blg. 22. 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 act of issuing a worthless check malum prohibitum. In prosecutions for violation of B.P. Blg. 22, therefore, prejudice or damage is not a prerequisite for conviction. In the more recent case of People vs. Nitafan (215 SCRA 79 [1992]), the Supreme Court ruled that the argument surrounding the issuance of the checks need not be first looked into, since the law clearly provides that the mere issuance of any kind of check, regardless of the intent of the parties; i.e., whether the check was intended merely to serve as a guarantee or deposit, but 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 and to protect the stability and integrity of checks as a means of payment of obligation (Lazaro vs. Court of Appeals, 227 SCRA 723, 726-727 [1993]).3. Criminal Law; Witnesses; It is well-settled in criminal jurisprudence that where the issue is one of credibility of witnesses, the appellate court will generally not disturb the findings of the trial court.It is well-settled in criminal jurisprudence that where the issue is one of credibility of witnesses, the appellate court will generally not disturb the findings of the trial court, considering it was in a better position to settle such issue. Indeed, the trial court has the advantage of hearing the witness and observing

his conduct during trial, circumstances which carry a great weight in appreciating his credibility. 4. Criminal Law; Indeterminate Sentence Law; In light of the rulings in the recent cases of Vaca v. Court of Appeals, 298 SCRA 656 (1998) and Rosa Lim v. People, 340 SCRA 497, G.R. No. 130038, 18 September 2000, the Court deems it best in the instant case, to limit the penalty for violation of B.P. Blg. 22 to payment of a fine; It would best serve the ends of criminal justice if in fixing the penalty within the range of discretion allowed by Sec. 1, par. 1, the same philosophy underlying the Indeterminate Sentence Law is observed, namely, that of redeeming valuable human material and preventing unnecessary deprivation of personal liberty and economic usefulness with due regard to the protection of the social order.In light, however, of the rulings in the recent cases of Vaca v. Court of Appeals and Rosa Lim v. People, the Court deems it best in the instant case, to limit the penalty for violation of B.P. Blg. 22 to payment of a fine in the amount of P150,000.00. Following our rationale in the aforesaid cases, the Court believes that it would best serve the ends of criminal justice if in fixing the penalty within the range of discretion allowed by Sec. 1, par. 1, the same philosophy underlying the Indeterminate Sentence Law is observed, namely, that of redeeming valuable human material and preventing unnecessary deprivation of personal liberty and economic usefulness with due regard to the protection of the social order. Division: FIRST DIVISION Docket Number: G.R. No. 139006 Counsel: Raymundo G. Hipolito II, Melchor Monsod Ponente: KAPUNAN Dispositive Portion: WHEREFORE, in view of the foregoing, we AFFIRM the decision of the Court of Appeals WITH THE MODIFICATION that the sentence of imprisonment is DELETED. Petitioner is hereby ordered to pay a fine of P150,000.00. He is likewise ordered to pay civil indemnity in the amount of P130,000.00, and the costs of the suit.

4. Criminal Law; Batas Pambansa Blg. 22; Evidence; The maker s knowledge is presumed from the dishonor of the check for insufficiency of funds.As to the second element, B.P. Blg. 22 creates a presumption juris tantum that the second element prima facie exists when the first and third elements of the offense are present. Thus, the maker s knowledge is presumed from the dishonor of the check for insufficiency of funds. 5. Criminal Law; Batas Pambansa Blg. 22; Evidence; Nowhere in Section 2 of the law does it require a maker to maintain funds in his bank account for only 90 days; That the check must be deposited within ninety (90) days is simply one of the conditions for the prima facie presumption of knowledge of lack of funds to arise.Contrary to petitioner s assertions, nowhere in said provision does the law require a maker to maintain funds in his bank account for only 90 days. Rather, the clear import of the law is to establish a prima facie presumption of knowledge of such insufficiency of funds under the following conditions (1) presentment within 90 days from date of the check, and (2) the dishonor of the check and failure of the maker to make arrangements for payment in full within 5 banking days after the notice thereof. That the check must be deposited within ninety (90) days is simply one of the conditions for the prima facie presumption of knowledge of lack of funds to arise. It is not an element of the offense. 6. Criminal Law; Batas Pambansa Blg. 22; Evidence; By current banking 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 presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay. By current banking practice, a check becomes stale after more than six (6) months, or 180 days. Private respondent herein deposited the checks 157 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 knowledge could still be proven by direct or circumstantial evidence. 7. Criminal Law; Batas Pambansa Blg. 22; Penalty; Pursuant to the policy guidelines in Administrative Circular No. 12-2000, the penalty imposed on petitioner should now be modified to a fine of not less than but not more than double the amount of the checks that were dishonored.Pursuant to the policy guidelines in Administrative Circular No. 12-2000, which took effect on November 21, 2000, the penalty imposed on petitioner should now be modified to a fine of not less than but not more than double the amount of the checks that were dishonored. Division: SECOND DIVISION Docket Number: G.R. No. 117857 Counsel: Agapito P. Pagayanan, Jr. and Taada, Vivo, Tan, The Solicitor General Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the petition is DENIED. Petitioner Luis S. Wong is found liable for violation of Batas Pambansa Blg. 22 but the penalty imposed on him is hereby MODIFIED so that the sentence of imprisonment is deleted. Petitioner is ORDERED to pay a FINE of (1) P6,750.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12057, (2) P12,820.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12058, and (3) P11,000.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12055, with subsidiary imprisonment

Case Title : LUIS S. WONG, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Batas Pambansa Blg. 22|Evidence|Penalty Syllabi: 1. Criminal Law; Batas Pambansa Blg. 22; Evidence; Findings of fact of the Court of Appeals are generally conclusive.Although Manuel Limtong was the sole witness for the prosecution, his testimony was found sufficient to prove all the elements of the offense charged. We find no cogent reason to depart from findings of both the trial and appellate courts. In cases elevated from the Court of Appeals, our review is confined to alleged errors of law. Its findings of fact are generally conclusive. Absent any showing that the findings by the respondent court are entirely devoid of any substantiation on record, the same must stand. 2. Criminal Law; Batas Pambansa Blg. 22; Evidence; What the law punishes is the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating to its issuance; The mere act of issuing a 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 greatly erode the faith the public reposes in the stability and commercial value of checks as currency substitutes, and bring about havoc in trade and in banking communities. So what the law punishes is the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating to its issuance. The mere act of issuing a worthless check is malum prohibitum. Nothing herein persuades us to hold otherwise. 3. Criminal Law; Batas Pambansa Blg. 22; Evidence; Two (2) ways of violating Batas Pambansa Blg. 22.There are two (2) ways of violating B.P. Blg. 22: (1) by making or drawing and issuing a check to apply on account or for value knowing at the time of issue that the check is not sufficiently funded; and (2) by having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep sufficient funds therein or credit with said bank to cover the full amount of the check when presented to the drawee bank within a period of ninety (90) days.

Case Title : CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP, RICHARD VELASCO and ALFONSO CO, petitioners, vs. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents., MICO METALS CORPORATION, petitioner, vs. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents. Syllabi Class : Civil Procedure|Commercial Law|Negotiable Instruments Law|Essential Requisites of a Negotiable Instrument Syllabi: 1. Civil Procedure; During the trial of an action, the party who has the burden of proof upon an 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 attaches to a specific state of facts; A presumption may operate against his adversary who has not introduced proof to rebut the presumption.During the trial of an action, the party who has the burden of proof upon an 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 attaches to a specific state of facts. A presumption may operate against his adversary who has not introduced proof to rebut the presumption. 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 prevail. The burden of proof remains where it is, but by the presumption the one who has that burden is relieved for the time being from introducing evidence in support of his averment, because the presumption stands in the place of evidence unless rebutted. 2. Commercial Law; Negotiable Instruments Law; Essential Requisites of a Negotiable Instrument;Letters of credit and trust receipts are not negotiable instruments.Negotiable instruments which are meant to be substitutes for money, must conform to the following requisites to be considered as such a) it must be in writing; b) it must be signed by the maker or drawer; c) it must contain an unconditional promise or order to pay a sum certain in money; d) it must be payable on demand or at a fixed or determinable future time; e) it must be payable to order or bearer; and f) where it is a bill of exchange, the drawee must be named or otherwise indicated with reasonable certainty. Negotiable instruments include promissory notes, bills of exchange and checks. Letters of credit and trust receipts are, however, not negotiable instruments. But drafts issued in connection with letters of credit are negotiable instruments. 3. Commercial Law; Negotiable Instruments Law; Essential Requisites of a Negotiable Instrument; A trust receipt is a document of security pursuant to which a bank acquires a security interest in the goods under trust receipt.A trust receipt is considered as a security transaction intended to aid in financing importers and retail dealers who do not have sufficient funds or resources to finance the importation or purchase of merchandise, and who may not be able to acquire credit except through utilization, as collateral of the merchandise 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 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. 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 indebtedness. Division: SECOND DIVISION Docket Number: G.R. No. 117913, G.R. No. 117914 Counsel: Lim, Duran & Associates, Silvestre J. Acejas & Associates, Laogan, Silva, Baeza & Llantino Law Office Ponente: DE LEON, JR. Dispositive Portion: WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 27480 entitled, Philippine Bank of Communications vs. Mico Metals Corporation, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Velasco and Alfonso Co, is AFFIRMED in toto.

is not necessarily a negative element which should be taken as diminishing the credit otherwise accorded to it. 2. Evidence; Documentary Evidence; Genuineness of Signature; Deceased presumed to be a party to the check for value by proof of the genuineness of the deceased s signature.The genuineness of the deceased s signature having been shown, he is prima facie presumed to have become a party to the check for value, following Section 24 of the Negotiable Instruments Law which reads: Section 24. Presumption of Consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. 3. Evidence; Testimonial Evidence; Hearsay Rule; Exception; Dead Man s Statute; The Dead Man s Statute renders incompetent certain persons from testifying.As for the administratrix s invocation of the Dead Man s Stat- ute, the same does not likewise lie. The rule renders incompetent: 1) parties to a case; 2) their assignors; or 3) persons in whose behalf a case is prosecuted. x x x The rule is exclusive and cannot be construed to extend its scope by implication so as to disqualify persons not mentioned therein. Mere witnesses who are not included in the above enumeration are not prohibited from testifying as to a conversation or transaction between the deceased and a third person, if he took no active part therein. x x x 4. Evidence; Testimonial Evidence; Hearsay Rule; Exception; Dead Man s Statute; What the Dead Man s Statute proscribes is the admission of testimonial evidence upon a claim which arose before the death of the deceased.In any event, what the Dead Man s Statute proscribes is the admission of testimonial evidence upon a claim which arose before the death of the deceased. The incompetency is confined to the giving of testimony. Since the separate claims of Sanson and Celedonia are supported by checks-documentary evidence, their claims can be prosecuted on the bases of said checks. Division: THIRD DIVISION Docket Number: G.R. No. 127745 Counsel: Jerry P. Trenas, Efrain B. Trenas, Tirol Ponente: CARPIO-MORALES Dispositive Portion: 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 late Juan Bon Fing Sy, through Administratrix Melecia T. Sy, to pay:

Case Title : FELICITO G. SANSON, CELEDONIA SANSON-SAQUIN, ANGELES A. MONTINOLA, EDUARDO A. MONTINOLA, JR., petitioners-appellants, vs. HONORABLE COURT OF APPEALS, FOURTH DIVISION and MELECIA T. SY, As Administratrix of the Intestate Estate of the Late Juan Bon Fing Sy, respondentsappellees.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Evidence|Witnesses|Relationship|Documentary Evidence|Genuineness of Signature|Testimonial Evidence|Hearsay Rule|Exception|Dead Man s Statute Syllabi: 1. Evidence; Witnesses; Relationship; Relationship to a party has never been recognized as an adverse factor in determining either the credibility of the witness or the admissibility of the testimony.Relationship to a party has never been recognized as an adverse factor in determining either the credibility of the witness or subject only to well recognized exceptions none of which is here present the admissibility of the testimony. At most, closeness of relationship to a party, or bias, may indicate the need for a little more caution in the assessment of a witness testimony but

Case Title : LEODEGARIO BAYANI, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of the decision of the Court of Appeals. Syllabi Class : Commercial Law|Criminal Law|Negotiable Instruments Law|Holder in Due Course|Special Law Syllabi: 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 a holder of the check in due course; Under Section 28 of the Negotiable Instruments Law, absence or failure of consideration is a matter of defense only as against any person not a 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 a holder of the check in due course. Under Section 28 of the Negotiable Instruments Law (NIL), absence or failure of consideration is a matter of defense only as against any person not a holder in due course, thus: SECTION 28. Effect of want of consideration. Absence or failure of consideration is a matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise. 2. Criminal Law; Special Law; Violation of B.P. Blg. 22; For the accused to be guilty of violation of Section 1 of B.P. Blg. 22, the prosecution is mandated to prove the essential elements thereof, to wit: (1) that a person makes or draws and issues any check; (2) that the check is made or drawn and issued to apply on account or for value; (3) that the person who makes or draws and issues the 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 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 payment.For the accused to be guilty of violation of Section 1 of B.P. Blg. 22, the prosecution is mandated to prove the essential elements thereof, to wit: 1. That a person makes or draws and issues any check; 2. That the check is made or drawn and issued to apply on account or for value; 3. That the person who makes or draws and issues the 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 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 payment. Division: SECOND DIVISION Docket Number: G.R. No. 154947 Counsel: Emmanuel C. Velasco, The Solicitor General Ponente: CALLEJO, SR. Dispositive Portion: IN LIGHT OF ALL THE FOREOING, the petition is DENIED DUE COURSE. The decision of the Court of Appeals is AFFIRMED.

Case Title : VICKY C. TY, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Exempting Circumstances|Defense of Uncontrollable Fear|Justifying Circumstances|State of Necessity|Bouncing Checks Law|Evidence|Penalty Syllabi: 1. Criminal Law; Exempting Circumstances; Defense of Uncontrollable Fear; Requisites for the defense of acting under an uncontrollable fear to be invoked.The only question of law raised whether the defense of uncontrollable fear is tenable to warrant her exemption from criminal liability has to be resolved in the negative. For this exempting circumstance to be invoked successfully, the following requisites must concur: (1) existence of an uncontrollable fear; (2) the fear must be real and imminent; and (3) the fear of an injury is greater than or at least equal to that committed. 2. Criminal Law; Exempting Circumstances; Defense of Uncontrollable Fear; A person invoking uncontrollable fear must show 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 appear that the threat that caused the uncontrollable fear is of such 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 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 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 to leave no opportunity to the accused for escape. 3. Criminal Law; Justifying Circumstances; State of Necessity; Requisites to 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 liability under this paragraph: (1) that the evil sought to be avoided actually exists; (2) that the injury feared be greater than the one done to avoid it; (3) that there be no other practical and less harmful means of preventing it. 4. Criminal Law; Justifying Circumstances; State of Necessity; If the evil sought to be avoided is merely expected or anticipated or may happen in the future, this defense is not applicable.In the instant case, the evil sought to be avoided is merely expected or anticipated. If the evil sought to be avoided is merely expected or anticipated or may happen in the future, this defense is not applicable. Ty could have taken advantage of an available option to avoid committing a crime. By her own 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

been brought about by the negligence or imprudence, more so, the willful inaction of the actor.For the defense of state of necessity to be availing, the greater injury feared should not have been brought about by the negligence or imprudence, more so, the willful inaction of the actor. In this case, the issuance of the bounced checks was brought about by Ty s own failure to pay her mother s hospital bills. 6. Criminal Law; Bouncing Checks Law; Evidence; It is presumed, upon the issuance of the checks, in the absence of evidence to the contrary, that the same was issued for valuable consideration.As to the issue of consideration, it is presumed, upon issuance of the checks, in the absence of evidence to the contrary, that the same was issued for valuable consideration. Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value. In alleging otherwise, Ty has the onus to prove that the checks were issued without consideration. She must present convincing evidence to overthrow the presumption. 7. Criminal Law; Bouncing Checks Law; Evidence; 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.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 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. The thrust of the law is to prohibit the making of worthless checks and putting them into circulation. As this Court held in Lim v. People of the Philippines, 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. 8. Criminal Law; Bouncing Checks Law; Evidence; Knowledge of insufficiency of funds legally presumed from the dishonor of the checks for insufficiency of funds.Such knowledge is legally presumed from the dishonor of the checks for insufficiency of funds. If not rebutted, it suffices to sustain a conviction. 9. Criminal Law; Bouncing Checks Law; Evidence; The gravamen of the offense is the issuance of a bad check, hence, malice and intent in the issuance thereof is inconsequential.The knowledge of the payee of the insufficiency or lack of funds of the drawer with the drawee bank is immaterial as deceit is not an essential element of an offense penalized by B.P. 22. The gravamen of the offense is the issuance of a bad check, hence, malice and intent in the issuance thereof is inconsequential. 10. Criminal Law; Bouncing Checks Law; Penalty; Administrative Circular 122000, adopting the rulings in Vaca v. Court of Appeals and Lim v. People, authorizes the non-imposition of the penalty of imprisonment in B.P. 22 cases subject to certain conditions.We agree with the Court of Appeals in deleting the penalty of imprisonment, absent any proof that petitioner was not a first-time offender nor that she acted in bad faith. Administrative Circular 12-2000, adopting the rulings in Vaca v. Court of Appeals and Lim v. People, authorizes the non-imposition of the penalty of imprisonment in B.P. 22 cases subject to certain conditions. Division: SECOND DIVISION Docket Number: G.R. No. 149275 Counsel: Marvin L. Herrera, The Solicitor General Ponente: TINGA Dispositive Portion: WHEREFORE, the instant Petition is DENIED and the assailed Decision of the Court of Appeals, dated 31 July 2001, finding petitioner Vicky C. Ty GUILTY of violating Batas Pambansa Bilang 22 is AFFIRMED with MODIFICATIONS. Petitioner Vicky C. Ty is ORDERED to pay a FINE equivalent to double the amount of each dishonored check subject of the seven cases at bar with subsidiary imprisonment in case of insolvency in accordance with Article 39 of the Revised Penal Code. She is also ordered to pay private complainant, Manila Doctors Hospital, the amount of Two Hundred Ten Thousand Pesos (P210,000.00) representing the total amount of the dishonored checks. Costs against the petitioner.

Case Title : VICTOR ONGSON, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Bouncing Checks Law (B.P. 22)|Judgments|Due Process|Right to be Informed|Admissions|Administrative Circular Nos. 12-2000 and 13-2001|Interest Rates Syllabi: 1. Criminal Law; Bouncing Checks Law (B.P. 22); Judgments; The absence of relevant antecedents as well as the lack of evaluation of the evidence adduced by the parties and justification for its conclusion render the trial court s decision void.Based on the foregoing considerations, we find that the trial court s decision in the case at bar did not state the material facts, i.e., the transaction that led to the issuance of the checks, their respective amounts, the date and reason for dishonor. The decision likewise failed to discuss the elements of B.P. 22 and other pertinent facts. Clearly, the absence of relevant antecedents as well as the lack of evaluation of the evidence adduced by the parties and justification for its conclusion render the instant decision void. 2. Criminal Law; Bouncing Checks Law (B.P. 22); Elements.The elements of violation of B.P. 22 are: (1) making, drawing, and issuance of any check to apply on account or for value; (2) knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. 3. Criminal Law; Bouncing Checks Law (B.P. 22); Due Process; Right to be Informed; Where the date of the check and the amount thereof as stated in the Informations vary with the exhibits submitted by the prosecution, which inconsistencies violate the accused s constitutional right to be informed, he should be acquitted; Without a sufficient identification of the dishonored check in the Information, the conviction of the accused should be set aside for being violative of the constitutional requirement of due process.The first element, i.e., making, drawing, and issuance of any check, requires that the check be properly described in the Information to inform the accused of the nature and cause of the accusation against him. Without a sufficient identification of the dishonored check in the Information, the conviction of the accused should be set aside for being violative of the constitutional requirement of due process. In the instant case, petitioner should be acquitted in Criminal Case Nos. Q-93-43437 and Q-93-43442, because the date of the check and the amount thereof as stated in the Informations vary with the exhibits submitted by the prosecution, which inconsistencies violate petitioner s constitutional right to be informed of the nature of the offense charged. 4. Criminal Law; Bouncing Checks Law (B.P. 22); Upon issuance of a check, in the absence of evidence to the contrary, it is presumed that the same was issued for valuable consideration, which may consist either in some right, interest, profit or benefit accruing to the party who makes the contract, or some forbearance, detriment, loss or some responsibility, to act, or labor, or service given, suffered or undertaken by the other side.There is no merit in petitioner s contention that the checks were issued without valuable consideration. We have held that upon issuance of a check, in the absence of evidence to the contrary, it is presumed that the same was issued for valuable consideration, which may consist either in some right, interest, profit or benefit accruing to the party who makes the contract, or some forbearance, detriment, loss or some responsibility, to act, or labor, or service given, suffered or undertaken by the other side. It is an obligation to do, or not to do in favor of the party who makes the contract, such as the maker or endorser. In the case at bar, the prosecution established beyond reasonable doubt that petitioner received money in various amounts from private complainant. Whether the amounts were loans or investment in the business of petitioner, the checks were issued for valuable consideration. Either way, petitioner is under obligation to pay private complainant. Likewise, the prosecution proved that some of the checks were payment for private complainant s commission from selling the products of petitioner. Hence, the latter cannot successfully claim that the issuance of the checks were not for a valuable consideration. 5. Criminal Law; Bouncing Checks Law (B.P. 22); What the law punishes is the issuance of a bum check and not the purpose for which the check was issued nor the terms or conditions relating to its issuance.The gravamen of the offense punished by B.P. 22 is the act of making and issuing a worthless check, that is, a check that is dishonored upon its presentation for payment. The mere act of issuing a worthless check is malum prohibitum. So also, it is not the nonpayment of the obligation that is being punished, but the making of worthless checks. What the law punishes is such

issuance of a bum check and not the purpose for which the check was issued nor the terms or conditions relating to its issuance. Thus, even if there had been payment through compensation or some other means, there could still be prosecution for violation of B.P. 22. 6. Criminal Law; Bouncing Checks Law (B.P. 22); For the prima facie presumption that the drawer had knowledge of the insufficiency of his funds in or credit with the bank at the time of the issuance and on the check s presentment for payment, the prosecution must prove that (a) the check is presented within ninety (90) days from the date of the check, (b) the drawer or maker of the check receives notice that such check has not been paid by the drawee, and (c) the drawer or maker of the check fails to pay the holder of the check the amount due thereon, or make arrange-ments for payment in full within five (5) banking days after receiving notice that such check has not been paid by the drawee; The presumption or prima facie evidence cannot arise, if such notice of nonpayment by the drawee bank is not sent to the maker or drawer, or if there is no proof as to when such notice was received by the drawer since there would simply be no way of reckoning the crucial 5-day period.As to the second element, we have held that knowledge involves a state of mind which is difficult to establish, thus the statute itself creates a prima facie presumption that the drawer had knowledge of the insufficiency of his funds in or credit with the bank at the time of the issuance and on the check s presentment for payment if he fails to pay the amount of the check within five (5) banking days from notice of dishonor. For this presumption to arise, the prosecution must prove the following: (a) the check is presented within ninety (90) days from the date of the check; (b) the drawer or maker of the check receives notice that such check has not been paid by the drawee; and (c) the drawer or maker of the check fails to pay the holder of the check the amount due thereon, or make arrangements for payment in full within five (5) banking days after receiving notice that such check has not been paid by the drawee. In other words, the presumption is brought into existence only after it is proved that the issuer had received a notice of dishonor and that within five days from receipt thereof, he failed to pay the amount of the check or to make arrangements for its payment. The presumption or prima facie evidence as provided in this section cannot arise, if such notice of nonpayment by the drawee bank is not sent to the maker or drawer, or if there is no proof as to when such notice was received by the drawer, since there would simply be no way of reckoning the crucial 5-day period. Furthermore, the notice of dishonor must be in writing; a verbal notice is not enough. 7. Criminal Law; Bouncing Checks Law (B.P. 22); Admissions; The accused s admission through counsel, made during the trial, binds the client.In King v. People,it was held that the accused s admission through counsel, made during the trial, binds the client. Similarly, in Rigor v. People, the Court ruled that the accused cannot pretend that he did not receive the notice of dishonor of the check because the transcript of records shows that the accused admitted knowledge of the dishonor of his check through a demand letter received by him. 8. Criminal Law; Bouncing Checks Law (B.P. 22); The reason for dishonor as stamped in the dorsal portion of the checks is prima facie presumptions of such dishonor and the reasons therefor.The third element of violation of B.P. 22, i.e., the dishonor of the check by the drawee bank, is also attendant in the present case as shown by the reason for the dishonor as stamped in the dorsal portion of the checks which are also prima facie presumptions of such dishonor and the reasons therefor. In Garcia v. Court of Appeals, it was held that while it is true that the presumption is merely prima facie, the accused must, nonetheless, present proof to the contrary to overcome this presumption. Here, other than the bare allegations of petitioner, he presented no well-grounded defense to prove that the subject checks were not dishonored by the drawee banks. 9. Criminal Law; Bouncing Checks Law (B.P. 22); It is not required, much less indispensable, for the prosecution to present the drawee bank s representative as a witness to testify on the dishonor of the checks.In Recuerdo v. People, the court emphasized that it is not required much less indispensable, for the prosecution to present the drawee bank s representative as a witness to testify on the dishonor of the checks. The prosecution may present, as it did in this case, only private complainant as a witness to prove all the elements of the offense charged. Said witness is competent and qualified to testify that upon presentment for payment, the subject checks were dishonored by the drawee bank. 10. Criminal Law; Bouncing Checks Law (B.P. 22); Administrative Circular Nos. 12-2000 and 13-2001;Imprisonment need not be imposed on those found guilty of violating B.P. Blg. 22 courts are vested the discretion to determine, taking into consideration the peculiar circumstances of each case, whether the

imposition of fine would best serve the interest of justice, or whether forbearing to impose imprisonment would depreciate the seriousness of the offense, work violence on the social order, or otherwise contrary to the imperatives of justice; Whether there is neither proof nor allegation that the accused is not a first time offender, imposition of the penalty of fine instead of imprisonment is proper.Under Administrative Circular No. 12-2000, imprisonment need not be imposed on those found guilty of violating B.P. Blg. 22. Administrative Circular No. 132001, issued on February 14, 2001, vests in the courts the discretion to determine, taking into consideration the peculiar circumstances of each case, whether the imposition of fine (of not less than but not more than double the amount of the check, but in no case exceeding P200,000.00), would best serve the interest of justice, or whether forbearing to impose imprisonment would depreciate the seriousness of the offense, work violence on the social order, or otherwise contrary to the imperatives of justice. In Recuerdo v. People, and Young v. Court of Appeals, it was held that where there is neither proof nor allegation that the accused is not a first time offender, imposition of the penalty of fine instead of imprisonment is proper. Likewise, in Lee v. Court of Appeals, we ruled that the policy laid down in Vaca v. Court of Appeals, and Lim v. People, of redeeming valuable human material and preventing unnecessary deprivation of personal liberty and economic usefulness, should be considered in favor of the accused who is not shown to be a habitual delinquent or a recidivist. Said doctrines squarely apply in the instant case there being no proof or allegation that petitioner is not a first time offender. 11. Criminal Law; Bouncing Checks Law (B.P. 22); Interest Rates; When an obligation is breached, and it consists in the payment of a sum of money, the interest due should be that which may have been stipulated in writing and in the absence of such stipulation, the rate shall be 12% per annum computed from judicial or extrajudicial demand; From the finality of this decision, the total amount of the dishonored checks inclusive of interest shall further earn 12% interest per annum until fully paid.Petitioner should be ordered to pay interest of 12% per annum pursuant to Cabrera v. People, that when an obligation is breached, and it consists in the payment of a sum of money, the interest due should be that which may have been stipulated in writing. In the absence of such stipulation, the rate shall be 12% per annum computed from judicial or extrajudicial demand. In this case, there was no stipulated interest on petitioner s obligation to pay the value of the dishonored checks. Demand for payment was made extrajudicially as evidenced by petitioner s receipt of private complainant s demand letter with notice of dishonor. The applicable interest rate is therefore 12% per annum from the date of receipt of the demand letter on December 7, 1992 for Check Nos. 492666, 492482, 492581 and 492319; December 10, 1992 for Check No. 119789; and December 18, 1992 for Check No. 492837 until finality of this decision. From the finality of this decision, the total amount of the dishonored checks inclusive of interest shall further earn 12% interest per annum until fully paid. Division: FIRST DIVISION Docket Number: G.R. No. 156169 Counsel: Llosa, Bonganciso, Ruperto, Abiera, Zerna Law Offices, The Solicitor General Ponente: YNARES-SANTIAGO Dispositive Portion: WHEREFORE, the petition is PARTIALLY GRANTED. The June 27, 2002 decision of the Court of Appeals in CA-G.R. CR No. 18662 is AFFIRMED with MODIFICATIONS.In Criminal Case Nos. Q-93-43437 and Q-93-43442, petitioner Victor Ongson is ACQUITTED of violation of B.P. Blg. 22 on the ground that his guilt has not been proved beyond reasonable doubt.In Criminal Case Nos. Q-9343435, Q-93-43436, Q-93-43438, Q-93-43439, Q-93-43440 and Q-93-43441 petitioner is found guilty beyond reasonable doubt of violation of B.P. Blg. 22 and is sentenced as follows:The total amount of the dishonored checks inclusive of interest shall further earn 12% interest per annum from the finality of the decision until fully paid.

Case Title : LEODEGARIO BAYANI, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Bouncing Checks Law|Jurisdictions|Evidence|Hearsay Evidence Syllabi:

1. Criminal Law; Bouncing Checks Law; Jurisdictions; Jurisdiction of the Court over cases elevated from the Court of Appeals is limited to reviewing or revising errors of law ascribed to the Court of Appeals, whose factual findings are conclusive and carry even more weight when said court affirms the findings of the trial court, absent any showing that the findings are totally devoid of support in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion.Well-settled is the rule that the factual findings and conclusions of the trial court and the CA are entitled to great weight and respect, and will not be disturbed on appeal in the absence of any clear showing that the trial court overlooked certain facts or circumstances which would substantially affect the disposition of the case. Jurisdiction of this Court over cases elevated from the CA is limited to reviewing or revising errors of law ascribed to the CA, whose factual findings are conclusive and carry even more weight when said court affirms the findings of the trial court, absent any showing that the findings are totally devoid of support in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion. 2. Criminal Law; Bouncing Checks Law; Evidence; Hearsay Evidence; Under Section 36 of Rule 130 of the Rules of Court, any evidence whether oral or documentary is hearsay if its probative value is not based on the personal knowledge of the witness but on that of some other person who is not on the witness stand.Section 36 of Rule 130 of the Rules of Court provides for the rule on hearsay evidence, to wit: Sec. 36. Testimony generally confined to personal knowledge; hearsay ex-cluded. A witness can testify only to those facts which he knows of his personal knowledge; that is, which are derived from his own perception, except as otherwise provided in these rules. Under the above rule, any evidence whether oral or documentary is hearsay if its probative value is not based on the personal knowledge of the witness, but on that of some other person who is not on the witness stand. Hence, information that is relayed to the former by the latter before it reaches the court is considered hearsay. 3. Criminal Law; Bouncing Checks Law; Evidence; In failing to object to the testimony on the ground that it was hearsay, the evidence offered may be admitted.Petitioner is barred from questioning the admission of Evangelista s testimony even if the same is hearsay. Section 34, Rule 132 of the Rules of Court requires that the trial court shall not consider any evidence which has not been finally offered. Section 35 of the same Rule provides that as regards the testimony of a witness, the offer must be made at the time the witness is asked to testify. And under Section 36 of the same Rule, objection to a question propounded in the course of the oral examination of a witness shall be made as soon as the ground therefor becomes reasonably apparent. Thus, it has been held that in failing to object to the testimony on the ground that it was hearsay, the evidence offered 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 the time her direct examination was conducted then petitioner has effectively waived any objection to the admissibility thereof and his belated attempts to have her testimony excluded for being hearsay has no ground to stand on. 4. Criminal Law; Bouncing Checks Law; Evidence; Although hearsay evidence may be admitted because of lack of objection by the adverse party s counsel, it is nonetheless without probative value, unless the proponent can show that the evidence falls within the exception to the hearsay evidence rule.While Evangelista s statement may be admitted in evidence, it does not necessarily follow that the same should be given evidentiary weight. Admissibility of evidence should not be equated with weight of evidence. In this regard, it has been held that although hearsay evidence may be admitted because of lack of objection by the adverse party s counsel, it is nonetheless without probative value, unless the proponent can show that the evidence falls within the exception to the hearsay evidence rule. 5. Criminal Law; Bouncing Checks Law; Elements of the Offense Penalized by Batas Pam-bansa Blg. 22; Upon the issuance of the checks and in the absence of evidence to the contrary, it is presumed that the same was issued for valuable consideration.The elements of the offense penalized by Batas Pambansa Blg. 22 are: (1) the 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 check in full upon its presentment; and (3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. As regards the first element, it is presumed, upon issuance of the checks and in the absence of evidence to the contrary, that the same was issued for valuable consideration. Under the Negotiable Instruments Law, it is

presumed that every party to an instrument acquired the same for a consideration or for value. In alleging that there was no consideration for the subject check, it devolved upon petitioner to present convincing evidence to overthrow the presumption and prove that the check was issued without consideration. 6. Criminal Law; Bouncing Checks Law; What the law punishes is the mere act of issuing a bouncing check, not the purpose for which it was issued or the terms and conditions relating to its issuance.What the law punishes is the mere act of issuing a bouncing check, not the purpose for which it was issued or the terms and conditions relating to its issuance. The law does not make any distinction on whether the checks within its contemplation are issued in payment of an obligation or to merely guarantee the obligation. The thrust of the law is to prohibit the making of worthless checks and putting them in circulation. Division: THIRD DIVISION Docket Number: G.R. No. 155619 Counsel: Emmanuel Z. Velasco, Jr., The Solicitor General Ponente: AUSTRIA-MARTINEZ Dispositive Portion: WHEREFORE, the petition is DENIED.

Case Title : ISIDRO PABLITO M. PALANA, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : APPEAL from a decision of the Court of Appeals. Syllabi Class : Remedial Law|Criminal Law|Jurisdictions|Violation of B.P. Blg. 22|Elements|Gravamen of the Offense|Criminal Procedure Syllabi: 1. Remedial Law; Jurisdictions; It is hornbook doctrine that jurisdiction to try a criminal action is determined by the law in force at the time of the institution of the action and not during the arraignment of the accused.It is hornbook doctrine that jurisdiction to try a criminal action is determined by the law in force at the time of the institution of the action and not during the arraignment of the accused. The Information charging petitioner with violation 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. 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 case if it is material and prejudicial to the accused so much that it affects his substantial rights.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 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 is material since it forms part of the second element of the offense that at the time of its issuance, petitioner knew of the insufficiency of funds. However, it cannot be said that petitioner was prejudiced by such variance nor was surprised by it. Records show that petitioner knew at the time he issued the check that he does not have sufficient funds in the bank to cover the amount of the check. Yet, he proceeded to issue the same claiming that the same would only be shown to prospective suppliers, a defense which is not valid. 3. Same; Same; Gravamen of the Offense; The allegation of petitioner that the checks were merely intended to be shown to prospective investors of her 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.The allegation of petitioner that the checks were merely intended to be shown to prospective investors of her 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. The law has made the mere act of issuing a bad check malum prohibitum, an act proscribed by the legislature for being deemed pernicious and inimical to public welfare. Considering the rule in mala prohibita cases, the only inquiry is whether the law has been breached. Criminal intent becomes unnecessary where the acts are prohibited for reasons of public policy, and the defenses of good faith and absence of criminal intent are unavailing. 4. Criminal Law; Violation of B.P. Blg. 22; Elements; The elements of the offense penalized under B.P. Blg. 22 are as follows: (1) the accused makes,

draws, or issues any check to apply on account or for value; (2) the accused 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; and (3) the check is subsequently dishonored by the drawee bank 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 payment.This Court sustains petitioner s conviction for violation of B.P. Blg. 22. The elements of the offense penalized under B.P. Blg. 22 are as follows: (1) the accused makes, draws, or issues any check to apply on account or for value; (2) the accused 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; and (3) the check is subsequently dishonored by the drawee bank 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 payment. 5. Same; Same; Where a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to proceed to the final determination of the cause is not affected by new legislation placing jurisdiction 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 before its enactment.The subsequent amendment of B.P. 129 by R.A. No. 7691, An Act Expanding the Jurisdiction of the Municipal Trial Courts, Municipal Circuit Trial Courts and 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 final determination of the cause is not affected by new legislation placing jurisdiction 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 before its enactment. Indeed, R.A. No. 7691 contains retroactive provisions. However, these only apply to civil cases that have not yet reached the pre-trial stage. Neither from an express proviso nor by implication can it be construed that R.A. No. 7691 has retroactive application to criminal cases pending or decided by the Regional Trial Courts prior to its effectivity. The jurisdiction of the RTC over the case attached upon the commencement of the action by the filing of the Information and could not be ousted by the passage of R.A. No. 7691 reapportioning the jurisdiction of inferior courts, the application of which to criminal cases is prospective in nature. Division: THIRD DIVISION Docket Number: G.R. No. 149995 Counsel: Zacarias L. Canonigo, The Solicitor General Ponente: YNARES-SANTIAGO Dispositive Portion: WHEREFORE, the assailed decision of the Court of Appeals in CA-G.R. CR No. 21879 dated September 17, 2001, finding petitioner ISIDRO PABLITO M. PALANA guilty of violating Batas Pambansa Blg. 22, is AFFIRMED with MODIFICATION. Petitioner is ordered to pay private complainant the amount of P590,000.00, representing the value of the check, with six (6%) percent interest from date of filing of the Information until the finality of the decision, the amount of which, inclusive of the interest, is subject to twelve percent (12%) interest, from finality of the decision until fully paid. In lieu of imprisonment, petitioner is ordered to pay a fine of P200,000.00.

Case Title : CARMENCITA G. CARIO, petitioner, vs. MERLIN DE CASTRO, respondentCase Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Bouncing Checks ; Syllabi: 1. Criminal Procedure; Appeals; Solicitor General; In criminal proceedings on appeal in the Court of Appeals or in the Supreme Court, the authority to represent the People is vested solely in the Solicitor General; The conformity of the Assistant City Prosecutor to a petition for review before the Court of Appeals is insufficient as the rules and jurisprudence mandate that the same should be filed by the Solicitor General.In criminal proceedings on appeal in the Court of Appeals or in the Supreme Court, the authority to represent the People is vested solely in the Solicitor

General. Under Presidential Decree No. 478, among the specific powers and functions of the OSG was to represent the government in the Supreme Court and the Court of Appeals in all criminal proceedings. This provision has been carried over to the Revised Administrative Code particularly in Book IV, Title III, Chapter 12 thereof. Without doubt, the OSG is the appellate counsel of the People of the Philippines in all criminal cases. Although the petition for review before the Court of Appealswas filed with the conformity of the Assistant City Prosecutor, such conformity is insufficient, as the rules and jurisprudence mandate that the same should be filed by the Solicitor General. 2. Bouncing Checks; Checks issued to a person who was not authorized to collect and receive the same are without valuable consideration and are also considered issued for a non-existing account.Both the Metropolitan Trial Court and the Regional Trial Court found that petitioner was not duly authorized by the owner of the subject property to collect and receive rentals thereon. Thus, not only were the checks without valuable consideration; they were also issued for a non-existing account. With these undisputed findings, we cannot reconcile petitioner s allegation that she is the aggrieved party. Finally, petitioner cannot validly claim that she was denied due process considering that she availed of every opportunity to present her case. Thus, we find no grave abuse of discretion on the part of the lower courts in dismissing the complaints. 3. Same; Same; Same; Only the Office of the Solicitor General (OSG) can bring or defend actions on behalf of the Republic or represent the People or state in criminal proceedings pending in the Supreme Court and the Court of Appeals.We are cognizant of our ruling in the cases of Perez v. Hagonoy, 327 SCRA 588 (2000), Mobilia Products, Inc. v. Umezawa, 452 SCRA 736 (2005), People v. Santiago, 174 SCRA 143 (1989), and Narciso v. Sta. Romana-Cruz, 328 SCRA 505 (2000), where we held that only the OSG can bring or defend actions on behalf of the Republic or represent the People or state in criminal proceedings pending in the Supreme Court and the Court of Appeals. At the same time, we acknowledged in those cases that a private offended party, in the interest of 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 to the petition filed. However, the special circumstances prevailing in the abovementioned cases are not present in the instant case. In those cases, the petitioners availed of petition for certiorari under Rule 65. In the instant case, the petition was filed under Rule 45. 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, 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.While a private prosecutor may be allowed to intervene in criminal proceedings on appeal in the Court of Appeals or the Supreme Court, 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. 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 petition for review and that the Court of Appeals correctly dismissed the petition. As such, the Assistant City Prosecutor or the private prosecutor cannot take a contrary view. Division: THIRD DIVISION Docket Number: G.R. No. 176084

1. Remedial Law; Appeals; Factual findings of the trial court especially when affirmed by the appellate court are accorded the highest degree of respect and are considered conclusive between the parties;Exceptions.Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties. A review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises or conjectures; (2) when a lower court s inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, are premised on the absence of evidence, or are contradicted by evidence on record. 2. Corporation Law; Piercing the Veil of Corporate Fiction; The general rule that a corporation will be deemed a separate legal entity until sufficient reason to the contrary appears, but the rule is not absolute.As a general rule, a corporation will be deemed a separate legal entity until sufficient reason to the contrary appears. But therule is not absolute. A corporation s separate and distinct legal personality may be disregarded and the veil of corporate fiction pierced when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime. 3. Same; Evidence; Disputable Presumptions; A disputable presumption is satisfactory if uncontradicted and not overcome by other evidence.Unmistakably, from the foregoing chain of transactions, a presumption has arisen that the loan documents were supported by a consideration. Rule 131, Section 3 of the Rules of Court specifies that a disputable presumption is satisfactory if uncontradicted and not overcome by other evidence. Division: THIRD DIVISION Docket Number: G.R. No. 170782 Counsel: Misa & Gonzales Law Offices Ponente: NACHURA Dispositive Portion: WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs against the petitioner.

FIRST DIVISION ENGR. JOSE E. CAYANAN, Petitioner, G.R. No. 172954 Present: CORONA, C.J., Chairperson, LEONARDO-DE CASTRO, BERSAMIN, DEL CASTILLO, and VILLARAMA, JR., JJ.

- versus Counsel: R.A. Din, Jr. & Associates Law Offices Ponente: YNARES-SANTIAGO Dispositive Portion: WHEREFORE, the petition for review is DENIED. The Decision of the Court of Appeals dated August 18, 2006 dismissing the petition as well as the Resolution dated December 29, 2006 denying the motion for reconsideration, are AFFIRMED.

NORTH STAR INTERNATIONAL TRAVEL, Promulgated: INC., Respondent. October 5, 2011 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION VILLARAMA, JR., J.: [1] Petitioner Engr. Jose E. Cayanan appeals the May 31, 2006 Decision of the Court of Appeals (CA) in CA-G.R. SP No. 65538 finding him civilly liable for the value of the five checks which are the subject of Criminal Case Nos. 16654953. The antecedent facts are as follows:

Case Title : SIAIN ENTERPRISES, INC., petitioner, vs. CUPERTINO REALTY CORP. and EDWIN R. CATACUTAN, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Corporation Law|Piercing the Veil of Corporate Fiction Syllabi:

North Star International Travel Incorporated (North Star) is a corporation engaged in the travel agency business while petitioner is the owner/general manager of JEAC International Management and Contractor Services, a recruitment agency. [2] On March 17, 1994, Virginia Balagtas, the General Manager of North Star, in accommodation and upon the instruction of its client, petitioner herein, [3] sent the amount of US$60,000 to View Sea Ventures Ltd., in Nigeria from her personal account in Citibank Makati. On March 29, 1994, Virginia again sent [4] US$40,000 to View Sea Ventures by telegraphic transfer, with US$15,000 coming from petitioner. Likewise, on various dates, North Star extended credit to petitioner for the airplane tickets of his clients, with the total amount of such [5] indebtedness under the credit extensions eventually reaching P510,035.47. To cover payment of the foregoing obligations, petitioner issued the following five checks to North Star: Check No : 246822 Drawn Against : Republic Planters Bank Amount : P695,000.00 Dated/Postdated : May 15, 1994 Payable to : North Star International Travel, Inc. Check No Drawn Against Amount Dated/Postdated Payable to Check No Drawn Against Amount Dated/Postdated Payable to Check No Drawn Against Amount Dated/Postdated Payable to : : : : : : : : : : : : : : : 246823 Republic Planters Bank P278,000.00 May 15, 1994 North Star International Travel, Inc. 246824 Republic Planters Bank P22,703.00 May 15, 1994 North Star International Travel, Inc. 687803 PCIB P1,500,000.00 April 14, 1994 North Star International Travel, Inc.

Check No : 687804 Drawn Against : PCIB Amount : P35,000.00 Dated/Postdated : April 14, 1994 [6] Payable to : North Star International Travel, Inc. When presented for payment, the checks in the amount of P1,500,000 and P35,000 were dishonored for insufficiency of funds while the other three checks were dishonored because of a stop payment order from [7] petitioner. North Star, through its counsel, wrote petitioner on September [8] 14, 1994 informing him that the checks he issued had been dishonored. North Star demanded payment, but petitioner failed to settle his obligations. Hence, North Star instituted Criminal Case Nos. 166549-53 charging petitioner with violation of Batas Pambansa Blg. 22, or the Bouncing Checks Law, before the Metropolitan Trial Court (MeTC) of Makati City. [9] The Informations, which were similarly worded except as to the check numbers, the dates and amounts of the checks, alleged: That on or about and during the month of March 1994 in the Municipality of Makati, Metro Manila, Philippines, a place within the jurisdiction of this Honorable Court, the above-named accused, being the authorized signatory of [JEAC] Int l Mgt & Cont. Serv. did then and there willfully, unlawfully and feloniously make out[,] draw and issue to North Star Int l. Travel Inc. herein rep. by Virginia D. Balagtas to apply on account or for value the checks described below: xxxx said accused well knowing that at the time of issue thereof, did not have sufficient funds in or credit with the drawee bank for the payment in full of the face amount of such check upon its presentment, which check when presented for payment within ninety (90) days from the date thereof was subsequently dishonored by the drawee bank for the reason PAYMENT STOPPED/DAIF and despite receipt of notice of such dishonor the accused failed to pay the payee the face amount of said check or to make

arrangement for full payment thereof within five (5) banking days after receiving notice. Contrary to law. Upon arraignment, petitioner pleaded not guilty to the charges. After trial, the MeTC found petitioner guilty beyond reasonable doubt of violation of B.P. 22. Thus: WHEREFORE, finding the accused, ENGR. JOSE E. CAYANAN GUILTY beyond reasonable doubt of Violation of Batas Pambansa Blg. 22 he is hereby sentenced to suffer imprisonment of one (1) year for each of the offense committed. Accused is likewise ordered to indemnify the complainant North Star International Travel, Inc. represented in this case by Virginia Balagtas, the sum of TWO MILLION FIVE HUNDRED THIRTY THOUSAND AND SEVEN HUNDRED THREE PESOS (P2,530,703.00) representing the total value of the checks in [question] plus FOUR HUNDRED EIGHTY[-]FOUR THOUSAND SEVENTY[-]EIGHT PESOS AND FORTY[-]TWO CENTAVOS (P484,078.42) as interest of the value of the checks subject matter of the instant case, deducting therefrom the amount of TWO HUNDRED TWENTY THOUSAND PESOS (P220,000.00) paid by the accused as interest on the value of the checks duly receipted by the complainant and marked as Exhibit FF of the record. xxxx [10] SO ORDERED. On appeal, the Regional Trial Court (RTC) acquitted petitioner of the criminal charges. The RTC also held that there is no basis for the imposition of the civil liability on petitioner. The RTC ratiocinated that: In the instant cases, the checks issued by the accused were presented beyond the period of NINETY (90) DAYS and therefore, there is no violation of the provision of Batas Pambansa Blg. 22 and the accused is not considered to have committed the offense. There being no offense committed, accused is not criminally liable and there would be no basis for the imposition of [11] the civil liability arising from the offense. Aggrieved, North Star elevated the case to the CA. On May 31, 2006, the CA reversed the decision of the RTC insofar as the civil aspect is concerned and held petitioner civilly liable for the value of the subject checks. The fallo of the CA decision reads: WHEREFORE, the petition is GRANTED. The assailed Decision of the RTC insofar as Cayanan's civil liability is concerned, is NULLIFIED and SET ASIDE. The indemnity awarded by the MeTC in its September 1, 1999 Decision is REINSTATED. [12] SO ORDERED. The CA ruled that although Cayanan was acquitted of the criminal charges, he may still be held civilly liable for the checks he issued since he never denied having issued the five postdated checks which were dishonored. Petitioner now assails the CA decision raising the lone issue of whether the CA erred in holding him civilly liable to North Star for the value of the [13] checks. Petitioner argues that the CA erred in holding him civilly liable to North Star for the value of the checks since North Star did not give any valuable consideration for the checks. He insists that the US$85,000 sent to View Sea Ventures was not sent for the account of North Star but for the account of Virginia as her investment. He points out that said amount was taken from Virginia s personal dollar account in Citibank and not from North Star s corporate account. Respondent North Star, for its part, counters that petitioner is liable for the value of the five subject checks as they were issued for value. Respondent insists that petitioner owes North Star P2,530,703 plus interest of P264,078.45, and that the P220,000 petitioner paid to North Star is conclusive proof that the checks were issued for value. The petition is bereft of merit. We have held that upon issuance of a check, in the absence of evidence to the contrary, it is presumed that the same was issued for valuable consideration which may consist either in some right, interest, profit or benefit accruing to the party who makes the contract, or some forbearance, detriment, loss or some responsibility, to act, or labor, or service given, suffered or

undertaken by the other side. Under the Negotiable Instruments Law, it is presumed that every party to an instrument acquires the same for a [15] consideration or for value. As petitioner alleged that there was no consideration for the issuance of the subject checks, it devolved upon him to present convincing evidence to overthrow the presumption and prove that the [16] Sadly, however, checks were in fact issued without valuable consideration. petitioner has not presented any credible evidence to rebut the presumption, as well as North Star s assertion, that the checks were issued as payment for the US$85,000 petitioner owed. Notably, petitioner anchors his defense of lack of consideration on the fact that he did not personally receive the US$85,000 from 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, Virginia sent the money upon the agreement that petitioner will give to North Star the peso equivalent of the amount remitted plus interest. As testified to by Virginia, Check No. 246822 dated May 15, 1994 in the amount of P695,000.00 is equivalent to US$25,000; Check No. 246823 dated May 15, 1994 in the amount of P278,000 is equivalent to US$10,000; Check No. 246824 in the amount of P22,703 represents the one month interest for P695,000 and P278,000 at the [17] rate of twenty-eight (28%) percent per annum; Check No. 687803 dated April 14, 1994 in the amount of P1,500,000 is equivalent to US$50,000 and Check No. 687804 dated 14 April 1994 in the amount of P35,000 represents the one month interest for P1,500,000 at the rate of twenty-eight (28%) percent per [18] Petitioner has not substantially refuted these averments. annum. Concomitantly, petitioner s assertion that the dollars sent to Nigeria was for the account of Virginia Balagtas and as her own investment with View Sea Ventures deserves no credence. Virginia has not been shown to have any business transactions with View Sea Ventures and from all indications, she only remitted the money upon the request and in accordance with petitioner s instructions. The evidence shows that it was petitioner who had a contract with View Sea Ventures as he was sending contract workers to Nigeria; Virginia Balagtas s participation was merely to send the money through telegraphic transfer in exchange for the checks issued by petitioner to North Star. Indeed, the transaction between petitioner and North Star is actually in the nature of a loan and the checks were issued as payment of the principal and the interest. As aptly found by the trial court: It is to be noted that the checks subject matter of the instant case were issued in the name of North Star International Inc., represented by private complainant Virginia Balagtas in replacement of the amount of dollars remitted by the latter to Vie[w] Sea Ventures in Nigeria. x x x But Virginia Balagtas has no business transaction with Vie[w] Sea Ventures where accused has been sending his contract workers and the North Star provided the trip tickets for said workers sent by the accused. North Star International has no participation at all in the transaction between accused and the Vie[w] Sea Ventures except in providing plane ticket used by the contract workers of the accused upon its understanding with the latter. The contention of the accused that the dollars were sent by Virginia Balagtas to Nigeria as business investment has not been shown by any proof to set aside the foregoing negative presumptions, thus negates accused contentions regarding the absence of consideration for the issuance [19] of checks. x x x Petitioner claims that North Star did not give any valuable consideration for the checks since the US$85,000 was taken from the personal dollar account of Virginia and not the corporate funds of North Star. The contention, however, deserves scant consideration. The subject checks, bearing petitioner s signature, speak for themselves. The fact that petitioner himself specifically named North Star as the payee of the checks is an admission of his liability to North Star and not to Virginia Balagtas, who as manager merely facilitated the transfer of funds. Indeed, it is highly inconceivable that an experienced businessman like petitioner would issue various checks in sizeable amounts to a payee if these are without consideration. Moreover, we note [20] that Virginia Balagtas averred in her Affidavit that North Star caused the payment of the US$60,000 and US$25,000 to View Sea Ventures to accommodate petitioner, which statement petitioner failed to refute. In addition, petitioner did not question the Statement of Account No. [21] 8639 dated August 31, 1994 issued by North Star which contained itemized amounts including the US$60,000 and US$25,000 sent through telegraphic transfer to View Sea Ventures per his instruction. Thus, the inevitable conclusion is that when petitioner issued the subject checks to North Star as

[14]

payee, he did so to settle his obligation with North Star for the US$85,000. And since the only payment petitioner made to North Star was in the amount of P220,000.00, which was applied to interest due, his liability is not extinguished. Having failed to fully settle his obligation under the checks, the appellate court was correct in holding petitioner liable to pay the value of the five checks he issued in favor of North Star. WHEREFORE, the present appeal by way of a petition for review on certiorari is DENIED for lack of merit. The Decision dated May 31, 2006 of the Court of Appeals in CA-G.R. SP No. 65538 is AFFIRMED. With costs against petitioner. SO ORDERED.
[1]

[2]

[3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14]

[15]

[16] [17] [18]

[19] [20] [21]

Rollo, pp. 35-45. Penned by Associate Justice Roberto A. Barrios with Associate Justices Mario L. Guaria III and Santiago Javier Ranada concurring. March 15 in some parts of the records but the date appearing on the telegraphic transfer receipt/money transfer slip is March 17. Exh. 8 , records, p. 262. Exh. 9 , id. at 263. Id. at 35. Id. at 36, 53-54. Id. at 56. Exh. R , id. at 291. Id. at 1-10. Rollo, pp. 57-58. Id. at 61. Id. at 44. Id. at 26. Palana v. People, G.R. No. 149995, September 28, 2007, 534 SCRA 296, 305. Section 24, Negotiable Instruments Law. Sec. 24. Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. See Bayani v. People, G. R. No. 155619, August 14, 2007, 530 SCRA 84, 95. TSN, July 31, 1996, p. 4; records, p. 429. See Exh. DD , records, p. 307; see also TSN, July 27, 1998, p. 4; records, p. 544; TSN, August 17, 1998, p. 8; records, p. 563. Rollo, pp. 54-55. Records, pp. 62-65. Id. at 88.

[G.R. No. 146663. March 14, 2001] PERPETUAL SAVINGS BANK vs. BRONDIAL, et al. FIRST DIVISION Gentlemen: Quoted hereunder, for your information, is a resolution of this Court dated MAR 14 2001. G.R. No. 146663 (Perpetual Savings Bank vs. Dolores Brondial, et al.) - Petitioner Bank filed a complaint for sum of money against respondent Dolores Brondial and her husband. Petitioner Bank alleged that, for value received, respondent Dolores executed a promissory note (PN) in the amount of P826,315.00 in favor of petitioner Bank payable in lump sum on 11 February 1984 plus interests. The PN had allegedly long matured but respondents failed to pay the amount thereon. Among others, respondents raised the defense of lack of consideration for the PN. According to respondent Dolores, she was required to sign the loan instruments and execute the PN by petitioner Bank as condition to her appointment as Senior Manager of Perpetual Capital Investments & Finance Corp. an affiliate of petitioner Bank. Both the RTC and CA ruled in favor of respondents upon the following factual findings: petitioner Bank was originally named Perpetual Savings Loan and Association. On 8 February 1983, it changed its name to Perpetual Savings Bank under the management of Danilo Natividad, President; Crisanto Norofla, Executive Vice-President; Zoilo Gabriel, Vice-President for Operations. Petitioner Bank designated Metropolitan Batik, Baclaran Branch as its depository bank with Account No. 070-15004-9. Natividad, Norofla and Gabriel were the authorized check signatories. These three officers, together with Roberto and Adora Baes, also had a joint account with the same bank under Account No. 070-00490-5. The authorized check signatories were the same bank officers.

On 11 February 1983, respondent Dolores purportedly applied for a loan and simultaneously executed the subject PN. Earlier, on 10 February 1983, City Estate Developers, Inc. executed a real estate mortgage of several parcels of land to secure, among others, the loan of respondent Dolores. The check issued to respondent Dolores as proceeds of the loan was endorsed and deposited on 14 February 1983 to Metro Bank Account No. 070-00490-5, the personal account ofNatividad., Norofia, Gabriel and the Baeses. The other documentary evidence further showed that the personal account of Natividad, et al. (Account No. 070-00490-5) was used to transfer the purported loan of respondent Dolores to petitioner Bank s account (Account No. 070-15004-9). Thus, the CA ruled that petitioner Bank as holder of the check, is not a holder in due course and accordingly, not entitled to enforce or collect payment from the maker (respondent Dolores) because of absence or lack of consideration. Absence or lack of consideration is a valid defense against any person not a holder in due course (Section 28, Negotiable Interests Law). It was further held that contrary to petitioner Bank s insistence, respondent Dolores is not liable as an accommodation maker. Section 29 of the NIL defines the term as x x x one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party. As held by the CA, it was petitioner Bank who was accommodated by respondent Dolores when she executed the PN, thus, petitioner Bank cannot collect from respondent Dolores. In this petition, petitioner Bank avers that the CA erred in, among others, not according the presumption of regularity in the execution by respondent Dolores of the subject PN; the CA erred in ruling that petitioner Bank is not a holder in due course and that respondent Dolores is not liable as accommodation maker; and the CA erred in awarding the counterclaims of respondents. Petitioner Bank has failed to show any cogent reasons to deviate from the general rule that factual findings of the lower court are accorded great weight. In this case, both the RTC and CA found that there was no consideration for the issuance by respondent Dolores of the PN. Upon appreciation of the evidence presented by the parties, the RTC and CA found that respondent Dolores was not indebted to petitioner Bank because the amounts (P826,315.00) she purportedly received were returned to and received by petitioner Bank on the very day the checks were released. Respondent Dolores did not receive a single centavo from the loan. Contrary to petitioner Bank s position, the presumption of regularity in the issuance of the PN had been sufficiently overthrown upon showing that the checks released to respondent Dolores as proceeds of the loan were immediately deposited to the personal account of Natividad et al, the officers of petitioner Bank. Thereafter, the funds in this account were credited to the account of petitioner Bank. WHEREFORE, the petition is DENIED for lack of merit.

Case Title : SPOUSES GIL AND NOELLI GARDOSE, petitioners, vs. REYNALDO S. TARROZA, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions|Obligations and Contracts|Interests|Judgments|Res Judicata|Jurisdiction|Forum Shopping|Due Process|Speedy Disposition of Cases|Guarantee|Surety|Accommodation Parties Syllabi: 1. Actions; Judgments; Res Judicata; Bar by Former Judgment, Requisites.The rule in Section 49(b) is known as bar by former judgment while the rule embodied in paragraph (c) of the same section is known as conclusiveness of judgment. There are four (4) requisites which must concur in order for res judicata as a bar by former judgment to attach, viz.: (1) the former judgment must be final; (2) it must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) it must be a judgment or order on the merits; and (4) there must be between the first and second action identity of parties, identity of subject matter and identity of causes of action. 2. Interests; If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, should be the payment of the interest which is now 12 percent per annum.Petitioners cannot assert that the award of 12% interest and attorney s fees to private respondent is not justified. The Court of Appeals correctly affirmed the trial court s monetary award to private respondent, viz.: x x x The lower court

was likewise correct in ordering appellants to pay interest at the legal rate of 12% per annum counted from the filing of the complaint. This is in accordance with Article 2209 of the Civil Code which provides that if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, should be the payment of the interest agreed upon, and in the absence of stipulation, the legal rate of interest which is now 12 percent per annum. (National Power Corporation vs. Agnar, G.R. Nos. 60225-26, May 8, 1992). The trial court was likewise correct in granting attorney s fees in the amount of P50,000.00. As found by the court a quo, appellants acted in gross evident bad faith in refusing to pay appellee s just and demandable claim (Reyes v. Zubirri, 208 SCRA 561; Maersk Line vs. Court of Appeals, 222 SCRA 108). 3. Obligations and Contracts; Guarantee; Surety; Accommodation Parties; An accommodation party and the party accommodated is in effect one of principal and surety.Petitioner Noelli s defense that she was merely an accommodation party was rightly rejected by the Court of Appeals which ruled: x x x Appellants persistently insist that when appellant Noelli Gardose issued the three (3) checks to appellee she merely acted as a guarantor and therefore should not be held primarily liable to appellee. We disagree, the mere fact that appellant Noelli Gardose issued the three (3) checks to appellee make her liable to the latter without the need for the appellee to first go after Cecilia Cacnio because the relationship between an accommodation party and the party accommodated is in effect one of principal and surety (Coneda, Jr. vs. Court of Appeals, 181 SCRA 673; Prudencio vs. Court of Appeals, 143 SCRA 7). In the recent case of Town Savings & Loan Bank, Inc. vs. Court of Appeals, 223 SCRA 459, the Supreme Court held: An accommodation party is one who has signed the instrument as maker, drawer, indorser, without receiving value therefor and for the purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of the taking of the instrument knew him to be only an accommodation party is in effect a surety for the latter. He lends his name to enable the accommodated party to obtain credit or to raise money. He receives no part of the consideration for the instrument but assumes liability to the other parties thereto because he wants to accommodate another (The Phil. Bank of Commerce vs. Aruego, 102 SCRA 530, 539, 540). 4. Same; Due Process; Speedy Disposition of Cases; The essence of due process is a fair opportunity to be heard; The right of one party to speedy justice is just as valuable as the right of the other party to due process.Petitioners cannot claim denial of due process. The essence of due process is a fair opportunity to be heard. Petitioners were given all the opportunities to cross-examine the private respondent and to present their evidence. They failed to make use of these opportunities either through negligence or unpreparedness of their counsel. The right of private respondent to speedy justice is just as valuable as the right of petitioners to due process. 5. Same; Forum Shopping; Revised Circular No. 28-91, the anti-forum shopping rule, took effect on January 1, 1992, and initially applied only to the Court of 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.Petitioners charge of forum shopping is baseless. To start with, petitioners did not raise the issue in the trial court. Moreover, Revised Circular No. 28-91, the anti-forum shopping rule, took effect on January 1, 1992, and it initially applied only to the Court of Appeals. 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. The second case against petitioners, Civil Case No. Q-917959, was filed on February 13, 1991 or before the effectivity of the rules on forum shopping on trial courts. 6. Same; Same; Same; Jurisdiction; If a court did not acquire jurisdiction over a party in a case, it cannot render any binding decision, favorable or adverse to them, or dismiss the case with prejudice which, in effect, is an adjudication on the merits.The Court of Appeals correctly ruled that petitioners cannot rely on the principle of bar by former judgment. Civil Case No. Q-89-3500 was dismissed for the continuing failure of private respondent to effect service of summons by publication on the petitioners. In other words, the dismissal was made before the trial court acquired jurisdiction over the petitioners. In Republic Planters Bank vs. Molina, we held: x x x In the very order of dismissal of Civil Case No. 116028, the trial court admitted that it did not acquire jurisdiction over the persons of private respondents and yet, it held that it was of no moment as to the dismissal of the case. We disagree. For the court to have authority to dispose of the case on the merits, it must acquire jurisdiction over the subject matter 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 or adverse to them, or dismiss the case with prejudice which, in effect, is an adjudication on the merits. The controverted orders in Civil Case No. 116028 disregarded the fundamental principles of remedial law and the meaning and the effect of jurisdiction. A judgment, to be considered res judicata, must be binding, and must be rendered by a court of competent jurisdiction. Otherwise, the judgment is a nullity. Division: SECOND DIVISION Docket Number: G.R. No. 130570 Counsel: Cesar M. Cario, Jose F. Manacop Ponente: PUNO Dispositive Portion: IN VIEW WHEREOF, the petition is dismissed. Costs against the petitioners.

Case Title : AGRO CONGLOMERATES, INC. and MARIO SORIANO, petitioners, vs. THE HON. COURT OF APPEALS and REGENT SAVINGS and LOAN BANK, INC, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Contracts|Actions|Sales|Suretyships|Novation|Requisites|Words and Phrases|Interpretation of Contracts|Parties|Pleadings and Practice Syllabi: 1. Contracts; Sales; A contract of sale is a reciprocal transaction, the obligation or promise of each party being the cause or consideration for the obligation or promise of the other.A contract of sale is a reciprocal transaction. The obligation or promise of each party is the cause or consideration for the obligation or promise by the other. The vendee is obliged to pay the price, while the vendor must deliver actual possession of the land. In the instant case the original plan was that the initial payments would be paid in cash. Subsequently, the parties (with the participation of respondent bank) executed an addendum providing instead, that the petitioners would secure a loan in the name of Agro Conglomerates Inc. for the total amount of the initial payments, while the settlement of said loan would be assumed by Wonderland. Thereafter, petitioner Soriano signed several promissory notes and received the proceeds in behalf of petitioner-company. 2. Contracts; Sales; Suretyships; Accommodation Parties; Words and Phrases; An accommodation party is a person who has signed the instrument as maker, acceptor, or indorser, without receiving value therefor, and for the purpose of 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 instrument knew (the signatory) to be an accommodation party; Suretyship is defined as the relation which exists where one person has undertaken an 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 are bound, one rather than the other should perform.By this time, we note a subsidiary contract of suretyship had taken effect since petitioners signed the promissory notes as maker and accommodation party for the benefit of Wonderland. Petitioners became liable as accommodation party. An accommodation party is a person who has signed the instrument as maker, acceptor, or indorser, without receiving value therefor, and for the purpose of 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 instrument knew (the signatory) to be an accommodation party. He has the right, after paying the holder, to obtain reimbursement from the party accommodated, since the relation between them has in effect become one of principal and surety, the accommodation party being the surety. Suretyship is defined as the relation which exists where one person has undertaken an 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 are bound, one rather than the other should perform. The surety s liability to the creditor or promisee of the principal is said to be direct, primary and absolute; in other words, he is directly and equally bound with the principal. And the creditor may proceed against any one of the solidary debtors. 3. Contracts; Novation; Requisites; Words and Phrases; Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing

the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor.Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order that a novation can take place, the concurrence of the following requisites are indispensable: 1) There must be a previous valid 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 must be the validity of the new contract. 4. Contracts; Novation; There is no novation by substitution of debtor where 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 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 notes, which bound the petitioners to pay were executed after the addendum. 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 the petitioners. Consequently, only a contract of surety arose. It was wrong for petitioners to presume a novation had taken place. The well-settled rule is that novation is never presumed, it must be clearly and unequivocally shown. 5. Contracts; Interpretation of Contracts; In order to judge the intention of the parties, their contemporaneous and subsequent acts should be considered.It is true that the basic and fundamental rule in the interpretation of contract is that, if the terms thereof are clear and leave no doubt as to the intention of the contracting parties, the literal meaning shall control. However, in order to judge the intention of the parties, their contemporaneous and subsequent acts should be considered. 6. Actions; Parties; Pleadings and Practice; The non-inclusion of a necessary party does not prevent the court from proceeding in the action, and the judgment rendered therein shall be without prejudice to the rights of such necessary party.Petitioners had no legal or just ground to retain the proceeds of the loan at the expense of private respondent. Neither could petitioners excuse themselves and hold Wonderland still liable to pay the loan upon the rescission of their sales contract. If petitioners sustained damages as a result of the rescission, they should have impleaded Wonderland and asked damages. The non-inclusion of a necessary party does not prevent the court from proceeding in the action, and the judgment rendered therein shall be without prejudice to the rights of such necessary party. But respondent appellate court did not err in holding that petitioners are duty-bound under the law to pay the claims of respondent bank from whom they had obtained the loan proceeds. Division: SECOND DIVISION Docket Number: G.R. No. 117660 Counsel: Quiason, Makalintal, Barot, Torres, Ibarra, Cesar M. Cario Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the petition is DENIED for lack of merit. The assailed decision of the Court of Appeals dated October 17, 1994 is AFFIRMED. Costs against petitioners.

[G.R. No. 147920. April 3, 2002] MAJESTIC FINANCE CO., INC. vs. BONIFACIO FIRST DIVISION Gentlemen: Quoted hereunder, for your information, is a resolution of this Court dated 03 APR 2002. G.R. No. 147920 (Majestic Finance & Investment Co., Inc. vs. Amelia L. Bonifacio.) This petition for review on certiorari assails the Decision of the Court [1] of Appeals in CA-G.R. CV No. 60662 which affirmed the Decision of the Regional Trial Court of Pasig City in Civil Case No. 62277, and the Resolution dated April 23, 2001 which denied petitioner Majestic Finance & Investment Co., Inc. s motion for reconsideration.

On December 6, 1989, petitioner entered into a Contract of Lease with Japanese nationals Yasutsugu Uoyama and Hiroyuki Shibutani (the lessees ) for the lease of Condominium Unit No. 5-K of the Legaspi Towers located at Roxas Boulevard corner Vito Cruz St. , Manila. The term of the lease was for one (1) year. Respondent Amelia Bonifacio, the girlfriend of T. Sakamoto who in turn was the friend of the lessees, actively participated in negotiating the terms of the contract of lease because the lessees could hardly speak English or Tagalog. On that same day (December 6, 1989), the lessees paid petitioner One Hundred Ninety Two Thousand Pesos (P192,000.00) to cover the deposit of P48,000.00 and the advance rentals for the first six months of the lease period, from December, 1989 to June, 1990 amounting to P148,000.00. Upon request of the lessees, respondent issued in petitioner s favor a postdated United Coconut Planters Bank (Puyat-Bautista Branch) Check No. PUB 285072 in the amount of One Hundred Forty Four Thousand Pesos (P144,000.00) to guarantee the payment of the rentals for last six months of the lease, from July to December, 1990. On April 24, 1990, petitioner s counsel received a letter from respondent and the lessees that the latter were vacating the condominium by May 1, 1990. Respondent also requested that the postdated check which she had earlier issued in petitioner s favor be returned to her since there was no longer any need for the said check to be in petitioner s possession. However, petitioner refused to return the check and instead deposited the same in its account with the Philippine Commercial International Bank. The check was later dishonored and returned pursuant to the stop payment order made by respondent. On August 4, 1992, petitioner filed with the Regional Trial Court of Pasig City (RTC) a complaint for collection of sum of money with prayer for the issuance of a writ of preliminary attachment against respondent due to the latter s refusal to make good her check. On September 30, 1997, the RTC issued its Decision dismissing the case against respondent. Petitioner thereafter filed a motion for reconsideration but the same was dismissed by the trial court in an Order dated January 22, 1998. Not satisfied with the decision of the trial court, petitioner filed an appeal thereof with the Court of Appeals. On February 13, 2001, the Court of Appeals promulgated its Decision affirming the RTC s Decision. The appellate court ruled that respondent is an accommodation party and may be held solidarily liable for the amount of the check under Section 29 of the Negotiable Instruments Law, subject to reimbursement from the lessees. However, it ruled that the respondent was not under any obligation to pay the P144,000.00 corresponding to advance rental payments for the months of July to December 1990 because the lease contract did not authorize the petitioner as lessor to automatically forfeit the advance rentals for the last six months of the lease period should the lessees terminate the lease before the end of said period. The appellate court also dismissed petitioner s motion for reconsideration in a Resolution dated April 23, 2001. Hence, this petition. Petitioner contends that the Court of Appeals misapplied and misinterpreted the real import of the automatic forfeiture clause in relation to pars. 3.a and 3.b of the Contract of Lease, and that even without the automatic forfeiture clause, it can still recover the amount of P144,000.00 corresponding to the rent of the condominium unit for the last six months of [2] the lease period because the lessees breached their contract with petitioner. On July 25, 2001, the Court resolved to require respondent to file her [3] Comment to the petition but respondent failed to file the same. In a Manifestation filed with the Court on December 13, 2001, respondent s counsel of record explained that he had lost contact with respondent even while the case was still pending before the trial court. He likewise prayed that the case be decided based on the records of the case. There is no merit in the petition. 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 terminated the lease before the expiration of the one-year period, the lessor may automatically forfeit the deposit of P48,000.00 and the advance rental of P144,000.00 for the first six months of the lease period. The pertinent portions of the Contract of Lease state: 3. RENTAL - The parties herein agree that the monthly rental of the leased premises and the listed furnishings and equipment shall be TWENTY FOUR THOUSAND PESOS (P24,000.00) Philippine Currency, net of any withholding

tax (BIR s Official receipts of which LESSEE shall furnished the LESSOR), payable within the first five days of every calendar month without need of demand. Failure to pay the agreed monthly rental, the LESSOR shall forfeit the two (2) months deposit as penalty. All furnitures and equipments listed in Annex A belong to the LESSOR. The LESSOR and the LESSEE mutually agree that the amount of ONE HUNDRED NINETY TWO THOUSAND PESOS (P192,000.00) Philippine Currency, which the LESSEE now tenders and pays to the LESSOR represents as follows: a) ONE HUNDRED FORTY FOUR THOUSAND PESOS (P144,000.00) as advance rental for the first six (6) months covering the period from December 6, 1989 to June 5, 1990. b) FORTY EIGHT THOUSAND PESOS (P48,000.00) fixed noninterest bearing deposit applicable to Item No. 4. 4. DEPOSIT - Upon signing of this contract LESSEE shall deposit in cash the amount of FORTY EIGHT THOUSAND PESOS (P48,000.00) Philippine Currency which shall be non-interest bearing guaranty for the faithful compliance by LESSEE of all covenants and conditions of this Contract and to answer for any unpaid bills for association dues and special assessments, water, gas, electricity, telephone and other utilities and damages suffered by LESSOR, and other momentary liabilities or obligations of LESSEE under this Contract for the leased premises, said deposit can t be applied by LESSEE to any unpaid rent and shall be kept intact throughout the life of this Contract. It shall be returned to LESSEE ninety days after LESSEE shall have completely and satisfactorily vacated and delivered the leased premises to LESSOR in the same condition the unit is first delivered to the LESSEE: less whatever amount the LESSEE may owe LESSOR at the time of said termination or expiration. Provided, that if LESSEE shall terminate this lease contract before the expiration thereof, then said deposit and advanced rental paid shall be automatically forfeited in favor of LESSOR since the parties herein agree that time is of the essence and the period for payment of rent, as well as the period of this contract, as fixed for the benefit of LESSOR, PROVIDED, further that the LESSEE liability for any breach of this Contract or any obligation to the amount of said deposit. (Emphasis [4] supplied.) There is nothing in the said contract which allows the petitioner as lessor to automatically forfeit the advance rental for the last six months of the lease period from July to December, 1990. Since the amount covered by respondent s postdated check pertained to the rentals for the last six months of the lease period, the appellate court was correct in holding that she was under no obligation as accommodation party of the lessees to make good her check. Considering the foregoing, no reversible error was committed by the Court of Appeals in affirming the decision of the trial court dismissing the complaint for collection filed by petitioner against respondent. WHEREFORE, the petition is hereby DENIED for lack of merit and the assailed Decision dated February 13, 2001 and the Resolution dated April 23, 2001 in CA-G.R. CV No. 60662 are hereby AFFIRMED. PUNO, J., on official leave. V Majestic Finance & Investment Co., Inc, Plaintiff-Appellant, vs. Amelia L. Bonifacio, Defendant-Appellee. [2] Petition, Rollo, pp. 17-35. [3] Resolution dated July 25, 2001, Id., at 72. [4] Decision of the Court of Appeals, Id., at 46-47. Case Title : GENEVIEVE LIM, petitioner, vs. FLORENCIO SABAN, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Civil Law|Commercial Law|Agency|Agency Coupled with an Interest|Negotiable Instruments Law Syllabi: 1. Civil Law; Agency; The right of a broker to his commission for finding a suitable buyer for the seller s property even though the seller himself consummated the sale with the buyer recognized by the Court.[1]

In Macondray Co. v. Sellner, the Court recognized the right of a broker to his commission for finding a suitable buyer for the seller s property even though the seller himself consummated the sale with the buyer. The Court held that it would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the broker s efforts. 2. Civil Law; Agency; The seller s withdrawal in bad faith of the broker s authority cannot unjustly deprive the brokers of their commission as the seller s duly constituted agents.In Infante v. Cunanan, et al., the Court upheld the right of the brokers to their commissions although the seller revoked their authority to act in his behalf after they had found a buyer for his properties and negotiated the sale directly with the buyer whom he met through the brokers efforts. The Court ruled that the seller s withdrawal in bad faith of the brokers authority cannot unjustly deprive the brokers of their commissions as the seller s duly constituted agents. 3. Civil Law; Agency; Agency Coupled with an Interest; An agency is deemed as one coupled with an interest where it is established for the mutual benefit of the principal and of the agent, or for the interest of the principal and of third persons, and it cannot be revoked by the principal so long as the interest of the agent or of a third person subsists.Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Stated differently, an agency is deemed as one coupled with an interest where it is established for the mutual benefit of the principal and of the agent, or for the interest of the principal and of third persons, and it cannot be revoked by the principal so long as the interest of the agent or of a third person subsists. In an agency coupled with an interest, the agent s interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation. When an agent s interest is confined to earning his agreed compensation, the agency is not one coupled with an interest, since an agent s interest in obtaining his compensation as such agent is an ordinary incident of the agency relationship. 4. Commercial Law; Negotiable Instruments Law; Requisites of an Accommodation Party.As gleaned from the text of Section 29 of the Negotiable Instruments Law, the accommodation party is one who meets all these three requisites, viz.: (1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the signature; and (3) he signed for the purpose of lending his name to some other person. In the case at bar, while Lim signed as drawer of the checks she did not satisfy the two other remaining requisites. Division: SECOND DIVISION Docket Number: G.R. No. 163720 Counsel: Palermo C. Belcia, Jr., Basilio E. Duaban Ponente: TINGA Dispositive Portion: WHEREFORE, in view of the foregoing, the petition is DISMISSED.

Case Title : TOMAS ANG, petitioner, vs. ASSOCIATED BANK AND ANTONIO ANG ENG LIONG, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Appeals|Asset Privatization Trust|Negotiable Instruments Law|Obligations and Contracts|Assignment of Errors|Pleadings and Practice|Actions|Parties|Accommodation Party|Requisites|Words and Phrases|Suretyship Syllabi: 1. Appeals; Assignment of Errors; Pleadings and Practice; It is well within the authority of the Court of Appeals to raise, if it deems proper under the circumstances obtaining, error/s not assigned on an appealed casean appellate court has the broad discretionary power to waive the lack of proper assignment of errors and to consider errors not assigned. Procedurally, it is well within the authority of the Court of Appeals to raise, if it deems proper under the circumstances obtaining, error/s not assigned on an appealed case. In Mendoza v. Bautista, 453 SCRA 691 (2005), this Court recognized the broad discretionary power of an appellate court to waive the lack of proper assignment of errors and to consider errors not assigned, thus: As a rule, no

issue may be raised on appeal unless it has been brought before the lower tribunal for its consideration. Higher courts are precluded from entertaining matters neither alleged in the pleadings nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal. However, as with most procedural rules, this maxim is subject to exceptions. Indeed, our rules recognize the broad discretionary power of an appellate court to waive the lack of proper assignment of errors and to consider errors not assigned. Section 8 of Rule 51 of the Rules of Court provides: SEC. 8. Questions that may be decided. No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed from or the proceedings therein will be considered, unless stated in the assignment of errors, or closely related to or dependent on an assigned error and properly argued in the brief, save as the court may pass upon plain errors and clerical errors. Thus, an appellate court is clothed with ample authority to review rulings even if they are not assigned as errors in the appeal in these instances: (a) grounds not assigned as errors but affecting jurisdiction over the subject matter; (b) matters not assigned as errors on appeal but are evidently plain or clerical errors within contemplation of law; (c) matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal justice; (d) matters not specifically assigned as errors on appeal but raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; (e) matters not assigned as errors on appeal but closely related to an error assigned; and (f) matters not assigned as errors on appeal but upon which the determination of a question properly assigned is dependent. 2. Same; Same; Since the liability of an accommodation party remains not only primary but also unconditional to a holder for value, even if the accommodated party receives an extension of the period for payment without the consent of the accommodation party, the latter is still liable for the whole obligation and such extension does not release him because as far as a holder for value is concerned, he is a solidary co-debtor; 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 in the enforcement of his rights as a creditor.Since the liability of an accommodation party remains not only primary but also unconditional to a holder for value, even if the accommodated party receives an extension of the period for payment without the consent of the accommodation party, the latter is still liable for the whole obligation and such extension does not release him because as far as a holder for value is concerned, he is a solidary co-debtor. In Clark v. Sellner, 42 Phil. 384 (1921), this Court held: x x x The mere delay of the creditor in enforcing the guaranty has not by any 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 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 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 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 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 he did not enforce the guaranty or apply on the payment of such funds as were 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 holding that the creditor s laches may discharge the surety, meaning by laches a negligent forbearance. This theory, however, is not generally accepted and the courts almost universally consider it essentially inconsistent with the relation of the parties to the note. (21 R.C.L., 1032-1034) 3. Same; Same; Upon the maturity of the note, a surety may pay the debt, demand the collateral security, if there be any, and dispose of it to his benefit, or, if applicable, subrogate himself in the place of the creditor with the right to enforce the guaranty against the other signers of the note for the reimbursement of what he is entitled to recover from them.Under the law, upon the maturity of the note, a surety may pay the debt, demand the collateral security, if there be any, and dispose of it to his benefit, or, if applicable, subrogate himself in the place of the creditor with the right to enforce the guaranty against the other signers of the note for the reimbursement of what he is entitled to recover from them. Regrettably, none of these we prudently done by petitioner. When he was first notified by the bank sometime in 1982 regarding his accountabilities under the promissory notes, he lackadaisically relied on Antonio Ang Eng Liong, who represented that he would 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 supposed extension of time given by the bank to his co-debtor. 4. Negotiable Instruments Law; Accommodation Party; Words and Phrases; The phrase without receiving value therefor used in Sec. 29 of the Negotiable Instruments Law (NIL) means without receiving value by virtue of the instrument and not as it is apparently supposed to mean, without receiving payment for lending his name when a third person advances the face value of the note to the accommodated party at the time of its creation, the consideration for the note as regards its maker is the money advanced to the accommodated party. In issuing the two promissory notes, petitioner as accommodating party warranted to the holder in due course that he would pay the same according to its tenor. It is no defense to state on his part that he did not receive any value therefor because the phrase without receiving value therefore used in Sec. 29 of the NIL means without receiving value by virtue of the instrument and not as it is apparently supposed to mean, without receiving payment for lending his name. Stated differently, when a third person advances the face value of the note to the accommodated party at the time of its creation, the consideration for the note as regards its maker is the money advanced to the accommodated party. It is enough that value was given for the note at the time of its creation. As in the instant case, a sum of money was received by virtue of the notes, hence, it is immaterial so far as the bank is concerned whether one of the signers, particularly petitioner, has or has not received anything in payment of the use of his name. 5. Obligations and Contracts; Suretyship; Article 2080 of the Civil Code does not apply in a contract of suretyshipArticles 1207 up to 1222 of the Code (on joint and solidary obligations) govern the relationship. Contrary to petitioner s adamant stand, however, Article 2080 of the Civil Code does not apply in a contract of suretyship. Art. 2047 of the Civil Code states that if a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I, Book IV of the Civil Code must be observed. Accordingly, Articles 1207 up to 1222 of the Code (on joint and solidary obligations) shall govern the relationship of petitioner with the bank. 6. Same; Same; Suretyship; The relation between an accommodation party and the accommodated party is one of principal and suretythe accommodation party being the surety; Although a contract of suretyship is in essence accessory or collateral to a valid principal obligation, the surety s liability to the creditor is immediate, primary and absolute he is directly and equally bound with the principal. As petitioner acknowledged it to be, the relation between an accommodation party and the accommodated party is one of principal and surety the accommodation party being the surety. As such, he is deemed an original promisor and debtor from the beginning; he is considered in law as the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter since their liabilities are interwoven as to be inseparable. Although a contract of suretyship is in essence accessory or collateral to a valid principal obligation, the surety s liability to the creditor is immediate, primary and absolute; he is directly and equally bound with the principal. As an equivalent of a regular party to the undertaking, a surety becomes liable to the debt and duty of the principal obligor even without possessing a direct or personal interest in the obligations nor does he receive any benefit therefrom. 7. Negotiable Instruments Law; Accommodation Party; Requisites; Words and Phrases; An accommodation party is a person who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Notably, Section 29 of the NIL defines an accommodation party as a person who has signed the instrument as maker, drawer, acceptor, or indorser, 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 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 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 accommodated party to obtain credit or to raise money; he receives no part of the consideration for the instrument but assumes liability to the other party/ies thereto. The accommodation party is liable on the instrument to a holder for 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. 8. Same; Actions; Parties; While a bank held by the Asset Privatization Trust may not appear to be the real party in interest at the time the action for

collection was instituted, the issue had been rendered moot with the occurrence of a supervening eventthe reacquisition of the bank by its former owner when the case was still pending in the lower court, thus reclaiming its real and actual interest over the unpaid promissory notes. Based on the above backdrop, respondent Bank does not appear to be the real party in interest when it instituted the collection suit on August 28, 1990 against Antonio Ang Eng Liong and petitioner Tomas Ang. At the time the complaint was filed in the trial court, it was the Asset Privatization Trust which had the authority to enforce its claims against both debtors. In fact, during the pre-trial conference, Atty. Roderick Orallo, counsel for the bank, openly admitted that it was under the trusteeship of the Asset Privatization Trust. The Asset Privatization Trust, which should have been represented by the Office of the Government Corporate Counsel, had the authority to file and prosecute the case. The foregoing notwithstanding, this Court can not, at present, readily subscribe to petitioner s insistence that the case must be dismissed. Significantly, it stands without refute, both in the pleadings as well as in the evidence presented during the trial and up to the time this case reached the Court, that the issue had been rendered moot with the occurrence of a supervening event the buy-back of the bank by its former owner, Leonardo Ty, sometime in October 1993. By such re-acquisition from the Asset Privatization Trust when the case was still pending in the lower court, the bank reclaimed its real and actual interest over the unpaid promissory notes; hence, it could rightfully qualify as a holder thereof under the NIL. 9. Asset Privatization Trust; History.Taking into account the imperative need of formally launching a program for the rationalization of the government corporate sector, then President Corazon C. Aquino issued Proclamation No. 50 on December 8, 1986. As one of the twin cornerstones of the program was to establish the privatization of a good number of government corporations, the proclamation created the Asset Privatization Trust, which would, for the benefit of the National Government, take title to and possession of, conserve, provisionally manage and dispose of transferred assets that were identified for privatization or disposition. In accordance with the provisions of Section 23 of the proclamation, then President Aquino subsequently issued Administrative Order No. 14 on February 3, 1987, which approved the identification of and transfer to the National Government of certain assets (consisting of loans, equity investments, accrued interest receivables, acquired assets and other assets) and liabilities (consisting of deposits, borrowings, other liabilities and contingent guarantees) of the Development Bank of the Philippines (DBP) and the Philippine National Bank (PNB). The transfer of assets was implemented through a Deed of Transfer executed on February 27, 1987 between the National Government, on one hand, and the DBP and PNB, on the other. In turn, the National Government designated the Asset Privatization Trust to act as its trustee through a Trust Agreement, whereby the non-performing accounts of DBP and PNB, including, among others, the DBP s equity with respondent Bank, were entrusted to the Asset Privatization Trust. As provided for in the Agreement, among the powers and duties of the Asset Privatization Trust with respect to the trust properties consisting of receivables was to handle their administration and collection by bringing suit to enforce payment of the obligations or any installment thereof or settling or compromising any of such obligations or any other claim or demand which the Govern- ment may have against any person or persons, and to do all acts, institute all proceedings, and to exercise all other rights, powers, and privileges of ownership that an absolute owner of the properties would otherwise have the right to do. Division: FIRST DIVISION Docket Number: G.R. No. 146511 Counsel: Breva, Breva Law Firm, Hildegardo F. Iigo, Bernardino Bolcan, Jr. Ponente: AZCUNA Dispositive Portion: WHEREFORE, the October 9, 2000 Decision and December 26, 2000 Resolution of the Court of Appeals in CA-G.R. CV No. 53413 are AFFIRMED. The petition is DENIED for lack of merit.

G.R. No. 154740. April 16, 2008.* HENRY DELA RAMA CO, petitioner, vs. ADMIRAL UNITED SAVINGS BANK, respondent.

Civil Law; Negotiable Instruments Law; Loans; Accommodation Party; An accommodation party who leads his name to enable the accommodated party to obtain credit or raise money is liable on the instrument to a holder for value even if he receives no part of the consideration. Co s assertion that he merely acted as an accommodation party for METRO RENT cannot release him from liability under the note. An accommodation party who lends his name to enable the accommodated party to obtain credit or raise money is liable on the instrument to a holder for value even if he receives no part of the consideration. He assumes the obligation to the other party and binds himself to pay the note on its due date. By signing the note, Co thus became liable for the debt even if he had no direct personal interest in the obligation or did not receive any benefit therefrom. Same; Mortgages; Payment; The receipts of payment although not exclusive were deemed to be the best evidence of the fact of payment; Cancellation 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 made. Co also offered the alternative defense that the loan had already been 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 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 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 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 made. 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 plaintiff to prove nonpayment. Juris-prudence is replete with rulings that in civil cases, the party who alleges a fact has the burden of proving it. Burden of proof is the duty of a party to present evidence on the facts in issue necessary to prove the truth of his claim or defense by the amount of evidence required by law. Thus, a party who pleads payment as a defense has the burden of proving that such payment had, in fact, been made. When the plaintiff alleges nonpayment, still, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove nonpayment. [Co vs. Admiral United Savings Bank, 551 SCRA 472(2008)]

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 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 accommodated party to obtain credit or to raise money; he receives no part of the consideration for the instrument but assumes liability to the other party/ies thereto. The first two elements are present here, however there is insufficient evidence presented in the instant case to show the presence of the third requisite. All that the evidence shows is that petitioner signed Check No. 58832, which is drawn against his personal account. The said check, dated December 15, 2000, corresponds to the value of 24 sets of tires received by Cruiser Bus Lines and 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 evidence it cannot just be assumed that petitioner intended to lend his name to the corporation. Hence, petitioner cannot be considered as an accommodation party. Division: SECOND DIVISION Docket Number: G.R. No. 166405 Counsel: Rodolfo B. Ta-asan, Jr. Ponente: QUISUMBING Dispositive Portion: I, THEREFORE, VOTE TO DISMISS THE PETITION.

Case Title : CLAUDE P. BAUTISTA, petitioner, vs. AUTO PLUS TRADERS, INCORPORATED and COURT OF APPEALS (Twenty-First Division), respondentsCase Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Negotiable Instruments Law ; Words and Phrases ; Accommodation Party ; Syllabi: 1. Corporation Law; Generally, the stockholders and officers are not personally liable for the obligations of the corporation except only when the veil of corporate fiction is being used as a cloak or cover for fraud or illegality, or to work injustice.Juridical entities have personalities separate and distinct from its officers and the persons composing it. Generally, the stockholders and officers are not personally liable for the obligations of the corporation except only when the veil of corporate fiction is being used as a cloak or cover for fraud or illegality, or to work injustice. These situations, however, do not exist in this case. The evidence shows that it is Cruiser Bus Lines and Transport Corporation that has obligations to Auto Plus Traders, Inc. for tires. There is no agreement that petitioner shall be held liable for the corporation s obligations in his personal capacity. Hence, he cannot be held liable for the value of the two checks issuedin payment for the corporation s obligation in the total amount of P248,700. 2. Negotiable Instruments Law; Words and Phrases; Accommodation Party; Section 29 of the Negotiable Instruments Law defines an accommodation party as a person who has signed the instrument as maker, drawer, acceptor, or endorser, without receiving value therefor, and for the purpose of lending his name to some other person.Contrary to private respondent s contentions, petitioner cannot be considered liable as an accommodation party for Check No. 58832. Section 29 of the Negotiable Instruments Law defines an accommodation party as a person who has signed the instrument as maker, drawer, acceptor, or indorser, 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 who meets

Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS, ANNABELLE A. SALAZAR, and JULIO R. TEMPLONUEVO, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Certiorari|Negotiable Instruments Law|Checks|Crossed Checks|Presumptions|Words and Phrases|Banks and Banking|Damages Syllabi: 1. Certiorari; Only questions of law may be raised in an appeal by certiorari under Rule 45 of the Rules of Court; Factual findings of the Court of Appeals 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 under Rule 45 of the Rules of Court. Factual findings of the CA are entitled to great weight and respect, especially when the CA affirms the factual findings of the trial court. Such questions on whether certain items of evidence should be accorded probative value or weight, or rejected as feeble or spurious, or whether or not the proofs on one side or the other are clear and convincing and adequate to establish a proposition in issue, are questions of fact. The same holds true for questions on whether or not the body of proofs presented by a party, weighed and analyzed in relation to contrary evidence submitted by the adverse party may be said to be strong, clear and convincing, or whether or not inconsistencies in the body of proofs of a party are of such gravity as to justify refusing to give said proofs weight all these are issues of fact which are not reviewable by the Court. This rule, however, is not absolute and admits of certain exceptions, namely: a) when the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; b) when the inference made is manifestly mistaken, absurd, or impossible; c) when there is a grave abuse of discretion; d) when the judgment is based on a misapprehension of facts; e) when the findings of fact are conflicting; f) when the CA, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; g) when the findings of the CA are contrary to those of the trial court; h) when the findings of fact are conclusions without citation of specific evidence on which they are based; i) when the finding of fact of the CA is premised on the supposed absence of evidence but is contradicted by the evidence on record; and j) when the CA manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion. 2. Same; Same; Damages; A 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 suffered mental anguish, serious anxiety, embarrassment and humiliation.This whole incident would have been avoided had petitioner adhered to the standard of diligence expected of one engaged in the banking business. A 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 suffered mental anguish, serious anxiety, embarrassment and humiliation. Moral damages are not meant to enrich a complainant at the expense of defendant. It is only intended to alleviate the moral suffering she has undergone. The award of exemplary damages is justified, on the other hand, when the acts of the bank are attended by malice, bad faith or gross negligence. The award of reasonable attorney s fees is proper where exemplary damages are awarded. It is proper where depositors are compelled to litigate to protect their interest. 3. Same; Same; The taking and collection of a check without the proper indorsement amount to a conversion of the check by the bank.To begin with, the irregularity appeared plainly on the face of the checks. Despite the obvious lack of indorsement thereon, petitioner permitted the encashment of these checks three times on three separate occasions. This negates petitioner s claim that it merely made a mistake in crediting the value of the checks to Salazar s account and instead bolsters the conclusion of the CA that petitioner recognized Salazar s claim of ownership of checks and acted deliberately in paying the same, contrary to ordinary banking policy and practice. It must be emphasized that the law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it, for the purpose of determining their genuineness and regularity. The collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it to a high standard of conduct. The taking and collection of a check without the proper indorsement amount to a conversion of the check by the bank. 4. Same; Same; As businesses affected with public interest, and because of the nature of their functions, banks are under obligation to treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their relationship.It is conceded that petitioner had the right of set-off over the amount it paid to Templonuevo against the deposit of Salazar, the issue of whether it acted judiciously is an entirely different matter. As businesses affected with public interest, and because of the nature of their functions, banks are under obligation to treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their relationship. In this regard, petitioner was clearly remiss in its duty to private respondent Salazar as its depositor. 5. Same; Banks and Banking; Checks; A bank generally has a right of set-off over the deposits therein for the payment of any withdrawals on the part of a depositorthe right of a collecting bank to debit a client s account for the value of a dishonored check that has previously been credited has fairly been established by jurisprudence. The right of set-off was explained in Associated Bank v. Tan, 446 SCRA 282 (2004): A bank generally has a right of set-off over the deposits therein for the payment of any withdrawals on the part of a depositor. The right of a collecting bank to debit a client s account for the value of a dishonored check that has previously been credited has fairly been established by jurisprudence. To begin with, Article 1980 of the Civil Code provides that [f]ixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. Hence, the relationship between banks and depositors has been held to be that of creditor and debtor. Thus, legal compensation under Article 1278 of the Civil Code may take place when all the requisites mentioned in Article 1279 are present, as follows: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. 6. Same; Same; It is an exception to the general rule for a payee of an order instrument to transfer the instrument without indorsement.It is an exception to the general rule for a payee of an order instrument to transfer the instrument without indorsement. Precisely because the situation is abnormal, it is but fair to the maker and to prior holders to require possessors to prove without the aid of an initial presumption in their favor, that they came into possession by virtue of a legitimate transaction with the last holder. Salazar failed to discharge this burden, and the return of the check proceeds to Templonuevo was therefore warranted under the circumstances despite the fact that Templonuevo may not have clearly demonstrated that he never authorized Salazar to deposit the checks or to encash the same. Noteworthy also is the fact that petitioner stamped on the back of the checks the words: All prior endorsements and/or lack of endorsements guaranteed, thereby making the

assurance that it had ascertained the genuineness of all prior endorsements. Having assumed the liability of a general indorser, petitioner s liability to the designated payee cannot be denied. 7. Same; Same; Presumptions; Words and Phrases; The presumption under Section 131(s) of the Rules of Court stating that a negotiable instrument was given for a sufficient consideration will not inure to the benefit of someone who was merely the transferee of the physical possession of the instrumentthe phrase given or indorsed in the context of a negotiable instrument refers to the manner in which such instrument may be negotiated. The presumption under Section 131(s) of the Rules of Court stating that a negotiable instrument was given for a sufficient consideration will not inure to the benefit of Salazar because the term given does not pertain merely to a transfer of physical possession of the instrument. The phrase given or indorsed in the context of a negotiable instrument refers to the manner in which such instrument may be negotiated. Negotiable instruments are negotiated by transfer to one person or another in such a manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery. If payable to order it is negotiated by the indorsement completed by delivery. The present case involves checks payable to order. Not being a payee or indorsee of the checks, private respondent Salazar could not be a holder thereof. 8. Same; Same; Crossed Checks; If instruments payable to named payees or to their order have not been indorsed in blank, only such payees or their indorsees can be holders and entitled to receive payment in their own right.In State Investment House v. IAC, 175 SCRA 310 (1989), the Court enumerated the effects of crossing a check, thus: (1) that the check may not be encashed but only deposited in the bank; (2) that the check may be negotiated only once to one who has an account with a bank; and (3) that the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that such holder must inquire if the check has been received pursuant to that purpose. Thus, even if the delay in the demand for reimbursement is taken in conjunction with Salazar s possession of the checks, it cannot be said that the presumption of ownership in Templonuevo s favor as the designated payee therein was sufficiently overcome. This is consistent with the principle that if instruments payable to named payees or to their order have not been indorsed in blank, only such payees or their indorsees can be holders and entitled to receive payment in their own right. 9. Negotiable Instruments Law; Checks; The weight of authority is that the mere possession of a negotiable instrument does not in itself conclusively establish either the right of the possessor to receive payment, or of the right of one who has made payment to be discharged from liability.Section 49 of the Negotiable Instruments Law contemplates a situation whereby the payee or indorsee delivers a negotiable instrument for value without indorsing it, thus: Transfer without indorsement; effect of. Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made. It bears stressing that the above transaction is an equitable assignment and the transferee acquires the instrument subject to defenses and equities available among prior parties. Thus, if the transferor had legal title, the transferee acquires such title and, in addition, the right to have the indorsement of the transferor and also the right, as holder of the legal title, to maintain legal action against the maker or acceptor or other party liable to the transferor. The underlying premise of this provision, however, is that a valid transfer of ownership of the negotiable instrument in question has taken place. Transferees in this situation do not enjoy the presumption of ownership in favor of holders since they are neither payees nor indorsees of such instruments. The weight of authority is that the mere possession of a negotiable instrument does not in itself conclusively establish either the right of the possessor to receive payment, or of the right of one who has made payment to be discharged from liability. Thus, something more than mere possession by persons who are not payees or indorsers of the instrument is necessary to authorize payment to them in the absence of any other facts from which the authority to receive payment may be inferred. Division: FIRST DIVISION Docket Number: G.R. No. 136202 Counsel: Justino M. Marquez, III, Abesamis, Medialdea & Abesamis, Arniel N. Bondoc

Ponente: AZCUNA Dispositive Portion: WHEREFORE, the petition is partially GRANTED. The assailed Decision dated April 3, 1998 and Resolution dated April 3, 1998 rendered by the Court of Appeals in CA-G.R. CV No. 42241 are MODIFIED insofar as it ordered petitioner Bank of the Philippine Islands to return the amount of Two Hundred Sixty-seven Thousand Seven Hundred and Seven and 70/100 Pesos (P267,707.70) to respondent Annabelle A. Salazar, which portion is REVERSED and SET ASIDE. In all other respects, the same are AFFIRMED.

Case Title : METROPOLITAN BANK AND TRUST COMPANY (formerly ASIANBANK CORPORATION), petitioner, vs. BA FINANCE CORPORATION and MALAYAN INSURANCE CO., INC., respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negotiable Instruments Law|Banks and Banking|Agency|Interest Rates Syllabi: 1. Negotiable Instruments Law; Checks; Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse unless the one indorsing has authority to indorse for the others.Section 41 of the Negotiable Instruments Law provides: Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse unless the one indorsing has authority to indorse for the others. Bitanga alone endorsed the crossed check, and petitioner allowed the deposit and release of the proceeds thereof, despite the absence of authority of Bitanga s co-payee BA Finance to endorse it on its behalf. 2. Same; Banks and Banking; Agency; Interest Rates; The nature of the relationship between the payee of a check and the collecting bank is one of agencythe obligation of the bank does not arise out of a loan or forbearance of money, goods or credit, thus the legal interest should be 6%, not 12%, per annum. The Court takes exception, however, to the appellate court s affirmance of the trial court s grant of legal interest of 12% per annum on the value of the check. For the obligation in this case did not arise out of a loan or forbearance of money, goods or credit. While Article 1980 of the Civil Code provides that: Fixed savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan, said provision does not find application in this case since the nature of the relationship between BA Finance and petitioner is one of agency whereby petitioner, as collecting bank, is to collect for BA Finance the corresponding proceeds from the check. Not being a loan or forbearance of money, the interest should be 6% per annum computed from the date of extrajudicial demand on September 25, 1992 until finality of judgment; and 12% per annum from finality of judgment until payment, conformably with Eastern Shipping Lines, Inc. v. Court of Appeals, 234 SCRA 78 (1994). 3. Same; Quasi-Delicts; Damages; Words and Phrases; In quasi-delict, exemplary damages may be granted if the defendant acted with gross negligence; Gross negligence implies a want or absence of or failure to exercise even slight care or diligence, or the entire absence of care, evincing a thoughtless disregard of consequences without exerting any effort to avoid them.Petitioner s liability is based not on contract or quasi-contract but on quasidelict since there is no pre-existing contractual relation between the parties. Article 2231 of the Civil Code, which provides that in quasi-delict, exemplary damages may be granted if the defendant acted with gross negligence, thus applies. For gross negligence implies a want or absence of or failure to exercise even slight care or diligence, or the entire absence of care, evincing a thoughtless disregard of consequences without exerting any effort to avoid them. x x x The law allows the grant of exemplary damages to set an example for the public good. The business of a bank is affected with public interest; thus it makes a sworn profession of diligence and meticulousness in giving irreproachable service. For this reason, the bank should guard against ininjury attributable to negligence or bad faith on its part. The award of exemplary damages is proper as a warning to [the petitioner] and all concerned not to recklessly disregard their obligation to exercise the highest and strictest diligence in serving their depositors. 4. Same; Same; Same; When the maker dishonors the instrument, the holder thereof can turn to those secondarily liablethe indorser for recovery. Granting petitioner s appeal for partial liability would run counter to the existing principles on the liabilities of parties on negotiable instruments, particularly on Section 68 of the Negotiable Instruments

Law which instructs that joint payees who indorse are deemed to indorse jointly and severally. Recall that when the maker dishonors the instrument, the holder thereof can turn to those secondarily liable the indorser for recovery. And since the law explicitly mandates a solidary liability on the part of the joint payees who indorse the instrument, the holder thereof (assuming the check was further negotiated) can turn to either Bitanga or BA Finance for full recompense. 5. Same; Same; Banks and Banking; One who credits the proceeds of a check to the account of the indorsing payee is liable in conversion to the non-indorsing payee for the entire amount of the check.The provisions of the Negotiable Instruments Law and underlying jurisprudential teachings on the black-letter law provide definitive justification for petitioner s full liability on the value of the check. To be sure, a collecting bank, Asianbank in this case, where a check is deposited and which indorses the check upon presentment with the drawee bank, is an indorser. This is because in indorsing a check to the drawee bank, a collecting bank stamps the back of the check with the 6. Same; Same; The payment of an instrument over a missing indorsement is the equivalent of payment on a forged indorsement or an unauthorized indorsement in itself in the case of joint payees.Petitioner s argument that since there was neither forgery, nor unauthorized indorsement because Bitanga was a co-payee in the subject check, the dictum in Associated Bank v. CA does not apply in the present case fails. The payment of an instrument over a missing indorsement is the equivalent of payment on a forged indorsement or an unauthorized indorsement in itself in the case of joint payees. Clearly, petitioner, through its employee, was negligent when it allowed the deposit of the crossed check, despite the lone endorsement of Bitanga, ostensibly ignoring the fact that the check did not, it bears repeating, carry the indorsement of BA Finance. Division: FIRST DIVISION Docket Number: G.R. No. 179952 Counsel: Carlo Magno J. Verzo and Lemuel D. Lopez Ponente: CARPIO-MORALES Dispositive Portion: WHEREFORE, the Decision of the Court of Appeals dated May 18, 2007 is AFFIRMED with MODIFICATION in that the rate of interest on the judgment obligation of P224,500 should be 6% per annum, computed from the time of extrajudicial demand on September 25, 1992 until its full payment before finality of judgment; thereafter, if the amount adjudged remains unpaid, the interest rate shall be 12% per annum computed from the time the judgment becomes final and executory until fully satisfied. Costs against petitioner.

Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Banks and Banking|Philippine Clearing House Corporation|Arbitration|Checks|Actions|Third-Party Complaints|Jurisdiction Syllabi: 1. Banks and Banking; Philippine Clearing House Corporation; Arbitration; Checks; Actions; Third-Party Complaints; Jurisdiction; A third-party complaint of one bank against another involving a check cleared through the PCHC is unavailing, unless the third-party claimant has first exhausted the arbitral authority of the PCHC Arbitration Committee and obtained a decision from said body adverse to its claim.Banco de Oro and Associated Bank are clear and unequivocal: a third-party complaint of one bank against another involving a check cleared through the PCHC is unavailing, unless the third-party claimant has first exhausted the arbitral authority of the PCHC Arbitration Committee and obtained a decision from said body adverse to its claim. 2. Same; Same; Same; In the world of commerce, especially in the field of banking, the promised word is crucial. Once given, it may no longer be broken.By participating in the clearing operations of the PCHC, petitioner agreed to submit disputes of this nature to arbitration. Accordingly, it cannot invoke the jurisdiction of the trial courts without a prior recourse to the PCHC Arbitration Committee. Having given its free and voluntary consent to the arbitration clause, petitioner cannot unilaterally take it back according to its whim. In the world of commerce, especially in the field of banking, the promised word is crucial. Once given, it may no longer be broken.

3. Same; Same; Same; Same; Same; Same; Same; The doctrine that a trial court, which has jurisdiction over the main action, also has jurisdiction over the third-party complaint, even if the said court would have had no jurisdiction over it had it been filed as an independent action, does not apply in the case of banks, which have given written and subscribed consent to arbitration under the auspices of the PCHC.We are not unaware of the rule that a trial court, which has jurisdiction over the main action, also has jurisdiction over the third-party complaint, even if the said court would have had no jurisdiction over it had it been filed as an independent action. However, this doctrine does not apply in the case of banks, which have given written and subscribed consent to arbitration under the auspices of the PCHC. 4. Same; Same; Same; Same; Same; Same; Same; When the error is so patent, gross and prejudicial as to constitute grave abuse of discretion, courts may address questions of fact already decided by the arbitrator.When the error is so patent, gross and prejudicial as to constitute grave abuse of discretion, courts may address questions of fact already decided by the arbitrator. 5. Same; Same; Same; Same; Same; Same; Same; Primary recourse to the PCHC does not preclude an appeal to the regional trial courts on questions of law.We defer to the primary authority of PCHC over the present dispute, because its technical expertise in this field enables it to better resolve questions of this nature. This is not prejudicial to the interest of any party, since primary recourse to the PCHC does not preclude an appeal to the regional trial courts on questions of law. Division: FIRST DIVISION Docket Number: G.R. No. 123871 Counsel: Ocampo, Quiroz, Pesayco & Associates, Alfonso B. Verzosa Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

however, shows that the petitioner failed to discharge her burden of proof. The petitioner s averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. 3. Negotiable Instrument Law; Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and not converted into cash.The Negotiable Instruments Law is silent with respect to crossed checks, although the Code of Commerce makes reference to such instruments. Nonetheless, this Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and not converted into cash. The effects of crossing a check, thus, relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein. Division: SECOND DIVISION Docket Number: G.R. No. 138074 Counsel: Don P. Porciuncula, Victor N. Alimurong, Siguion Reyna, Monticillo & Ongsiako, Curato, Divina & Associates, Recto Law Offices, Fortun, Narvasa & Salazar, Pacis, Ramirez & Bacorro Law Offices Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the instant petition is DENIED. The assailed decision of the Court of Appeals, dated March 25, 1999, in

Case Title : CELY YANG, petitioner, vs. HON. COURT OF APPEALS, PHILIPPINE COMMERCIAL INTERNATIONAL BANK, FAR EAST BANK & TRUST CO., EQUITABLE BANKING CORPORATION, PREM CHANDIRAMANI and FERNANDO DAVID, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negotiable Instrument Law|Every holder of a negotiable instrument is deemed prima facie a holder in due course|Definition of a holder in due course Syllabi: 1. Negotiable Instrument Law; Every holder of a negotiable instrument is deemed prima facie a holder in due course; Definition of a holder in due course; Presumption rebuttable.Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course applies in his favor. However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in David s case; otherwise he cannot be deemed a holder in due course. 2. Negotiable Instrument Law; Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value; Petitioner must present convincing evidence to overthrow the presumption.With respect to consideration, Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value. Thus, the law itself creates a presumption in David s favor that he gave valuable consideration for the checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of the checks absent said consideration. In other words, the petitioner must present convincing evidence to overthrow the presumption. Our scrutiny of the records,

Case Title : EQUITABLE PCI BANK (the Banking Entity into which Philippine Commercial International Bank was merged), petitioner, vs. ROWENA ONG, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions|Banks and Banking|Damages|Proximate Cause|Judgments|Words and Phrases|Checks|Doctrine of Unjust Enrichment|Manager s Checks Syllabi: 1. Actions; Judgments; Words and Phrases; A genuine issue is an issue of fact which calls for the presentation of evidence, as distinguished from an issue which is sham, fictitious, contrived and pat-ently unsubstantiated so as not to constitute a genuine issue of fact.It has been held that a summary judgment is proper where, upon a motion filed after the issues had been joined and on the basis of the pleadings and papers filed, the court finds that there is no genuine issue as to any material fact to except as to the amount of damages. A genuine issue has been defined as an issue of fact which calls for the presentation of evidence, as distinguished from an issue which is sham, fictitious, contrived and patently unsubstantial so as not to constitute a genuine issue for trial. A court may grant summary judgment to settle expeditiously a case if, on motion of either party, there appears from the pleadings, depositions, admissions, and affidavits that no important issues of fact are involved, except the amount of damages. Rule 35, Section 3, of the Rules of Court provides two requisites for summary judgment to be proper: (1) there must be no genuine issue as to any material fact, except for the amount of damages; and (2) the party presenting the motion for summary judgment must be entitled to a judgment as a matter of law. 2. Banks and Banking; Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and most of all, confidence.The law allows the grant of exemplary damages to set an example for the public good. The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and most of all, confidence. For this reason, banks should guard against injury attributable to negligence or bad faith on its part. Without a doubt, it has been repeatedly emphasized that since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance

are even required of it. Having failed in this respect, the award of exemplary damages is warranted. 3. Proximate Cause; Words and Phrases; Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred.By refusing to make good the manager s check it has issued, Ong suffered embarrassment and humiliation arising from the dishonor of the said check. Secondly, the culpable act of PCI Bank in having cleared the check of Serande and issuing the manager s check to Ong is undeniable. Thirdly, the proximate cause of the loss is attributable to PCI Bank. Proximate cause is defined as that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. In this case, the proximate cause of the loss is the act of PCI Bank in having cleared the check of Sarande and its failure to exercise that degree of diligence required of it under the law which resulted in the loss to Ong. 4. Damages; The requisites for an award of moral damages are well-defined, thus, firstly, evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant;secondly, a culpable act or omission factually established; thirdly, proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and, fourthly, that the case is predicated on any of the instances expressed or envisioned by Articles 2219 and 2220 of the Civil Code.Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant s wrongful act or omission. The requisites for an award of moral damages are well-defined, thus, firstly, evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; secondly, a culpable act or omission factually established; thirdly, proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and fourthly, that the case is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the Civil Code. All these elements are present in the instant case. 5. Same; Same; The degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned.Section 2, of Republic Act No. 8791, The General Banking Law of 2000 decrees: SEC. 2. Declaration of Policy. The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. In Associated Bank v. Tan, 446 SCRA 282 (2004), it was reiterated: x x x the degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned. Indeed, the banking business is vested with the trust and confidence of the public; hence the appropriate standard of diligence must be very high, if not the highest degree of diligence. 6. Same; Same; Manager s Checks; Words and Phrases; A manager s check is an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and honor behind its issuance, and by its peculiar character and general use in commerce, a manager s check is regarded substantially to be as good as the money it represents.Easily discernible is that what Ong obtained from PCI Bank was not just any ordinary check but a manager s check. A manager s check is an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and honor behind its issuance. By its peculiar character and general use in commerce, a manager s check is regarded substantially to be as good as the money it represents. A manager s check stands on the same footing as a certified check. The effect of certification is found in Section 187, Negotiable Instruments Law. Sec. 187. Certification of check; effect of. Where a check is certified by the bank on which it is drawn, the certification is equivalent to an acceptance. 7. Banks and Banking; Checks; Doctrine of Unjust Enrichment; The fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration, the main objective being to prevent one to enrich himself at the expense of another; A check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account.-

On the matter of unjust enrichment, the fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. The elements of this doctrine are: enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause. The main objective is to prevent one to enrich himself at the expense of another. It is based on the equitable postulate that it is unjust for a person to retain benefit without paying for it. It is well to stress that the check of Sarande had been cleared by the PCI Bank for which reason the former issued the check to Ong. A check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account. Division: FIRST DIVISION Docket Number: G.R. No. 156207 Counsel: Jowel T. Cloma, Roberto T. Sencio Ponente: CHICO-NAZARIO Dispositive Portion: WHEREFORE, premises considered, the Petition is DENIED and the Decision of the Court of Appeals dated 29 October 2002 in CA-G.R. CV No. 65000 affirming the Decision dated 3 May 1999, of the Regional Trial Court of Davao City, Branch 14, in Civil Case No. 21458-92, are AFFIRMED.

Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. GREGORIO C. ROXAS, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negotiable Instruments Law||Presumption|Words and Phrases|Checks|Cashier s Check|Judicial Notice Syllabi: 1. Negotiable Instruments Law; Holder in Due Course, Explained.SEC. 52. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue and without notice that it had been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of person negotiating it. 2. Same; Same; Checks; Cashier s Check; Judicial Notice; The Supreme Court has taken judicial notice of the well-known and accepted practice in the business sector that a cashier s check is deemed as cash; Cashier s check is really the bank s own check and may be treated as a promissory note with the bank as the maker.It bears emphasis that the disputed check is a cashier s check. In International Corporate Bank v. Spouses Gueco, 351 SCRA 516 (2001), this Court held that a cashier s check is really the bank s own check and may be treated as a promissory note with the bank as the maker. The check becomes the primary obligation of the bank which issues it and constitutes a written promise to pay upon demand. In New Pacific Timber & Supply Co., Inc. v. Seeris, 101 SCRA 686 (1980), this Court took judicial notice of the well-known and accepted practice in the business sector that a cashier s check is deemed as cash. This is because the mere issuance of a cashier s check is considered acceptance thereof. 3. Same; Same; Same; Words and Phrases; Value in general terms may be some right, interest, profit or benefit to the party who makes the contract or some forbearance, detriment, loan, responsibility, etc. on the other side.In Walker Rubber Corp. v. Nederlandsch Indische & Handelsbank, N.V. and South Sea Surety & Insurance Co., Inc., 105 Phil. 934, this Court ruled that value in general terms may be some right, interest, profit or benefit to the party who makes the contract or some forbearance, detriment, loan, responsibility, etc. on the other side. Here, there is no dispute that respondent received Rodrigo Cawili s cashier s check as payment for the former s vegetable oil. The fact that it was Rodrigo who purchased the cashier s check from petitioner will not affect respondent s status as a holder for value since the check was delivered to him as payment for the vegetable oil he sold to spouses Cawili. Verily, the Court of Appeals did not err in concluding that respondent is a holder in due course of the cashier s check. 4. Same; Same; Presumption; Every holder is presumed prima facie to be a holder in due course and he who claims otherwise has the onus probandi to prove that one or more of the conditions required to constitute a holder in due course are lacking.-

As a general rule, under the above provision, every holder is presumed prima facie to be a holder in due course. One who claims otherwise has the onus probandi to prove that one or more of the conditions required to constitute a holder in due course are lacking. In this case, petitioner contends that the element of value is not present, therefore, respondent could not be a holder in due course. Division: FIRST DIVISION Docket Number: G.R. No. 157833 Counsel: Benedicto, Versoza, Gealogo, Burkley and Associates, Dominador R. Santiago Ponente: SANDOVAL-GUTIERREZ Dispositive Portion: WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals (Fourth Division) in CA-G.R. CV No. 67980 is AFFIRMED. Costs against petitioner.

4. Same; Same; The law presumes that a holder of a negotiable instrument is a holder thereof in due course.The law presumes that a holder of a negotiable instrument is a holder thereof in due course. In this case, the CA is correct in finding that BA Finance meets all the foregoing requisites: In the present recourse, on its face, (a) the Promissory Note, Exhibit A, is complete and regular; (b) the Promissory Note was endorsed by the VMSC in favor of the Appellee; (c) the Appellee, when it accepted the Note, acted in good faith and for value; (d) the Appellee was never informed, before and at the time the Promissory Note was endorsed to the Appellee, that the vehicle sold to the Defendants-Appellants was not delivered to the latter and that VMSC had already previously sold the vehicle to Esmeraldo Violago. Although Jose Olvido mortgaged the vehicle to Generoso Lopez, who assigned his rights to the BA Finance Corporation (Cebu Branch), the same occurred only on May 8, 1987, much later than August 4, 1983, when VMSC assigned its rights over the Chattel Mortgage by the Defendants-Appellants to the Appellee. Hence, Appellee was a holder in due course. Division: SECOND DIVISION Docket Number: G.R. No. 158262 Counsel: Cabrera, Makalintal & Baliad Law Offices

Case Title : SPS. PEDRO AND FLORENCIA VIOLAGO, petitioners, vs. BA FINANCE CORPORATION and AVELINO VIOLAGO, respondentsCase Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Corporation Law ; Piercing-of-the-Corporate-Veil; ; Syllabi: 1. Negotiable Instruments Law; Promissory Notes; The promissory note is clearly negotiable.The promissory note is clearly negotiable. The appellate court was correct in finding all the requisites of a negotiable instrument present. The NIL provides: Section 1. Form of Negotiable Instruments. An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. 2. Corporation Law; Piercing-of-the-Corporate-Veil; We suggested as much in Arcilla v. Court of Appeals (215 SCRA 120 [1992]), an appellate proceeding involving petitioner Arcilla s bid to avoid the adverse CA decision on argument that he is not personally liable for the amount adjudged since the same constitutes a corporate liability which nevertheless cannot be enforced against the corporation which has not been impleaded as a party below.The fact that VMSC was not included as defendant in petitioners third party complaint does not preclude recovery by petitioners from Avelino; neither would such non-inclusion constitute a bar to the application of the piercing-of-thecorporate-veil doctrine. We suggested as much in Arcilla v. Court of Appeals, 215 SCRA 120 (1992), an appellate proceeding involving petitioner Arcilla s bid to avoid the adverse CA decision on the argument that he is not personally liable for the amount adjudged since the same constitutes a corporate liability which nevertheless cannot even be enforced against the corporation which has not been impleaded as a party below. In that case, the Court found as well-taken the CA s act of disregarding the separate juridical personality of the corporation and holding its president, Arcilla, liable for the obligations incurred in the name of the corporation although it was not a party to the collection suit before the trial court. 3. Same; Same; The Negotiable Instruments Law considers every negotiable instrument prima facie to have been issued for a valuable consideration.In the hands of one other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. A holder in due course, however, holds the instrument free from any defect of title of prior parties and from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof. Since BA Finance is a holder in due course, petitioners cannot raise the defense of non-delivery of the object and nullity of the sale against the corporation. The NIL considers every negotiable instrument prima facie to have been issued for a valuable consideration. In Salas, 181 SCRA 296 (1990), we held that a party holding an instrument may enforce payment of the instrument for the full amount thereof. As such, the maker cannot set up the defense of nullity ofthe contract of sale. Thus, petitioners are liable to respondent corporation for the payment of the amount stated in the instrument.

Ponente: VELASCO, JR. Dispositive Portion: WHEREFORE, the CA s August 20, 2002 Decision and May 15, 2003 Resolution in CA-G.R. CV No. 48489 are SET ASIDE insofar as they dismissed without prejudice the third party complaint of petitioners-spouses Pedro and Florencia Violago against respondent Avelino Violago. The March 5, 1994 Decision of the RTC is REINSTATED and AFFIRMED. Costs against Avelino Violago.

Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS and BENJAMIN C. NAPIZA, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negotiable Instruments Law|Banks and Banking|Passbooks|Negotiable Instruments Law|Checks|Words and Phrases|Negligence Syllabi: 1. Negotiable Instruments Law; Warranties of a person negotiating an instrument by delivery or by qualified indorsement.Section 65, on the other hand, provides for the following warranties of a person negotiating an instrument by delivery or by qualified indorsement: (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it; and (c) that all prior parties had capacity to contract. 2. Banks and Banking; Passbooks; The requirement of presentation of the passbook when withdrawing an amount cannot be given mere lip service even though the person making the withdrawal is authorized by the depositor to do so.The withdrawal slip contains a boxed warning that states: This receipt must be signed and pre- sented with the corresponding foreign currency savings passbook by the depositor in person. For withdrawals thru a representative, depositor should accomplish the authority at the back. The requirement of presentation of the passbook when withdrawing an amount cannot be given mere lip service even though the person making the withdrawal is authorized by the depositor to do so. This is clear from Rule No. 6 set out by petitioner so that, for the protection of the bank s interest and as a reminder to the depositor, the withdrawal shall be entered in the depositor s passbook. The fact that private respondent s passbook was not presented during the withdrawal is evidenced by the entries therein showing that the last transaction that he made with the bank was on September 3, 1984, the date he deposited the controversial check in the amount of $2,500.00. 3. Banks and Banking; Negotiable Instruments Law; Checks; A negotiable instrument, such as a check, whether a manager s check or ordinary check, is not legal tender.As correctly held by the Court of Appeals, in depositing the check in his name, private respondent did not become the outright owner of the amount stated therein. Under the above rule, by depositing the check with petitioner, private respondent was, in a way, merely designating petitioner as the collecting bank. This is in consonance with the rule that a negotiable instrument, such as a check, whether a manager s check or ordinary check, is not legal tender. As such, after receiving the deposit, under its own rules, petitioner shall credit the amount in

private respondent s account or infuse value thereon only after the drawee bank shall have paid the amount of the check or the check has been cleared for deposit. Again, this is in accordance with ordinary banking practices and with this Court s pronouncement that the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements. The rule finds more meaning in this case where the check involved is drawn on a foreign bank and therefore collection is more difficult than when the drawee bank is a local one even though the check in question is a manager s check. 4. Banks and Banking; Negotiable Instruments Law; Checks; Words and Phrases; Manager s Check" Explained; A manager s check is like a cashier s check which, in the commercial world, is regarded substantially to be as good as the money it represents.A manager s check is like a cashier s check which, in the commercial world, is regarded substantially to be as good as the money it represents (Tan v. Court of Appeals, G.R. No. 108555, 239 SCRA 310, 322 [1994]). 5. Banks and Banking; Negotiable Instruments Law; In dealing with its depositors, a bank should exercise its functions not only with the diligence of a good father of a family but it should do so with the highest degree of care.Said ruling brings to light the fact that the banking business is affected with public interest. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. As such, in dealing with its depositors, a bank should exercise its functions not only with the diligence of a good father of a family but it should do so with the highest degree of care. 6. Banks and Banking; Negotiable Instruments Law; Words and Phrases; Negligence, Explained; Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do.In the case at bar, petitioner, in allowing the withdrawal of private respondent s deposit, failed to exercise the diligence of a good father of a family. In total disregard of its own rules, petitioner s personnel negligently handled private respondent s account to petitioner s detriment. As this Court once said on this matter: Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do. The seventy-eight (78)-year-old, yet still relevant, case of Picart v. Smith, provides the test by which to determine the existence of negligence in a particular case which may be stated as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the discreet pater familias of the Roman law. The existence of negligence in a given case is not determined by reference to the personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that. 7. Banks and Banking; Negotiable Instruments Law; Even after the lapse of the 35-day period, the amount of a deposited check cannot be withdrawn in the absence of a clearance thereon.From these facts on record, it is at once apparent that petitioner s personnel allowed the withdrawal of an amount bigger than the original deposit of $750.00 and the value of the check deposited in the amount of $2,500.00 although they had not yet received notice from the clearing bank in the United States on whether or not the check was funded. Reyes contention that after the lapse of the 35-day period the amount of a deposited check could be withdrawn even in the absence of a clearance thereon, otherwise it could take a long time before a depositor could make a withdrawal, is untenable. Said practice amounts to a disregard of the clearance requirement of the banking system. 8. Banks and Banking; Negotiable Instruments Law; Negligence; Words and Phrases; Proximate Cause, Explained; Proximate cause, which is determined by a mixed consideration of logic, common sense, policy and precedent, is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. While it is true that private respondent s having signed a blank withdrawal slip set in motion the events that resulted in the withdrawal and encashment of the counterfeit check, the negligence of petitioner s personnel was the proximate cause of the loss that petitioner sustained. Proximate cause, which is determined by a mixed consideration of logic, common sense, policy and

precedent, is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. The proximate cause of the withdrawal and eventual loss of the amount of $2,500.00 on petitioner s part was its personnel s negligence in allowing such withdrawal in disregard of its own rules and the clearing requirement in the banking system. In so doing, petitioner assumed the risk of incurring a loss on account of a forged or counterfeit foreign check and hence, it should suffer the resulting damage. Division: FIRST DIVISION Docket Number: G.R. No. 112392 Counsel: Benedicto, Tale & Versoza, Leonen, Ramirez & Associates, Renato M. Coronado Ponente: YNARES-SANTIAGO Dispositive Portion: WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 37392 is AFFIRMED.

Case Title : GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners, vs. THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Remedial Law|Commercial Law|Petition for Review|Banks and Banking|Negligence Syllabi: 1. Remedial Law; Petition for Review; Factual findings of the Court of Appeals are conclusive on the parties and not reviewable by the Court and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court.Section 1 of Rule 45 of the Revised Rules of Court provides that (T)he petition (for review) shall raise only questions of law which must be distinctly set forth. Thus, we have ruled that factual findings of the Court of Appeals are conclusive on the parties and not reviewable by this Court and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court. 2. Commercial Law; Banks and Banking; Negligence; The degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned; The same higher degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors.With these established facts, we now determine the degree of diligence that banks are required to exert in their commercial dealings. In Philippine Bank of Commerce v. Court of Appeals upholding a long standing doctrine, we ruled that the degree of diligence required of banks, is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned. In other words banks are duty bound to treat the deposit accounts of their depositors with the highest degree of care. But the said ruling applies only to cases where banks act under their fiduciary capacity, that is, as deposi- tary of the deposits of their depositors. But the same higher degree of diligence is not expected to be exerted by banks in commercial transactions that do not involve their fiduciary relationship with their depositors. Division: SECOND DIVISION Docket Number: G.R. No. 118492 Counsel: Benitez, Parlade, Africa, Herrera, Parlade & Panga Law Offices, Antonio R. Bautista & Partners Ponente: DE LEON, JR. Dispositive Portion: WHEREFORE, the petition is hereby DENIED, and the assailed decision of the Court of Appeals is AFFIRMED. Costs against the petitioners.

Case Title : ASSOCIATED BANK (Now WESTMONT BANK), petitioner, vs. VICENTE HENRY TAN, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Commercial Law|Banks and Banking|Negotiable Instruments Law Syllabi: 1. Commercial Law; Banks and Banking; The right of a collecting bank to debit a client s account for the value of a dishonored check that has previously been credited has fairly been established by jurisprudence.A bank generally has a right of setoff over the deposits therein for the payment of any withdrawals on the part of a depositor. The right of a collecting bank to debit a client s account for the value of a dishonored check that has previously been credited has fairly been established by jurisprudence. To begin with, Article 1980 of the Civil Code provides that [f]ixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. 2. Commercial Law; Banks and Banking; The relationship between banks and depositors has been held to take place.The relationship between banks and depositors has been held to be that of creditor and debtor. Thus, legal compensation under Article 1278 of the Civil Code may take place when all the requisites mentioned in Article 1279 are present, as follows: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. 3. Commercial Law; Banks and Banking; By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care.In BPI v. Casa Montessori, the Court has emphasized that the banking business is impressed with public interest. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care. 4. Commercial Law; Banks and Banking; The degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned; The standard applies, regardless of whether the account consists of only a few hundred pesos or of millions.Also affirming this long standing doctrine, Philippine Bank of Commerce v. Court of Appeals has held that the degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned. Indeed, the banking business is vested with the trust and confidence of the public; hence the appropriate standard of diligence must be very high, if not the highest, degree of diligence. The standard applies, regardless of whether the account consists of only a few hundred pesos or of millions. 5. Commercial Law; Banks and Banking; It is indeed arguable that in signing the deposit slip, the depositor does so only to identify himself and not to agree to the conditions set forth at the back of the deposit slip .This reservation is not enough to insulate the bank from any liability. In the past, we have expressed doubt about the binding force of such conditions unilaterally imposed by a bank without the consent of the depositor. It is indeed arguable that in signing the deposit slip, the depositor does so only to identify himself and not to agree to the conditions set forth at the back of the deposit slip. 6. Commercial Law; Banks and Banking; Negotiable Instruments Law; Under the provisions of the Negotiable Instruments Law regarding the liability of a general indorser and the procedure for a notice of dishonor, it was incumbent on the bank to give proper notice to respondent.Under the provisions of the Negotiable Instruments Law regarding the liability of a general indorser and the procedure for a notice of dishonor, it was incumbent on the bank to give proper notice to respondent. In Gullas v. National Bank, the Court emphasized: x x x [A] general indorser of a negotiable instrument engages that if the instrument the check in this case is dishonored and the necessary proceedings for its dishonor are duly taken, he will pay the amount thereof to the holder (Sec. 66) It has been held by a long line of authorities that notice of dishonor is necessary to charge an indorser and that the right of action against him does not accrue until the notice is given. Division: THIRD DIVISION Docket Number: G.R. No. 156940

Counsel: Edgardo G. Villarin, Cesar R. Villar Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

Case Title : SOLIDBANK CORPORATION, petitioner, vs. Spouses TEODULFO and CARMEN ARRIETA, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Banks and Banking|Negotiable Instruments Law|Checks|Damages|Words and Phrases Syllabi: 1. Banks and Banking; Negotiable Instruments Law; Checks; Damages; The fact that another check a person had issued was previously dishonored does not necessarily imply that the dishonor of a succeeding check can no longer cause moral injury and personal hurt for which the aggrieved party may claim damages.The fact that another check Carmen had issued was previously dishonored does not necessarily imply that the dishonor of a succeeding check can no longer cause moral injury and personal hurt for which the aggrieved party may claim damages. Such prior occurrence does not prove that respondent does not have a good reputation that can be besmirched. The reasons for and the circumstances surrounding the previous issuance and eventual dishonor of Check No. 0293983 are totally separate the payee of the prior check was different from that of Check No. 0293984, subject of present case. Carmen had issued the earlier check to accommodate a relative, and the succeeding one to pay for goods purchased from Lopue s Department Store. That she might not have suffered damages as a result of the first dishonored check does not necessarily hold true for the second. In the light of sufficient evidence showing that she indeed suffered damages as a result of the dishonor of Check No. 0293984, petitioner may not be exonerated from liability. 2. Banks and Banking; Negotiable Instruments Law; Checks; Damages; Conditions for Award of Moral Damages.Case law lays out the following conditions for the award of moral damages: (1) there is an injury whether physical, mental or psychological clearly sustained by the claimant; (2) the culpable act or omission is factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code. 3. Banks and Banking; Negotiable Instruments Law; Checks; Damages; Words and Phrases; Proximate Cause, Explained.Proximate cause has been defined as any cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the result complained of and without which would not have occurred x x x. It is determined from the facts of each case upon combined considerations of logic, common sense, policy and precedent. Clearly, had the bank accepted and honored the check, Carmen would not have had to face the questions of and explain her predicament to her office mates, her daughters, and the leaders and members of her church. 4. Banks and Banking; Negotiable Instruments Law; Checks; Damages; Treating a depositor s account as closed, merely because the ledger could not be found was a reckless act that could not simply be brushed off as an honest mistake.Treating Carmen s account as closed, merely because the ledger could not be found was a reckless act that could not simply be brushed off as an honest mistake. We have repeatedly emphasized that the banking industry is impressed with public interest. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care and always to have in mind the fiduciary nature of its relationship with them. 5. Banks and Banking; Negotiable Instruments Law; Checks; Damages; The award of moral damages is aimed at a restoration within the limits of the possible, of the spiritual status quo ante it must always reasonably approximate the extent of injury and be proportional to the wrong committed.The foregoing notwithstanding, we find the sum of P150,000 awarded by the lower courts excessive. Moral damages are not intended to enrich the complainant at the expense of the defendant. Rather, these are awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering that resulted by reason of the defendant s

culpable action. The purpose of such damages is essentially indemnity or reparation, not punishment or correction. In other words, the award thereof is aimed at a restoration within the limits of the possible, of the spiritual status quo ante; therefore, it must always reasonably approximate the extent of injury and be proportional to the wrong committed. Accordingly, the award of moral damages must be reduced to P20,000, an amount commensurate with the alleviation of the suffering caused by the dishonored check that was issued for the amount of P330. 6. Banks and Banking; Negotiable Instruments Law; Checks; Damages; The initial carelessness of the bank, aggravated by its lack of promptness in repairing its error, justifies the grant of exemplary damages.The law allows the grant of exemplary damages to set an example for the public good. The business of a bank is affected with public interest; thus, it makes a sworn profession of diligence and meticulousness in giving irreproachable service. For this reason, the bank should guard against injury attributable to negligence or bad faith on its part. The banking sector must at all times maintain a high level of meticulousness. The grant of exemplary damages is justified by the initial carelessness of petitioner, aggravated by its lack of promptness in repairing its error. It was only on August 30, 1990, or a period of five months from the erroneous dishonor of the check, when it wrote Lopue s Department Store a letter acknowledging the bank s mistake. In our view, however, the award of P50,000 is excessive and should accordingly be reduced to P20,000. Division: THIRD DIVISION Docket Number: G.R. No. 152720 Counsel: Segundo Y. Chua, Romeo B. Esuerte Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the Petition is PARTLY GRANTED and the assailed Decision MODIFIED. Petitioners are ORDERED to pay respondents P20,000 as moral damages, P20,000 as exemplary damages, and P20,000 as attorney s fees.

present case, petitioners raise the fact of agency as an affirmative defense, yet fail to prove its existence. 4. Negotiable Instruments Law; After an instrument is dishonored by nonpayment, indorsers cease to be merely secondarily liable, they become principal debtors whose liability becomes identical to that of the original obligor.As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the checks were to be accepted or paid, or both, according to their tenor; and that in case they were dishonored, she would pay the corresponding amount. After an instrument is dishonored by nonpayment, indorsers cease to be merely secondarily liable; they become principal debtors whose liability becomes identical to that of the original obligor. The holder of a negotiable instrument need not even proceed against the maker before suing the indorser. Clearly, Evangeline Santos as the drawer of the checks is not an indispensable party in an action against Maria Tuazon, the indorser of the checks. Division: THIRD DIVISION Docket Number: G.R. No. 156262 Counsel: Habitan, Carbonell, Ferrer, Chan & Associates, Ireneo G. Calderon Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners.

Case Title : MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses ANASTACIO and MARY T. BUENA-VENTURA, petitioners, vs. HEIRS OF BARTOLOME RAMOS, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Remedial Law|Civil Law|Negotiable Instruments Law|Appeals|Agency Syllabi: 1. Remedial Law; Appeals; Supreme Court s role in a petition under Rule 45 is limited to reviewing errors of law allegedly committed by the Court of Appeals.Well-entrenched is the rule that the Supreme Court s role in a petition under Rule 45 is limited to reviewing errors of law allegedly committed by the Court of Appeals. Factual findings of the trial court, especially when affirmed by the CA, are conclusive on the parties and this Court. Petitioners have not given us sufficient reasons to deviate from this rule. 2. Civil Law; Agency; In a contract of agency, one binds oneself to render some service or to do something in representation or on behalf of another, with the latter s consent or authority; Elements of Agency.In a contract of agency, one binds oneself to render some service or to do something in representation or on behalf of another, with the latter s consent or authority. The following are the elements of agency: (1) the parties consent, express or implied, to establish the relationship; (2) the object, which is the execution of a juridical act in relation to a third person; (3) the representation, by which the one who acts as an agent does so, not for oneself, but as a representative; (4) the limitation that the agent acts within the scope of his or her authority. As the basis of agency is representation, there must be, on the part of the principal, an actual intention to appoint, an intention naturally inferable from the principal s words or actions. In the same manner, there must be an intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is generally no agency. 3. Civil Law; Agency; Declarations of agents alone are generally insufficient to establish the fact or extent of their authority.The declarations of agents alone are generally insufficient to establish the fact or extent of their authority. The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person alleging it. In the

G.R. No. 148211. July 25, 2006.* SINCERE Z. VILLANUEVA, petitioner, vs. MARLYN P. NITE,** respondent. Actions; Annulment of Judgment; Parties; An action for annulment of judgment can be filed by one who was not a party to the case in which the assailed judgment was rendered. Annulment of judgment is a remedy in law independent of the case where the judgment sought to be annulled is promulgated. It can be filed by one who was not a party to the case in which the assailed judgment was rendered. Section 1 of Rule 47 provides: Section 1. Coverage. This Rule shall govern the annulment by the Court of Appeals of judgments or final orders and resolutions in civil actions of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner. Respondent may avail of the remedy of annulment of judgment under Rule 47. The ordinary remedies of new trial, appeal and petition for relief were not available to her for the simple reason that she was not made a party to the suit against ABC. Thus, she was neither able to participate in the original proceedings nor resort to the other remedies because the case was filed when she was abroad. Same; Annulment of judgment may be based only on extrinsic fraud and lack of jurisdiction. Annulment of judgment may be based only on extrinsic fraud and lack of jurisdiction. Extrinsic or collateral fraud pertains to such fraud which prevents the aggrieved party from having a trial or presenting his case to the court, or is used to procure the judgment without fair submission of the controversy. This refers to acts intended to keep the unsuccessful party away from the courts as when there is a false promise of compromise or when one is kept in ignorance of the suit. Banks and Banking; Negotiable Instruments Law; Checks; Parties; If a bank refuses to pay a check (notwithstanding sufficiency of funds), the payee-holder cannot sue the bank the payee should instead sue the drawer who might in turn sue the bank. If a bank refuses to pay a check (notwithstanding the sufficiency of funds), the payee-holder cannot, in view of the cited sections, sue the bank. The payee should instead sue the drawer who might in turn sue the bank. Section 189 is sound law based on logic and established legal principles: no privity of contract exists between the drawee-bank and the payee. Indeed, in this case, there was no such privity of contract between ABC and petitioner. Petitioner should not have sued ABC. Contracts take effect only between the parties, their assigns and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. None of the foregoing exceptions to the relativity of contracts applies in this case. Parties; Words and Phrases; An indispensable party is one whose interest in the controversy is such that a final decree will necessarily affect his rights; If an indispensable party is not impleaded, any judgment is ineffective. The contract of loan was between petitioner and respondent. No collection suit

could prosper without respondent who was an indispensable party. Rule 3, Sec. 7 of the Rules of Court states: Sec. 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. (emphasis ours) An indispensable party is one whose interest in the controversy is such that a final decree will necessarily affect his rights. The court cannot proceed without his presence. If an indispensable party is not impleaded, any judgment is ineffective. [Villanueva vs. Nite, 496 SCRA 459(2006)]

Dispositive Portion: WHEREFORE, the assailed CA Decision dated August 30, 2002 is REVERSED and SET ASIDE and the Complaint in this case DISMISSED for lack of merit. Petitioner s counter- claim is GRANTED, ordering the respondent RCBC to reimburse petitioner the amount P12,822.20, with legal interest computed from the time of salary deduction up to actual payment, and to pay petitioner the total amount of P60,000.00 as moral and exemplary damages, and attorney s fees.

Case Title : MELVA THERESA ALVIAR GONZALES, petitioner, vs. RIZAL COMMERCIAL BANKING CORPORATION, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negotiable Instruments|Checks|Equity Syllabi: 1. Negotiable Instruments; Checks; A subsequent party which caused the defect in the instrument cannot have any recourse against any of the prior endorsers in good faith.The dollar-check in question in the amount of $7,500.00 drawn by Don Zapanta of Ade Medical Group (U.S.A.) against a Los Angeles, California bank, Wilshire Center Bank N.A., was dishonored because of End. Irregular, i.e., an irregular endorsement. While the foreign drawee bank did not specifically state which among the four signatures found on the dorsal portion of the check made the check irregularly endorsed, it is absolutely undeniable that only the signature of Olivia Gomez, an RCBC employee, was a qualified endorsement because of the phrase up to P17,500.00 only. There can be no other acceptable explanation for the dishonor of the foreign check than this signature of Olivia Gomez with the phrase up to P17,500.00 only accompanying it. This Court definitely agrees with the petitioner that the foreign drawee bank would not have dishonored the check had it not been for this signature of Gomez with the same phrase written by her. The foreign drawee bank, Wilshire Center Bank N.A., refused to pay the bearer of this dollar-check drawn by Don Zapanta because of the defect introduced by RCBC, through its employee, Olivia Gomez. It is, therefore, a useless piece of paper if returned in that state to its original payee, Eva Alviar. There is no doubt in the mind of the Court that a subsequent party which caused the defect in the instrument cannot have any recourse against any of the prior endorsers in good faith. Eva Alviar s and the petitioner s liability to subsequent holders of the foreign check is governed by the Negotiable Instruments Law. 2. Same; Same; Equity; The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for irregular endorsement must not be the irregular endorser himself who gave cause for the dishonor; Courts of law, being also courts of equity, may not countenance grossly unfair results without doing violence to their solemn obligation to administer fair and equal justice for all.Section 66 of the Negotiable Instruments Law which further states that the general endorser additionally engages that, on due presentment, the instrument shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent endorser who may be compelled to pay it, must be read in the light of the rule in equity requiring that those who come to court should come with clean hands. The holder or subsequent endorser who tries to claim under the instrument which had been dishonored for irregular endorsement must not be the irregular endorser himself who gave cause for the dishonor. Otherwise, a clear injustice results when any subsequent party to the instrument may simply make the instrument defective and later claim from prior endorsers who have no knowledge or participation in causing or introducing said defect to the instrument, which thereby caused its dishonor. Courts in this jurisdiction are not only courts of law but also of equity, and therefore cannot unqualifiedly apply a provision of law so as to cause clear injustice which the framers of the law could not have intended to so deliberately cause. In Carceller v. Court of Appeals, 302 SCRA 718 (1999), this Court had occasion to stress: Courts of law, being also courts of equity, may not countenance such grossly unfair results without doing violence to its solemn obligation to administer fair and equal justice for all. Division: SECOND DIVISION Docket Number: G.R. No. 156294 Counsel: Jinky Rose L. Go, Siguion Reyna, Montecillo & Ongsiako Ponente: GARCIA

Case Title : GEMMA ILAGAN, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent., ALBERT CORDERO SY, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent., JAIME TAN, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITIONS for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Estafa|Evidence Syllabi: 1. Criminal Law; Estafa; Evidence; Deceit and damage are the essential elements of estafa; Deceit to constitute estafa under Article 315, 2(d) of the Revised Penal Code must be the efficient cause of the defraudation.Deceit and damage are the essential elements of estafa. Deceit to constitute estafa under above-quoted Article 315, 2(d) of the Revised Penal Code must be the efficient cause of the defraudation. There must be concomitance: the issuance of the check should be the means to obtain money or property from the payer. 2. Same; Same; Same; Petitioners lack of criminal liability notwithstanding, they are civilly liable in the amount of P470,350 to bear 12% interest from the filing of the information on January 30, 2002 up to the time it is fully paid.The lack of criminal liability of petitioners then notwithstanding, they are civilly liable in the amount of P470,350, to bear 12% interest from the filing of the information on January 30, 2002 up to the time it is fully paid. Division: SECOND DIVISION Docket Number: G.R. No. 166873, G.R. No. 168069, G.R. No. 168543 Counsel: M.M. Lazaro and Associates, Virgilio B. Jara, Antonio H. Tan, R.A. Din, Jr. and Associates Law Office, The Solicitor General Ponente: CARPIO-MORALES Dispositive Portion: WHEREFORE, the challenged decision of the Court of Appeals convicting petitioners Gemma Ilagan, Albert Cordero Sy, and Jaime Tan is REVERSED and SET ASIDE. Petitioners are thus ACQUITTED of the crime charged.

Case Title : EQUITABLE PCI BANK, petitioner, vs. ARCELITO B. TAN, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Damages|Banks and Banking Syllabi: 1. Administrative Law; Administrative issuances must not override, supplant or modify the law, but must remain consistent with the law they intend to carry outOffice Order No. 82-04-CG cannot defeat the provisions of Republic Act No. 8246. Although CA-G.R. CV No. 41928 originated from Cebu City and is thus referable to the CA s Divisions in Cebu City, the said case was already submitted for decision as of July 25, 1994. Hence, CA-G.R. CV No. 41928, which was already submitted for decision as of the effectivity of R.A. 8246, i.e., February 1, 1997, can no longer be referred to the CA s Division in Cebu City. Thus, the CA s Former Fourth Division correctly ruled that CA-G.R. CV No. 41928 pending in its division was not among those cases that had to be re-raffled to the newly-created CA Divisions in the Visayas Region. Further, administrative issuances must not override, supplant or modify the law, but must remain consistent with the law they intend to carry out. Thus, Office Order No. 82-04-CG cannot defeat the provisions of R.A. 8246. 2. Same; Same; The highest degree of diligence is expected of banking institutionshigh standards of integrity and performance are required of them and where they fail in that regard, award of exemplary damages may be made. The law allows the grant of exemplary damages to set an example for the public good.

The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and most of all, confidence. For this reason, banks should guard against injury attributable to negligence or bad faith on its part. Without a doubt, it has been repeatedly emphasized that since the banking business is impressed with public interest, of paramount importance thereto is the trust and confidence of the public in general. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even required of it. Petitioner, having failed in this respect, the award of exemplary damages in the amount of P50,000.00 is in order. 3. Same; Banks and Banking; A bank is under obligation to treat the accounts of its depositors with meticulous care whether such account consists only of a few hundred pesos or of millions of pesosresponsibility arising from negligence in the performance of every kind of obligation is demandable. Anent the award of moral damages, it is settled that moral damages are meant to compensate the claimant for any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injuries unjustly caused. In Philippine National Bank v. Court of Appeals, 315 SCRA 309 (1999), the Court held that a bank is under obligation to treat the accounts of its depositors with meticulous care whether such account consists only of a few hundred pesos or of millions of pesos. Responsibility arising from negligence in the performance of every kind of obligation is demandable. While petitioner s negligence in that case may not have been attended with malice and bad faith, the banks negligence caused respondent to suffer mental anguish, serious anxiety, embarrassment and humiliation. In said case, We ruled that respondent therein was entitled to recover reasonable moral damages. In this case, the unexpected cutting off of respondent s electricity, which resulted in the stoppage of his business operations, had caused him to suffer humiliation, mental anguish and serious anxiety. The award of P50,000.00 is reasonable, considering the reputation and social standing of respondent. As found by the CA, as an accredited supplier, respondent had been reposed with a certain degree of trust by various reputable and well-established corporations. 4. Same; The allowance of temperate damages when actual damages were not adequately proven is ultimately a rule drawn from equity, the principle affording relief to those definitely injured who are unable to prove how definite the injury.In the absence of competent proof on the actual damages suffered, respondent is entitled to temperate damages. Under Article 2224 of the Civil Code of the Philippines, temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. The allowance of temperate damages when actual damages were not adequately proven is ultimately a rule drawn from equity, the principle affording relief to those definitely injured who are unable to prove how definite the injury. 5. Damages; The Court cannot simply rely on speculation, conjecture or guesswork in determining the amount of damages.Actual or compensatory damages are those awarded in order to compensate a party for an injury or loss he suffered. They arise out of a sense of natural justice and are aimed at repairing the wrong done. Except as provided by law or by stipulation, a party is entitled to an adequate compensation only for such pecuniary loss as he has duly proven. To recover actual damages, not only must the amount of loss be capable of proof; it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or the best evidence obtainable. Respondent s claim for damages was based on purchase orders from various customers which were allegedly not met due to the disruption of the operation of his sawmills. However, aside from the purchase orders and his testimony, respondent failed to present competent proof on the specific amount of actual damages he suffered during the entire period his power was cut off. No other evidence was provided by respondent to show that the foregoing purchase orders were not met or were canceled by his various customers. The Court cannot simply rely on speculation, conjecture or guesswork in determining the amount of damages. 6. Same; Same; Same; As a matter of practice, bank tellers would not receive nor honor such checks which they believe to be unclear, without the countersignature of its drawer.In its memorandum filed before the RTC, petitioner submits that respondent caused confusion on the true date of the check by writing the date of the check as 5/3/0/92. If, indeed, petitioner was confused on whether the check was dated

May 3 or May 30 because of the / which allegedly separated the number 3 from the 0, petitioner should have required respondent drawer to countersign the said / in order to ascertain the true intent of the drawer before honoring the check. As a matter of practice, bank tellers would not receive nor honor such checks which they believe to be unclear, without the counter-signature of its drawer. Petitioner should have exercised the highest degree of diligence required of it by ascertaining from the respondent the accuracy of the entries therein, in order to settle the confusion, instead of proceeding to honor and receive the check. 7. Same; Same; Negligence; Proximate Cause; Words and Phrases; Proximate cause is that cause which, in a natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred; The bank on which the check is drawn, known as the drawee bank, is under strict liability to pay to the order of the payee in accordance with the drawer s instructions as reflected on the face and by the terms of the checkpayment made before the date specified by the drawer is clearly against the drawee bank s duty to its client. With respect to the third issue, petitioner submits that respondent s way of writing the date on Check No. 275100 was the proximate cause of the dishonor of his three other checks. Contrary to petitioner s view, the Court finds that its negligence is the proximate cause of respondent s loss. Proximate cause is that cause which, in a natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. The proximate cause of the loss is not respondent s manner of writing the date of the check, as it was very clear that he intended Check No. 275100 to be dated May 30, 1992 and not May 3, 1992. The proximate cause is petitioner s own negligence in debiting the account of the respondent prior to the date as appearing in the check, which resulted in the subsequent dishonor of several checks issued by the respondent and the disconnection by ASELCO and ANECO of his electric supply. The bank on which the check is drawn, known as the drawee bank, is under strict liability to pay to the order of the payee in accordance with the drawer s instructions as reflected on the face and by the terms of the check. Thus, payment made before the date specified by the drawer is clearly against the drawee bank s duty to its client. 8. Same; Same; The diligence required of banks, therefore, is more than that of a good father of a family.The diligence required of banks, therefore, is more than that of a good father of a family. In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. From the foregoing, it is clear that petitioner bank did not exercise the degree of diligence that it ought to have exercised in dealing with its client. 9. Same; Banks and Banking; Statutes; Although Republic Act No. 8791 took effect only in the year 2000, the Court had already imposed on banks the same high standard of diligence required under Republic Act No. 8791 at the time of the untimely debiting of respondent s account by petitioner in May 1992.The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of R.A. 8791 decrees: Declaration of Policy. The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. Although R.A. 8791 took effect only in the year 2000, the Court had already imposed on banks the same high standard of diligence required under R.A. 8791 at the time of the untimely debiting of respondent s account by petitioner in May 1992. In Simex International (Manila), Inc. v. Court of Appeals, 183 SCRA 360 (1990), which was decided in 1990, the Court held that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. 10. Mercantile Law; Negotiable Instruments Law; Checks; The purpose for the issuance of the check has no logical connection with the date of the check.The RTC concluded that the check was dated May 3, 1992 and not May 30, 1992, because the same check was not issued to pay for Bills of Lading Nos. 15, 16 and 17, as respondent claims. The trial court s conclusion is preposterous and illogical. The purpose for the issuance of the check has no logical connection

with the date of the check. Besides, the trial court need not look into the purpose for which the check was issued. A reading of Check No. 275100 would readily show that it was dated May 30, 1992. 11. Appeals; In an appeal by certiorari under Rule 45 of the Rules of Court, only questions of law may be raised, but one of the recognized exceptions is when the findings of the appellate court are contrary to those of the trial court.The principle is well established that this Court is not a trier of facts. Therefore, in an appeal by certiorari under Rule 45 of the Rules of Court, only questions of law may be raised. The resolution of factual issues is the function of the lower courts whose findings on these matters are received with respect and are, as a rule, binding on this Court. However, this rule is subject to certain exceptions. One of these is when the findings of the appellate court are contrary to those of the trial court. Due to the divergence of the findings of the CA and the RTC, We shall re-examine the facts and evidence presented before the lower courts. Division: SECOND DIVISION Docket Number: G.R. No. 165339 Counsel: Francis M. Zosa Ponente: PERALTA Dispositive Portion: Petitioner Equitable PCI Bank is instead directed to pay respondent the amount of Fifty Thousand Pesos (P50,000.00) as temperate damages. The award of One Million Eight Hundred Sixty-Four Thousand and Five Hundred Pesos (P1,864,500.00) as actual damages, in favor of respondent Arcelito B. Tan, is DELETED; and 2. WHEREFORE, the petition is PARTIALLY GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 41928, dated May 31, 2004 and August 24, 2004, respectively, are AFFIRMED with the following MODIFICATIONS: 1.

Division: SECOND DIVISION Docket Number: G.R. No. 188412 Counsel: Jose Luis V. Agcaoili Ponente: MENDOZA Dispositive Portion: Costs of suit, plus interest at the legal rate reckoned from the filing of the complaint. P50,000.00 as and for attorney s fees; and 4] P50,000.00 as and for exemplary damages; 3] P100,000.00 as and for moral damages; 2] WHEREFORE, the December 16, 2008 Decision of the Court of Appeals is MODIFIED to read as follows: In view of the foregoing, judgment is hereby rendered ordering defendant Citibank, N.A. to pay plaintiff Atty. Ernesto S. Dinopol the following: 1]

Case Title : CITIBANK, N.A., petitioner, vs. ATTY. ERNESTO S. DINOPOL, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Banks and Banking Syllabi: 1. Remedial Law; Certiorari; The general rule is that in petitions for review on certain certiorari, the Court will not re-examine the findings of fact of the appellate court; Exceptions.The general rule is that in petitions for review on certiorari, the Court will not re-examine the findings of fact of the appellate court except (a) when the latter s findings are grounded entirely on speculations, surmises or conjectures; (b) when its inference is manifestly mistaken, absurd or impossible; (c) when there is a grave abuse of discretion; (d) when its findings of fact are conflicting; and (e) when it goes beyond the issues of the case. Citibank fails to convince the Court that the case falls under any of the exceptions. Hence, the findings of fact should no longer be reviewed. 2. Banks and Banking; Banks must always act in good faith and must win the confidence of clients and people in general.In any event, Citibank should have been more cautious in dealing with its clients since its business is imbued with public interest. Banks must always act in good faith and must win the confidence of clients and people in general. It is irrelevant whether the client is a lawyer or not. 3. Same; Same; Exemplary Damages; The law allows the award of exemplary damages by way of example for the public good.As to the award of exemplary damages, the law allows it by way of example for the public good. The business of banking is impressed with public interest and great reliance is made on the bank s sworn profession of diligence and meticulousness in giving irreproachable service. Thus, the Court affirms the award as a way of setting an example for the public good. In addition, it also provided for attorney s fees. Both are subject to legal interest. 4. Civil Law; Damages; Moral Damages; The award of moral damages should be granted in reasonable amounts depending on the facts and circumstances of the case.The award of moral damages should be granted in reasonable amounts depending on the facts and circumstances of the case. Moral damages are meant to compensate the claimant for any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injuries unjustly caused.

Case Title : LINA LIM LAO, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Batas Pambansa Blg. 22 Syllabi: 1. Criminal Law; Batas Pambansa Blg. 22; Elements of the offense penalized under B.P. Blg. 22.This Court listed the elements of the offense penalized under B.P. Blg. 22, as follows: (1) the 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 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 check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. 2. Same; Same; Responsibility under B.P. Blg. 22 is personal to the accused, hence, personal knowledge of the notice of dishonor is necessary.In this light, the postulate of Respondent Court of Appeals that (d)emand on the Corporation constitutes demand on appellant (herein petitioner), is erroneous. Premiere has no obligation to forward the notice addressed to it to the employee concerned, especially because the corporation itself incurs no criminal liability under B.P. Blg. 22 for the issuance of a bouncing check. Responsibility under B.P. Blg. 22 is personal to the accused; hence, personal knowledge of the notice of dishonor is necessary. Consequently, constructive notice to the corporation is not enough to satisfy due process. Moreover, it is petitioner, as an officer of the corporation, who is the latter s agent for purposes of receiving notices and other documents, and not the other way around. It is but axiomatic that notice to the corporation, which has a personality distinct and separate from the petitioner, does not constitute notice to the latter. 3. Same; Same; The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal prosecution.In this light, the full payment of the amount appearing in the check within five banking days from notice of dishonor is a complete defense. The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a criminal prosecution. Accordingly, procedural due process clearly enjoins that a notice of dishonor be actually served on petitioner. Petitioner has a right to demand and the basic postulates of fairness require that the notice of dishonor be actually sent to and received by her to afford her the opportunity to avert prosecution under B.P. Blg. 22. 4. Same; Same; Because no notice of dishonor was actually sent to and received by the petitioner, the prima facie presumption that she knew about the insufficiency of funds cannot apply.Because no notice of dishonor was actually sent to and received by the petitioner, the prima facie presumption that she knew about the insufficiency of funds cannot apply. Section 2 of B.P. Blg. 22 clearly provides that this presumption arises not from the mere fact of drawing, making and issuing a bum check; there must also be a showing that, within five banking days from receipt of the notice of dishonor, such maker or drawer failed to pay the holder of the check the amount due thereon or to make arrangement for its payment in full by the drawee of such check. 5. Same; Same; The element of knowledge of insufficiency of funds having been proven to be absent, petitioner is entitled to an acquittal.Since petitioner Lina Lim Lao signed the checks without knowledge of the insufficiency of funds, knowledge she was not expected or obliged to possess

under the organizational structure of the corporation, she may not be held liable under B.P. Blg. 22. For in the final analysis, penal statutes such as B.P. Blg. 22 must be construed with such strictness as to carefully safeguard the rights of the defendant x x x. The element of knowledge of insufficiency of funds having been proven to be absent, petitioner is therefore entitled to an acquittal. 6. Same; Same; The prosecution has a duty to prove all the elements of the crime, including the acts that give rise to the prima facie presumption; petitioner, on the other hand, has a right to rebut the prima facie presumption.In the present case, the fact alone that petitioner was a signatory to the checks that were subsequently dishonored merely engenders the prima facie presumption that she knew of the insufficiency of funds, but it does not render her automatically guilty under B.P. Blg. 22. The prosecution has a duty to prove all the elements of the crime, including the acts that give rise to the prima facie presumption; petitioner, on the other hand, has a right to rebut the prima facie presumption. Therefore, if such knowledge of insufficiency of funds is proven to be actually absent or non-existent, the accused should not be held liable for the offense defined under the first paragraph of Section 1 of B.P. Blg. 22. Although the offense charged is a malum prohibitum, the prosecution is not thereby excused from its responsibility of proving beyond reasonable doubt all the elements of the offense, one of which is knowledge of the insufficiency of funds. 7. Same; Same; Knowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an essential element of the offense.Knowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an essential element of the offense. There is a prima facie presumption of the existence of this element from the fact of drawing, issuing or making a check, the payment of which was subsequently refused for insufficiency of funds. It is important to stress, however, that this is not a conclusive presumption that forecloses or precludes the presentation of evidence to the contrary. Division: THIRD DIVISION Docket Number: G.R. No. 119178 Counsel: Garcia, Garcia, Ong Vano Law Offices, Generosa R. Jacinto Law Firm Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the questioned Decision of the Court of Appeals affirming that of the Regional Trial Court, is hereby REVERSED and SET ASIDE. Petitioner Lina Lim Lao is ACQUITTED. The Clerk of Court is hereby ORDERED to furnish the Secretary of Justice and the Secretary of Interior and Local Government with copies of this Decision. No costs.

dishonored; It must be shown further that the person who issued the check has knowledge of the insufficiency of funds.To hold a person liable under BP 22, it is not enough to establish that a check issued was subsequently dishonored. It must be shown further that the person who issued the check knew 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. Because this element involves a state of mind which is difficult to establish, Section 2 of the law creates a prima facie presumption of such knowledge. 4. Criminal Law; Batas Pambansa Blg. 22; Evidence; Prima facie presumption does not arise when the issuer pays the amount of the check or makes arrangement for its payment within five banking days after receiving notice that such check has not been paid by the drawee. The prima facie presumption arises when a check is issued. But the law also provides that the presumption does not arise when the issuer pays the amount of the check or makes arrangement for its payment within five banking days after receiving notice that such check has not been paid by the drawee. Verily, BP 22 gives the accused an opportunity to satisfy the amount indicated in the check and thus avert prosecution. As the Court held in Lozano v. Martinez, the aforecited provision serves to mitigate the harshness of the law in its application. This opportunity, however, can be used only upon receipt by the accused of a notice of dishonor. This point was underscored by the Court in Lina Lim Lao v. Court of Appeals. 5. Criminal Law; Batas Pambansa Blg. 22; Evidence; To create the prima facie presumption it must be shown that the issuer received a notice of dishonor and, within five banking days thereafter, failed to satisfy the amount of the check or make arrangement for its payment.In order to create the prima facie presumption that the issuer knew of the insufficiency of funds, it must be shown that he or she received a notice of dishonor and, within five banking days thereafter, failed to satisfy the amount of the check or make arrangement for its payment. 6. Criminal Law; Batas Pambansa Blg. 22; Evidence; Evidence on hand demonstrates the indelible fact that petitioner did not receive notice that the checks had been dishonored; Presumption that petitioner knew of the insufficiency of funds cannot arise.Notwithstanding the clear import of the post-master s certification, the prosecution failed to adduce any other proof that petitioner received the post office notice but unjustifiably refused to claim the registered mail. It is possible that the drawee bank sent petitioner a notice of dishonor, but the prosecution did not present evidence that the bank did send it, or that petitioner actually received it. It was also possible that she was trying to flee from complainant by staying in different addresses. Speculations and possibilities, however, cannot take the place of proof. Conviction must rest on proof beyond reasonable doubt. Clearly, the evidence on hand demonstrates the indelible fact that petitioner did not receive notice that the checks had been dishonored. Necessarily, the presumption that she knew of the insufficiency of funds cannot arise. Division: THIRD DIVISION

Case Title : BETTY KING, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Batas Pambansa Blg. 22|Evidence Syllabi: 1. Criminal Law; Batas Pambansa Blg. 22; Evidence; Petitioner s conviction was based on the evidence presented during trial, and not on the stipulations made during the pre-trial.Petitioner s conviction was based on the evidence presented during trial, and not on the stipulations made during the pretrial. Hence, petitioner s admissions during the trial are governed not by the Fule ruling or by Section 4 of Rule 118, but by Section 4 of Rule 129. 2. Criminal Law; Batas Pambansa Blg. 22; Evidence; Elements of the Crime of Batas Pambansa Blg. 22.This Court has held that the elements of the crime are as follows: 1. The accused makes, draws or issues any check to apply to account or for value. 2. The check is subsequently dishonored by the drawee bank for insufficiency of funds or credit; or it would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment. 3. The accused knows at the time of the issuance that he or she does not have sufficient funds in, or credit with, drawee bank for the payment of the check in full upon its presentment. 3. Criminal Law; Batas Pambansa Blg. 22; Evidence; To hold a person liable under BP 22, it is not enough to establish that a check issued was subsequently

Docket Number: G.R. No. 131540 Counsel: Chua and Associates Law Office, The Solicitor General Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the assailed Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. Petitioner Betty King is ACQUITTED for failure of the prosecution to prove all the elements of the crimes charged. No pronouncement as to costs.

Case Title : GREAT ASIAN SALES CENTER CORPORATION and TAN CHONG LIN, petitioners, vs. THE COURT OF APPEALS and BANCASIA FINANCE AND INVESTMENT CORPORATION, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Corporation Law|Commercial Law|Negotiable Instruments Law Syllabi: 1. Corporation Law; The exercise of the corporate powers of the corporation rested in the board of directors save in those instances where the Corporation Code requires stockholders approval for certain specific acts.The Corporation Code of the Philippines vests in the board of directors the exercise of the corporate powers of the corporation, save in those instances where the Code requires stockholders approval for certain specific acts. In the

ordinary course of business, a corporation can borrow funds or dispose of assets of the corporation only on authority of the board of directors. The board of directors normally designates one or more corporate officers to sign loan documents or deeds of assignment for the corporation. 2. Commercial Law; Negotiable Instruments Law; Meaning of Discounting Line. In the financing industry, the term discounting line means a credit facility with a financing company or bank, which allows a business entity to sell, on a continuing basis, its accounts receivable at a discount. The term discount means the sale of a receivable at less than its face value. The purpose of a discounting line is to enable a business entity to generate instant cash out of its receivables which are still to mature at future dates. The financing company or bank which buys the receivables makes its profit out of the difference between the face value of the receivable and the discounted price. 3. Commercial Law; Negotiable Instruments Law; Under the Negotiable Instruments Law, notice of dishonor is not required if the drawer has no right to expect or require the bank to honor the check, or if the drawer has countermanded payment.Under the Negotiable Instruments Law, notice of dishonor is not required if the drawer has no right to expect or require the bank to honor the check, or if the drawer has countermanded payment. In the instant case, all the checks were dishonored for any of the following reasons: account closed, account under garnishment, insufficiency of funds, or payment stopped. In the first three instances, the drawers had no right to expect or require the bank to honor the checks, and in the last instance, the drawers had countermanded payment. 4. Commercial Law; Negotiable Instruments Law; Delay in notice of dishonor, where such notice is required, discharges the drawer only to the extent of the loss caused by the delay.Under common law, delay in notice of dishonor, where such notice is required, discharges the drawer only to the extent of the loss caused by the delay. This rule finds application in this jurisdiction pursuant to Section 196 of the Negotiable Instruments Law which states, Any case not provided for in this Act shall be governed by the provisions of existing legislation, or in default thereof, by the rules of the Law Merchant. Under Section 186 of the Negotiable Instruments Law, delay in the presentment of checks discharges the drawer. However, Section 186 refers only to delay in presentment of checks but is silent on delay in giving notice of dishonor. Consequently, the common law or Law Merchant can supply this gap in accordance with Section 196 of the Negotiable Instruments Law. 5. Commercial Law; Negotiable Instruments Law; Distinction between a Discounting Line and a Loan Accommodation.At any rate, there is indeed a fine distinction between a discounting line and a loan accommodation. If the accounts receivable, like postdated checks, are sold for a consideration less than their face value, the transaction is one of discounting, and is subject to the provisions of the Financing Company Act. The assignee is immediately subrogated as creditor of the accounts receivable. However, if the accounts receivable are merely used as collateral for the loan, the transaction is only a simple loan, and the lender is not subrogated as creditor until there is a default and the collateral is foreclosed. Division: THIRD DIVISION Docket Number: G.R. No. 105774 Counsel: Antonio H. Garces, Balgos & Perez, Angelito Chua Ponente: CARPIO Dispositive Portion: WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R.CV No. 20167 is AFFIRMED with MODIFICATION. Petitioners are ordered to pay, solidarily, private respondent the following amounts: (a) P1,042,005.00 plus 3% penalty thereon, (b) interest on the total outstanding amount in item (a) at the legal rate of 12% per annum from the filing of the complaint until the same is fully paid, (c) attorney s fees equivalent to 25% of the total amount in item (a), including interest at 12% per annum on the outstanding amount of the attorney s fees from the finality of this judgment until the same is fully paid, and (c) costs of suit.

Case Title : WILLY G. SIA, appellee, vs. PEOPLE OF THE PHILIPPINES, appellant.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals.

Syllabi Class : Criminal Law|Batas Pambansa Bilang 22 Syllabi: 1. Criminal Law; Batas Pambansa Bilang 22; The act sought to be prevented by B.P. Blg. 22 is the act of making and issuing a check with the knowledge that, at the time of issue, the drawer issuing the check does not have sufficient funds in or credit with the bank.The act sought to be prevented by the law is the act of making and issuing a check with the knowledge that, at the time of issue, the drawer issuing the check does not have sufficient funds in or credit with the bank for payment and the check was subsequently dishonored upon presentment. What the law punishes is the issuance of a worthless check and not the purpose for which such check was issued nor the terms or conditions relating to its issuance. The thrust of the law is to prohibit, under pain of penal sanctions, the making of worthless checks and putting them in circulation. The crime is one against public order and is malum prohibitum. The law is intended to safeguard the interests of the banking system and the legitimate checking account user. It is not intended nor designed to coerce a debtor to pay his debt, nor to favor or encourage those who seek to enrich themselves through manipulation and circumvention of the purpose of the law. 2. Criminal Law; Batas Pambansa Bilang 22; To hold a person liable, the prosecution must prove that the accused knew, at the time of issue, that he does not have sufficient funds in or credit for the full payment of such check upon its presentment.To hold a person liable, the prosecution must prove that the accused knew, at the time of issue, that he does not have sufficient funds in or credit for the full payment of such check upon its presentment. The prosecution must rely on the strength of its own evidence and not on the weakness of the evidence of the accused. 3. Criminal Law; Batas Pambansa Bilang 22; Knowledge on the part of the drawer or maker of the insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an essential element of the offense.Knowledge on the part of the drawer or maker of the insufficiency of funds or credit in the drawee bank for the payment of a check upon its presentment is an essential element of the offense. This element involves a state of the mind of the drawer or maker of the check which is difficult for the prosecution to prove. To ease the burden of the prosecution, Section 2 of B.P. Blg. 22 created a prima facie presumption of knowledge on the part of the drawer or maker of the check of the insufficiency of his fund in the drawee bank. 4. Criminal Law; Batas Pambansa Bilang 22; The drawer or maker of a check has a right, under the law, to demand that a written notice of dishonor be sent to and received by him to enable him to avoid indictment for violation of B.P. Blg. 22.For the presumption to arise, the prosecution must adduce evidence to prove the factual basis for its onset, namely, (a) the check is presented within ninety (90) days from the date of the check; (b) the drawer or maker of the check receives notice that such check has not been paid by the drawer; and, (c) the drawer or maker of the check fails to pay the holder of the check the amount due thereon, or makes arrangements for payment in full within five (5) banking days after receiving notice that such check has not been paid by the drawer. With the onset of the presumption, the burden of evidence is shifted on the drawer/maker of the check to prove that, when he issued the subject check, he had no knowledge that he had insufficient funds in the drawee bank to answer for the amount due. The notice of dishonor may be sent to the drawer or maker by the drawee bank, the holder of the check, or the offended party, either by personal delivery or by registered mail. The drawer or maker of a check has a right, under the law, to demand that a written notice of dishonor be sent to and received by him to enable him to avoid indictment for violation of B.P. Blg. 22. 5. Criminal Law; Batas Pambansa Bilang 22; Notice of dishonor of a check to the maker must be in writing.Construing Section 2 of the said law, we held in Domagsang v. Court of Appeals, et al. that the notice of dishonor of a check to the maker must be in writing. A mere oral notice to the drawer or maker of the dishonor of his check is not enough. 6. Criminal Law; Batas Pambansa Bilang 22; Unless and until the drawer or maker of the check receives a written notice of dishonor of the check, or where there is no proof as to when and such notice of dishonor was received by the drawer or maker, the five-day period within which the drawer or maker has to pay the amount due or made arrangements with the drawee bank for the payment of the check, cannot be determined.Unless and until the drawer or maker of the check receives a written notice of dishonor of the check, or where there is no proof as to when such notice of dishonor was received by the drawer or maker, the five-day period within which

the drawer or maker has to pay the amount due or made arrangements with the drawee bank for the payment of the check, cannot be determined. In such case, the prima facie presumption cannot arise. Emphasizing the intent of the State in providing a five-day banking period from notice of dishonor of a check within which the maker or drawer may pay the amount due or make arrangements with the drawee bank for its payments the Court declared in Lao v. Court of Appeals: It has been observed that the State, under this statute, actually offers the violator a compromise by allowing him to perform some act which operates to preempt the criminal action, and if he opts to perform it the action is abated. This was also compared to certain laws allowing illegal possessors of firearms a certain period of time to surrender the illegally possessed firearms to the Government, without incurring any criminal liability. 7. Criminal Law; Batas Pambansa Bilang 22; If the maker or drawer pays, or makes arrangements with the drawee bank for the payment of the amount due within the five-day period from notice of the dishonor given to the drawer, it is a complete defense; the accused may no longer be indicted for violation of Section 1, B.P. Blg. 22.If the maker or drawer pays, or makes arrangements with the drawee bank for the payment of the amount due within the five-day period from notice of the dishonor given to the drawer, it is a complete defense; the accused may no longer be indicted for violation of Section 1, B.P. Blg. 22. If he is so indicted, he may set up the payment of the amount due as a complete defense. 8. Criminal Law; Batas Pambansa Bilang 22; In not sending a notice of dishonor or letter of dishonor to the petitioner as required by law, the COLF deprived the petitioner of his right to avoid prosecution for violation of B.P. Blg 22.Assuming that the petitioner had knowledge that he had insufficient funds in the drawee bank when he issued the questioned checks, he could still have paid the checks or made arrangements with the drawee bank for the payment of the said checks if he had been duly notified of their dishonor. In not sending a notice or letter of dishonor to the petitioner as required by law, the COLF deprived the petitioner of his right to avoid prosecution for violation of B.P. Blg. 22. Division: SECOND DIVISION Docket Number: G.R. No. 149695 Counsel: Abao, Pamfilo, Paras, Pineda & Agustin Law Offices, The Solicitor General Ponente: CALLEJO, SR. Dispositive Portion: IN LIGHT OF THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals affirming with modifications the Decision of the Regional Trial Court in Criminal Cases Nos. 11865 and 11866 are REVERSED and SET ASIDE. The petitioner is ACQUITTED of the crimes charged in said cases for insufficiency of evidence.

by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two hundred thousand pesos, or both such fine and imprisonment at the discretion of the court. The elements of the offense are: (1) Making, drawing, and issuance of any check to apply on account or for value; (2) knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor of the check for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. 2. Criminal Law; Violation of Batas Pambansa Blg. 22; Elements; Assuming arguendo that the payee had knowledge that he had insufficient funds at the time he issued the check, such knowledge by the payee is immaterial as deceit is not an essential element of the offense under B.P. Blg. 22; The gravamen of the offense is the issuance of a bad check hence malice and intent in the issuance thereof are inconsequential.Assuming arguendo that the payee had knowledge that he had insufficient funds at the time he issued the check, such knowledge by the payee is immaterial as deceit is not an essential element of the offense under Batas Pambansa Bilang 22. The gravamen of the offense is the issuance of a bad check; hence, malice and intent in the issuance thereof are inconsequential. 3. Negotiable Instruments Law; Notice of Dishonor of a Check; The notice of dishonor of a check may be sent to the drawer or maker by the drawee bank, the holder of the check, or the offended party either by personal delivery or by registered mail. The notice of dishonor to the maker of a check must be in writing.The notice of dishonor of a check may be sent to the drawer or maker by the drawee bank, the holder of the check, or the offended party either by personal delivery or by registered mail. The notice of dishonor to the maker of a check must be in writing. 4. Criminal Law; Violations of B.P. Blg. 22; Continuing Crimes; Remedial Law; Jurisdiction; Violations of BP Blg. 22 are categorized as transitory or continuing crimes; In such crimes, some acts material and essential to the crimes and requisite to their consummation occur in one municipality or territory and some in another, in which event, the court of either has jurisdiction to try the cases, it being understood that the first court taking cognizance of the case excludes the other.Violations of Batas Pambansa Bilang 22 are categorized as transitory or continuing crimes. In such crimes, some acts material and essential to the crimes and requisite to their consummation occur in one municipality or territory and some in another, in which event, the court of either has jurisdiction to try the cases, it being understood that the first court taking cognizance of the case excludes the other. Hence, a person charged with a transitory crime may be validly tried in any municipality or territory where the offense was in part committed. Division: FIRST DIVISION Docket Number: G.R. No. 144887

Case Title : ALFREDO RIGOR, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law|Negotiable Instruments Law|Violation of Batas Pambansa Blg. 22|Elements|Notice of Dishonor of a Check|Violations of B.P. Blg. 22|Continuing Crimes|Remedial Law|Jurisdiction Syllabi: 1. Criminal Law; Violation of Batas Pambansa Blg. 22; Elements; The elements of the offense are: (1) making, drawing, and issuance of any check to apply on account or for value; (2) knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor of the check for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.Petitioner is charged with violation of Section 1 of Batas Pambansa Bilang 22, thus: SECTION 1. Checks without sufficient funds. Any person who makes or draws and issues any check to apply on account or for value, knowing 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, which check is subsequently dishonored by the drawee bank 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 payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or

Counsel: Jesus A. Concepcion, The Solicitor General Ponente: AZCUNA Dispositive Portion: WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals, in CA-G.R. CR No. 18855, is hereby AFFIRMED. Costs against petitioner.

Case Title : JAMES SVENDSEN, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Criminal Law ; Bouncing Checks Law (B.P. Blg. 22) ; Loans ; Evidence ; Syllabi: 1. Criminal Law; Bouncing Checks Law (B.P. Blg. 22); Elements.For petitioner to be validly convicted of the crime under B.P. Blg. 22, the following requisites must thus concur: (1) the 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 he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) the subsequent dishonor of the check by the drawee bank

for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. 2. Same; Same; Same; Evidence; The presentation of the promissory note may be dispensed with in a prosecution for violation of B.P. Blg. 22 as the purpose for the issuance of such check is irrelevant in the determination of the accused s criminal liability.Respecting petitioner s claim that since the promissory note incorporating the stipulated 10% interest per month was not presented, there is no written proof thereof, hence, his obligation to pay the same must be void, the same fails. As reflected above, Cristina admitted such stipulation. In any event, the presentation of the promissory note may be dispensed with in a prosecution for violation of B.P. Blg. 22 as the purpose for the issuance of such check is irrelevant in the determination of the accused s criminal liability. It is for the purpose of determining his civil liability that the document bears significance. Notably, however, Section 24 of the Negotiable Instruments Law provides that Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration, and every person whose signature appears thereon to have become a party thereto for value. It was incumbent then on petitioner to prove thatthe check was not for a valuable consideration. This he failed to discharge. 3. Same; Same; Loans; Interests; Usury; An obligation to pay 10% interest per month on the loan is unconscionable and against public policywhile the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. 905, nothing therein grants lenders carte blanche to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets, and stipulations authorizing such interest are contra bonos mores, if not against the law. The decision of the MeTC, which was affirmed on appeal by the RTC and the appellate court, ordering petitioner to pay private complainant Cristina C. Reyes civil indemnity in the total amount of ONE HUNDRED SIXTY THOUSAND PESOS (P160,000) representing his civil obligation covered by subject check, deserves circumspect examination, however, given that the obligation of petitioner to pay 10% interest per month on the loan is unconscionable and against public policy. The P160,000 check petitioner issued to Cristina admittedly represented unpaid interest. By Cristina s information, the interest was computed at a fixed rate of 10% per month. While the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. 905, nothing therein grants lenders carte blanche to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. Stipulations authorizing such interest are contra bonos mores, if not against the law. They are, under Article 1409 of the New Civil Code, inexistent and void from the beginning. 4. Same; Same; Postal Service; Registry Receipts; Receipts for registered letters including return receipts do not themselves prove receiptthey must be properly authenticated to serve as proof of receipt of the letters. The evidence for the prosecution failed to prove the second element. While the registry receipt, which is said to cover the letter-notice of dishonor and of demand sent to petitioner, was presented, there is no proof that he or a duly authorized agent received the same. Receipts for registered letters including return receipts do not themselves prove receipt; they must be properly authenticated to serve as proof of receipt of the letters. Thus in Ting v. Court of Appeals, 344 SCRA 551 (2000), this Court observed: x x x All that we have on record is an illegible signature on the registry receipt as evidence that someone received the letter. As to whether this signature is that of one of the petitioners or of their authorized agent remains a mystery. From the registry receipt alone, it is possible that petitioners or their authorized agent did receive the demand letter. Possibilities, however, cannot replace proof beyond reasonable doubt. Division: SECOND DIVISION Docket Number: G.R. No. 175381 Counsel: Florosco P. Fronda Ponente: CARPIO-MORALES Dispositive Portion: WHEREFORE, the Court of Appeals Decision of November 16, 2006 is REVERSED and SET ASIDE. Petitioner, James Svendsen, is acquitted of the crime charged for failure of the prosecution to prove his guilt beyond reasonable doubt. He is, however, ordered to pay private complainant, Cristina C. Reyes, the amount of SIXTEEN THOUSAND PESOS (P16,000) representing civil indemnity, plus 12% interest per annum computed from April 29, 1999 up to the finality of this

judgment. After the judgment becomes final and executory until the obligation is satisfied, the total amount due shall earn interest at 12% per annum.

G.R. No. 166810. June 26, 2008.* JUDE JOBY LOPEZ, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent. Criminal Law; Estafa; Elements of the crime of estafa. By settled jurisprudence, the elements of the crime of estafa, as defined in the above quoted provision of law, are as follows: (1) the offender has postdated or issued a check in payment of an obligation contracted at the time of the postdating or issuance; (2) at the time of postdating or issuance of said check, the offender has no funds in the bank or the funds deposited are not sufficient to cover the amount of the check; and (3) the payee has been defrauded. Damage and deceit are essential elements of the offense and must be established with satisfactory proof to warrant conviction, while the false pretense or fraudulent act must be committed prior to, or simultaneous with, the issuance of the bad check. The drawer of the dishonored check is given three days from receipt of the notice of dishonor to cover the amount of the check, otherwise, a prima facie presumption of deceit arises. Same; Same; It is settled that it is criminal fraud or deceit in the issuance of a check which is made punishable under the Revised Penal Code, and not the nonpayment of a debt. It is settled that it is criminal fraud or deceit in the issuance of a check which is made punishable under the Revised Penal Code, and not the nonpayment of a debt. Deceit is the false representation of a matter of fact whether by words or conduct by false or misleading allegations or by concealment of that which should have been disclosed which deceives or is intended to deceive another so that he shall act upon it to his legal injury. Concealment which the law denotes as fraudulent implies a purpose or design to hide facts which the other party ought to have. The postdating or issuing of a check in payment of an obligation when the offender had no funds in the bank or his funds deposited therein are not sufficient to cover the amount of the check is a false pretense or a fraudulent act. Same; Same; The receipt by the drawer of the notice of dishonor is not an element of the offense. The receipt by the drawer of the notice of dishonor is not an element of the offense. The presumption only dispenses with the presentation of evidence of deceit if such notification is received and the drawer of the check failed to deposit the amount necessary to cover his check within three (3) days from receipt of the notice of dishonor of the check. The presumption indulged in by law does not preclude the presentation of other evidence to prove deceit. It is not disputed by petitioner that, as found by the CA, respondent Ables called up petitioner to inform him of the dishonor of the check. Moreover, when petitioner issued the check in question on March 23, 1998, he knew that his current account with the DBP was a closed account as early as January 27, 1998. Same; Same; Section 114(d) of the Negotiable Instruments Law provides: Sec. 114. When notice need not be given to drawer. Notice of dishonor is not required to be given to the drawer in either of the following cases: x x x d.) where the drawer has no right to expect or require that the drawee or acceptor will honor the check. The absence of proof as to receipt of the written notice of dishonor notwithstanding, the evidence shows that petitioner had actual notice of the dishonor of the check because he was verbally notified by the respondent and notice whether written or verbal was a surplusage and totally unnecessary considering that almost two (2) months before the issuance of the check, petitioner s current account was already closed. Under these circumstances, the notice of dishonor would have served no useful purpose as no deposit could be made in a closed bank account. Pertinently, Section 114(d) of the Negotiable Instruments Law provides: Sec. 114. When notice need not be given to drawer. Notice of dishonor is not required to be given to the drawer in either of the following cases: x x x d. Where the drawer has no right to expect or require that the drawee or acceptor will honor the check. Since petitioner s bank account was already closed even before the issuance of the subject check, he had no right to expect or require the drawee bank to honor his check. By virtue of the aforequoted provision of law, petitioner is not entitled to be given a notice of dishonor. Same; Same; Penalties; The Indeterminate Sentence Law provides that if an offense is punished by the Revised Penal Code or its amendments, the court shall sentence the accused to an indeterminate penalty, the maximum term of which shall be that which, in view of the attending circumstances, can be

properly imposed under the rules of the Revised Penal Code, while the minimum term of which shall be within the range of penalty next lower to that prescribed by the Code for the offense. The Indeterminate Sentence Law provides that if an offense is punished by the Revised Penal Code or its amendments, the court shall sentence the accused to an indeterminate penalty, the maximum term of which shall be that which, in view of the attending circumstances, can be properly imposed under the rules of the Revised Penal Code, while the minimum term of which shall be within the range of the penalty next lower to that prescribed by the Code for the offense. [Lopez vs. People, 555 SCRA 525(2008)]

G.R. No. 152666. April 23, 2008.* MARCIANO TAN, petitioner, vs. PHILIPPINE COMMERCIAL INTERNATIONAL BANK, respondent. Criminal Law; Bouncing Checks Law; Elements Necessary for Conviction for Violation of B.P. Blg. 22. Unless the following elements are shown to have been proven by the prosecution, an accused will not be convicted for violation of B.P. Blg. 22: 1. The accused makes, draws or issues any check to apply to account or for value; 2. The accused knows at the time of the issuance that he or she does not have sufficient funds in, or credit with, the drawee bank for the payment of the check in full upon its presentment; and 3. The check is subsequently dishonored by the drawee bank for insufficiency of funds or credit, or it would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment. (Italics supplied) While issuing of a bouncing check is malum prohibitum, the prosecution is not excused from its responsibility of proving beyond reasonable doubt all the elements of the offense. Same; Same; Same; Respecting the second element of the crime, the prosecution must prove that the accused knew, at the time of issuance, that he does not have sufficient funds or credit for the full payment of the check upon its presentment. Respecting the second element of the crime, the prosecution must prove that the accused knew, at the time of issuance, that he does not have sufficient funds or credit for the full payment of the check upon its presentment. The element of knowledge involves a state of mind that obviously would be difficult to establish, hence, the statute creates a prima facie presumption of knowledge on the insufficiency of funds or credit coincidental with the attendance of the two other elements. Same; Same; Same; In order to create such presumption, it must be shown that the drawer or maker received a notice of dishonor and, within five banking days thereafter, failed to satisfy the amount of the check or arrange for its payment; Presumption is not conclusive as it may be rebutted by full payment; Payment is a complete defense that would lie regardless of the strength of the evidence presented by the prosecution. In order to create such presumption, it must be shown that the drawer or maker received a notice of dishonor and, within five banking days thereafter, failed to satisfy the amount of the check or arrange for its payment. The above-quoted provision creates a presumption juris tantum that the second element prima facie exists when the first and third elements of the offense are present. The presumption is not conclusive, however, as it may be rebutted by full payment. If the maker or drawer pays, or makes arrangement with the drawee bank for the payment of the amount due within the five-day period from notice of the dishonor, he or she may no longer be indicted for such violation. It is a complete defense that would lie regardless of the strength of the evidence presented by the prosecution. In essence, the law affords the drawer or maker the opportunity to avert prosecution by performing some acts that would operate to preempt the criminal action, which opportunity serves to mitigate the harshness of the law in its application. Same; Same; Same; Only a full payment at the time of its presentment or during the five-day grace period could exonerate one from criminal liability under B.P. Blg. 22 and that subsequent payments can only affect the civil, but not the criminal, liability. It is a general rule that only a full payment at the time of its presentment or during the five-day grace period could exonerate one from criminal liability under B.P. Blg. 22 and that subsequent payments can only affect the civil, but not the criminal, liability. [Tan vs. Philippine Commercial International Bank, 552 SCRA 532(2008)]

Syllabi Class : Obligations and Contracts|Novation|Checks|Crossed Checks|Judicial Notice|Words and Phrases Syllabi: 1. Obligations and Contracts; Novation; Checks; Novation is never presumed, there must be an express intention to novate; The creditor s acceptance of another check, which replaced an earlier dishonored check, does not result in novation where there was no express agreement to establish that the debtor was already discharged from his liability.In this case, respondent s acceptance of the Solid Bank check, which replaced the dishonored Prudential Bank check, did not result to novation as there was no express agreement to establish that petitioner was already discharged from his liability to pay respondent the amount of P214,000.00 as payment for the 300 bags of rice. As we said, novation is never presumed, there must be an express intention to novate. In fact, when the Solid Bank check was delivered to respondent, the same was also indorsed by petitioner which shows petitioner s recognition of the existing obligation to respondent to pay P214,000.00 subject of the replaced Prudential Bank check. 2. Same; Same; Same; Crossed Checks; Judicial Notice; Words and Phrases; The Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and could not be converted into cash; The effect of crossing a check relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named thereinthe change in the mode of paying the obligation is not a change in any of the objects or principal condition of the contract for novation to take place. Among the different types of checks issued by a drawer is the crossed check. The Negotiable Instruments Law is silent with respect to crossed checks, although the Code of Commerce makes reference to such instruments. We have taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and could not be converted into cash. Thus, the effect of crossing a check relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein. The change in the mode of paying the obligation was not a change in any of the objects or principal condition of the contract for novation to take place. Division: Secondary Docket Number: G.R. No. 171998 Counsel: Frank E. Lobrigo Ponente: PERALTA Dispositive Portion: WHEREFORE, the petition is DENIED. The Decision dated September 29, 2005 and the Resolution dated March 2, 2006, of the Court of Appeals in CA-G.R. CV No. 83104, are AFFIRMED.

Case Title : ANAMER SALAZAR, petitioner, vs. J.Y. BROTHERS MARKETING CORPORATION, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

Case Title : PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS, CAPITOL CITY DEVELOPMENT BANK, PHILIPPINE BANK OF COMMUNICATIONS, and F. ABANTE MARKETING, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Banks and Banking|Damages||Attorney s Fees Syllabi: 1. Banks and Banking; Negotiable Instruments Law (Act No. 2031); Checks; Words and Phrases; An alteration is said to be material if it alters the effect of the instrument.We shall first deal with the effect of the alteration of the serial number on the negotiability of the check in question. Petitioner anchors its position on Section 125 of the Negotiable Instruments Law (ACT No. 2031). Petitioner alleges that there is no hard and fast rule in the interpretation of the aforequoted provision of the Negotiable Instruments Law. It maintains that under Section 125(f), any change that alters the effect of the instrument is a material alteration. We do not agree. An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law.

2. Banks and Banking; The drawee bank cannot refuse to accept a check on the ground that the serial number of said check was altered, since the serial number is an item which is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law.The case at bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same. The check s serial number is not the sole indication of its origin. As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The check s issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential. Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number was altered, the same being an immaterial or innocent one. 3. Damages; Attorney s Fees; Where the lower courts fail to explicitly state the rationale for the award of attorney s fees, the same shall be disallowed.The amount of P10,000.00 as attorney s fees is hereby deleted. In their respective decisions, the trial court and the Court of Appeals failed to explicitly state the rationale for the said award. The foregoing is in conformity with the guiding principles laid down in a long line of cases and reiterated recently in Consolidated Bank Trust Corporation (Solidbank) v. Court of Appeals: The award of attorney s fees lies within the discretion of the court and depends upon the circumstances of each case. However, the discretion of the court to award attorney s fees under Article 2208 of the Civil Code of the Philippines demands factual, legal and equitable justification, without which the award is a conclusion without a premise and improperly left to speculation and conjecture. It becomes a violation of the proscription against the imposition of a penalty on the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188 SCRA 170 [1990]). The reason for the award must be stated in the text of the court s decision. If it is stated only in the dispositive portion of the decision, the same shall be disallowed. As to the award of attorney s fees being an exception rather than the rule, it is necessary for the court to make findings of fact and law that would bring the case within the exception and justify the grant of the award (Refractories Corporation of the Philippines v. Intermediate Appellate Court, 176 SCRA 539 [1989]). Division: FIRST DIVISION Docket Number: G.R. No. 107508 Counsel: Monsod, Tamargo, Valencia & Associates, Siguion Reyna, Montecillo & Ongsiako Ponente: KAPUNAN Dispositive Portion: WHEREFORE, premises considered, except for the deletion of the award of attorney s fees, the decision of the Court of Appeals is hereby AFFIRMED.

and neither may petitioners delegate upon the court the task of determining under which rule the petition should fall. 2. Banks and Banking; Material Alterations; Since there were no material alterations on the checks, respondent as drawee bank has no right to dishonor them and return them to petitioner, the collecting bank.The Court will not rule on the proper application of Central Bank Circular No. 580 in this case. Since there were no material alterations on the checks, respondent as drawee bank has no right to dishonor them and return them to petitioner, the collecting bank. Thus, respondent is liable to petitioner for the value of the checks, with legal interest from the time of filing of the complaint on 16 March 1982 until full payment. Further, considering that respondent s motion for reconsideration was filed late, the 10 October 1991 Decision, which held respondent liable for the value of the checks amounting to P1,447,920, had become final and executory. 3. Appeals; There are instances when rules of procedure are relaxed in the interest of justice, however, in this case, respondent did not proffer any explanation for the late filing of the motion of reconsideration.There are instances when rules of procedure are relaxed in the interest of justice. However, in this case, respondent did not proffer any explanation for the late filing of the motion for reconsideration. Instead, there was a deliberate attempt to deceive the Court of Appeals by claiming that the copy of the 10 October 1991 Decision was received on 22 October 1991 instead of on 16 October 1991. We find no justification for the posture taken by the Court of Appeals in admitting the motion for reconsideration. Thus, the late filing of the motion for reconsideration rendered the 10 October 1991 Decision final and executory. 4. Negotiable Instruments Law; Material Alterations; The alteration on the serial number of a check is not a material alteration.The question on whether an alteration of the serial number of a check is a material alteration under the Negotiable Instruments Law is already a settled matter. In Philippine National Bank v. Court of Appeals, 256 SCRA 491 (1996), this Court ruled that the alteration on the serial number of a check is not a material alteration. Thus: An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instrument[s] Law. 5. Same; Certiorari; The remedies of appeal and certiorari are mutually exclusive and not alternative or successive; However, this Court may set aside technicality for justifiable reasons and in the interest of justice, we will treat the petition as having been filed under Rule 45.The remedies of appeal and certiorari are mutually exclusive and not alternative or successive. However, this Court may set aside technicality for justifiable reasons. The petition before the Court is clearly meritorious. Further, the petition was filed on time both under Rules 45 and 65. Hence, in accordance with the liberal spirit which pervades the Rules of Court and in the interest of justice, we will treat the petition as having been filed under Rule 45. Division: THIRD DIVISION Docket Number: G.R. No. 129910

Case Title : THE INTERNATIONAL CORPORATE BANK, INC., petitioner, vs. COURT OF APPEALS and PHILIPPINE NATIONAL BANK, respondents.Case Nature : PETITION for review on certiorari of the amended decision and resolution of the Court of Appeals. Syllabi Class : Appeals|Negotiable Instruments Law|Banks and Banking|Petitioners may not delegate upon the court the task of determining under which rule the petition should fall|Certiorari|The remedies of appeal and certiorari are mutually exclusive and not alternative or successive|Material Alterations Syllabi: 1. Appeals; Petitioners may not delegate upon the court the task of determining under which rule the petition should fall; A petition cannot be subsumed simultaneously under Rule 45 and Rule 65 of the Rules of Court, and neither may petitioners delegate upon the court the task of determining under which rule the petition should fall.Respondent asserts that the petition should be dismissed outright since petitioner availed of a wrong mode of appeal. Respondent cites Ybaez v. Court of Appeals, 253 SCRA 540 (1996), where the Court ruled that a petition cannot be subsumed simultaneously under Rule 45 and Rule 65 of the Rules of Court,

Counsel: Macalino & Associates, Salvador A. Uy Ponente: CARPIO Dispositive Portion: WHEREFORE, we SET ASIDE the 9 August 1994 Amended Decision and the 16 July 1997 Resolution of the Court of Appeals. We rule that respondent Philippine National Bank is liable to petitioner International Corporate Bank, Inc. for the value of the checks amounting to P1,447,920, with legal interest from 16 March 1982 until full payment. Costs against respondent.

Case Title : METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. RENATO D. CABILZO, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Equitable Estoppel|Banks and Banking|Negotiable Instruments|Checks Syllabi:

1. Equitable Estoppel; The doctrine of equitable estoppel states that when one of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer a loss, it must be borne by the one whose erroneous conduct, either by omission or commission, was the cause of injury.Metrobank cannot lightly impute that Cabilzo was negligent and is therefore prevented from asserting his rights under the doctrine of equitable estoppel when the facts on record are bare of evidence to support such conclusion. The doctrine of equitable estoppel states that when one of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer a loss, it must be borne by the one whose erroneous conduct, either by omission or commission, was the cause of injury. Metrobank s reliance on this dictum, is misplaced. For one, Metrobank s representation that it is an innocent party is flimsy and evidently, misleading. At the same time, Metrobank cannot asseverate that Cabilzo was negligent and this negligence was the proximate cause of the loss in the absence of even a scintilla proof to buttress such claim. Negligence is not presumed but must be proven by the one who alleges it. 2. Banks and Banking; The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. The appropriate degree of diligence required of a bank must be a high degree of diligence, if not the utmost diligence. 3. Negotiable Instruments; Checks; Payment made under materially altered instrument is not payment done in accordance with the instruction of the drawer.The bank on which the check is drawn, known as the drawee bank, is under strict liability to pay to the order of the payee in accordance with the drawer s instructions as reflected on the face and by the terms of the check. Payment made under materially altered instrument is not payment done in accordance with the instruction of the drawer. When the drawee bank pays a materially altered check, it violates the terms of the check, as well as its duty to charge its client s account only for bona fide disbursements he had made. Since the drawee bank, in the instant case, did not pay according to the original tenor of the instrument, as directed by the drawer, then it has no right to claim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from the drawer s account which it was expected to treat with utmost fidelity. 4. Negotiable Instruments; It owes the highest degree fidelity to its client and should not therefore lightly rely on the judgment of other banks on occasions where its clients money were involve, no matter how small or substantial the amount at stake.The reliance made by Metrobank on Westmont Bank s indorsement is clearly inconsistent, if not totally offensive to the dictum that being impressed with public interest, banks should exercise the highest degree of diligence, if not utmost diligence in dealing with the accounts of its own clients. It owes the highest degree fidelity to its clients and should not therefore lightly rely on the judgment of other banks on occasions where its clients money were involve, no matter how small or substantial the amount at stake. Division: FIRST DIVISION Docket Number: G.R. No. 154469 Counsel: Sedigo, Sison & Associates, Jose A. Suing Ponente: CHICO-NAZARIO Dispositive Portion: WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 8 March 2002 and the Resolution dated 26 July 2002 of the Court of Appeals are AFFIRMED with modification that exemplary damages in the amount of P50,000.00 be awarded. Costs against the petitioner.

Syllabi: 1. Obligations and Contracts; Obligations arising from contracts have the force of law between the parties and should be complied with in good faith.We must stress that obligations arising from contracts have the force of law between the parties and should be complied with in good faith. Nothing can stop the parties from establishing stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. 2. Negotiable Instruments Law; There are well-defined distinctions between the contract of an indorser and that of a guaran-tor/surety of a commercial paper.Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by respondents, is not pertinent to this case. There are well-defined distinctions between the contract of an indorser and that of a guarantor/surety of a commercial paper, which is what is involved in this case. The contract of indorsement is primarily that of transfer, while the contract of guaranty is that of personal security. The liability of a guarantor/surety is broader than that of an indorser. Unless the bill is promptly presented for payment at maturity and due notice of dishonor given to the indorser within a reasonable time, he will be discharged from liability thereon. On the other hand, except where required by the provisions of the contract of suretyship, a demand or notice of default is not required to fix the surety s liability. 3. Laches; The question of laches is addressed to the sound discretion of the court and since laches is an equitable doctrine, its application is controlled by equitable considerations.We find the defense of laches unavailing. The question of laches is addressed to the sound discretion of the court and since laches is an equitable doctrine, its application is controlled by equitable considerations. Respondents, however, failed to show that the collection suit against them as sureties was inequitable. Remedies in equity address only situations tainted with inequity, not those expressly governed by statutes. Division: THIRD DIVISION Docket Number: G.R. No. 125851 Counsel: Walter T. Young, Ernesto T. Zshornack, Jr., Valeriano Del Rosario, Larry Gabriel Ramos Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of Appeals is hereby MODIFIED, and we hold that respondent Alcron International Ltd. is subsidiarily liable, while respondents Nari Gidwani, and Spouses Leon and Leticia de Villa are jointly and severally liable together with G.G. Sportswear, to pay petitioner Bank the sum of P151,474.52 with interest at the legal rate from the filing of the complaint, and the costs.

Case Title : ALLIED BANKING CORPORATION, petitioner, vs. COURT OF APPEALS, G.G. SPORTSWEAR MANUFACTURING CORPORATION, NARI GIDWANI, SPOUSES LETICIA AND LEON DE VILLA AND ALCRON INTERNATIONAL LTD., respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Obligations and Contracts|Laches|Negotiable Instruments Law|

Case Title : PRODUCERS BANK OF THE PHILIPPINES, petitioner, vs. EXCELSA INDUSTRIES, INC., respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Real Estate Mortgage|Mortgages Syllabi: 1. Real Estate Mortgage; Mortgages; Negotiable Instruments Law; Where the drawer executes a separate letter of undertaking in consideration for the bank s negotiation of its sight drafts, the Court held that the drawer can still be made liable under the letter of undertaking even if he is discharged due to the bank s failure to protest the non-acceptance of the drafts.In Velasquez v. Solidbank Corporation, 550 SCRA 119 (2008), where the drawer therein also executed a separate letter of undertaking in consideration for the bank s negotiation of its sight drafts, the Court held that the drawer can still be made liable under the letter of undertaking even if he is discharged due to the bank s failure to protest the non-acceptance of the drafts. The Court explained, thus: Petitioner, however, can still be made liable under the letter of undertaking. It bears stressing that it is a separate contract from the sight draft. The liability of petitioner under the letter of undertaking is direct and primary. It is independent from his liability under the sight draft. Liability subsists on it even if the sight draft was dishonored for non-acceptance or non-payment. 2. Same; Same; It has been settled in a long line of decisions that mortgages given to secure future advancements are valid and legal contracts, and the amounts named as consideration in said contracts do not limit the amount for

which the mortgage may stand as security if from the four corners of the instrument the intent to secure future and other indebtedness can be gathered.Respondent executed a real estate mortgage containing a blanket mortgage clause, also known as a dragnet clause. It has been settled in a long line of decisions that mortgages given to secure future advancements are valid and legal contracts, and the amounts named as consideration in said contracts do not limit the amount for which the mortgage may stand as security if from the four corners of the instrument the intent to secure future and other indebtedness can be gathered. Division: SECOND DIVISION Docket Number: G.R. No. 152071 Counsel: Pangilinan, Britanico, Sarmiento & Franco Law Offices Ponente: TINGA Dispositive Portion: WHEREFORE, the instant petition for review on certiorari is GRANTED and the decision and resolution of the Court of Appeals in CA-G.R. CV No. 59931 are REVERSED and SET ASIDE. The decision of the Regional Trial Court Branch 73, Antipolo, Rizal in Civil Case No. 1587-A and LR Case No. 90-787 is REINSTATED.

Case Title : PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA), petitioner, vs. COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK, N.A., respondents., FORD PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS and CITIBANK, N.A. and PHILIPPINE COMMERCIAL INTERNATIONAL BANK, respondents., FORD PHILIPPINES, INC., petitioner, vs. CITIBANK, N.A., PHILIPPINE COMMERCIAL INTERNATIONAL BANK and THE COURT OF APPEALS, respondents.Case Nature : PETITIONS for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Negligence|Banks and Banking|Torts|Quasi-Delicts|Words and Phrases|Negotiable Instruments|Checks|Collecting Banks|Taxation|Crossed Checks|Negligence|Doctrine of Comparative Negligence|Prescription Syllabi: 1. Negligence; Torts; Quasi-Delicts; The general rule is that if the master is injured by the negligence of a third person and by the concurring contributory negligence of his own servant or agent, the latter s negligence is imputed to his superior and will defeat the superior s action against the third person, assuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made.On this point, jurisprudence regarding the imputed negligence of employer in a master-servant relationship is instructive. Since a master may be held for his servant s wrongful act, the law imputes to the master the act of the servant, and if that act is negligent or wrongful and proximately results in injury to a third person, the negligence or wrongful conduct is the negligence or wrongful conduct of the master, for which he is liable. The general rule is that if the master is injured by the negligence of a third person and by the concurring contributory negligence of his own servant or agent, the latter s negligence is imputed to his superior and will defeat the superior s action against the third person, assuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made. 2. Negligence; Torts; Quasi-Delicts; Words and Phrases; Proximate cause is that which, in the natural and continuous sequence, unbroken by any efficient, intervening cause, produces the injury, and without which the result would not have occurred.Accordingly, we need to determine whether or not the action of Godofredo Rivera, Ford s General Ledger Accountant, and/or Alexis Marindo, his assistant, was the proximate cause of the loss or damage. As defined, proximate cause is that which, in the natural and continuous sequence, unbroken by any efficient, intervening cause produces the injury, and without which the result would not have occurred. 3. Banks and Banking; Negotiable Instruments; Checks; The mere fact that the forgery was committed by a drawer-payor s confidential employee or agent, who by virtue of his position had unusual facilities for perpetrating the fraud and imposing the forged paper upon the bank, does not entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstances raising estoppel against the drawer.It appears that although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of encashing the checks payable to the CIR. The degree of

Ford s negligence, if any, could not be characterized as the proximate cause of the injury to the parties. The Board of Directors of Ford, we note, did not confirm the request of Godofredo Rivera to recall Citibank Check No. SN-04867. Rivera s instruction to replace the said check with PCIBank s Manager s Check was not in the ordinary course of business which could have prompted PCIBank to validate the same. As to the preparation of Citibank Checks Nos. SN-10597 and 16508, it was established that these checks were made payable to the CIR. Both were crossed checks. These checks were apparently turned around by Ford s employees, who were acting on their own personal capacity. Given these circumstances, the mere fact that the forgery was committed by a drawerpayor s confidential employee or agent, who by virtue of his position had unusual facilities for perpetrating the fraud and imposing the forged paper upon the bank, does not entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. This rule likewise applies to the checks fraudulently negotiated or diverted by the confidential employees who hold them in their possession. 4. Banks and Banking; Checks; Collecting Banks; Taxation; A bank authorized to collect the payment of taxpayers in behalf of the Bureau of Internal Revenue is duty bound to consult its principal regarding the unwarranted instructions given by the pay or of its agent.Citibank Check No. SN-04867 was deposited at PCIBank through its Ermita Branch. It was coursed through the ordinary banking transaction, sent to Central Clearing with the indorsement at the back all prior indorsements and/or lack of indorsements guaranteed, and was presented to Citibank for payment. Thereafter PCIBank, instead of remitting the proceeds to the CIR, prepared two of its Manager's checks and enabled the syndicate to encash the same. On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances. Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted instructions given by the payor or its agent. 5. Banks and Banking; Checks; Collecting Banks; Negotiable Instruments; It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an agreement to the contrary, that of principal and agent.It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an agreement to the contrary, that of principal and agent. A bank which receives such paper for collection is the agent of the payee or holder. 6. Banks and Banking; Checks; Collecting Banks; Even considering arguendo, that the diversion of the amount of a check payable to the collecting bank in behalf of the designated payee may be allowed, still such diversion must be properly authorized by the payor.Even considering arguendo, that the diversion of the amount of a check payable to the collecting bank in behalf of the designated payee may be allowed, still such diversion must be properly authorized by the payor. Otherwise stated, the diversion can be justified only by proof of authority from the drawer, or that the drawer has clothed his agent with apparent authority to receive the proceeds of such check. 7. Banks and Banking; Checks; Collecting Banks; Crossed Checks; Words and Phrases; The crossing of the check with the phrase Payee s Account Only, is a warning that the check should be deposited only in the account of the payee; It is the collecting bank which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement all prior indorsements and lor lack ofindorsement guaranteed. Indeed, the crossing of the check with the phrase Payee s Account Only, is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee s account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement all prior indorsements and/or lack of indorsement guaranteed. 8. Banks and Banking; Checks; Collecting Banks; A bank which cashes a check drawn upon another bank, without requiring proof as to the identity of persons presenting it, or making inquiries with regard to them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to the hands of a third party.Banking business requires that the one who first cashes and negotiates the check must take some precautions to learn whether or not it is genuine. And if the one cashing the check through indifference or other circumstance assists the forger in committing the fraud, he should not be permitted to retain the

proceeds of the check from the drawee whose sole fault was that it did not discover the forgery or the defect in the title of the person negotiating the instrument before paying the check. For this reason, a bank which cashes a check drawn upon another bank, without requiring proof as to the identity of persons presenting it, or making inquiries with regard to them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to the hands of a third party. In such cases the drawee bank has a right to believe that the cashing bank (or the collecting bank) had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus, one who encashed a check which had been forged or diverted and in turn received payment thereon from the drawee, is guilty of negligence which proximately contributed to the success of the fraud practiced on the drawee bank. The latter may recover from the holder the money paid on the check. 9. Banks and Banking; Checks; Torts; As a general rule, a banking corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment it may be liable for the tortuous acts of its officers even as regards that species of tort of which malice is an essential element.In this case, there was no evidence presented confirming the conscious participation of PCIBank in the embezzlement. As a general rule, however, a banking corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. A bank will be held liable for the negligence of its officers or agents when acting within the course and scope of their employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of which malice is an essential element. In this case, we find a situation where the PCIBank appears also to be the victim of the scheme hatched by a syndicate in which its own management employees had participated. 10. Banks and Banking; Checks; Torts; The general rule is that a bank is liable for the fraudulent acts or representations of an officer or agent acting within the course and apparent scope of his employment or authority.A bank hold- ing out its officers and agents as worthy of confidence will not be permit- ted to profit by the frauds these officers or agents were enabled to perpetrate in the apparent course of their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom. For the general rule is that a bank is liable for the fraudulent acts or representations of an officer or agent acting within the course and apparent scope of his employment or authority. And if an officer or employee of a bank, in his official capacity, receives money to satisfy an evidence of indebtedness lodged with his bank for collection, the bank is liable for his misappropriation of such sum. 11. Banks and Banking; Checks; Torts; Negligence; As a business affected with public interest and because of the nature of its functions, a bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.Citibank should have scrutinized Citibank Check Numbers SN-10597 and 16508 before paying the amount of the proceeds thereof to the collecting bank of the BIR. One thing is clear from the record: the clearing stamps at the back of Citibank Check Nos. SN-10597 and 16508 do not bear any initials. Citibank failed to notice and verify the absence of the clearing stamps. Had this been duly examined, the switching of the worthless checks to Citibank Check Nos. 10597 and 16508 would have been discovered in time. For this reason, Citibank had indeed failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to its designated payee. The fact that the drawee bank did not discover the irregularity seasonably, in our view, constitutes negligence in carrying out the bank s duty to its depositors. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. 12. Banks and Banking; Checks; Torts; Negligence; Doctrine of Comparative Negligence; Where both the collecting and drawee banks failed in their respective obligations and both were negligent in the selection and supervision of their employees, both are equally liable for the loss of the proceeds of checks fraudulently encashed.Thus, invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN-10597 and 16508. Thus, we are constrained to hold them equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR. 13. Banks and Banking; Checks; Torts; Negligence; The banking business is so impressed with public interest where the trust and confidence of the public in

general is of paramount importance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence.Time and again, we have stressed that banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence. A bank s liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment. 14. Banks and Banking; Checks; Torts; Negligence; Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees.Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and employees. Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees. 15. Banks and Banking; Checks; Torts; Prescription; The statute of limitations begins to run when the bank gives the depositor notice of the payment, and an action upon a check is ordinarily governed by the statutory period applicable to instruments in writing; An action upon a written contract must be brought within ten years from the time the right of action accrues.The statute of limitations begins to run when the bank gives the depositor notice of the payment, which is ordinarily when the check is returned to the alleged drawer as a voucher with a statement of his account, and an action upon a check is ordinarily governed by the statutory period applicable to instruments in writing. Our laws on the matter provide that the action upon a written contract must be brought within ten years from the time the right of action accrues. Hence, the reckoning time for the prescriptive period begins when the instrument was issued and the corresponding check was returned by the bank to its depositor (normally a month thereafter). Applying the same rule, the cause of action for the recovery of the proceeds of Citibank Check No. SN-04867 would normally be a month after December 19, 1977, when Citibank paid the face value of the check in the amount of P4,746,114.41. Since the original complaint for the cause of action was filed on January 20, 1983, barely six years had lapsed. Thus, we conclude that Ford s cause of action to recover the amount of Citibank Check No. SN-04867 was seasonably filed within the period provided by law. 16. Banks and Banking; Checks; Torts; Negligence; Failure on the part of the depositor to examine its passbook, statements of account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in the exercise of due care and diligence find therein, serves to mitigate the banks liability by reducing the award of interest from twelve percent (12%) to six percent (6%) per annum.We also find that Ford is not completely blameless in its failure to detect the fraud. Failure on the part of the depositor to examine its passbook, statements of account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in the exercise of due care and diligence find therein, serves to mitigate the banks liability by reducing the award of interest from twelve percent (12%) to six percent (6%) per annum. As provided in Article 1172 of the Civil Code of the Philippines, responsibility arising from negligence in the performance of every kind of obligation is also demandable, but such liability may be regulated by the courts, according to the circumstances. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he may recover. Division: SECOND DIVISION Docket Number: G.R. No. 121413, G.R. No. 121479, G.R. No. 128604, G.R. Nos. 121413 Counsel: Romulo, Mabanta, Buenaventura, Sayoc & Delos Angeles, Agabin, Verzola, Hermoso, Layaoen, De Castro, Angara, Abello, Concepcion, Regala, Cruz Ponente: QUISUMBING Dispositive Portion: WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 25017, are AFFIRMED. PCIBank, known formerly as Insular Bank of Asia and America, is declared solely responsible for the loss of the proceeds of Citibank Check No. SN-04867 in the amount of P4,746,114.41, which shall be paid together with six percent (6%) interest thereon to Ford Philippines, Inc. from the date when the original complaint was filed until said amount is fully paid.However, the Decision and Resolution of the Court of Appeals in CA-G.R.

No. 28430 are MODIFIED as follows: PCIBank and Citibank are adjudged liable for and must share the loss, (concerning the proceeds of Citibank Check Numbers SN-10597 and 16508 totalling P12,163,298.10) on a fifty-fifty ratio, and each bank is ORDERED to pay Ford Philippines, Inc. P6,081,649.05, with six percent (6%) interest thereon, from the date the complaint was filed until full payment of said amount.Costs against Philippine Commercial International Bank and Citibank, N.A.

Case Title : ELVIRA YU OH, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Criminal Law|Jurisdiction|Batas Pambansa (B.P.) Bilang. 22 Syllabi: 1. Criminal Law; Jurisdiction; Republic Act (R.A.) 7691 does not prohibit certain acts or provides penalties for its violation, neither does it treat of the nature of crimes and its punishment.A penal law, as defined by this Court, is an act of the legislature that prohibits certain acts and establishes penalties for its violations. It also defines crime, treats of its nature and provides for its punishment. R.A. No. 7691 does not prohibit certain acts or provides penalties for its violation; neither does it treat of the nature of crimes and its punishment. Consequently, R.A. No. 7691 is not a penal law, and therefore, Art. 22 of the RPC does not apply in the present case. 2. Criminal Law; Jurisdiction; Jurisdiction being a matter of substantive law, the established rule is that the statute in force at the time of the commencement of the action determines the jurisdiction of the court; A law vesting additional jurisdiction in the court cannot be given retroactive effect.In the case of Cang vs. Court of Appeals, this Court held that jurisdiction being a matter of substantive law, the established rule is that the statute in force at the time of the commencement of the action determines the jurisdiction of the court. R.A. No. 7691 was not yet in force at the time of the commencement of the cases in the trial court. It took effect only during the pendency of the appeal before the Court of Appeals. There is therefore no merit in the claim of petitioner that R.A. No. 7691 should be retroactively applied to this case and the same be remanded to the MTC. The Court has held that a law vesting additional jurisdiction in the court cannot be given retroactive effect. 3. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; The language of B.P. Blg. 22 is broad enough to cover all kinds of checks, whether present dated or postdated, or whether issued in payment of pre-existing obligations or given in mutual or simultaneous exchange for something for value.Petitioner s claim that cases of closed accounts are not included in the coverage of B.P. Blg. 22 has no merit considering the clear intent of the law, which is to discourage the issuance of worthless checks due to its harmful effect to the public. This Court, in Lozano vs. Martinez, was explicit in ruling that the language of B.P. Blg. 22 is broad enough to cover all kinds of checks, whether present dated or postdated, or whether issued in payment of preexisting obligations or given in mutual or simultaneous exchange for something of value. 4. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; Elements of the Crime of Batas Pambansa Blg. 22.B.P. Blg. 22 or the Bouncing Check s Law seeks to prevent the act of making and issuing checks with the knowledge that at the time of issue, the drawer does not have sufficient funds in or credit with the bank for payment and the checks were subsequently dishonored upon presentment. To be convicted thereunder, the following elements must be proved: 1. The accused makes, draws or issues any check to apply to account or for value; 2. The accused knows at the time of the issuance that he or she does not have sufficient funds in, or credit with, the drawee bank for the payment of the check in full upon its presentment; and 3. The check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or it would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment. 5. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; For liability to attach under B.P. Blg. 22, prosecution must establish that checks were issued, the same were subsequently dishonored and that the issuer at the time of the check s issuance had knowledge that he did not have enough funds or credit in the bank of payment thereof upon its presentment.For liability to attach under B.P. Blg. 22, it is not enough that the prosecution establishes that checks were issued and that the same were subsequently dishonored. The prosecution must also prove that the issuer, at the time of the check s issuance, had knowledge that he did not have enough funds or credit in the bank of payment thereof upon its presentment. 6. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; Presumption that the issuer had knowledge of the insufficiency of funds is brought into existence only after it is proved that the issuer had received a notice of dishonor and that within five

days from receipt thereof, he failed to pay the amount of the check or to make arrangement for its payment.Based on this section, the presumption that the issuer had knowledge of the insufficiency of funds is brought into existence only after it is proved that the issuer had received a notice of dishonor and that within five days from receipt thereof, he failed to pay the amount of the check or to make arrangement for its payment. The presumption or prima facie evidence as provided in this section cannot arise, if such notice of non-payment by the drawee bank is not sent to the maker or drawer, or if there is no proof as to when such notice was received by the drawer, since there would simply be no way of reckoning the crucial 5day period. 7. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; Failure of the prosecution to prove that petitioner was given the requisite notice of dishonor is a clear ground for her acquittal.A perusal of the testimony of the prosecution witness Joaquin Novales III, General Manager of complainant Solid Gold, discloses that no personal demands were made on appellant before the filing of the complaints against her. Thus, absent a clear showing that petitioner actually knew of the dishonor of her checks and was given the opportunity to make arrangements for payment as provided for under the law, we cannot with moral certainty convict her of violation of B.P. Blg. 22. The failure of the prosecution to prove that petitioner was given the requisite notice of dishonor is a clear ground for her acquittal. Division: SECOND DIVISION Docket Number: G.R. No. 125297 Counsel: M. Quevero Taganas, The Solicitor General Ponente: AUSTRIA-MARTINEZ Dispositive Portion: WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED and SET ASIDE. Petitioner Elvira Yu Oh is ACQUITTED of the offense of violation of B.P. Blg. 22 on ten counts for insufficiency of evidence. However, she is ordered to pay complainant Solid Gold International Traders, Inc. the total amount of Five Hundred Thousand Pesos (P500,000.00) with 12% interest per annum from date of finality of herein judgment.

Case Title : HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, petitioner, vs. CECILIA DIEZ CATALAN, respondent., HSBC INTERNATIONAL TRUSTEE LIMITED, petitioner, vs. CECILIA DIEZ CATALAN, respondent.Case Nature : PETITIONS for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions|Pleadings and Practice|Cause of Action|Damages|Abuse of Rights Principle|Elements|Forum Shopping|Jurisdictions|Voluntary Appearance Syllabi: 1. Actions; Pleadings and Practice; Cause of Action; The elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded.The elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded. Stated otherwise, may the court render a valid judgment upon the facts alleged therein? The inquiry is into the sufficiency, not the veracity of the material allegations. If the allegations in the complaint furnish sufficient basis on which it can be maintained, it should not be dismissed regardless of the defense that may be presented by the defendants. 2. Actions; Pleadings and Practice; Damages; Abuse of Rights Principle; Elements; There is an abuse of right when it is exercised for the only purpose of prejudicing or injuring another.Catalan anchors her complaint for damages on Article 19 of the Civil Code. It speaks of the fundamental principle of law and human conduct that a person must, in the exercise of his rights and in the performance of his duties, act with justice, give every one his due, and observe honesty and good faith. It sets the standards which may be observed not only in the exercise of one s rights but also in the performance of one s duties. When a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be held responsible. But a right, though by itself legal because recognized or granted by law as such, may nevertheless become the source of some illegality. A person should be protected only when he acts in the legitimate

exercise of his right, that is, when he acts with prudence and in good faith; but not when he acts with negligence or abuse. There is an abuse of right when it is exercised for the only purpose of prejudicing or injuring another. The exercise of a right must be in accordance with the purpose for which it was established, and must not be excessive or unduly harsh; there must be no intention to injure another. Thus, in order to be liable under the abuse of rights principle, three elements must concur, to wit: (a) that there is a legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another. 3. Actions; Pleadings and Practice; Forum Shopping; Elements; There is forum shopping when there exists the following.It has been held that forum shopping exists where a litigant sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis pendentia in one case is a bar to the others; and, a final judgment in one would constitute res judicata and thus would cause the dismissal of the rest. Thus, there is forum shopping when there exist: a) identity of parties, or at least such parties as represent the same interests in both actions, b) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and c) the identity of the two preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful would amount to res judicata in the other. 4. Actions; Pleadings and Practice; Forum Shopping; Verily, there can be no forum shopping where in one proceeding a party raises a claim for damages based on tort and, in another proceeding a party seeks the allowance of an alleged last will based on one s claim as an heir.Verily, there can be no forum shopping where in one proceeding a party raises a claim for damages based on tort and, in another proceeding a party seeks the allowance of an alleged last will based on one s claim as an heir. After all, the merits of the action for damages is not to be determined in the probate proceeding and vice versa. Undeniably, the facts or evidence as would support and establish the two causes of action are not the same. 5. Actions; Pleadings and Practice; Jurisdictions; Voluntary Appearance; The Court has held that the filing of motions seeking affirmative relief such as, to admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered voluntary submission to the jurisdiction of the court.The Court has held that the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered voluntary submission to the jurisdiction of the court. 6. Actions; Pleadings and Practice; Jurisdictions; A party who makes a special appearance in court challenging the jurisdiction of said court, cannot be considered voluntary submission to the jurisdiction of the court.It is settled that a party who makes a special appearance in court challenging the jurisdiction of said court, e.g., invalidity of the service of summons, cannot be considered to have submitted himself to the jurisdiction of the court. Division: SECOND DIVISION Docket Number: G.R. No. 159590, G.R. No. 159591 Counsel: Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles, The Law Firm of Mirano and Mirano Ponente: AUSTRIA-MARTINEZ Dispositive Portion: WHEREFORE, the petition in G.R. No. 159590 is DENIED. The Decision of the Court of Appeals, dated August 14, 2003, in CA-G.R. SP No. 75757 dismissing the petition for certiorari of the Hongkong and Shanghai Banking Corporation Limited is AFFIRMED.The petition in G.R. No. 159591 is GRANTED. The Decision of the Court of Appeals, dated August 14, 2003, in CA-G.R. SP No. 75756 dismissing the petition for certiorari of the HSBC International Trustee Limited is REVERSED and SET ASIDE. The Regional Trial Court, Branch 44, Bacolod City is declared without jurisdiction to take cognizance of Civil Case No. 01-11372 against the HSBC International Trustee Limited, and all its orders and issuances with respect to the latter are hereby ANNULLED and SET ASIDE. The said Regional Trial Court is hereby ORDERED to DESIST from maintaining further proceedings against the HSBC International Trustee Limited in the case aforestated.

Case Title : LUZON DEVELOPMENT BANK, petitioner, vs. BENEDICTO C. CONQUILLA, CORNELIA C. CONQUILLA, DOROTEA C. ORCINE and FELICIANO S. CONQUILLA, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Judgments|Actions|Res Judicata|Causes of Action|Mortgages|Acceleration Clauses|Words and Phrases|Pleadings and Practice|Evidence|Admissions|Judgments on the Pleadings|Requisites|Parties|Promissory Notes|Foreclosure of Mortgage Syllabi: 1. Judgments; Res Judicata; Requisites.A case is barred by prior judgment or res judicata when the following requisites concur: (1) the former judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties; (3) it is a judgment or an order on the merits; (4) there is between the first and the second actions identity of parties, of subject matter, and of causes of action. 2. Actions; Causes of Action; Elements.Preliminarily, we have to determine the actual ground for the dismissal of Civil Case No. N-6659. According to the CA, the ground for dismissal could not possibly be failure to establish [respondents ] cause of action, as stated by the trial court, because there was no hearing on the case. Rather, the CA ruled that the ground for dismissal could only be failure to state a cause of action in the light of the fact that the trial court had looked only at the allegations in the Complaint. Cause of action is the act or omission by which a party violates a right of another. It contains three elements: (1) a right existing in favor of the plaintiff, (2) a duty on the part of the defendant to respect the right of the plaintiff, and (3) a breach of the defendant s duty. 3. Actions; Causes of Action; Usually, the declaration that a plaintiff failed to establish a cause of action is postponed until after the parties are given the opportunity to present all relevant evidence on questions of fact.It is clear that plaintiff had a cause of action to apply for an injunction on the basis of the alleged breach. In other words, the allegations in the Complaint are sufficient to enable the trial court to grant the relief prayed for. Therefore, we do not agree that there was a failure to state a cause of action ; on the contrary, there was no insufficiency of allegations in the pleading. To repeat, the actual ground for dismissal was the insufficiency of the factual basis for the action. It may be raised at any time after the questions of fact shall have been resolved on the basis of stipulations, admissions, or evidence presented. Usually, the declaration that a plaintiff failed to establish a cause of action is postponed until after the parties are given the opportunity to present all relevant evidence on questions of fact. 4. Actions; Causes of Action; Mortgages; Acceleration Clauses; Words and Phrases; An acceleration clause is a stipulation stating that, on the occasion of the mortgagor s default, the whole sum remaining unpaid automatically becomes due and payable.The Complaint (and its Annexes) admitted that respondents own default triggered the acceleration clause of the mortgage Contract. An acceleration clause is a stipulation stating that, on the occasion of the mortgagors default, the whole sum remaining unpaid automatically becomes due and payable. The presence and activation of the acceleration clause, the validity of which was never questioned by respondents, negates their contention that the foreclosure was premature. 5. Actions; Causes of Action; Pleadings and Practice; Evidence; Admissions; Admissions in the complaint and its annexes, the same being in the nature of judicial admission made in the course of the proceedings, do not require proof.To state it simply, respondents are saying in their own pleading that the breach committed by petitioner bank is actually justified in the light of their breach of the agreement on the monthly installments. Hence, on the basis of their admission of their breach of their own obligations to the bank, the trial court found that petitioner had a right to foreclose the mortgage. This is not a flimsy conclusion arrived at by the trial court. It is a fact derived from respondents Complaint and its Annexes. Being in the nature of a judicial admission made in the course of the proceedings, it did not require proof. This factual admission in the pleadings on record dispensed with the need for petitioner to present evidence to prove the admitted fact. 6. Actions; Causes of Action; Findings of facts are not unbendingly postponed until after the trial, but may be made as soon as there is sufficient evidence available.Findings of fact are not unbendingly postponed until after trial, but may be made as soon as there is sufficient evidence available. In the present case, the evidence that the trial court needed in order to make a decision on the matter was the admission contained in respondents Complaint and its Annexes.

7. Judgments; Judgments on the Pleadings; A judgment on the pleadings may be rendered by the court either on motion of the plaintiff or motu proprio.What transpired in the court below is akin to a judgment on the pleadings. A judgment on the pleadings may be rendered by the court either on motion of the plaintiff or motu proprio. Such judgment is based exclusively upon the pleadings without introduction of evidence; therefore, it is proper whenever it appears that there is no controverted factual issue. 8. Judgments; Words and Phrases; A judgment is on the merits when it amounts to a legal declaration of the respective rights and duties of the parties, based upon the disclosed facts; Merits has been defined as a matter of substance in law, as distinguished from a matter of form it refers to the real or substantial grounds of action or defense, as contrasted with some technical or collateral matter raised in the course of the suit.The CA ruled that Civil Case No. N-6659 did not operate as res judicata, because no trial had ever been conducted in the trial court; hence, no judgment on the merits could have possibly been issued. While it is indisputable that there was no trial on the merits in Civil Case No. N-6659, the ruling was nonetheless a judgment on the merits. Escarte v. Office of the President held that a ruling based on a motion to dismiss, without any trial on the merits or formal presentation of evidence, can still be a judgment on the merits. Merits has been defined as a matter of substance in law, as distinguished from a matter of form; it refers to the real or substantial grounds of action or defense, as contrasted with some technical or collateral matter raised in the course of the suit. A judgment is on the merits when it amounts to a legal declaration of the respective rights and duties of the parties, based upon the disclosed facts. 9. Judgments; A judgment ruling that the defense was substantial enough to overcome the relief sought by the plaintiff is a judgment on the merits; Dismissal on the ground of failure to state a cause of action is still a judgment on the merits and operates as res judicata on a subsequent case.Contrary to the findings of the appellate court, the dismissal of Civil Case No. N6659 was a dismissal on the merits. The Order was based on the finding that the Complaint contained an admission that respondents had violated the terms of the Mortgage Contract, a violation that gave petitioner the right to foreclose the mortgaged property. The judgment was on the merits, because it ruled that petitioner s defense was substantial enough to overcome the relief sought by respondents. The Order applied the law to the facts as stated in the Complaint; it was and is thus conclusive on the propriety of foreclosure and determinative of the legal rights and obligations of the parties with respect to the mortgage. The Order definitively put an end to the controversy and barred any subsequent action on the same subject matter. Even assuming arguendo that the ground for dismissal in the First Case was the failure to state a cause of action, that particular Order of Dismissal was still a judgment on the merits and operated as res judicata on a subsequent case. 10. Judgments; What appears to be essential to a judgment on the merits is that it is a reasoned decision, which clearly states the facts and law on which it is based.These cases show that even a dismissal on the ground of failure to state a cause of action may operate as res judicata on a subsequent case involving the same parties, subject matter, and causes of action, provided that the order of dismissal actually ruled on the issues raised. What appears to be essential to a judgment on the merits is that it be a reasoned decision, which clearly states the facts and the law on which it is based. In the present case, the Order of Dismissal in Civil Case No. N-6659 ruled on the right of petitioner to foreclose the property. It held that foreclosure was valid; and that the debtor was in default in the payment of his obligation. The Order of Dismissal also explained that the Mortgage Contract and the Promissory Notes had authorized the mortgagee to foreclose. It clearly looked into the facts as presented by respondents pleadings and applied the law accordingly. Thus, based on Manalo and Mendiola, the Order carried the effect of res judicata, it definitively settled the controversy between the parties. 11. Judgments; Res Judicata; Requisites; Parties; Promissory Notes; Words and Phrases; To invoke res judicata, absolute identity of the parties is not required substantial identity is sufficient. A Promissory Note is defined as an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a determinable future time, a sum certain in money to order or to bearer. It is axiomatic that to invoke res judicata, absolute identity of parties is not required. A substantial identity of parties is sufficient. There is substantial identity of parties when there is a community of interest between a party in the first case and that in the second one, even if the latter party was not impleaded in the first case. In the instant controversy, the Complaint alleged that Columbia College, Inc., was the only debtor. But the CA found that the Promissory Note given to petitioner contained the signatures of all the four registered owners,

without any qualification. A Promissory Note is defined as an unconditional promise in writing made 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 bearer. This definition shows that the makers or signatories of a promissory note have the duty to pay the amount stated on it. 12. Judgments; Res Judicata; Identity of causes of action does not mean absolute identity the test to determine whether the causes of action are identical is to ascertain whether the same evidence will sustain both actions, or whether there is an identity in the facts essential to the maintenance of the actions.Respondents insist that the two cases involve different causes of action, allegedly because the First Case seeks to prevent, and the Third Case to nullify, the foreclosure. However, hornbook is the rule that identity of causes of action does not mean absolute identity. Otherwise, a party could easily escape the operation of res judicata by changing the form of the action or the relief sought. The test to determine whether the causes of action are identical is to ascertain whether the same evidence will sustain both actions, or whether there is an identity in the facts essential to the maintenance of the two actions. If the same facts or evidence would sustain both, the two actions are considered the same, and a judgment in the first case is a bar to the subsequent action. 13. Judgments; Res Judicata; According to the principle of res judicata, a judgment is conclusive between the parties with respect to matters directly adjudged and to any other matter that may have been related thereto.The alleged failure of petitioner bank to release the balance of the loan was a fact already in existence at the time that the First Case was filed in court. If petitioner had really violated the terms of the loan agreement, this fact should have been pleaded by respondents in the First Case. If true, such fact bolstered the claim of respondents that petitioner had no right to foreclose. According to the principle of res judicata, a judgment is conclusive between the parties with respect to matters directly adjudged and to any other matter that may have been raised in relation to it. By failing to raise this matter in the first instance, respondents are deemed to have waived it. They can no longer cite any ground for invalidating the Mortgage Contract, which was already in existence at the time of the First Case. 14. Judgments; Res Judicata; Relitigation of issues already settled merely burdens the courts and the taxpayers, creates uneasiness and confusion, wastes valuable time and energy that could be devoted to worthier cases.In putting an end to litigation between the same parties over a subject that has already been adjudicated, the principle of res judicata is dictated by public interest. Relitigation of issues already settled merely burdens the courts and the taxpayers, creates uneasiness and confusion, and wastes valuable time and energy that could be devoted to worthier cases. Even at the risk of occasional errors, judgments of courts should become final at some definite time fixed by law and x x x parties should not be permitted to litigate the same issues over again. 15. Judgments; Res Judicata; Mortgages; Foreclosure of Mortgage; An action for recovery of the excess proceeds of the foreclosure sale is a different cause of action from an injunction of foreclosure; By accessory nature of mortgage, the mortgagee has the right to foreclose the mortgaged property only to the extent of the loan secured by it.A different fate befalls the third alternative cause of action in Civil Case No. LP 99-0019, which is for recovery of the excess proceeds of the foreclosure sale. Respondents allege that the mortgaged property was sold for P18,462,900, which allegedly far exceeded the amount of loan agreed upon by the parties. Under the same evidence test, this is a different cause of action from an injunction of foreclosure. As already discussed, Civil Case No. N-6659 requires proof that the mortgagee had no right to foreclose; on the other hand, the alternative cause of action in Civil Case No. LP 99-0019 requires proof that the bid price of the mortgaged property was in excess of the contracted loan. The two issues require different sets of evidence; there is no identity of causes of action. Moreover, the recovery of the excess proceeds of the sale was not and could not be included in Civil Case No. N-6659, because it was a new cause of action that had arisen only after the foreclosure. It was not barred by res judicata, because it could not have been raised then. This is the only matter that may be remanded to the trial court. If it is proven that the mortgaged property was foreclosed and sold for an amount exceeding the loan contracted, respondent must be allowed to recover the excess. By the accessory nature of mortgage, the mortgagee has the right to foreclose the mortgaged property only to the extent of the loan secured by it. Any decision to the contrary abets unjust enrichment. Division: THIRD DIVISION

Docket Number: G.R. No. 163338 Counsel: De Jesus and Associates Law Offices, Vicente M. Tagoc, Jr. Ponente: PANGANIBAN Dispositive Portion: WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision and Resolution are hereby MODIFIED pursuant to the above discussion. The case is REMANDED to the Regional Trial Court of Cavite City for further proceedings, only on the matter of recovery of the alleged excess proceeds of the auction sale. No pronouncement as to costs.

Case Title : VICTORIA J. ILANO represented by her Attorney-in-fact, MILO ANTONIO C. ILANO, petitioners, vs. HON. DOLORES L. ESPAOL, in her capacity as Executive Judge, RTC of Imus, Cavite, Br. 90, and, AMELIA ALONZO, EDITH CALILAP, DANILO CAMACLANG, ESTELA CAMACLANG, ALLAN CAMACLANG, LENIZA REYES, EDWIN REYES, JANE BACAREL, CHERRY CAMACLANG, FLORA CABRERA, ESTELITA LEGASPI, CARMENCITA GONZALES, NEMIA CASTRO, GLORIA DOMINGUEZ, ANNILYN C. SABALE and several JOHN DOES, respondents.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Actions|Pleadings and Practice|Complaints|Causes of Action|Bill of Particulars Syllabi: 1. Actions; Pleadings and Practice; Complaints; Causes of Action; A cause of action has three elements (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right.A cause of action has three elements: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. In determining the presence of these elements, inquiry is confined to the four corners of the complaint including its annexes, they being parts thereof. If these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action. 2. Actions; Pleadings and Practice; Complaints; Bill of Particulars; Where the allegations of a complaint are vague, indefinite, or in the form of conclusion, its dismissal is not proper for the defendant may ask for more particulars.While some of the allegations may lack particulars, and are in the form of conclusions of law, the elements of a cause of action are present. For even if some are not stated with particularity, petitioner alleged 1) her legal right not to be bound by the instruments which were bereft of consideration and to which her consent was vitiated; 2) the correlative obligation on the part of the defendantsrespondents to respect said right; and 3) the act of the defendantsrespondents in procuring her signature on the instruments through deceit, abuse of confidence machination, fraud, falsification, forgery, defraudation, and bad faith, and with malice, malevolence and selfish intent. Where the allegations of a complaint are vague, indefinite, or in the form of conclusion, its dismissal is not proper for the defendant may ask for more particulars. Division: THIRD DIVISION Docket Number: G.R. No. 161756 Counsel: Edgardo J. Naoe, Nora Alejo-Buenviaje, Deogenes N. Agellon Ponente: CARPIO-MORALES Dispositive Portion: WHEREFORE, the petition is PARTLY GRANTED. 21, 2003 decision of the appellate court affirming the October 12, 2000 Order of the trial court, Branch 20 of the RTC of Imus, Cavite, is AFFIRMED with MODIFICATION in light of the foregoing discussions.The trial court is DIRECTED to REINSTATE Civil Case No. 2079-00 to its docket and take further proceedings thereon only insofar as the complaint seeks the revocation/cancellation of the subject promissory notes and damaLet the records of the case be then REMANDED to the trial court.

Case Title : ATTY. JOSE RICUERDO P. FLORES, complainant, vs. FELIX M. FALCOTELO, Sheriff IV, RTC, Branch 276, Muntinlupa City, respondent.Case

Nature : ADMINISTRATIVE MATTER in the Supreme Court. Simple Neglect of Duty. Syllabi Class : Administrative Law|Courts|Sheriffs Syllabi: 1. Administrative Law; Courts; Any conduct, act or omission on the part of those who violate the norm of public accountability and diminish or even just tend to diminish the faith of the people in the judiciary shall not be countenanced.This Court has pointed out, time and again, the heavy burden and responsibility court personnel are saddled with in view of their exalted positions as keepers of the public faith. Any impression of impropriety, misdeed or negligence in the performance of official functions must therefore be avoided. Court personnel should be examples of responsibility, competence and efficiency and must discharge their duties with due care and utmost diligence. Any conduct, act or omission on the part of those who would violate the norm of public accountability and diminish or even just tend to diminish the faith of the people in the judiciary shall not be countenanced. 2. Administrative Law; Courts; Sheriffs; As officers of the court, sheriffs are duty-bound to use reasonable skill and diligence in the performance of their duties, and conduct themselves with propriety and decorum and act above suspicion.Sheriffs in particular play an important role in the administration of justice since they are called upon to serve court writs, execute all processes, and carry into effect the orders of the court with due care and utmost diligence. As officers of the court, sheriffs are duty-bound to use reasonable skill and diligence in the performance of their duties, and conduct themselves with propriety and decorum and act above suspicion. 3. Administrative Law; Courts; Sheriffs; In garnishment of bank deposits, the executing sheriff is mandated to observe the same procedure under paragraph (a) of the same Rule with respect to delivery of payment to the judgment obligee.Under paragraph (c), Section 9, Rule 39 of the Rules of Court on garnishment of bank deposits, the executing sher- iff is mandated to observe the same procedure under paragraph (a) of the same Rule with respect to delivery of payment to the judgment obligee. 4. Administrative Law; Courts; Sheriffs; While respondent s explanation may dispel any ill motive on the part of the sheriff, still, his act cannot be allowed to go unpunished for he failed to strictly observe the rules in implementing money judgments.Respondent explains that the prevailing party in the civil case initially sought to have the check made payable to Divina Remollino, president of plaintiff Polilio Shipping Lines. However, since the notice of garnishment did not specify to whom it shall be issued, the bank did not directly issue a check in the name of said prevailing party and instead issued a check to the order of RTC Br. 276 Muntinlupa thru Felix Falcotelo, Sheriff IV. While such explanation may dispel any ill motive on the part of the sheriff, still, his act cannot be allowed to go unpunished for he failed to strictly observe the rules in implementing money judgments. 5. Administrative Law; Courts; Sheriffs; Court explained in Philippine Airlines, Inc. vs. Court of Appeals, 181 SCRA 557 (1990), why checks should not be made payable through Sheriffs.Issuing checks in the name of sheriffs is fraught with danger. In Philippine Airlines, Inc. vs. Court of Appeals, 181 SCRA 557 (1990), where the judgment debtor issued a check in the name of the sheriff who later absconded with the money, the Court explained why checks should not be made payable through sheriffs: It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name of another. Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue advantage by the sheriff, or any person into whose hands the checks may have fallen, whether wrongfully or in behalf of the creditor. The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn. 6. Administrative Law; Courts; Sheriffs; As an implementing officer of the court, respondent should set the example by faithfully observing the Rules of Court, and not brazenly disregard the Rules.Respondent argues that he never had any intention to misappropriate the amount of P900,000.00 covered by the subject check since the issuance of the same was with the conformity of both the plaintiff and the defendant in Civil Case No. 95-172. Even if true, such excuse will not completely exculpate him. Good faith on the part of the sheriff, in proceeding to execute his mandate would be of no moment for he is chargeable with the knowledge that being the officer of the court tasked therefor, it behooves him to make due compliances. As an implementing officer of the court, respondent should set the example by faithfully observing the Rules of Court, and not brazenly disregard the Rules.

Indeed, despite the hazards that come with the implementation of the judgment, sheriffs must perform their duties by the book. Division: FIRST DIVISION Docket Number: A.M. No. P-05-2038 Ponente: AUSTRIA-MARTINEZ Dispositive Portion: WHEREFORE, respondent FELIX FALCOTELO, Sheriff IV of RTC Branch 276, Muntinlupa City, is found GUILTY of simple neglect of duty and FINED the amount of Five Thousand Pesos (P5,000.00) with a WARNING that a repetition of the same or similar acts in the future shall be dealt with more severely.

Case Title : LETICIA G. MIRANDA, petitioner, vs. PHILIPPINE DEPOSIT INSURANCE CORPORATION, BANGKO SENTRAL NG PILIPINAS and PRIME SAVINGS BANK, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Jurisdictions|Banks and Banking|Banks and Banking Syllabi: 1. Jurisdictions; Banks and Banking; Regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank, unless there is a clear showing that the action taken by the BSP, through the Monetary Board in the closure of financial institutions was in excess of jurisdiction, or with grave abuse of discretion.The claim lodged by the petitioner qualifies as a disputed claim subject to the jurisdiction of the liquidation court. Regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank, unless there is a clear showing that the action taken by the BSP, through the Monetary Board in the closure of financial institutions was in excess of jurisdiction, or with grave abuse of discretion. 2. Same; Section 31 of the New Central Bank Act which provides that [I]n case of liquidation of a bank or quasi-bank, after payment of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institutions, under order of the court, in accordance with the rules on concurrence and preference of credit as provided in the Civil Code, should apply.In the distribution of assets of Prime Savings Bank, Section 31 of the New Central Bank Act which provides that [i]n case of liquidation of a bank or quasibank, after payment of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such institution, under order of the court, in accordance with the rules on concurrence and preference of credit as provided in the Civil Code, should apply. 3. Same; In a situation involving the element of fraud, where a cashier s check is purchased from a bank at a time when it is insolvent, as its officers know or are bound to know by the exercise of reasonable diligence, it has been held that the purchase as entitled to a preference in the assets of the bank on its liquidation before the check is paid.In a situation involving the element of fraud, where a cashier s check is purchased from a bank at a time when it is insolvent, as its officers know or are bound to know by the exercise of reasonable diligence, it has been held that the purchase is entitled to a preference in the assets of the bank on its liquidation before the check is paid. 4. Same; In the absence of fraud, the purchase of cashier s check, like the purchase of a draft on a correspondent bank, creates the relation of creditor and debtor.In the absence of fraud, the purchase of a cashier s check, like the purchase of a draft on a correspondent bank, creates the relation of creditor and debtor, not that of principal and agent, with the result that the purchaser or holder thereof is not entitled to a preference over general creditors in the assets of the bank issuing the check, when it fails before payment of the check. 5. Same; Both BSP and PDIC cannot therefore be held directly and solidarily liable for the payment of the two cashier s checks.Co-respondent PDIC was impleaded as a party-litigant only in its representative capacity as the receiver/liquidator of Prime Savings Bank. Both BSP and PDIC cannot therefore be held directly and solidarily liable for the payment of the two cashier s checks. Sole liability rests with Prime Savings Bank. 6. Same; The BSP, through the Monetary Board was well within its discretion to exercise this power granted by law to issue a resolution suspending the interbank clearing privileges of Prime Savings Bank, having made a factual

determination that the bank had deficient cash reserves deposited before the BSP.As correctly pointed out by the Court of Appeals, the BSP should not be held liable on the crossed cashier s checks for it was not a party to the issuance of the same; nor can it be held liable for imposing the sanctions on Prime Savings Bank which indirectly affected Miranda, since it is mandated under Sec. 37 of R.A. No. 7653 to act accordingly. The BSP, through the Monetary Board was well within its discretion to exercise this power granted by law to issue a resolution suspending the interbank clearing privileges of Prime Savings Bank, having made a factual determination that the bank had deficient cash reserves deposited before the BSP. There is no showing that the BSP abused this discretionary power conferred upon it by law. 7. Same; Solidary liability cannot attach to the BSP, in its capacity as government regulator of banks, and the PDIC as statutory receiver under R.A. No. 7653, because they are the principal government agencies mandated by law to determine the financial viability of banks and quasi-banks, and facilitate receivership and liquidation of closed financial institutions, upon a factual determination of the latter s insolvency.Regarding the third issue, it is only Prime Savings Bank that is liable to pay for the amount of the two cashier s checks. Solidary liability cannot attach to the BSP, in its capacity as government regulator of banks, and the PDIC as statutory receiver under R.A. No. 7653, because they are the principal government agencies mandated by law to determine the financial viability of banks and quasi-banks, and facilitate receivership and liquidation of closed financial institutions, upon a factual determination of the latter s insolvency. 8. Same; As clearly laid down in Ong v. Court of Appeals, 253 SCRA 105 (1996), the rationale behind the judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank.As clearly laid down in Ong v. Court of Appeals, 253 SCRA 105 (1996), the rationale behind judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. It is a pragmatic arrangement designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness. The lawmaking body contemplated that for convenience, only one court, if possible, should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendent of Banks and regulate his operations. 9. Same; In Central Bank of the Philippines v. Dela Cruz, 191 SCRA 346 (1990), we held that the actions of the Monetary Board in proceedings on insolvency are explicitly declared by the law to be final and executory they may not be set aside, or restrained, or enjoined by the courts, except upon convincing proof that the action is plainly arbitrary and made in bad faith. In Central Bank of the Philippines v. De la Cruz, 191 SCRA 346 (1990), we held that the actions of the Monetary Board in proceedings on insolvency are explicitly declared by law to be final and executory. They may not be set aside, or restrained, or enjoined by the courts, except upon convincing proof that the action is plainly arbitrary and made in bad faith. 10. Same; It is well-settled in both law and jurisprudence that the Central Monetary Authority, through the Monetary Board, is vested with exclusive authority to assess, evaluate, and determine the condition of any bank.It is well-settled in both law and jurisprudence that the Central Monetary Authority, through the Monetary Board, is vested with exclusive authority to assess, evaluate and determine the condition of any bank, and finding such condition to be one of insolvency, or that its continuance in business would involve a probable loss to its depositors or creditors, forbid bank or non-bank financial institution to do business in the Philippines; and shall designate an official of the BSP or other competent person as receiver to immediately take charge of its assets and liabilities. 11. Same; Disputed claims refer to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever.Disputed claims refer to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever. Petitioner s claim which involved the payment of the two cashier s checks that were not honored by Prime Savings Bank due to its closure falls within the ambit of a claim against the assets of the insolvent bank. The issuance of the cashier s checks by Prime Savings Bank to the petitioner created a debtor/creditor relationship between them. This disputed claim should therefore be lodged in the liquidation proceedings by the petitioner as creditor, since the closure of Prime Savings Bank has rendered all claims subsisting at that time moot which can best be threshed out by the liquidation court and not the regular courts.

12. Banks and Banking; The power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the State.The power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the State. Police power, however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of due process and equal protection clauses of the Constitution. Division: FIRST DIVISION Docket Number: G.R. No. 169334 Counsel: Earnest A. Soberano, Office of the General Counsel Ponente: YNARES-SANTIAGO Dispositive Portion: WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated February 23, 2005 and the Resolution dated July 7, 2005, in CA-G.R. CV No. 77556, are AFFIRMED with the MODIFICATION that petitioner Leticia G. Miranda is entitled to a preference in the assets of Prime Savings Bank in its liquidation for the amounts of P3,002,000.00 and P2,500,000.00, respectively stated in Cashier s Check No. 0000000514 and 0000000518 dated June 3, 1999 in the proceedings before the liquidation court designated to adjudicate on all claims against Prime Savings Bank, in accordance with the rules on concurrence and preference of credits as provided in the Civil Code.

Case Title : CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS FINANCE CORPORATION, doing business under the name and style of FNCB Finance, petitioners, vs. MODESTA R. SABENIANO, respondent.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Actions|Appeals|Judges|Evidence|Banks and Banking|Damages|Pleadings and Practice|Forum Shopping|Motions for Extension of Time|Certification Against Forum Shopping|Contents|Admissions|Documentary Evidence|Promissory Notes|Obligations and Contracts|Payments|Witnesses|Preponderance of Evidence|Checks|Crossed Checks|Presumptions|Loans|Words and Phrases|Best Evidence Rule|Compensation|Notarial Law|Pledge|Conflict of Laws|Processual Presumptions|Forgery|When a document is assailed on the basis of forgery|the best evidence rule applies Syllabi: 1. Actions; Pleadings and Practice; Forum Shopping; Motions for Extension of Time; The Petition for Review would constitute the initiatory pleading before the Supreme Court, upon the timely filing of which, the case before the Court commences, much in the same way a case is initiated by the filing of a Complaint before the trial courtand, without such a Petition, there is technically no case before the Court; A Motion for Extension of Time within which to file a Petition for Review does not serve the same purpose as the Petition for Review itself. Although it may seem at first glance that respondent was simultaneously seeking recourse from the Court of Appeals and this Court, a careful and closer scrutiny of the details of the case at bar would reveal otherwise. It should be recalled that respondent did nothing more in G.R. No. 152985 than to file with this Court a Motion for Extension of Time within which to file her Petition for Review. For unexplained reasons, respondent failed to submit to this Court her intended Petition within the reglementary period. Consequently, this Court was prompted to issue a Resolution, dated 13 November 2002, declaring G.R. No. 152985 terminated, and the therein assailed Court of Appeals Decision final and executory. G.R. No. 152985, therefore, did not progress and respondent s appeal was unperfected. The Petition for Review would constitute the initiatory pleading before this Court, upon the timely filing of which, the case before this Court commences; much in the same way a case is initiated by the filing of a Complaint before the trial court. The Petition for Review establishes the identity of parties, rights or causes of action, and relief sought from this Court, and without such a Petition, there is technically no case before this Court. The Motion filed by respondent seeking extension of time within which to file her Petition for Review does not serve the same purpose as the Petition for Review itself. Such a Motion merely presents the important dates and the justification for the additional time requested for, but it does not go into the details of the appealed case. Without

any particular idea as to the assignments of error or the relief respondent intended to seek from this Court, in light of her failure to file her Petition for Review, there is actually no second case involving the same parties, rights or causes of action, and relief sought, as that in CA-G.R. CV No. 51930. 2. Damages; The award of moral damages is meant to compensate for the actual injury suffered by a party, not to enrich her.For the mental anguish, serious anxiety, besmirched reputation, moral shock and social humiliation suffered by the respondent, the award of moral damages is but proper. However, this Court reduces the amount thereof to P300,000.00, for the award of moral damages is meant to compensate for the actual injury suffered by the respondent, not to enrich her. 3. Banks and Banking; Banking is impressed with public interest and its fiduciary character requires high standards of integrity and performancea bank is under the obligation to treat the accounts of its depositors with meticulous care whether such accounts consist only of a few hundred pesos or of millions of pesos. Although this Court appreciates the right of petitioner Citibank to effect legal compensation of respondent s local deposits, as well as its right to the proceeds of PNs No. 20138 and 20139 by virtue of the notarized Deeds of Assignment, to partly extinguish respondent s outstanding loans, it finds that petitioner Citibank did commit wrong when it failed to pay and properly account for the proceeds of respondent s money market placements, evidenced by PNs No. 23356 and 23357, and when it sought the remittance of respondent s dollar accounts from Citibank-Geneva by virtue of a highly-suspect Declaration of Pledge to be applied to the remaining balance of respondent s outstanding loans. It bears to emphasize that banking is impressed with public interest and its fiduciary character requires high standards of integrity and performance. A bank is under the obligation to treat the accounts of its depositors with meticulous care whether such accounts consist only of a few hundred pesos or of millions of pesos. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. Petitioner Citibank evidently failed to exercise the required degree of care and transparency in its transactions with respondent, thus, resulting in the wrongful deprivation of her property. 4. Appeals; Review of matters, even those not assigned as errors in the appeal, may be authorized if the consideration thereof is necessary in arriving at a just decision of the case, and there is a close interrelation between the omitted assignment of error and those actually assigned and discussed by the appellant.While it is true that the general rule is that only errors which have been stated in the assignment of errors and properly argued in the brief shall be considered, this Court has also recognized exceptions to the general rule, wherein it authorized the review of matters, even those not assigned as errors in the appeal, if the consideration thereof is necessary in arriving at a just decision of the case, and there is a close interrelation between the omitted assignment of error and those actually assigned and discussed by the appellant. Thus, the Court of Appeals did not err in awarding the damages when it already made findings that would justify and support the said award. 5. Same; Presumptions; It is presumed that evidence willfully suppressed by a party would be adverse to said party if the evidence is produced.Respondent made several attempts to have the original copy of the pledge produced before the RTC so as to have it examined by experts. Yet, despite several Orders by the RTC, petitioner Citibank failed to comply with the production of the original Declaration of Pledge. It is admitted that CitibankGeneva had possession of the original copy of the pledge. While petitioner Citibank in Manila and its branch in Geneva may be separate and distinct entities, they are still incontestably related, and between petitioner Citibank and respondent, the former had more influence and resources to convince CitibankGeneva to return, albeit temporarily, the original Declaration of Pledge. Petitioner Citibank did not present any evidence to convince this Court that it had exerted diligent efforts to secure the original copy of the pledge, nor did it proffer the reason why Citibank-Geneva obstinately refused to give it back, when such document would have been very vital to the case of petitioner Citibank. There is thus no justification to allow the presentation of a mere photocopy of the Declaration of Pledge in lieu of the original, and the photocopy of the pledge presented by petitioner Citibank has nil probative value. In addition, even if this Court cannot make a categorical finding that respondent s signature on the original copy of the pledge was forged, it is persuaded that petitioner Citibank willfully suppressed the presentation of the original document, and takes into consideration the presumption that the evidence willfully suppressed would be adverse to petitioner Citibank if produced. 6. Same; Best Evidence Rule; Forgery; When a document is assailed on the basis of forgery, the best evidence rule applies; Without the original document containing the alleged forged signature, one cannot make a definitive comparison which would establish forgery-

a comparison based on a mere xerox copy or reproduction of the document under controversy cannot produce reliable results. Respondent denied that it was her signature on the Declaration of Pledge. She claimed that the signature was a forgery. When a document is assailed on the basis of forgery, the best evidence rule applies Basic is the rule of evidence that when the subject of inquiry is the contents of a document, no evidence is admissible other than the original document itself except in the instances mentioned in Section 3, Rule 130 of the Revised Rules of Court. Mere photocopies of documents are inadmissible pursuant to the best evidence rule. This is especially true when the issue is that of forgery. As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing evidence and the burden of proof lies on the party alleging forgery. The best evidence of a forged signature in an instrument is the instrument itself reflecting the alleged forged signature. The fact of forgery can only be established by a comparison between the alleged forged signature and the authentic and genuine signature of the person whose signature is theorized upon to have been forged. Without the original document containing the alleged forged signature, one cannot make a definitive comparison which would establish forgery. A comparison based on a mere xerox copy or reproduction of the document under controversy cannot produce reliable results. 7. Same; Same; Conflict of Laws; Processual Presumptions; Words and Phrases; In the absence of any allegation and evidence presented of the specific rules and laws governing the constitution of a pledge in Geneva, Switzerland, they will be presumed to be the same as Philippine local or domestic lawsthis is known as processual presumption. Certain principles of private international law should be considered herein because the property pledged was in the possession of an entity in a foreign country, namely, Citibank-Geneva. In the absence of any allegation and evidence presented by petitioners of the specific rules and laws governing the constitution of a pledge in Geneva, Switzerland, they will be presumed to be the same as Philippine local or domestic laws; this is known as processual presumption. 8. Same; Pledge; Although the pertinent documents were entitled Deeds of Assignment, they were, in reality, more of a pledge.Petitioner Citibank was only acting upon the authority granted to it under the foregoing Deeds when it finally used the proceeds of PNs No. 20138 and 20139, paid by petitioner FNCB Finance, to partly pay for respondent s outstanding loans. Strictly speaking, it did not effect a legal compensation or off-set under Article 1278 of the Civil Code, but rather, it partly extinguished respondent s obligations through the application of the security given by the respondent for her loans. Although the pertinent documents were entitled Deeds of Assignment, they were, in reality, more of a pledge by respondent to petitioner Citibank of her credit due from petitioner FNCB Finance by virtue of her money market placements with the latter. According to Article 2118 of the Civil Code ART. 2118. If a credit has been pledged becomes due before it is redeemed, the pledgee may collect and receive the amount due. He shall apply the same to the payment of his claim, and deliver the surplus, should there be any, to the pledgor. 9. Same; Same; The certificate of acknowledgment in notarized Deeds of Assignment constitutes prima facie evidence of the execution thereof.The rule on the evidentiary weight that must be accorded a notarized document is clear and unambiguous. The certificate of acknowledgement in the notarized Deeds of Assignment constituted prima facie evidence of the execution thereof. Thus, the burden of refuting this presumption fell on respondent. She could have presented evidence of any defect or irregularity in the execution of the said documents or raised questions as to the verity of the notary public s acknowledgment and certificate in the Deeds. But again, respondent admitted executing the Deeds of Assignment, dated 2 March 1978 and 9 March 1978, although claiming that the loans for which they were executed as security were already paid. And, she assailed the Deeds of Assignment, dated 25 August 1978, with nothing more than her bare denial of execution thereof, hardly the clear and convincing evidence required to trounce the presumption of due execution of a notarized document. 10. Evidence; Notarial Law; On the evidentiary value of notarized documents, it should be recalled that the notarization of a private document converts it into a public one and renders it admissible in court without further proof of its authenticity.The Deeds of Assignment of the money market placements with petitioner FNCB Finance were notarized documents, thus, admissible in evidence. Rule 132, Section 30 of the Rules of Court provides that SEC. 30. Proof of notarial documents. Every instrument duly acknowledged or proved and certified as provided by law, may be presented in evidence without further proof, the certificate of acknowledgement being prima facie evidence of the execution of the instrument or document involved. Significant herein is this Court s elucidation in De Jesus v. Court of Appeals, 217 SCRA 307 (1993), which reads

On the evidentiary value of these documents, it should be recalled that the notarization of a private document converts it into a public one and renders it admissible in court without further proof of its authenticity (Joson vs. Baltazar, 194 SCRA 114 [1991]). This is so because a public document duly executed and entered in the proper registry is presumed to be valid and genuine until the contrary is shown by clear and convincing proof (Asido vs. Guzman, 57 Phil. 652 [1918]; U.S. vs. Enriquez, 1 Phil. 241 [1902]; Favor vs. Court of Appeals, 194 SCRA 308 [1991]). As such, the party challenging the recital of the document must prove his claim with clear and convincing evidence (Diaz vs. Court of Appeals, 145 SCRA 346 [1986]). 11. Banks and Banking; Compensation; Compensation takes place by operation of law.There is little controversy when it comes to the right of petitioner Citibank to compensate respondent s outstanding loans with her deposit account. As already found by this Court, petitioner Citibank was the creditor of respondent for her outstanding loans. At the same time, respondent was the creditor of petitioner Citibank, as far as her deposit account was concerned, since bank deposits, whether fixed, savings, or current, should be considered as simple loan or mutuum by the depositor to the banking institution. Both debts consist in sums of money. By June 1979, all of respondent s PNs in the second set had matured and became demandable, while respondent s savings account was demandable anytime. Neither was there any retention or controversy over the PNs and the deposit account commenced by a third person and communicated in due time to the debtor concerned. Compensation takes place by operation of law, therefore, even in the absence of an expressed authority from respondent, petitioner Citibank had the right to effect, on 25 June 1979, the partial compensation or off-set of respondent s outstanding loans with her deposit account, amounting to P31,079.14. 12. Same; A basic rule of evidence states that evidence that one did or did not do a certain thing at one time is not admissible to prove that he did or did not do the same or similar thing at another time, but it may be received to prove a specific intent or knowledge, identity, plan, system, scheme, habit, custom or usage, and the like. While the Court of Appeals can take judicial notice of the Decision of its Third Division in the Dy case, it should not have given the said case much weight when it rendered the assailed Decision, since the former does not constitute a precedent. The Court of Appeals, in the challenged Decision, did not apply any legal argument or principle established in the Dy case but, rather, adopted the findings therein of wrongdoing or misconduct on the part of herein petitioner Citibank and Mr. Tan. Any finding of wrongdoing or misconduct as against herein petitioners should be made based on the factual background and pieces of evidence submitted in this case, not those in another case. It is apparent that the Court of Appeals took judicial notice of the Dy case not as a legal precedent for the present case, but rather as evidence of similar acts committed by petitioner Citibank and Mr. Tan. A basic rule of evidence, however, states that, Evidence that one did or did not do a certain thing at one time is not admissible to prove that he did or did not do the same or similar thing at another time; but it may be received to prove a specific intent or knowledge, identity, plan, system, scheme, habit, custom or usage, and the like. The rationale for the rule is explained thus The rule is founded upon reason, public policy, justice and judicial convenience. The fact that a person has committed the same or similar acts at some prior time affords, as a general rule, no logical guaranty that he committed the act in question. This is so because, subjectively, a man s mind and even his modes of life may change; and, objectively, the conditions under which he may find himself at a given time may likewise change and thus induce him to act in a different way. Besides, if evidence of similar acts are to be invariably admitted, they will give rise to a multiplicity of collateral issues and will subject the defendant to surprise as well as confuse the court and prolong the trial. 13. Same; Same; Even with respect to documentary evidence, the best evidence rule applies only when the content of such document is the subject of the inquiry.As the afore-quoted provision states, the best evidence rule applies only when the subject of the inquiry is the contents of the document. The scope of the rule is more extensively explained thus But even with respect to documentary evidence, the best evidence rule applies only when the content of such document is the subject of the inquiry. Where the issue is only as to whether such document was actually executed, or exists, or on the circumstances relevant to or surrounding its execution, the best evidence rule does not apply and testimonial evidence is admissible (5 Moran, op. cit., pp. 76-66; 4 Martin, op. cit., p. 78). Any other substitutionary evidence is likewise admissible without need for accounting for the original. Thus, when a document is presented to prove its existence or condition it is offered not as documentary, but as real,

evidence. Parol evidence of the fact of execution of the documents is allowed (Hernaez, et al. vs. McGrath, etc., et al., 91 Phil 565). x x x 14. Same; Best Evidence Rule; Words and Phrases; In general, the best evidence rule requires that the highest available degree of proof must be produced, and, for documentary evidence, the contents of a document are best proved by the production of the document itself, to the exclusion of any secondary or substitutionary evidence.The best evidence rule requires that the highest available degree of proof must be produced. Accordingly, for documentary evidence, the contents of a document are best proved by the production of the document itself, to the exclusion of any secondary or substitutionary evidence. The best evidence rule has been made part of the revised Rules of Court, Rule 130, Section 3, which reads SEC. 3. Original document must be produced; exceptions. When the subject of inquiry is the contents of a document, no evidence shall be admissible other than the original document itself, except in the following cases: (a) When the original has been lost or destroyed, or cannot be produced in court, without bad faith on the part of the offeror; (b) When the original is in the custody or under the control of the party against whom the evidence is offered, and the latter fails to produce it after reasonable notice; (c) When the original consists of numerous accounts or other documents which cannot be examined in court without great loss of time and the fact sought to be established from them is only the general result of the whole; and (d) When the original is a public record in the custody of a public officer or is recorded in a public office. 15. Evidence; Preponderance of Evidence; Words and Phrases; While it is wellsettled that the term preponderance of evidence should not be wholly dependent on the number of witnesses, there are certain instances when the number of witnesses becomes the determining factor.This Court finds that the preponderance of evidence supports the existence of the respondent s loans, in the principal sum of P1,920,000.00, as of 5 September 1979. While it is well-settled that the term preponderance of evidence should not be wholly dependent on the number of witnesses, there are certain instances when the number of witnesses become the determining factor The preponderance of evidence may be determined, under certain conditions, by the number of witnesses testifying to a particular fact or state of facts. For instance, one or two witnesses may testify to a given state of facts, and six or seven witnesses of equal candor, fairness, intelligence, and truthfulness, and equally well corroborated by all the remaining evidence, who have no greater interest in the result of the suit, testify against such state of facts. Then the preponderance of evidence is determined by the number of witnesses. (Wilcox vs. Hines, 100 Tenn. 524, 66 Am. St. Rep., 761.) 16. Same; Loans; Words and Phrases; Booking the loan means recording it in the General Ledger.Ms. Cristina Dondoyano, who worked at petitioner Citibank as a loan processor, was responsible for booking respondent s loans. Booking the loans means recording it in the General Ledger. She explained the procedure for booking loans, as follows: The account officer, in the Marketing Department, deals directly with the clients who wish to borrow money from petitioner Citibank. The Marketing Department will forward a loan booking checklist, together with the borrowing client s PNs and other supporting documents, to the loan pre-processor, who will check whether the details in the loan booking checklist are the same as those in the PNs. The documents are then sent to Signature Control for verification of the client s signature in the PNs, after which, they are returned to the loan pre-processor, to be forwarded finally to the loan processor. The loan processor shall book the loan in the General Ledger, indicating therein the client name, loan amount, interest rate, maturity date, and the corresponding PN number. Since she booked respondent s loans personally, Ms. Dondoyano testified that she saw the original PNs. In 1986, Atty. Fernandez of petitioner Citibank requested her to prepare an accounting of respondent s loans, which she did, and which was presented as Exhibit 120 for the petitioners. The figures from the said exhibit were culled from the bookings in the General Ledger, a fact which respondent s counsel was even willing to stipulate. 17. Same; Same; Same; A check, whether a manager s check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor.Mr. Tan, in his deposition, further explained that provisional receipts were issued when payment to the bank was made using checks, since the checks would still be subject to clearing. The purpose for the provisional receipts was merely to acknowledge the delivery of the checks to the possession of the bank, but not yet of payment. This bank practice finds legitimacy in the pronouncement of this Court that a check, whether an MC or an ordinary check, is not legal tender and, therefore, cannot constitute valid tender of payment. In Philippine Airlines, Inc. v. Court of Appeals, 181 SCRA 557 (1990), this Court

elucidated that: Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment (Sec. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7 Phil. 255; Tan Sunco, v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager s check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3). 18. Same; Same; Same; Same; Where checks crossed for payee s account only were actually deposited, cleared, and paid, then the presumption would be that the said checks were properly deposited to the account of the payee, who was clearly named as such in the checks; The mere fact that the Manager s Checks (MCs) do not bear the payee s signature at the back does not negate deposit thereof in her account.Respondent denied ever receiving MCs No. 220701 and 226467. However, considering that the said checks were crossed for payee s account only, and that they were actually deposited, cleared, and paid, then the presumption would be that the said checks were properly deposited to the account of respondent, who was clearly named the payee in the checks. Respondent s bare allegations that she did not receive the two checks fail to convince this Court, for to sustain her, would be for this Court to conclude that an irregularity had occurred somewhere from the time of the issuance of the said checks, to their deposit, clearance, and payment, and which would have involved not only petitioner Citibank, but also BPI, which accepted the checks for deposit, and the Central Bank of the Philippines, which cleared the checks. It falls upon the respondent to overcome or dispute the presumption that the crossed checks were issued, accepted for deposit, cleared, and paid for by the banks involved following the ordinary course of their business. The mere fact that MCs No. 220701 and 226467 do not bear respondent s signature at the back does not negate deposit thereof in her account. The liability for the lack of indorsement on the MCs no longer fall on petitioner Citibank, but on the bank who received the same for deposit, in this case, BPI Cubao Branch. Once again, it must be noted that the MCs were crossed, for payee s account only, and the payee named in both checks was none other than respondent. The crossing of the MCs was already a warning to BPI to receive said checks for deposit only in respondent s account. It was up to BPI to verify whether it was receiving the crossed MCs in accordance with the instructions on the face thereof. If, indeed, the MCs were deposited in accounts other than respondent s, then the respondent would have a cause of action against BPI. 19. Same; Same; Same; Same; It is presumed that private transactions have been fair and regular, and that the ordinary course of business has been followed.This Court finds applicable herein the presumptions that private transactions have been fair and regular, and that the ordinary course of business has been followed. There is no question that the loan transaction between petitioner Citibank and the respondent is a private transaction. The transactions revolving around the crossed MCs from their issuance by petitioner Citibank to respondent as payment of the proceeds of her loans; to its deposit in respondent s accounts with several different banks; to the clearing of the MCs by an independent clearing house; and finally, to the payment of the MCs by petitioner Citibank as the drawee bank of the said checks are all private transactions which shall be presumed to have been fair and regular to all the parties concerned. In addition, the banks involved in the foregoing transactions are also presumed to have followed the ordinary course of business in the acceptance of the crossed MCs for deposit in respondent s accounts, submitting them for clearing, and their eventual payment and cancellation. 20. Same; Same; Same; Presumptions; Given that a check is more than just an instrument of credit used in commercial transactions for it also serves as a receipt or evidence for the drawee bank of the cancellation of the said check due to payment, then, the possession by the drawee bank of the said Manager s Checks (MCs), duly stamped Paid gives rise to the presumption that the said Manager s Checks (MCs) were already paid out to the intended payee.The crossed MCs presented by petitioner Bank were indeed deposited in several different bank accounts and cleared by the Clearing Office of the Central Bank of the Philippines, as evidenced by the stamp marks and notations on the said checks. The crossed MCs are already in the possession of petitioner Citibank, the drawee bank, which was ultimately responsible for the payment of the amount stated in the checks. Given that a check is more than just an instrument of credit used in commercial transactions for it also serves as a receipt or evidence for the drawee bank of the cancellation of the said check due to payment, then, the possession by petitioner Citibank of the said MCs, duly

stamped Paid gives rise to the presumption that the said MCs were already paid out to the intended payee, who was in this case, the respondent. 21. Same; Same; Crossed Checks; A crossed check cannot be presented to the drawee bank for payment in cashthe check can only be deposited with the payee s bank which, in turn, must present it for payment against the drawee bank in the course of normal banking hours; The crossed check can only be deposited and the drawee bank may only pay to another bank in the payee s or indorser s account. In general, a crossed check cannot be presented to the drawee bank for payment in cash. Instead, the check can only be deposited with the payee s bank which, in turn, must present it for payment against the drawee bank in the course of normal banking hours. The crossed check cannot be presented for payment, but it can only be deposited and the drawee bank may only pay to another bank in the payee s or indorser s account. The effect of crossing a check was described by this Court in Philippine Commercial International Bank v. Court of Appeals, 350 SCRA 446 (2001) [T]he crossing of a check with the phrase Payee s Account Only is a warning that the check should be deposited in the account of the payee. Thus, it is the duty of the collecting bank PCI Bank to ascertain that the check be deposited in payee s account only. It is bound to scrutinize the check and to know its depositors before it can make the clearing indorsement all prior indorsements and/or lack of indorsement guaranteed. 22. Banks and Banking; Checks; Manager s Checks (MCs) are drawn by the bank s manager upon the bank itself and regarded to be as good as the money it represents.It bears to emphasize that the proceeds of the loans were paid to respondent in MCs, with the respondent specifically named as payee. MCs checks are drawn by the bank s manager upon the bank itself and regarded to be as good as the money it represents. Moreover, the MCs were crossed checks, with the words Payee s Account Only. 23. Same; Preponderance of Evidence; Words and Phrases; Preponderant evidence means that, as a whole, the evidence adduced by one side outweighs that of the adverse party.After going through the testimonial and documentary evidence presented by both sides to this case, it is this Court s assessment that respondent did indeed have outstanding loans with petitioner Citibank at the time it effected the offset or compensation on 25 July 1979 (using respondent s savings deposit with petitioner Citibank), 5 September 1979 (using the proceeds of respondent s money market placements with petitioner FNCB Finance) and 26 October 1979 (using respondent s dollar accounts remitted from Citibank-Geneva). The totality of petitioners evidence as to the existence of the said loans preponderates over respondent s. Preponderant evidence means that, as a whole, the evidence adduced by one side outweighs that of the adverse party. 24. Same; Witnesses; Taking into consideration the substantial length of time between the transactions and the witnesses testimonies, as well as the undeniable fact that bank officers deal with multiple clients and process numerous transactions during their tenure, the Court is reluctant to give much weight to such bank officials testimonies regarding the payment of promissory notes and the use of the proceeds thereof for opening time deposit accountsthe Court finds it implausible that they should remember, after all these years, the particular transaction with respondent involving her promissory notes and her time deposit accounts. Before anything else, it should be noted that when Mr. Pujeda s testimony before the RTC was made on 12 March 1990 and Mr. Tan s deposition in Hong Kong was conducted on 3 September 1990, more than a decade had passed from the time the transactions they were testifying on took place. This Court had previously recognized the frailty and unreliability of human memory with regards to figures after the lapse of five years. Taking into consideration the substantial length of time between the transactions and the witnesses testimonies, as well as the undeniable fact that bank officers deal with multiple clients and process numerous transactions during their tenure, this Court is reluctant to give much weight to the testimonies of Mr. Pujeda and Mr. Tan regarding the payment of PNs No. 23356 and 23357 and the use by respondent of the proceeds thereof for opening TD accounts. This Court finds it implausible that they should remember, after all these years, this particular transaction with respondent involving her PNs No. 23356 and 23357 and TD accounts. Both witnesses did not give any reason as to why, from among all the clients they had dealt with and all the transactions they had processed as officers of petitioner Citibank, they specially remembered respondent and her PNs No. 23356 and 23357. Their testimonies likewise lacked details on the circumstances surrounding the payment of the two PNs and the opening of the time deposit accounts by respondent, such as the date of payment of the two PNs, mode of payment, and the manner and context by which respondent relayed her instructions to the officers of petitioner Citibank to use the proceeds of her two PNs in opening the TD accounts.

25. Same; Obligations and Contracts; Payments; As a general rule, one who pleads payment has the burden of proving iteven where the plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. Since the genuineness and due execution of PNs No. 23356 and 23357 are uncontested, respondent was able to establish prima facie that petitioner Citibank is liable to her for the amounts stated therein. The assertion of petitioner Citibank of payment of the said PNs is an affirmative allegation of a new matter, the burden of proof as to such resting on petitioner Citibank. Respondent having proved the existence of the obligation, the burden of proof was upon petitioner Citibank to show that it had been discharged. It has already been established by this Court that As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege nonpayment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment. When the existence of a debt is fully established by the evidence contained in the record, the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such defense to the claim of the creditor. Where the debtor introduces some evidence of payment, the burden of going forward with the evidence as distinct from the general burden of proof shifts to the creditor, who is then under the duty of producing some evidence of non-payment. 26. Evidence; Admissions; Documentary Evidence; Promissory Notes; By the admission of the genuineness and due execution of an instrument is meant that the party whose signature it bears admits that he signed it or that it was signed by another for him with his authority, that at the time it was signed it was in words and figures exactly as set out in the pleading of the party relying on it, that the document was delivered, and that any formal requisites required by law, are waived by him; The effect of an admission is such that in the case of a promissory note a prima facie case is made for the plaintiff which dispenses with the necessity of evidence on his part and entitles him to a judgment on the pleadings unless a special defense of new matter, such as payment, is interposed by the defendant.Petitioner Citibank did not deny the existence nor questioned the authenticity of PNs No. 23356 and 23357 it issued in favor of respondent for her money market placements. In fact, it admitted the genuineness and due execution of the said PNs, but qualified that they were no longer outstanding. In Hibberd v. Rohde and McMillian, 32 Phil. 476, this Court delineated the consequences of such an admission By the admission of the genuineness and due execution of an instrument, as provided in this section, is meant that the party whose signature it bears admits that he signed it or that it was signed by another for him with his authority; that at the time it was signed it was in words and figures exactly as set out in the pleading of the party relying upon it; that the document was delivered; and that any formal requisites required by law, such as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by him. Hence, such defenses as that the signature is a forgery (Puritan Mfg. Co. vs. Toti Cox vs. Northwestern Stage Co., 1 Idaho, 376; Woollen vs. Whitacre, 73 Ind., 198; Smith vs. Ehnert, 47 Wis., 479; Faelnar vs. Escao, 11 Phil. Rep., 92); or that it was unauthorized, as in the case of an agent signing for his principal, or one signing in behalf of a partnership (Country Bank vs. Greenberg, 127 Cal., 26; Henshaw vs. Root, 60 Inc., 220; Naftzker vs. Lantz, 137 Mich., 441) or of a corporation (Merchant vs. International Banking Corporation, 6 Phil Rep., 314; Wanita vs. Rollins, 75 Miss., 253; Barnes vs. Spencer or that, in the case of the latter, that the corporation was authorized under its charter to sign the instrument (Merchant vs. International Banking Corporation, supra); or that the party charged signed the instrument in some other capacity than that alleged in the pleading setting it out (Payne vs. National Bank, 16 Kan., 147); or that it was never delivered (Hunt vs. Weir, 29 Ill., 83; Elbring vs. Mullen, 4 Idaho, 199; Thorp vs. Keokuk Coal Co., 48 N.Y., 253; Fire Association of Philadelphia vs. Ruby, 60 Neb., 216) are cut off by the admission of its genuineness and due execution. The effect of the admission is such that in the case of a promissory note a prima facie case is made for the plaintiff which dispenses with the necessity of evidence on his part and entitles him to a judgment on the pleadings unless a special defense of new matter, such as payment, is interposed by the defendant (Papa vs. Martinez, 12 Phil. Rep., 613; Chinese Chamber of Commerce vs. Pua To Ching, 14 Phil. Rep., 222; Banco Espaol-Filipino vs. McKay & Zoeller, 27 Phil. Rep., 183). x x x 27. Judges; That the trial court judge who decided a case is not the same judge who heard the case and received the evidence is of little consequence when the records and transcripts of stenographic notes (TSNs) are complete and available for consideration by the former.-

What deserves stressing is that, in this jurisdiction, there exists a disputable presumption that the RTC Decision was rendered by the judge in the regular performance of his official duties. While the said presumption is only disputable, it is satisfactory unless contradicted or overcame by other evidence. Encompassed in this presumption of regularity is the presumption that the RTC judge, in resolving the case and drafting his Decision, reviewed, evaluated, and weighed all the evidence on record. That the said RTC judge is not the same judge who heard the case and received the evidence is of little consequence when the records and transcripts of stenographic notes (TSNs) are complete and available for consideration by the former. 28. Appeals; Findings of fact of the Court of Appeals are conclusive upon the Supreme Court;Exceptions.It is already a well-settled rule that the jurisdiction of this Court in cases brought before it from the Court of Appeals by virtue of Rule 45 of the Revised Rules of Court is limited to reviewing errors of law. Findings of fact of the Court of Appeals are conclusive upon this Court. There are, however, recognized exceptions to the foregoing rule, namely: (1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the interference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner s main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record. 29. Same; Same; Same; Certification Against Forum Shopping; Contents; The Certification against Forum Shopping is required to be attached to the initiatory pleading.It should also be noted that the Certification against Forum Shopping is required to be attached to the initiatory pleading, which, in G.R. No. 152985, should have been respondent s Petition for Review. It is in that Certification wherein respondent certifies, under oath, that: (a) she has not commenced any action or filed any claim involving the same issues in any court, tribunal or quasijudicial agency and, to the best of her knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, that she is presenting a complete statement of the present status thereof; and (c) if she should thereafter learn that the same or similar action or claim has been filed or is pending, she shall report that fact within five days therefrom to this Court. Without her Petition for Review, respondent had no obligation to execute and submit the foregoing Certification against Forum Shopping. Thus, respondent did not violate Rule 7, Section 5 of the Revised Rules of Court; neither did she mislead this Court as to the pendency of another similar case. Division: FIRST DIVISION Docket Number: G.R. No. 156132 Counsel: Agcaoili & Associates, Angara, Abello, Concepcion, Regala & Cruz, Moises R. Tolentino, Jr. Ponente: CHICO-NAZARIO Dispositive Portion: IN VIEW OF THE FOREGOING, the instant Petition is PARTLY GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. No. 51930, dated 26 March 2002, as already modified by its Resolution, dated 20 November 2002, is hereby AFFIRMED WITH MODIFICATION, as follows

Case Title : HI-CEMENT CORPORATION, petitioner, vs. INSULAR BANK OF ASIA AND AMERICA (later PHILIPPINE COMMERCIAL INTERNATIONAL BANK and now, EQUITABLE-PCI BANK), respondent., E.T. HENRY & CO. and SPOUSES ENRIQUE TAN and LILIA TAN, petitioners, vs. INSULAR BANK OF ASIA AND AMERICA (later PHILIPPINE COMMERCIAL INTERNATIONAL BANK and now, EQUITABLE-PCI BANK), respondent.Case Nature : PETITIONS for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Remedial Law|Mercantile Law|Civil Law|Civil Procedure|Certiorari|Negotiable Instruments Law|Holder in Due Course|Crossed Checks|Obligations and Contracts|Solidary

Liability|Corporation Law|Doctrine of Piercing the Veil of Corporate Entity|Sales|Foreclosures|Cross-Claims Syllabi: 1. Remedial Law; Civil Procedure; Certiorari; As a rule, an appeal by certiorari under Rule 45 of the Rules of Court is limited to review of errors of law; The factual findings of the trial court are generally binding on us unless there was a misapprehension of facts or when the inference drawn from the facts was manifestly mistaken.As a rule, an appeal by certiorari under Rule 45 of the Rules of Court is limited to review of errors of law. The factual findings of the trial court, specially when affirmed by the appellate court, are generally binding on us unless there was a misapprehension of facts or when the inference drawn from the facts was manifestly mistaken. This case falls within the exception. 2. Remedial Law; Civil Procedure; Cross-Claims; Under Rule 3 of the Rules of Court, every action, including a counterclaim or a cross-claim, must be prosecuted or defended in the name of the real party in interest.Under Rule 3 of the Rules of Court, every action, including a counterclaim (or a cross-claim), must be prosecuted or defended in the name of the real party in interest. The term defendant may refer to the original defending party, the defendant in a counterclaim, the cross-defendant or the third (fourth, etc.) party defendant. Hence, for this technical lapse, we are constrained not to pass on E.T. Henry s and the spouses Tan s cross-claims. 3. Civil Law; Sales; Foreclosures; Mere inadequacy of the price obtained at the sheriff s sale, unless shocking to the conscience, was not sufficient to set aside the sale if there was no showing that, in the event of a regular sale, a better price can be obtained.With respect to the allegation that foreclosure was void due to the inadequacy of the bid price, we agree with the CA that the mere inadequacy of the price obtained at the [s]heriff s sale, unless shocking to the conscience, (was) not sufficient to set aside the sale if there (was) no showing that, in the event of a regular sale, a better price (could) be obtained. 4. Same; Same; Same; Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality.Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality. For this ground to stand in this case, there must be proof that the spouses Tan: (1) had control or complete domination of E.T. Henry s finances and that the latter had no separate existence with respect to the act complained of; (2) used such control to commit fraud or wrong and (3) the control was the proximate cause of the loss or injury complained of by respondent. The records of this case do not show that these elements were present. 5. Same; Same; Same; Fraud is an allegation of fact that demands clear and convincing evidence. It is never presumed.The CA left a gaping hole by failing to provide the basis for its ruling that E.T. Henry and the spouses Tan defrauded respondent. It did not also state what act constituted the fraud. Fraud is an allegation of fact that demands clear and convincing evidence. It is never presumed. 6. Mercantile Law; Corporation Law; Doctrine of Piercing the Veil of Corporate Entity; It is only when the fiction or notion of legal entity is used to defeat public convenience, justify wrong, perpetuate fraud or defend crime that the law will shred the corporate legal veil and regard it as a mere association of persons.If any general rule can be laid down, it is that the corporation will be looked upon as a legal entity until sufficient reasons to the contrary appear. It is only when the fiction or notion of legal entity is used to defeat public convenience, justify wrong, perpetuate fraud or defend crime that the law will shred the corporate legal veil and regard it as a mere association of persons. This is referred to as the doctrine of piercing the veil of corporate entity. 7. Civil Law; Obligations and Contracts; Solidary Liability; Solidary liability cannot be presumed but must be established by law or contract; There is solidary liability only when the obligation expressly so states, or when the obligation requires solidarity.Solidary liability cannot be presumed but must be established by law or contract. Neither is present here. Articles 1207 and 1208 of the Civil Code provide: Art. 1207. The concurrence of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the presentation. There is solidary liability only when the obligation expressly so states, or when the obligation requires solidarity. 8. Same; Same; Same; The Negotiable Instruments Law (NIL) does not absolutely bar a holder who is not a holder in due course from recovering on

the checks; It may recover from the party who indorsed/encashed the checks if the latter has no valid excuse for refusing payment. We note, however, that in the two aforementioned cases, we made it clear that the NIL does not absolutely bar a holder who is not a holder in due course from recovering on the checks. In both, we ruled that it may recover from the party who indorsed/encashed the checks if the latter has no valid excuse for refusing payment. Here, there was no doubt that it was E.T. Henry that rediscounted Hi-Cement s checks and received their value from respondent. Since E.T. Henry had no justification to refuse payment, it should pay respondent. 9. Same; Same; Same; Apparently, it was not the payee who presented the same for payment and therefore, there was no proper presentment, and the liability did not attach to the drawer; In the absence of due presentment, the drawer did not become liable.In State Investment House, Inc. (SIHI) v. Intermediate Appellate Court, 175 SCRA 310 (1989), SIHI re-discounted crossed checks and was declared not a holder in due course. As a result, when it presented the checks for deposit, we deemed that its presentment to the drawee bank was not proper, hence, the liability did not attach to the drawer of the checks. We ruled that: The three subject checks in the case at bar had been crossed which could only mean that the drawer had intended the same for deposit only by the rightful person, i.e., the payee named therein. Apparently, it was not the payee who presented the same for payment and therefore, there was no proper presentment, and the liability did not attach to the drawer. Thus, in the absence of due presentment, the drawer did not become liable. 10. Same; Same; Same; It is settled that crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain the indorser s title to the check or the nature of his possession. Failing in this respect, the holder is declared guilty of gross negligence amounting to legal absence of good faith.It is then settled that crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain the indorser s title to the check or the nature of his possession. Failing in this respect, the holder is declared guilty of gross negligence amounting to legal absence of good faith and as such[,] the consensus of authority is to the effect that the holder of the check is not a holder in due course. 11. Same; Same; Crossed Checks; Effects.In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a check should have the following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once to one who has an account with a bank [and]; (c) the act of crossing the checks serves as warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course. 12. Mercantile Law; Negotiable Instruments Law; Holder in Due Course; Holder means the payee or indorsee of a bill or a note, or the person who is in possession of it, or the bearer thereof.Holder means the payee or indorsee of a bill or a note, or the person who is in possession of it, or the bearer thereof. On the other hand, Section 52 states: A holder in due course is a holder who has taken the instrument under the following conditions: (a) it is complete and regular on its face; (b) he became the holder of it before it was overdue, and without notice that it has previously been dishonored, if such was the fact; (c) he took it in good faith and for value and (d) at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. Division: FIRST DIVISION Docket Number: G.R. No. 132403, G.R. No. 132419 Counsel: Quisumbing, Torres, Westwood Law, Bengzon, Narciso, Cudala, Jimenez, Gonzales and Liwanag Ponente: CORONA Dispositive Portion: WHEREFORE, the assailed decision of the Court of Appeals in CA-G.R. CV No. 31600 is hereby AFFIRMED with MODIFICATION. Accordingly, petitioner HiCement Corporation is discharged from any liability. Only petitioner E.T. Henry & Co. is ORDERED to pay respondent Insular Bank of Asia and America (later Philippine Commercial International Bank and now Equitable PCI-Bank) the following:Let the records of this case be remanded to the trial court for the proper computation of E.T. Henry s, Riverside s and Kanebo s liabilities for the checks, attorney s fees and costs of litigation.Costs against petitioners E.T. Henry and the spouses Enrique and Lilia Tan.

Case Title : METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. PHILIPPINE BANK OF COMMUNICATIONS, FILIPINAS ORIENT FINANCE CORPORATION, PIPE MASTER CORPORATION and TAN JUAN LIAN, respondents., SOLID BANK CORPORATION, petitioner, vs. FILIPINAS ORIENT FINANCE CORPORATION, PIPE MASTER CORPORATION, TAN JUAN LIAN and/or PHILIPPINE BANK OF COMMUNICATIONS, respondents.Case Nature : PETITIONS for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Banks and Banking|Negotiable Instruments Law|Checks|Judicial Notice Syllabi: 1. Banks and Banking; Negotiable Instruments Law; Checks; Judicial Notice; While the Negotiable Instruments Law is silent with respect to crossed checks, the Supreme Court nonetheless has taken judicial cognizance of the practice that a check with two parallel lines on the upper left hand corner means that it could only be deposited and not converted into cash; The crossing of a check with the phrase Payee s Account Only is a warning that the check should be deposited in the account of the payee.A check is defined by law as a bill of exchange drawn on a bank payable on demand. The Negotiable Instruments Law is silent with respect to crossed checks. Nonetheless, this Court has taken judicial cognizance of the practice that a check with two parallel lines on the upper left hand corner means that it could only be deposited and not converted into cash. The crossing of a check with the phrase Payee s Account Only is a warning that the check should be deposited in the account of the payee. It is the collecting bank which is bound to scrutinize the check and to know its depositors before it can make the clearing indorsement, all prior indorsements and/or lack of indorsement guaranteed. 2. Same; Same; Same; One who accepts and encashes a check from an individual knowing that the payee is a corporation does so at his peril; It must be emphasized that the law imposes on the collecting bank the duty to diligently scrutinize the checks deposited with it for the purpose of determining their genuineness and regularitythe collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it to a high standard of conduct. Petitioner banks disregarded established banking rules and procedures. They were negligent in accepting the checks and allowing the transaction to push through. In Jai-Alai Corp. of the Phil. v. Bank of the Phil. Islands, 66 SCRA 29 (1975), we ruled that one who accepts and encashes a check from an individual knowing that the payee is a corporation does so at his peril. Therefore, petitioner banks are liable to respondent Filipinas Orient. In fine, it must be emphasized that the law imposes on the collecting bank the duty to diligently scrutinize the checks deposited with it for the purpose of determining their genuineness and regularity. The collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it to a high standard of conduct. Since petitioner banks negligence was the direct cause of the misappropriation of the checks, they should bear and answer for respondent Filipinas Orient s loss, without prejudice to their filing of an appropriate action against Yu Kio. 3. Same; Same; Same; The drawee bank cannot be held liable since it mainly relied on the express guarantee made by the collecting banks of all prior indorsements.In Associated Bank v. Court of Appeals, 252 SCRA 620 (1996), we held that the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior indorsements and is privy to the depositor who negotiated the check. PBCom, as the drawee bank, cannot be held liable since it mainly relied on the express guarantee made by petitioners, the collecting banks, of all prior indorsements. 4. Same; Same; Same; Under Section 66 of the Negotiable Instruments Law, an endorser warrants that the instrument is genuine and in all respects what it purports to be; that he has a good title to it;that all prior parties had capacity to contract; and that the instrument is at the time of his indorsement valid and subsisting ; Collecting banks which stamp at the back of the check that all prior indorsements and/or lack of indorsements are guaranteed become general endorsers and cannot deny liability.As what transpired in this case, petitioner banks accommodated Yu Kio, being a valued client and the president of Pipe Master, and accepted the crossed checks. They stamped at the back thereof that all prior indorsements and/or lack of indorsements are guaranteed. In so doing, they became general endorsers. Under Section 66 of the Negotiable Instruments Law, an endorser warrants that the instrument is genuine and in all respects what it purports to be; that he has a good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his indorsement valid and subsisting.

5. Same; Same; Same; The effect of crossing a check means that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein.Here, petitioner banks have the obligation to ensure that the PBCom checks were deposited in accordance with the instructions stated in the checks. The four PBCom checks in question had been crossed and issued for payee s account only. This could only mean that the drawer, Filipinas Orient, intended the same for deposit only by the payee, Pipe Master. The effect of crossing a check means that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein Pipe Master. Division: FIRST DIVISION Docket Number: G.R. No. 141408, G.R. No. 141429 Counsel: Perez & Calima Law Office, Siguion Reyna, Montecillo & Ongsiako, Maximo Z. Banaga, Jr., Quisumbing, Torres Law Offices Ponente: SANDOVAL-GUTIERREZ Dispositive Portion: WHEREFORE, we DENY the petitions. The challenged Decision

G.R. No. 170984. January 30, 2009.* SECURITY BANK AND TRUST COMPANY, petitioner, vs. RIZAL COMMERCIAL BANKING CORPORATION, respondent. G.R. No. 170987. January 30, 2009.* RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. SECURITY BANK AND TRUST COMPANY, respondent. Banks and Banking; Checks; Words and Phrases; A manager s check is one drawn by a bank s manager upon the bank itself it stands on the same footing as a certified check, which is deemed to have been accepted by the bank that certified it. It must be noted that the questioned check issued by SBTC is not just an ordinary check but a manager s check. A manager s check is one drawn by a bank s manager upon the bank itself. It stands on the same footing as a certified check, which is deemed to have been accepted by the bank that certified it. As the bank s own check, a manager s check becomes the primary obligation of the bank and is accepted in advance by the act of its issuance. In this case, RCBC, in immediately crediting the amount of P8 million to CMC s account, relied on the integrity and honor of the check as it is regarded in commercial transactions. Where the questioned check, which was payable to Cash, appeared regular on its face, and the bank found nothing unusual in the transaction, as the drawer usually issued checks in big amounts made payable to cash, RCBC cannot be faulted in paying the value of the questioned check. Same; Same; The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society it is important that banks should guard against injury attributable to negligence or bad faith on its part; The highest degree of diligence is expected, and high standards of integrity and performance are required of banks. In addition to the above-mentioned award of compensatory damages, we also find merit in the need to award exemplary damages in order to set an example for the public good. The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, above all, trust and confidence. In this connection, it is important that banks should guard against injury attributable to negligence or bad faith on its part. As repeatedly emphasized, since the banking business is impressed with public interest, the trust and confidence of the public in it is of paramount importance. Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are required of it. SBTC having failed in this respect, the award of exemplary damages to RCBC in the amount of P50,000.00 is warranted. [Security Bank and Trust Company vs. Rizal Commercial Banking Corporation, 577 SCRA 407(2009)]

Case Title : ROBERT DINO, petitioner, vs. MARIA LUISA JUDAL-LOOT, joined by her husband VICENTE LOOT, respondents.Case Nature : PETITION for review on certiorari of the decision and resolution of the Court of Appeals. Syllabi Class : Mercantile Law|Negotiable Instruments|Checks|Holder in Due Course Syllabi: 1. Mercantile Law; Negotiable Instruments Law; Checks; Crossed Checks; The act of crossing a check serves as a warning to the holder that the check has been issued for a definite purpose so that the holder thereof must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course.The act of crossing a check serves as a warning to the holder that the check has been issued for a definite purpose so that the holder thereof must inquire if he has received the check pursuant to that purpose; otherwise, he is not a holder in due course. Contrary to respondents view, petitioner never changed his theory, that respondents are not holders in due course of the subject check, as would violate fundamental rules of justice, fair play, and due process. Besides, the subject check was presented and admitted as evidence during the trial and respondents did not and in fact cannot deny that it is a crossed check. 2. Same; Same; Same; Holder in Due Course; The Negotiable Instruments Law does not provide that a holder who is not a holder in due course may not in any case recover on the instrument; The only disadvantage of a holder who is not in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable.The fact that respondents are not holders in due course does not automatically mean that they cannot recover on the check. The Negotiable Instruments Law does not provide that a holder who is not a holder in due course may not in any case recover on the instrument. The only disadvantage of a holder who is not in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable. Among such defenses is the absence or failure of consideration, which petitioner sufficiently established in this case. Petitioner issued the subject check supposedly for a loan in favor of Consing s group, who turned out to be a syndicate defrauding gullible individuals. Since there is in fact no valid loan to speak of, there is no consideration for the issuance of the check. Consequently, petitioner cannot be obliged to pay the face value of the check. 3. Same; Same; Same; Same; Special Crossed Check, and General Crossed Check, Defined; Crossing a check is done by placing two parallel lines diagonally on the left top portion of the check.Under usual practice, crossing a check is done by placing two parallel lines diagonally on the left top portion of the check. The crossing may be special wherein between the two parallel lines is written the name of a bank or a business institution, in which case the drawee should pay only with the intervention of that bank or company, or crossing may be general wherein between two parallel diagonal lines are written the words and Co. or none at all as in the case at bar, in which case the drawee should not encash the same but merely accept the same for deposit. The effect therefore of crossing a check relates to the mode of its presentment for payment. Under Section 72 of the Negotiable Instruments Law, presentment for payment to be sufficient must be made (a) by the holder, or by some person authorized to receive payment on his behalf x x x As to who the holder or authorized person will be depends on the instructions stated on the face of the check. 4. Same; Same; Checks; Crossed Checks; Principles that must be considered in the treatment of crossed checks.In the case of a crossed check, as in this case, the following principles must additionally be considered: A crossed check (a) may not be encashed but only deposited in the bank; (b) may be negotiated only once to one who has an account with a bank; and (c) warns the holder that it has been issued for a definite purpose so that the holder thereof must inquire if he has received the check pursuant to that purpose; otherwise, he is not a holder in due course. 5. Mercantile Law; Negotiable Instruments Law; Holder in Due Course, Defined.Section 52 of the Negotiable Instruments Law defines a holder in due course, thus: A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it has been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. 6. Civil Procedure; Courts; Jurisdiction; The Court is clothed with ample authority to entertain issues or matters not raised in the lower courts in the interest of substantial justice.-

In any event, the Court is clothed with ample authority to entertain issues or matters not raised in the lower courts in the interest of substantial justice. In Casa Filipina Realty v. Office of the President, 241 SCRA 165 (1995), the Court held: [T]he trend in modern-day procedure is to accord the courts broad discretionary power such that the appellate court may consider matters bearing on the issues submitted for resolution which the parties failed to raise or which the lower court ignored. Since rules of procedure are mere tools designed to facilitate the attainment of justice, their strict and rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be avoided. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. Division: SECOND DIVISION Docket Number: G.R. No. 170912 Counsel: The Law Firm of Hermosisima & Inso Ponente: CARPIO Dispositive Portion: WHEREFORE, we GRANT the petition. We SET ASIDE the 16 August 2005 Decision and 30 November 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 57994.

Case Title : SALVADOR O. ECHANO, JR., petitioner, vs. LIBERTY TOLEDO, respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Administrative Law|Misconduct Syllabi: 1. Administrative Law; Misconduct; Misconduct is a transgression of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by a public officer; In grave misconduct the elements of corruption, clear intent to violate the law or flagrant disregard of established rule, must be manifest.There is no doubt, based on the evidence that Echano was guilty of grave misconduct. Misconduct is a transgression of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by a public officer. As differentiated from simple misconduct, in grave misconduct the elements of corruption, clear intent to violate the law or flagrant disregard of established rule, must be manifest. 2. Same; Same; There is a tremendous difference between theAs Acting Branch Cashier, petitioner was charged with responsibility of handling the bank s daily transactions which could run into large amounts. There is a tremendous difference between the degree of responsibility, care, and trustworthiness expected of a clerk or ordinary employee in the bureaucracy and that required of bank managers, cashiers, finance officers, and other officials directly handling large sums of money and properties. The evidence clearly shows that Echano took light of such responsibility and flagrantly disregarded established banking rules and practices. His misconduct and dishonesty paved the way for the commission of fraud against, and consequent damage to, the City Government of Manila. Division: SECOND DIVISION

Syllabi Class : Constitutional Law|Criminal Law|Judgments Syllabi: 1. Constitutional Law; Criminal Law; Judgments; Cruel and Excessive Punishment; Settled is the rule that punishment authorized by statute is not cruel, degrading or disproportionate to the nature of the offense unless it is flagrantly and plainly oppressive and wholly disproportionate to the nature of the offense as to shock the moral sense of the community.Settled is the rule that a punishment authorized by statute is not cruel, degrading or disproportionate to the nature of the offense unless it is flagrantly and plainly oppressive and wholly disproportionate to the nature of the offense as to shock the moral sense of the community. It takes more than merely being harsh, excessive, out of proportion or severe for a penalty to be obnoxious to the Constitution. Based on this principle, the Court has consistently overruled contentions of the defense that the penalty of fine or imprisonment authorized by the statute involved is cruel and degrading. 2. Constitutional Law; Criminal Law; Judgments; The prohibition against cruel and unusual punishment is generally aimed at the form or character of the punishment rather than its severity in respect of its duration or amount, and applies to punishments which never existed in America or which public sentiment regards as cruel or obsolete.In People vs. Tongko, this Court held that the prohibition against cruel and unusual punishment is generally aimed at the form or character of the punishment rather than its severity in respect of its duration or amount, and applies to punishments which never existed in America or which public sentiment regards as cruel or obsolete. This refers, for instance, to those inflicted at the whipping post or in the pillory, to burning at the stake, breaking on the wheel, disemboweling and the like. The fact that the penalty is severe provides insufficient basis to declare a law unconstitutional and does not, by that circumstance alone, make it cruel and inhuman. 3. Constitutional Law; Criminal Law; Judgments; Presidential Decree 818; The increase in penalty in PD 818 is to effectuate the repression of an evil that undermines the country s commercial and economic growth, and to serve as a necessary precaution to deter people from issuing bouncing checks.Clearly, the increase in the penalty, far from being cruel and degrading, was motivated by a laudable purpose, namely, to effectuate the repression of an evil that undermines the country s commercial and economic growth, and to serve as a necessary precaution to deter people from issuing bouncing checks. The fact that PD 818 did not increase the amounts corresponding to the new penalties only proves that the amount is immaterial and inconsequential. What the law sought to avert was the proliferation of estafa cases committed by means of bouncing checks. Taking into account the salutary purpose for which said law was decreed, we conclude that PD 818 does not violate Section 19 of Article III of the Constitution. 4. Constitutional Law; Criminal Law; Judgments; The burden of proving the invalidity of a law rests on those who challenge it.When a law is questioned before the Court, the presumption is in favor of its constitutionality. To justify its nullification, there must be a clear and unmistakable breach of the Constitution, not a doubtful and argumentative one. The burden of proving the invalidity of a law rests on those who challenge it. In this case, petitioners failed to present clear and convincing proof to defeat the presumption of constitutionality of PD 818. Docket Number: G.R. No. 149276 Counsel: Puno & Associates Law Office, Rodante D. Marcoleta Ponente: CORONA

Docket Number: G.R. No. 173930 Counsel: Scheherazade C. Miluhon Ponente: ABAD Dispositive Portion: WHEREFORE, the Court DENIES the petition and AFFIRMS the assailed decision of the Court of Appeals in CA-G.R. SP 75681 dated April 17, 2006. Dispositive Portion: WHEREFORE, the petition is hereby DISMISSED. Case Title : REPUBLIC OF THE PHILIPPINES, Represented by THE ANTI-MONEY LAUNDERING COUNCIL (AMLC), petitioner, vs. HON. ANTONIO M. EUGENIO, JR., AS PRESIDING JUDGE OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and LILIA CHENG, respondents.Case Nature : SPECIAL CIVIL ACTION in the Supreme Court. Certiorari and Prohibition. Syllabi Class : Banks and Banking|Anti-Money Laundering Act|Search Warrants|Bank Secrecy Act of 1955 Syllabi: 1. Banks and Banking; Anti-Money Laundering Act; Even if the bank inquiry order may be availed of without need of a pre-existing case under the AntiMoney Laundering Act (AMLA), it does not follow that such order may be availed of ex parte.-

Case Title : JOVENCIO LIM and TERESITA LIM, petitioners, vs. THE PEOPLE OF THE PHILIPPINES, THE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 217, THE CITY PROSECUTOR OF QUEZON CITY, AND WILSON CHAM, respondents.Case Nature : SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

We are unconvinced by this proposition, and agree instead with the then Solicitor General who conceded that the use of the phrase in cases of was unfortunate, yet submitted that it should be interpreted to mean in the event there are violations of the AMLA, and not that there are already cases pending in court concerning such violations. If the contrary position is adopted, then the bank inquiry order would be limited in purpose as a tool in aid of litigation of live cases, and wholly inutile as a means for the government to ascertain whether there is sufficient evidence to sustain an intended prosecution of the account holder for violation of the AMLA. Should that be the situation, in all likelihood the AMLC would be virtually deprived of its character as a discovery tool, and thus would become less circumspect in filing complaints against suspect account holders. After all, under such set-up the preferred strategy would be to allow or even encourage the indiscriminate filing of complaints under the AMLA with the hope or expectation that the evidence of money laundering would somehow surface during the trial. Since the AMLC could not make use of the bank inquiry order to determine whether there is evidentiary basis to prosecute the suspected malefactors, not filing any case at all would not be an alternative. Such unwholesome setup should not come to pass. Thus Section 11 cannot be interpreted in a way that would emasculate the remedy it has established and encourage the unfounded initiation of complaints for money laundering. Still, even if the bank inquiry order may be availed of without need of a pre-existing case under the AMLA, it does not follow that such order may be availed of ex parte. There are several reasons why the AMLA does not generally sanction ex parte applications and issuances of the bank inquiry order. 2. Banks and Banking; Anti-Money Laundering Act; In the instances where a court order is required for the issuance of the bank inquiry order, nothing in Section 11 specifically authorizes that such order may be issued ex parte.In the instances where a court order is required for the issuance of the bank inquiry order, nothing in Section 11 specifically authorizes that such court order may be issued ex parte. It might be argued that this silence does not preclude the ex parte issuance of the bank inquiry order since the same is not prohibited under Section 11. Yet this argument falls when the immediately preceding provision, Section 10, is examined. 3. Banks and Banking; Anti-Money Laundering Act; Section 10 uses specific language to authorize an ex parte application for the provisional relief therein, a circumstance absent in Section 11.Although oriented towards different purposes, the freeze order under Section 10 and the bank inquiry order under Section 11 are similar in that they are extraordinary provisional reliefs which the AMLC may avail of to effectively combat and prosecute money laundering offenses. Crucially, Section 10 uses specific language to authorize an ex parte application for the provisional relief therein, a circumstance absent in Section 11. If indeed the legislature had intended to authorize ex parte proceedings for the issuance of the bank inquiry order, then it could have easily expressed such intent in the law, as it did with the freeze order under Section 10. 4. Banks and Banking; Anti-Money Laundering Act; With respect to freeze orders under Section 10, the implementing rules do expressly provide that the applications for freeze orders be filed ex parte but no similar clearance is granted in the case of inquiry orders under Section 11.That the AMLA does not contemplate ex parte proceedings in applications for bank inquiry orders is confirmed by the present implementing rules and regulations of the AMLA, promulgated upon the passage of R.A. No. 9194. With respect to freeze orders under Section 10, the implementing rules do expressly provide that the applications for freeze orders be filed ex parte, but no similar clearance is granted in the case of inquiry orders under Section 11. These implementing rules were promulgated by the Bangko Sentral ng Pilipinas, the Insurance Commission and the Securities and Exchange Commission, and if it was the true belief of these institutions that inquiry orders could be issued ex parte similar to freeze orders, language to that effect would have been incorporated in the said Rules. This is stressed not because the implementing rules could authorize ex parte applications for inquiry orders despite the absence of statutory basis, but rather because the framers of the law had no intention to allow such ex parteapplications. 5. Banks and Banking; Anti-Money Laundering Act; Court receiving the application for inquiry order cannot simply take the Anti-Money Laundering Council s (AMLC s) word that probable cause exists that the deposits or investments are related to an unlawful activity.The court receiving the application for inquiry order cannot simply take the AMLC s word that probable cause exists that the deposits or investments are related to an unlawful activity. It will have to exercise its own determinative function in order to be convinced of such fact. The account holder would be certainly capable of contesting such probable cause if given the opportunity to be apprised of the pending application to inquire into his account; hence a

notice requirement would not be an empty spectacle. It may be so that the process of obtaining the inquiry order may become more cumbersome or prolonged because of the notice requirement, yet we fail to see any unreasonable burden cast by such circumstance. After all, as earlier stated, requiring notice to the account holder should not, in any way, compromise the integrity of the bank records subject of the inquiry which remain in the possession and control of the bank. 6. Banks and Banking; Anti-Money Laundering Act; Search Warrants; The supposed analogy between a search warrant and a bank inquiry order is unconvincing.Petitioner argues that a bank inquiry order necessitates a finding of probable cause, a characteristic similar to a search warrant which is applied to and heard ex parte. We have examined the supposed analogy between a search warrant and a bank inquiry order yet we re- main to be unconvinced by petitioner. The Constitution and the Rules of Court prescribe particular requirements attaching to search warrants that are not imposed by the AMLA with respect to bank inquiry orders. A constitutional warrant requires that the judge personally examine under oath or affirmation the complainant and the witnesses he may produce, such examination being in the form of searching questions and answers. Those are impositions which the legislative did not specifically prescribe as to the bank inquiry order under the AMLA, and we cannot find sufficient legal basis to apply them to Section 11 of the AMLA. Simply put, a bank inquiry order is not a search warrant or warrant of arrest as it contemplates a direct object but not the seizure of persons or property. 7. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of 1955; There is a right to privacy governing bank accounts in the Philippines and that such right finds application to the case at bar.Sufficient for our purposes, we can assert there is a right to privacy governing bank accounts in the Philippines, and that such right finds application to the case at bar. The source of such right is statutory, expressed as it is in R.A. No. 1405 otherwise known as the Bank Secrecy Act of 1955. The right to privacy is enshrined in Section 2 of that law. 8. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of 1955; Unless the Bank Secrecy Act is repealed or amended, the legal order is obliged to conserve the absolutely confidential nature of Philippine bank deposits.Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy in the Philippines. Subsequent laws, including the AMLA, may have added exceptions to the Bank Secrecy Act, yet the secrecy of bank deposits still lies as the general rule. It falls within the zones of privacy recognized by our laws. The framers of the 1987 Constitution likewise recognized that bank accounts are not covered by either the right to information under Section 7, Article III or under the requirement of full public disclosure under Section 28, Article II. Unless the Bank Secrecy Act is repealed or amended, the legal order is obliged to conserve the absolutely confidential nature of Philippine bank deposits. 9. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of 1955; Exceptions prescribed in Section 2 of the Bank Secrecy Act whereby bank accounts may be examined by any person, government official, bureau or office ; The Ombudsman Act of 1989 contains a provision relating to access to bank accounts and records. Any exception to the rule of absolute confidentiality must be specifically legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions whereby these bank accounts may be examined by any person, government official, bureau or office ; namely when: (1) upon written permission of the depositor; (2) in cases of impeachment; (3) the examination of bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials; and (4) the money deposited or invested is the subject matter of the litigation. Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt Practices Act, has been recognized by this Court as constituting an additional exception to the rule of absolute confidentiality. A subsequent law, the Ombudsman Act of 1989 contains a provision relating to access to bank accounts and records. 10. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of 1955; The Anti-Money Laundering Act (AMLA) also provides exceptions to the Bank Secrecy Act.The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11, the AMLC may inquire into a bank account upon order of any competent court in cases of violation of the AMLA, it having been established that there is probable cause that the deposits or investments are related to unlawful activities as defined in Section 3(i) of the law, or a money laundering offense under Section 4 thereof. Further, in instances where there is probable cause that the deposits or investments are related to kidnapping for ransom, certain violations of the Comprehensive Dangerous Drugs Act of 2002, hijacking and other violations

under R.A. No. 6235, destructive arson and murder, then there is no need for the AMLC to obtain a court order before it could inquire into such accounts. 11. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of 1955; If there are doubts in upholding the absolutely confidential nature of bank deposits against affirming the authority to inquire into such accounts, then such doubts must be resolved in favor of the former.Just because the AMLA establishes additional exceptions to the Bank Secrecy Act it does not mean that the later law has dispensed with the general principle established in the older law that [a]ll deposits of whatever nature with banks or banking institutions in the Philippines x x x are hereby considered as of an absolutely confidential nature. Indeed, by force of statute, all bank deposits are absolutely confidential, and that nature is unaltered even by the legislated exceptions referred to above. There is disfavor towards construing these exceptions in such a manner that would authorize unlimited discretion on the part of the govern- ment or of any party seeking to enforce those exceptions and inquire into bank deposits. If there are doubts in upholding the absolutely confidential nature of bank deposits against affirming the authority to inquire into such accounts, then such doubts must be resolved in favor of the former. Such a stance would persist unless Congress passes a law reversing the general state policy of preserving the absolutely confidential nature of Philippine bank accounts. 12. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of 1955; Nowhere in the legislative record cited by Lilia Cheng does it appear that there was an unequivocal intent to exempt from the bank inquiry order all bank accounts opened prior to the passage of the Anti-Money Laundering Act (AMLA).Nowhere in the legislative record cited by Lilia Cheng does it appear that there was an unequivocal intent to exempt from the bank inquiry order all bank accounts opened prior to the passage of the AMLA. There is a cited exchange between Representatives Ronaldo Zamora and Jaime Lopez where the latter confirmed to the former that deposits are supposed to be exempted from scrutiny or monitoring if they are already in place as of the time the law is enacted. That statement does indicate that transactions already in place when the AMLA was passed are indeed exempt from scrutiny through a bank inquiry order, but it cannot yield any interpretation that records of transactions undertaken after the enactment of the AMLA are similarly exempt. Due to the absence of cited authority from the legislative record that unqualifiedly supports respondent Lilia Cheng s thesis, there is no cause for us to sustain her interpretation of the AMLA, fatal as it is to the anima of that law. Division: SECOND DIVISION Docket Number: G.R. No. 174629 Counsel: The Solicitor General, Saguisag, Carao and Associates, Diosdado N. Silva, Madrid & Associates Dispositive Portion: WHEREFORE, the PETITION is DISMISSED. No pronouncement as to costs.

Section 13, Rule 10 of the Senate Rules provides: 12) Committee on Foreign Relations. Fifteen (15) members. All matters relating to the relations of the Philippines with other nations generally; diplomatic and consular services; the Association of Southeast Asian Nations; the United Nations Organization and its agencies; multi-lateral organizations, all international agreements, obligations and contracts; and overseas Filipinos. A reading of the above provision unmistakably shows that the investigation of the Moscow incident involving petitioners is well within the respondent Committee s jurisdiction. Same; Same; Same; The Blue Ribbon Committee may conduct investigations on all matters relating to malfeasance, misfeasance and nonfeasance in office by officers and employees of the government, its branches, agencies, subdivisions and instrumentalities, and on any matter of public interest on its own initiative or brought to its attention by any of its members. The Philippine Senate has decided that the legislative inquiry will be jointly conducted by the respondent Committee and the Senate Committee on Accountability of Public Officers and Investigations (Blue Ribbon Committee). Pursuant to paragraph 36, Section 13, Rule 10 of the Senate Rules, the Blue Ribbon Committee may conduct investigations on all matters relating to malfeasance, misfeasance and nonfeasance in office by officers and employees of the government, its branches, agencies, subdivisions and instrumentalities, and on any matter of public interest on its own initiative or brought to its attention by any of its members. It is, thus, beyond cavil that the Blue Ribbon Committee can investigate Gen. Dela Paz, a retired PNP general and member of the official PNP delegation to the INTERPOL Conference in Russia, who had with him millions which may have been sourced from public funds. [Dela Paz vs. Senate Committee on Foreign Relations, 579 SCRA 521(2009)]

G.R. No. 184849. February 13, 2009.* SPOUSES PNP DIRECTOR ELISEO D. DELA PAZ (Ret.) and MARIA FE C. DELA PAZ, petitioners, vs. SENATE COMMITTEE ON FOREIGN RELATIONS and the SENATE SERGEANT-AT-ARMS JOSE BALAJADIA, JR., respondents. Administrative Law; Constitutional Law; Congress; The exercise of the power of each house to determine the rules of its proceedings is generally exempt from judicial supervision and interference, except on a clear showing of such arbitrary and improvident use of the power as will constitute a denial of due process. Section 16(3), Article VI of the Philippine Constitution states: Each House shall determine the rules of its proceedings. This provision has been traditionally construed as a grant of full discretionary authority to the Houses of Congress in the formulation, adoption and promulgation of its own rules. As such, the exercise of this power is generally exempt from judicial supervision and interference, except on a clear showing of such arbitrary and improvident use of the power as will constitute a denial of due process. Same; Same; Same; Respondent Senate Foreign Relations Committee has acted within the proper sphere of its authority. Even if it is within our power to inquire into the validity of the exercise of jurisdiction over the petitioners by the Senate Foreign Relations Committee, we are convinced that respondent Committee has acted within the proper sphere of its authority. Paragraph 12,

Case Title : SPOUSES SIMON YAP AND MILAGROS GUEVARRA, petitioners, vs. FIRST e-BANK CORPORATION (previously known as PDCP DEVELOPMENT BANK, INC.), respondent.Case Nature : PETITION for review on certiorari of a decision of the Court of Appeals. Syllabi Class : Loans|Mortgages|Options of an Unpaid Creditor Syllabi: 1. Criminal Law; Bouncing Checks Law (Batas Pambansa Blg. 22); Foreclosure of Mortgage; Prior to the effectivity of Circular 57-97, the alternative remedies of foreclosure of mortgage and collection suit were not barred even if a suit for Batas Pambansa Blg. 22 had been filed earlier, unless a judgment of conviction had already been rendered in the BP 22 case finding the accused debtor criminally liable and ordering him to pay the amount of the check(s).Sad to say, Circular 57-97 (and, it goes without saying, Section 1(b), Rule 111 of the Rules of Court) was not yet in force when PDCP sued Sammy for violation of BP 22 and when it filed a petition for extrajudicial foreclosure on the mortgaged property of petitioners on February 8, 1993 and May 3, 1993, respectively. In Lo Bun Tiong v. Balboa (542 SCRA 504 [2008]), Circular 57-97 was not applied because the collection suit and the criminal complaints for violation of BP 22 were filed prior to the adoption of Circular 57-97. The same principle applies here. Thus, prior to the effectivity of Circular 57-97, the alternative remedies of foreclosure of mortgage and collection suit were not barred even if a suit for BP 22 had been filed earlier, unless a judgment of conviction had already been rendered in the BP 22 case finding the accused debtor criminally liable and ordering him to pay the amount of the check(s). 2. Same; Same; Options of an Unpaid Creditor.We state the rule at present. If the debtor fails (or unjustly refuses) to pay his debt when it falls due and the debt is secured by a mortgage and by a check, the creditor has three options against the debtor and the exercise of one will bar the exercise of the others. He may pursue either of the three but not all or a combination of them. First, the creditor may file a collection suit against the debtor. This will open up all the properties of the debtor to attachment and execution, even the mortgaged property itself. Second, the creditor may opt to foreclose on the mortgaged property. In case the debt is not fully satisfied, he may sue the debtor for deficiency judgment (not a collection case for the whole indebtedness), in which case, all the properties of the debtor, other than the mortgaged property, are again opened up for the satisfaction of the deficiency. Lastly, the creditor may opt to sue the debtor for violation of BP 22 if the checks securing the obligation bounce. Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court both provide that the criminal action for violation of BP 22 shall be deemed to necessarily include the corresponding civil action, i.e., a collection suit. No reservation to file such civil action separately shall be allowed or recognized. 3. Same; Same; It is but logical that a creditor who obtains a personal judgment against the debtor on a loan waives his right to foreclose on the mortgage

securing the loan, otherwise, the creditor becomes guilty of splitting a single cause of action for the debtor s inability (or unjustified refusal) to pay his debt.So as not to create any misunderstanding, however, the point should be underscored that the creditor s obvious purpose when it forecloses on mortgaged property is to obtain payment for a loan which the debtor is unable or unjustifiably refuses to pay. The rationale is the same if the creditor opts to sue the debtor for collection. Thus, it is but logical that a creditor who obtains a personal judgment against the debtor on a loan waives his right to foreclose on the mortgage securing the loan. Otherwise, the creditor becomes guilty of splitting a single cause of action for the debtor s inability (or unjustified refusal) to pay his debt. Nemo debet bis vexare pro una et eadem causa. No man shall be twice vexed for one and the same cause. 4. Loans; Mortgages; A third party mortgagor should be mindful that he has agreed that his property would stand as collateral to the loan of the owner until the last centavo is paid to the mortgagee.Petitioners should be mindful that, by being third party mortgagors, they agreed that their property would stand as collateral to the loan of Sammy until the last centavo is paid to PDCP. That is a risk they willingly assumed. To release the mortgage just because they find it inconvenient would be the height of injustice against PDCP. All told, PDCP should not be left without recourse for the unsettled loan of Sammy. Otherwise, an iniquitous situation will arise where Sammy and petitioners are unjustly enriched at the expense of PDCP. That we cannot sanction. Division: FIRST DIVISION Docket Number: G.R. No. 169889 Counsel: Leopoldo C. Tulagan, Sr. Ponente: CORONA Dispositive Portion: WHEREFORE, the petition is hereby DENIED. Costs against petitioners.