Nil Until Sec 15

PHILIPPINE EDUCATION Co., INC., plaintiff-appelant, vs. MAURICIO A. SORIANO, ET AL.
, defendants-
appellees.
Statutes; Interpretation of statutes; Philippine Postal statutes being patterned after United, States postal statutes
are generally construed according to the latter.It is not disputed that our postal statutes were patterned after similar
statutes in force in the United States. For this reason, ours are generally construed in accordance with the construction
given in the United States to their own postal statutes, in the absence of any special reason justifying a departure from this
policy or practice.
Negotiable instruments laws; Postal money order is not a negotiable instrument.The weight of authority in the
United States is that postal money orders are not negotiable instruments, the reason being that in establishing and
operating a postal money order system, the government is not engaged in commercial transactions but merely exercises a
governmental power for the public benefit. Moreover, some of the restrictions imposed upon money orders by postal laws
and regulations are inconsistent with the character of negotiable instruments. For instance, such laws and regulations
usually provide for not more than one endorsement; payment of money orders may be withheld under a variety of
circumstances (49 C.J., 1153).
DIZON, J.:
An appeal from a decision of the Court of First Instance of Manila dismissing the complaint filed by the Philippine
Education Co., Inc. against Mauricio A. Soriano, Enrico Palomar and Rafael Contreras.
On April 18, 1958 Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders of
P200.00 each payable to E. P. Montinola with address at Lucena, Quezon. After the postal teller had made out money
orders numbered 124685, 124687-124695, Montinola offered to pay for them with a private check. As private checks were
not generally accepted in payment of money orders, the teller advised him to see the Chief of the Money Order Division,
but instead of doing so, Montinola managed to leave the building with his own check and the ten (10) money orders
without the knowledge of the teller.
On the same date, April 18, 1958, upon discovery of the disappearance of the unpaid money orders, an urgent message
was sent to all postmasters, and the following day notice was likewise served upon all banks. instructing them not to pay
anyone of the money orders aforesaid if presented for payment. The Bank of America received a copy of said notice three
days later.
On April 23, 1958 one of the above-mentioned money orders numbered 124688 was received by appellant as part of its
sales receipts, The following day it deposited the same with the Bank of America, and one day thereafter the latter cleared
it with the Bureau of Posts and received from the latter its face value of P200.00.
On September 27, 1961, appellee Mauricio A. Soriano, Chief of the Money Order Division of the Manila Post Office,
acting for and in behalf of his co-appellee, Postmaster Enrico Palomar, notified the Bank of America that money order No.
124688 attached to his letter had been found to have been irregularly issued and that, in view thereof, the amount it
represented had been deducted f rom the bank's clearing account. For its part, on August 2 of the same year, the Bank of
America debited appellant's account with the same amount and gave it advice thereof by means of a debit memo.
On October 12, 1961 appellant requested the Postmaster General to reconsider the action taken by has office deducting
the sum of P200.00 from the clearing account of the Bank of America, but his request was denied. So was appellant's
subsequent request that the matter be referred to the Secretary of Justice for advice. Thereafter, appellant elevated the
matter to the Secretary of Public Works and Communications, but the latter sustained the actions taken by the postal
officers.
In connection with the events set f orth above, Montinola was charged with theft in the Court of First Instance of
Manila (Criminal Case No. 43866) but after trial he was acquitted on the ground of reasonable doubt.
On January 8, 1962 appellant filed an action against appellees in the Municipal Court of Manila praying for judgment
as follows:
"WHEREFORE, plaintiff prays that after hearing defendants be ordered:

(a) To countermand the notice given to the Bank of America on September 27, 1961, deducting from the said
Bank's clearing account the sum of P200.00 represented by postal money order No. 124688, or in the
alternative indemnify the plaintiff in the same amount with interest at 8-1/2% per annum from September 27,
1961, which is the rate of interest being paid by plaintiff on its overdraft account;
(b) To pay to the plaintiff out of their own personal funds, jointly and severally, actual and moral damages in the
amount of P1, 000.00 or in such amount as will be proved and/or determined by this Honorable Court:
exemplary damages in the amount of P1,000.00, attorney's fees of P1,000.00, and the costs of action.
Plaintiff also prays for such other and further relief as may be deemed just and equitable."
On November 17, 1962, after the parties had submitted the stipulation of facts reproduced at pages 12 to 15 of the
Record on Appeal, the above-named court rendered judgment as follows:
"WHEREFORE, judgment is hereby rendered, ordering the defendants to countermand the notice given to the
Bank of America on September 27, 1961, deducting from said Bank's clearing account the sum of P200.00
representing the amount of postal money order No. 124688, or in the alternative, to indemnify the plaintiff in the
said sum of P200.00 with interest thereon at the rate of 8-1/2% per annum from September 27, 1961 until fully
paid; without any pronouncement as to costs and attorney's fees."
1
The case was appealed to the Court of First Instance of Manila where, after the parties had resubmitted the same
stipulation of facts, the appealed decision dismissing the complaint, with costs, was rendered.
The first, second and fifth assignments of error discussed in appellant's brief are related to each other and will
therefore be discussed jointly. They raise this main issue: that the postal money order in question is a negotiable
instrument; that its nature as such is not in anyway affected by the letter dated October 26,1948 signed by the Director of
Posts and addressed to all banks with a clearing account with the Post Office, and that money orders. once issued. create a
contractual relationship of debtor and creditor, respectively, between the government, on the one hand, and the remitters
payees or endorsees, on the other.
It is not disputed that our postal statutes were patterned after similar statutes in force in the United States. For this
reason, ours are generally construed in accordance with the construction given in the United States to their own postal
statutes, in the absence of any special reason justifying a departure from this policy or practice. The weight of authority in
the United States is that postal money orders are not negotiable instruments (Bolognesi vs. U. S., 189 Fed. 395; U. S. vs.
Stock Drawers National Bank, 30 Fed. 912), the reason behind this rule being that, in establishing and operating a postal
money order system, the government is not engaging in commercial transactions but merely exercises a governmental
power for the public benefit.
It is to be noted in this connection that some of the restrictions imposed upon money orders by postal laws and
regulations are inconsistent with the character of negotiable instruments. For instance, such laws and regulations usually
provide for not more than one endorsement; payment of money orders may be withheld under a variety of circumstances
(49 C. J. 1153).
Of particular application to the postal money order in question are the conditions laid down in the letter of the Director
of Posts of October 26, 1948 (Exhibit 3) to the Bank of America f or the redemption of postal money orders received by it
from its depositors, Among others, the condition is imposed that "in cases of adverse claim, the money order or money
orders involved will be returned to you (the bank) and the corresponding amount will have to be refunded to the
Postmaster, Manila, who reserves the right to deduct the value thereof from any amount due you if such step is deemed
necessary." The conditions thus imposed in order to enable the bank to continue enjoying the facilities theretofore enjoyed
by its depositors, were accepted by the Bank of America. The latter is therefore bound by them. That it is so is clearly
inferred from the fact that, upon receiving advice that the amount represented by the money order in question had been
deducted from its clearing account with the Manila Post Office, it did not file any protest against such action.
Moreover, not being a party to the understanding existing between the postal officers, on the one hand, and the Bank
of America, on the other, appellant has no right to assail the terms and conditions thereof on the ground that the letter
setting forth the terms and conditions aforesaid is void because it was not issued by a Department Head in accordance
with Sec. 79 (B) of the Revised Administrative Code. In reality, however, said legal provision does not apply to the letter in
question because it does not provide for a department regulation but merely sets down certain conditions upon the
privilege granted to the Bank of America to accept and pay postal money orders presented by its depositors, instead of the
same being presented for payment at the Manila Post Office. Such being the case, it is clear that the Director of Posts had
ample authority to issue it pursuant to Sec. 1190 of the Revised Administrative Code.
In view of the foregoing, We do not find it necessary to resolve the issues raised in the third and fourth assignments of
error. WHEREFORE, the appealed decision being in accordance with law, the same is hereby affirmed with costs. Decision
affirmed.
Notes.Negotiable instruments; commerciality of document as a requisite of negotiability.In order that a promise

to pay may have the effect of a commercial instrument it must appear that it originated in a commercial transaction
(Rodriguez vs. Lasala, 5 Phil. 357). To be considered commercial, whether the parties interested be merchants or not, a
promissory note must be based on commercial transactions (Isaac vs. Bray, 30 Phil. 533). A note is not considered a
mercantile document if it nowhere appears that it arose from a mercantile transaction (Miller, Sloss & Scott vs. Jones, 9
Phil. 648).
A Government treasury warrant which on its f ace bears the words "payable from the administration for food
administration" is not a negotiable instrument since it is actually an order for payment out of a particular fund and hence
not unconditional (Abubakar vs. Auditor General, 81 Phil. 359).
But a draft is nonetheless a negotiable instrument because the amount payable is expressed in dollars, which are no
longer current money in the Philippines, because it is dischargeable with pesos of the equivalent amount (Philippine
National Bank vs. Zulueta, L-7271, Aug. 30, 1957).
[No. 18103. June 8, 1922]
PHILIPPINE NATIONAL BANK, plaintiff and appellee, vs. MANILA OIL REFINING & BY-PRODUCTS COMPANY, INC.,
defendant and appellant.
1. 1.JUDGMENTS; JUDGMENTS BY CONFESSION; ORIGIN.The practice of entering judgments in debt on

warrants of attorney is of ancient origin.
1. 2.ID. ; ID. ; COMMON LAW PRACTICE.In the course of time a warrant of attorney to confess judgment became
a familiar commonlaw security.
1. 3.lD.; ID. ; ID.; KINDS.At common law, there were two kinds of judgments by confession; the one a judgment
by cognovit actionem, and the other by confession relicta verificatione.
2
445
VOL. 43, JUNE 8, 1922 445
National Bank vs. Manila Oil Refining & Ey-Products Co.
1. 4.ID.; ID.; ADVANTAGBS.Judgments by confession as appeared at common law were considered an amicable,
easy, and cheap way to settle and secure debts.
1. 5.ID.; ID.; DISADVANTAGES.The recognition of such a form of obligation would bring about a complete
reorganization of commercial customs and practices, with reference to short-term obligations. Instead of
resulting to the advantage of commercial life in the Philippines, judgment notes might be the source of abuse and
oppression, and make the courts involuntary parties thereto.
1. 6.ID.; ID.; VALIDITY OF; IN THE UNITED STATES.A number of jurisdictions in the United States have
accepted the common law view of judgments by confession, while still other jurisdictions have refused to
sanction them.
1. 7.ID. ; ID. ; ID. ; ID.In the absence of statute, there is a conflict of authority as to the validity of a warrant of
attorney for the confession of judgment. The weight of opinion is that unless authorized by statute, warrants of
attorney to confess judgment are void, as against public policy.
1. 8.ID.; ID.; ID.; IN THE PHILIPPINE ISLANDS; STATUTORY PROVISIONS.Neither the Code of Civil
Procedure nor any other remedial statute expressly or tacitly recognizes a confession of judgment commonly
called a judgment note.
1. 9.ID.; ID.; ID.; ID.; ID.; RIGHT TO A DAY IN COUBT.The provisions of the Code of Civil Procedure, in relation
to constitutional safeguards relating to the right to take a man's property only after a day in court and after due
process of law, contemplate that all defendants shall have opportunity to be heard.
1. 10.ID.; ID.; ID.; ID.; ID.; COUNTERCLAIMS.The provisions of the Code of Civil Procedure pertaining to
counterclaims argue against judgment notes, especially as the Code provides that in case the defendant or his
assignee omits to set up a counterclaim, he cannot afterwards maintain an action against the plaintiff therefor.
1. 11.ID.; ID.; ID.; ID.; ID.; ARTICLE 1256, CIVIL CODE.At least one provision of the substantive law, namely, that
the validity and fulfillment of contracts cannot be left to the will of one of the contracting parties (Civil Code, art.
1256), constitutes another indication of fundamental legal purpose.
1. 12.ID.; ID.; ID.; ID.; ID.; NEGOTIABLE INSTRUMENTS LAW (AcT No. 2031), SECTION 5 (&).Section 5 (b) of
the Negotiable Instruments Law providing that the negotiable character of an instrument otherwise negotiable is
not affected by a provision which authorizes a confession of judgment if the instru
446
4 PHILIPPINE REPORTS ANNOTATED
46
National Bank vs. Manila Oil Refining & By-Products Co.
1. ment be not paid at maturity, cannot be taken to sanction judgments by confession.
1. 13.ID.; ID.; ID.; ID.Warrants of attorney to confess judgment are void as against public policy, because they
enlarge the field for fraud, because under these instruments the promissor bargains away his right to a day in
court, and because the effect of the instrument is to strike down the right of appeal accorded by statute.
1. 14.ID.; ID.; ID.; ID.Warrants of attorney to confess judgment are not authorized, nor contemplated by our law.
1. 15.BILLS AND NOTES: JUDGMENT NOTES, VALIDITY OF.In the absence of express legislative sanction,
provisions in notes authorizing attorneys to appear and confess judgments against makers should not be
recognized in this jurisdiction by implication.
1. 16.ID. ; ID.A provision in a promissory note whereby in case the same is not paid at maturity, the maker
authorizes any attorney to appear and confess judgment thereon for the principal amount, with interest, costs,
and attorney's fees, and waives all errors, rights to inquisition, and appeal, and all property exemptions, is not
valid in this jurisdiction.
APPEAL from a judgment of the Court of First Instance of Manila. Diaz, J.

The facts are stated in the opinion of the court.
Antonio Gonzalez for appellant.
Roman J. Lacson for appellee.
Hartigan & Welch; Fisher & DeWitt; Perkins & Kincaid; Gibbs, McDonough & Johnson; Julian Wolfson; Ross &
Lawrence; Francis B. Mahoney, and Jose A. Espiritu, amici curise.
3
MALCOLM, J.:
The question of first impression raised in this case concerns the validity in this jurisdiction of a provision in a promissory
note whereby in case the same is not paid at maturity, the maker authorizes any attorney to appear and confess judgment
thereon for the principal amount, with interest, costs, and attorney's fees, and waives all errors, rights to inquisition, and
appeal, and all property exemptions.
447
VOL. 43, JUNE 8, 1922 447
On May 8, 1920, the manager and the treasurer of the Manila Oil Refining & By-Products Company, Inc., executed and
delivered to the Philippine National Bank, a written instrument reading as follows:
"RENEWAL.
"P61,000.00
"MANILA, P. I., May 8,1920.

"On demand after date we promise to pay to the order of the Philippine National Bank sixty-one thousand only pesos at
Philippine National Bank, Manila, P. I.
"Without defalcation, value received; and do hereby authorize any attorney in the Philippine Islands, in case this note
be not paid at maturity, to appear in my name and confess judgment for the above sum with interest, cost of suit and
attorney's fees of ten (10) per cent for collection, a release of all errors and waiver of all rights to inquisition and appeal,
and to the benefit of all laws exempting property, real or personal, from levy or sale. Value received. No. Due
"MANILA OIL REFINING & BY-PRODUCTS Co., INC.,
(Sgd.) "VlCENTE SOTELO,
"Manager.
"MANILA OIL REFINING & BY-PRODUCTS Co., INC.,
(Sgd.) "RAFAEL LOPEZ,
"Treasurer."
The Manila Oil Refining & By-Products Company, Inc. failed to pay the promissory note on demand. The Philippine
National Bank brought action in the Court of First Instance of Manila, to recover P61,000, the amount of the note,
together with interest and costs. Mr. Elias N. Recto, an attorney associated with the Philippine National Bank, entered his
appearance in representation of the defendant, and filed a motion confessing judgment. The defendant, however, in a
sworn declaration, objected strongly to the unsolicited representation of attorney Recto. Later, attorney Antonio Gonzalez
appeared for the defendant and
448
National Bank vs. Manila, Oil Refining & By-Products Co.
filed a demurrer, and when this was overruled, presented an answer. The trial judge rendered judgment on the motion of
attorney Recto in the terms of the complaint.
The foregoing facts, and appellant's three assignments of error, raise squarely the question which was suggested in the
beginning of this opinion. In view of the importance of the subject to the business community, the advice of prominent
attorneys-at-law with banking connections, was solicited. These members of the bar responded promptly to the request of
the court, and their memoranda have proved highly useful in the solution of the question. It is to the credit of the bar that
although the sanction of judgment notes in the Philippines might prove of immediate value to clients, every one of the
attorneys has looked upon the matter in a big way, with the result that out of their independent investigations has come a
practically unanimous protest against the recognition in this jurisdiction of judgment notes. 1
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MEMORANDA OF "AMICI CURI"
Attorney Thos. L. Hartigan, of Hartigan & Welch, states:

"Though we are attorneys for two of the large banks here and keenly interested in the introduction of any
improvements that would make for simplification of procedure and rapidity of practice, we cannot favor the introduction
of confessions of judgment in the Philippine Islands. In our opinion, it would open the doors to fraud to an extent that
would more than counterbalance any advantages of its use.
"With our lack of system in recording judgments and with the practice of keeping merchants' books in various foreign
languages, there would be ample opportunity for a debtor to make preferences by confessions of judgment which could not
be discovered by the creditors until too late and which would be nearly impossible to set aside even when discovered in
time.
"Although, as representatives of the banks, we are representing the creditor class, we believe the introduction of
confessions of judgment would ultimately cause much more loss than benefit to that class."
Attorney Clyde A. DeWitt, of Fisher & DeWitt, states:
"There is no statutory sanction in this jurisdiction for such provisions in negotiable instruments. Section 5 (6) of the
Negotiable Instruments Law does not constitute such sanction because (1) it
449
VOL. 43, JUNE 8, 1922 449
Natiowl Bank vs. Manila, Oil Refining & By-Products Co.
Neither the Code of Civil Procedure nor any other remedial statute expressly or tacitly recognizes a confession of judgment
commonly called a judgment note. On the contrary, the provisions of the Code of Civil Procedure, in relation to
4
constitutional safeguards relating to the right to take a man's property only after a day in court and after due process of
law, contemplate that all defendants shall have an opportunity to be heard. Further, the provisions of the Code of Civil
Procedure pertaining to counterclaims argue against judgment notes, especially as the Code provides that in case the
defendant or his assignee omits to set up a counterclaim, he cannot afterwards maintain an action against the plaintiff
therefor. (Secs. 95, 96, 97.) At least one provision of the substantive law, namely, that the validity and fulfillment of
contracts cannot be left to the will of one of the contracting parties (Civil Code, art. 1256), constitutes another indication of
fundamental legal purpose.
_______________
merely provides that such clauses will not affect the negotiable character of the instrument, and (2) it concludes with
language showing that the Legislature did not intend thereby to validate any provision otherwise unlawful. The language
is: 'But nothing in this section shall validate any provision or stipulation otherwise illegal.'
"The question then is whether or not, in the absence of express legislative sanction, such warrants of attorney are valid.
There are not many American cases in which this precise question has been considered, and in those cases in which the
question has been raised, the reasoning of the courts has been colored by the fact that the commercial use of these
warrants of attorney as security for debt was sanctioned at common law, and the procedural statutes are held to be merely
cumulative and not in derogation of the commonlaw remedies. We, of course, have no such situation here.
"The cases are collected in a note to First National Bank vs. White (220 Mo., 717), found in 16 Ann. Cas., 893, and it is
there shown that in Missouri and Kansas such provisions are held to be void as against the public policy of the State as
expressed in its laws and the decisions of its courts, while in Colorado and Illinois their validity was upheld as a familiar
common-law security not affected by the procedural statutes. Yet it is there pointed out that in Kahn vs. Lesser (97 Wis.,
217, 72 N. W., 739), the court, in
450
NatioTial Bank vs. Manila, Oil Refining & By-Products Co.
The attorney f or the appellee contends that the Negotiable Instruments Law (Act No. 2031) expressly recognizes judg-
_______________
referring to a judgment by confession under warrant of attorney in a promissory note, said:

" The judgment in this case must stand, if at all, by the authority of the statute. The proceeding by which it was entered
was outside and in derogation of the common-law practice of courts; and the statute, as well as the proceedings under it,
must be strictly construed.'
"In lowa, in an early case, McClish vs. Manning (3 Green, 223), the validity of these warrants of attorney was upheld,
referring to a statute authorizing any person to confess a judgment, by himself or his attorney. In a later decision,
Hamilton vs. Schoenberger (47 lowa, 385), it was expressly held that such a provision in a note could not be enforced in
the courts of that State, and was not authorized or contemplated by its laws. And in Tolman vs. Jansen (106 lowa, 455), it
was held that such a provision, being void, would not affect the negotiability of a note, even though its effect would be to
make uncertain the time of payment.
"The reasoning in First National Bank vs. White, supra, is persuasive. The court there held that these warrants of
attorney are void as against the public policy of the state on the ground, first, that their effect is to enlarge the field for
fraud; second, that under such an instrument the promissor bargains away his right to his day in court; third, that the
effect of the instrument is to strike down the right to appeal accorded by statute, and, fourth, that there was no provision
for the public recording of. such an instrument if regarded as a security for a debt.
"It seems to me that on the precise grounds stated in the White case, these warrants of attorney &hould be held void as
against public policy in this jurisdiction. If given effect, they bargain away the jurisdiction of the courts to try and
determine the liability of the maker of the note on its merits. To uphold them would be to facilitate the operations of
usurers, the collection of gambling debts, and would make difficult, if not impossible under our procedure, the setting
aside of judgments entered in virtue thereof where the execution of the instrument was obtained by fraud, duress, or
where there had been an entire failure of consideration. I can think of no advantage which would result to the commercial
world from upholding these warrants of attorney which would outweigh the foregoing considerations."
Attorney E. Arthur Perkins, 'of Perkins & Kincaid, states:
"Leaving aside entirely the legal considerations involved, I feel that there is only one answer to your inquiry, and that
is, that the
451
VOL. 43, JUNE 8, 1922 451
Natioml Bank vs. Manila Oil Refimng & By-Products Co.
ment notes, and that they are enforcible under the regular procedure. The Negotiable Instruments Law, in section
_______________
best interests of the commercial life of the Philippines require the non-recognition of such a form of judgment note.
Feeling that you would want to know the reasons which impell me to adopt such a conclusion, I will say briefly that if the
Supreme Court should, by a decision, recognize such a judgment note and thereby place the stamp of approval upon
transactions of such a nature, the entire business population of the Philippine Islands would be justified in their future
transactions with debtors in requiring, in all instances, the execution of notes of a similar tenor, with the consequence that
the debtor would thereby be deprived, to all intents and purposes, of his day in court. It will pave the way for the practice
of fraud upon ignorant debtors. It will prove a serious drawback to the campaign being now waged against usury.
"There is the further fear that the banks and money lenders having accounts now outstanding will immediately require
every debtor to execute that form of note and to refuse further extensions of credit unless it is done, which the debtor
under the stress of circumstances will be compelled to accept, amounting in effect to duress.
5
"The recognition of such a form of obligation would be so revolutionary in character as to bring about a complete
reorganization of commercial customs and practices with reference to short-term obligations.
"Having in mind that the Philippine National Bank is practically the only institution which can assist the farmers and
agriculturists, the practice of requiring a judgment note would place the latter wholly at the mercy of the bank, and this is
stated without any reflection on the bank, but merely to point out one of the consequent evils which will necessarily follow
if the practice should receive the high judicial sanction which a judgment of the Supreme Court would necessarily give to
it.
"Another feature which occurs to me is that where any new enterprise is being launched, it is universally the custom
for. such company to arrange with some banking institution for credit facilities, over and above the capital with which it
brings business. Shotild it become the custom here to require the execution of so-called judgment notes, organizers of
corporations, partnerships and the like, who have in mind to secure additional working capital or credit facilities from
banks, will be very reluctant to put their funds into any enterprises which could be destroyed without warning by the
creditor exercising the rights which that form of transaction would give him. This would act therefore as a deterrent to new
enter
452
5, provides that "The negotiable character of an instrument otherwise negotiable is not affected by a provision
_______________
prises and the development of industry through individual initiative and with private funds.
"Let us take a very simple illustration of this. Suppose that you and I should form. a partnership, wi+h a capital of
P50,000 to buy hemp and, in connection with our business, we went to some banking institution for the purpose of
securing credit facilities, as is customary, in the conduct of our business. Let us then suppose that the bank, taking into
consideration the capital which we ourselves had furnished and our standing in the community, was willing to allow us a
credit in the further sum of ?50,000 upon our signing a so-called judgment note. Would not you and I consider a long time
before we would so far obligate ourselves as to place it in the power of the bank to send their attorney over to court, upon
the least provocation or at the first unfavorable rumor, and to confess judgment in our names, which would permit the
sheriff to close us out without even an opportunity to be heard?
"The sum and substance of the whole proposition is that such a practice is contrary to good morals."
Attorney David C. Johnson, of Gibbs, McDonough & Johnson, states:
"It seems that under the common law a confession of judgment was only allowable by the defendant himself, either
before or after appearance and answer. The confession of judgment by warrant of attorney is a statutory development (15
R. C. L.,, 656, 657; 17 Am. and Eng. Encyc. of Law [2d ed.], 765; 11 Enc. Pl. and Pr., 973-975; Mason vs. Ward, 80 Vt., 290;
130 A. S. R., 987, 988).
"The procedure contemplated in the note quoted in your letter is contrary to that contemplated in our code of
procedure, which gives to all defendants an opportunity at least to be heard. An action on the note in question could be so
presented that the def endant would never be summoned or notified, since an appearance and confession of judgment
might be filed simultaneously. We believe that this procedure should not be recognized in this jurisdiction by implication,
but should have legislative sanction with the rights of the defendant amply safeguarded. We believe that section 5 of Act
No. 2031 does not of itself sanction any of the acts mentioned in that section, but is only a statement regarding the
negotiable character of the instrument. Subsection A of section 5 states that the authority to sell collateral security does
not affect negotiability. As we understand the decision of the Supreme Court in the case of Mahoney vs. Tuason (39 Phil.,
952), the creditor in this, jurisdiction is n0t authorized by law to sell collateral security except in the manner
453
VOL. 43, JUNE 8, 1922 453
which "* * * (b) Authorizes a confession of judgment if the instrument be not paid at maturity." We do not
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provided in section 14 of Act No. 1508. This would seem to reinforce our opinion.
"There are some favorable features of a judgment note or warrant for confession of judgment, but we believe that there
are many objections which outweigh any of the advantages. Forgery and usury are more prevalent in these Islands than in
the, United States. The sanctioning of this procedure would add an additional weapon to the money lender who desires to
overreach his debtor.
"We have delayed answering your letter in order that we might consult our Mr. Gibbs, who returned from Baguio
yesterday.
"The foregoing is the consensus of opinion of the members of this firm."
Attorney Julian Wolfson states:
"It is assumed that the only question propounded is:
" 'Admitting that there may be some doubt, as to a correct solution, which solution, the recognition of a confession of
judgment, or a non-recognition of a confession of judgment, would be for the best interests of the commercial life of the
Philippines?' and that no opinion is required upon the incidental questions previously asked, as same have already been
determined by an examination of such authorities as: 23 Cyc., pp. 699, 701-2-3-5-6-7, 723-5; 6 C. J., pp. 645-6 (Notes 35 &
42); 8 C. J., p. 128 (Notes 43-47); 12 C. J., p. 418 (Note 37); and such leading textbooks as 'Brannan's Negotiable
Instruments Law' and 'Selover on Negotiable Instruments.'
"Everyone is entitled to 'his day in court.' This right may be waived after an opportunity has been given to exercise the
right, but must not and cannot be taken away before an opportunity has been given to exercise the right.
"The ordinary ship's bill of lading and the ordinary fire and marine insurance policy are generally printed on forms
prepared by the carrier and the insurer respectively, and generally contain a clause making it a condition precedent to the
6
institution of an action to first submit the matter to a board of arbitration. The Supreme Court has never recognized this
clause. The reasons are stated in the opinions. Once submitted to arbitration, then another question is raised.
"Special defenses to written instruments are common. Need we do more than cite the following
cases: Maulini vs. Serrano (28 Phil., 640); Henry W. Peabody & Co. vs. Bromfield and Ross (38 Phil.,
841); Cuyugan vs. Santos(34 Phil., 100; 39 Phil., 970).
"If the 'judgment note' (this term is used throughout for brevity and as it is the recognized term) is to' be recognized,
what chance
454
believe, however, that this provision of law can be taken to sanction judgments by confession, because it is a portion of a
uniform law which merely provides that, in jurisdic-
_______________
has defendant of defending as did the defendants in the above cited cases? None!
"Often a promissory note is a mere formality taken by a bank as evidence of indebtedness, while the real indebtedness
may be for a superior or inferior amount incurred by way of overdraft, letters of credit outstanding, acceptances to mature,
or a thousand other forms of banking credit. Such 'judgment notes' are generally made payable on demand- In the case at
bar, the note is made payable on demand. The real indebtedness may be partially paid, or the liquidation may be going
along too slow to suit the bank and/ then use is made of the judgment note. The defendant might have a perfect defense
except for the judgment note. Would not article 1269 of the Civil Code here apply?
"The 'judgment note' is not once in a thousand times signed at the time of receiving money from the bank. The
indebtedness represented thereby is incurred in prior transactions, the obligation became past due and the bank, as a
forcible measure, produces one of these 'judgment notes,' when the debtor is absolutely helpless, and says 'Sign on the
dotted line' and the debtor has no option, he signs. The minds of the parties never met. The debtor owes the money, knows
that the bank must have evidence of the indebtedness to pass the auditors and the debtor further realizes he must accept
the bank's dictation, because if he declines, he is liable to immediate ruin, or if not that, he will never get further
accommodation from the bank. He does not realize, even if he knows, what is meant by a 'judgment note.' Again, would
not article 1269 of the Civil Code here apply?
"Just a few months ago there was a suit instituted by a local bank for a large sum of money, based on a written
instrument which, on its face, seemed absolute. Special defenses were pleaded, setting up that the instrument did not
express the real understanding of the parties and the real understanding was set up. The special defenses were fully
proved and the lower court dismissed the bank's suit. The bank did not even attempt to appeal to the Supreme
Court (See Cause No.' 18239 of the Docket of the Court of Pirst Instance of Manila). Suppose the instrument sued on had
contained a clause of confession of judgment, what chance would defendant have had to prove his defense? None!
"Let us go a step further and see where this leads us. A is a dealer in hardware and sells B a bill of goods, A prints a
form, which he has B to sign, in which B acknowledges receipt of the
455
VOL. 43, JUNE 8, 1922 455
tions where judgment notes are recognized, such clauses shall not affect the negotiable character of the instrument.
Moreover, the same section of the Negotiable Instruments
_______________
goods and in consideration thereof promises to pay A and 'a confession of judgment' clause is inserted. The goods turn
out entirely different from those ordered and invoiced. B refuses to pay. A sues on his 'judgment note.' What chance has B?
None!
"Very often a promissory note is only one of a series of documents given as security for the debt. What about
considering the other documents which bear on the transaction?
"A bank may have made certain advances and may have undertaken to make more, but fails to do so, to the damage
and prejudice of debtor. Let us assume that the bank agreed to advance several hundred thousand pesos in instalments of
P60,000 each, and had advanced only the first instalment, taking a 'judgment note' for said first instalment, and had
failed to advance further, to the damage of the debtor. What would become of section 97 of the Code of Civil Procedure?
How would debtor be able to exercise his right of counterclaim? Was it ever contemplated at the time of signing the
judgment note that the debtor would not only waive defense, but absolutely shut himself out of court, as he would,
according to section 97 above cited, on his counterclaim? Yet again, would not article 1269 of the Civil Code here apply?
"We dare not attempt to elaborate on what would happen in the provinces of the Philippines should a 'judgment note'
be held valid.
"What about the Usury Law? How could a defense be offered there? The usurious rate might not appear on the face of
the 'judgment note,' but it may be there all the same.
"Examples could be multiplied until the very absurdity of the proposition would be clearly seen, even by a blind man.
"Of what possible benefit would the recognition of a 'judgment note' serve 'the best interests of the commercial life of
the Philippines?' None! An honest creditor is willing to let his debtor have his day in court and is willing to prove to the
court his case. It might take slightly longer to go through with a trial, but that cannot be considered a set-back. But, on the
other hand, a dishonest creditor would take unfair advantage of a 'judgment note' and would use it to the utmost to harass
and take advantage of the poor and helpless debtor. The real consequences likely, in fact sure, to arise from such
recognition are horrible beyond words to contemplate.
"There can be but one answer to the proposition and that is: The non-recognition of a confession of judgment would be
for the best interests of the commercial life of the Philippines"
456
7
Law concludes with these words: "But nothing in this section shall validate any provision or stipulation otherwise illegal."
_______________
Attorney J. G. Lawrence, of Ross & Lawrence, states:

"We are aware of no expression of our Legislature or courts which would indicate that confessions of judgment under
powers given in a promissory note are contrary to public policy. This action was regularly brought in accordance with the
provisions of the Code of Civil Procedure and the defendant served with process. The answer, confessing judgment, was
filed in strict accordance with the powers contained in the notea power coupled with an interest which defendant would
be estopped of denying. We think that no express legal sanction is necessary to legalize such a proceeding.
"0n the question of what ought to be the public policy of the Philippines, we hold quite a different opinion. While the
use of judgment notes might in some cases expedite the collection of just debts, we believe that under conditions as exist
here, their use should be discouraged. They lend themselves easily to fraud in the hands of friends of a dishonest debtor,
and to extortion in the hands of usurers who .are already too well equipped with the pacto de retro.
"While we believe that the position of the bank is sound legally, we should be very glad to be proven mistaken."
Attorney Francis B. Mahoney, of the Philippine Trust Company, states:
"I have not gone into the law and cases, except to take a glance at the subject of judgments in Volume 15 of Ruling Case
Law. However, the reasons indicated on page 651 thereof are significant.
"Unquestionably, if our Legislature provided in unmistakable terms for confession of judgment as herein indicated, the
validity and constitutionality of the enactment might be questioned as failing to provide those constitutional safeguards of
taking a man's property onlyafter a day in court and after due process of law.
"This conclusion is strongera fortioriwhere the enacting provisionif such section 5 of Act No. 2031 may be
calledis of a lefthanded nature, apparently relating only to negotiabilityincidentally thus answering here your first
inquiry. Whatever legal principles there might be in favor of recognizing a confession of judgmentfor example, the
matter of expediencystronger and more vital principles oppose such recognition.
"By refusing to recognize confession of judgment under existing statutes or under general legal principles, at the worst
phase from the point of view of the plaintiff bank, there would result only possible delay, costs and attorney's fees, which,
after all, are only passed on to the clients of the bank in the shape of interests, charges.
457
VOL. 43, JUNE 8, 1922 457
National Bank vs. Manila, Oil Refimng & By-Products Co.
The court is thus put in the position of having to determine the validity in the absence of statute of a provision in a note
authorizing an attorney to appear and confess
_______________
etc. If the bank has a meritorious case, the judgment is ultimately certain as courts.
"If the defendant debtor has any defense of merit, he is given an opportunity to present it, as, for example, in the
matter of usury so common, so difficult to uncover and such an unscrupulous rival of legitimate banking, the courts may
keep their doors open to the equities of each individual case. Whereas, if defendant, who theoretically may allege fraud
and who practically has great difficulty in proving it, must rely upon a defense of fraud, he has little chance and the doors
of the court are closed to any other defense. "In the final analysis, the matter simmers down to: 1. Possible delay in
judgment with costs, etc. 2. Certain justice in the end. 3. The eyes and doors of courts open to the equities of each
individual case. 4. Equality before the law,
or
(a) Expediting judgment. (b) Defendant debtor practically kept out of court by additional expense and difficulty in
securing a hearing. (c) Putting a strong weapon in the hands of unscrupulous persons and taking the strength necessary to
wield this weapon from the courts.
"At first glance, if a debtor signs a document throwing away his right to be heard, the average man has a feeling such
debtor deserves to suffer the consequences. If that were the entire story, probably he should. But what man, needing
money badly enoughfacing strenuous necessitywill not in the circumstances be inclined to look on the cheerful side
to sign and get the money, letting the future take care of itself ? Such is the frailty of human nature. Then, as the usual
thing, the rich and powerful can take care of themselves, and it is usually others who have need of courts, just laws and
liberal interpretation of them.
"No doubt, banks would favor expediting judgments against their debtors, other things being equal. And no doubt,
additional delay in courts and the incidental costs thereof will be borne by the clients of the bank. But sound banking is
not established and enhanced by harsh laws which put strong weapons in powerful hands. Contented peoples, safe laws
and sound banking usually go hand in hand."
Professor Jose A. Espiritu, of the University of the Phihppmes, states:
"Permit me to cite first of all the authorities that I have gathered concerning the principal question, at issue in the case
mentioned in
458
National Bank vs, Manila, Oil Refining & By-Products Co.
judgment against the maker. This situation, in reality, has its advantages for it permits us to reach that solution
_______________
your letter, namely, 'The Effect and Validity of Confession of Judgment in the Philippines.'
8
1. "1.Confession of judgment has been defined as 'a voluntary submission to the jurisdiction of the court, giving by
consent and without the service of process, what could otherwise be obtained by summons and complaint, and
other f ormal proceedings, an acknowledgment of indebtedness, upon which it is contemplated that a judgment
may and will be rendered.' (8 Cyc., pp. 563, 564.)
2. "2.As to the general effects of confession of judgment, the following statements may be mentioned: 'A warrant to
confess judgment does not destroy the negotiability of the note. Such a note is commonly called a "judgment
note." Decisions to the contrary in the States where the Negotiable Instruments Law is now in force are
abrogated thereby, since it expressly provides that the negotiable character of an instrument otherwise
negotiable is not affected by a provision which authorizes a confession of judgment, if the instrument is not paid
at maturity. However, this statutory provision does not apply to stipulations for the confession of judgment
"prior" to maturity.' (8 C. J., p. 128, sec. 222.)
3. "3.Nature and Requisites. 'A judgment may be rendered upon the confession of defendant, either in an action
regularly commenced against him by the issuance and service of process, in which case the confession may be
made by his attorney of record, or, without the institution of a suit, upon a confession by defendant in person or
by his attorney in fact. It implies something more than a mere admission of a debt to plaintiff; in addition, it is
defendant's consent that a judgment shall be entered against him. * * *.' (23 Cyc., 699.)
4. "4.Statutory Provisions. 'Statutes regulating the confession of judgments without action, or otherwise than
according to the course of the common law, are strictly construed, and a strict compliance with their provisions
must be shown in order to sustain the validity of the judgment.' (Chapin vs. Thompson, 20 Cal, 681.) 'And this
applies also to statutory restrictions upon the right to confess judgment, as that authority to confess judgment
shall not be given in the same instrument which contains the promise or obligation to pay the debt, or that such
confession shall not be authorized by any instrument executed prior to suit brought.' (23 Cyc., 699, 700.)
5. "5.Warrant or Power of AttorneyValidity and Necessity. 'A judgment by confession may be entered upon a
written authority, called a warrant or letter of attorney, by which the debtor empowers an attorney to enter an
appearance for him, waive process, and
459
VOL. 43, JUNE 8, 1922 459
which is best grounded in the solid principles of the law, and which will best advance the public interest.
_______________
1. confess judgment against him for a designated sum, except where this method of proceeding is prohibited by
statute. The warrant as the basis of the judgment is generally required to be placed on file in the clerk's office,
and no judgment can be so entered until it is so filed.' (23 Cyc., 703.)
2. "6.Requisites and Sufficiency. 'A warrant or power of attorney to confess judgment should be in writing and
should conform to the requirements of the statute in force at the time of its execution, 'although in the absence of
specific statutory directions it is sufficient, without much regard to its form, if it contains the essentials of a good
power and clearly states its purpose. It must be signed by the person against whom the judgment is to be entered
* * *.' (23 Cyc., 704.)
"The above quoted authorities are among the various authorities I found bearing on the question at issue. As it can be
readily seen none of them decides squarely and definitely the questions propounded in your letter. One thing, however,
seems to be clear, from the very provision of section 5 (b) of the Negotiable Instruments Law and from the quotation No. 2
of this letter, that a provision in a note or bill of exchange authorizing a confession of judgment in default of payment at its
maturity has particular reference, in so far as Act No. 2031 is concerned, only to the negotiable character of an instrument.
I do not believe that the Legislature had the intention in passing the said Act No. 2031 to introduce in the Philippines a
new practice in our Remedial Law, namely, that of confession of judgment, which is purely procedural in nature.
"Now as to the second question, to wit: 'Does the silence of the Code of Civil Procedure on the subject mean that a
confession of judgment cannot be recognized in this jurisdiction, or can a judgment by confession be imported into the
Philippines under general legal principles?' Before answering this question attention is respectfully called to the quotation
No. 4 of this letter, which expressly provides that statutes regulating confession of judgments must be strictly construed
and their provisions strictly complied with to sustain the validity of judgments rendered under such statutes. Now it being
admitted that there is no express provision in our Code of Civil Procedure authorizing or sanctioning this mode of practice
in this jurisdiction, and consequently there are no regulations provided to be followed in this particular remedy, I am
therefore of the opinion that confession of judgment should not be deemed as imported in the Philippines under the
general legal principles. The remedy itself is a most summary one, and when the defendant-debtor, instead of ad
460
The practice of entering judgments in debt on warrants of attorney is of ancient origin. In the course of time a warrant of
attorney to confess judgment became a familiar common law security. At common law, there were two kinds of judgments
by confession; the one a judgment by cognovit actionem, and the other by confession relicta verificatione. A number of
jurisdictions in the United States have accepted the common law view of judgments by confession, while still other
jurisdictions have refused to sanction them. In some States, statutes have been passed which have either expressly
authorized confession of judgment on warrant of attorney, without antecedent process, or have forbidden judgments of
this character. In the absence of statute, there is a conflict of authority as to the validity of a warrant of attorney for the
confession of judgment. The weight of opinion is that, unless authorized by statute, warrants of attorney to confess
judgment are void, as against public policy.
_______________
9
mitting or allowing a judgment be taken against him, presents his appearance and answers the complaint filed against
him, it seems that the trial court should not render a judgment without first hearing the evidence that the parties may wish
to submit before him, for it may happen that the defendant-debtor may have some valid or good defences against the
plaintiff-creditor. This is especially true in the case of a counterclaim that the defendant may have against the plaintiff as
provided in sections 95 and 96 of the Code of Civil Procedure. The same Code provides that in case of an omission to set
up his counterclaim, the defendant or his assignee loses all his right to bring further suit on such claim. (Sec. 97, Act No.
190.)
"In answer to the last question, namely: 'Admitting that there may be some doubt, as to the correct solution, which
solution, the recognition of a confession of judgment, or the non-recognition of a confession of judgment, would be for the
best interests of the commercial life of the Philippines?', I wish first of all to state what I believe to be the advantages and
disadvantages of this particular remedy. As to advantages, it can, of course, be readily seen that a confession of judgment
is a quick remedy. It saves time and money as far as the parties to the suit are concerned if the same is properly and legally
brought. It saves the court's time and the government the expense that a long litigation entails. As to its disadvantages we
may say among other things the following: 1. It
461
VOL. 43, JUNE 8, 1922 461
Possibly the leading case on the subject is First National Bank of Kansas City vs. White ([19Q9], 220 Mo., 717; 16 Ann.
Cas., 889; 120 S. W., 36; 132 Am. St. Rep., 612). The record in this case discloses that on October 4, 1900, the defendant
executed and delivered to the plaintiff an obligation in which the defendant authorized any attorney-at-law to appear for
him in an action on the note at any time after the note became due in any court of record in the State of Missouri, or
elsewhere, to waive the issuing and service of process, and to confess judgment in favor of the First National Bank of
Kansas City for the amount that might then be due thereon, with interest at the rate therein mentioned and the costs of
suit, together with an attorney's fee of 10 per cent and also to waive and release all errors in said proceedings and
judgment, and all proceedings, appeals, or writs of error thereon. Plaintiff filed a petition in the Circuit Court to which was
attached the
_______________
may be abused in the same way as the usurious rates of interest on loans are now in the Philippines, because a
borrower who is in great need of money might be induced, if not actually compelled, to sign such a burdensome obligation;
2. It deprives the defendant of his day in court, and as a consequence it will prevent him to set up and prove before the
court his just claims and other lawful defences against the plaintiff; 3. It will create multiplicity of actions in this
jurisdiction, for if the confession of judgment has been wrongfully or unjustly entered, the judgment debtor may start
another litigation on the same subject-matter that might have been brought before the court in case a proper trial was
formally held before the rendition of such a judgment; and 4. It does not really hold the plaintiff who has a good cause of
action against the defendant as his proofs will surely establish his claims and consequently a judgment must necessarily be
rendered in his favor.
"From the above statements, I am of the opinion that unless proper regulations are first duly introduced and
incorporated in our remedial law, confession of judgments, instead of resulting advantageous to our commercial life in the
Philippines, might be the sources of abuse and oppression. The very fact that confession of judgment is a most summary
and in fact a violent remedy,4t should first of all be properly regulated by statute, and those regulations must be strictly
complied with, before the court should concede to such a remedy."
462
above-mentioned instrument. An attorney named Denham appeared pursuant to the authority given by the note sued on,
entered the appearance of the defendant, and consented that judgment be rendered in favor of the plaintiff as prayed in
the petition. After the Circuit Court had entered a judgment, the defendant, through counsel, appeared specially and filed
a motion to set it aside. The Supreme Court of Missouri, speaking through Mr. Justice Graves, in part said:
"But going beyond the mere technical question in our preceding paragraph discussed, we come to a question urged which
goes to the very root of this case, and whilst new and novel in this state, we do not feel that the cause should be disposed of
without discussing and passing upon that question.
* * * * * * *
"And if this instrument be considered as a security for a debt, as it was by the common law, it has never so f ound
recognition in this state. The policy of our law has been against such hidden securities for debt. Our Recorder's Act is such
that instruments intended as security for debt shoUld find a place in the public records, and if not, they have often been
viewed with suspicion, and their bona fides often questioned.
"Nor do we think that the policy of our law is such as to thus place a debtor in the absolute power of his creditor. The
field for fraud is too far enlarged by such an instrument. Oppression and tyranny would follow the footsteps of such a
diversion in the way of security for debt. Such instruments procured by duress could shortly be placed in .-judgment in a
foreign court and much distress result therefrom.
"Again, under the law the right to appeal to this court or some other appellate court is granted to all persons against
whom an adverse judgment is rendered, and this statutory right is by the instrument stricken down. True it is that such
right is not claimed in this case, but it is a
463
VOL. 43, JUNE 8, 1922 463
part of the bond and we hardly know why this pound of flesh has not been demanded. Courts guard with jealous eye any
contract innovations upon their jurisdiction. The instrument before us, considered in the light of a contract, actually
10
reduces the courts to mere clerks to enter and record the judgment called for therein. By our statute (Rev. St. 1899, sec.
645) a party to a written instrument of this character has the right to show a failure of consideration, but this right is
brushed to the wind by this instrument and the jurisdiction of the court to hear that controversy is by the contract
divested. In 9 Cyc., 510, it is said: 'Agreements whose object is to oust the jurisdiction of the courts are contrary to public
policy and will not be enf orced. Thus it is held that any stipulation between parties to a contract distinguishing between
the different courts of the country is contrary to public policy. The principle has also been applied to a stipulation in a
contract that a party who breaks it may not be sued, to an agreement designating a person to be sued for its breach who is
nowise liable and prohibiting action against any but him, to a provision in a lease that the landlord shall have the right to
take immediate judgment against the tenant in case of a default on his part, without giving the notice and demand for
possession and filing the complaint required by statute, to a by-law of a benefit association that the decisions of its officers
on a claim shall be final and conclusive, and to many other agreements of a similar tendency. In some courts, any
agreement as to the time for suing different from the time allowed by the statute of limitations within which suit shall be
brought or the right to sue be barred is held -void.'
* * * * * * *
"We shall not pursue this question further. This contract, in so far as it goes-beyond the usual provisions of a note, is
void as against the public policy of the state, as such public policy is found expressed in our laws and decisions. Such
agreements are iniquitous to the uttermost and should
464
be promptly condemned by the courts, until such time as they may receive express statutory recognition, as they have in
some states.
* * * * * * *
"From what has been said, it follows that the Circuit Court never had jurisdiction of the defendant, and the judgment is
reversed."
The case of Parquhar & Co. vs. Dehaven ([1912], 70 W. Va., 738; 40 L. R. A. [N. S.], 956; 75 S. E., 65; Ann. Cas. [1914-A],
640), is another well-considered authority. The notes referred to in the record contained waiver of presentment and
protest, homestead and exemption rights real and personal, and other rights, and also the following material provision: "
'And we do hereby empower and authorize the said A. B. Farquhar Co. Limited, or agent, or any prothonotary or attorney
of any Court of Record to appear for us and in our name to confess judgment against us and in favor of said A. B. Farquhar
Co., Limited, for the above named sum with costs of suit and release of all errors and without stay of execution after the
maturity of this note." ' The Supreme Court of West Virginia, on consideration of the validity of the judgment note above
described, speaking through Mr. Justice Miller, in part said:
"As both sides agree the question presented is one of first impression in this State. We have -no statute, as has
Pennsylvania and many other states, regulating the subject. In the decision we are called upon to render, we must have
recourse to the rules and principles of the common law, in force here, and to our statute law, applicable, and to such
judicial decisions and practices in Virginia, in force at the time of the separation, as are properly binding on us. It is
pertinent to remark in this connection, that after nearly fifty years of judicial history in this State no case has been brought
here involving this question, strong evidence, we think, that such notes, if at all, have never been in very general use in this
commonwealth.
465
VOL. 43, JUNE 8, 1922 465
Ndtional Bank vs. Manila, Oil Refining & By-Products Co.
And in most states where they are current the use of them has grown up under statutes authorizing them, and regulating
the practice of employing them in commercial transactions.
* * * * * * *
"It is contended, however, that the old legal maxim, qui facit per alium, facit per se, is as applicable here as in other
cases. We do not think so. Strong reasons exist, as we have shown, for denying its application, when holders of contracts of
this character seek the aid of the courts and of their execution process to enforce them, defendant having had no day in
court or opportunity to be heard. We need not say in this case that a debtor may not, by proper power of attorney duly
executed, authorize another to appear in court, and by proper endorsement upon the writ waive service of process, and
confess judgment. But we do not wish to be understood as approving or intending to countenance the practice of
employing in this state commercial paper of the character here involved. Such paper has heretofore had little if any
currency here. If the practice is adopted into this state it ought to be, we think, by act of the Legislature, with all proper
safeguards thrown around it, to prevent fraud and imposition. The policy of our law is, that no man shall suffer judgment
at the hands of our courts without proper process and a day to be heard. To give currency to such paper by judicial
pronouncement would be to open the door to fraud and imposition, and to subject the people to wrongs and injuries not
heretofore contemplated. This we are unwilling to do."
A case typical of those authorities which lend support to judgment notes is First National Bank of Las
Cruces vs.Baker ([1919], 180 Pac., 291). The Supreme Court of New Mexico, in a per curiam decision, in part, said:
"In some of the states the judgments upon warrants of attorney are condemned as being against public policy. (Farquhar &
Co. vs.Dehaven, 70 W. Va., 738; 75 S. E.,
466
11
G5; 40 L. R. A. [N. S.], 956; Ann. Cas. [1914 A], 640, and First National Bank of Kansas City vs. White, 220 Mo., 717; 120
S. W., 36; 132 Am. St. Rep., 612; 16 Ann. Cas., 889, are examples of such holding.) By just what course of reasoning it can
be said by the courts that such judgments are against public policy we are unable to understand. It was a practice from
time immemorial at common law, and the common law comes down to us sanctioned as justified by the reason and
experience of English-speaking peoples. If conditions have arisen in this country which make the application of the
common law undesirable, it is for the Legislature to so announce, and to prohibit the taking of judgments of this kind.
Until the Legislature has spoken along that line, we know of no theory upon which such judgments can be declared as
against the public policy of the state. We are aware that the argument against them is that they enable the unconscionable
creditor to take advantage of the necessities of the poor debtor and cut him off from his ordinary day in court. On the other
hand, it may be said in their favor that it frequently enables a debtor to obtain money which he could by no possibility
otherwise obtain. It strengthens his credit, and may be most highly beneficial to him at times. In some of the states these
judgments have been condemned' by statute and of course in that case are not allowed.
"Our conclusion in this case is that a warrant of attorney given as security to a creditor accompanying a promissory
note confers a valid power, and authorizes a confession of judgment in any court of competent jurisdiction in an action to
be brought upon said note; that our cognovit statute does not cover the same field as that occupied by the common-law
practice of taking judgments upon warrant of attorney, and does not impliedly or otherwise abrogate such practice; and
that the practice of taking judgments upon warrants of attorney as it was pursued in this case is not against any public
policy of the state, as declared by its laws."
467
VOL. 43, JUNE 8, 1922 467
With reference to the conclusiveness of the decisions here mentioned, it may be said that they are based on the practice of
the English-American common law, and that the doctrines of the common law are binding upon Philippine courts only in
so f ar as they are f ounded on sound principles applicable to local conditions.
Judgments by confession as appeared at common law were considered an amicable, easy, and cheap way to settle and
secure debts. They are a quick remedy and serve to save the court's time. They also save the time and money of the
litigants and the government the expenses that a long litigation entails. In one sense, instruments of this character may be
considered as special agreements, with power to enter up judgments on them, binding the parties to the result as they
themselves viewed it.
On the other hand, are disadvantages to the commercial world which outweigh the considerations just mentioned.
Such warrants of attorney are void as against public policy, because they enlarge the field for fraud, because under these
instruments the promissor bargains away his right to a day in court, and because the effect of the instrument is to strike
down the right of appeal accorded by statute. The recognition of such a form of obligation would bring about a complete
reorganization of commercial customs and practices, with reference to short-term obligations. It can readily be seen that
judgment notes, instead of resulting to the advantage of commercial life in the Philippines might be the source of abuse
and oppression, and make the courts involuntary parties thereto. If the bank has a meritorious case, the judgment is
ultimately certain in the courts.
We are of the opinion that warrants of attorney to confess judgment are not authorized nor contemplated by our law.
We are further of the opinion that provisions in notes authorizing attorneys to appear and confess judgments against
makers should not be recognized in this jurisdiction by implication and should only be considered as valid when given
express legislative sanction.
468
Gonzalez vs. Davis
The judgment appealed from is set aside, and the case is remanded to the lower court for further proceedings in
accordance with this decision. Without special finding as to costs in this instance, it is so ordered.
Araullo, C. J., Avancea, Villamor, Ostrand, Johns,and Romualdez, JJ., concur.
Judgment set aside.
12
[No. L-2516. September 25, 1950]
ANG TEK LIAN, petitioner, vs. THE COURT OF APPEALS, respondent.
1. 1.CRIMINAL LAW; "ESTAFA"; ISSUING CHECK WITH INSUFFICIENT BANK DEPOSIT TO COVER THE
SAME.One who issues a check payable to cash to accomplish deceit and knows that at the time had no
sufficient deposit with the bank to cover the amount of the check and without informing the payee of such
circumstances, is guilty of estafa as provided by article 315, paragraph (d), subsection 2 of the Revised Penal
Code.
1. 2.NEGOTIABLE INSTRUMENTS; CHECK DRAWN PAYABLE TO THE ORDER OF "CASH"; INDORSEMENT.

A check payable to the order of "cash" is a check payable to bearer, and the bank may pay it to the person
presenting it for payment without the drawer's indorsement.
PETITION to review on certiorari a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.
Laurel, Sabido, Almario & Laurel for petitioner.
384
Ang Tek Lian vs. Court of Appeals
Solicitor General Felix Bautista Angelo and Solicitor Manuel Tomacruz for respondent.
BENGZON, J.:
For having issued a rubber check, Ang Tek Lian was convicted of estafa, in the Court of First Instance of Manila. The
Court of Appeals affirmed the verdict.
It appears that, knowing he had no funds therefor, Ang Tek Lian drew on Saturday, November 16, 1946, the check
Exhibit A upon the China Banking Corporation f or the sum of P4,000, payable to the order of "cash". He delivered it to
Lee Hua Hong in exchange for money which the latter handed in the act. On November 18, 1946, the next business day,
the check was presented by Lee Hua Hong to the drawee bank for payment, but it was dishonored for insufficiency of
funds, the balance of the deposit of Ang Tek Lian on both dates being P335 only.
The Court of Appeals believed the version of Lee Huan Hong who testified that "on November 16, 1946, appellant went
to his (complainant's) office, at 1217 Herran, Paco, Manila, and asked him to exchange Exhibit Awhich he (appellant)
then brought with himwith cash alleging that he needed badly the sum of P4,000 represented by the check, but could
not withdraw it from the bank, it being then already closed; that in view of this request and relying upon appellant's
assurance that he had sufficient funds in the bank to meet Exhibit A, and because they used to borrow money from each
other, even before the war, and appellant owns a hotel and restaurant known as the North Bay Hotel, said complainant
delivered to him, on the same date, the sum of P4,000 in cash; that despite repeated efforts to notify him that the check
had been dishonored by the bank, appellant could not be located any-where, until he was summoned in the City Fiscal's
Office in view of the complaint for estafa filed in connection therewith; and that appellant has not paid as yet the amount
of the check, or any part thereof."
385
VOL. 87, SEPTEMBER 25, 1950 385
Inasmuch as the findings of fact of the Court of Appeals are final, the only question of law for decision is whether under
the facts found, estafa had been accomplished.
Article 315, paragraph (d), subsection 2 of the Revised Penal Code, punishes swindling committed "By postdating a
check, or issuing such check in payment of an obligation the offender knowing that at the time he had no funds in the
bank, or the funds deposited by him in the bank were not sufficient to cover the amount of the check, and without
informing the payee of such circumstances".
We believe that under this provision of law Ang Tek Lian was properly held liable. In this connection, it must be stated
that, as explained in People vs. Fernandez (59 Phil., 615), estafa is committed by issuing either a postdated check or an
ordinary check to accomplish the deceit, It is argued, however, that as the check had been made payable to "cash" and had
not been endorsed by Ang Tek Lian, the defendant is not guilty of the offense charged. Based on the proposition that "by
uniform practice of all banks in the Philippines a check so drawn is invariably dishonored," the following line of reasoning
is advanced in support of the argument:
"* * * When, therefore, he (the offended party) accepted the check (Exhibit A) from the appellant, he did so with full
knowledge that it would be dishonored upon presentment. In that sense, the appellant could not be said to have acted
fraudulently because the complainant, in so accepting the check as it was drawn, must be considered, by every rational
consideration, to have done so fully aware of the risk he was running thereby." (Brief for the appellant, p. 11.)
We are not aware of the uniformity of such practice. Instances have undoubtedly occurred wherein the Bank required the
indorsement of the drawer before honoring a check payable to "cash." But cases there are too, where no such requirement
had been made. It depends upon the circumstances of each transaction.
Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the order of "cash" is a check pay-
386
able to bearer, and the bank may pay it to the person presenting it for payment without the drawer's indorsement.
"A check payable to the order of cash is a bearer instrument. Bacal vs. National City Bank of New York (1933), 146 Misc.,
732; 262 N. Y. S., 839; Cleary vs. De Beck Plate Glass Co. (1907), 54 Misc., 537; 104 N. Y. S., 831; Massachusetts Bonding
& Insurance Co. vs. Pittsburgh Pipe & Supply Co. (Tex. Civ. App., 1939), 135 S. W. (2d), 818. See also H. Cook &
Son vs. Moody (1916), 17 Ga. App., 465; 87 S. E., 713."
13
"Where a check is made payable to the order of 'cash', the word cash 'does not purport to be the name of any person',
and hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but may
pay it to the person presenting it without any indorsement. * * *" (Zollmann, Banks and Banking, Permanent Edition, Vol.
6, p. 494.)
Of course, if the bank is not sure of the bearer's identity or financial solvency, it has the right to demand identification
and/or assurance against possible complications,for instance, (a) forgery of drawer's signature, (b) loss of the check by
the rightful owner, (c) raising of the amount payable, etc. The bank may therefore require, for its protection, that the
indorsement of the draweror of some other person known to itbe obtained. But where the Bank is satisfied of the
identity and/or the economic standing of the bearer who tenders the check for collection, it will pay the instrument
without further question; and it would incur no liability to the drawer in thus acting.
"A check payable to bearer is authority for payment to the holder. Where a check is in the ordinary form, and is payable to
bearer, so that no indorsement is required, a bank, to which it is presented for payment, need not have the holder
identified, and is not negligent in failing to do so. * * *" (Michie on Banks and Banking, Permanent Edition, Vol. 5, p. 343.)
"* * * Consequently, a drawee bank to which a bearer check is presented for payment need not necessarily have the
holder identified and ordinarily may not be charged with negligence in failing to do so. See Opinions 6C:2 and 6C:3. If the
bank has no reasonable cause for suspecting any irregularity, it will be protected in paying a bearer check, 'no matter what
facts unknown to it may
387
VOL. 87, SEPTEMBER 25, 1950 387
Phil. Assn. of Mech. and Electrical Eng. vs. Sanidad
have occurred prior to the presentment.' 1 Morse, Banks and Banking, sec. 393.
"Although a bank is entitled to pay the amount of a bearer check without further inquiry, it is entirely reasonable for
the bank to insist that the holder give satisfactory proof of his identity. * * *." (Paton's Digest, Vol. I, p. 1089.)
Anyway, it is significant, and conclusive, that the form of the check Exhibit A was totally unconnected with its dishonor.
The Court of Appeals declared that it was returned unsatisfied because the drawer had insufficient fundsnot because the
drawer's indorsement was lacking.
Wherefore, there being no question as to the correctness of the penalty imposed on the appellant, the writ of certiorari
is denied and the decision of the Court of Appeals is hereby affirmed, with costs.
Moran, C. J., Ozaeta, Pars, Pablo, Tuason, and Reyes, JJ., concur.
Writ denied, decision affirmed.
_______________
14
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 justicethe
highest degree of diligence must go into the study of every controversy submitted for decision by litigants.
_______________
** Justice Teresita J. Leonardo de Castro was designated to sit as additional member, replacing Justice Antonio
Eduardo B. Nachura per Raffle dated 23 May 2008.
* THIRD DIVISION.
514
5 SUPREME COURT REPORTS ANNOTATED
14
Philippine National Bank vs. Rodriguez
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 to515
VOL. 566, SEPTEMBER 26, 2008 5
15
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 checkif 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 a516
16
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.
15
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 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.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
transferees 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
dishonestlywhere 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 checksmere 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 the517
17
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 banks 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
situationthat 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 customers 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 the518
18
drawers 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 drawers
instructions, i.e., to the named payee in the check. It should charge to the drawers 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 drawers account.
Banks and Banking; The trustworthiness of bank employees is indispensable to maintain the stability of the
banking industrybanks 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 PNBs 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 PNBs 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.
PETITION for review on certiorari of an amended decision of the Court of Appeals.
16
The facts are stated in the opinion of the Court.519
VOL. 566, SEPTEMBER 26, 2008 519
Kenneth A. Alovera for petitioner.
Joel G. Dojillo for respondents.
REYES, R.T., J.:
WHEN the payee of the check is not intended to be the true recipient of its proceeds, is it payable to order or bearer?
What is the fictitious-payee rule and who is liable under it? Is there any exception?
These questions seek answers in this petition for review on certiorari of the Amended Decision1 of the Court of Appeals
(CA) which affirmed with modification that of the Regional Trial Court (RTC).2
The Facts
The facts as borne by the records are as follows:
Respondents-Spouses Erlando and Norma Rodriguez were clients of petitioner Philippine National Bank (PNB),
Amelia Avenue Branch, Cebu City. They maintained savings and demand/checking accounts, namely, PNBig Demand
Deposits (Checking/Current Account No. 810624-6 under the account name Erlando and/or Norma Rodriguez), and
PNBig Demand Deposit (Checking/Current Account No. 810480-4 under the account name Erlando T. Rodriguez).
The spouses were engaged in the informal lending business. In line with their business, they had a discounting3
_______________
1 CA-G.R. CV No. 76645 dated October 11, 2005. Penned by Associate Justice Isaias P. Dicdican, with Associate
Justices Pampio A. Abarintos and Ramon M. Bato, Jr., concurring; Rollo, pp. 29-42.
2 Civil Case No. 99-10892, Regional Trial Court in Negros Occidental, Branch 51, Bacolod City, dated May 10, 2002;
CA Rollo, pp. 63-72.
3 A financing scheme where a postdated check is exchanged for a current check with a discounted face value.
520
arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB employees.
Naturally, PEMSLA was likewise a client of PNB Amelia Avenue Branch. The association maintained current and savings
accounts with petitioner bank.
PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to
members whenever the association was short of funds. As was customary, the spouses would replace the postdated checks
with their own checks issued in the name of the members.
It was PEMSLAs policy not to approve applications for loans of members with outstanding debts. To subvert this
policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan accounts. They
took out loans in the names of unknowing members, without the knowledge or consent of the latter. The PEMSLA checks
issued for these loans were then given to the spouses for rediscounting. The officers carried this out by forging the
indorsement of the named payees in the checks.
In return, the spouses issued their personal checks (Rodriguez checks) in the name of the members and delivered the
checks to an officer of PEMSLA. The PEMSLA checks, on the other hand, were deposited by the spouses to their account.
Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its savings account without any
indorsement from the named payees. This was an irregular procedure made possible through the facilitation of
Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch. It appears that this became the usual
practice for the parties.
For the period November 1998 to February 1999, the spouses issued sixty-nine (69) checks, in the total amount of521
VOL. 566, SEPTEMBER 26, 2008 521
P2,345,804.00. These were payable to forty-seven (47) individual payees who were all members of PEMSLA.4
_______________
4 Current Account No. 810480-4 in the name of Erlando T. Rodriguez

Name of Payees Check No. Date Amount
Issued
01. Simon Carmelo B. 0001110 11.27.98 40,934.00

Libo-on
02. Simon Carmelo Libo- 0000011589 02.01.99 29,877.00

on
03. Simon Libo-on 0000011567 01.25.99 50,350.00
04. Pacifico Castillo 0000011565 01.22.99 39,995.00
05. Jose Bago-od 0000011587 02.01.99 38,000.00
06. Dioleto Delcano 0000011594 02.02.99 28,500.00
17
Name of Payees Check No. Date Amount
Issued
07. Antonio Maravilla 0000011593 02.02.99 37,715.00
08. Josel Juguan 0000011595 02.02.99 45,002.00
09. Domingo Roa, Jr. 0000011591 02.01.99 35,373.00
10. Antonio Maravilla 0001657 02.05.99 39,900.00
11. Christy Mae Berden 0001655 02.05.99 28,595.00
12. Nelson Guadalupe 0000011588 02.01.99 34,819.00
13. Antonio Londres 0000011596 02.05.99 32,851.00
14. Arnel Navarosa 0000011597 02.05.99 28,785.00
15. Estrella Alunan 0000011600 02.05.99 32,509.00
16. Dennis Montemayor 0000011598 02.05.99 43,691.00
17. Mickle Argusar 0000011599 02.05.99 31,498.00
18. Perlita Gallego 0000011564 01.21.99 38,000.00
19. Sheila Arcobillas 0000011563 01.19.99 38,000.00
20. Danilo Villarosa 0001656 02.05.99 32,006.00
21. Almie Borce 0000011583 02.01.99 20,093.00
22. Ronie Aragon 0000011566 01.20.99 28,844.00
Total: 775,337.00
522
Petitioner PNB eventually found out about these fraudulent acts. To put a stop to this scheme, PNB closed the current
_______________
Current Account No. 810624-6 in the name of Erlando and/or Norma Rodriguez
Name of Payees Check No. Date Issued Amount
01. Elma Bacarro 0001944 01.15.99 37,449.00
02. Delfin Recarder 0001927 01.14.99 30,020.00
03. Elma Bacarro 0001926 01.14.99 34,884.00
04. Perlita Gallego 0001924 01.14.99 35,502.00
05. Jose Weber 0001932 01.14.99 38,323.00
06. Rogelio Alfonso 0001922 01.14.99 43,852.00
07. Gianni Amantillo 0001928 01.14.99 32,414.00
08. Eddie Bago-od 0001929 01.14.99 38,361.00
09. Manuel Longero 0001933 01.14.99 38,285.00
10. Anavic Lorenzo 0001923 01.14.99 29,982.00
18
Name of Payees Check No. Date Issued Amount
11. Corazon Salva 0001945 01.15.99 37,449.00
12. Arlene Diamante 0001951 01.18.99 39,995.00
13. Joselin Laurilla 0001955 01.18.99 37,221.00
14. Andy Javellana 0001960 01.22.99 30,923.00
15. Erdelinda Porras 0001958 01.22.99 40,679.00
16. Nelson Guadalupe 0001956 01.18.99 24,700.00
17. Barnard Escano 0001969 01/22/99 38,304.00
18. Buena Coscolluela 0001968 01/22/99 37,706.00
19. Erdelinda Porras 0002021 02/01/99 36,727.00
20. Neda Algara 0002023 02/01/99 38,000.00
21. Eddie Bago-od 0002030 02/02/99 26,600.00
22. Gianni Amantillo 0002032 02/02/99 19,000.00
23. Alfredo Llena 0002020 02/01/99 32,282.00
24. Emmanuel Fermo 0001972 01/22/99 36,376.00
25. Yvonne Ano-os 0001967 01/22/99 36,566.00
26. Joel Abibuag 0002022 02/01/99 37,981.00
523
VOL. 566, SEPTEMBER 26, 2008 523
account of PEMSLA. As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason
Account Closed. The corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA savings
account. The amounts were duly debited from the Rodriguez account. Thus, because the PEMSLA checks given as
payment were returned, spouses Rodriguez incurred losses from the rediscounting transactions.
_______________
27. Ma. Corazon Salva 0002029 02/02/99 25,270.00
28. Jose Bago-od 0001957 01/18/99 34,656.00
29. Avelino Brion 0001965 01/22/99 31,882.00
30. Mickle Algusar 0001962 01/22/99 25,004.00
31. Jose Weber 0001959 01/22/99 37,001.00
32. Joel Velasco 0002028 02/02/99 9,500.00
33. Elma Bacarro 0002031 02/02/99 23,750.00
34. Grace Tambis 0001952 01/18/99 39,995.00
35. Proceso Mailim 0001980 01/21/99 37,193.00
36. Ronnie Aragon 0001983 01/22/99 30,324.00
37. Danilo Villarosa 0001931 01/14/99 31,008.00
38. Joel Abibuag 0001954 01/18/99 26,600.00
19
27. Ma. Corazon Salva 0002029 02/02/99 25,270.00
39. Danilo Villarosa 0001984 01/22/99 26,790.00
40. Reynard Guia 0001985 01/22/99 42,959.00
41. Estrella Alunan 0001925 01/14/99 39,596.00
42. Eddie Bago-od 0001982 01/22/99 31,018.00
43. Jose Bago-od 0001982 01/22/99 37,240.00
44. Nicandro Aguilar 0001964 01/22/99 52,250.00
45. Guandencia Banaston 0001963 01/22/99 38,000.00
46. Dennis Montemayor 0001961 01/22/99 26,600.00
47. Eduardo Buglosa 0002027 01/02/99 14,250.00
Total ................. 1,570,467.00

Grand Total ........ 2,345,804.00
524
RTC Disposition
Alarmed over the unexpected turn of events, the spouses Rodriguez filed a civil complaint for damages against
PEMSLA, the Multi-Purpose Cooperative of Philnabankers (MCP), and petitioner PNB. They sought to recover the value of
their checks that were deposited to the PEMSLA savings account amounting to P2,345,804.00. The spouses contended
that because PNB credited the checks to the PEMSLA account even without indorsements, PNB violated its
contractual obligation to them as depositors. PNB paid the wrong payees, hence, it should bear the loss.
PNB moved to dismiss the complaint on the ground of lack of cause of action. PNB argued that the claim for damages
should come from the payees of the checks, and not from spouses Rodriguez. Since there was no demand from the said
payees, the obligation should be considered as discharged.
In an Order dated January 12, 2000, the RTC denied PNBs motion to dismiss.
In its Answer,5 PNB claimed it is not liable for the checks which it paid to the PEMSLA account without any
indorsement from the payees. The bank contended that spouses Rodriguez, the makers, actually did not intend for the
named payees to receive the proceeds of the checks. Consequently, the payees were considered as fictitious
payees as defined under the Negotiable Instruments Law (NIL). Being checks made to fictitious payees which are bearer
instruments, the checks were negotiable by mere delivery. PNBs Answer included its cross-claim against its co-defendants
PEMSLA and the MCP, praying that in the event that judgment is rendered against the bank, the cross-defendants should
be ordered to reimburse PNB the amount it shall pay.
_______________
5 Rollo, pp. 64-69.

525
VOL. 566, SEPTEMBER 26, 2008 525
After trial, the RTC rendered judgment in favor of spouses Rodriguez (plaintiffs). It ruled that PNB (defendant) is
liable to return the value of the checks. All counterclaims and cross-claims were dismissed. The dispositive portion of the
RTC decision reads:
WHEREFORE, in view of the foregoing, the Court hereby renders judgment, as follows:
1. Defendant is hereby ordered to pay the plaintiffs the total amount of P2,345,804.00 or reinstate or restore the
amount of P775,337.00 in the PNBig Demand Deposit Checking/Current Account No. 810480-4 of Erlando T. Rodriguez,
and the amount of P1,570,467.00 in the PNBig Demand Deposit, Checking/Current Account No. 810624-6 of Erlando T.
Rodriguez and/or Norma Rodriguez, plus legal rate of interest thereon to be computed from the filing of this complaint
until fully paid;
2. The defendant PNB is hereby ordered to pay the plaintiffs the following reasonable amount of damages suffered by
them taking into consideration the standing of the plaintiffs being sugarcane planters, realtors, residential subdivision
owners, and other businesses:
(a) Consequential damages, unearned income in the amount of P4,000,000.00, as a result of their having
incurred great dificulty (sic) especially in the residential subdivision business, which was not pushed through and
the contractor even threatened to file a case against the plaintiffs;
(b) Moral damages in the amount of P1,000,000.00;
(c) Exemplary damages in the amount of P500,000.00;
(d) Attorneys fees in the amount of P150,000.00 considering that this case does not involve very complicated
issues; and for the
(e) Costs of suit.526
20
3. Other claims and counterclaims are hereby dismissed.6
CA Disposition
PNB appealed the decision of the trial court to the CA on the principal ground that the disputed checks should be
considered as payable to bearer and not to order.
In a Decision7 dated July 22, 2004, the CA reversed and set aside the RTC disposition. The CA concluded that the
checks were obviously meant by the spouses to be really paid to PEMSLA. The court a quo declared:
We are not swayed by the contention of the plaintiffs-appellees (Spouses Rodriguez) that their cause of action arose
from the alleged breach of contract by the defendant-appellant (PNB) when it paid the value of the checks to PEMSLA
despite the checks being payable to order. Rather, we are more convinced by the strong and credible evidence for the
defendant-appellant with regard to the plaintiffs-appellees and PEMSLAs business arrangementthat the value of the
rediscounted checks of the plaintiffs-appellees would be deposited in PEMSLAs account for payment of the loans it has
approved in exchange for PEMSLAs checks with the full value of the said loans. This is the only obvious explanation as to
why all the disputed sixty-nine (69) checks were in the possession of PEMSLAs errand boy for presentment to the
defendant-appellant that led to this present controversy. It also appears that the teller who accepted the said checks was
PEMSLAs officer, and that such was a regular practice by the parties until the defendant-appellant discovered the
scam. The logical conclusion, therefore, is that the checks were never meant to be paid to order, but instead, to
PEMSLA. We thus find no breach of contract on the part of the defendant-appellant.
According to plaintiff-appellee Erlando Rodriguez testimony, PEMSLA allegedly issued post-dated checks to its
qualified members who had applied for loans. However, because of PEMSLAs insuffi-
_______________
6 CA Rollo, pp. 71-72.

7 Rollo, pp. 44-49. Penned by Associate Justice Isaias P. Dicdican, with Associate Justices Elvi John S. Asuncion and
Ramon M. Bato, Jr., concurring.
527
VOL. 566, SEPTEMBER 26, 2008 527
ciency of funds, PEMSLA approached the plaintiffs-appellees for the latter to issue rediscounted checks in favor of said
applicant members. Based on the investigation of the defendant-appellant, meanwhile, this arrangement allowed the
plaintiffs-appellees to make a profit by issuing rediscounted checks, while the officers of PEMSLA and other members
would be able to claim their loans, despite the fact that they were disqualified for one reason or another. They were able to
achieve this conspiracy by using other members who had loaned lesser amounts of money or had not applied at all.
x x x.8 (Emphasis added)
The CA found that the checks were bearer instruments, thus they do not require indorsement for negotiation; and that
spouses Rodriguez and PEMSLA conspired with each other to accomplish this money-making scheme. The payees in the
checks were fictitious payees because they were not the intended payees at all.
The spouses Rodriguez moved for reconsideration. They argued, inter alia, that the checks on their faces were
unquestionably payable to order; and that PNB committed a breach of contract when it paid the value of the checks to
PEMSLA without indorsement from the payees. They also argued that their cause of action is not only against PEMSLA
but also against PNB to recover the value of the checks.
On October 11, 2005, the CA reversed itself via an Amended Decision, the last paragraph and fallo of which read:
In sum, we rule that the defendant-appellant PNB is liable to the plaintiffs-appellees Sps. Rodriguez for the following:
1. Actual damages in the amount of P2,345,804 with interest at 6% per annum from 14 May 1999 until fully
paid;
2. Moral damages in the amount of P200,000;
3. Attorneys fees in the amount of P100,000; and
4. Costs of suit.
_______________
8 Id., at p. 47.
528
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by Us AFFIRMING WITH
MODIFICATION the assailed decision rendered in Civil Case No. 99-10892, as set forth in the immediately next preceding
paragraph hereof, and SETTING ASIDE Our original decision promulgated in this case on 22 July 2004.
SO ORDERED.9
The CA ruled that the checks were payable to order. According to the appellate court, PNB failed to present sufficient
proof to defeat the claim of the spouses Rodriguez that they really intended the checks to be received by the specified
payees. Thus, PNB is liable for the value of the checks which it paid to PEMSLA without indorsements from the named
payees. The award for damages was deemed appropriate in view of the failure of PNB to treat the Rodriguez account
with the highest degree of care considering the fiduciary nature of their relationship, which constrained
respondents to seek legal action.
Hence, the present recourse under Rule 45.
Issues
The issues may be compressed to whether the subject checks are payable to order or to bearer and who bears the loss?
21
PNB argues anew that when the spouses Rodriguez issued the disputed checks, they did not intend for the named
payees to receive the proceeds. Thus, they are bearer instruments that could be validly negotiated by mere
delivery. Further, testimonial and documentary evidence presented during trial amply proved that spouses Rodriguez
and the officers of PEMSLA conspired with each other to defraud the bank.
_______________
9 Id., at p. 41.
529
VOL. 566, SEPTEMBER 26, 2008 529
Our Ruling
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. 10
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.
Now to the core of the petition.
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. 11It
is either an order or a bearer instrument. Sections 8 and 9 of the NIL states:
_______________
10 Veluz v. Justice of the Peace of Sariaga, 42 Phil. 557 (1921).

11 Negotiable Instruments Law, Sec. 185. Check defined.A check is a bill of exchange drawn on a bank payable on
demand. Except as herein otherwise provided, the provisions of this Act applicable to a bill of exchange payable on
demand apply to a check.
Section 126. Bill of exchange defined.A bill of exchange is an unconditional order in writing addressed by
one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
530
SEC. 8. When payable to order.The instrument is payable to order where it is drawn payable to the order of a
specified person or to him or his order. It may be drawn payable to the order of
(a) A payee who is not maker, drawer, or drawee; or
(b) The drawer or maker; or
(c) The drawee; or
(d) Two or more payees jointly; or
(e) One or some of several payees; or
(f) The holder of an office for the time being.
Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable
certainty.
SEC. 9. When payable to bearer.The instrument is payable to bearer
(a) When it is expressed to be so payable; or
(b) When it is payable to a person named therein or bearer; or
(c) When 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; or
(d) When the name of the payee does not purport to be the name of any person; or
(e) Where the only or last indorsement is an indorsement in blank.12 (Italics supplied)
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
_______________
12 Id.
531
VOL. 566, SEPTEMBER 26, 2008 531
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.
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
22
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.
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. 13
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.14 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.
_______________
13 Campos, J.C., Jr. and Lopez-Campos, M.C., Notes and Selected Cases on Negotiable Instruments Law (1994), 5th
ed., pp. 8-9.
14 Bourne v. Maryland Casualty, 192 SE 605 (1937); Norton v. City Bank & Trust Co., 294 F. 839 (1923); United
States v. Chase Nat. Bank, 250 F. 105 (1918).
532
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.15
The fictitious-payee rule is best illustrated in Mueller & Martin v. Liberty Insurance Bank. 16 In the said case, the
corporation Mueller & Martin was defrauded by George L. Martin, one of its authorized signatories. Martin drew seven
checks payable to the German Savings Fund Company Building Association (GSFCBA) amounting to $2,972.50 against
the account of the corporation without authority from the latter. Martin was also an officer of the GSFCBA but did not
have signing authority. At the back of the checks, Martin placed the rubber stamp of the GSFCBA and signed his own
name as indorsement. He then successfully drew the funds from Liberty Insurance Bank for his own personal profit. When
the corporation filed an action against the bank to recover the amount of the checks, the claim was denied.
The US Supreme Court held in Mueller that when the person making the check so payable did not intend for the
specified payee to have any part in the transactions, the payee is
_______________
15 Mueller & Martin v. Liberty Insurance Bank, 187 Ky. 44, 218 SW 465 (1920).
16 Id.
533
VOL. 566, SEPTEMBER 26, 2008 533
considered as a fictitious payee. The check is then considered as a bearer instrument to be validly negotiated by mere
delivery. Thus, the US Supreme Court held that Liberty Insurance Bank, as drawee, was authorized to make payment to
the bearer of the check, regardless of whether prior indorsements were genuine or not.17
The more recent Getty Petroleum Corp. v. American Express Travel Related Services Company, Inc.18 upheld the
fictitious-payee rule. The rule protects the depositary bank and assigns the loss to the drawer of the check who was in a
better position to prevent the loss in the first place. Due care is not even required from the drawee or depositary bank in
accepting and paying the checks. The effect is that a showing of negligence on the part of the depositary bank will not
defeat the protection that is derived from this rule.
However, 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 transferees 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 dishonestlywhere 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 re-
_______________
17 Mueller & Martin v. Liberty Insurance Bank, id.

18 90 NY 2d 322 (1997), citing the Uniform Commercial Code, Sec. 3-405.
534
23
quirement from UCC 3-405 but imposes on all parties an obligation to act with honesty in fact. x x x19 (Emphasis
added)
Getty also laid the principle that the fictitious-payee rule extends protection even to non-bank transferees of the
checks.
In the case under review, the Rodriguez checks were payable to specified payees. It is unrefuted that the 69 checks
were payable to specific persons. Likewise, it is uncontroverted that the payees were actual, existing, and living persons
who were members of PEMSLA that had a rediscounting arrangement with spouses Rodriguez.
What remains to be determined is if the payees, though existing persons, were fictitious in its broader context.
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 banks 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-
_______________
19 Getty Petroleum Corp. v. American Express Travel Related Services Company, Inc., id., citing Peck v. Chase
Manhattan Bank, 190 AD 2d 547, 548-549 (1993); Touro Coll. v. Bank Leumi Trust Co., 186 AD 2d 425, 427
(1992); Prudential-Bache Sec. v. Citibank, N.A., 73 NY 2d 276 (1989); Merrill Lynch, Pierce, Fenner & Smith v. Chemical
Bank, 57 NY 2d 447 (1982).
535
VOL. 566, SEPTEMBER 26, 2008 535
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 situationthat 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. 20
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.21 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. 22 For this reason, banks are
minded to treat their customers accounts with utmost care, confidence, and honesty. 23
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 drawers instructions, i.e., to the named payee in the check. It should charge
_______________
20 See Traders Royal Bank v. Radio Philippines Network, Inc., G.R. No. 138510, October 10, 2002, 390 SCRA 608.
21 Id.
22 Metropolitan Bank and Trust Company v. Cabilzo, G.R. No. 154469, December 6, 2006, 510 SCRA 259.
23 Citytrust Banking Corporation v. Intermediate Appellate Court, G.R. No. 84281, May 27, 1994, 232 SCRA
559; Bank of the Philippine Islands v. Intermediate Appellate Court, G.R. No. 69162, February 21, 1992, 206 SCRA 408.
536
to the drawers 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 drawers account. 24
In the case at bar, respondents-spouses were the banks depositors. The checks were drawn against respondents-
spouses accounts. PNB, as the drawee bank, had the responsibility to ascertain the regularity of the indorsements, and the
genuineness of the signatures on the checks before accepting them for deposit. Lastly, PNB was obligated to pay the checks
in strict accordance with the instructions of the drawers. Petitioner miserably failed to discharge this burden.
The checks were presented to PNB for deposit by a representative of PEMSLA absent any type of indorsement, forged
or otherwise. The facts clearly show that the bank did not pay the checks in strict accordance with the instructions of the
drawers, respondents-spouses. Instead, it paid the values of the checks not to the named payees or their order, but to
PEMSLA, a third party to the transaction between the drawers and the payees.
Moreover, 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,25 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
_______________
24 Associated Bank v. Court of Appeals, G.R. Nos. 107382 & 107612, January 31, 1996, 252 SCRA 620, 631.
24
25 G.R. No. 102383, November 26, 1992, 216 SCRA 51.
537
VOL. 566, SEPTEMBER 26, 2008 537
reasons, the banks are expected to exercise the highest degree of diligence in the selection and supervision of their
employees.26
PNBs tellers and officers, in violation of banking rules of procedure, permitted the invalid deposits of checks to the
PEMSLA account. Indeed, when it is the gross negligence of the bank employees that caused the loss, the bank should be
held liable.27
PNBs argument that there is no loss to compensate since no demand for payment has been made by the payees must
also fail. Damage was caused to respondents-spouses when the PEMSLA checks they deposited were returned for the
reason Account Closed. These PEMSLA checks were the corresponding payments to the Rodriguez checks. Since they
could not encash the PEMSLA checks, respondents-spouses were unable to collect payments for the amounts they had
advanced.
A bank that has been remiss in its duty must suffer the consequences of its negligence. Being issued to named payees,
PNB was duty-bound by law and by banking rules and procedure to require that the checks be properly indorsed before
accepting them for deposit and payment. In fine, PNB should be held liable for the amounts of the checks.
One Last Note
We note that the RTC failed to thresh out the merits of PNBs 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
_______________
26 Bank of the Philippine Islands v. Court of Appeals, id., at p. 71.

27 Id., at p. 77.
538
that defendant is in default.28 Yet, the RTC failed to sanction the failure of both PEMSLA and MPC to file responsive
pleadings. Verily, the RTC dismissal of PNBs 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.
To PNBs credit, it became involved in the controversial transaction not of its own volition but due to the actions of
some of its employees. Considering that moral damages must be understood to be in concept of grants, not punitive or
corrective in nature, We resolve to reduce the award of moral damages to P50,000.00.29
WHEREFORE, the appealed Amended Decision is AFFIRMED with the MODIFICATION that the award for moral
damages is reduced to P50,000.00, and that this is without prejudice to whatever civil, criminal, or administrative action
PNB might take against PEMSLA, MPC, and the employees involved.
SO ORDERED.
Ynares-Santiago (Chairperson), Austria-Martinez, Chico-Nazario and Nachura, JJ., concur.
Amended decision affirmed with modification.
_______________
28 Rules of Civil Procedure, Rule 9, Sec. 3. Default: declaration of.If the defending party fails to answer within the
time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of
such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment granting the
claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit
evidence. Such reception of evidence may be delegated to the clerk of court.
29 Morales v. Court of Appeals, G.R. No. 117228, June 19, 1997, 274 SCRA 282.
25
G.R. No. 167567. September 22, 2010.*
SAN MIGUEL CORPORATION, petitioner, vs. BARTOLOME PUZON, JR., respondent.
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 Justices
findings
_______________
* FIRST DIVISION.
49
9
San Miguel Corporation vs. Puzon, Jr.
and conclusions on the matter of probable cause except in clear cases of grave abuse of discretion.
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.
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.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
Castell & Bermejo for petitioner.50
Alexandre J. Andrada Villanueva for respondent.
DEL CASTILLO, J.:
This petition for review assails the December 21, 2004 Decision 1 and March 28, 2005 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 83905, which dismissed the petition before it and denied reconsideration, respectively.
Factual Antecedents
Respondent Bartolome V. Puzon, Jr., (Puzon) owner of Bartenmyk Enterprises, was a dealer of beer products of
petitioner San Miguel Corporation (SMC) for Paraaque City. Puzon purchased SMC products on credit. To ensure
payment and as a business practice, SMC required him to issue postdated checks equivalent to the value of the products
purchased on credit before the same were released to him. Said checks were returned to Puzon when the transactions
covered by these checks were paid or settled in full.
On December 31, 2000, Puzon purchased products on credit amounting to P11,820,327 for which he issued, and gave
to SMC, Bank of the Philippine Islands (BPI) Check Nos. 27904 (for P309,500.00) and 27903 (for P11,510,827.00) to
cover the said transaction.
On January 23, 2001, Puzon, together with his accountant, visited the SMC Sales Office in Paraaque City to reconcile
his account with SMC. During that visit Puzon allegedly requested to see BPI Check No. 17657. However, when he got hold
of BPI Check No. 27903 which was attached to a bond paper together with BPI Check No. 17657 he allegedly imme-
_______________
26
1 Rollo, pp. 32-42; penned by Associate Justice Perlita J. Tria-Tirona and concurred in by Associate Justices Ruben T.
Reyes and Jose C. Reyes, Jr.
2 Id., at pp. 43-45.
51
VOL. 631, SEPTEMBER 22, 2010 51
diately left the office with his accountant, bringing the checks with them.
SMC sent a letter to Puzon on March 6, 2001 demanding the return of the said checks. Puzon ignored the demand
hence SMC filed a complaint against him for theft with the City Prosecutors Office of Paraaque City.
Rulings of the Prosecutor and the Secretary
of Department of Justice (DOJ)
The investigating prosecutor, Elizabeth Yu Guray found that the relationship between [SMC] and [Puzon] appears to
be one of credit or creditor-debtor relationship. The problem lies in the reconciliation of accounts and the non-payment of
beer empties which cannot give rise to a criminal prosecution for theft.3 Thus, in her July 31, 2001 Resolution,4 she
recommended the dismissal of the case for lack of evidence. SMC appealed.
On June 4, 2003, the DOJ issued its resolution 5affirming the prosecutors Resolution dismissing the case. Its motion
for reconsideration having been denied in the April 23, 2004 DOJ Resolution, 6 SMC filed a petition for certiorari with the
CA.
Ruling of the Court of Appeals
The CA found that the postdated checks were issued by Puzon merely as a security for the payment of his purchases
and that these were not intended to be encashed. It thus concluded that SMC did not acquire ownership of the checks as it
was duty bound to return the same checks to Puzon after the transactions covering them were settled. The CA agreed with
the prosecutor that there was no theft, considering that a
_______________
3 Id., at p. 141.
4 Id., at pp. 140-142.
5 CA Rollo, pp. 24-27.
6 Id., at pp. 22-23.
52
person cannot be charged with theft for taking personal property that belongs to himself. It disposed of the appeal as
follows:
WHEREFORE, finding no grave abuse of discretion committed by public respondent, the instant petition is
hereby DISMISSED. The assailed Resolutions of public respondent, dated 04 June 2003 and 23 April 2004,
are AFFIRMED. No costs at this instance.
SO ORDERED.7
The motion for reconsideration of SMC was denied. Hence, the present petition.
Issues
Petitioner now raises the following issues:
I
WHETHER X X X PUZON HAD STOLEN FROM SMC ON JANUARY 23, 2001, AMONG OTHERS BPI CHECK NO.
27903 DATED MARCH 30, 2001 IN THE AMOUNT OF PESOS: ELEVEN MILLION FIVE HUNDRED TEN THOUSAND
EIGHT HUNDRED TWENTY SEVEN (Php11,510,827.00)
II
WHETHER X X X THE POSTDATED CHECKS ISSUED BY PUZON, PARTICULARLY BPI CHECK NO. 27903 DATED
MARCH 30, 2001 IN THE AMOUNT OF PESOS: ELEVEN MILLION FIVE HUNDRED TEN THOUSAND EIGHT
HUNDRED TWENTY SEVEN (Php11,510,827.00), WERE ISSUED IN PAYMENT OF HIS BEER PURCHASES OR WERE
USED MERELY AS SECURITY TO ENSURE PAYMENT OF PUZONS OBLIGATION.
III
WHETHER X X X THE PRACTICE OF SMC IN RETURNING THE POSTDATED CHECKS ISSUED IN PAYMENT OF
BEER PRODUCTS PURCHASED ON CREDIT SHOULD THE TRANSACTIONS
_______________
7 Rollo, p. 41.
53
VOL. 631, SEPTEMBER 22, 2010 53
COVERED BY THESE CHECKS [BE] SETTLED ON [THE] MATURITY DATES THEREOF COULD BE LIKENED TO A
CONTRACT OF PLEDGE.
IV
WHETHER X X X SMC HAD ESTABLISHED PROBABLE CAUSE TO JUSTIFY THE INDICTMENT OF PUZON FOR
THE CRIME OF THEFT PURSUANT TO ART. 308 OF THE REVISED PENAL CODE. 8
Petitioners Arguments
SMC contends that Puzon was positively identified by its employees to have taken the subject postdated checks. It also
contends that ownership of the checks was transferred to it because these were issued, not merely as security but were, in
payment of Puzons purchases. SMC points out that it has established more than sufficient probable cause to justify the
indictment of Puzon for the crime of Theft.
Respondents Arguments
27
On the other hand, Puzon contends that SMC raises questions of fact that are beyond the province of an appeal
on certiorari. He also insists that there is no probable cause to charge him with theft because the subject checks were
issued only as security and he therefore retained ownership of the same.
Our Ruling
The petition has no merit.

Preliminary Matters
At the outset we find that as pointed out by Puzon, SMC raises questions of fact. The resolution of the first issue raised
_______________
8 Id., at p. 305.
54
by SMC of whether respondent stole the subject check, which calls for the Court to determine whether respondent is guilty
of a felony, first requires that the facts be duly established in the proper forum and in accord with the proper procedure.
This issue cannot be resolved based on mere allegations of facts and affidavits. The same is true with the second issue
raised by petitioner, to wit: whether the checks issued by Puzon were payments for his purchases or were intended merely
as security to ensure payment. These issues cannot be properly resolved in the present petition for review
on certiorari which is rooted merely on the resolution of the prosecutor finding no probable cause for the filing of an
information for theft.
The third issue raised by petitioner, on the other hand, would entail venturing into constitutional matters for a
complete resolution. This route is unnecessary in the present case considering that the main matter for resolution here
only concerns grave abuse of discretion and the existence of probable cause for theft, which at this point is more properly
resolved through another more clear cut route.
Probable Cause for Theft
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. 9 On the fine points of the
determination of probable cause, Reyes v. Pearlbank Securities, Inc.10 comprehensively elaborated that:
The determination of [the existence or absence of probable cause] lies within the discretion of the prosecuting officers
after conducting
_______________
9 Sanrio Company Limited v. Lim, G.R. No. 168662, February 19, 2008, 546 SCRA 303, 312-313.
10 G.R. No. 171435, July 30, 2008, 560 SCRA 518, 535-536, citing Public Utilitites Department v. Hon. Guingona,
Jr., 417 Phil. 798, 804; 365 SCRA 467, 473 (2001).
55
VOL. 631, SEPTEMBER 22, 2010 55
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 Justices findings and conclusions on the matter of probable cause except in clear
cases of grave abuse of discretion.
In the present case, we are also not sufficiently convinced to deviate from the general rule of non-interference. Indeed
the CA did not err in dismissing the petition for certiorari before it, absent grave abuse of discretion on the part of the
DOJ Secretary in not finding probable cause against Puzon for theft.
The Revised Penal Code 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 latters
consent.
x x x x
56
[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.11
28
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.12 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.
_______________
11 Aoas v. People, G.R. No. 155339, March 3, 2008, 547 SCRA 311, 317-318; People v. Puig, G.R. Nos. 173654-765,
August 28, 2008, 563 SCRA 564, 570; Cruz v. People, G.R. No. 176504, September 3, 2008, 564 SCRA 99, 110.
12 Sec. 16 of the Negotiable Instruments Law.
57
VOL. 631, SEPTEMBER 22, 2010 57
The evidence of SMC failed to establish that the check was given in payment of the obligation of Puzon. There was no
provisional receipt or official receipt issued for the amount of the check. What was issued was a receipt for the document, a
POSTDATED CHECK SLIP.13
Furthermore, the petitioners demand letter sent to respondent states As per company policies on receivables, all
issuances are to be covered by post-dated checks. However, you have deviated from this policy by forcibly taking away the
check you have issued to us to cover the December issuance. 14 Notably, the term payment was not used instead the
terms covered and cover were used.
Although the petitioners witness, Gregorio L. Joven III, states in paragraph 6 of his affidavit that the check was given
in payment of the obligation of Puzon, the same is contradicted by his statements in paragraph 4, where he states that As
a standard company operating procedure, all beer purchases by dealers on credit shall be covered by postdated checks
equivalent to the value of the beer products purchased; in paragraph 9 where he states that the transaction covered by
the said check had not yet been paid for, and in paragraph 8 which clearly shows that partial payment is expected to be
made by the return of beer empties, and not by the deposit or encashment of the check. Clearly the term cover was not
meant to be used interchangeably with payment.
When taken in conjunction with the counter-affidavit of Puzonwhere he states that As the [liquid beer] contents are
paid for, SMC return[s] to me the corresponding PDCs or request[s] me to replace them with whatever was the unpaid
balance.15it becomes clear that both parties did not intend for the check to pay for the beer products. The evidence
proves that the check was accepted, not as payment, but in accor-
_______________
13 Rollo, p. 76.
14 Demand letter. Id., at p. 79.
15 Id., at p. 113.
58
dance with the long-standing policy of SMC to require its dealers to issue postdated checks to cover its receivables. The
check was only meant to cover the transaction and in the meantime Puzon was to pay for the transaction by some other
means other than the check. This being so, title to the check did not transfer to SMC; it remained with Puzon. The second
element of the felony of theft was therefore not established. Petitioner was not able to show that Puzon took a check
that belonged to another. Hence, the prosecutor and the DOJ were correct in finding no probable cause for theft.
Consequently, the CA did not err in finding no grave abuse of discretion committed by the DOJ in sustaining the
dismissal of the case for theft for lack of probable cause.
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.
SO ORDERED.
Corona (C.J., Chairperson), Carpio-Morales,** Velasco, Jr. and Perez, JJ., concur.
Petition denied, judgment and resolution affirmed.
Note.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 namewhen 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.
(Ang vs. Associated Bank, 532 SCRA 244 [2007])
o0o
_______________
** In lieu of Associate Justice Teresita J. Leonardo-De Castro per Special Order No. 884 dated September 1, 2010.
29
G.R. No. 126568. April 30, 2003.*
QUIRINO GONZALES LOGGING CONCESSIONAIRE, QUIRINO GONZALES and EUFEMIA GONZALES,
petitioners, vs. THE COURT OF APPEALS (CA) and REPUBLIC PLANTERS BANK, respondents.
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.
_______________
36 TSN, Valero, February 6, 1991, pp. 12-14, supra.

* THIRD DIVISION.
182
82
Quirino Gonzales Logging Concessionaire vs. Court of Appeals
Same; Same; Same; 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.
PETITION for review on certiorari of a decision of the Court of Appeals.

Mariano R. Riva for petitioners.
The Chief Legal Counsel for private respondent.
CARPIO-MORALES, J.:
In the expansion of its logging business, petitioner Quirino Gonzales Logging Concessionaire (QGLC), through its
proprietor, general managerco-petitioner Quirino Gonzales, applied on October 15, 1962 for credit
accommodations1 with respondent Republic Bank (the Bank), later known as Republic Planters Bank.
The Bank approved QGLCs application on December 21, 1962, granting it a credit line of P900,000.002 broken into an
overdraft line of P500,000.00 which was later reduced to P450,000.00 and a Letter of Credit (LC) line of P400,000.00.3
Pursuant to the grant, the Bank and petitioners QGLC and the spouses Quirino and Eufemia Gonzales executed ten
documents: two denominated Agreement for Credit in Current Account, 4 four denominated Application and Agreement
for Commercial Letter of Credit,5 and four denominated Trust Receipt.6
_______________
Records at p. 128.
1
Id., at p. 129.
2
3 Vide Complaint, Records at p. 100.
4 Dated December 26, 1962 (Records at p. 134) and February 10, 1964 (Records at p. 135).
5 Records at pp. 136, 143, 149 and 154.
6 Dated: January 15, 1963, Records at p. 141; January 15, 1963, Records at p. 148; February 13, 1963, Records at p. 151;
and March 14, 1963, Records at p. 159.

183
VOL. 402, APRIL 30, 2003 183
Petitioners obligations under the credit line were secured by a real estate mortgage on four parcels of land: two in
Pandacan, Manila, one in Makati (then part of Rizal), and another in Diliman, Quezon City.7
In separate transactions, petitioners, to secure certain advances from the Bank in connection with QGLCs exportation
of logs, executed a promissory note in 1964 in favor of the Bank. They were to execute three more promissory notes in
1967.
In 1965, petitioners having long defaulted in the payment of their obligations under the credit line, the Bank foreclosed
the mortgage and bought the properties covered thereby, it being the highest bidder in the auction sale held in the same
year. Ownership over the properties was later consolidated in the Bank on account of which new titles thereto were issued
to it.8
On January 27, 1977, alleging non-payment of the balance of QGLCs obligation after the proceeds of the foreclosure
sale were applied thereto, and non-payment of the promissory notes despite repeated demands, the Bank filed a complaint
for sum of money (Civil Case No. 106635) against petitioners before the Regional Trial Court (RTC) of Manila.
The complaint listed ten causes of action. The first concerns the overdraft line under which the Bank claimed that
petitioners withdrew amounts (unspecified) at twelve percent per annum which were unpaid at maturity and that after it
applied the proceeds of the foreclosure sale to the overdraft debt, there remained an unpaid balance of P1,224,301.56.
The Banks second to fifth causes of action pertain to the LC line under which it averred that on the strength of the LCs
it issued, the beneficiaries thereof drew and presented sight drafts to it which it all paid after petitioners acceptance; and
that it delivered the tractors and equipment subject of the LCs to petitioners who have not paid either the full or part of the
face value of the drafts.
30
Specifically with respect to its second cause of action, the Bank alleged that it issued LC No. 63-0055D on January 15,
1963 in favor of Monark International Incorporated9 covering the purchase
_______________
7 Records at p. 100.
8 Id., at p. 103.
9 Id., at p. 104.
184
of a tractor10 on which the latter allegedly drew a sight draft with a face value of P71,500.00, 11 which amount petitioners
have not, however, paid in full.
Under its third cause of action, the Bank charged that it issued LC No. 61-1110D on December 27, 1962 also in favor of
Monark International covering the purchase of another tractor and other equipment; 12 and that Monark International
drew a sight draft with a face value of P80,350.00,13 and while payments for the value thereof had been made by
petitioners, a balance of P68,064.97 remained.
Under the fourth cause of action, the Bank maintained that it issued LC No. 63-0182D on February 11, 1963 in favor of
J.B.L. Enterprises, Inc.14 covering the purchase of two tractors,15 and J.B.L. Enterprises drew on February 13, 1963 a sight
draft on said LC in the amount of P155,000.00 but petitioners have not paid said amount.
On its fifth cause of action, the Bank alleged that it issued LC No. 63-0284D on March 14, 1963 in favor of Super
Master Auto Supply (SMAS) covering the purchase of Eight Units GMC (G.I.) Trucks; that on March 14, 1963, SMAS
drew a sight draft with a face value of P64,000.00 16 on the basis of said LC; and that the payments made by petitioners for
the value of said draft were deficient by P45,504.74.
The Bank thus prayed for the settlement of the above-stated obligations at an interest rate of eleven percent per
annum, and for the award of trust receipt commissions, attorneys fees and other fees and costs of collection.
The sixth to ninth causes of action are anchored on the promissory notes issued by petitioners allegedly to secure
certain ad-
_______________
10 One unit of used caterpillar D7 tractor, Serial No. 3T10074.

11 Exhibits H and H-1 (Records at p. 140).
12 One unit of used CAT D7 Tractor with Serial No. 3T13002 equipped with Hydraulic Angledozer and D7N Hyster
Winch; two pieces of Cat D8 Track Link Assembly; and two pieces of D8 Sprocket Rim (Records at pp. 106-107).
13 Exhibits M and M-1 (Records at p. 146).
14 Records at pp. 108-109.
15 Two Units D7 Crawler Tractors with Angledozer Blades Bearing Serial Nos. 5T179 and 4T2567.
185
VOL. 402, APRIL 30, 2003 185
vances from the Bank in connection with the exportation of logs as reflected above. 17 The notes were payable 30 days after
date and provided for the solidary liability of petitioners as well as attorneys fees at ten percent of the total amount
due18 in the event of their non-payment at maturity.
The note dated June 18, 1964, subject of the sixth cause of action, has a face value of P55,000.00 with interest rate of
twelve percent per annum;19 that dated July 7, 1967 subject of the seventh has a face value of P20,000.00; 20 that dated
July 18, 1967 subject of the eighth has a face value of P38,000.00; 21 and that dated August 23, 1967 subject of the ninth
has a face value of P11,000.00.22 The interest rate of the last three notes is pegged at thirteen percent per annum.23
On its tenth and final cause of action, the Bank claimed that it has accounts receivable from petitioners in the amount
of P120.48.
In their Answer24 of March 3, 1977, petitioners admit the following: having applied for credit accommodations totaling
P900,000.00 to secure which they mortgaged real properties; opening of the LC/Trust Receipt Line; the issuance by the
Bank of the various LCs; and the foreclosure of the real estate mortgage and the consolidation of ownership over the
mortgaged properties in favor of the Bank. They deny, however, having availed of the credit accommodations and having
received the value of the promissory notes, as they do deny having physically received the tractors and equipment subject
of the LCs.
As affirmative defenses, petitioners assert that the complaint states no cause of action, and assuming that it does, the
same is/are barred by prescription or null and void for want of consideration.
_______________
17 The Bank acted as an intermediary or agent of petitioners in the export transactions.

18 Records at pp. 160, 161, 162 and 163.
19 Id., at p. 160.
20 Id., at p. 161.
21 Id., at p. 162.
22 Id., at p. 163.
23 Id., at pp. 161, 162 and 163.
24 Id., at p. 121.
186
31
By Order of March 10, 1977, Branch 36 of the Manila RTC attached the preferred shares of stocks of the spouses Quirino
and Eufemia Gonzales with the Bank with a total par value of P414,000.00.
Finding for petitioners, the trial court rendered its Decision of April 22, 1992 the dispositive portion of which reads:
WHEREFORE, judgment is rendered as follows:
1. 1.All the claims of plaintiff particularly those described in the first to the tenth causes of action of its complaint are
denied for the reasons earlier mentioned in the body of this decision;
2. 2.As regards the claims of defendants pertaining to their counterclaim (Exhibits 1, 2 and 3), they are hereby
given ten (10) years from the date of issuance of the torrens title to plaintiff and before the transfer thereof in
good faith to a third party buyer within which to ask for the reconveyance of the real properties foreclosed by
plaintiff;
3. 3.The order of attachment which was issued against the preferred shares of stocks of defendants-spouses Quirino
Gonzales and Eufemia Gonzales with the Republic Bank now known as Republic Planters Bank dated March 21,
1977 is hereby dissolved and/or lifted, and
4. 4.Plaintiff is likewise ordered to pay the sum of P20,000.00, as and for attorneys fees, with costs against plaintiff.
SO ORDERED.
In finding for petitioners, the trial court ratiocinated: 25
Art. 1144 of the Civil Code states that an action upon a written contract prescribes in ten (10) years from the time the right
of action accrues. Art. 1150 states that prescription starts to run from the day the action may be brought. The obligations
allegedly created by the written contracts or documents supporting plaintiffs first to the sixth causes of action were
demandable at the latest in 1964. Thus when the complaint was filed on January 27, 1977 more than ten (10) years from
1964 [when the causes of action accrued] had already lapsed. The first to the sixth causes of action are thus barred by
prescription . . . .
As regards the seventh and eight causes of action, the authenticity of which documents were partly in doubt in the light
of the categorical and uncontradicted statements that in 1965, defendant Quirino Gonzales logging concession was
terminated based on the policy of the government to terminate logging concessions covering less than 20,000 hectares. If
this
_______________
25Id., at pp. 323-324.

187
VOL. 402, APRIL 30, 2003 187
is the case, the Court is in a quandary why there were log exports in 1967? Because of the foregoing, the Court does not
find any valid ground to sustain the seventh and eight causes of action of plaintiffs complaint.
As regards the ninth cause of action, the Court is baffled why plaintiff extended to defendants another loan when
defendants according to plaintiffs records were defaulting creditors? The above facts and circumstances has (sic)
convinced this Court to give credit to the testimony of defendants witnesses that the Gonzales spouses signed the
documents in question in blank and that the promised loan was never released to them. There is therefore a total absence
of consent since defendants did not give their consent to loans allegedly procured, the proceeds of which were never
received by the alleged debtors, defendants herein . . . .
Plaintiff did not present evidence to support its tenth cause of action. For this reason, it must consequently be denied
for lack of evidence.
On the matter of [the] counterclaims of defendants, they seek the return of the real and personal properties which they
have given in good faith to plaintiff. Again, prescription may apply. The real properties of defendants acquired by plaintiff
were foreclosed in 1965 and consequently, defendants had one (1) year to redeem the property or ten (10) years from
issuance of title on the ground that the obligation foreclosed was fictitious.
xxx
On appeal,26 the Court of Appeals (CA) reversed the decision of the trial court by Decision 27 of June 28, 1996 which
disposed as follows:28
WHEREFORE, premises considered, the appealed decision (dated April 22, 1992) of the Regional Trial Court (Branch 36)
in Manila in Civil Case No. 82-4141 is hereby REVERSEDand let the case be remanded back to the court a quo for the
determination of the amount(s) to be awarded to the [the Bank]-appellant relative to its claims against the appellees.
SO ORDERED.
With regard to the first to sixth causes of action, the CA upheld the contention of the Bank that the notices of foreclosure
sale were
_______________
26 The Bank filed a notice of appeal on May 13, 1992 (Records at p. 326) while petitioners filed their own on May 14,
1992 (Records at p. 328).
27 CA Rollo at pp. 84-98.
28 CA Rollo at p. 98.
188
tantamount to demand letters upon the petitioners which interrupted the running of the prescriptive period. 29
As regards the seventh to ninth causes of action, the CA also upheld the contention of the Bank that the written
agreements-promissory notes prevail over the oral testimony of petitioner Quirino Gonzales that the cancellation of their
32
logging concession in 1967 made it unbelievable for them to secure in 1967 the advances reflected in the promissory
notes.30
With respect to petitioners counterclaim, the CA agreed with the Bank that: 31
Certainly, failure on the part of the trial court to pass upon and determine the authenticity and genuineness of [the Banks]
documentary evidence [the trial court having ruled on the basis of prescription of the Banks first to sixth causes of action]
makes it impossible for the trial court to eventually conclude that the obligation foreclosed (sic) was fictitious. Needless to
say, the trial courts ruling averses (sic) the wellentrenched rule that courts must render verdict on their findings of facts.
(China Banking Co. vs. CA, 70 SCRA 398)
Furthermore, the defendants-appellees [herein petitioners] counterclaim is basically an action for the reconveyance of
their properties, thus, the trial courts earlier ruling that the defendants-appellees counterclaim has prescribed is itself a
ruling that the defendants-appellees separate action for reconveyance has also prescribed.
The CA struck down the trial courts award of attorneys fees for lack of legal basis. 32
Hence, petitioners now press the following issues before this Court by the present petition for review on certiorari:
1. 1.WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT RESPONDENT-APPELLEES

(SIC) REPUBLIC PLANTERS BANK[S] FIRST, SECOND, THIRD, FOURTH, FIFTH AND SIXTH CAUSES OF
ACTION HAVE NOT PRESCRIBED CONTRARY TO THE FINDINGS OF THE LOWER COURT, RTC BRANCH
36 THAT THE SAID CAUSES OF ACTION HAVE ALREADY PRESCRIBED.
_______________
29 Id., at p. 93.
30 Id., at pp. 94-95.
31 Id., at pp. 96-97.
32 Id., at p. 98.
189
VOL. 402, APRIL 30, 2003 189
1. 2.WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT RESPODNENT-APPELLEES

(SIC) REPUBLIC PLANTERS BANK[S] SEVENTH, EIGHT AND NINTH CAUSES OF ACTION APPEARS (SIC)
TO BE IMPRESSED WITH MERIT CONTRARY TO THE FINDINGS OF THE LOWER COURT RTC BRANCH
36 THAT THE SAID CAUSES HAVE NO VALID GROUND TO SUSTAIN [THEM] AND FOR LACK OF
EVIDENCE.
2. 3.WHETHER OR NOT RESPONDENT COURT [ERRED] IN REVERSING THE FINDINGS OF THE REGIONAL
TRIAL COURT BRANCH 36 OF MANILA THAT PETITIONERS-APPELLANT (SIC) MAY SEEK THE RETURN
OF THE REAL AND PERSONAL PROPERTIES WHICH THEY MAY HAVE GIVEN IN GOOD FAITH AS THE
SAME IS BARRED BY PRESCRIPTION AND THAT PETITIONERS-APPELLANT (SIC) HAD ONE (1) YEAR TO
REDEEM THE PROPERTY OR TEN (10) YEARS FROM ISSUANCE OF THE TITLE ON THE GROUND THAT
THE OBLIGATION FORECLOSED WAS FICTITIOUS.
3. 4.WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT PEITIONERS-APPELLANTS
[SIC] ARE NOT ENTITLED TO AN AWARD OF ATTORNEYS FEES.
The petition is partly meritorious.

On the first issue. 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. 33
The finding of the trial court that more than ten years had elapsed since the right to bring an action on the Banks first
to sixth causes had arisen34 is not disputed. The Bank contends, however, that the notices of foreclosure sale in the
foreclosure proceedings of 1965 are tantamount to formal demands upon petitioners for the payment of their past due
loan obligations with the Bank, hence, said notices of foreclosure sale interrupted/forestalled the running of the
prescriptive period.35
The Banks contention does not impress. Prescription of actions is interrupted when they are filed before the court,
when there is a written extrajudicial demand by the creditors, and when, there is any written acknowledgment of the debt
by the debtor.36
_______________
33 Civil Code, Art. 1144.

35 Rollo at p. 95.
190
The law specifically requires a written extrajudicial demand by the creditors which is absent in the case at bar. The
contention that the notices of foreclosure are tantamount to a written extrajudicial demand cannot be appreciated, the
contents of said notices not having been brought to light.
But even assuming arguendo that the notices interrupted the running of the prescriptive period, the argument would
still not lie for the following reasons:
With respect to the first to the fifth causes of action, as gleaned from the complaint, the Bank seeks the recovery of the
deficient amount of the obligation after the foreclosure of the mortgage. Such suit is in the nature of a mortgage action
33
because its purpose is precisely to enforce the mortgage contract.37 A mortgage action prescribes after ten years from the
time the right of action accrued.38
The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in the sale of the
property at public auction and the outstanding obligation at the time of the foreclosure proceedings. 39 In the present case,
the Bank, as mortgagee, had the right to claim payment of the deficiency after it had foreclosed the mortgage in 1965. 40 In
other words, the prescriptive period started to run against the Bank in 1965. As it filed the complaint only on January 27,
1977, more than ten years had already elapsed, hence, the action on its first to fifth causes had by then prescribed. No
other conclusion can be reached even if the suit is considered as one upon a written contract or upon an obligation to
_______________
37 Caltex Philippines, Inc. v. Intermediate Appellate Court, 176 SCRA 741, 754 (1989).
38 Civil Code, Article 1142. The right of action accrues when there exists a cause of action, which consists of 3 elements,
namely: a) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; b) an
obligation on the part of defendant to respect such right; and c) an act or omission on the part of such defendant violative
of the right of the plaintiff (Paraaque Kings Enterprises, Inc. v. Court of Appeals, 268 SCRA 727, 739 [1997]; Espaol v.
Chairman, Philippine Veterans Administration, 137 SCRA 314, 318 [1985] [citations omitted]).
39 DBP v. Tomeldan, 101 SCRA 171, 174 (1980) (citations omitted); See also Development Bank of the Philippines v.
Mirang, 66 SCRA 141, 144-145 [1975], citing Philippine Bank of Commerce v. Tomas de Vera, 6 SCRA 1026 (1962).
40 See id.
191
VOL. 402, APRIL 30, 2003 191
pay the deficiency which is created by law,41 the prescriptive period of both being also ten years.42
As regards the promissory note subject of the sixth cause of action, its period of prescription could not have been
interrupted by the notices of foreclosure sale not only because, as earlier discussed, petitioners contention that the notices
of foreclosure are tantamount to written extrajudicial demand cannot be considered absent any showing of the contents
thereof, but also because it does not appear from the records that the said note is covered by the mortgage contract.
Coming now to the second issue, petitioners seek to evade liability under the Banks seventh to ninth causes of action
by claiming that petitioners Quirino and Eufemia Gonzales signed the promissory notes in blank; that they had not
received the value of said notes, and that the credit line thereon was unnecessary in view of their money deposits, they
citing Exhibits 2 to 2-B,43 in, and unremitted proceeds on log exports from, the Bank. In support of their claim, they also
urge this Court to look at Exhibits B (the Banks recommendation for approval of petitioners application for credit
accommodations), P (the Application and Agreement for Commercial Letter of Credit dated January 16, 1963) and T
(the Application and Agreement for Commercial Letter of Credit dated February 14, 1963).
The genuineness and due execution of the notes had, however, been deemed admitted by petitioners, they having
failed to deny the same under oath.44 Their claim that they signed the notes in blank does not thus lie.
Petitioners admission of the genuineness and due execution of the promissory notes notwithstanding, they raise want
of consideration45 thereof. The promissory notes, however, appear to be negotiable as they meet the requirements of
Section 146 of the Ne-
_______________
41 Id.
43 Vide, Petition, Rollo at p. 10.
44 Rules of Court, Rule 8, Section 8.
45 Republic v. Court of Appeals, 296 SCRA 171, 181-182 (1998) (citations omitted).
46 SECTION 1. Form of negotiable instruments.An instrument to be negotiable must conform to the following
requirements:
192
gotiable Instruments Law. Such being the case, the notes are prima facie deemed to have been issued for
consideration.47 It bears noting that no sufficient evidence was adduced by petitioners to show otherwise.
Exhibits 2 to 2-B to which petitioners advert in support of their claim that the credit line on the notes was
unnecessary because they had deposits in, and remittances due from, the Bank deserve scant consideration. Said exhibits
are merely claims by petitioners under their then proposals for a possible settlement of the case dated February 3, 1978.
Parenthetically, the proposals were not even signed by petitioners but by certain Attorneys Osmundo R. Victoriano and
Rogelio P. Madriaga.
In any case, it is no defense that the promissory notes were signed in blank as Section 14 48 of the Negotiable
Instruments Law concedes the prima facie authority of the person in possession of negotiable instruments, such as the
notes herein, to fill in the blanks.
_______________
1. (a)It must be in writing and signed by the maker or drawer;

2. (b)Must contain an unconditional promise or order to pay a sum certain in money;
3. (c)Must be payable on demand, or at a fixed or determinable future time;
4. (d)Must be payable to order or to bearer; and
5. (e)Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty.
34
47 Negotiable Instruments Law, Section 24.0.
48 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 a 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.
193
VOL. 402, APRIL 30, 2003 193
As for petitioners reliance on Exhibits B, P and T, they have failed to show the relevance thereof to the seventh up to
the ninth causes of action of the Bank.
On the third issue, petitioners asseverate that with the trial courts dismissal of the Banks complaint and the denial of
its first to sixth causes of action, it is but fair and just that the real properties which were mortgaged and foreclosed be
returned to them.49 Such, however, does not lie. It is not disputed that the properties were foreclosed under Act No. 3135
(An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages), as
amended. Though the Banks action for deficiency is barred by prescription, nothing irregular attended the foreclosure
proceedings to warrant the reconveyance of the properties covered thereby.
As for petitioners prayer for moral and exemplary damages, it not having been raised as issue before the courts below,
it can not now be considered. Neither can the award attorneys fees for lack of legal basis.
WHEREFORE, the CA Decision is hereby AFFIRMED with MODIFICATION.
Republic Banks 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.
SO ORDERED.
Puno (Chairman), Panganiban, Sandoval-Gutierrezand Corona, JJ., concur.
Judgment affirmed with modification.
Note.Rights and actions can be lost by the fact of delay and by the effect of delay. (Ochagabia vs. Court of
Appeals, 304 SCRA 587 [1999])
o0o
35
Borromeo vs. Sun
G.R. No. 75908. October 22, 1999.*
FEDERICO O. BORROMEO, LOURDES O. BORROMEO and FEDERICO O. BORROMEO, INC, petitioners, vs.AMANCIO
SUN and the COURT OF APPEALS, respondents.
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 Courtand they carry even more weight when the Court of Appeals affirms
the factual findings of the trial court.
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
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.
_______________
*THIRD DIVISION.
177
VOL. 317, OCTOBER 22, 1999 17
7
Borromeo vs. Sun
Same; Same; 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.
PETITION for review on certiorari of a resolution of the then Intermediate Appellate Court.

Angara, Abello, Concepcion, Regala & Cruz for petitioners.
Villamor, Laxa & Associates for private respondent.
PURISIMA, J.:
At bar is a Petition for review on Certiorari under Rule 45 of the Revised Rules of Court seeking to set aside the Resolution
of the then Intermediate Appellate Court,1dated March 13, 1986, in AC-G.R. CV No. 67988, which reversed its earlier
Decision dated February 12, 1985, setting aside the Decision
_______________
1 Composed of Associate Justices Eduardo P. Caguioa (Ponente), Ramon G. Gaviola, Jr., Ma. Rosario Quetolio-Losa,
and Leonor Ines-Luciano.

178
Borromeo vs. Sun
of the former Court of the First Instance of Rizal, Branch X, in Civil Case No. 19466.
The antecedent facts are as follows:
Private respondent Amancio Sun brought before the then Court of the First Instance of Rizal, Branch X, an action
against Lourdes O. Borromeo (in her capacity as corporate secretary), Federico O. Borromeo and Federico O. Borromeo
(F.O.B.), Inc., to compel the transfer to his name in the books of F.O.B., Inc., 23,223 shares of stock registered in the name
of Federico O. Borromeo, as evidenced by a Deed of Assignment dated January 16, 1974.
Private respondent averred2 that all the shares of stock of F.O.B., Inc. registered in the name of Federico O. Borromeo
belong to him, as the said shares were placed in the name of Federico O. Borromeo only to give the latter personality and
36
importance in the business world.3According to the private respondent, on January 16, 1974 Federico O. Borromeo
executed in his favor a Deed of Assignment with respect to the said 23,223 shares of stock.
On the other hand, petitioner Federico O. Borromeo disclaimed any participation in the execution of the Deed of
Assignment, theorizing that his supposed signature thereon was forged.
After trial, the lower court of origin came out with a decision declaring the questioned signature on subject Deed of
Assignment, dated January 16, 1974, as the genuine signature of Federico O. Borromeo; ratiocinating thus:
After considering the testimonies of the two expert witnesses for the parties and after a careful and judicious study and
analysis of the questioned signature as compared to the standard signatures, the Court is not in a position to declare that
the questioned signature in Exh. A is a forgery. On the other hand, the Court is of the opinion that the questioned
signature is the real signature of Federico O. Borromeo between the years 1954 to 1957 but definitely
_______________
2Complaint, par. 11 as cited in the Petition, Rollo, pp. 11-12.

3Ibid.
179
VOL. 317, OCTOBER 22, 1999 179
Borromeo vs. Sun
is not his signature in 1974 for by then he has changed his signature. Consequently, to the mind of the Court Exhibit A was
signed by defendant Federico O. Borromeo between the years 1954 to 1957 although the words in the blank were filled at a
much later date.4
On appeal by petitioners, the Court of Appeals adjudged as forgery the controverted signature of Federico O. Borromeo;
disposing as follows:
WHEREFORE, the judgment of the Court a quo as to the second cause of action dated March 12, 1980 is hereby reversed
and set aside and a new judgment is hereby rendered:
1. 1.Ordering the dismissal of the complaint as to defendantappellants;

2. 2.Ordering plaintiff-appellee on appellants counterclaim to pay the latter:
1. a)P 20,000.00 as moral damages;
2. b)P 10,000.00 as exemplary damages;
3. c)P 10,000.00 as attorneys fees.
3. 3.Ordering plaintiff-appellee to pay the costs.5
On March 29, 1985, Amancio Sun interposed a motion for reconsideration of the said decision, contending that Segundo
Tabayoyong, petitioners expert witness, is not a credible witness as found and concluded in the following disposition by
this Court in Cesar vs. Sandiganbayan:6
The testimony of Mr. Segundo Tabayoyong on March 5, 1980, part of which is cited on pages 19-23 of the petition, shows
admissions which are summarized by the petitioner as follows:
He never finished any degree in Criminology. Neither did he obtain any degree in physics or chemistry. He was a mere
trainee in the NBI laboratory. He said he had gone abroad only onceto Argentina which, according to him is the only
one country in the world that gives this degree (?) . . . People go there where they obtain this
_______________
4 Resolution, Annex A, Rollo, p. 31.

5 Petition, Rollo, p. 12.
6 134 SCRA 105 (January 17, 1985).
180
Borromeo vs. Sun
sort of degree (?) where they are authorized to practice (sic) examination of questioned documents.
His civil service eligibility was second grade (general clerical). His present position had to be re-classified
confidential in order to qualify him to it. He never passed any Board Examination.
He has never authored any book on the subject on which he claimed to be an expert. Well, he did write a so-called
pamphlet pretentiously called Fundamentals of Questioned Documents Examination and Forgery Detection. In that
pamphlet, he mentioned some references(some) are Americans and one I think is a British, sir, like in the case of Dr.
Wilson Harrison, a British (he repeated with emphasis). Many of the theories contained in his pamphlet were lifted body
and soul from those references, one of them being Albert Osborn. His pamphlet has neither quotations nor footnotes,
although he was too aware of the crime committed by many an author called plagiarism. But that did not deter him, nor
bother him in the least.
He has never been a member of any professional organization of experts in his supposed field of expertise, because he
said there is none locally. Neither is he on an international level. 7
Acting on the aforesaid motion for reconsideration, the Court of Appeals reconsidered its decision of February 12, 1985
aforementioned. Thereafter, the parties agreed to have subject Deed of Assignment examined by the Philippine
Constabulary (PC) Crime Laboratory, which submitted a Report on January 9, 1986, the pertinent portion of which,
stated:
1. 1.Comparative examination and analysis of the questioned and the standard signature reveal significant
similarities in the freedom of movement, good quality of lines, skills and individual handwriting characteristics.
2. 2.By process of interpolation the questioned signature fits in and can be bracketed in time with the standard
signatures written in the years between 1956 to 1959. Microscopic examination of the ink used in the questioned
signature and the standard signature in document dated 30 July 1959 marked Exh. E indicate gallotanic ink.
37
_______________
7Ibid., pp. 132-133.

181
VOL. 317, OCTOBER 22, 1999 181
Borromeo vs. Sun
xxx
1. 1.The questioned signature FEDERICO O. BORROMEO marked Q appearing in the original Deed of Assignment
dated 16 January 1974 and the submitted standard signatures of Federico O. Borromeo marked S-1 to S-49
inclusive were written BY ONE AND THE SAME PERSON.
2. 2.The questioned signature FEDERICO O. BORROMEO marked Q COULD HAVE BEEN SIGNED IN THE
YEARS BETWEEN 1950-1957.8
After hearing the arguments the lawyers of record advanced on the said Report of the PC Crime Laboratory, the Court of
Appeals resolved:
x x x
1. 1)to ADMIT the Report dated Jan. 9, 1986 of the PC Crime Laboratory on the Deed of Assignment in evidence,
without prejudice to the parties assailing the credibility of said Report;
2. 2)to GIVE both parties a non-extendible period of FIVE (5) DAYS from February 27, 1986, within which to file
simultaneous memoranda.9
On March 13, 1986, the Court of Appeals reversed its decision of February 12, 1985, which affirmed in toto the decision of
the trial court of origin; resolving thus:
WHEREFORE, finding the Motion for Reconsideration meritorious, We hereby set aside our Decision, dated February
12, 1985 and in its stead a new judgment is hereby rendered affirming in toto the decision of the trial Court, dated March
12, 1980, without pronouncement as to costs.
SO ORDERED.10
Therefrom, petitioners found their way to this court via the present Petition; theorizing that:
_______________
8 Resolution, Rollo, p. 43.

182
Borromeo vs. Sun
I.
THE RESPONDENT COURT ERRED IN HOLDING THAT WHEN PETITIONER AGREED TO THE SUGGESTION OF
RESPONDENT COURT TO HAVE THE QUESTIONED DOCUMENT EXAMINED BY THE PC CRIME LABORATORY
THEY COULD NO LONGER QUESTION THE COMPETENCY OF THE DOCUMENT.
II.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE QUESTIONED DOCUMENT WAS SIGNED IN 1954
BUT WAS DATED IN 1974.
III.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE SIGNATURE OF FEDERICO O. BORROMEO IN THE
DEED OF ASSIGNMENT (EXHIBIT A) IS A GENUINE SIGNATURE CIRCA 1954-1957.
The Petition is barren of merit.
Well-settled is the rule that factual findings of the Court of Appeals are conclusive on the parties and not reviewable
by the Supreme Courtand they carry even more weight when the Court of Appeals affirms the factual findings of the trial
court.11
In the present case, the trial court found that the signature in question is the genuine signature of Federico O.
Borromeo between the years 1954 to 1957 although the words in the blank space of the document in question were written
on a much later date. The same conclusion was arrived at by the Court of Appeals on the basis of the Report of the PC
Crime Laboratory corroborating the findings of Col. Jose Fernandez that the signature under controversy is genuine.
_______________
11 Meneses vs. Court of Appeals, 246 SCRA 162, p. 171 (1995) citing: Coca-Cola Bottlers Phil., Inc. vs. Court of
Appeals 229 SCRA 533 and Binalay vs. Manalo, 195 SCRA 374.
183
VOL. 317, OCTOBER 22, 1999 183
Borromeo vs. Sun
38
It is significant to note that Mr. Tabayoyong, petitioners expert witness, limited his comparison of the questioned
signature with the 1974 standard signature of Federico O. Borromeo. No comparison of the subject signature with the
1950-1957 standard signature was ever made by Mr. Tabayoyong despite his awareness that the expert witness of private
respondent, Col. Jose Fernandez, made a comparison of said signatures and notwithstanding his (Tabayoyongs) access to
such signatures as they were all submitted to the lower Court. As correctly ratiocinated 12 by the Court of origin, the only
conceivable reason why Mr. Tabayoyong avoided making such a comparison must have been, that even to the naked eye,
the questioned signature affixed to the Deed of Assignment, dated January 16, 1974, is strikingly similar to the 1950 to
1954 standard signature of Federico O. Borromeo, such that if a comparison thereof was made by Mr. Tabayoyong, he
would have found the questioned signature genuine.
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
_______________
12Resolution, Rollo, p. 40.

184
Borromeo vs. Sun
between the date of the deed of assignment and the date when the signature was affixed thereto.
While it is true that the 1974 standard signature of Federico O. Borromeo is to the naked eye dissimilar to his
questioned signature circa 1954-1957, which could have been caused by sheer lapse of time, Col. Jose Fernandez,
respondents expert witness, found the said signatures similar to each other after subjecting the same to stereomicroscopic
examination and analysis because the intrinsic and natural characteristics of Federico O. Borromeos handwriting were
present in all the exemple signatures used by both Segundo Tabayoyong and Col. Jose Fernandez.
It is therefore beyond cavil that the findings of the Court of origin affirmed by the Court of Appeals on the basis of the
corroborative findings of the Philippine Constabulary Crime Laboratory confirmed the genuineness of the signature of
Federico O. Borromeo in the Deed of Assignment dated January 16, 1974.
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 the 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.13 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
_______________
13Francisco, Vicente J., Evidence, 1997 edition, vol. 7, part I, p. 663; citing: 20 Am. Jur. 1060.
185
VOL. 317, OCTOBER 22, 1999 185
Borromeo vs. Sun
findings by the Court of Appeals should not be disturbed on appeal.
Premises studiedly considered, the Court is of the irresistible conclusion, and so holds, that the respondent court erred
not in affirming the decision of the Regional Trial Court a quo in Civil Case No. 19466.
WHEREFORE, the Petition is DISMISSED for lack of merit and the assailed Resolution, dated March 13, 1986,
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Melo (Chairman), Vitug, Panganiban and Gonzaga-Reyes, JJ., concur.
Petition dismissed; Assailed resolution affirmed.
Notes.Human experience has proven that the lines and strokes of a persons handwriting reflect his disposition at a
certain given time. (Filoteo, Jr. vs. Sandiganbayan, 263 SCRA 222 [1996])
Expert opinions are not ordinarily conclusive in the sense that they must be accepted as true on the subject of their
testimony, but are generally regarded as purely advisory in character. (Punzalan vs. Commission on Elections, 289 SCRA
702 [1998])
Handwriting may be proved through a comparison of one set of writings with those admitted or treated by the
respondent as genuine. (Narag vs. Narag, 291 SCRA 451[1998])
o0o
39
G.R. No. 187769. G.R. No. 187769.*
ALVIN PATRIMONIO, petitioner, vs. NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN III,
respondents.
Remedial Law; Civil Procedure; Appeals; Petition for Review on Certiorari; The rule that questions of fact are not
the proper subject of an appeal by certiorari, as a petition for review under Rule 45 is limited only to questions of law, is
not an absolute rule that admits of no exceptions.The rule that questions of fact are not the proper subject of an appeal
by certiorari, as a petition for review under Rule 45 is limited only to questions of law, is not an absolute rule that admits
of no exceptions. One notable exception is when the findings of fact of both the trial court and the CA are conflicting,
making their review necessary. In the present case, the tribunals below arrived at two conflicting factual findings, albeit
with the same conclusion, i.e., dismissal of the complaint for nullity of the loan. Accordingly, we will examine the parties
evidence presented.
Civil Law; Contracts; Agency; As a general rule, a contract of agency may be oral. However, it must be written
when the law requires a specific form, for example, in a sale of a piece of land or any interest therein through an
agent.Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person binds himself to render
some service or to do something in representation or on behalf of another, with the consent or authority of the latter.
Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without authority. As a general rule, a contract
of agency may be oral. However, it must be written when the law requires a specific form, for example, in a sale of a piece
of land or any interest therein through an agent.
Same; Same; Same; Loans; Special Power of Attorney; Article 1878, paragraph 7 of the Civil Code expressly
requires a special power of authority before an agent can loan or borrow money in behalf of the principal.Article 1878,
paragraph 7 of the Civil Code expressly requires a special power of authority before an agent can loan or borrow money in
behalf of the principal, to wit: Art.1878. Special powers of attorney are necessary in the following cases: x x x x
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which
are under administration. (emphasis supplied) Article 1878 does not state that the authority be in writing. As long as the
mandate is express, such authority may be either oral or written. We unequivocably declared in Lim Pin v. Liao Tian, et
al., 115 SCRA 290 (1982), that the requirement under Article 1878 of the Civil Code refers to the nature of the
authorization and not to its form. Be that as it may, the authority must be duly established by competent and convincing
evidence other than the self-serving assertion of the party claiming that such authority was verbally given.
Same; Same; Same; Same; A contract of loan, like any other contract, is subject to the rules governing the
requisites and validity of contracts in general.Another significant point that the lower courts failed to consider is that a
contract of loan, like any other contract, is subject to the rules governing the requisites and validity of contracts in general.
Article 1318 of the Civil Code enumerates the essential requisites for a valid contract, namely: 1. consent of the
contracting parties; 2. object certain which is the subject matter of the contract; and 3. cause of the obligation which is
established. In this case, the petitioner denied liability on the ground that the contract lacked the essential element of
consent. We agree with the petitioner. As we explained above, Gutierrez did not have the petitioners written/verbal
authority to enter into a contract of loan. While there may be a meeting of the minds between Gutierrez and Marasigan,
such agreement cannot bind the petitioner whose consent was not obtained and who was not privy to the loan agreement.
Hence, only Gutierrez is bound by the contract of loan.
Mercantile Law; Negotiable Instruments Law; Incomplete But Delivered Instruments; In order that one who is not
a holder in due course can enforce the instrument against a party prior to the instruments completion, two requisites
must exist: (1) that the blank must be filled strictly in accordance with the authority given; and (2) it must be filled up
within a reasonable time.This provision applies to an incomplete but delivered instrument. Under this rule, if the maker
or drawer delivers a pre-signed blank paper to another person for the purpose of converting it into a negotiable
instrument, that person is deemed to have prima facie authority to fill it up. It 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 presumes agency to fill up the blanks.In order however that one
who is not a holder in due course can enforce the instrument against a party prior to the instruments completion, two
requisites must exist: (1) that the blank must be filled strictly in accordance with the authority given; and (2) it must be
filled up within a reasonable time. If it was proven that the instrument had not been filled up strictly in accordance with
the authority given and within a reasonable time, the maker can set this up as a personal defense and avoid liability.
However, if the holder is a holder in due course, there is a conclusive presumption that authority to fill it up had been
given and that the same was not in excess of authority.
Same; Same; Holder in Due Course; Section 52(c) of the Negotiable Instruments Law (NIL) states that a holder in
due course is one who takes the instrument in good faith and for value.Section 52(c) of the NIL states that a holder in
due course is one who takes the instrument in good faith and for value. It also provides in Section 52(d) that in order
that one may be a holder in due course, it is necessary 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. Acquisition in good faith means taking
without knowledge or notice of equities of any sort which could be set up against a prior holder of the instrument. It
means that he does not have any knowledge of fact which would render it dishonest for him to take a negotiable paper.
The absence of the defense, when the instrument was taken, is the essential element of good faith.
Same; Same; Same; The Negotiable Instruments Law (NIL) 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.Since he knew that the underlying
obligation was not actually for the petitioner, the rule that a possessor of the instrument is prima facie a holder in due
course is inapplicable. As correctly noted by the CA, his inaction and failure to verify, despite knowledge of that the
petitioner was not a party to the loan, may be construed as gross negligence amounting to bad faith. Yet, it does not follow
that simply because he is not a holder in due course, Marasigan is already totally barred from recovery. The NIL does not
40
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 filling up blank not within the authority.
Same; Same; Same; While under the law, Gutierrez had a prima facie authority to complete the check, such prima
facie authority does not extend to its use (i.e., subsequent transfer or negotiation) once the check is completed.While
under the law, Gutierrez had a prima facie authority to complete the check, such prima facie authority does not extend
to its use (i.e.,subsequent transfer or negotiation) once the check is completed. In other words, only the authority to
complete the check is presumed. Further, the law used the term prima facie to underscore the fact that the authority
which the law accords to a holder is a presumption juris tantum only; hence, subject to subject to contrary proof. Thus,
evidence that there was no authority or that the authority granted has been exceeded may be presented by the maker in
order to avoid liability under the instrument.
BRION, J.:
Assailed in this petition for review on certiorari under Rule 45 of the Revised Rules of Court is the decision dated
September 24, 2008 and the resolution dated April 30, 2009 of the Court of Appeals (CA) in C.A.-G.R. CV No. 82301. The
appellate court affirmed the decision of the Regional Trial Court (RTC) of Quezon City, Branch 77, dismissing the
complaint for declaration of nullity of loan filed by petitioner Alvin Patrimonio and ordering him to pay respondent
Octavio Marasigan III (Marasigan) the sum of P200,000.00.
The Factual Background
The facts of the case, as shown by the records, are briefly summarized below.
The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a business venture under the name of
Slam Dunk Corporation (Slam Dunk), a production outfit that produced mini-concerts and shows related to basketball.
Petitioner was already then a decorated professional basketball player while Gutierrez was a well-known sports columnist.
In the course of their business, the petitioner pre-signed several checks to answer for the expenses of Slam Dunk.
Although signed, these checks had no payees name, date or amount. The blank checks were entrusted to Gutierrez with
the specific instruction not to fill them out without previous notification to and approval by the petitioner. According to
petitioner, the arrangement was made so that he could verify the validity of the payment and make the proper
arrangements to fund the account.
In the middle of 1993, without the petitioners knowledge and consent, Gutierrez went to Marasigan (the petitioners
former teammate), to secure a loan in the amount of P200,000.00 on the excuse that the petitioner needed the money for
the construction of his house. In addition to the payment of the principal, Gutierrez assured Marasigan that he would be
paid an interest of 5% per month from March to May 1994.
After much contemplation and taking into account his relationship with the petitioner and Gutierrez, Marasigan
acceded to Gutierrez request and gave him P200,000.00 sometime in February 1994. Gutierrez simultaneously delivered
to Marasigan one of the blank checks the petitioner pre-signed with Pilipinas Bank, Greenhills Branch, Check No.
21001764 with the blank portions filled out with the words Cash Two Hundred Thousand Pesos Only, and the amount
of P200,000.00. The upper right portion of the check corresponding to the date was also filled out with the words May
23, 1994 but the petitioner contended that the same was not written by Gutierrez.
On May 24, 1994, Marasigan deposited the check but it was dishonored for the reason ACCOUNT CLOSED. It was
later revealed that petitioners account with the bank had been closed since May 28, 1993.
Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several demand letters to the petitioner
asking for the payment of P200,000.00, but his demands likewise went unheeded. Consequently, he filed a criminal case
for violation of B.P. 22 against the petitioner, docketed as Criminal Case No. 42816.
On September 10, 1997, the petitioner filed before the Regional Trial Court (RTC) a Complaint for Declaration of
Nullity of Loan and Recovery of Damages against Gutierrez and co-respondent Marasigan. He completely denied
authorizing the loan or the checks negotiation, and asserted that he was not privy to the parties loan agreement.
Only Marasigan filed his answer to the complaint. In the RTCs order dated December 22, 1997, Gutierrez was declared
in default.
The Ruling of the RTC

The RTC ruled on February 3, 2003 in favor of Marasigan. It found that the petitioner, in issuing the pre-signed blank
checks, had the intention of issuing a negotiable instrument, albeit with specific instructions to Gutierrez not to negotiate
or issue the check without his approval. While under Section 14 of the Negotiable Instruments Law Gutierrez had
the prima facie authority to complete the checks by filling up the blanks therein, the RTC ruled that he deliberately
violated petitioners specific instructions and took advantage of the trust reposed in him by the latter.
Nonetheless, the RTC declared Marasigan as a holder in due course and accordingly dismissed the petitioners
complaint for declaration of nullity of the loan. It ordered the petitioner to pay Marasigan the face value of the check with
a right to claim reimbursement from Gutierrez.
41
The petitioner elevated the case to the Court of Appeals (CA), insisting that Marasigan is not a holder in due course. He
contended that when Marasigan received the check, he knew that the same was without a date, and hence, incomplete. He
also alleged that the loan was actually between Marasigan and Gutierrez with his check being used only as a security.
The Ruling of the CA
On September 24, 2008, the CA affirmed the RTC ruling, although premised on different factual findings. After careful
analysis, the CA agreed with the petitioner that Marasigan is not a holder in due course as he did not receive the check in
good faith.
The CA also concluded that the check had been strictly filled out by Gutierrez in accordance with the petitioners
authority. It held that the loan may not be nullified since it is grounded on an obligation arising from law and ruled that
the petitioner is still liable to pay Marasigan the sum of P200,000.00.
After the CA denied the subsequent motion for reconsideration that followed, the petitioner filed the present petition
for review on certiorari under Rule 45 of the Revised Rules of Court.
The Petition
The petitioner argues that: (1) there was no loan between him and Marasigan since he never authorized the borrowing
of money nor the checks negotiation to the latter; (2) under Article 1878 of the Civil Code, a special power of attorney is
necessary for an individual to make a loan or borrow money in behalf of another; (3) the loan transaction was between
Gutierrez and Marasigan, with his check being used only as a security; (4) the check had not been completely and strictly
filled out in accordance with his authority since the condition that the subject check can only be used provided there is
prior approval from him, was not complied with; (5) even if the check was strictly filled up as instructed by the petitioner,
Marasigan is still not entitled to claim the checks value as he was not a holder in due course; and (6) by reason of the bad
faith in the dealings between the respondents, he is entitled to claim for damages.
The Issues
Reduced to its basics, the case presents to us the following issues:
1. Whether the contract of loan in the amount of P200,000.00 granted by respondent Marasigan to petitioner, through
respondent Gutierrez, may be nullified for being void;
2. Whether there is basis to hold the petitioner liable for the payment of the P200,000.00 loan;
3. Whether respondent Gutierrez has completely filled out the subject check strictly under the authority given by the
petitioner; and
4. Whether Marasigan is a holder in due course.
The Courts Ruling
The petition is impressed with merit.
We note at the outset that the issues raised in this petition are essentially factual in nature. The main point of inquiry
of whether the contract of loan may be nullified, hinges on the very existence of the contract of loan a question that, as
presented, is essentially, one of fact. Whether the petitioner authorized the borrowing; whether Gutierrez completely filled
out the subject check strictly under the petitioners authority; and whether Marasigan is a holder in due course are also
questions of fact, that, as a general rule, are beyond the scope of a Rule 45 petition.
The rule that questions of fact are not the proper subject of an appeal by certiorari, as a petition for review under Rule
45 is limited only to questions of law, is not an absolute rule that admits of no exceptions. One notable exception is when
the findings of fact of both the trial court and the CA are conflicting, making their review necessary.[5] In the present case,
the tribunals below arrived at two conflicting factual findings, albeit with the same conclusion, i.e., dismissal of the
complaint for nullity of the loan. Accordingly, we will examine the parties evidence presented.
I. Liability Under the Contract of Loan
The petitioner seeks to nullify the contract of loan on the ground that he never authorized the borrowing of money. He
points to Article 1878, paragraph 7 of the Civil Code, which explicitly requires a written authority when the loan is
contracted through an agent. The petitioner contends that absent such authority in writing, he should not be held liable for
the face value of the check because he was not a party or privy to the agreement.
Contracts of Agency May be Oral Unless The Law Requires a Specific Form
Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person binds himself to render
some service or to do something in representation or on behalf of another, with the consent or authority of the latter.
Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without authority.
As a general rule, a contract of agency may be oral.[6]However, it must be written when the law requires a specific
form, for example, in a sale of a piece of land or any interest therein through an agent.
Article 1878, paragraph 7 of the Civil Code expressly requires a special power of authority before an agent can loan or
borrow money in behalf of the principal, to wit:
Art. 1878. Special powers of attorney are necessary in the following cases:
xxxx
42
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of
the things which are under administration. (emphasis supplied)
Article 1878 does not state that the authority be in writing. As long as the mandate is express, such authority may be
either oral or written. We unequivocably declared in Lim Pin v. Liao Tian, et al.,[7] that the requirement under Article
1878 of the Civil Code refers to the nature of the authorization and not to its form. Be that as it may, the authority must b e
duly established by competent and convincing evidence other than the self-serving assertion of the party claiming that
such authority was verbally given, thus:
The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special
authority in Rule 138 of the Rules of Court refer to the nature of the authorization and not its form. The
requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. As
early as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either oral
or written, the one vital thing being that it shall be express. And more recently, We stated that, if the special
authority is not written, then it must be duly established by evidence:
x x x the Rules require, for attorneys to compromise the litigation of their clients, a special authority. And while the same
does not state that the special authority be in writing the Court has every reason to expect that, if not in writing, the same
be duly established by evidence other than the self-serving assertion of counsel himself that such authority
was verbally given him. (Home Insurance Company vs. United States Lines Company, et al., 21 SCRA 863, 866
[1967]; Vicente vs. Geraldez, 52 SCRA 210, 225 [1973]). (emphasis supplied)
The Contract of Loan Entered Into

by Gutierrez in Behalf of the Peti-
tioner Should be Nullified for Being
Void; Petitioner is Not Bound by the
Contract of Loan
A review of the records reveals that Gutierrez did not have any authority to borrow money in behalf of the petitioner.
Records do not show that the petitioner executed any special power of attorney (SPA) in favor of Gutierrez. In fact, the
petitioners testimony confirmed that he never authorized Gutierrez (or anyone for that matter), whether verbally or in
writing, to borrow money in his behalf, nor was he aware of any such transaction:
ALVIN PATRIMONIO (witness)

ATTY. DE VERA: Did you give Nap Gutierrez any Special Power of Attorney in writing authorizing him to borrow
using your money?
WITNESS: No, sir. (T.S.N., Alvin Patrimonio, Nov. 11, 1999, p. 105)[8]
xxxx
Marasigan however submits that the petitioners acts of pre-signing the blank checks and releasing them to Gutierrez
suffice to establish that the petitioner had authorized Gutierrez to fill them out and contract the loan in his behalf.
Marasigans submission fails to persuade us.
In the absence of any authorization, Gutierrez could not enter into a contract of loan in behalf of the petitioner. As held
in Yasuma v. Heirs of De Villa,[9] involving a loan con-
_______________
[8] Rollo, p. 82.
[9] G.R. No. 150350, August 22, 2006, 499 SCRA 466, 472.
648
Patrimonio vs. Gutierrez
tracted by de Villa secured by real estate mortgages in the name of East Cordillera Mining Corporation, in the absence of
an SPA conferring authority on de Villa, there is no basis to hold the corporation liable, to wit:
The power to borrow money is one of those cases where corporate officers as agents of the corporation need a special
power of attorney. In the case at bar, no special power of attorney conferring authority on de Villa was ever
presented. x x x There was no showing that respondent corporation ever authorized de Villa to obtain the loans on its
behalf.
xxxx
Therefore, on the first issue, the loan was personal to de Villa. There was no basis to hold the
corporation liable since there was no authority, express, implied or apparent, given to de Villa to borrow
money from petitioner. Neither was there any subsequent ratification of his act.
xxxx
The liability arising from the loan was the sole indebtedness of de Villa (or of his estate after his death). (citations
omitted; emphasis supplied)
This principle was also reiterated in the case of Gozun v. Mercado,[10] where this court held:
Petitioner submits that his following testimony suffices to establish that respondent had authorized Lilian to obtain a
loan from him.
xxxx
Petitioners testimony failed to categorically state, however, whether the loan was made on behalf of respondent or of
his wife. While petitioner claims that Lilian was authorized by respondent, the statement of ac-
_______________
43
[10] G.R. No. 167812, December 19, 2006, 511 SCRA 305, 313-314.
649
VOL. 724, JUNE 4, 2014 649

count marked as Exhibit A states that the amount was received by Lilian in behalf of Mrs. Annie Mercado.
It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was acting for
and in behalf of respondent. She thus bound herself in her personal capacity and not as an agent of
respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real
property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of
the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact
authorized to make the mortgage, if he has not acted in the name of the principal. x x x (emphasis supplied)
In the absence of any showing of any agency relations or special authority to act for and in behalf of the petitioner, the
loan agreement Gutierrez entered into with Marasigan is null and void. Thus, the petitioner is not bound by the parties
loan agreement.
Furthermore, that the petitioner entrusted the blank pre-signed checks to Gutierrez is not legally sufficient because the
authority to enter into a loan can never be presumed. The contract of agency and the special fiduciary relationship
inherent in this contract must exist as a matter of fact. The person alleging it has the burden of proof to show, not only the
fact of agency, but also its nature and extent.[11] As we held in People v. Yabut:[12]
Modesto Yambaos receipt of the bad checks from Cecilia Que Yabut or Geminiano Yabut, Jr., in Caloocan City cannot,
contrary to the holding of the respondent
_______________
[11] People v. Yabut, Nos. L-42847 and L-42902, April 29, 1977, 167 Phil. 336, 343.
[12] Id.
650

Judges, be licitly taken as delivery of the checks to the complainant Alicia P. Andan at Caloocan City to fix the venue there.
He did not take delivery of the checks as holder, i.e., as payee or indorsee. And there appears to be no contract of
agency between Yambao and Andan so as to bind the latter for the acts of the former. Alicia P. Andan declared in that
sworn testimony before the investigating fiscal that Yambao is but her messenger or part-time employee. There was
no special fiduciary relationship that permeated their dealings. For a contract of agency to exist, the
consent of both parties is essential, the principal consents that the other party, the agent, shall act on his
behalf, and the agent consents so to act. It must exist as a fact. The law makes no presumption thereof.
The person alleging it has the burden of proof to show, not only the fact of its existence, but also its
nature and extent. This is more imperative when it is considered that the transaction dealt with involves
checks, which are not legal tender, and the creditor may validly refuse the same as payment of obligation.
(at p. 630). (emphasis supplied)
The records show that Marasigan merely relied on the words of Gutierrez without securing a copy of the SPA in favor
of the latter and without verifying from the petitioner whether he had authorized the borrowing of money or release of the
check. He was thus bound by the risk accompanying his trust on the mere assurances of Gutierrez.
No Contract of Loan Was Perfected
Between Marasigan And Petitioner,
as The Latters Consent Was Not
Obtained
Another significant point that the lower courts failed to consider is that a contract of loan, like any other contract, is
subject to the rules governing the requisites and validity of
651
VOL. 724, JUNE 4, 2014 651
contracts in general.[13] Article 1318 of the Civil Code[14]enumerates the essential requisites for a valid contract, namely:
1. consent of the contracting parties;
2. object certain which is the subject matter of the contract; and
3. cause of the obligation which is established.
In this case, the petitioner denied liability on the ground that the contract lacked the essential element of consent. We
agree with the petitioner. As we explained above, Gutierrez did not have the petitioners written/verbal authority to enter
into a contract of loan. While there may be a meeting of the minds between Gutierrez and Marasigan, such agreement
cannot bind the petitioner whose consent was not obtained and who was not privy to the loan agreement. Hence, only
Gutierrez is bound by the contract of loan.
True, the petitioner had issued several pre-signed checks to Gutierrez, one of which fell into the hands of Marasigan.
This act, however, does not constitute sufficient authority to borrow money in his behalf and neither should it be
construed as petitioners grant of consent to the parties loan agreement. Without any evidence to prove Gutierrez
authority, the petitioners signature in the check cannot be taken, even remotely, as sufficient authorization, much less,
consent to the contract of loan. Without the consent given by one party in a purported contract, such contract could not
have been perfected; there simply was no contract to speak of.[15]
44
_______________
[13] Pentacapital Investment Corporation v. Mahinay, G.R. No. 171736, July 5, 2010, 623 SCRA 284, 302.
[14] Art. 1318. There is no contract unless the following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261).
[15] Deheza-Inamarga v. Alano, G.R. No. 171321, December 18, 2008, 574 SCRA 651, 660.
652
With the loan issue out of the way, we now proceed to determine whether the petitioner can be made liable under the
check he signed.
II. Liability Under the Instrument
The answer is supplied by the applicable statutory provision found in Section 14 of the Negotiable Instruments Law
(NIL) which states:
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 facieauthority 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.
This provision applies to an incomplete but delivered instrument. Under this rule, if the maker or drawer delivers a
pre-signed blank paper to another person for the purpose of converting it into a negotiable instrument, that person is
deemed to have prima facie authority to fill it up. It 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
653
VOL. 724, JUNE 4, 2014 653
material particular, the law presumes agency to fill up the blanks.[16]
In order however that one who is not a holder in due course can enforce the instrument against a party prior to the
instruments completion, two requisites must exist: (1) that the blank must be filled strictly in accordance with the
authority given; and (2) it must be filled up within a reasonable time. If it was proven that the instrument had not been
filled up strictly in accordance with the authority given and within a reasonable time, the maker can set this up as a
personal defense and avoid liability. However, if the holder is a holder in due course, there is a conclusive presumption
that authority to fill it up had been given and that the same was not in excess of authority.[17]
In the present case, the petitioner contends that there is no legal basis to hold him liable both under the contract and
loan and under the check because: first, the subject check was not completely filled out strictly under the authority he has
given and second, Marasigan was not a holder in due course.
Marasigan is Not a Holder in Due Course
The Negotiable Instruments Law (NIL) defines a holder in due course, thus:
Sec. 52.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;
_______________
[16] Dy v. People, G.R. No. 158312, November 14, 2008, 571 SCRA 59, 71-72.
[17] T.B. Aquino, Notes and Cases on Banks, Negotiable Instruments and Other Commercial Documents, p. 234,
2006 ed.
654

(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. (emphasis supplied)
Section 52(c) of the NIL states that a holder in due course is one who takes the instrument in good faith and for
value. It also provides in Section 52(d) that in order that one may be a holder in due course, it is necessary 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.
Acquisition in good faith means taking without knowledge or notice of equities of any sort which could be set up
against a prior holder of the instrument.[18] It means that he does not have any knowledge of fact which would render it
dishonest for him to take a negotiable paper. The absence of the defense, when the instrument was taken, is the essential
element of good faith.[19]
As held in De Ocampo v. Gatchalian:[20]
45
In order to show that the defendant had knowledge of such facts that his action in taking the instrument amounted to
bad faith, it is not necessary to prove that the defendant knew the exact fraud that was practiced upon the
plaintiff by the defendants assignor, it being sufficient to show that the defendant had notice that there
was something wrong about his assignors acquisition of title, although he did not have notice of the
particular wrong that was committed.
_______________
[18] A.F. Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, p. 281, 1992 ed.
[19] Id.
[20] No. L-15126, November 30, 1961, 3 SCRA 596, 598.
655
VOL. 724, JUNE 4, 2014 655

It is sufficient that the buyer of a note had notice or knowledge that the note was in some way tainted with fraud. It is
not necessary that he should know the particulars or even the nature of the fraud, since all that is required is
knowledge of such facts that his action in taking the note amounted bad faith.
The term bad faith does not necessarily involve furtive motives, but means bad faith in a commercial sense. The
manner in which the defendants conducted their Liberty Loan department provided an easy way for thieves to dispose of
their plunder. It was a case of no questions asked. Although gross negligence does not of itself constitute bad faith, it is
evidence from which bad faith may be inferred. The circumstances thrust the duty upon the defendants to make further
inquiries and they had no right to shut their eyes deliberately to obvious facts. (emphasis supplied)
In the present case, Marasigans knowledge that the petitioner is not a party or a privy to the contract of loan, and
correspondingly had no obligation or liability to him, renders him dishonest, hence, in bad faith. The following exchange is
significant on this point:
WITNESS: AMBET NABUS

Q: Now, I refer to the second call after your birthday. Tell us what you talked about?
A: Since I celebrated my birthday in that place where Nap and I live together with the other crew, there
were several visitors that included Danny Espiritu. So a week after my birthday, Bong Marasigan called
me up again and he was fuming mad. Nagmumura na siya. Hinahanap niya si hinahanap niya si
Nap, dahil pinagtataguan na siya at sinabi na niya na kailangan i-settle na niya yung utang ni Nap,
dahil
xxxx
656

WITNESS: Yes. Sinabi niya sa akin na kailangan ayusin na bago pa mauwi sa kung saan ang tsekeng
tumalbog (He told me that we have to fix it up before it) mauwi pa kung saan
xxxx
Q: What was your reply, if any?
A: I actually asked him. Kanino ba ang tseke na sinasabi mo? (Whose check is it that you are referring to or talking
about?)
Q: What was his answer?
A: It was Alvins check.
Q: What was your reply, if any?
A: I told him do you know that it is not really Alvin who borrowed money from you or what you
want to appear
xxxx
Q: What was his reply?
A: Yes, it was Nap, pero tseke pa rin ni Alvin ang hawak ko at si Alvin ang maiipit dito. (T.S.N.,
Ambet Nabus, July 27, 2000; pp. 65-71; emphasis supplied)[21]
Since he knew that the underlying obligation was not actually for the petitioner, the rule that a possessor of the
instrument is prima facie a holder in due course is inapplicable. As correctly noted by the CA, his inaction and failure to
verify, despite knowledge of that the petitioner was not a party to the loan, may be construed as gross negligence
amounting to bad faith.
Yet, it does not follow that simply because he is not a holder in due course, Marasigan is already totally barred from
recovery. The NIL does not provide that a holder who is not a holder in due course may not in any case recover on the in-
_______________
[21] Rollo, pp. 141-142.
657
VOL. 724, JUNE 4, 2014 657
strument.[22] 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.[23] Among such defenses is the filling up blank not within the authority.
On this point, the petitioner argues that the subject check was not filled up strictly on the basis of the authority he
gave. He points to his instruction not to use the check without his prior approval and argues that the check was filled up in
violation of said instruction.
46
Check Was Not Completed Strictly Under
The Authority Given by The Petitioner
Our own examination of the records tells us that Gutierrez has exceeded the authority to fill up the blanks and use the
check. To repeat, petitioner gave Gutierrez pre-signed checks to be used in their business provided that he could only use
them upon his approval. His instruction could not be any clearer as Gutierrez authority was limited to the use of the
checks for the operation of their business, and on the condition that the petitioners prior approvalbe first secured.
While under the law, Gutierrez had a prima facieauthority to complete the check, such prima facieauthority does
not extend to its use (i.e., subsequent transfer or negotiation) once the check is completed. In other words, only the
authority to complete the check is presumed. Further, the law used the term prima facie to underscore the fact that the
authority which the law accords to a holder is a presumption juris tantum only; hence, subject to subject to contrary proof.
Thus, evidence that there was no authority or that the authority granted has been exceeded may be presented by the
maker in order to avoid liability under the instrument.
_______________
[22] Dino v. Loot, G.R. No. 170912, April 19, 2010, 618 SCRA 393, 404.
[23] Id.
658
In the present case, no evidence is on record that Gutierrez ever secured prior approval from the petitioner to fill up
the blank or to use the check. In his testimony, petitioner asserted that he never authorized nor approved the filling up of
the blank checks, thus:
ATTY. DE VERA: Did you authorize anyone including Nap Gutierrez to write the date, May 23, 1994?
WITNESS: No, sir.
Q: Did you authorize anyone including Nap Gutierrez to put the word cash? In the check?
A: No, sir.
Q: Did you authorize anyone including Nap Gutierrez to write the figure P200,000 in this
check?
A: No, sir.
Q: And lastly, did you authorize anyone including Nap Gutierrez to write the words P200,000
only xx in this check?
A: No, sir. (T.S.N., Alvin Patrimonio, November 11, 1999).[24]
Notably, Gutierrez was only authorized to use the check for business expenses; thus, he exceeded the authority when
he used the check to pay the loan he supposedly contracted for the construction of petitioners house. This is a clear
violation of the petitioners instruction to use the checks for the expenses of Slam Dunk. It cannot therefore be validly
concluded that the check was completed strictly in accordance with the authority given by the petitioner.
Considering that Marasigan is not a holder in due course, the petitioner can validly set up the personal defense that the
_______________
[24] Rollo, p. 117.
659
VOL. 724, JUNE 4, 2014 659
blanks were not filled up in accordance with the authority he gave. Consequently, Marasigan has no right to enforce
payment against the petitioner and the latter cannot be obliged to pay the face value of the check.
WHEREFORE, in view of the foregoing, judgment is hereby rendered GRANTING the petitioner Alvin Patrimonios
petition for review on certiorari. The appealed Decision dated September 24, 2008 and the Resolution dated April 30,
2009 of the Court of Appeals are consequently ANNULLED AND SET ASIDE. Costs against the respondents.
SO ORDERED.
Carpio (Chairperson), Del Castillo, Perez and Perlas-Bernabe, JJ., concur.
Petition granted, judgment and resolution annulled and set aside.
Notes.Owing to the consumable nature of the thing loaned, the resulting duty of the borrower in a contract of loan is
to pay, not to return, to the creditor or lender the very thing loaned, and this explains why the ownership of the thing
loaned is transferred to the debtor upon perfection of the contract; Evidently, the resulting relationship between a creditor
and debtor in a contract of loan cannot be characterized as fiduciary; Absent any special facts and circumstances proving a
higher degree of responsibility, any dealings between a lender and borrower are not fiduciary in nature. (Republic vs.
Sandiganbayan [First Division], 648 SCRA 47 [2011])
A crossed check is one where two parallel lines are drawn across its face or across its corner; The crossing of a check has
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 the one who has an account with the bank; and (c) the act of crossing the check serves as a warning to
the660

holder that the check has been issued for a definite purpose and he must inquire if he received the check pursuant to this
purpose; otherwise, he is not a holder in due course. (Philippine Commercial International Bank vs. Balmaceda, 658
SCRA 33 [2011])
o0o
47
48
G.R. No. 150228. July 30, 2009.*
BANK OF AMERICA NT & SA, petitioner, vs. PHILIPPINE RACING CLUB, respondent.
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-clients genuine signatures. The genuine signatures of the clients 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-clients 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.
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.
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 clients 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.
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 petitioners 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 petitioners 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.
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.
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.
Attorneys Fees; An adverse decision does not ipso facto justify an award of attorneys fees to the winning party.
We find that the awards of attorneys 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 attorneys 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 attorneys 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 attorneys fees may not be awarded where no sufficient showing of bad faith could
be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause.
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision 1 promulgated on July
16, 2001 by the former Second Division of the Court of Appeals (CA), in CA-G.R. CV No. 45371 entitled Philippine Racing
Club, Inc. v. Bank of America NT & SA, affirming the Decision2 dated March 17, 1994 of the Regional Trial Court (RTC) of
Makati, Branch 135 in Civil Case No. 89-5650, in favor of the respondent. Likewise, the present petition assails the
Resolution3 promulgated on September 28, 2001, denying the Motion for Reconsideration of the CA Decision.
49
The facts of this case as narrated in the assailed CA Decision are as follows:
Plaintiff-appellee PRCI is a domestic corporation which maintains several accounts with different banks in
the Metro Manila area. Among the accounts maintained was Current Account No. 58891-012 with defendant-
appellant BA (Paseo de Roxas Branch). The authorized joint signatories with respect to said Current Account
were plaintiff-appellees President (Antonia Reyes) and Vice President for Finance (Gregorio Reyes).
On or about the 2nd week of December 1988, the President and Vice President of plaintiff-appellee
corporation were scheduled to go out of the country in connection with the corporations business. In order not
to disrupt operations in their absence, they pre-signed several checks relating to Current Account No. 58891-012.
The intention was to insure continuity of plaintiff-appellees operations by making available cash/money
especially to settle obligations that might become due. These checks were entrusted to the accountant with
instruction to make use of the same as the need arose. The internal arrangement was, in the event there was need
to make use of the checks, the accountant would prepare the corresponding voucher and thereafter complete the
entries on the pre-signed checks.
It turned out that on December 16, 1988, a John Doe presented to defendant-appellant bank for encashment
a couple of plaintiff-appellee corporations checks (Nos. 401116 and 401117) with the indicated value of
P110,000.00 each. It is admitted that these 2 checks were among those presigned by plaintiff-appellee
corporations authorized signatories.
The two (2) checks had similar entries with similar infirmities and irregularities. On the space where the name
of the payee should be indicated (Pay To The Order Of) the following 2-line entries were instead typewritten: on
the upper line was the word CASH while the lower line had the following typewritten words, viz: ONE
HUNDRED TEN THOUSAND PESOS ONLY. Despite the highly irregular entries on the face of the checks,
defendant-appellant bank, without as much as verifying and/or confirming the legitimacy of the checks
considering the substantial amount involved and the obvious infirmity/defect of the checks on their faces,
encashed said checks. A verification process, even by was of a telephone call to PRCI office, would have taken less
than ten (10) minutes. But this was not done by BA. Investigation conducted by plaintiff-appellee corporation
yielded the fact that there was no transaction involving PRCI that call for the payment of P220,000.00 to anyone.
The checks appeared to have come into the hands of an employee of PRCI (one Clarita Mesina who was
subsequently criminally charged for qualified theft) who eventually completed without authority the entries on the
pre-signed checks. PRCIs demand for defendant-appellant to pay fell on deaf ears. Hence, the complaint.4
After due proceedings, the trial court rendered a Decision in favor of respondent, the dispositive portion of which
reads:
PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiff and against the defendant, and
the latter is ordered to pay plaintiff:
(1) The sum of Two Hundred Twenty Thousand (P220,000.00) Pesos, with legal interest to be computed
from date of the filing of the herein complaint;
(2) The sum of Twenty Thousand (P20,000.00) Pesos by way of attorneys fees;
(3) The sum of Ten Thousand (P10,000.00) Pesos for litigation expenses, and
To pay the costs of suit.
SO ORDERED.5
Petitioner appealed the aforesaid trial court Decision to the CA which, however, affirmed said decision in toto in its
July 16, 2001 Decision. Petitioners Motion for Reconsideration of the CA Decision was subsequently denied on September
28, 2001.
Petitioner now comes before this Court arguing that:
I. The Court of Appeals gravely erred in holding that the proximate cause of respondents loss was petitioners
encashment of the checks.
A. The Court of Appeals gravely erred in holding that petitioner was liable for the amount of the checks despite
the fact that petitioner was merely fulfilling its obligation under law and contract.
B. The Court of Appeals gravely erred in holding that petitioner had a duty to verify the encashment, despite
the absence of any obligation to do so.
C. The Court of Appeals gravely erred in not applying Section 14 of the Negotiable Instruments Law, despite its
clear applicability to this case;
II. The Court of Appeals gravely erred in not holding that the proximate cause of respondents loss was its own grossly
negligent practice of pre-signing checks without payees and amounts and delivering these pre-signed checks to its
employees (other than their signatories).
III. The Court of Appeals gravely erred in affirming the trial courts award of attorneys fees despite the absence of any
applicable ground under Article 2208 of the Civil Code.
IV. The Court of Appeals gravely erred in not awarding attorneys fees, moral and exemplary damages, and costs of suit
in favor of petitioner, who clearly deserves them.6
From the discussions of both parties in their pleadings, the key issue to be resolved in the present case is whether the
proximate cause of the wrongful encashment of the checks in question was due to (a) petitioners failure to make a
verification regarding the said checks with the respondent in view of the misplacement of entries on the face of the checks
or (b) the practice of the respondent of pre-signing blank checks and leaving the same with its employees.
50
Petitioner insists that it merely fulfilled its obligation under law and contract when it encashed the aforesaid checks.
Invoking Sections 1267 and 1858 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-clients genuine
signatures. The genuine signatures of the clients 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-clients 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. 9
Furthermore, 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. 10 This is a fact which was affirmed by
the trial court itself.11
There is no dispute that the signatures appearing on the subject checks were genuine signatures of the respondents
authorized joint signatories; namely, Antonia Reyes and Gregorio Reyes who were respondents President and Vice
President for Finance, respectively. Both pre-signed the said checks since they were both scheduled to go abroad and it
was apparently their practice to leave with the company accountant checks signed in black to answer for company
obligations that might fall due during the signatories absence. It is likewise admitted that neither of the subject checks
contains any material alteration or erasure.
However, on the blank space of each check reserved for the payee, the following typewritten words appear: ONE
HUNDRED TEN THOUSAND PESOS ONLY. Above the same is the typewritten word, CASH. On the blank reserved for
the amount, the same amount of One Hundred Ten Thousand Pesos was indicated with the use of a check writer. The
presence of these irregularities in each check should have alerted the petitioner to be cautious before proceeding to encash
them which it did not do.
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 clients
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.12
Petitioner asserts that it was not duty-bound to verify with the respondent since the amount below the typewritten
word CASH, expressed in words, is the very same amount indicated in figures by means of a check writer on the amount
portion of the check. The amount stated in words is, therefore, a mere reiteration of the amount stated in figures.
Petitioner emphasizes that a reiteration of the amount in words is merely a repetition and that a repetition is not an
alteration which if present and material would have enjoined it to commence verification with respondent. 13
We do not agree with petitioners myopic view and carefully crafted defense. Although not in the strict sense material
alterations, the misplacement of the typewritten entries for the payee and the amount on the same blank and the
repetition of the amount using a check writer were glaringly obvious irregularities on the face of the check. Clearly,
someone made a mistake in filling up the checks and the repetition of the entries was possibly an attempt to rectify the
mistake. Also, if the check had been filled up by the person who customarily accomplishes the checks of respondent, it
should have occurred to petitioners employees that it would be unlikely such mistakes would be made. All these
circumstances should have alerted the bank to the possibility that the holder or the person who is attempting to encash the
checks did not have proper title to the checks or did not have authority to fill up and encash the same. As noted by the CA,
petitioner could have made a simple phone call to its client to clarify the irregularities and the loss to respondent due to
the encashment of the stolen checks would have been prevented.
In the case at bar, extraordinary diligence demands that petitioner should have ascertained from respondent the
authenticity of the subject checks or the accuracy of the entries therein not only because of the presence of highly irregular
entries on the face of the checks but also of the decidedly unusual circumstances surrounding their encashment.
Respondents witness testified that for checks in amounts greater than Twenty Thousand Pesos (P20,000.00) it is the
companys practice to ensure that the payee is indicated by name in the check.14 This was not rebutted by petitioner.
Indeed, it is highly uncommon for a corporation to make out checks payable to CASH for substantial amounts such as in
this case. If each irregular circumstance in this case were taken singly or isolated, the banks employees might have been
justified in ignoring them. However, the confluence of the irregularities on the face of the checks and circumstances that
depart from the usual banking practice of respondent should have put petitioners employees on guard that the checks
were possibly not issued by the respondent in due course of its business. Petitioners subtle sophistry cannot exculpate it
from behavior that fell extremely short of the highest degree of care and diligence required of it as a banking institution.
Indeed, taking this with the testimony of petitioners 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,15 we are even more convinced that petitioners 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.
In defense of its cashier/tellers questionable action, petitioner insists that pursuant to Sections 14 16 and 1617 of the
NIL, it could validly presume, upon presentation of the checks, that the party who filled up the blanks had authority and
that a valid and intentional delivery to the party presenting the checks had taken place. Thus, in petitioners view, the sole
51
blame for this debacle should be shifted to respondent for having its signatories pre-sign and deliver the subject
checks.18 Petitioner argues that there was indeed delivery in this case because, following American jurisprudence, the
gross negligence of respondents accountant in safekeeping the subject checks which resulted in their theft should be
treated as a voluntary delivery by the maker who is estopped from claiming non-delivery of the instrument.19
Petitioners contention would have been correct if the subject checks were correctly and properly filled out by the thief
and presented to the bank in good order. In that instance, there would be nothing to give notice to the bank of any
infirmity in the title of the holder of the checks and it could validly presume that there was proper delivery to the holder.
The bank could not be faulted if it encashed the checks under those circumstances. However, the undisputed facts plainly
show that there were circumstances that should have alerted the bank to the likelihood that the checks were not properly
delivered to the person who encashed the same. In all, we see no reason to depart from the finding in the assailed CA
Decision that the subject checks are properly characterized as incomplete and undelivered instruments thus making
Section 1520 of the NIL applicable in this case.
However, we do agree with petitioner that respondents officers practice of pre-signing of blank checks should be
deemed seriously negligent behavior and a highly risky means of purportedly ensuring the efficient operation of
businesses. It should have occurred to respondents officers and managers that the pre-signed blank checks could fall into
the wrong hands as they did in this case where the said checks were stolen from the company accountant to whom the
checks were entrusted.
Nevertheless, 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,21 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.22 (emphasis ours)
In the case at bar, petitioner cannot evade responsibility for the loss by attributing negligence on the part of
respondent because, even if we concur that the latter was indeed negligent in pre-signing blank checks, the former had the
last clear chance to avoid the loss. To reiterate, petitioners own operations manager admitted that they could have called
up the client for verification or confirmation before honoring the dubious checks. Verily, petitioner had the final
opportunity to avert the injury that befell the respondent. Failing to make the necessary verification due to the volume of
banking transactions on that particular day is a flimsy and unacceptable excuse, considering that 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 a high degree of diligence, if not the utmost diligence. 23 Petitioners
negligence has been undoubtedly established and, thus, pursuant to Art. 1170 of the NCC,24 it must suffer the consequence
of said negligence.
In the interest of fairness, however, we believe it is proper to consider respondents own negligence to mitigate
petitioners liability. Article 2179 of the Civil Code provides:
Art. 2179. When the plaintiffs own negligence was the immediate and proximate cause of his injury, he
cannot recover damages. But if his negligence was only contributory, the immediate and proximate cause of the
injury being the defendants lack of due care, the plaintiff may recover damages, but the courts shall mitigate the
damages to be awarded.
Explaining this provision in Lambert v. Heirs of Ray Castillon,25 the Court held:
The underlying precept on contributory negligence is that a plaintiff who is partly responsible for his own
injury should not be entitled to recover damages in full but must bear the consequences of his own negligence.
The defendant must thus be held liable only for the damages actually caused by his negligence. xxx xxx xxx
As we previously stated, respondents practice of signing checks in blank whenever its authorized bank signatories
would travel abroad was a dangerous policy, especially considering the lack of evidence on record that respondent had
appropriate safeguards or internal controls to prevent the pre-signed blank checks from falling into the hands of
unscrupulous individuals and being used to commit a fraud against the company. We cannot believe that there was no
other secure and reasonable way to guarantee the non-disruption of respondents business. As testified to by petitioners
expert witness, other corporations would ordinarily have another set of authorized bank signatories who would be able to
sign checks in the absence of the preferred signatories.26 Indeed, if not for the fortunate happenstance that the thief failed
to properly fill up the subject checks, respondent would expectedly take the blame for the entire loss since the defense of
forgery of a drawers signature(s) would be unavailable to it. Considering that respondent knowingly took the risk that the
pre-signed blank checks might fall into the hands of wrongdoers, it is but just that respondent shares in the responsibility
for the loss.
We also cannot ignore the fact that the person who stole the pre-signed checks subject of this case from respondents
accountant turned out to be another employee, purportedly a clerk in respondents accounting department. As the
employer of the thief, respondent supposedly had control and supervision over its own employee. This gives the Court
more reason to allocate part of the loss to respondent.
52
Following established jurisprudential precedents,27 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.
Finally, we find that the awards of attorneys 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 attorneys fees and litigation expenses
under Article 2208 of the NCC28 demands factual, legal, and equitable justification.
An adverse decision does not ipso facto justify an award of attorneys fees to the winning party.29 Even when a
claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorneys fees may not
be awarded where no sufficient showing of bad faith could be reflected in a partys persistence in a case other than an
erroneous conviction of the righteousness of his cause. 30
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 attorneys fees and litigation expenses in favor of respondent
are deleted.
Proportionate costs. SO ORDERED.
53

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PHILIPPINE EDUCATION Co., INC., plaintiff-appelant, vs. MAURICIO A. SORIANO, ET AL.

"WHEREFORE, plaintiff prays that after hearing defendants be ordered:

Notes.Negotiable instruments; commerciality of document as a requisite of negotiability.In order that a promise

1. 1.JUDGMENTS; JUDGMENTS BY CONFESSION; ORIGIN.The practice of entering judgments in debt on

1. ment be not paid at maturity, cannot be taken to sanction judgments by confession.

APPEAL from a judgment of the Court of First Instance of Manila. Diaz, J.

"MANILA, P. I., May 8,1920.

MEMORANDA OF "AMICI CURI"

Attorney Thos. L. Hartigan, of Hartigan & Welch, states:

referring to a judgment by confession under warrant of attorney in a promissory note, said:

Attorney J. G. Lawrence, of Ross & Lawrence, states:

1. 2.NEGOTIABLE INSTRUMENTS; CHECK DRAWN PAYABLE TO THE ORDER OF "CASH"; INDORSEMENT.

PETITION to review on certiorari a decision of the Court of Appeals.

4 Current Account No. 810480-4 in the name of Erlando T. Rodriguez

01. Simon Carmelo B. 0001110 11.27.98 40,934.00

02. Simon Carmelo Libo- 0000011589 02.01.99 29,877.00

03. Simon Libo-on 0000011567 01.25.99 50,350.00

04. Pacifico Castillo 0000011565 01.22.99 39,995.00

05. Jose Bago-od 0000011587 02.01.99 38,000.00

06. Dioleto Delcano 0000011594 02.02.99 28,500.00

07. Antonio Maravilla 0000011593 02.02.99 37,715.00

08. Josel Juguan 0000011595 02.02.99 45,002.00

09. Domingo Roa, Jr. 0000011591 02.01.99 35,373.00

10. Antonio Maravilla 0001657 02.05.99 39,900.00

11. Christy Mae Berden 0001655 02.05.99 28,595.00

12. Nelson Guadalupe 0000011588 02.01.99 34,819.00

13. Antonio Londres 0000011596 02.05.99 32,851.00

14. Arnel Navarosa 0000011597 02.05.99 28,785.00

15. Estrella Alunan 0000011600 02.05.99 32,509.00

16. Dennis Montemayor 0000011598 02.05.99 43,691.00

17. Mickle Argusar 0000011599 02.05.99 31,498.00

18. Perlita Gallego 0000011564 01.21.99 38,000.00

19. Sheila Arcobillas 0000011563 01.19.99 38,000.00

20. Danilo Villarosa 0001656 02.05.99 32,006.00

21. Almie Borce 0000011583 02.01.99 20,093.00

22. Ronie Aragon 0000011566 01.20.99 28,844.00

01. Elma Bacarro 0001944 01.15.99 37,449.00

02. Delfin Recarder 0001927 01.14.99 30,020.00

03. Elma Bacarro 0001926 01.14.99 34,884.00

04. Perlita Gallego 0001924 01.14.99 35,502.00

05. Jose Weber 0001932 01.14.99 38,323.00

06. Rogelio Alfonso 0001922 01.14.99 43,852.00

07. Gianni Amantillo 0001928 01.14.99 32,414.00

08. Eddie Bago-od 0001929 01.14.99 38,361.00

09. Manuel Longero 0001933 01.14.99 38,285.00

10. Anavic Lorenzo 0001923 01.14.99 29,982.00

11. Corazon Salva 0001945 01.15.99 37,449.00

12. Arlene Diamante 0001951 01.18.99 39,995.00

13. Joselin Laurilla 0001955 01.18.99 37,221.00

14. Andy Javellana 0001960 01.22.99 30,923.00

15. Erdelinda Porras 0001958 01.22.99 40,679.00

16. Nelson Guadalupe 0001956 01.18.99 24,700.00

17. Barnard Escano 0001969 01/22/99 38,304.00

18. Buena Coscolluela 0001968 01/22/99 37,706.00

19. Erdelinda Porras 0002021 02/01/99 36,727.00

20. Neda Algara 0002023 02/01/99 38,000.00

21. Eddie Bago-od 0002030 02/02/99 26,600.00

22. Gianni Amantillo 0002032 02/02/99 19,000.00

23. Alfredo Llena 0002020 02/01/99 32,282.00

24. Emmanuel Fermo 0001972 01/22/99 36,376.00

25. Yvonne Ano-os 0001967 01/22/99 36,566.00

26. Joel Abibuag 0002022 02/01/99 37,981.00

27. Ma. Corazon Salva 0002029 02/02/99 25,270.00

28. Jose Bago-od 0001957 01/18/99 34,656.00