2. HOLDER IN DUE COURSE
Gatchalian issued a "Stop
G.R. No. L-15126 November 30, 1961
VICENTE R. DE OCAMPO & CO., plaintiff-appellee,
vs.
ANITA GATCHALIAN, ET AL., defendants-appellants.
LABRADOR, J.:
Appeal from a judgment of the Court of First Instance of Manila,
Hon. Conrado M. Velasquez, presiding, sentencing the defendants to
pay the plaintiff the sum of P600, with legal interest from September
10, 1953 until paid, and to pay the costs.
The action is for the recovery of the value of a check for P600
payable to the plaintiff and drawn by defendant Anita C. Gatchalian.
The complaint sets forth the check and alleges that plaintiff received
it in payment of the indebtedness of one Matilde Gonzales; that upon
receipt of said check, plaintiff gave Matilde Gonzales P158.25, the
difference between the face value of the check and Matilde Gonzales'
indebtedness. The defendants admit the execution of the check but
they allege in their answer, as affirmative defense, that it was issued
subject to a condition, which was not fulfilled, and that plaintiff was
guilty of gross negligence in not taking steps to protect itself.
At the time of the trial, the parties submitted a stipulation of facts,
which reads as follows:
Plaintiff and defendants through their respective undersigned
attorney's respectfully submit the following Agreed Stipulation of
Facts;
First. — That on or about 8 September 1953, in the evening,
defendant Anita C. Gatchalian who was then interested in looking for
a car for the use of her husband and the family, was shown and
offered a car by Manuel Gonzales who was accompanied by Emil
Fajardo, the latter being personally known to defendant Anita C.
Gatchalian;
Second. — That Manuel Gonzales represented to defend Anita C.
Gatchalian that he was duly authorized by the owner of the car,
Ocampo Clinic, to look for a buyer of said car and to negotiate for
and accomplish said sale, but which facts were not known to plaintiff;
Third. — That defendant Anita C. Gatchalian, finding the price of the
car quoted by Manuel Gonzales to her satisfaction, requested Manuel
Gonzales to bring the car the day following together with the
certificate of registration of the car, so that her husband would be able
to see same; that on this request of defendant Anita C. Gatchalian,
Manuel Gonzales advised her that the owner of the car will not be
willing to give the certificate of registration unless there is a showing
that the party interested in the purchase of said car is ready and
willing to make such purchase and that for this purpose Manuel
Gonzales requested defendant Anita C. Gatchalian to give him
(Manuel Gonzales) a check which will be shown to the owner as
evidence of buyer's good faith in the intention to purchase the said
car, the said check to be for safekeeping only of Manuel Gonzales
and to be returned to defendant Anita C. Gatchalian the following day
when Manuel Gonzales brings the car and the certificate of
registration, but which facts were not known to plaintiff;
Fourth. — That relying on these representations of Manuel Gonzales
and with his assurance that said check will be only for safekeeping
and which will be returned to said defendant the following day when
the car and its certificate of registration will be brought by Manuel
Gonzales to defendants, but which facts were not known to plaintiff,
defendant Anita C. Gatchalian drew and issued a check, Exh. "B";
that Manuel Gonzales executed and issued a receipt for said check,
Exh. "1";
Fifth. — That on the failure of Manuel Gonzales to appear the day
following and on his failure to bring the car and its certificate of
registration and to return the check, Exh. "B", on the following day as
previously agreed upon, defendant Anita C.
Payment Order" on the check, Exh. "3", with the drawee bank. Said
"Stop Payment Order" was issued without previous notice on plaintiff
not being know to defendant, Anita C. Gatchalian and who
furthermore had no reason to know check was given to plaintiff;
Sixth. — That defendants, both or either of them, did not know
personally Manuel Gonzales or any member of his family at any time
prior to September 1953, but that defendant Hipolito Gatchalian is
personally acquainted with V. R. de Ocampo;
Seventh. — That defendants, both or either of them, had no
arrangements or agreement with the Ocampo Clinic at any time prior
to, on or after 9 September 1953 for the hospitalization of the wife of
Manuel Gonzales and neither or both of said defendants had assumed,
expressly or impliedly, with the Ocampo Clinic, the obligation of
Manuel Gonzales or his wife for the hospitalization of the latter;
Eight. — That defendants, both or either of them, had no obligation
or liability, directly or indirectly with the Ocampo Clinic before, or
on 9 September 1953;
Ninth. — That Manuel Gonzales having received the check Exh. "B"
from defendant Anita C. Gatchalian under the representations and
conditions herein above specified, delivered the same to the Ocampo
Clinic, in payment of the fees and expenses arising from the
hospitalization of his wife;
Tenth. — That plaintiff for and in consideration of fees and expenses
of hospitalization and the release of the wife of Manuel Gonzales
from its hospital, accepted said check, applying P441.75 (Exhibit
"A") thereof to payment of said fees and expenses and delivering to
Manuel Gonzales the amount of P158.25 (as per receipt, Exhibit "D")
representing the balance on the amount of the said check, Exh. "B";
Eleventh. — That the acts of acceptance of the check and application
of its proceeds in the manner specified above were made without
previous inquiry by plaintiff from defendants:
Twelfth. — That plaintiff filed or caused to be filed with the Office of
the City Fiscal of Manila, a complaint for estafa against Manuel
Gonzales based on and arising from the acts of said Manuel Gonzales
in paying his obligations with plaintiff and receiving the cash balance
of the check, Exh. "B" and that said complaint was subsequently
dropped;
Thirteenth. — That the exhibits mentioned in this stipulation and the
other exhibits submitted previously, be considered as parts of this
stipulation, without necessity of formally offering them in evidence;
WHEREFORE, it is most respectfully prayed that this agreed
stipulation of facts be admitted and that the parties hereto be given
fifteen days from today within which to submit simultaneously their
memorandum to discuss the issues of law arising from the facts,
reserving to either party the right to submit reply memorandum, if
necessary, within ten days from receipt of their main memoranda.
(pp. 21-25, Defendant's Record on Appeal).
No other evidence was submitted and upon said stipulation the court
rendered the judgment already alluded above.
In their appeal defendants-appellants contend that the check is not a
negotiable instrument, under the facts and circumstances stated in the
stipulation of facts, and that plaintiff is not a holder in due course. In
support of the first contention, it is argued that defendant Gatchalian
had no intention to transfer her property in the instrument as it was
for safekeeping merely and, therefore, there was no delivery required
by law (Section 16, Negotiable Instruments Law); that assuming for
the sake of argument that delivery was not for safekeeping merely,
delivery was conditional and the condition was not fulfilled.
In support of the contention that plaintiff-appellee is not a holder in
due course, the appellant argues that plaintiff-appellee cannot be a
holder in due course because there was no negotiation prior to
1
plaintiff-appellee's acquiring the possession of the check; that a
holder in due course presupposes a prior party from whose hands
negotiation proceeded, and in the case at bar, plaintiff-appellee is the
payee, the maker and the payee being original parties. It is also
claimed that the plaintiff-appellee is not a holder in due course
because it acquired the check with notice of defect in the title of the
holder, Manuel Gonzales, and because under the circumstances stated
in the stipulation of facts there were circumstances that brought
suspicion about Gonzales' possession and negotiation, which
circumstances should have placed the plaintiff-appellee under the
duty, to inquire into the title of the holder. The circumstances are as
follows:
The check is not a personal check of Manuel Gonzales. (Paragraph
Ninth, Stipulation of Facts). Plaintiff could have inquired why a
person would use the check of another to pay his own debt.
Furthermore, plaintiff had the "means of knowledge" inasmuch as
defendant Hipolito Gatchalian is personally acquainted with V. R. de
Ocampo (Paragraph Sixth, Stipulation of Facts.).
The maker Anita C. Gatchalian is a complete stranger to Manuel
Gonzales and Dr. V. R. de Ocampo (Paragraph Sixth, Stipulation of
Facts).
The maker is not in any manner obligated to Ocampo Clinic nor to
Manuel Gonzales. (Par. 7, Stipulation of Facts.)
The check could not have been intended to pay the hospital fees
which amounted only to P441.75. The check is in the amount of
P600.00, which is in excess of the amount due plaintiff. (Par. 10,
Stipulation of Facts).
It was necessary for plaintiff to give Manuel Gonzales change in the
sum P158.25 (Par. 10, Stipulation of Facts). Since Manuel Gonzales
is the party obliged to pay, plaintiff should have been more cautious
and wary in accepting a piece of paper and disbursing cold cash.
The check is payable to bearer. Hence, any person who holds it
should have been subjected to inquiries. EVEN IN A BANK,
CHECKS ARE NOT CASHED WITHOUT INQUIRY FROM THE
BEARER. The same inquiries should have been made by plaintiff.
(Defendants-appellants' brief, pp. 52-53)
Answering the first contention of appellant, counsel for plaintiff-
appellee argues that in accordance with the best authority on the
Negotiable Instruments Law, plaintiff-appellee may be considered as
a holder in due course, citing Brannan's Negotiable Instruments Law,
6th edition, page 252. On this issue Brannan holds that a payee may
be a holder in due course and says that to this effect is the greater
weight of authority, thus:
Whether the payee may be a holder in due course under the N. I. L.,
as he was at common law, is a question upon which the courts are in
serious conflict. There can be no doubt that a proper interpretation of
the act read as a whole leads to the conclusion that a payee may be a
holder in due course under any circumstance in which he meets the
requirements of Sec. 52.
The argument of Professor Brannan in an earlier edition of this work
has never been successfully answered and is here repeated.
Section 191 defines "holder" as the payee or indorsee of a bill or note,
who is in possession of it, or the bearer thereof. Sec. 52 defendants
defines a holder in due course as "a holder who has taken the
instrument under the following conditions: 1. That it is complete and
regular on its face. 2. 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. 3. That he took it in good faith and for value. 4.
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."
Since "holder", as defined in sec. 191, includes a payee who is in
possession the word holder in the first clause of sec. 52 and in the
second subsection may be replaced by the definition in sec. 191 so as
to read "a holder in due course is a payee or indorsee who is in
possession," etc. (Brannan's on Negotiable Instruments Law, 6th ed.,
p. 543).
The first argument of the defendants-appellants, therefore, depends
upon whether or not the plaintiff-appellee is a holder in due course. If
it is such a holder in due course, it is immaterial that it was the payee
and an immediate party to the instrument.
The other contention of the plaintiff is that there has been no
negotiation of the instrument, because the drawer did not deliver the
instrument to Manuel Gonzales with the intention of negotiating the
same, or for the purpose of giving effect thereto, for as the stipulation
of facts declares the check was to remain in the possession Manuel
Gonzales, and was not to be negotiated, but was to serve merely as
evidence of good faith of defendants in their desire to purchase the
car being sold to them. Admitting that such was the intention of the
drawer of the check when she delivered it to Manuel Gonzales, it was
no fault of the plaintiff-appellee drawee if Manuel Gonzales delivered
the check or negotiated it. As the check was payable to the plaintiff-
appellee, and was entrusted to Manuel Gonzales by Gatchalian, the
delivery to Manuel Gonzales was a delivery by the drawer to his own
agent; in other words, Manuel Gonzales was the agent of the drawer
Anita Gatchalian insofar as the possession of the check is concerned.
So, when the agent of drawer Manuel Gonzales negotiated the check
with the intention of getting its value from plaintiff-appellee,
negotiation took place through no fault of the plaintiff-appellee,
unless it can be shown that the plaintiff-appellee should be
considered as having notice of the defect in the possession of the
holder Manuel Gonzales. Our resolution of this issue leads us to a
consideration of the last question presented by the appellants, i.e.,
whether the plaintiff-appellee may be considered as a holder in due
course.
Section 52, Negotiable Instruments Law, defines holder in due
course, thus:
A holder in due course is a holder who has taken the instrument under
the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and
without notice that it had been previously dishonored, if such was the
fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any
infirmity in the instrument or defect in the title of the person
negotiating it.
The stipulation of facts expressly states that plaintiff-appellee was not
aware of the circumstances under which the check was delivered to
Manuel Gonzales, but we agree with the defendants-appellants that
the circumstances indicated by them in their briefs, such as the fact
that appellants had no obligation or liability to the Ocampo Clinic;
that the amount of the check did not correspond exactly with the
obligation of Matilde Gonzales to Dr. V. R. de Ocampo; and that the
check had two parallel lines in the upper left hand corner, which
practice means that the check could only be deposited but may not be
converted into cash — all these circumstances should have put the
plaintiff-appellee to inquiry as to the why and wherefore of the
possession of the check by Manuel Gonzales, and why he used it to
pay Matilde's account. It was payee's duty to ascertain from the
holder Manuel Gonzales what the nature of the latter's title to the
check was or the nature of his possession. Having failed in this
respect, we must declare that plaintiff-appellee was guilty of gross
neglect in not finding out the nature of the title and possession of
Manuel Gonzales, amounting to legal absence of good faith, and it
may not be considered as a holder of the check in good faith. To such
effect is the consensus of authority.
2
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 defendant's assignor, it being
sufficient to show that the defendant had notice that there was
something wrong about his assignor's acquisition of title, although he
did not have notice of the particular wrong that was committed. Paika
v. Perry, 225 Mass. 563, 114 N.E. 830.
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. Ozark Motor Co. v. Horton (Mo. App.),
196 S.W. 395. Accord. Davis v. First Nat. Bank, 26 Ariz. 621, 229
Pac. 391.
Liberty bonds stolen from the plaintiff were brought by the thief, a
boy fifteen years old, less than five feet tall, immature in appearance
and bearing on his face the stamp a degenerate, to the defendants'
clerk for sale. The boy stated that they belonged to his mother. The
defendants paid the boy for the bonds without any further inquiry.
Held, the plaintiff could recover the value of the bonds. 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. Morris v. Muir, 111 Misc. Rep. 739, 181 N.Y. Supp.
913, affd. in memo., 191 App. Div. 947, 181 N.Y. Supp. 945." (pp.
640-642, Brannan's Negotiable Instruments Law, 6th ed.).
The above considerations would seem sufficient to justify our ruling
that plaintiff-appellee should not be allowed to recover the value of
the check. Let us now examine the express provisions of the
Negotiable Instruments Law pertinent to the matter to find if our
ruling conforms thereto. Section 52 (c) provides that a holder in due
course is one who takes the instrument "in good faith and for value;"
Section 59, "that every holder is deemed prima facie to be a holder in
due course;" and Section 52 (d), that in order that one may be a
holder in due course it is necessary that "at the time the instrument
was negotiated to him "he had no notice of any . . . defect in the title
of the person negotiating it;" and lastly Section 59, that every holder
is deemed prima facieto be a holder in due course.
In the case at bar the rule that a possessor of the instrument is prima
faciea holder in due course does not apply because there was a defect
in the title of the holder (Manuel Gonzales), because the instrument is
not payable to him or to bearer. On the other hand, the stipulation of
facts indicated by the appellants in their brief, like the fact that the
drawer had no account with the payee; that the holder did not show or
tell the payee why he had the check in his possession and why he was
using it for the payment of his own personal account — show that
holder's title was defective or suspicious, to say the least. As holder's
title was defective or suspicious, it cannot be stated that the payee
acquired the check without knowledge of said defect in holder's title,
and for this reason the presumption that it is a holder in due course or
that it acquired the instrument in good faith does not exist. And
having presented no evidence that it acquired the check in good faith,
it (payee) cannot be considered as a holder in due course. In other
words, under the circumstances of the case, instead of the
presumption that payee was a holder in good faith, the fact is that it
acquired possession of the instrument under circumstances that
should have put it to inquiry as to the title of the holder who
negotiated the check to it. The burden was, therefore, placed upon it
to show that notwithstanding the suspicious circumstances, it
acquired the check in actual good faith.
The rule applicable to the case at bar is that described in the case of
Howard National Bank v. Wilson, et al., 96 Vt. 438, 120 At. 889,
894, where the Supreme Court of Vermont made the following
disquisition:
Prior to the Negotiable Instruments Act, two distinct lines of cases
had developed in this country. The first had its origin in Gill v.
Cubitt, 3 B. & C. 466, 10 E. L. 215, where the rule was distinctly laid
down by the court of King's Bench that the purchaser of negotiable
paper must exercise reasonable prudence and caution, and that, if the
circumstances were such as ought to have excited the suspicion of a
prudent and careful man, and he made no inquiry, he did not stand in
the legal position of a bona fide holder. The rule was adopted by the
courts of this country generally and seem to have become a fixed rule
in the law of negotiable paper. Later in Goodman v. Harvey, 4 A. &
E. 870, 31 E. C. L. 381, the English court abandoned its former
position and adopted the rule that nothing short of actual bad faith or
fraud in the purchaser would deprive him of the character of a bona
fide purchaser and let in defenses existing between prior parties, that
no circumstances of suspicion merely, or want of proper caution in
the purchaser, would have this effect, and that even gross negligence
would have no effect, except as evidence tending to establish bad
faith or fraud. Some of the American courts adhered to the earlier
rule, while others followed the change inaugurated in Goodman v.
Harvey. The question was before this court in Roth v. Colvin, 32 Vt.
125, and, on full consideration of the question, a rule was adopted in
harmony with that announced in Gill v. Cubitt, which has been
adhered to in subsequent cases, including those cited above. Stated
briefly, one line of cases including our own had adopted the test of
the reasonably prudent man and the other that of actual good faith. It
would seem that it was the intent of the Negotiable Instruments Act
to harmonize this disagreement by adopting the latter test. That such
is the view generally accepted by the courts appears from a recent
review of the cases concerning what constitutes notice of defect.
Brannan on Neg. Ins. Law, 187-201. To effectuate the general
purpose of the act to make uniform the Negotiable Instruments Law
of those states which should enact it, we are constrained to hold
(contrary to the rule adopted in our former decisions) that negligence
on the part of the plaintiff, or suspicious circumstances sufficient to
put a prudent man on inquiry, will not of themselves prevent a
recovery, but are to be considered merely as evidence bearing on the
question of bad faith. See G. L. 3113, 3172, where such a course is
required in construing other uniform acts.
It comes to this then: When the case has taken such shape that the
plaintiff is called upon to prove himself a holder in due course to be
entitled to recover, he is required to establish the conditions entitling
him to standing as such, including good faith in taking the instrument.
It devolves upon him to disclose the facts and circumstances
attending the transfer, from which good or bad faith in the transaction
may be inferred.
In the case at bar as the payee acquired the check under
circumstances which should have put it to inquiry, why the holder
had the check and used it to pay his own personal account, the duty
devolved upon it, plaintiff-appellee, to prove that it actually acquired
said check in good faith. The stipulation of facts contains no
statement of such good faith, hence we are forced to the conclusion
that plaintiff payee has not proved that it acquired the check in good
faith and may not be deemed a holder in due course thereof.
For the foregoing considerations, the decision appealed from should
be, as it is hereby, reversed, and the defendants are absolved from the
complaint. With costs against plaintiff-appellee.
3
G.R. No. 138074 August 15, 2003
CELY YANG, Petitioner,
vs.
HON. COURT OF APPEALS, PHILIPPINE COMMERCIAL
INTERNATIONAL BANK, FAR EAST BANK & TRUST CO.,
EQUITABLE BANKING CORPORATION, PREM
CHANDIRAMANI and FERNANDO DAVID, Respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the decision1 of the Court of Appeals,
dated March 25, 1999, in CA-G.R. CV No. 52398, which affirmed
with modification the joint decision of the Regional Trial Court
(RTC) of Pasay City, Branch 117, dated July 4, 1995, in Civil Cases
Nos. 54792 and 5492.3 The trial court dismissed the complaint against
herein respondents Far East Bank & Trust Company (FEBTC),
Equitable Banking Corporation (Equitable), and Philippine
Commercial International Bank (PCIB) and ruled in favor of
respondent Fernando David as to the proceeds of the two cashier’s
checks, including the earnings thereof pendente lite. Petitioner Cely
Yang was ordered to pay David moral damages of ₱100,000.00 and
attorney’s fees also in the amount of ₱100,000.00.
The facts of this case are not disputed, to wit:
On or before December 22, 1987, petitioner Cely Yang and private
respondent Prem Chandiramani entered into an agreement whereby
the latter was to give Yang a PCIB manager’s check in the amount of
₱4.2 million in exchange for two (2) of Yang’s manager’s checks,
each in the amount of ₱2.087 million, both payable to the order of
private respondent Fernando David. Yang and Chandiramani agreed
that the difference of ₱26,000.00 in the exchange would be their
profit to be divided equally between them.
Yang and Chandiramani also further agreed that the former would
secure from FEBTC a dollar draft in the amount of US$200,000.00,
payable to PCIB FCDU Account No. 4195-01165-2, which
Chandiramani would exchange for another dollar draft in the same
amount to be issued by Hang Seng Bank Ltd. of Hong Kong.
Accordingly, on December 22, 1987, Yang procured the following:
a) Equitable Cashier’s Check No. CCPS 14-009467 in the sum of
₱2,087,000.00, dated December 22, 1987, payable to the order of
Fernando David;
b) FEBTC Cashier’s Check No. 287078, in the amount of
₱2,087,000.00, dated December 22, 1987, likewise payable to the
order of Fernando David; and
c) FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New
York, in the amount of US$200,000.00, dated December 22, 1987,
payable to PCIB FCDU Account No. 4195-01165-2.
At about one o’clock in the afternoon of the same day, Yang gave the
aforementioned cashier’s checks and dollar drafts to her business
associate, Albert Liong, to be delivered to Chandiramani by Liong’s
messenger, Danilo Ranigo. Ranigo was to meet Chandiramani at
Philippine Trust Bank, Ayala Avenue, Makati City, Metro Manila
where he would turn over Yang’s cashier’s checks and dollar draft to
Chandiramani who, in turn, would deliver to Ranigo a PCIB
manager’s check in the sum of P4.2 million and a Hang Seng Bank
dollar draft for US$200,000.00 in exchange.
Chandiramani did not appear at the rendezvous and Ranigo allegedly
lost the two cashier’s checks and the dollar draft bought by petitioner.
Ranigo reported the alleged loss of the checks and the dollar draft to
Liong at half past four in the afternoon of December 22, 1987. Liong,
in turn, informed Yang, and the loss was then reported to the police.
It transpired, however, that the checks and the dollar draft were not
lost, for Chandiramani was able to get hold of said instruments,
without delivering the exchange consideration consisting of the PCIB
manager’s check and the Hang Seng Bank dollar draft.
At three o’clock in the afternoon or some two (2) hours after
Chandiramani and Ranigo were to meet in Makati City,
Chandiramani delivered to respondent Fernando David at China
Banking Corporation branch in San Fernando City, Pampanga, the
following: (a) FEBTC Cashier’s Check No. 287078, dated December
22, 1987, in the sum of ₱2.087 million; and (b) Equitable Cashier’s
Check No. CCPS 14-009467, dated December 22, 1987, also in the
amount of ₱2.087 million. In exchange, Chandiramani got
US$360,000.00 from David, which Chandiramani deposited in the
savings account of his wife, Pushpa Chandiramani; and his mother,
Rani Reynandas, who held FCDU Account No. 124 with the United
Coconut Planters Bank branch in Greenhills, San Juan, Metro Manila.
Chandiramani also deposited FEBTC Dollar Draft No. 4771, dated
December 22, 1987, drawn upon the Chemical Bank, New York for
US$200,000.00 in PCIB FCDU Account No. 4195-01165-2 on the
same date.
Meanwhile, Yang requested FEBTC and Equitable to stop payment
on the instruments she believed to be lost. Both banks complied with
her request, but upon the representation of PCIB, FEBTC
subsequently lifted the stop payment order on FEBTC Dollar Draft
No. 4771, thus enabling the holder of PCIB FCDU Account No.
4195-01165-2 to receive the amount of US$200,000.00.
On December 28, 1987, herein petitioner Yang lodged a
Complaint4 for injunction and damages against Equitable,
Chandiramani, and David, with prayer for a temporary restraining
order, with the Regional Trial Court of Pasay City. The Complaint
was docketed as Civil Case No. 5479. The Complaint was
subsequently amended to include a prayer for Equitable to return to
Yang the amount of P2.087 million, with interest thereon until fully
paid.5
On January 12, 1988, Yang filed a separate case for injunction and
damages, with prayer for a writ of preliminary injunction against
FEBTC, PCIB, Chandiramani and David, with the RTC of Pasay
City, docketed as Civil Case No. 5492. This complaint was later
amended to include a prayer that defendants therein return to Yang
the amount of P2.087 million, the value of FEBTC Dollar Draft No.
4771, with interest at 18% annually until fully paid.6
On February 9, 1988, upon the filing of a bond by Yang, the trial
court issued a writ of preliminary injunction in Civil Case No. 5479.
A writ of preliminary injunction was subsequently issued in Civil
Case No. 5492 also.
Meanwhile, herein respondent David moved for dismissal of the
cases against him and for reconsideration of the Orders granting the
writ of preliminary injunction, but these motions were denied. David
then elevated the matter to the Court of Appeals in a special civil
action for certiorari docketed as CA-G.R. SP No. 14843, which was
dismissed by the appellate court.
As Civil Cases Nos. 5479 and 5492 arose from the same set of facts,
the two cases were consolidated. The trial court then conducted pre-
trial and trial of the two cases, but the proceedings had to be
suspended after a fire gutted the Pasay City Hall and destroyed the
records of the courts.
After the records were reconstituted, the proceedings resumed and the
parties agreed that the money in dispute be invested in Treasury Bills
to be awarded in favor of the prevailing side. It was also agreed by
the parties to limit the issues at the trial to the following:
1. Who, between David and Yang, is legally entitled to the proceeds
of Equitable Banking Corporation (EBC) Cashier’s Check No. CCPS
14-009467 in the sum of ₱2,087,000.00 dated December 22, 1987,
and Far East Bank and Trust Company (FEBTC) Cashier’s Check
No. 287078 in the sum of ₱2,087,000.00 dated December 22, 1987,
together with the earnings derived therefrom pendente lite?
4
2. Are the defendants FEBTC and PCIB solidarily liable to Yang for
having allowed the encashment of FEBTC Dollar Draft No. 4771, in
the sum of US$200,000.00 plus interest thereon despite the stop
payment order of Cely Yang?7
On July 4, 1995, the trial court handed down its decision in Civil
Cases Nos. 5479 and 5492, to wit:
WHEREFORE, the Court renders judgment in favor of defendant
Fernando David against the plaintiff Cely Yang and declaring the
former entitled to the proceeds of the two (2) cashier’s checks,
together with the earnings derived therefrom pendente lite; ordering
the plaintiff to pay the defendant Fernando David moral damages in
the amount of ₱100,000.00; attorney’s fees in the amount of
₱100,000.00 and to pay the costs. The complaint against Far East
Bank and Trust Company (FEBTC), Philippine Commercial
International Bank (PCIB) and Equitable Banking Corporation (EBC)
is dismissed. The decision is without prejudice to whatever action
plaintiff Cely Yang will file against defendant Prem Chandiramani
for reimbursement of the amounts received by him from defendant
Fernando David.
SO ORDERED.8
In finding for David, the trial court ratiocinated:
The evidence shows that defendant David was a holder in due course
for the reason that the cashier’s checks were complete on their face
when they were negotiated to him. They were not yet overdue when
he became the holder thereof and he had no notice that said checks
were previously dishonored; he took the cashier’s checks in good
faith and for value. He parted some $200,000.00 for the two (2)
cashier’s checks which were given to defendant Chandiramani; he
had also no notice of any infirmity in the cashier’s checks or defect in
the title of the drawer. As a matter of fact, he asked the manager of
the China Banking Corporation to inquire as to the genuineness of the
cashier’s checks (tsn, February 5, 1988, p. 21, September 20, 1991,
pp. 13-14). Another proof that defendant David is a holder in due
course is the fact that the stop payment order on [the] FEBTC
cashier’s check was lifted upon his inquiry at the head office (tsn,
September 20, 1991, pp. 24-25). The apparent reason for lifting the
stop payment order was because of the fact that FEBTC realized that
the checks were not actually lost but indeed reached the payee
defendant David.9
Yang then moved for reconsideration of the RTC judgment, but the
trial court denied her motion in its Order of September 20, 1995.
In the belief that the trial court misunderstood the concept of a holder
in due course and misapprehended the factual milieu, Yang
seasonably filed an appeal with the Court of Appeals, docketed as
CA-G.R. CV No. 52398.
On March 25, 1999, the appellate court decided CA-G.R. CV No.
52398 in this wise:
WHEREFORE, this court AFFIRMS the judgment of the lower
court with modification and hereby orders the plaintiff-appellant
to pay defendant-appellant PCIB the amount of Twenty-Five
Thousand Pesos (₱25,000.00).
SO ORDERED.10
In affirming the trial court’s judgment with respect to herein
respondent David, the appellate court found that:
In this case, defendant-appellee had taken the necessary precautions
to verify, through his bank, China Banking Corporation, the
genuineness of whether (sic) the cashier’s checks he received from
Chandiramani. As no stop payment order was made yet (at) the time
of the inquiry, defendant-appellee had no notice of what had
transpired earlier between the plaintiff-appellant and Chandiramani.
All he knew was that the checks were issued to Chandiramani with
whom he was he had (sic) a transaction. Further on, David received
the checks in question in due course because Chandiramani, who at
the time the checks were delivered to David, was acting as Yang’s
agent.
David had no notice, real or constructive, cogent for him to make
further inquiry as to any infirmity in the instrument(s) and defect of
title of the holder. To mandate that each holder inquire about every
aspect on how the instrument came about will unduly impede
commercial transactions, Although negotiable instruments do not
constitute legal tender, they often take the place of money as a
means of payment.
The mere fact that David and Chandiramani knew one another for a
long time is not sufficient to establish that they connived with each
other to defraud Yang. There was no concrete proof presented by
Yang to support her theory.11
The appellate court awarded ₱25,000.00 in attorney’s fees to PCIB as
it found the action filed by Yang against said bank to be "clearly
unfounded and baseless." Since PCIB was compelled to litigate to
protect itself, then it was entitled under Article 220812 of the Civil
Code to attorney’s fees and litigation expenses.
Hence, the instant recourse wherein petitioner submits the following
issues for resolution:
a - WHETHER THE CHECKS WERE ISSUED TO PREM
CHANDIRAMANI BY PETITIONER;
b - WHETHER THE ALLEGED TRANSACTION BETWEEN
PREM CHANDIRAMANI AND FERNANDO DAVID IS
LEGITIMATE OR A SCHEME BY BOTH PRIVATE
RESPONDENTS TO SWINDLE PETITIONER;
c - WHETHER FERNANDO DAVID GAVE PREM
CHANDIRAMANI US$360,000.00 OR JUST A FRACTION OF
THE AMOUNT REPRESENTING HIS SHARE OF THE LOOT;
d - WHETHER PRIVATE RESPONDENTS FERNANDO DAVID
AND PCIB ARE ENTITLED TO DAMAGES AND ATTORNEY’S
FEES.13
At the outset, we must stress that this is a petition for review under
Rule 45 of the 1997 Rules of Civil Procedure. It is basic that in
petitions for review under Rule 45, the jurisdiction of this Court is
limited to reviewing questions of law, questions of fact are not
entertained absent a showing that the factual findings complained of
are totally devoid of support in the record or are glaringly
erroneous.14 Given the facts in the instant case, despite petitioner’s
formulation, we find that the following are the pertinent issues to be
resolved:
a) Whether the Court of Appeals erred in holding herein respondent
Fernando David to be a holder in due course; and
b) Whether the appellate court committed a reversible error in
awarding damages and attorney’s fees to David and PCIB.
On the first issue, petitioner Yang contends that private respondent
Fernando David is not a holder in due course of the checks in
question. While it is true that he was named the payee thereof, David
failed to inquire from Chandiramani about how the latter acquired
possession of said checks. Given his failure to do so, it cannot be said
that David was unaware of any defect or infirmity in the title of
Chandiramani to the checks at the time of their negotiation.
Moreover, inasmuch as the checks were crossed, then David should
have, pursuant to our ruling in Bataan Cigar & Cigarette Factory,
Inc. v. Court of Appeals, G.R. No. 93048, March 3, 1994, 230 SCRA
643, been put on guard that the checks were issued for a definite
purpose and accordingly, made inquiries to determine if he received
the checks pursuant to that purpose. His failure to do so negates the
finding in the proceedings below that he was a holder in due course.
5
Finally, the petitioner argues that there is no showing whatsoever that
David gave Chandiramani any consideration of value in exchange for
the aforementioned checks.
Private respondent Fernando David counters that the evidence on
record shows that when he received the checks, he verified their
genuineness with his bank, and only after said verification did he
deposit them. David stresses that he had no notice of previous
dishonor or any infirmity that would have aroused his suspicions, the
instruments being complete and regular upon their face. David
stresses that the checks in question were cashier’s checks. From the
very nature of cashier’s checks, it is highly unlikely that he would
have suspected that something was amiss. David also stresses
negotiable instruments are presumed to have been issued for valuable
consideration, and he who alleges otherwise must controvert the
presumption with sufficient evidence. The petitioner failed to
discharge this burden, according to David. He points out that the
checks were delivered to him as the payee, and he took them as
holder and payee thereof. Clearly, he concludes, he should be deemed
to be their holder in due course.
We shall now resolve the first issue.
Every holder of a negotiable instrument is deemed prima facie a
holder in due course. However, this presumption arises only in favor
of a person who is a holder as defined in Section 191 of the
Negotiable Instruments Law,15meaning a "payee or indorsee of a bill
or note, who is in possession of it, or the bearer thereof."
In the present case, it is not disputed that David was the payee of the
checks in question. The weight of authority sustains the view that a
payee may be a holder in due course.16 Hence, the presumption that
he is a prima facieholder in due course applies in his favor. However,
said presumption may be rebutted. Hence, what is vital to the
resolution of this issue is whether David took possession of the
checks under the conditions provided for in Section 52 17 of the
Negotiable Instruments Law. All the requisites provided for in
Section 52 must concur in David’s case, otherwise he cannot be
deemed a holder in due course.
We find that the petitioner’s challenge to David’s status as a holder in
due course hinges on two arguments: (1) the lack of proof to show
that David tendered any valuable consideration for the disputed
checks; and (2) David’s failure to inquire from Chandiramani as to
how the latter acquired possession of the checks, thus resulting in
David’s intentional ignorance tantamount to bad faith. In sum,
petitioner posits that the last two requisites of Section 52 are missing,
thereby preventing David from being considered a holder in due
course. Unfortunately for the petitioner, her arguments on this score
are less than meritorious and far from persuasive.
First, with respect to consideration, Section 2418 of the Negotiable
Instruments Law creates a presumption that every party to an
instrument acquired the same for a consideration19 or for
value.20 Thus, the law itself creates a presumption in David’s favor
that he gave valuable consideration for the checks in question. In
alleging otherwise, the petitioner has the onus to prove that David got
hold of the checks absent said consideration. In other words, the
petitioner must present convincing evidence to overthrow the
presumption. Our scrutiny of the records, however, shows that the
petitioner failed to discharge her burden of proof. The petitioner’s
averment that David did not give valuable consideration when he
took possession of the checks is unsupported, devoid of any concrete
proof to sustain it. Note that both the trial court and the appellate
court found that David did not receive the checks gratis, but instead
gave Chandiramani US$360,000.00 as consideration for the said
instruments. Factual findings of the Court of Appeals are conclusive
on the parties and not reviewable by this Court; they carry great
weight when the factual findings of the trial court are affirmed by the
appellate court.21
Second, petitioner fails to point any circumstance which should have
put David on inquiry as to the why and wherefore of the possession
of the checks by Chandiramani. David was not privy to the
transaction between petitioner and Chandiramani. Instead,
Chandiramani and David had a separate dealing in which it was
precisely Chandiramani’s duty to deliver the checks to David as
payee. The evidence shows that Chandiramani performed said task to
the letter. Petitioner admits that David took the step of asking the
manager of his bank to verify from FEBTC and Equitable as to the
genuineness of the checks and only accepted the same after being
assured that there was nothing wrong with said checks. At that time,
David was not aware of any "stop payment" order. Under these
circumstances, David thus had no obligation to ascertain from
Chandiramani what the nature of the latter’s title to the checks was, if
any, or the nature of his possession. Thus, we cannot hold him guilty
of gross neglect amounting to legal absence of good faith, absent any
showing that there was something amiss about Chandiramani’s
acquisition or possession of the checks. David did not close his eyes
deliberately to the nature or the particulars of a fraud allegedly
committed by Chandiramani upon the petitioner, absent any
knowledge on his part that the action in taking the instruments
amounted to bad faith.22
Belatedly, and we say belatedly since petitioner did not raise this
matter in the proceedings below, petitioner now claims that David
should have been put on alert as the instruments in question were
crossed checks. Pursuant to Bataan Cigar & Cigarette Factory, Inc.
v. Court of Appeals, David should at least have inquired as to whether
he was acquiring said checks for the purpose for which they were
issued, according to petitioner’s submission.
Petitioner’s reliance on the Bataan Cigar case, however, is
misplaced. The facts in the present case are not on all fours
with Bataan Cigar. In the latter case, the crossed checks were
negotiated and sold at a discount by the payee, while in the instant
case, the payee did not negotiate further the checks in question but
promptly deposited them in his bank account.
The Negotiable Instruments Law is silent with respect to crossed
checks, although the Code of Commerce23 makes reference to such
instruments. Nonetheless, this Court has taken judicial cognizance of
the practice that a check with two parallel lines in the upper left hand
corner means that it could only be deposited and not converted into
cash.24 The effects of crossing a check, thus, relates to the mode of
payment, meaning that the drawer had intended the check for deposit
only by the rightful person, i.e., the payee named therein. In Bataan
Cigar, the rediscounting of the check by the payee knowingly
violated the avowed intention of crossing the check. Thus, in
accepting the cross checks and paying cash for them, despite the
warning of the crossing, the subsequent holder could not be
considered in good faith and thus, not a holder in due course. Our
ruling in Bataan Cigar reiterates that in De Ocampo & Co. v.
Gatchalian.25
The factual circumstances in De Ocampo and in Bataan Cigar are not
present in this case. For here, there is no dispute that the crossed
checks were delivered and duly deposited by David, the payee named
therein, in his bank account. In other words, the purpose behind the
crossing of the checks was satisfied by the payee.
Proceeding to the issue of damages, petitioner merely argues that
respondents David and PCIB are not entitled to damages, attorney’s
fees, and costs of suit as both acted in bad faith towards her, as shown
by her version of the facts which gave rise to the instant case.
Respondent David counters that he was maliciously and
unceremoniously dragged into this suit for reasons which have
nothing to do with him at all, but which arose from petitioner’s
failure to receive her share of the profit promised her by
Chandiramani.1âwphi1 Moreover, in filing this suit which has lasted
for over a decade now, the petitioner deprived David of the rightful
enjoyment of the two checks, to which he is entitled, under the law,
6
compelled him to hire the services of counsel to vindicate his rights,
and subjected him to social humiliation and besmirched reputation,
thus harming his standing as a person of good repute in the business
community of Pampanga. David thus contends that it is but proper
that moral damages, attorney’s fees, and costs of suit be awarded
him.
For its part, respondent PCIB stresses that it was established by both
the trial court and the appellate court that it was needlessly dragged
into this case. Hence, no error was committed by the appellate court
in declaring PCIB entitled to attorney’s fees as it was compelled to
litigate to protect itself.
We have thoroughly perused the records of this case and find no
reason to disagree with the finding of the trial court, as affirmed by
the appellate court, that:
[D]efendant David is entitled to [the] award of moral damages as he
has been needlessly and unceremoniously dragged into this case
which should have been brought only between the plaintiff and
defendant Chandiramani.26
A careful reading of the findings of facts made by both the trial court
and appellate court clearly shows that the petitioner, in including
David as a party in these proceedings, is barking up the wrong tree. It
is apparent from the factual findings that David had no dealings with
the petitioner and was not privy to the agreement of the latter with
Chandiramani. Moreover, any loss which the petitioner incurred was
apparently due to the acts or omissions of Chandiramani, and hence,
her recourse should have been against him and not against David. By
needlessly dragging David into this case all because he and
Chandiramani knew each other, the petitioner not only unduly
delayed David from obtaining the value of the checks, but also
caused him anxiety and injured his business reputation while waiting
for its outcome. Recall that under Article 2217 27 of the Civil Code,
moral damages include mental anguish, serious anxiety, besmirched
reputation, wounded feelings, social humiliation, and similar injury.
Hence, we find the award of moral damages to be in order.
The appellate court likewise found that like David, PCIB was
dragged into this case on unfounded and baseless grounds. Both were
thus compelled to litigate to protect their interests, which makes an
award of attorney’s fees justified under Article 2208 (2)28 of the Civil
Code. Hence, we rule that the award of attorney’s fees to David and
PCIB was proper.
WHEREFORE, the instant petition is DENIED. The assailed
decision of the Court of Appeals, dated March 25, 1999, in CA-G.R.
CV No. 52398 is AFFIRMED. Costs against the petitioner.
SO ORDERED.
G.R. No. 70145 November 13, 1986
MARCELO A. MESINA, petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT,
HON. ARSENIO M. GONONG, in his capacity as Judge of
Regional Trial Court — Manila (Branch VIII), JOSE GO, and
ALBERT UY, respondents.
PARAS, J.:
This is an appeal by certiorari from the decision of the then
Intermediate Appellate Court (IAC for short), now the Court of
Appeals (CA) in AC-G.R. S.P. 04710, dated Jan. 22, 1985, which
dismissed the petition for certiorari and prohibition filed by Marcelo
A. Mesina against the trial court in Civil Case No. 84-22515. Said
case (an Interpleader) was filed by Associated Bank against Jose Go
and Marcelo A. Mesina regarding their conflicting claims over
Associated Bank Cashier's Check No. 011302 for P800,000.00, dated
December 29, 1983.
Briefly, the facts and statement of the case are as follows:
Respondent Jose Go, on December 29, 1983, purchased from
Associated Bank Cashier's Check No. 011302 for P800,000.00.
Unfortunately, Jose Go left said check on the top of the desk of the
bank manager when he left the bank. The bank manager entrusted the
check for safekeeping to a bank official, a certain Albert Uy, who had
then a visitor in the person of Alexander Lim. Uy had to answer a
phone call on a nearby telephone after which he proceeded to the
men's room. When he returned to his desk, his visitor Lim was
already gone. When Jose Go inquired for his cashier's check from
Albert Uy, the check was not in his folder and nowhere to be found.
The latter advised Jose Go to go to the bank to accomplish a "STOP
PAYMENT" order, which suggestion Jose Go immediately followed.
He also executed an affidavit of loss. Albert Uy went to the police to
report the loss of the check, pointing to the person of Alexander Lim
as the one who could shed light on it.
The records of the police show that Associated Bank received the lost
check for clearing on December 31, 1983, coming from Prudential
Bank, Escolta Branch. The check was immediately dishonored by
Associated Bank by sending it back to Prudential Bank, with the
words "Payment Stopped" stamped on it. However, the same was
again returned to Associated Bank on January 4, 1984 and for the
second time it was dishonored. Several days later, respondent
Associated Bank received a letter, dated January 9, 1984, from a
certain Atty. Lorenzo Navarro demanding payment on the cashier's
check in question, which was being held by his client. He however
refused to reveal the name of his client and threatened to sue, if
payment is not made. Respondent bank, in its letter, dated January 20,
1984, replied saying the check belonged to Jose Go who lost it in the
bank and is laying claim to it.
On February 1, 1984, police sent a letter to the Manager of the
Prudential Bank, Escolta Branch, requesting assistance in Identifying
the person who tried to encash the check but said bank refused saying
that it had to protect its client's interest and the Identity could only be
revealed with the client's conformity. Unsure of what to do on the
matter, respondent Associated Bank on February 2, 1984 filed an
action for Interpleader naming as respondent, Jose Go and one John
Doe, Atty. Navarro's then unnamed client. On even date, respondent
bank received summons and copy of the complaint for damages of a
certain Marcelo A. Mesina from the Regional Trial Court (RTC) of
Caloocan City filed on January 23, 1984 bearing the number C-
11139. Respondent bank moved to amend its complaint, having been
notified for the first time of the name of Atty. Navarro's client and
substituted Marcelo A. Mesina for John Doe. Simultaneously,
respondent bank, thru representative Albert Uy, informed Cpl. Gimao
of the Western Police District that the lost check of Jose Go is in the
7
possession of Marcelo Mesina, herein petitioner. When Cpl. Gimao
went to Marcelo Mesina to ask how he came to possess the check, he
said it was paid to him by Alexander Lim in a "certain transaction"
but refused to elucidate further. An information for theft (Annex J)
was instituted against Alexander Lim and the corresponding warrant
for his arrest was issued (Annex 6-A) which up to the date of the
filing of this instant petition remains unserved because of Alexander
Lim's successful evation thereof.
Meanwhile, Jose Go filed his answer on February 24, 1984 in the
Interpleader Case and moved to participate as intervenor in the
complain for damages. Albert Uy filed a motion of intervention and
answer in the complaint for Interpleader. On the Scheduled date of
pretrial conference inthe interpleader case, it was disclosed that the
"John Doe" impleaded as one of the defendants is actually petitioner
Marcelo A. Mesina. Petitioner instead of filing his answer to the
complaint in the interpleader filed on May 17, 1984 an Omnibus
Motion to Dismiss Ex Abudante Cautela alleging lack of jurisdiction
in view of the absence of an order to litigate, failure to state a cause
of action and lack of personality to sue. Respondent bank in the other
civil case (CC-11139) for damages moved to dismiss suit in view of
the existence already of the Interpleader case.
The trial court in the interpleader case issued an order dated July 13,
1984, denying the motion to dismiss of petitioner Mesina and ruling
that respondent bank's complaint sufficiently pleaded a cause of
action for itnerpleader. Petitioner filed his motion for reconsideration
which was denied by the trial court on September 26, 1984. Upon
motion for respondent Jose Go dated October 31, 1984, respondent
judge issued an order on November 6, 1984, declaring petitioner in
default since his period to answer has already expirecd and set the ex-
parte presentation of respondent bank's evidence on November 7,
1984.
Petitioner Mesina filed a petition for certioari with preliminary
injunction with IAC to set aside 1) order of respondent court denying
his omnibus Motion to Dismiss 2) order of 3) the order of default
against him.
On January 22, 1985, IAC rendered its decision dimissing the petition
for certiorari. Petitioner Mesina filed his Motion for Reconsideration
which was also denied by the same court in its resolution dated
February 18, 1985.
Meanwhile, on same date (February 18, 1985), the trial court in Civil
Case #84-22515 (Interpleader) rendered a decisio, the dispositive
portion reading as follows:
WHEREFORE, in view of the foregoing, judgment is hereby
rendered ordering plaintiff Associate Bank to replace Cashier's Check
No. 011302 in favor of Jose Go or its cas equivalent with legal rate of
itnerest from date of complaint, and with costs of suit against the
latter.
SO ORDERED.
On March 29, 1985, the trial court in Civil Case No. C-11139, for
damages, issued an order, the pertinent portion of which states:
The records of this case show that on August 20, 1984 proceedings in
this case was (were) ordered suspended because the main issue in
Civil Case No. 84-22515 and in this instant case are the same which
is: who between Marcelo Mesina and Jose Go is entitled to payment
of Associated Bank's Cashier's Check No. CC-011302? Said issue
having been resolved already in Civil casde No. 84-22515, really this
instant case has become moot and academic.
WHEREFORE, in view of the foregoing, the motion sholud be as it is
hereby granted and this case is ordered dismissed.
In view of the foregoing ruling no more action should be taken on the
"Motion For Reconsideration (of the order admitting the
Intervention)" dated June 21, 1984 as well as the Motion For
Reconsideration dated September 10, 1984.
SO ORDERED.
Petitioner now comes to Us, alleging that:
1. IAC erred in ruling that a cashier's check can be countermanded
even in the hands of a holder in due course.
2. IAC erred in countenancing the filing and maintenance of an
interpleader suit by a party who had earlier been sued on the same
claim.
3. IAC erred in upholding the trial court's order declaring petitioner
as in default when there was no proper order for him to plead in the
interpleader complaint.
4. IAC went beyond the scope of its certiorari jurisdiction by making
findings of facts in advance of trial.
Petitioner now interposes the following prayer:
1. Reverse the decision of the IAC, dated January 22, 1985 and set
aside the February 18, 1985 resolution denying the Motion for
Reconsideration.
2. Annul the orders of respondent Judge of RTC Manila giving due
course to the interpleader suit and declaring petitioner in default.
Petitioner's allegations hold no water. Theories and examples
advanced by petitioner on causes and effects of a cashier's check such
as 1) it cannot be countermanded in the hands of a holder in due
course and 2) a cashier's check is a bill of exchange drawn by the
bank against itself-are general principles which cannot be aptly
applied to the case at bar, without considering other things. Petitioner
failed to substantiate his claim that he is a holder in due course and
for consideration or value as shown by the established facts of the
case. Admittedly, petitioner became the holder of the cashier's check
as endorsed by Alexander Lim who stole the check. He refused to say
how and why it was passed to him. He had therefore notice of the
defect of his title over the check from the start. The holder of a
cashier's check who is not a holder in due course cannot enforce such
check against the issuing bank which dishonors the same. If a payee
of a cashier's check obtained it from the issuing bank by fraud, or if
there is some other reason why the payee is not entitled to collect the
check, the respondent bank would, of course, have the right to refuse
payment of the check when presented by the payee, since respondent
bank was aware of the facts surrounding the loss of the check in
question. Moreover, there is no similarity in the cases cited by
petitioner since respondent bank did not issue the cashier's check in
payment of its obligation. Jose Go bought it from respondent bank for
purposes of transferring his funds from respondent bank to another
bank near his establishment realizing that carrying money in this
form is safer than if it were in cash. The check was Jose Go's property
when it was misplaced or stolen, hence he stopped its payment. At
the outset, respondent bank knew it was Jose Go's check and no one
else since Go had not paid or indorsed it to anyone. The bank was
therefore liable to nobody on the check but Jose Go. The bank had no
intention to issue it to petitioner but only to buyer Jose Go. When
payment on it was therefore stopped, respondent bank was not the
one who did it but Jose Go, the owner of the check. Respondent bank
could not be drawer and drawee for clearly, Jose Go owns the money
it represents and he is therefore the drawer and the drawee in the
same manner as if he has a current account and he issued a check
against it; and from the moment said cashier's check was lost and/or
stolen no one outside of Jose Go can be termed a holder in due course
because Jose Go had not indorsed it in due course. The check in
question suffers from the infirmity of not having been properly
negotiated and for value by respondent Jose Go who as already been
said is the real owner of said instrument.
In his second assignment of error, petitioner stubbornly insists that
there is no showing of conflicting claims and interpleader is out of
the question. There is enough evidence to establish the contrary.
Considering the aforementioned facts and circumstances, respondent
8
bank merely took the necessary precaution not to make a mistake as
to whom to pay and therefore interpleader was its proper remedy. It
has been shown that the interpleader suit was filed by respondent
bank because petitioner and Jose Go were both laying their claims on
the check, petitioner asking payment thereon and Jose Go as the
purchaser or owner. The allegation of petitioner that respondent bank
had effectively relieved itself of its primary liability under the check
by simply filing a complaint for interpleader is belied by the
willingness of respondent bank to issue a certificate of time deposit in
the amount of P800,000 representing the cashier's check in question
in the name of the Clerk of Court of Manila to be awarded to
whoever wig be found by the court as validly entitled to it. Said
validity will depend on the strength of the parties' respective rights
and titles thereto. Bank filed the interpleader suit not because
petitioner sued it but because petitioner is laying claim to the same
check that Go is claiming. On the very day that the bank instituted the
case in interpleader, it was not aware of any suit for damages filed by
petitioner against it as supported by the fact that the interpleader case
was first entitled Associated Bank vs. Jose Go and John Doe, but
later on changed to Marcelo A. Mesina for John Doe when his name
became known to respondent bank.
In his third assignment of error, petitioner assails the then respondent
IAC in upholding the trial court's order declaring petitioner in default
when there was no proper order for him to plead in the interpleader
case. Again, such contention is untenable. The trial court issued an
order, compelling petitioner and respondent Jose Go to file
their Answers setting forth their respective claims. Subsequently, a
Pre-Trial Conference was set with notice to parties to submit position
papers. Petitioner argues in his memorandum that this order requiring
petitioner to file his answer was issued without jurisdiction alleging
that since he is presumably a holder in due course and for value, how
can he be compelled to litigate against Jose Go who is not even a
party to the check? Such argument is trite and ridiculous if we have to
consider that neither his name or Jose Go's name appears on the
check. Following such line of argument, petitioner is not a party to
the check either and therefore has no valid claim to the Check.
Furthermore, the Order of the trial court requiring the parties to file
their answers is to all intents and purposes an order to interplead,
substantially and essentially and therefore in compliance with the
provisions of Rule 63 of the Rules of Court. What else is the purpose
of a law suit but to litigate?
The records of the case show that respondent bank had to resort to
details in support of its action for Interpleader. Before it resorted to
Interpleader, respondent bank took an precautionary and necessary
measures to bring out the truth. On the other hand, petitioner
concealed the circumstances known to him and now that private
respondent bank brought these circumstances out in court (which
eventually rendered its decision in the light of these facts), petitioner
charges it with "gratuitous excursions into these non-issues."
Respondent IAC cannot rule on whether respondent RTC committed
an abuse of discretion or not, without being apprised of the facts and
reasons why respondent Associated Bank instituted the Interpleader
case. Both parties were given an opportunity to present their sides.
Petitioner chose to withhold substantial facts. Respondents were not
forbidden to present their side-this is the purpose of the Comment of
respondent to the petition. IAC decided the question by considering
both the facts submitted by petitioner and those given by respondents.
IAC did not act therefore beyond the scope of the remedy sought in
the petition.
WHEREFORE, finding that the instant petition is merely dilatory, the
same is hereby denied and the assailed orders of the respondent court
are hereby AFFIRMED in toto.
SO ORDERED.
Digest:
FACTS:
Jose Go purchased from Associate Bank a Cashier’s Check, which he
left on top of the manager’s desk when left the bank. The bank
manager then had it kept for safekeeping by one of its
employees. The employee was then in conference with one
Alexander Lim. He left the check in his desk and upon his return,
Lim and the check were gone. When Go inquired about his check,
the same couldn't be found and Go was advised to request for the
stoppage of payment which he did. He executed also an affidavit of
loss as well as reported it to the police.
The bank then received the check twice for clearing. For these two
times, they dishonored the payment by saying that payment has
been stopped. After the second time, a lawyer contacted it
demanding payment. He refused to disclose the name of his client
and threatened to sue. Later, the name of Mesina was revealed.
When asked by the police on how he possessed the check, he
said it was paid to him Lim. An information for theft was then filed
against Lim.
A case of interpleader was filed by the bank and Go moved to
participate as intervenor in the complaint for damages. Mesina
moved for the dismissal of the case but was denied. The trial
court ruled in the interpleader case ordering the bank to replace the
cashier’s check in favor of Go.
HELD:
Petitioner cannot raise as arguments that a cashier’ check cannot
be countermanded from the hands of a holder in due course and
that a cashier’s check is a check drawn by the bank against
itself. Petitioner failed to substantiate that he was a holder in
due course.
Upon questioning, he admitted that he got the check from Lim
who stole the check. He refused to disclose how and why it has
passed to him. It simply means that he has notice of the defect of his
title over the check from the start. The holder of a cashier’s
check who is not a holder in due course cannot enforce payment
against the issuing bank which dishonors the same. If a payee of
a cashier’s check obtained it from the issuing bank by fraud, or if
there is some other reason why the payee is not entitled to
collect the check, the bank would of course have the right to
refuse payment of the check when presented by payee, since the bank
was aware of the facts surrounding the loss of the check in question.
9
INCOMPLETE BUT DELIVERED INSTRUMENT (SEC. 14)
G.R. No. 187769 June 4, 2014
ALVIN PATRIMONIO, Petitioner,
vs.
NAPOLEON GUTIERREZ and OCTAVIO MARASIGAN
III, Respondents.
DECISION
BRION, J.:
Assailed in this petition for review on certiorari1 under Rule 45 of the
Revised Rules of Court is the decision2 dated September 24, 2008
and the resolution3 dated April 30, 2009 of the Court of Appeals (CA)
in CA-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 ₱200,000.00.
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 (Slum 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 payee’s 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 petitioner’s knowledge and
consent, Gutierrez went to Marasigan (the petitioner’s former
teammate), to secure a loan in the amount of ₱200,000.00 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 ₱200,000.00 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 "₱200,000.00". 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 petitioner’s 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
₱200,000.00, 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 check’s
negotiation, and asserted that he was not privy to the parties’ loan
agreement.
Only Marasigan filed his answer to the complaint. In the RTC’s 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.4 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 petitioner’s 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 petitioner’s 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.
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 petitioner’s 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 ₱200,000.00.
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
check’s 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 check’s 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:
10
1. Whether the contract of loan in the amount of ₱200,000.00 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 ₱200,000.00 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 Court’s 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
petitioner’s 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 off act 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.
6 contract of loan in behalf of the petitioner. As held in Yasuma v.
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 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
(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 be 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: Vicente vs.
Geraldez, 52 SCRA 210; 225). (emphasis supplied).
The Contract of Loan Entered Into by Gutierrez in Behalf of the
Petitioner 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.1âwphi1Records do not show that the petitioner executed
any special power of attorney (SPA) in favor of Gutierrez. In fact, the
petitioner’s 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 petitioner’s 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.
Marasigan’s submission fails to persuade us.
In the absence of any authorization, Gutierrez could not enter into a
Heirs of De Villa,9 involving a loan contracted 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
11
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
Petitioner’s 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 account 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 Yambao's receipt of the bad checks from Cecilia Que Yabut
or Geminiano Yabut, Jr., in Caloocan City cannot, contrary to the
holding of the respondent 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 beno 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 Latter’s 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 contracts in general. 13 Article
1318 of the Civil Code14enumerates 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
petitioner’s 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 petitioner’s grant of consent to
the parties’ loan agreement. Without any evidence to prove
Gutierrez’ authority, the petitioner’s 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
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 facie authority to fill it up
as such for any amount. In order, however, that any such instrument
when completed may be enforced against any person who became a
party thereto prior to its completion, it must be filled up strictly in
accordance with the authority given and within a reasonable time. But
if any such instrument, after completion, is negotiated to a holder in
due course, it is valid and effectual for all purposes in his hands, and
he may enforce it as if it had been filled up strictly in accordance with
the authority given and within a reasonable time.
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.16
In order however that one who is not a holder in due course can
enforce the instrument against a party prior to the instrument’s
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
12
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;
(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 beset 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
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 defendant's assignor, it being
sufficient to show that the defendant had notice that there was
something wrong about his assignor's acquisition of title, although he
did not have notice of the particular wrong that was committed.
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, Marasigan’s 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
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 Alvin’s 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 instrument.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.
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.1âwphi1 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 petitioner’s
prior approval be first secured.
13
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 tantumonly; 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.
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 ₱200,000 in this check?
A: No, sir.
Q: And lastly, did you authorize anyone including Nap Gutierrez to
write the words ₱200,000 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
petitioner's house. This is a clear violation of the petitioner's
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 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 Patrimonio's 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.
Digest:
NATURE: Petition for review on certiorari assailing the decision and
the resolution of the CA which affirmed the decision of RTC
dismissing the complaint for declaration of nullity of loan filed by
petitioner Alvin Patrimonio and ordering him to pay respondent
Octavio Marasigan III
FACTS:
1. The petitioner and the respondent Gutierrez entered into a
business venture under the name of Slam Dunk Corporation, a
production outfit that produced mini-concerts and shows related to
basketball.
2. The petitioner pre-signed several checks to answer for the
expenses of Slam Dunk. Although signed, these checks had no
payee’s 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.
3. Without the petitioner’s knowledge and consent, Gutierrez
went to Marasigan 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.
4. Marasigan acceded to Gutierrez’ request and gave him
P200,000.00. Gutierrez simultaneously delivered to Marasigan one of
the blank checks the petitioner pre-signed with Pilipinas Bank with
the blank portions filled out with the words "Cash" "Two Hundred
Thousand Pesos Only", and the amount of "P200,000.00."
5. Marasigan deposited the check but it was dishonored for
the reason "ACCOUNT CLOSED." It was later revealed that
petitioner’s account with the bank had been closed.
6. 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.
7. Petitioner filed before the RTC a Complaint for Declaration
of Nullity of Loan and Recovery of Damages against Gutierrez and
co-respondent Marasigan.
8. RTC--- 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. RTC
declared Marasigan as a holder in due course and accordingly
dismissed the petitioner’s 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. CA---
affirmed the RTC ruling.
ISSUE: Whether or not Marasigan is a holder in due course thus may
hold Petitioner liable
HELD: NO.
RATIO:
Section 14 of the Negotiable Instruments Law provides for when
blanks may be filled. 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
14
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 instrument’s
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.
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.
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 beset 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.
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 defendant's assignor, it being
sufficient to show that the defendant had notice that there was
something wrong about his assignor's acquisition of title, although he
did not have notice of the particular wrong that was committed.
The term ‘bad faith’ does not necessarily involve furtive motives, but
means bad faith in a commercial sense. Although gross negligence
does not of itself constitute bad faith, it is evidence from which bad
faith may be inferred.
In the present case, Marasigan’s 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. 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 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.
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 tantumonly; 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.
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
petitioner's house. This is a clear violation of the petitioner's
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 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 Patrimonio's 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.
G.R. No. 158312 November 14, 2008
JOHN DY, petitioner,
vs.
PEOPLE OF THE PHILIPPINES and The HONORABLE
COURT OF APPEALS, respondents.
DECISION
QUISUMBING, Acting C.J.:
This appeal prays for the reversal of the Decision1 dated January 23,
2003 and the Resolution2 dated May 14, 2003 of the Court of Appeals
in CA-G.R. CR No. 23802. The appellate court affirmed with
modification the Decision3 dated November 17, 1999 of the Regional
Trial Court (RTC), Branch 82 of Quezon City, which had convicted
petitioner John Dy of two counts of estafa in Criminal Cases Nos. Q-
93-46711 and Q-93-46713, and two counts of violation of Batas
Pambansa Bilang 224 (B.P. Blg. 22) in Criminal Cases Nos. Q-93-
46712 and Q-93-46714.
The facts are undisputed:
Since 1990, John Dy has been the distributor of W.L. Food Products
(W.L. Foods) in Naga City, Bicol, under the business name Dyna
Marketing. Dy would pay W.L. Foods in either cash or check upon
pick up of stocks of snack foods at the latter's branch or main office
in Quezon City. At times, he would entrust the payment to one of his
drivers.
On June 24, 1992, Dy's driver went to the branch office of W.L.
Foods to pick up stocks of snack foods. He introduced himself to the
checker, Mary Jane D. Maraca, who upon confirming Dy's credit with
15
the main office, gave him merchandise worth P106,579.60. In return,
the driver handed her a blank Far East Bank and Trust Company
(FEBTC) Check with Check No. 553602 postdated July 22, 1992.
The check was signed by Dy though it did not indicate a specific
amount.
Yet again, on July 1, 1992, the same driver obtained snack foods
from Maraca in the amount of P226,794.36 in exchange for a blank
FEBTC Check with Check No. 553615 postdated July 31, 1992.
In both instances, the driver was issued an unsigned delivery receipt.
The amounts for the purchases were filled in later by Evelyn Ong,
accountant of W.L. Foods, based on the value of the goods delivered.
When presented for payment, FEBTC dishonored the checks for
insufficiency of funds. Raul D. Gonzales, manager of FEBTC-Naga
Branch, notified Atty. Rita Linda Jimeno, counsel of W.L. Foods, of
the dishonor. Apparently, Dy only had an available balance of P2,000
as of July 22, 1992 and July 31, 1992.
Later, Gonzales sent Atty. Jimeno another letter5 advising her that
FEBTC Check No. 553602 for P106,579.60 was returned to the
drawee bank for the reasons stop payment order and drawn against
uncollected deposit (DAUD), and not because it was drawn against
insufficient funds as stated in the first letter. Dy's savings deposit
account ledger reflected a balance of P160,659.39 as of July 22,
1992. This, however, included a regional clearing check for P55,000
which he deposited on July 20, 1992, and which took five (5) banking
days to clear. Hence, the inward check was drawn against the yet
uncollected deposit.
When William Lim, owner of W.L. Foods, phoned Dy about the
matter, the latter explained that he could not pay since he had no
funds yet. This prompted the former to send petitioner a demand
letter, which the latter ignored.
On July 16, 1993, Lim charged Dy with two counts of estafa under
Article 315, paragraph 2(d)6 of the Revised Penal Code in two
Informations, which except for the dates and amounts involved,
similarly read as follows:
That on or about the 24th day of June, 1992, in Quezon City,
Philippines, the said accused, did then and there [willfully] and
feloniously defraud W.L. PRODUCTS, a corporation duly organized
and existing under the laws of the Republic of the Philippines with
business address at No. 531 Gen. Luis St., Novaliches, this City, in
the following manner, to wit: the said accused, by means of false
manifestations and fraudulent representation which he made to
complainant to the effect that Far East Bank and Trust Co. check No.
553602 dated July 22, 1992 in the amount of P106,579.60, payable to
W.L. Products is a good check and will be honored by the bank on its
maturity date, and by means of other deceit of similar import, induced
and succeeded in inducing the said complainant to receive and accept
the aforesaid check in payment of snack foods, the said accused
knowing fully well that all his manifestations and representations
were false and untrue and were made solely for the purpose of
obtaining, as in fact he did obtain the aforesaid snack foods valued
at P106,579.60 from said complainant as upon presentation of said
check to the bank for payment, the same was dishonored and
payment thereof refused for the reason stop payment and the said
accused, once in possession of the aforesaid snack foods, with intent
to defraud, [willfully], unlawfully and feloniously misapplied,
misappropriated and converted the same or the value thereof to his
own personal use and benefit, to the damage and prejudice of said
W.L. Products, herein represented by RODOLFO BORJAL, in the
aforementioned amount of P106,579.60, Philippine Currency.
Contrary to law.7
On even date, Lim also charged Dy with two counts of violation
of B.P. Blg. 22 in two Informations which likewise save for the dates
and amounts involved similarly read as follows:
That on or about the 24th day of June, 1992, the said accused, did then
and there [willfully], unlawfully and feloniously make or draw and
issue to W.L. FOOD PRODUCTS to apply on account or for value a
Far East Bank and Trust Co. Check no. 553602 dated July 22, 1992
payable to W.L. FOOD PRODUCTS in the amount of P106,579.60
Philippine Currency, said accused knowing fully well that at the time
of issue he/she/they did not have sufficient funds in or credit with the
drawee bank for payment of such check in full upon its presentment,
which check when presented 90 days from the date thereof was
subsequently dishonored by the drawee bank for the reason "Payment
stopped" but the same would have been dishonored for insufficient
funds had not the accused without any valid reason, ordered the bank
to stop payment, the said accused despite receipt of notice of such
dishonor, failed to pay said W.L. Food Products the amount of said
check or to make arrangement for payment in full of the same within
five (5) banking days after receiving said notice.
CONTRARY TO LAW.8
On November 23, 1994, Dy was arrested in Naga City. On
arraignment, he pleaded not guilty to all charges. Thereafter, the
cases against him were tried jointly.
On November 17, 1999 the RTC convicted Dy on two counts each of
estafa and violation of B.P. Blg. 22. The trial court disposed of the
case as follows:
WHEREFORE, accused JOHN JERRY DY ALDEN (JOHN DY) is
hereby found GUILTY beyond reasonable doubt of swindling
(ESTAFA) as charged in the Informations in Criminal Case No. 93-
46711 and in Criminal Case No. Q-93-46713, respectively.
Accordingly, after applying the provisions of the Indeterminate
Sentence Law and P.D. No. 818, said accused is hereby sentenced to
suffer the indeterminate penalty of ten (10) years and one (1) day to
twelve (12) years of prision mayor, as minimum, to twenty (20) years
of reclusion temporal, as maximum, in Criminal Case No. Q-93-
46711 and of ten (10) years and one (1) day to twelve (12) years
of prision mayor, as minimum, to thirty (30) years of reclusion
perpetua, as maximum, in Criminal Case No. Q-93-46713.
Likewise, said accused is hereby found GUILTY beyond reasonable
doubt of Violation of B.P. 22 as charged in the Informations in
Criminal Case No. Q-93-46712 and in Criminal Case No. Q-93-
46714 and is accordingly sentenced to imprisonment of one (1) year
for each of the said offense and to pay a fine in the total amount
of P333,373.96, with subsidiary imprisonment in case of insolvency.
FINALLY, judgment is hereby rendered in favor of private
complainant, W. L. Food Products, herein represented by Rodolfo
Borjal, and against herein accused JOHN JERRY DY ALDEN
(JOHN DY), ordering the latter to pay to the former the total sum
of P333,373.96 plus interest thereon at the rate of 12% per annum
from September 28, 1992 until fully paid; and, (2) the costs of this
suit.
SO ORDERED.9
Dy brought the case to the Court of Appeals. In the assailed Decision
of January 23, 2003, the appellate court affirmed the RTC. It,
however, modified the sentence and deleted the payment of interests
in this wise:
WHEREFORE, in view of the foregoing, the decision appealed from
is hereby AFFIRMED with MODIFICATION. In Criminal Case
No. Q-93-46711 (for estafa), the accused-appellant JOHN JERRY
DY ALDEN (JOHN DY) is hereby sentenced to suffer an
indeterminate penalty of imprisonment ranging from six (6) years and
one (1) day of prision mayor as minimum to twenty (20) years
of reclusion temporal as maximum plus eight (8) years in excess of
[P]22,000.00. In Criminal Case No. Q-93-46712 (for violation of
BP 22), accused-appellant is sentenced to suffer an imprisonment of
one (1) year and to indemnify W.L. Food Products, represented by
Rodolfo Borjal, the amount of ONE HUNDRED SIX THOUSAND
16
FIVE HUNDRED SEVENTY NINE PESOS and 60/100
([P]106,579.60). In Criminal Case No. Q-93-46713 (for estafa),
accused-appellant is hereby sentenced to suffer an indeterminate
penalty of imprisonment ranging from eight (8) years and one (1) day
of prision mayor as minimum to thirty (30) years as maximum.
Finally, in Criminal Case No. Q-93-46714 (for violation of BP 22),
accused-appellant is sentenced to suffer an imprisonment of one (1)
year and to indemnify W.L. Food Products, represented by Rodolfo
Borjal, the amount of TWO HUNDRED TWENTY SIX
THOUSAND SEVEN HUNDRED NINETY FOUR PESOS AND
36/100 ([P]226,794.36).
SO ORDERED.10
Dy moved for reconsideration, but his motion was denied in the
Resolution dated May 14, 2003.
Hence, this petition which raises the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN FINDING THAT THE PROSECUTION
HAS PROVEN THE GUILT OF ACCUSED BEYOND
REASONABLE DOUBT OF ESTAFA ON TWO (2) COUNTS?
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN FINDING THAT THE PROSECUTION
HAS PROVEN THE GUILT OF ACCUSED BEYOND
REASONABLE DOUBT OF VIOLATION OF BP 22 ON TWO (2)
COUNTS?
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
GRAVELY ERRED IN AWARDING DAMAGES TO PRIVATE
COMPLAINANT, W.L. FOOD PRODUCTS, THE TOTAL SUM
OF [P]333,373.96?11
Essentially, the issue is whether John Dy is liable for estafa and for
violation of B.P. Blg. 22.
First, is petitioner guilty of estafa?
Mainly, petitioner contends that the checks were ineffectively issued.
He stresses that not only were the checks blank, but also that W.L.
Foods' accountant had no authority to fill the amounts. Dy also claims
failure of consideration to negate any obligation to W.L. Foods.
Ultimately, petitioner denies having deceived Lim inasmuch as only
the two checks bounced since he began dealing with him. He
maintains that it was his long established business relationship with
Lim that enabled him to obtain the goods, and not the checks issued
in payment for them. Petitioner renounces personal liability on the
checks since he was absent when the goods were delivered.
The Office of the Solicitor General (OSG), for the State, avers that
the delivery of the checks by Dy's driver to Maraca, constituted valid
issuance. The OSG sustains Ong's prima facie authority to fill the
checks based on the value of goods taken. It observes that nothing in
the records showed that W.L. Foods' accountant filled up the checks
in violation of Dy's instructions or their previous agreement. Finally,
the OSG challenges the present petition as an inappropriate remedy to
review the factual findings of the trial court.
We find that the petition is partly meritorious.
Before an accused can be held liable for estafa under Article 315,
paragraph 2(d) of the Revised Penal Code, as amended by Republic
Act No. 4885,12 the following elements must concur: (1) postdating
or issuance of a check in payment of an obligation contracted at the
time the check was issued; (2) insufficiency of funds to cover the
check; and (3) damage to the payee thereof.13 These elements are
present in the instant case.
Section 191 of the Negotiable Instruments Law14 defines "issue" as
the first delivery of an instrument, complete in form, to a person who
takes it as a holder. Significantly, delivery is the final act essential to
the negotiability of an instrument. Delivery denotes physical transfer
of the instrument by the maker or drawer coupled with an intention to
convey title to the payee and recognize him as a holder.15 It means
more than handing over to another; it imports such transfer of the
instrument to another as to enable the latter to hold it for himself. 16
In this case, even if the checks were given to W.L. Foods in blank,
this alone did not make its issuance invalid. When the checks were
delivered to Lim, through his employee, he became a holder
with prima facie authority to fill the blanks. This was, in fact,
accomplished by Lim's accountant.
The pertinent provisions of Section 14 of the Negotiable Instruments
Law are instructive:
SEC. 14. Blanks; when may be filled.-Where the instrument is
wanting in any material particular, the person in possession thereof
has a prima facie authority to complete it by filling up the
blanks therein. And a signature on a blank paper delivered by the
person making the signature in order that the paper may be converted
into a negotiable instrument operates as a prima facie authority to fill
it up as such for any amount. …. (Emphasis supplied.)
Hence, the law merely requires that the instrument be in the
possession of a person other than the drawer or maker. From such
possession, together with the fact that the instrument is wanting in a
material particular, the law presumes agency to fill up the
blanks.17 Because of this, the burden of proving want of authority or
that the authority granted was exceeded, is placed on the person
questioning such authority.18 Petitioner failed to fulfill this
requirement.
Next, petitioner claims failure of consideration. Nevertheless, in a
letter19 dated November 10, 1992, he expressed willingness to pay
W.L. Foods, or to replace the dishonored checks. This was a clear
acknowledgment of receipt of the goods, which gave rise to his duty
to maintain or deposit sufficient funds to cover the amount of the
checks.
More significantly, we are not swayed by petitioner's arguments that
the single incident of dishonor and his absence when the checks were
delivered belie fraud. Indeed damage and deceit are essential
elements of the offense and must be established with satisfactory
proof to warrant conviction.20 Deceit as an element of estafa is a
specie of fraud. It is actual fraud which consists in any
misrepresentation or contrivance where a person deludes another, to
his hurt. There is deceit when one is misled -- by guile, trickery or by
other means -- to believe as true what is really false.21
Prima facie evidence of deceit was established against petitioner with
regard to FEBTC Check No. 553615 which was dishonored for
insufficiency of funds. The letter22 of petitioner's counsel dated
November 10, 1992 shows beyond reasonable doubt that petitioner
received notice of the dishonor of the said check for insufficiency of
funds. Petitioner, however, failed to deposit the amounts necessary to
cover his check within three banking days from receipt of the notice
of dishonor. Hence, as provided for by law,23 the presence of deceit
was sufficiently proven.
Petitioner failed to overcome the said proof of deceit. The trial court
found no pre-existing obligation between the parties. The existence of
prior transactions between Lim and Dy alone did not rule out deceit
because each transaction was separate, and had a different
consideration from the others. Even as petitioner was absent when the
goods were delivered, by the principle of agency, delivery of the
checks by his driver was deemed as his act as the employer. The
evidence shows that as a matter of course, Dy, or his employee,
would pay W.L. Foods in either cash or check upon pick up of the
stocks of snack foods at the latter's branch or main office. Despite
17
their two-year standing business relations prior to the issuance of the
subject check, W.L Foods employees would not have parted with the
stocks were it not for the simultaneous delivery of the check issued
by petitioner.24Aside from the existing business relations between
petitioner and W.L. Foods, the primary inducement for the latter to
part with its stocks of snack foods was the issuance of the check in
payment of the value of the said stocks.
In a number of cases,25 the Court has considered good faith as a
defense to a charge of estafa by postdating a check. This good faith
may be manifested by making arrangements for payment with the
creditor and exerting best efforts to make good the value of the
checks. In the instant case petitioner presented no proof of good faith.
Noticeably absent from the records is sufficient proof of sincere and
best efforts on the part of petitioner for the payment of the value of
the check that would constitute good faith and negate deceit.
With the foregoing circumstances established, we find petitioner
guilty of estafa with regard to FEBTC Check No. 553615
for P226,794.36.
The same, however, does not hold true with respect to FEBTC Check
No. 553602 for P106,579.60. This check was dishonored for the
reason that it was drawn against uncollected deposit. Petitioner
had P160,659.39 in his savings deposit account ledger as of July 22,
1992. We disagree with the conclusion of the RTC that since the
balance included a regional clearing check worth P55,000 deposited
on July 20, 1992, which cleared only five (5) days later, then
petitioner had inadequate funds in this instance. Since petitioner
technically and retroactively had sufficient funds at the time Check
No. 553602 was presented for payment then the second element
(insufficiency of funds to cover the check) of the crime is absent.
Also there is no prima facie evidence of deceit in this instance
because the check was not dishonored for lack or insufficiency of
funds. Uncollected deposits are not the same as insufficient funds.
The prima facie presumption of deceit arises only when a check has
been dishonored for lack or insufficiency of funds. Notably, the law
speaks of insufficiency of funds but not of uncollected deposits.
Jurisprudence teaches that criminal laws are strictly construed against
the Government and liberally in favor of the accused. 26 Hence, in the
instant case, the law cannot be interpreted or applied in such a way as
to expand its provision to encompass the situation of uncollected
deposits because it would make the law more onerous on the part of
the accused.
Clearly, the estafa punished under Article 315, paragraph 2(d) of the
Revised Penal Code is committed when a check is dishonored for
being drawn against insufficient funds or closed account, and not
against uncollected deposit.27 Corollarily, the issuer of the check is
not liable for estafa if the remaining balance and the uncollected
deposit, which was duly collected, could satisfy the amount of the
check when presented for payment.
Second, did petitioner violate B.P. Blg. 22?
Petitioner argues that the blank checks were not valid orders for the
bank to pay the holder of such checks. He reiterates lack of
knowledge of the insufficiency of funds and reasons that the checks
could not have been issued to apply on account or for value as he did
not obtain delivery of the goods.
The OSG maintains that the guilt of petitioner has been proven
beyond reasonable doubt. It cites pieces of evidence that point to Dy's
culpability: Maraca's acknowledgment that the checks were issued to
W.L. Foods as consideration for the snacks; Lim's testimony proving
that Dy received a copy of the demand letter; the bank manager's
confirmation that petitioner had insufficient balance to cover the
checks; and Dy's failure to settle his obligation within five (5) days
from dishonor of the checks.
Once again, we find the petition to be meritorious in part.
The elements of the offense penalized under B.P. Blg. 22 are as
follows: (1) the making, drawing and issuance of any check to apply
to account or for value; (2) the knowledge of the maker, drawer or
issuer that at the time of issue he does not have sufficient funds in or
credit with the drawee bank for the payment of such check in full
upon its presentment; and (3) subsequent dishonor of the check by the
drawee bank for insufficiency of funds or credit or dishonor for the
same reason had not the drawer, without any valid cause, ordered the
bank to stop payment.28 The case at bar satisfies all these elements.
During the joint pre-trial conference of this case, Dy admitted that he
issued the checks, and that the signatures appearing on them were
his.29 The facts reveal that the checks were issued in blank because of
the uncertainty of the volume of products to be retrieved, the discount
that can be availed of, and the deduction for bad orders. Nevertheless,
we must stress that what the law punishes is simply the issuance of a
bouncing check and not the purpose for which it was issued nor the
terms and conditions relating thereto.30 If inquiry into the reason for
which the checks are issued, or the terms and conditions of their
issuance is required, the public's faith in the stability and commercial
value of checks as currency substitutes will certainly erode.31
Moreover, the gravamen of the offense under B.P. Blg. 22 is the act
of making or issuing a worthless check or a check that is dishonored
upon presentment for payment. The act effectively declares the
offense to be one of malum prohibitum. The only valid query, then, is
whether the law has been breached, i.e., by the mere act of issuing a
bad check, without so much regard as to the criminal intent of the
issuer.32 Indeed, non-fulfillment of the obligation is immaterial. Thus,
petitioner's defense of failure of consideration must likewise fall. This
is especially so since as stated above, Dy has acknowledged receipt
of the goods.
On the second element, petitioner disputes notice of insufficiency of
funds on the basis of the check being issued in blank. He relies
on Dingle v. Intermediate Appellate Court33 and Lao v. Court of
Appeals34 as his authorities. In both actions, however, the accused
were co-signatories, who were neither apprised of the particular
transactions on which the blank checks were issued, nor given notice
of their dishonor. In the latter case, Lao signed the checks without
knowledge of the insufficiency of funds, knowledge she was not
expected or obliged to possess under the organizational structure of
the corporation.35 Lao was only a minor employee who had nothing
to do with the issuance, funding and delivery of checks.36 In contrast,
petitioner was the proprietor of Dyna Marketing and the sole
signatory of the checks who received notice of their dishonor.
Significantly, under Section 237 of B.P. Blg. 22, petitioner was prima
facie presumed to know of the inadequacy of his funds with the bank
when he did not pay the value of the goods or make arrangements for
their payment in full within five (5) banking days upon notice. His
letter dated November 10, 1992 to Lim fortified such presumption.
Undoubtedly, Dy violated B.P. Blg. 22 for issuing FEBTC Check No.
553615. When said check was dishonored for insufficient funds and
stop payment order, petitioner did not pay or make arrangements with
the bank for its payment in full within five (5) banking days.
Petitioner should be exonerated, however, for issuing FEBTC Check
No. 553602, which was dishonored for the reason DAUD or drawn
against uncollected deposit. When the check was presented for
payment, it was dishonored by the bank because the check deposit
made by petitioner, which would make petitioner's bank account
balance more than enough to cover the face value of the subject
check, had not been collected by the bank.
In Tan v. People,38 this Court acquitted the petitioner therein who was
indicted under B.P. Blg. 22, upon a check which was dishonored for
the reason DAUD, among others. We observed that:
In the second place, even without relying on the credit line,
petitioner's bank account covered the check she issued because even
18
though there were some deposits that were still uncollected the Digest:
deposits became "good" and the bank certified that the check was
"funded."39 FACTS:

To be liable under Section 140 of B.P. Blg. 22, the check must be  Since 1990, John Dy under the business name Dyna MarketinG has
dishonored by the drawee bank for insufficiency of funds or credit or been the distributor of W.L. Food Products (W.L. Foods)
dishonored for the same reason had not the drawer, without any valid
cause, ordered the bank to stop payment.
 Dy would pay W.L. Foods in either cash or check upon pick up of
In the instant case, even though the check which petitioner deposited stocks of snack foods
on July 20, 1992 became good only five (5) days later, he was
considered by the bank to retroactively have had P160,659.39 in his
account on July 22, 1992. This was more than enough to cover the
check he issued to respondent in the amount of P106,579.60. Under  At times, he would entrust the payment to one of his drivers.
the circumstance obtaining in this case, we find the petitioner had
issued the check, with full ability to abide by his commitment 41 to
pay his purchases.  June 24, 1992: Dy's driver went to the branch office of W.L. Foods to
pick up stocks of snack foods.
Significantly, like Article 315 of the Revised Penal Code, B.P. Blg.
22 also speaks only of insufficiency of funds and does not treat of
uncollected deposits. To repeat, we cannot interpret the law in such a
 He introduced himself to the checker, Mary Jane D. Maraca, who
way as to expand its provision to encompass the situation of
upon confirming Dy's credit with the main office, gave him
uncollected deposits because it would make the law more onerous on
merchandise worth P106,579.60
the part of the accused. Again, criminal statutes are strictly construed
against the Government and liberally in favor of the accused. 42
As regards petitioner's civil liability, this Court has previously ruled  In return, the driver handed her a blank Far East Bank and Trust
that an accused may be held civilly liable where the facts established Company (FEBTC) Check postdated July 22, 1992 signed by Dy
by the evidence so warrant.43 The rationale for this is simple. The
criminal and civil liabilities of an accused are separate and distinct
from each other. One is meant to punish the offender while the other  July 1, 1992: the driver obtained snack foods worth P226,794.36 in
is intended to repair the damage suffered by the aggrieved party. So, exchange for a blank FEBTC Check postdated July 31, 1992
for the purpose of indemnifying the latter, the offense need not be
proved beyond reasonable doubt but only by preponderance of
evidence.44
 In both instances, the driver was issued an unsigned delivery receipt.
We therefore sustain the appellate court's award of damages to W.L.
Foods in the total amount of P333,373.96, representing the sum of the
checks petitioner issued for goods admittedly delivered to his  When presented for payment, FEBTC dishonored the checks for
company. insufficiency of funds.
As to the appropriate penalty, petitioner was charged
with estafa under Article 315, paragraph 2(d) of the Revised Penal
Code, as amended by Presidential Decree No. 818 45 (P.D. No. 818).  Later, Gonzales sent Atty. Jimeno another letter advising her that
FEBTC Check for P106,579.60 was returned to the drawee bank for
Under Section 146 of P.D. No. 818, if the amount of the fraud the reasons stop payment order and drawn against uncollected deposit
exceeds P22,000, the penalty of reclusión temporal is imposed in its (DAUD), and not because it was drawn against insufficient funds as
maximum period, adding one year for each additional P10,000 but stated in the first letter.
the total penalty shall not exceed thirty (30) years, which shall be
termed reclusión perpetua.47Reclusión perpetua is not the prescribed
penalty for the offense, but merely describes the penalty actually
 Dy's savings deposit account ledger reflected a balance
imposed on account of the amount of the fraud involved.
of P160,659.39 as of July 22, 1992. This, however, included a
WHEREFORE, the petition is PARTLY GRANTED. John Dy is regional clearing check for P55,000 which he deposited on July 20,
hereby ACQUITTED in Criminal Case No. Q-93-46711 for estafa, 1992, and which took 5 banking days to clear.
and Criminal Case No. Q-93-46712 for violation of B.P. Blg. 22, but
he is ORDERED to pay W.L. Foods the amount of P106,579.60 for
goods delivered to his company.  When William Lim, owner of W.L. Foods, phoned Dy about the
matter, the latter explained that he could not pay since he had no
In Criminal Case No. Q-93-46713 for estafa, the Decision of the
funds yet.
Court of Appeals is AFFIRMED with MODIFICATION.
Petitioner is sentenced to suffer an indeterminate penalty of twelve
(12) years of prisión mayor, as minimum, to thirty (30) years
of reclusión perpetua, as maximum.  This prompted the former to send petitioner a demand letter, which
the latter ignored.
In Criminal Case No. Q-93-46714 for violation of B.P. Blg. 22, the
Decision of the Court of Appeals is AFFIRMED, and John Dy is
hereby sentenced to one (1) year imprisonment and ordered to  July 16, 1993: Lim charged Dy with 2 counts of estafa under Article
indemnify W.L. Foods in the amount of P226,794.36. 315, paragraph 2(d) of RPC and 2 counts of violation of B.P. Blg. 22
SO ORDERED.

 RTC convicted Dy on two counts each of estafa and violation of B.P.

Blg. 22.

19

 CA: affirmed
 Dy contends that the checks were ineffectively issued
 W.L. Foods' accountant had no authority to fill the amounts
ISSUE: W/N Dy is liable for estafa and in violation of BP 22.
Acquitted for the criminal cases in relation to the first check.
HELD: YES but only for the 2nd check.
 estafa under Article 315, paragraph 2(d) of the Revised Penal Code,
as amended by Republic Act No. 4885 elements
1. postdating or issuance of a check in payment of an obligation
contracted at the time the check was issued
2. insufficiency of funds to cover the check - including the uncollected
deposit he had more than enough funds to cover the first check
3. damage to the payee
 Section 191 of the Negotiable Instruments Law
 "issue" - first delivery of an instrument, complete in form, to a person
who takes it as a holder
 Significantly, delivery is the final act essential to the negotiability of
an instrument. Delivery denotes physical transfer of the instrument by
the maker or drawer coupled with an intention to convey title to the
payee and recognize him as a holder. It means more than handing
over to another; it imports such transfer of the instrument to another
as to enable the latter to hold it for himself
 Even if the checks were given to W.L. Foods in blank, this alone did
not make its issuance invalid.
 When the checks were delivered to Lim, through his employee, he
became a holder with prima facie authority to fill the blanks
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 aprima facie authority to fill
it up as such for any amount.
 law merely requires that the instrument be in the possession of a
person other than the drawer or maker
 From such possession, together with the fact that the instrument is
wanting in a material particular, the law presumes agency to fill up
the blanks
 burden of proving want of authority or that the authority granted was
exceeded, is placed on the person questioning such authority - Dy
didn't fulfill this
 estafa punished under Article 315, paragraph 2(d) of the Revised
Penal Code is committed when a check is dishonored for being drawn
against insufficient funds or closed account, and not against
uncollected deposit. Corollarily, the issuer of the check is not liable
for estafa if the remaining balance and the uncollected deposit, which
was duly collected, could satisfy the amount of the check when
presented for payment.
 B.P. Blg. 22 elements = malum prohibitum
 the making, drawing and issuance of any check to apply to account or
for value
 the knowledge of the maker, drawer or issuer that at the time of issue
he does not have sufficient funds in or credit with the drawee bank
for the payment of such check in full upon its presentment
 subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit or dishonor for the same reason had
not the drawer, without any valid cause, ordered the bank to stop
payment - considered by the bank to retroactively have
had P160,659.39 in his account on July 22, 1992 which was more
than enough to cover the first check
 Dy admitted that he issued the checks, and that the signatures
appearing on them were his
 Section 2 of B.P. Blg. 22, petitioner was prima facie presumed to
know of the inadequacy of his funds with the bank when he did not
pay the value of the goods or make arrangements for their payment in
full within 5 banking days upon notice
[G.R. No. 142047. July 10, 2006]
SPS. SERGIO AND MILAGROS OJEDA versus ANDRELINA
ORBETA
Third Division
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court
dated JULY 10, 2006.
G.R. No. 142047 (Sps. Sergio and Milagros Ojeda versus Andrelina
Orbeta)
Petitioner spouses Sergio Ojeda and Milagros Ojeda seek a reversal
of the February 24, 2000 Decision[1]cralawrendered by the Court of
Appeals in CA-G.R. CV No. 59985 entitled Andrelina Orbeta v. Sps.
Sergio Ojeda and Milagros Ojeda. The questioned decision affirmed
the February 23, 1995 Decision[2]cralaw of the Regional Trial Court,
Branch 106 of Quezon City in Civil Case No. Q-91-7794.
The facts of this case are not complicated.
From 1986 to 1989, the spouses Ojeda obtained various loans they
would use as additional capital from Andrelina Orbeta, a general
merchandiser and former market stall holder. Over time, Orbeta
extended a total of 18 loans to the spouses.[3]cralaw Although the
couple failed to pay their obligations on time, Orbeta continued to
accommodate them, and lent them more money on the assurance that
they would soon pay all their debts. Every time Orbeta would
verbally demand payment, she was told that payment was
forthcoming and there was nothing to worry about since the spouses'
business was doing well and the couple had a daughter based in Japan
who always sent them money. To their sincerity, they aver, they even
delivered a copy of the registration papers of one of their vehicles to
Orbeta.
Notwithstanding all their promises, however, the spouses' obligations
remained unpaid. Orbeta made numerous demands but all attempts to
collect from the couple proved futile. Frustrated by their failure to
pay, Orbeta through her lawyer sent a demand letter to the spouses on
March 1989.[4]cralaw Eventually, on July 1989, after an accounting
of all outstanding loans due, Milagros Ojeda issued Security Bank
and Trust Company Check No. 027836 dated September 1, 1989 for
P487,133.87, representing full settlement of all obligations due in
favor of Orbeta. When presented for payment, however, the check
was dishonored for having been drawn against an account already
closed.
Consequently, Orbeta filed Criminal Case No. Q-90-10226 for
violation of Batas Pambansa Bilang 22 against Milagros Ojeda with
20
 the Regional Trial Court of Quezon City.[5]cralaw After a plea of
guilty, judgment was rendered against the accused in a
decision[6]cralaw dated October 11, 1990. The dispositive portion of
the decision read:
WHEREFORE, considering the plea of Guilty entered by accused
Milagros Ojeda this morning, the Court hereby renders judgment:
1. Finding said accused GUILTY beyond reasonable doubt of the
offense charged;
2. Sentencing her to suffer the penalty of ONE (1) YEAR
imprisonment; and
3. To pay costs.
The decision was promulgated in open Court this morning in the
presence of the accused herself, Assistant City Prosecutor Perpetuo
LB Alonzo and Atty. Renerio S. Payumo.
SO ORDERED.
Consistent with the reservation made by Ojeda in the BP 22 case,
Civil Case No. Q-91-7794 was subsequently filed against the spouses
to collect on the civil aspect of the BP 22 case. In the civil case, the
Regional Trial Court ruled as follows:
WHEREFORE, finding no cogent reason to deny the relief being
prayed for, the cause of action of plaintiff having been fully
established and proven by preponderant evidence, judgment is hereby
rendered ordering defendants to pay plaintiff:
1. The amount of Four Hundred Eighty Seven Thousand One
Hundred Thirteen and 87/100 (P487,113.87) pesos with 12% interest
from filing of the case until fully paid.
2. 25% of the principal obligation as and by way of attorney's
fees.
3. Cost of suit.
SO ORDERED.[7]cralaw
Aggrieved, the spouses brought their case to the Court of Appeals
where the Regional Trial Court's judgment was affirmed, to wit:
WHEREFORE, with the sole modification that the award for
attorney's fee[s] is hereby eliminated, the Judgment appealed from is
in all other respects AFFIRMED, with the costs of this instance to be
taxed against the defendants-appellants.
SO ORDERED.[8]cralaw
Before us now are the following issues: (1) Are the spouses liable for
issuing Security Bank and Trust Company Check No. 027836? (2)
Did the Court of Appeals err in upholding the propriety of the civil
case that was instituted separately from the BP 22 case?
To justify their prayer for a reversal of the Court of Appeals' decision,
the spouses insist that there are special and important reasons present
in the case which constitute a question of law and there was a
misapprehension of facts committed by the Court of Appeals which
must be rectified.
Petitioners maintain that any obligation arising from Security Bank
and Trust Company Check No. 027836 is invalid and illegal since the
same was issued in blank except for the signature of Milagros Ojeda.
They further claim that they already paid P55,000 to satisfy their
obligation to Orbeta of P30,000 only. The couple also aver that the
motion of Orbeta to file a separate civil action was merely noted by
the Regional Trial Court in the BP 22 case and there was no order
granting the institution of a separate civil action.
Respondent Orbeta, on the other hand, counters that the errors raised
by the spouses deal with questions of fact which have already been
passed upon and decided by the Regional Trial Court and the Court
of Appeals and cannot now be raised in this petition for review.
Orbeta also contends that, the couple cannot assert for the first time
that the motion to file a separate civil action was merely noted and no
order was issued by the Regional Trial Court granting the same since
a full blown trial had been conducted without the said issue having
been raised by the spouses, hence, they are barred from doing so,
since they are considered to have waived any objection they may
have had on the subject. Finally, Orbeta points out that the judgment
in the BP 22 case did not contain an award for civil liability which is
tantamount to the Regional Trial Court's approval of the
motion.[9]cralaw
To resolve the first issue, we must here emphasize that the
jurisdiction of this Court in a petition such as this is limited to
reviewing errors of law that might have been committed by the lower
court. The allegation of the spouses that Security Bank and Trust
Company Check No. 027836 was delivered to Orbeta in blank except
for the signature of Milagros Ojeda and the amount of P10,000
annotated at the back of the check, and their contention that they
cannot be held liable for the face value of the check since Milagros
Ojeda was not the one who filled up the date, name of the payee and
the amount appearing on the check, are questions of fact that require
us to re-examine the evidence presented by the contending parties
during trial. This cannot be done in a petition for review. Under Rule
45, only questions of law may be raised in a petition for review,
except in very few specified instances, e.g. where there is variance in
the factual findings of the trial and appellate courts. Since both the
Regional Trial Court and the Court of Appeals agree on the cited
facts, we are bound by their factual findings.
In any event, the spouses do not deny that the check was delivered to
Orbeta and that the signature appearing on the check belongs to
Milagros Ojeda. Even if the check was delivered to Orbeta in blank,
we must stress that the presumption is that the latter had prima
facie authority to complete the check by filling up the same. Here, the
provision of Section 14 of the Negotiable Instruments Law is
pertinent:
SEC. 14. Blanks; when may be filled. - Where the instrument is
wanting in any material particular, the person in possession thereof
has a prima facie authority to complete it by filling up the
blankstherein. And a signature on a blank paper delivered by the
person making the signature in order that the paper may be converted
into a negotiable instrument operates as a prima facie authority to fill
it up as such for any amount. In order, however, that any such
instrument, when completed may be enforced against any person who
became a party thereto prior to its completion, it must be filled up
strictly in accordance with the authority given and within a
reasonable time. But if any such instrument, after completion, is
negotiated to a holder in due course, it is valid and effectual for all
purposes in his hands, and he may enforce it as if it had been filled up
strictly in accordance with the authority given and within a
reasonable time. (Emphasis supplied.)
The law merely requires that the instrument be in the possession of a
person other than the drawer or maker, and from such possession,
together with the fact that the instrument is wanting in a material
particular, the law presumes agency to fill up the
blanks.[10]cralaw Because of the presumption of authority, the burden
of proving that there was no authority or that the authority granted
was exceeded is placed on the person questioning such
authority.[11]cralaw There is nothing on record to show that the prima
faciepresumption created by the afore-quoted section was
successfully refuted by the spouses. Therefore, the couple's stance
that they cannot be held liable for the check because they were not
the ones who wrote the date, the name of the payee and the amount,
is untenable.
On the second issue, it appears that an urgent motion to file a separate
civil action was filed by Orbeta on October 11, 1990, which motion
was correspondingly noted by the Regional Trial Court in its
decision.[12]cralaw Since the civil liability involved in this case is one
21
that arises from a crime, the rule is that the same is impliedly
instituted with the criminal action unless the offended party expressly
waives the civil action; reserves his right to institute it separately; or
institutes the civil action prior to the filing of the criminal
case.[13]cralaw The purpose of the rule requiring reservation is to
prevent the offended party from recovering damages twice for the
same act or omission.[14]cralaw
Orbeta's intention to reserve her right to recover the civil liability
arising from the BP 22 case is clear from the time she filed the urgent
motion.[15]cralaw The fact that the Regional Trial Court did not
provide for an award of damages in its decision is also a clear
recognition of Orbeta's reservation.
Contrary to the spouses' argument, an order by the Regional Trial
Court granting the urgent motion to file a separate civil action is not
necessary since the rules only require that the offended party make
the reservation before the prosecution starts to present its evidence
and under circumstances affording the offended party a reasonable
opportunity to make such reservation.
Lastly, we agree with respondent that it is now too late for the
spouses to question the institution of the civil case separately from
the BP 22 case. A full blown trial was conducted in the civil case
with the participation of the spouses, but they never raised any
objection thereto, and they cannot be allowed here and now to raise
this issue for the first time.
WHEREFORE, the instant petition is DENIED. The February 24,
2000 Decision of the Court of Appeals sustaining the February 23,
1995 Decision of the Regional Trial Court is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Very truly yours,
(Sgd.) LUCITA ABJELINA-SORIANO
Clerk of Court
G.R. No. 150228 July 30, 2009
BANK OF AMERICA NT & SA, Petitioner,
vs.
PHILIPPINE RACING CLUB, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court from the Decision1 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.
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-appellee’s 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 corporation’s 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-appellee’s 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 corporation’s 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
corporation’s 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. PRCI’s demand for defendant-appellant to pay fell on deaf
ears. Hence, the complaint.4
22
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 (₱220,000.00)
Pesos, with legal interest to be computed from date of the filing of the
herein complaint;
(2) The sum of Twenty Thousand (₱20,000.00) Pesos by way of
attorney’s fees;
(3) The sum of Ten Thousand (₱10,000.00) Pesos for litigation
expenses, and
(4) 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. Petitioner’s 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 respondent’s loss was petitioner’s 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 respondent’s 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 court’s
award of attorney’s 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 attorney’s
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)
petitioner’s 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.
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-client’s genuine signatures. The genuine signatures of the
client’s duly authorized signatories affixed on the checks signify the
order for payment. Thus, pursuant to the said obligation, the drawee
bank has the duty to determine whether the signatures appearing on
the check are the drawer-client’s or its duly authorized signatories. If
the signatures are genuine, the bank has the unavoidable legal and
contractual duty to pay. If the signatures are forged and falsified, the
drawee bank has the corollary, but equally unavoidable legal and
contractual, duty not to pay.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 respondent’s authorized joint
signatories; namely, Antonia Reyes and Gregorio Reyes who were
respondent’s 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 client’s account meticulously and with the
highest degree of care, considering the fiduciary nature of their
relationship. The diligence required of banks, therefore, is more than
that of a good father of a family.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 petitioner’s 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 petitioner’s 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.
23
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. Respondent’s witness testified that for checks in
amounts greater than Twenty Thousand Pesos (₱20,000.00) it is the
company’s 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 bank’s
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 petitioner’s employees on guard that the
checks were possibly not issued by the respondent in due course of its
business. Petitioner’s 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 petitioner’s operations
manager that in case of an irregularity on the face of the check (such
as when blanks were not properly filled out) the bank may or may not
call the client depending on how busy the bank is on a particular
day,15 we are even more convinced that petitioner’s safeguards to
protect clients from check fraud are arbitrary and subjective. Every
client should be treated equally by a banking institution regardless of
the amount of his deposits and each client has the right to expect that
every centavo he entrusts to a bank would be handled with the same
degree of care as the accounts of other clients. Perforce, we find that
petitioner plainly failed to adhere to the high standard of diligence
expected of it as a banking institution.
In defense of its cashier/teller’s questionable action, petitioner insists
that pursuant to Sections 1416 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 petitioner’s
view, the sole 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
respondent’s 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
Petitioner’s 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 respondent’s 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
respondent’s 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, petitioner’s 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 Petitioner’s 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
respondent’s own negligence to mitigate petitioner’s liability. Article
2179 of the Civil Code provides:
Art. 2179. When the plaintiff’s 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 defendant’s lack of due care, the
plaintiff may recover damages, but the courts shall mitigate the
damages to be awarded.1avvph!1
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, respondent’s 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
respondent’s business. As testified to by petitioner’s 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 drawer’s 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.
24
 We also cannot ignore the fact that the person who stole the pre- proximate cause of the encashment was the respondent’s negligent
signed checks subject of this case from respondent’s accountant practice of delivering pre-signed check to its accountant.
turned out to be another employee, purportedly a clerk in
respondent’s accounting department. As the employer of the "thief," Issue: Whether or not petitioner bank is obligated to verify said
respondent supposedly had control and supervision over its own checks to respondent.
employee. This gives the Court more reason to allocate part of the
loss to respondent.
Held: Anent Petitioner’s contention that it could validly
Following established jurisprudential precedents,27 we believe the presume that the check was filled up with authority and
allocation of sixty percent (60%) of the actual damages involved in intentionally delivered:
this case (represented by the amount of the checks with legal interest)
to petitioner is proper under the premises. Respondent should, in light It would have been correct if the subject checks were
of its contributory negligence, bear forty percent (40%) of its own correctly and properly filled out by the thief and presented to the
loss. 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
Finally, we find that the awards of attorney’s fees and litigation checks and it could validly presume that there was proper delivery to
expenses in favor of respondent are not justified under the the holder.
circumstances and, thus, must be deleted. The power of the court to
award attorney’s fees and litigation expenses under Article 2208 of The irregularities on the check would have prompted the
the NCC28 demands factual, legal, and equitable justification.
Bank of America’s employee to verify it with respondent. Petitioner
An adverse decision does not ipso facto justify an award of attorney’s
could have made a simple phone call to its client to clarify the
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, irregularities and the loss to respondent due to the encashment of the
still attorney’s fees may not be awarded where no sufficient showing stolen checks would have been prevented.
of bad faith could be reflected in a party’s persistence in a case other
than an erroneous conviction of the righteousness of his cause. 30
WHEREFORE, the Decision of the Court of Appeals dated July 16,
2001 and its Resolution dated September 28, 2001 are AFFIRMED PROXIMATE CAUSE
with the following MODIFICATIONS: (a) petitioner Bank of
On the contention that it was respondent’ act of issuing pre-signed
America NT & SA shall pay to respondent Philippine Racing Club
check, the Supreme Court held that, although the respondent was also
sixty percent (60%) of the sum of Two Hundred Twenty Thousand
negligent, but under the doctrine of Last clear chance, the law
Pesos (₱220,000.00) with legal interest as awarded by the trial court
provides that “who had a last clear opportunity to avoid the
and (b) the awards of attorney’s fees and litigation expenses in favor
impending harm but failed to do so is chargeable with the
of respondent are deleted.
consequences thereof. At the most, the respondents liability is meely
Proportionate costs. contributory
SO ORDERED.
Digest: In the interest of fairness, however, we believe it is proper to consider
Facts: respondent’s own negligence to mitigate petitioner’s liability. Article
 Respondent PRCI is a domestic corporation which maintains several 2179 of the Civil Code provides:
accounts with different banks in the Metro Manila area; among the
accounts maintained was with Bank of America- The authorize
signatories are the president and the vice-president of the corporation, Art. 2179. When the plaintiff’s own negligence was the
respectively. immediate and proximate cause of his injury, he cannot recover
damages. But if his negligence was only contributory, the immediate
 Sometime in Dec 1988. The president and the vice-president of the
and proximate cause of the injury being the defendant’s lack of due
corporation went abroad. So, in order to insure continuity of business
care, the plaintiff may recover damages, but the courts shall mitigate
operation, the president and the vice-president of the corporation left
the damages to be awarded.
a pre-signed check and entrusted to the accountant;
 It turned out that on December 16, 1988, a John Doe presented two
(2) checks to Bank of America for encashment; the two (2) checks
had similar entries with similar infirmities and irregularities. Following established jurisprudential precedents, we believe the
 Under the line for the payee, the upper line has a typewritten word allocation of sixty percent (60%) of the actual damages involved in
“CASH” and the lower line has a type written word “ONE this case (represented by the amount of the checks with legal interest)
HUNDRED TEN THOUSAND PESOS ONLY.”
to petitioner is proper under the premises. Respondent should, in
 Despite the highly irregular entries on the face of the checks bank of
America encashed said checks. light of its contributory negligence, bear forty percent (40%) of its

 The RTC ordered Bank of America to pay respondent PRCI the value own loss.
of the two (2) checks, plus damages and attorney’s fees.
 Petitioner bank of America contended that since the instrument is
incomplete but delivered or complete but undelivered, 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. And the

25
G.R. No. 111190 June 27, 1995
LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City
and in his personal capacity as garnishee, petitioner,
vs.
HON. JOSE P. BURGOS, Presiding Judge, RTC, Br. XVII, Cebu
City, and RAUL H. SESBREÑO, respondents.
BELLOSILLO, J.:
RAUL H. SESBREÑO filed a complaint for damages against
Assistant City Fiscals Bienvenido N. Mabanto, Jr., and Dario D.
Rama, Jr., before the Regional Trial Court of Cebu City. After trial
judgment was rendered ordering the defendants to pay P11,000.00 to
the plaintiff, private respondent herein. The decision having become
final and executory, on motion of the latter, the trial court ordered its
execution. This order was questioned by the defendants before the
Court of Appeals. However, on 15 January 1992 a writ of execution
was issued.
On 4 February 1992 a notice of garnishment was served on petitioner
Loreto D. de la Victoria as City Fiscal of Mandaue City where
defendant Mabanto, Jr., was then detailed. The notice directed
petitioner not to disburse, transfer, release or convey to any other
person except to the deputy sheriff concerned the salary checks or
other checks, monies, or cash due or belonging to Mabanto, Jr., under
penalty of law. 1 On 10 March 1992 private respondent filed a motion
before the trial court for examination of the garnishees.
On 25 May 1992 the petition pending before the Court of Appeals
was dismissed. Thus the trial court, finding no more legal obstacle to
act on the motion for examination of the garnishees, directed
petitioner on 4 November 1992 to submit his report showing the
amount of the garnished salaries of Mabanto, Jr., within fifteen (15)
days from receipt 2 taking into consideration the provisions of Sec.
12, pars. (f) and (i), Rule 39 of the Rules of Court.
On 24 November 1992 private respondent filed a motion to require
petitioner to explain why he should not be cited in contempt of court
for failing to comply with the order of 4 November 1992.
On the other hand, on 19 January 1993 petitioner moved to quash the
notice of garnishment claiming that he was not in possession of any
money, funds, credit, property or anything of value belonging to
Mabanto, Jr., except his salary and RATA checks, but that said
checks were not yet properties of Mabanto, Jr., until delivered to him.
He further claimed that, as such, they were still public funds which
could not be subject to garnishment.
On 9 March 1993 the trial court denied both motions and ordered
petitioner to immediately comply with its order of 4 November
1992. 3 It opined that the checks of Mabanto, Jr., had already been
released through petitioner by the Department of Justice duly signed
by the officer concerned. Upon service of the writ of garnishment,
petitioner as custodian of the checks was under obligation to hold
them for the judgment creditor. Petitioner became a virtual party to,
or a forced intervenor in, the case and the trial court thereby acquired
jurisdiction to bind him to its orders and processes with a view to the
complete satisfaction of the judgment. Additionally, there was no
sufficient reason for petitioner to hold the checks because they were
no longer government funds and presumably delivered to the payee,
conformably with the last sentence of Sec. 16 of the Negotiable
Instruments Law.
With regard to the contempt charge, the trial court was not morally
convinced of petitioner's guilt. For, while his explanation suffered
from procedural infirmities nevertheless he took pains in enlightening
the court by sending a written explanation dated 22 July 1992
requesting for the lifting of the notice of garnishment on the ground
that the notice should have been sent to the Finance Officer of the
Department of Justice. Petitioner insists that he had no authority to
segregate a portion of the salary of Mabanto, Jr. The explanation
however was not submitted to the trial court for action since the
stenographic reporter failed to attach it to the record. 4
On 20 April 1993 the motion for reconsideration was denied. The
trial court explained that it was not the duty of the garnishee to
inquire or judge for himself whether the issuance of the order of
execution, writ of execution and notice of garnishment was justified.
His only duty was to turn over the garnished checks to the trial court
which issued the order of execution. 5
Petitioner raises the following relevant issues: (1) whether a check
still in the hands of the maker or its duly authorized representative is
owned by the payee before physical delivery to the latter: and, (2)
whether the salary check of a government official or employee
funded with public funds can be subject to garnishment.
Petitioner reiterates his position that the salary checks were not
owned by Mabanto, Jr., because they were not yet delivered to him,
and that petitioner as garnishee has no legal obligation to hold and
deliver them to the trial court to be applied to Mabanto, Jr.'s judgment
debt. The thesis of petitioner is that the salary checks still formed part
of public funds and therefore beyond the reach of garnishment
proceedings.
Petitioner has well argued his case.
Garnishment is considered as a species of attachment for reaching
credits belonging to the judgment debtor owing to him from a
stranger to the litigation. 6 Emphasis is laid on the phrase "belonging
to the judgment debtor" since it is the focal point in resolving the
issues raised.
As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is
public funds. He receives his compensation in the form of checks
from the Department of Justice through petitioner as City Fiscal of
Mandaue City and head of office. Under Sec. 16 of the Negotiable
Instruments Law, every contract on a negotiable instrument is
incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. As ordinarily understood, delivery
means the transfer of the possession of the instrument by the maker
or drawer with intent to transfer title to the payee and recognize him
as the holder thereof.7
According to the trial court, the checks of Mabanto, Jr., were already
released by the Department of Justice duly signed by the officer
concerned through petitioner and upon service of the writ of
garnishment by the sheriff petitioner was under obligation to hold
them for the judgment creditor. It recognized the role of petitioner
as custodian of the checks. At the same time however it considered
the checks as no longer government funds and presumed delivered to
the payee based on the last sentence of Sec. 16 of the Negotiable
Instruments Law which states: "And where the instrument is no
longer in the possession of a party whose signature appears thereon, a
valid and intentional delivery by him is presumed." Yet, the
presumption is not conclusive because the last portion of the
provision says "until the contrary is proved." However this phrase
was deleted by the trial court for no apparent reason. Proof to the
contrary is its own finding that the checks were in the custody of
petitioner. Inasmuch as said checks had not yet been delivered to
Mabanto, Jr., they did not belong to him and still had the character of
public funds. In Tiro v. Hontanosas 8 we ruled that —
The salary check of a government officer or employee such as a
teacher does not belong to him before it is physically delivered to
him. Until that time the check belongs to the government.
Accordingly, before there is actual delivery of the check, the payee
has no power over it; he cannot assign it without the consent of the
Government.
As a necessary consequence of being public fund, the checks may not
be garnished to satisfy the judgment. 9 The rationale behind this
doctrine is obvious consideration of public policy. The Court
26
succinctly stated in Commissioner of Public Highways v. San
Diego 10 that —
The functions and public services rendered by the State cannot be
allowed to be paralyzed or disrupted by the diversion of public funds
from their legitimate and specific objects, as appropriated by law.
In denying petitioner's motion for reconsideration, the trial court
expressed the additional ratiocination that it was not the duty of the
garnishee to inquire or judge for himself whether the issuance of the
order of execution, the writ of execution, and the notice of
garnishment was justified, citing our ruling in Philippine Commercial
Industrial Bank v. Court of Appeals. 11 Our precise ruling in that case
was that "[I]t is not incumbent upon the garnishee to inquire or to
judge for itself whether or not the order for the advance execution of
a judgment is valid." But that is invoking only the general rule. We
have also established therein the compelling reasons, as exceptions
thereto, which were not taken into account by the trial court, e.g., a
defect on the face of the writ or actual knowledge by the garnishee of
lack of entitlement on the part of the garnisher. It is worth to note that
the ruling referred to the validity of advance execution of judgments,
but a careful scrutiny of that case and similar cases reveals that it was
applicable to a notice of garnishment as well. In the case at bench, it
was incumbent upon petitioner to inquire into the validity of the
notice of garnishment as he had actual knowledge of the non-
entitlement of private respondent to the checks in question.
Consequently, we find no difficulty concluding that the trial court
exceeded its jurisdiction in issuing the notice of garnishment
concerning the salary checks of Mabanto, Jr., in the possession of
petitioner.
WHEREFORE, the petition is GRANTED. The orders of 9 March
1993 and 20 April 1993 of the Regional Trial Court of Cebu City, Br.
17, subject of the petition are SET ASIDE. The notice of garnishment
served on petitioner dated 3 February 1992 is ordered
DISCHARGED.
SO ORDERED.
Quiason and Kapunan, JJ., concur.
Digest:
Facts:
Sesbreno filed a case against Mabanto Jr. among other people
wherein the court decided in favor of the plaintiff, ordering the
defendants to pay former a definite amount of cash. The
decision had become final and executory and a writ of execution
was issued. This was questioned in the CA by the defendants. In
the meanwhile, a notice of garnishment was issued to petitioner
who was then the City Fiscal. She was asked to withhold any
check or whatnot in favor of Mabanto Jr. The CA then
dismissed the defendant’s petition and the garnishment was
commenced only to find out that petitioner didn't follow instructions
of sheriff. She is now being held liable.
HELD:
Garnishment is considered as the species of attachment for
reaching credits belonging to the judgment debtor owing to him from
a stranger in litigation. Emphasis is laid on the phrase belonging to
the judgment debtor since it is the focal point of resolving the issues
raised.
As Assistant City Fiscal, the source of Mabanto’s salary is
public funds. Under Section 16 of the NIL, every contract on a
negotiable instrument is incomplete and revocable until delivery of
the instrument for the purpose of giving effect thereto. As
ordinarily understood, delivery means the transfer of the
possession of the instrument by the maker or drawer with intent to
transfer title to the payee and recognize him as the holder
thereof.
The petitioner is the custodian of the checks. Inasmuch as said
checks were in the custody of the petitioner and not yet
delivered to Mabanto, they didn't belong to him and still had the
character of public funds. The salary check of a government
officer or employee doesn't belong to him before it has been
physically delivered to him. Until that time the check belongs to
the government. Accordingly, before there is actual delivery of the
check, the payee has no power over it, he cannot assign it without the
consent of the government.
*If public funds would be allowed to be garnished, then basic
services of the government may be hampered.
G.R. No. 107898 December 19, 1995
MANUEL LIM and ROSITA LIM, petitioners,
vs.
COURT OF APPEALS and PEOPLE OF THE
PHILIPPINES, respondents.
BELLOSILLO, J.:
MANUEL LIM and ROSITA LIM, spouses, were charged before the
Regional Trial Court of Malabon with estafa on three (3) counts
under Art. 315, par. 2 (d), of The Revised Penal Code, docketed as
Crim. Cases Nos. 1696-MN to 1698-MN. The Informations
substantially alleged that Manuel and Rosita, conspiring together,
purchased goods from Linton Commercial Company, Inc.
(LINTON), and with deceit issued seven Consolidated Bank and
Trust Company (SOLIDBANK) checks simultaneously with the
delivery as payment therefor. When presented to the drawee bank for
payment the checks were dishonored as payment on the checks had
been stopped and/or for insufficiency of funds to cover the amounts.
Despite repeated notice and demand the Lim spouses failed and
refused to pay the checks or the value of the goods.
On the basis of the same checks, Manuel and Rosita Lim were also
charged with seven (7) counts of violation of B.P. Blg. 22, otherwise
known as the Bouncing Checks Law, docketed as Crim. Cases Nos.
1699-MN to 1705-MN. In substance, the Informations alleged that
the Lims issued the checks with knowledge that they did not have
sufficient funds or credit with the drawee bank for payment in full of
such checks upon presentment. When presented for payment within
ninety (90) days from date thereof the checks were dishonored by the
drawee bank for insufficiency of funds. Despite receipt of notices of
such dishonor the Lims failed to pay the amounts of the checks or to
make arrangements for full payment within five (5) banking days.
Manuel Lim and Rosita Lim are the president and treasurer,
respectively, of Rigi Bilt Industries, Inc. (RIGI). RIGI had been
transacting business with LINTON for years, the latter supplying the
former with steel plates, steel bars, flat bars and purlin sticks which it
uses in the fabrication, installation and building of steel structures. As
officers of RIGI the Lim spouses were allowed 30, 60 and sometimes
even up to 90 days credit.
On 27 May 1983 the Lims ordered 100 pieces of mild steel plates
worth P51,815.00 from LINTON which were delivered on the same
day at their place of business at 666 7th Avenue, 8th Street, Kalookan
City. To pay LINTON for the delivery the Lims issued SOLIDBANK
Check No. 027700 postdated 3 September 1983 in the amount of
P51,800.00.1
On 30 May 1983 the Lims ordered another 65 pieces of mild steel
plates worth P63,455.00 from LINTON which were delivered at their
place of business on the same day. They issued as payment
27
SOLIDBANK Check No. 027699 in the amount of P63,455.00 On appeal, the accused assailed the decision as they imputed error to
postdated 20 August 1983.2 the trial court as follows: (a) the regional Trial Court of malabon had
no jurisdiction over the cases because the offenses charged ere
The Lim spouses also ordered 2,600 "Z" purlins worth P241,800.00 committed outside its territory; (b) they could not be held liable for
which were delivered to them on various dates, to wit: 15 and 22 estafa because the seven (7) checks were issued by them several
April 1983; 11, 14, 20, 23, 25, 28 and 30 May 1983; and, 2 and 9 weeks after the deliveries of the goods; and, (c) neither could they be
June 1983. To pay for the deliveries, they issued seven SOLIDBANK held liable for violating B.P. Blg. 22 as they ordered payment of the
checks, five of which were — checks to be stopped because the goods delivered were not those
Check No. Date of Issue Amount specified by them, besides they had sufficient funds to pay the
checks.
027683 16 July 1983 P27,900.003
027684 23 July 1983 P27,900.004 In the decision of 18 September 199216 respondent Court of Appeals
027719 6 Aug. 1983 P32,550.005 acquitted accused-appellants of estafa on the ground that indeed the
027720 13 Aug. 1983 P27,900.006 checks were not made in payment of an obligation contracted at the
027721 27 Aug. 1983 P37,200.007 time of their issuance. However it affirmed the finding of the trial
court that they were guilty of having violated B.P. Blg. 22. 17 On 6
William Yu Bin, Vice President and Sales Manager of LINTON, November 1992 their motion for reconsideration was denied.18
testified that when those seven (7) checks were deposited with the
Rizal Commercial Banking Corporation they were dishonored for In the case at bench petitioners maintain that the prosecution failed to
"insufficiency of funds" with the additional notation "payment prove that any of the essential elements of the crime punishable under
stopped" stamped thereon. Despite demand Manuel and Rosita B.P. Blg. 22 was committed within the jurisdiction of the Regional
refused to make good the checks or pay the value of the deliveries. Trial Court of Malabon. They claim that what was proved was that all
the elements of the offense were committed in Kalookan City. The
Salvador Alfonso, signature verifier of SOLIDBANK, Grace Park checks were issued at their place of business, received by a collector
Branch, Kalookan City, where the Lim spouses maintained an of LINTON, and dishonored by the drawee bank, all in Kalookan
account, testified on the following transactions with respect to the City. Furthermore, no evidence whatsoever supports the proposition
seven (7) checks: that they knew that their checks were insufficiently funded. In fact,
CHECK NO. DATE PRESENTED REASON FOR DISHONOR some of the checks were funded at the time of presentment but
dishonored nonetheless upon their instruction to the bank to stop
027683 22 July 1983 Payment Stopped (PS)8 payment. In fine, considering that the checks were all issued,
027684 23 July 1983 PS and Drawn Against delivered, and dishonored in Kalookan City, the trial court of
Insufficient Fund (DAIF)9 Malabon exceeded its jurisdiction when it tried the case and rendered
027699 24 Aug. 1983 PS and DAIF10 judgment thereon.
027700 5 Sept. 1983 PS and DAIF11
027719 9 Aug. 1983 DAIF 12 The petition has no merit. Section 1, par. 1, of B.P. Blg. 22 punishes
027720 16 Aug. 1983 PS and DAIF13 "[a]ny person who makes or draws and issues any check to apply on
027721 30 Aug. 1983 PS and DAIF14 account or for value, knowing at the time of issue that he does not
have sufficient funds in or credit with the drawee bank for the
Manuel Lim admitted having issued the seven (7) checks in question payment of such check in full upon its presentment, which check is
to pay for deliveries made by LINTON but denied that his company's subsequently dishonored by the drawee bank for insufficiency of
account had insufficient funds to cover the amounts of the checks. He funds or credit or would have been dishonored for the same reason
presented the bank ledger showing a balance of P65,752.75. Also, he had not the drawer, without any valid reason, ordered the bank to stop
claimed that he ordered SOLIDBANK to stop payment because the payment . . ." The gravamen of the offense is knowingly issuing a
supplies delivered by LINTON were not in accordance with the worthless check.19 Thus, a fundamental element is knowledge on the
specifications in the purchase orders. part of the drawer of the insufficiency of his funds in 20 or credit with
the drawee bank for the payment of such check in full upon
Rosita Lim was not presented to testify because her statements would
presentment. Another essential element is subsequent dishonor of the
only be corroborative.
check by the drawee bank for insufficiency of funds or credit or
On the basis of the evidence thus presented the trial court held both would have been dishonored for the same reason had not the drawer,
accused guilty of estafa and violation of B.P. Blg. 22 in its decision without any valid reason, ordered the bank to stop payment. 21
dated 25 January 1989. In Crim. Case No. 1696-MN they were
It is settled that venue in criminal cases is a vital ingredient of
sentenced to an indeterminate penalty of six (6) years and one (1) day
jurisdiction.22 Section 14, par. (a), Rule 110, of the Revised Rules of
of prision mayor as minimum to twelve (12) years and one (1) day
Court, which has been carried over in Sec. 15, par. (a), Rule 110 of
of reclusion temporal as maximum plus one (1) year for each
the 1985 Rules on Criminal Procedure, specifically provides:
additional P10,000.00 with all the accessory penalties provided for by
law, and to pay the costs. They were also ordered to indemnify Sec. 14. Place where action is to be instituted. — (a) In all criminal
LINTON in the amount of P241,800.00. Similarly sentences were prosecutions the action shall be instituted and tried in the court of the
imposed in Crim. Cases Nos. 1697-MN and 1698-MN except as to municipality or province wherein the offense was committed or
the indemnities awarded, which were P63,455.00 and P51,800.00, anyone of the essential ingredients thereof took place.
respectively.
If all the acts material and essential to the crime and requisite of its
In Crim. Case No. 1699-MN the trial court sentenced both accused to consummation occurred in one municipality or territory, the court
a straight penalty of one (1) year imprisonment with all the accessory therein has the sole jurisdiction to try the case.23 There are certain
penalties provided for by law and to pay the costs. In addition, they crimes in which some acts material and essential to the crimes and
were ordered to indemnify LINTON in the amount of P27,900.00. requisite to their consummation occur in one municipality or territory
Again, similar sentences were imposed in Crim. Cases Nos. 1700- and some in another, in which event, the court of either has
MN to 1705-MN except for the indemnities awarded, which were jurisdiction to try the cases, it being understood that the first court
P32,550.00, P27,900.00, P27,900.00, P63,455.00, P51,800.00 and taking cognizance of the case excludes the other.24 These are the so-
P37,200.00 respectively.15 called transitory or continuing crimes under which violation of B.P.
Blg. 22 is categorized. In other words, a person charged with a

28
transitory crime may be validly tried in any municipality or territory
where the offense was in part committed.25
In determining proper venue in these cases, the following acts
material and essential to each crime and requisite to its
consummation must be considered: (a) the seven (7) checks were
issued to LINTON at its place of business in Balut, Navotas; b) they
were delivered to LINTON at the same place; (c) they were
dishonored in Kalookan City; and, (d) petitioners had knowledge of
the insufficiency of their funds in SOLIDBANK at the time the
checks were issued. Since there is no dispute that the checks were
dishonored in Kalookan City, it is no longer necessary to discuss
where the checks were dishonored.
Under Sec. 191 of the Negotiable Instruments Law the term "issue"
means the first delivery of the instrument complete in form to a
person who takes it as a holder. On the other hand, the term "holder"
refers to the payee or indorsee of a bill or note who is in possession of
it or the bearer thereof. In People v. Yabut26 this Court explained —
. . . The place where the bills were written, signed, or dated does not
necessarily fix or determine the place where they were executed.
What is of decisive importance is the delivery thereof. The delivery
of the instrument is the final act essential to its consummation as an
obligation. An undelivered bill or note is inoperative. Until delivery,
the contract is revocable. And the issuance as well as the delivery of
the check must be to a person who takes it as a holder, which means
"(t)he payee or indorsee of a bill or note, who is in possession of it,
or the bearer thereof." Delivery of the check signifies transfer of
possession, whether actual or constructive, from one person to
another with intent to transfer titlethereto . . .
Although LINTON sent a collector who received the checks from
petitioners at their place of business in Kalookan City, they were
actually issued and delivered to LINTON at its place of business in
Balut, Navotas. The receipt of the checks by the collector of LINTON
is not the issuance and delivery to the payee in contemplation of law.
The collector was not the person who could take the checks as a
holder, i.e., as a payee or indorsee thereof, with the intent to transfer
title thereto. Neither could the collector be deemed an agent of
LINTON with respect to the checks because he was a mere
employee. As this Court further explained in People v. Yabut27 —
Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut
or Geminiano Yabut, Jr., in Caloocan City cannot, contrary to the
holding of the respondent 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 as to act. It must exist as afact. 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 . . .
Section 2 of B.P. Blg. 22 establishes a prima facie evidence of
knowledge of insufficient funds as follows —
The making, drawing and issuance of a check payment of which is
refused by the bank because of insufficient funds in or credit with
such bank, when presented within ninety (90) days from the date of
the check, shall be prima facie evidence of knowledge of such
insufficiency of funds or credit unless such maker or drawer pays the
holder thereof the amount due thereon, or makes arrangement for
payment in full by the drawee of such check within five (5) banking
days after receiving notice that such check has not been paid by the
drawee.
The prima facie evidence has not been overcome by petitioners in the
cases before us because they did not pay LINTON the amounts due
on the checks; neither did they make arrangements for payment in
full by the drawee bank within five (5) banking days after receiving
notices that the checks had not been paid by the drawee bank.
In People v. Grospe28 citing People v. Manzanilla29 we held that ". . .
knowledge on the part of the maker or drawer of the check of the
insufficiency of his funds is by itself a continuing eventuality,
whether the accused be within one territory or another."
Consequently, venue or jurisdiction lies either in the Regional Trial
Court of Kalookan City or Malabon. Moreover, we ruled in the
same Grospe and Manzanilla cases as reiterated in Lim
v. Rodrigo30 that venue or jurisdiction is determined by the
allegations in the Information. The Informations in the cases under
consideration allege that the offenses were committed in the
Municipality of Navotas which is controlling and sufficient to vest
jurisdiction upon the Regional Trial Court of Malabon.31
We therefore sustain likewise the conviction of petitioners by the
Regional Trial Court of Malabon for violation of B.P. Blg. 22 thus —
Accused-appellants claim that they ordered payment of the checks to
be stopped because the goods delivered were not those specified by
them. They maintain that they had sufficient funds to cover the
amount of the checks. The records of the bank, however, reveal
otherwise. The two letters (Exhs. 21 and 22) dated July 23, and
August 10, 1983 which they claim they sent to Linton Commercial,
complaining against the quality of the goods delivered by the latter,
did not refer to the delivery of mild steel plates (6mm x 4 x 8) and
"Z" purlins (16 x 7 x 2-1/2 mts) for which the checks in question
were issued. Rather, the letters referred to B.1. Lally columns (Sch.
#20), which were the subject of other purchase orders.
It is true, as accused-appellants point out, that in a case brought by
them against the complainant in the Regional Trial Court of
Kalookan City (Civil Case No. C-10921) the complainant was held
liable for actual damages because of the delivery of goods of inferior
quality (Exh. 23). But the supplies involved in that case were those of
B.I. pipes, while the purchases made by accused-appellants, for
which they issued the checks in question, were purchases of mild
steel plates and "Z" purlins.
Indeed, the only question here is whether accused-appellants
maintained funds sufficient to cover the amounts of their checks at
the time of issuance and presentment of such checks. Section 3 of
B.P. Blg. 22 provides that "notwithstanding receipt of an order to stop
payment, the drawee bank shall state in the notice of dishonor that
there were no sufficient funds in or credit with such bank for the
payment in full of the check, if such be the fact."
The purpose of this provision is precisely to preclude the maker or
drawer of a worthless check from ordering the payment of the check
to be stopped as a pretext for the lack of sufficient funds to cover the
check.
In the case at bar, the notice of dishonor issued by the drawee bank,
indicates not only that payment of the check was stopped but also that
the reason for such order was that the maker or drawer did not have
sufficient funds with which to cover the checks. . . . Moreover, the
bank ledger of accused-appellants' account in Consolidated Bank
shows that at the time the checks were presented for encashment, the
balance of accused-appellants' account was inadequate to cover the
amounts of the checks.32 . . .
WHEREFORE, the decision of the Court of Appeals dated 18
September 1992 affirming the conviction of petitioners Manuel Lim
and Rosita Lim —
In CA-G.R. CR No. 07277 (RTC Crim. Case No. 1699-MN); CA-
G.R. CR No. 07278 (RTC Crim. Case No. 1700-MN); CA-G.R. CR
No. 07279 (RTC Crim. Case No. 1701-MN); CA-G.R. CR No. 07280
(RTC Crim. Case No. 1702-MN); CA-G.R. CR No. 07281 (RTC
29
Crim. Case No. 1703-MN); CA-G.R. CA No. 07282 (RTC Crim.
Case No. 1704-MN); and CA-G.R. CR No. 07283 (RTC Crim Case
No. 1705-MN), the Court finds the accused-appellants
MANUEL LIM and ROSITA LIM guilty beyond reasonable doubt of
violation of Batas Pambansa Bilang 22 and are hereby sentenced to
suffer a STRAIGHT PENALTY OF ONE (1) YEAR
IMPRISONMENT in each case, together with all the accessory
penalties provided by law, and to pay the costs.
In CA-G.R. CR No. 07277 (RTC Crim. Case No. 1699-MN), both
accused-appellants are hereby ordered to indemnify the offended
party in the sum of P27,900.00.
In CA-G.R. CR No. 07278 (RTC Crim. Case No. 1700-MN) both
accused-appellants are hereby ordered to indemnify the offended
party in the sum of P32,550.00.
In CA-G.R. CR No. 07278 (RTC Crim. Case No. 1701-MN) both
accused-appellants are hereby ordered to indemnify the offended
party in the sum of P27,900.00.
In CA-G.R. CR No. 07280 (RTC Crim. Case No. 1702-MN) both
accused-appellants are hereby ordered to indemnify the offended
party in the sum of P27,900.00.
In CA-G.R. CR No. 07281 (RTC Crim. Case No. 1703-MN) both
accused are hereby ordered to indemnify the offended party in the
sum of P63,455.00.
In CA-G.R CR No. 07282 (RTC Crim. Case No. 1704-MN) both
accused-appellants are hereby ordered to indemnify the offended
party in the sum of P51,800.00, and
In CA-G.R. CR No. 07283 (RTC Crim. Case No. 1705-MN) both
accused-appellants are hereby ordered to indemnify the offended
party in the sum of P37,200.00 33 —
as well as its resolution of 6 November 1992 denying reconsideration
thereof, is AFFIRMED. Costs against petitioners.
SO ORDERED.
Digest:
FACTS:
Spouses Lim were charged with estafa and violations of BP22 for
allegedly purchasing goods from Linton Commercial Corporation and
issuing checks
as payment thereof. The checks when presented to the bank w
ere
dishonored for insufficiency of funds or the payment for the c
hecks has been stopped.
HELD:
It is settled that venue in criminal cases is a vital ingredient of
jurisdiction. It shall be where the crime or offense was committ
ed or any one of the essential ingredients thereof took place. In
determining the proper venue for these cases, the following are
material facts—the checks were issued at the place of business of
Linton; they were delivered to Linton at the same place; they were
dishonored in Kalookan City; petitioners had knowledge of the
insufficiency of funds in their account.
Under Section 191 of the Negotiable Instruments
Law, issue means the first delivery of the
instrument complete in its form to a person who takes it as
holder. The term holder on the other hand refers to the payee or
indorsee of a bill or note who is in possession of it or the bearer
thereof. The important place to consider in the consummation of a
negotiable instrument is the place of
delivery. Delivery is the final act essential to its consummation
as an obligation.
G.R. No. 192413 June 13, 2012
Rizal Commercial Banking Corporation, Petitioner,
vs.
Hi-Tri Development Corporation and Luz R.
Bakunawa, Respondents.
DECISION
SERENO, J.:
Before the Court is a Rule 45 Petition for Review on Certiorari filed
by petitioner Rizal Commercial Banking Corporation (RCBC) against
respondents Hi-Tri Development Corporation (Hi-Tri) and Luz R.
Bakunawa (Bakunawa). Petitioner seeks to appeal from the 26
November 2009 Decision and 27 May 2010 Resolution of the Court
of Appeals (CA),1 which reversed and set aside the 19 May 2008
Decision and 3 November 2008 Order of the Makati City Regional
Trial Court (RTC) in Civil Case No. 06-244.2 The case before the
RTC involved the Complaint for Escheat filed by the Republic of the
Philippines (Republic) pursuant to Act No. 3936, as amended by
Presidential Decree No. 679 (P.D. 679), against certain deposits,
credits, and unclaimed balances held by the branches of various
banks in the Philippines. The trial court declared the amounts, subject
of the special proceedings, escheated to the Republic and ordered
them deposited with the Treasurer of the Philippines (Treasurer) and
credited in favor of the Republic.3 The assailed RTC judgments
included an unclaimed balance in the amount of ₱ 1,019,514.29,
maintained by RCBC in its Ermita Business Center branch.
We quote the narration of facts of the CA4 as follows:
x x x Luz [R.] Bakunawa and her husband Manuel, now deceased
("Spouses Bakunawa") are registered owners of six (6) parcels of
land covered by TCT Nos. 324985 and 324986 of the Quezon City
Register of Deeds, and TCT Nos. 103724, 98827, 98828 and 98829
of the Marikina Register of Deeds. These lots were sequestered by
the Presidential Commission on Good Government [(PCGG)].
Sometime in 1990, a certain Teresita Millan ("Millan"), through her
representative, Jerry Montemayor, offered to buy said lots for "₱
6,724,085.71", with the promise that she will take care of clearing
whatever preliminary obstacles there may[]be to effect a "completion
of the sale". The Spouses Bakunawa gave to Millan the Owner’s
Copies of said TCTs and in turn, Millan made a down[]payment of "₱
1,019,514.29" for the intended purchase. However, for one reason or
another, Millan was not able to clear said obstacles. As a result, the
Spouses Bakunawa rescinded the sale and offered to return to Millan
her down[]payment of ₱ 1,019,514.29. However, Millan refused to
accept back the ₱ 1,019,514.29 down[]payment. Consequently, the
Spouses Bakunawa, through their company, the Hi-Tri Development
Corporation ("Hi-Tri") took out on October 28, 1991, a Manager’s
Check from RCBC-Ermita in the amount of ₱ 1,019,514.29, payable
to Millan’s company Rosmil Realty and Development Corporation
("Rosmil") c/o Teresita Millan and used this as one of their basis for a
complaint against Millan and Montemayor which they filed with the
Regional Trial Court of Quezon City, Branch 99, docketed as Civil
Case No. Q-91-10719 [in 1991], praying that:
1. That the defendants Teresita Mil[l]an and Jerry Montemayor may
be ordered to return to plaintiffs spouses the Owners’ Copies of
Transfer Certificates of Title Nos. 324985, 324986, 103724, 98827,
98828 and 98829;
30
2. That the defendant Teresita Mil[l]an be correspondingly ordered to
receive the amount of One Million Nineteen Thousand Five Hundred
Fourteen Pesos and Twenty Nine Centavos (₱ 1,019,514.29);
3. That the defendants be ordered to pay to plaintiffs spouses moral
damages in the amount of ₱ 2,000,000.00; and
4. That the defendants be ordered to pay plaintiffs attorney’s fees in
the amount of ₱ 50,000.00.
Being part and parcel of said complaint, and consistent with their
prayer in Civil Case No. Q-91-10719 that "Teresita Mil[l]an be
correspondingly ordered to receive the amount of One Million
Nineteen Thousand Five Hundred Fourteen Pesos and Twenty Nine
[Centavos] ("₱ 1,019,514.29")["], the Spouses Bakunawa, upon
advice of their counsel, retained custody of RCBC Manager’s Check
No. ER 034469 and refrained from canceling or negotiating it.
All throughout the proceedings in Civil Case No. Q-91-10719,
especially during negotiations for a possible settlement of the case,
Millan was informed that the Manager’s Check was available for her
withdrawal, she being the payee.
On January 31, 2003, during the pendency of the abovementioned
case and without the knowledge of [Hi-Tri and Spouses Bakunawa],
x x x RCBC reported the "₱ 1,019,514.29-credit existing in favor of
Rosmil" to the Bureau of Treasury as among its "unclaimed balances"
as of January 31, 2003. Allegedly, a copy of the Sworn Statement
executed by Florentino N. Mendoza, Manager and Head of RCBC’s
Asset Management, Disbursement & Sundry Department
("AMDSD") was posted within the premises of RCBC-Ermita.
On December 14, 2006, x x x Republic, through the [Office of the
Solicitor General (OSG)], filed with the RTC the action below for
Escheat [(Civil Case No. 06-244)].
On April 30, 2008, [Spouses Bakunawa] settled amicably their
dispute with Rosmil and Millan. Instead of only the amount of "₱
1,019,514.29", [Spouses Bakunawa] agreed to pay Rosmil and Millan
the amount of "₱ 3,000,000.00", [which is] inclusive [of] the amount
of ["]₱ 1,019,514.29". But during negotiations and evidently prior to
said settlement, [Manuel Bakunawa, through Hi-Tri] inquired from
RCBC-Ermita the availability of the ₱ 1,019,514.29 under RCBC
Manager’s Check No. ER 034469. [Hi-Tri and Spouses Bakunawa]
were however dismayed when they were informed that the amount
was already subject of the escheat proceedings before the RTC.
On April 17, 2008, [Manuel Bakunawa, through Hi-Tri] wrote x x x
RCBC, viz:
"We understand that the deposit corresponding to the amount of Php
1,019,514.29 stated in the Manager’s Check is currently the subject
of escheat proceedings pending before Branch 150 of the Makati
Regional Trial Court.
Please note that it was our impression that the deposit would be taken
from [Hi-Tri’s] RCBC bank account once an order to debit is issued
upon the payee’s presentation of the Manager’s Check. Since the
payee rejected the negotiated Manager’s Check, presentation of the
Manager’s Check was never made.
Consequently, the deposit that was supposed to be allocated for the
payment of the Manager’s Check was supposed to remain part of the
Corporation[’s] RCBC bank account, which, thereafter, continued to
be actively maintained and operated. For this reason, We hereby
demand your confirmation that the amount of Php 1,019,514.29
continues to form part of the funds in the Corporation’s RCBC bank
account, since pay-out of said amount was never ordered. We wish to
point out that if there was any attempt on the part of RCBC to
consider the amount indicated in the Manager’s Check separate from
the Corporation’s bank account, RCBC would have issued a
statement to that effect, and repeatedly reminded the Corporation that
the deposit would be considered dormant absent any fund movement.
Since the Corporation never received any statements of account from
RCBC to that effect, and more importantly, never received any single
letter from RCBC noting the absence of fund movement and advising
the Corporation that the deposit would be treated as dormant."
On April 28, 2008, [Manuel Bakunawa] sent another letter to x x x
RCBC reiterating their position as above-quoted.
In a letter dated May 19, 2008, x x x RCBC replied and informed
[Hi-Tri and Spouses Bakunawa] that:
"The Bank’s Ermita BC informed Hi-Tri and/or its principals
regarding the inclusion of Manager’s Check No. ER034469 in the
escheat proceedings docketed as Civil Case No. 06-244, as well as
the status thereof, between 28 January 2008 and 1 February 2008.
xxx xxx xxx
Contrary to what Hi-Tri hopes for, the funds covered by the
Manager’s Check No. ER034469 does not form part of the Bank’s
own account. By simple operation of law, the funds covered by the
manager’s check in issue became a deposit/credit susceptible for
inclusion in the escheat case initiated by the OSG and/or Bureau of
Treasury.
xxx xxx xxx
Granting arguendo that the Bank was duty-bound to make good the
check, the Bank’s obligation to do so prescribed as early as October
2001."
(Emphases, citations, and annotations were omitted.)
The RTC Ruling
The escheat proceedings before the Makati City RTC continued. On
19 May 2008, the trial court rendered its assailed Decision declaring
the deposits, credits, and unclaimed balances subject of Civil Case
No. 06-244 escheated to the Republic. Among those included in the
order of forfeiture was the amount of ₱ 1,019,514.29 held by RCBC
as allocated funds intended for the payment of the Manager’s Check
issued in favor of Rosmil. The trial court ordered the deposit of the
escheated balances with the Treasurer and credited in favor of the
Republic. Respondents claim that they were not able to participate in
the trial, as they were not informed of the ongoing escheat
proceedings.
Consequently, respondents filed an Omnibus Motion dated 11 June
2008, seeking the partial reconsideration of the RTC Decision insofar
as it escheated the fund allocated for the payment of the Manager’s
Check. They asked that they be included as party-defendants or, in
the alternative, allowed to intervene in the case and their motion
considered as an answer-in-intervention. Respondents argued that
they had meritorious grounds to ask reconsideration of the Decision
or, alternatively, to seek intervention in the case. They alleged that
the deposit was subject of an ongoing dispute (Civil Case No. Q-91-
10719) between them and Rosmil since 1991, and that they were
interested parties to that case.5
On 3 November 2008, the RTC issued an Order denying the motion
of respondents. The trial court explained that the Republic had proven
compliance with the requirements of publication and notice, which
served as notice to all those who may be affected and prejudiced by
the Complaint for Escheat. The RTC also found that the motion failed
to point out the findings and conclusions that were not supported by
the law or the evidence presented, as required by Rule 37 of the Rules
of Court. Finally, it ruled that the alternative prayer to intervene was
filed out of time.
The CA Ruling
On 26 November 2009, the CA issued its assailed Decision reversing
the 19 May 2008 Decision and 3 November 2008 Order of the RTC.
According to the appellate court,6 RCBC failed to prove that the latter
had communicated with the purchaser of the Manager’s Check (Hi-
Tri and/or Spouses Bakunawa) or the designated payee (Rosmil)
31
immediately before the bank filed its Sworn Statement on the
dormant accounts held therein. The CA ruled that the bank’s failure
to notify respondents deprived them of an opportunity to intervene in
the escheat proceedings and to present evidence to substantiate their
claim, in violation of their right to due process. Furthermore, the CA
pronounced that the Makati City RTC Clerk of Court failed to issue
individual notices directed to all persons claiming interest in the
unclaimed balances, as well as to require them to appear after
publication and show cause why the unclaimed balances should not
be deposited with the Treasurer of the Philippines. It explained that
the jurisdictional requirement of individual notice by personal service
was distinct from the requirement of notice by publication.
Consequently, the CA held that the Decision and Order of the RTC
were void for want of jurisdiction.
Issue
After a perusal of the arguments presented by the parties, we cull the
main issues as follows:
I. Whether the Decision and Order of the RTC were void for failure
to send separate notices to respondents by personal service
II. Whether petitioner had the obligation to notify respondents
immediately before it filed its Sworn Statement with the Treasurer
III. Whether or not the allocated funds may be escheated in favor of
the Republic
Discussion
Petitioner bank assails7 the CA judgments insofar as they ruled that
notice by personal service upon respondents is a jurisdictional
requirement in escheat proceedings. Petitioner contends that
respondents were not the owners of the unclaimed balances and were
thus not entitled to notice from the RTC Clerk of Court. It hinges its
claim on the theory that the funds represented by the Manager’s
Check were deemed transferred to the credit of the payee or holder
upon its issuance.
We quote the pertinent provision of Act No. 3936, as amended, on
the rule on service of processes, to wit:
Sec. 3. Whenever the Solicitor General shall be informed of such
unclaimed balances, he shall commence an action or actions in the
name of the People of the Republic of the Philippines in the Court of
First Instance of the province or city where the bank, building and
loan association or trust corporation is located, in which shall be
joined as parties the bank, building and loan association or trust
corporation and all such creditors or depositors. All or any of such
creditors or depositors or banks, building and loan association or trust
corporations may be included in one action. Service of process in
such action or actions shall be made by delivery of a copy of the
complaint and summons to the president, cashier, or managing officer
of each defendant bank, building and loan association or trust
corporation and by publication of a copy of such summons in a
newspaper of general circulation, either in English, in Filipino, or in a
local dialect, published in the locality where the bank, building and
loan association or trust corporation is situated, if there be any, and in
case there is none, in the City of Manila, at such time as the court
may order. Upon the trial, the court must hear all parties who have
appeared therein, and if it be determined that such unclaimed
balances in any defendant bank, building and loan association or trust
corporation are unclaimed as hereinbefore stated, then the court shall
render judgment in favor of the Government of the Republic of the
Philippines, declaring that said unclaimed balances have escheated to
the Government of the Republic of the Philippines and commanding
said bank, building and loan association or trust corporation to
forthwith deposit the same with the Treasurer of the Philippines to
credit of the Government of the Republic of the Philippines to be
used as the National Assembly may direct.
At the time of issuing summons in the action above provided for, the
clerk of court shall also issue a notice signed by him, giving the title
and number of said action, and referring to the complaint therein, and
directed to all persons, other than those named as defendants therein,
claiming any interest in any unclaimed balance mentioned in said
complaint, and requiring them to appear within sixty days after the
publication or first publication, if there are several, of such summons,
and show cause, if they have any, why the unclaimed balances
involved in said action should not be deposited with the Treasurer of
the Philippines as in this Act provided and notifying them that if they
do not appear and show cause, the Government of the Republic of the
Philippines will apply to the court for the relief demanded in the
complaint. A copy of said notice shall be attached to, and published
with the copy of, said summons required to be published as above,
and at the end of the copy of such notice so published, there shall be a
statement of the date of publication, or first publication, if there are
several, of said summons and notice. Any person interested may
appear in said action and become a party thereto. Upon the
publication or the completion of the publication, if there are several,
of the summons and notice, and the service of the summons on the
defendant banks, building and loan associations or trust corporations,
the court shall have full and complete jurisdiction in the Republic of
the Philippines over the said unclaimed balances and over the persons
having or claiming any interest in the said unclaimed balances, or any
of them, and shall have full and complete jurisdiction to hear and
determine the issues herein, and render the appropriate judgment
thereon. (Emphasis supplied.)
Hence, insofar as banks are concerned, service of processes is made
by delivery of a copy of the complaint and summons upon the
president, cashier, or managing officer of the defendant bank.8 On the
other hand, as to depositors or other claimants of the unclaimed
balances, service is made by publication of a copy of the summons in
a newspaper of general circulation in the locality where the institution
is situated.9 A notice about the forthcoming escheat proceedings must
also be issued and published, directing and requiring all persons who
may claim any interest in the unclaimed balances to appear before the
court and show cause why the dormant accounts should not be
deposited with the Treasurer.
Accordingly, the CA committed reversible error when it ruled that the
issuance of individual notices upon respondents was a jurisdictional
requirement, and that failure to effect personal service on them
rendered the Decision and the Order of the RTC void for want of
jurisdiction. Escheat proceedings are actions in rem,10 whereby an
action is brought against the thing itself instead of the person.11 Thus,
an action may be instituted and carried to judgment without personal
service upon the depositors or other claimants.12 Jurisdiction is
secured by the power of the court over the res.13 Consequently, a
judgment of escheat is conclusive upon persons notified by
advertisement, as publication is considered a general and constructive
notice to all persons interested.14
Nevertheless, we find sufficient grounds to affirm the CA on the
exclusion of the funds allocated for the payment of the Manager’s
Check in the escheat proceedings.
Escheat proceedings refer to the judicial process in which the state,
by virtue of its sovereignty, steps in and claims abandoned, left
vacant, or unclaimed property, without there being an interested
person having a legal claim thereto.15 In the case of dormant
accounts, the state inquires into the status, custody, and ownership of
the unclaimed balance to determine whether the inactivity was
brought about by the fact of death or absence of or abandonment by
the depositor.16 If after the proceedings the property remains without
a lawful owner interested to claim it, the property shall be reverted to
the state "to forestall an open invitation to self-service by the first
comers."17 However, if interested parties have come forward and lain
claim to the property, the courts shall determine whether the credit or
deposit should pass to the claimants or be forfeited in favor of the
state.18 We emphasize that escheat is not a proceeding to penalize
32
depositors for failing to deposit to or withdraw from their accounts. It
is a proceeding whereby the state compels the surrender to it of
unclaimed deposit balances when there is substantial ground for a
belief that they have been abandoned, forgotten, or without an
owner.19
Act No. 3936, as amended, outlines the proper procedure to be
followed by banks and other similar institutions in filing a sworn
statement with the Treasurer concerning dormant accounts:
Sec. 2. Immediately after the taking effect of this Act and within the
month of January of every odd year, all banks, building and loan
associations, and trust corporations shall forward to the Treasurer of
the Philippines a statement, under oath, of their respective managing
officers, of all credits and deposits held by them in favor of persons
known to be dead, or who have not made further deposits or
withdrawals during the preceding ten years or more, arranged in
alphabetical order according to the names of creditors and depositors,
and showing:
(a) The names and last known place of residence or post office
addresses of the persons in whose favor such unclaimed balances
stand;
(b) The amount and the date of the outstanding unclaimed balance
and whether the same is in money or in security, and if the latter, the
nature of the same;
(c) The date when the person in whose favor the unclaimed balance
stands died, if known, or the date when he made his last deposit or
withdrawal; and
(d) The interest due on such unclaimed balance, if any, and the
amount thereof.
A copy of the above sworn statement shall be posted in a conspicuous
place in the premises of the bank, building and loan association, or
trust corporation concerned for at least sixty days from the date of
filing thereof: Provided, That immediately before filing the above
sworn statement, the bank, building and loan association, and trust
corporation shall communicate with the person in whose favor the
unclaimed balance stands at his last known place of residence or post
office address.
It shall be the duty of the Treasurer of the Philippines to inform the
Solicitor General from time to time the existence of unclaimed
balances held by banks, building and loan associations, and trust
corporations. (Emphasis supplied.)
As seen in the afore-quoted provision, the law sets a detailed system
for notifying depositors of unclaimed balances. This notification is
meant to inform them that their deposit could be escheated if left
unclaimed. Accordingly, before filing a sworn statement, banks and
other similar institutions are under obligation to communicate with
owners of dormant accounts. The purpose of this initial notice is for a
bank to determine whether an inactive account has indeed been
unclaimed, abandoned, forgotten, or left without an owner. If the
depositor simply does not wish to touch the funds in the meantime,
but still asserts ownership and dominion over the dormant account,
then the bank is no longer obligated to include the account in its
sworn statement.20 It is not the intent of the law to force depositors
into unnecessary litigation and defense of their rights, as the state is
only interested in escheating balances that have been abandoned and
left without an owner.
In case the bank complies with the provisions of the law and the
unclaimed balances are eventually escheated to the Republic, the
bank "shall not thereafter be liable to any person for the same and any
action which may be brought by any person against in any bank xxx
for unclaimed balances so deposited xxx shall be defended by the
Solicitor General without cost to such bank."21 Otherwise, should it
fail to comply with the legally outlined procedure to the prejudice of
the depositor, the bank may not raise the defense provided under
Section 5 of Act No. 3936, as amended.
Petitioner asserts22 that the CA committed a reversible error when it
required RCBC to send prior notices to respondents about the
forthcoming escheat proceedings involving the funds allocated for the
payment of the Manager’s Check. It explains that, pursuant to the
law, only those "whose favor such unclaimed balances stand" are
entitled to receive notices. Petitioner argues that, since the funds
represented by the Manager’s Check were deemed transferred to the
credit of the payee upon issuance of the check, the proper party
entitled to the notices was the payee – Rosmil – and not respondents.
Petitioner then contends that, in any event, it is not liable for failing
to send a separate notice to the payee, because it did not have the
address of Rosmil. Petitioner avers that it was not under any
obligation to record the address of the payee of a Manager’s Check.
In contrast, respondents Hi-Tri and Bakunawa allege23 that they have
a legal interest in the fund allocated for the payment of the Manager’s
Check. They reason that, since the funds were part of the
Compromise Agreement between respondents and Rosmil in a
separate civil case, the approval and eventual execution of the
agreement effectively reverted the fund to the credit of respondents.
Respondents further posit that their ownership of the funds was
evidenced by their continued custody of the Manager’s Check.
An ordinary check refers to a bill of exchange drawn by a depositor
(drawer) on a bank (drawee),24 requesting the latter to pay a person
named therein (payee) or to the order of the payee or to the bearer, a
named sum of money.25The issuance of the check does not of itself
operate as an assignment of any part of the funds in the bank to the
credit of the drawer.26 Here, the bank becomes liable only after it
accepts or certifies the check.27 After the check is accepted for
payment, the bank would then debit the amount to be paid to the
holder of the check from the account of the depositor-drawer.
There are checks of a special type called manager’s or cashier’s
checks. These are bills of exchange drawn by the bank’s manager or
cashier, in the name of the bank, against the bank itself.28 Typically, a
manager’s or a cashier’s check is procured from the bank by
allocating a particular amount of funds to be debited from the
depositor’s account or by directly paying or depositing to the bank
the value of the check to be drawn. Since the bank issues the check in
its name, with itself as the drawee, the check is deemed accepted in
advance.29 Ordinarily, the check becomes the primary obligation of
the issuing bank and constitutes its written promise to pay upon
demand.30
Nevertheless, the mere issuance of a manager’s check does not ipso
facto work as an automatic transfer of funds to the account of the
payee. In case the procurer of the manager’s or cashier’s check
retains custody of the instrument, does not tender it to the intended
payee, or fails to make an effective delivery, we find the following
provision on undelivered instruments under the Negotiable
Instruments Law applicable:31
Sec. 16. Delivery; when effectual; when presumed. – Every contract
on a negotiable instrument is incomplete and revocable until delivery
of the instrument for the purpose of giving effect thereto. As between
immediate parties and as regards a remote party other than a holder in
due course, the delivery, in order to be effectual, must be made either
by or under the authority of the party making, drawing, accepting, or
indorsing, as the case may be; and, in such case, the delivery may be
shown to have been conditional, or for a special purpose only, and
not for the purpose of transferring the property in the instrument. But
where the instrument is in the hands of a holder in due course, a valid
delivery thereof by all parties prior to him so as to make them liable
to him is conclusively presumed. And where the instrument is no
longer in the possession of a party whose signature appears thereon, a
valid and intentional delivery by him is presumed until the contrary is
proved. (Emphasis supplied.)
33
Petitioner acknowledges that the Manager’s Check was procured by
respondents, and that the amount to be paid for the check would be
sourced from the deposit account of Hi-Tri.32 When Rosmil did not
accept the Manager’s Check offered by respondents, the latter
retained custody of the instrument instead of cancelling it. As the
Manager’s Check neither went to the hands of Rosmil nor was it
further negotiated to other persons, the instrument remained
undelivered. Petitioner does not dispute the fact that respondents
retained custody of the instrument.33
Since there was no delivery, presentment of the check to the bank for
payment did not occur. An order to debit the account of respondents
was never made. In fact, petitioner confirms that the Manager’s
Check was never negotiated or presented for payment to its Ermita
Branch, and that the allocated fund is still held by the bank.34 As a
result, the assigned fund is deemed to remain part of the account of
Hi-Tri, which procured the Manager’s Check. The doctrine that the
deposit represented by a manager’s check automatically passes to the
payee is inapplicable, because the instrument – although accepted in
advance – remains undelivered. Hence, respondents should have been
informed that the deposit had been left inactive for more than 10
years, and that it may be subjected to escheat proceedings if left
unclaimed.1âwphi1
After a careful review of the RTC records, we find that it is no longer
necessary to remand the case for hearing to determine whether the
claim of respondents was valid. There was no contention that they
were the procurers of the Manager’s Check. It is undisputed that there
was no effective delivery of the check, rendering the instrument
incomplete. In addition, we have already settled that respondents
retained ownership of the funds. As it is obvious from their foregoing
actions that they have not abandoned their claim over the fund, we
rule that the allocated deposit, subject of the Manager’s Check,
should be excluded from the escheat proceedings. We reiterate our
pronouncement that the objective of escheat proceedings is state
forfeiture of unclaimed balances. We further note that there is nothing
in the records that would show that the OSG appealed the assailed
CA judgments. We take this failure to appeal as an indication of
disinterest in pursuing the escheat proceedings in favor of the
Republic.
WHEREFORE the Petition is DENIED. The 26 November 2009
Decision and 27 May 2010 Resolution of the Court of Appeals in
CA-G.R. SP No. 107261 are hereby AFFIRMED.
SO ORDERED
Digest:
Facts: Luz Bakunawa and her husband Manuel, now deceased (Spouses
Bakunawa) are registered owners of six (6) parcels of land covered by
TCT Nos. 324985 and 324986 of the Quezon City Register of Deeds, and
TCT Nos. 103724, 98827, 98828 and 98829 of the Marikina Register of
Deeds. These lots were sequestered by the Presidential Commission on
Good Government [(PCGG)]. Sometime in 1990, a certain Teresita
Millan (Millan), through her representative, Jerry Montemayor, offered to
buy said lots for ₱6,724,085.71, with the promise that she will take care
of clearing whatever preliminary obstacles there may be to effect a
completion of the sale. The Spouses Bakunawa gave to Millan the
Owners Copies of said TCTs and in turn, Millan made a downpayment of
₱1,019,514.29 for the intended purchase. However, for one reason or
another, Millan was not able to clear said obstacles. As a result, the
Spouses Bakunawa rescinded the sale and offered to return to Millan her
downpayment of ₱1,019,514.29. However, Millan refused to accept back
the ₱1,019,514.29 down[]payment. Consequently, the Spouses
Bakunawa, through their company, the Hi-Tri Development Corporation
(Hi-Tri) took out on October 28, 1991, a Managers Check from RCBC-
Ermita in the amount of ₱1,019,514.29, payable to Millan’s company
Rosmil Realty and Development Corporation (Rosmil) c/o Teresita
Millan and used this as one of their basis for a complaint against Millan
and Montemayor which they filed with the Regional Trial Court of
Quezon City, Branch 99. On January 31, 2003, during the pendency of
the above mentioned case and without the knowledge of [Hi-Tri and
Spouses Bakunawa], RCBC reported the ₱1,019,514.29-credit existing in
favor of Rosmil to the Bureau of Treasury as among its unclaimed
balances as of January 31, 2003. Allegedly, a copy of the Sworn
Statement executed by Florentino N. Mendoza, Manager and Head of
RCBCs Asset Management, Disbursement & Sundry Department
(AMDSD) was posted within the premises of RCBC-Ermita.
Issue: Whether or not the escheat of the account in RCBC is proper.
Held: No. An ordinary check refers to a bill of exchange drawn by a
depositor (drawer) on a bank (drawee), requesting the latter to pay a
person named therein (payee) or to the order of the payee or to the bearer,
a named sum of money. The issuance of the check does not of itself
operate as an assignment of any part of the funds in the bank to the credit
of the drawer. Here, the bank becomes liable only after it accepts or
certifies the check. After the check is accepted for payment, the bank
would then debit the amount to be paid to the holder of the check from
the account of the depositor-drawer.
There are checks of a special type called managers or cashiers checks.
These are bills of exchange drawn by the banks manager or cashier, in the
name of the bank, against the bank itself. Typically, a managers or a
cashiers check is procured from the bank by allocating a particular
amount of funds to be debited from the depositors account or by directly
paying or depositing to the bank the value of the check to be drawn. Since
the bank issues the check in its name, with itself as the drawee, the check
is deemed accepted in advance. Ordinarily, the check becomes the
primary obligation of the issuing bank and constitutes its written promise
to pay upon demand.
Nevertheless, the mere issuance of a managers check does not ipso facto
work as an automatic transfer of funds to the account of the payee. In
case the procurer of the managers or cashiers check retains custody of the
instrument, does not tender it to the intended payee, or fails to make an
effective delivery, we find the following provision on undelivered
instruments under the Negotiable Instruments Law applicable:
Sec. 16. Delivery; when effectual; when presumed. Every contract on a
negotiable instrument is incomplete and revocable until delivery of the
instrument for the purpose of giving effect thereto. As between
immediate parties and as regards a remote party other than a holder in due
course, the delivery, in order to be effectual, must be made either by or
under the authority of the party making, drawing, accepting, or indorsing,
as the case may be; and, in such case, the delivery may be shown to have
been conditional, or for a special purpose only, and not for the purpose of
transferring the property in the instrument. But where the instrument is in
the hands of a holder in due course, a valid delivery thereof by all parties
prior to him so as to make them liable to him is conclusively presumed.
And where the instrument is no longer in the possession of a party whose
signature appears thereon, a valid and intentional delivery by him is
presumed until the contrary is proved.
Since there was no delivery, presentment of the check to the bank for
payment did not occur. An order to debit the account of respondents was
never made. In fact, petitioner confirms that the Managers Check was
never negotiated or presented for payment to its Ermita Branch, and that
the allocated fund is still held by the bank. As a result, the assigned fund
is deemed to remain part of the account of Hi-Tri, which procured the
Managers Check. The doctrine that the deposit represented by a managers
check automatically passes to the payee is inapplicable, because the
instrument although accepted in advance remains undelivered. Hence,
respondents should have been informed that the deposit had been left
inactive for more than 10 years, and that it may be subjected to escheat
proceedings if left unclaimed.
34