Republic of the Philippines After much contemplation and taking into account his relationship with the petitioner
SUPREME COURT and Gutierrez, Marasigan acceded to Gutierrez’ request and gave him ₱200,000.00
Manila
SECOND DIVISION
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.
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:
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.
As a general rule, a contract of agency may be oral.6 However, it must be written when
the law requires a specific form, for example, in a sale of a piece of land or any interest
therein through an agent.
Article 1878 paragraph 7 of the Civil Code expressly requires a special power of
authority before an agent can loan or borrow money in behalf of the principal, to wit:
Art. 1878. Special powers of attorney are necessary in the following cases:
xxxx
(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 contract of loan in
behalf of the petitioner. As held in Yasuma v. 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 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 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.
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.
 Republic of the Philippines 7th Avenue, 8th Street, Kalookan City. To pay LINTON for the delivery the Lims issued
SUPREME COURT SOLIDBANK Check No. 027700 postdated 3 September 1983 in the amount of
Manila P51,800.00.1

FIRST DIVISION 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 SOLIDBANK Check No. 027699 in the amount of
P63,455.00 postdated 20 August 1983.2
G.R. No. 107898 December 19, 1995
The Lim spouses also ordered 2,600 "Z" purlins worth P241,800.00 which were
delivered to them on various dates, to wit: 15 and 22 April 1983; 11, 14, 20, 23, 25, 28
MANUEL LIM and ROSITA LIM, petitioners, and 30 May 1983; and, 2 and 9 June 1983. To pay for the deliveries, they issued seven
vs. SOLIDBANK checks, five of which were —
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
Check No. Date of Issue Amount

027683 16 July 1983 P27,900.003

BELLOSILLO, J.: 027684 23 July 1983 P27,900.004
027719 6 Aug. 1983 P32,550.005
MANUEL LIM and ROSITA LIM, spouses, were charged before the Regional Trial 027720 13 Aug. 1983 P27,900.006
Court of Malabon with estafa on three (3) counts under Art. 315, par. 2 (d), of The 027721 27 Aug. 1983 P37,200.007
Revised Penal Code, docketed as Crim. Cases Nos. 1696-MN to 1698-MN. The
Informations substantially alleged that Manuel and Rosita, conspiring together, William Yu Bin, Vice President and Sales Manager of LINTON, testified that when those
purchased goods from Linton Commercial Company, Inc. (LINTON), and with deceit seven (7) checks were deposited with the Rizal Commercial Banking Corporation they
issued seven Consolidated Bank and Trust Company (SOLIDBANK) checks were dishonored for "insufficiency of funds" with the additional notation "payment
simultaneously with the delivery as payment therefor. When presented to the drawee stopped" stamped thereon. Despite demand Manuel and Rosita refused to make good
bank for payment the checks were dishonored as payment on the checks had been the checks or pay the value of the deliveries.
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. Salvador Alfonso, signature verifier of SOLIDBANK, Grace Park Branch, Kalookan City,
where the Lim spouses maintained an account, testified on the following transactions
with respect to the seven (7) checks:
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 CHECK NO. DATE PRESENTED REASON FOR DISHONOR
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 027683 22 July 1983 Payment Stopped (PS)8
presentment. When presented for payment within ninety (90) days from date thereof 027684 23 July 1983 PS and Drawn Against
the checks were dishonored by the drawee bank for insufficiency of funds. Despite Insufficient Fund (DAIF)9
receipt of notices of such dishonor the Lims failed to pay the amounts of the checks or 027699 24 Aug. 1983 PS and DAIF10
to make arrangements for full payment within five (5) banking days. 027700 5 Sept. 1983 PS and DAIF11
027719 9 Aug. 1983 DAIF 12
Manuel Lim and Rosita Lim are the president and treasurer, respectively, of Rigi Bilt 027720 16 Aug. 1983 PS and DAIF13
Industries, Inc. (RIGI). RIGI had been transacting business with LINTON for years, the 027721 30 Aug. 1983 PS and DAIF14
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 Manuel Lim admitted having issued the seven (7) checks in question to pay for
the Lim spouses were allowed 30, 60 and sometimes even up to 90 days credit. deliveries made by LINTON but denied that his company's account had insufficient
funds to cover the amounts of the checks. He presented the bank ledger showing a
On 27 May 1983 the Lims ordered 100 pieces of mild steel plates worth P51,815.00 balance of P65,752.75. Also, he claimed that he ordered SOLIDBANK to stop payment
from LINTON which were delivered on the same day at their place of business at 666 because the supplies delivered by LINTON were not in accordance with the
specifications in the purchase orders.
Rosita Lim was not presented to testify because her statements would only be
corroborative.
On the basis of the evidence thus presented the trial court held both accused guilty of
estafa and violation of B.P. Blg. 22 in its decision dated 25 January 1989. In Crim. Case
No. 1696-MN they were sentenced to an indeterminate penalty of six (6) years and one
(1) day of prision mayor as minimum to twelve (12) years and one (1) day of reclusion
temporal as maximum plus one (1) year for each additional P10,000.00 with all the
accessory penalties provided for by law, and to pay the costs. They were also ordered
to indemnify LINTON in the amount of P241,800.00. Similarly sentences were imposed
in Crim. Cases Nos. 1697-MN and 1698-MN except as to the indemnities awarded,
which were P63,455.00 and P51,800.00, respectively.
In Crim. Case No. 1699-MN the trial court sentenced both accused to a straight penalty
of one (1) year imprisonment with all the accessory penalties provided for by law and
to pay the costs. In addition, they were ordered to indemnify LINTON in the amount of
P27,900.00. Again, similar sentences were imposed in Crim. Cases Nos. 1700-MN to
1705-MN except for the indemnities awarded, which were P32,550.00, P27,900.00,
P27,900.00, P63,455.00, P51,800.00 and P37,200.00 respectively.15
On appeal, the accused assailed the decision as they imputed error to the trial court as
follows: (a) the regional Trial Court of malabon had no jurisdiction over the cases
because the offenses charged ere committed outside its territory; (b) they could not be
held liable for estafa because the seven (7) checks were issued by them several weeks
after the deliveries of the goods; and, (c) neither could they be held liable for violating
B.P. Blg. 22 as they ordered payment of the checks to be stopped because the goods
delivered were not those specified by them, besides they had sufficient funds to pay
the checks.
In the decision of 18 September 199216 respondent Court of Appeals acquitted
accused-appellants of estafa on the ground that indeed the checks were not made in
payment of an obligation contracted at the 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
November 1992 their motion for reconsideration was denied.18
In the case at bench petitioners maintain that the prosecution failed to prove that any
of the essential elements of the crime punishable under B.P. Blg. 22 was committed
within the jurisdiction of the Regional Trial Court of Malabon. They claim that what was
proved was that all the elements of the offense were committed in Kalookan City. The
checks were issued at their place of business, received by a collector of LINTON, and
dishonored by the drawee bank, all in Kalookan City. Furthermore, no evidence
whatsoever supports the proposition that they knew that their checks were insufficiently
funded. In fact, some of the checks were funded at the time of presentment but
dishonored nonetheless upon their instruction to the bank to stop payment. In fine,
considering that the checks were all issued, delivered, and dishonored in Kalookan
City, the trial court of Malabon exceeded its jurisdiction when it tried the case and
rendered judgment thereon.
The petition has no merit. Section 1, par. 1, of B.P. Blg. 22 punishes "[a]ny person who
makes or draws and issues any check to apply on account or for value, knowing at the
time of issue that he does not have sufficient funds in or credit with the drawee bank
for the payment of such check in full upon its presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit or would have been
dishonored for the same reason had not the drawer, without any valid reason, ordered
the bank to stop payment . . ." The gravamen of the offense is knowingly issuing a
worthless check.19 Thus, a fundamental element is knowledge on the part of the drawer
of the insufficiency of his funds in20 or credit with the drawee bank for the payment of
such check in full upon presentment. Another essential element is
subsequent dishonor of the check by the drawee bank for insufficiency of funds or
credit or would have been dishonored for the same reason had not the drawer, without
any valid reason, ordered the bank to stop payment. 21
It is settled that venue in criminal cases is a vital ingredient of jurisdiction. 22 Section 14,
par. (a), Rule 110, of the Revised Rules of Court, which has been carried over in Sec.
15, par. (a), Rule 110 of the 1985 Rules on Criminal Procedure, specifically provides:
Sec. 14. Place where action is to be instituted. — (a) In all criminal
prosecutions the action shall be instituted and tried in the court of the
municipality or province wherein the offense was committed or
anyone of the essential ingredients thereof took place.
If all the acts material and essential to the crime and requisite of its consummation
occurred in one municipality or territory, the court therein has the sole jurisdiction to try
the case.23 There are certain crimes in which some acts material and essential to the
crimes and requisite to their consummation occur in one municipality or territory and
some in another, in which event, the court of either has jurisdiction to try the cases, it
being understood that the first court taking cognizance of the case excludes the
other.24 These are the so-called transitory or continuing crimes under which violation of
B.P. Blg. 22 is categorized. In other words, a person charged with a 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, In CA-G.R. CR No. 07283 (RTC Crim. Case No. 1705-MN) both
indicates not only that payment of the check was stopped but also accused-appellants are hereby ordered to indemnify the offended
that the reason for such order was that the maker or drawer did not party in the sum of P37,200.00 33 —
have sufficient funds with which to cover the checks. . . . Moreover,
the bank ledger of accused-appellants' account in Consolidated as well as its resolution of 6 November 1992 denying reconsideration
Bank shows that at the time the checks were presented for thereof, is AFFIRMED. Costs against petitioners.
encashment, the balance of accused-appellants' account was
inadequate to cover the amounts of the checks.32 . . .
SO ORDERED.
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 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
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
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 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.
Separate Opinions
DAVIDE, JR., J., concurring and dissenting:
This Court may take judicial notice of the fact that checks for salaries of employees of
various Departments all over the country are prepared in Manila not at the end of the
payroll period, but days before it to ensure that they reach the employees concerned
not later than the end of the payroll period. As to the employees in the provinces or
cities, the checks are sent through the heads of the corresponding offices of the
Departments. Thus, in the case of Prosecutors and Assistant Prosecutors of the
Department of Justice, the checks are sent through the Provincial Prosecutors or City
Prosecutors, as the case may be, who shall then deliver the checks to the payees.
Involved in the instant case are the salary and RATA checks of then Assistant City
Fiscal Bienvenido Mabanto, Jr., who was detailed in the Office of the City Fiscal (now
Prosecutor) of Mandaue City. Conformably with the aforesaid practice, these checks
were sent to Mabanto thru the petitioner who was then the City Fiscal of Mandaue City.
The ponencia failed to indicate the payroll period covered by the salary check and the
month to which the RATA check corresponds.
I respectfully submit that if these salary and RATA checks corresponded, respectively,
to a payroll period and to a month which had already lapsed at the time the notice of
garnishment was served, the garnishment would be valid, as the checks would then
cease to be property of the Government and would become property of Mabanto. Upon
the expiration of such period and month, the sums indicated therein were deemed
automatically segregated from the budgetary allocations for the Department of Justice
under the General Appropriations Act.
It must be recalled that the public policy against execution, attachment, or garnishment
is directed to public funds.
Thus, in the case of Director of the Bureau of Commerce and Industry
vs. Concepcion 1 where the core issue was whether or not the salary due from the
Government to a public officer or employee can, by garnishment, be seized before
being paid to him and appropriated to the payment of his judgment debts, this Court
held:
A rule, which has never been seriously questioned, is that money in
the hands of public officers, although it may be due government
employees, is not liable to the creditors of these employees in the
process of garnishment. One reason is, that the State, by virtue of its
sovereignty, may not be sued in its own courts except by express
authorization by the Legislature, and to subject its officers to
garnishment would be to permit indirectly what is prohibited
directly. Another reason is that moneys sought to be garnished, as
long as they remain in the hands of the disbursing officer of the
Government, belong to the latter, although the defendant in
garnishment may be entitled to a specific portion thereof. And still
another reason which covers both of the foregoing is that every
consideration of public policy forbids it.
The United States Supreme Court, in the leading case of Buchanan
vs. Alexander ([1846], 4 How., 19), in speaking of the right of
creditors of seamen, by process of attachment, to divert the public
money from its legitimate and appropriate object, said:
To state such a principle is to refute it. No
government can sanction it. At all times it would be
found embarrassing, and under some
circumstances it might be fatal to the public
service. . . . So long as money remains in the
hands of a disbursing officer, it is as much the
money of the United States, as if it had not been
drawn from the treasury. Until paid over by the
agent of the government to the person entitled to
it, the fund cannot, in any legal sense, be
considered a part of his effects." (See, further, 12
R.C.L., p. 841; Keene vs. Smith [1904], 44 Ore.,
525; Wild vs. Ferguson [1871], 23 La. Ann., 752;
Bank of Tennessee vs. Dibrell [1855], 3 Sneed
[Tenn.], 379). (emphasis supplied)
The authorities cited in the ponencia are inapplicable. Garnished or levied on therein
were public funds, to wit: (a) the pump irrigation trust fund deposited with the Philippine
National Bank (PNB) in the account of the Irrigation Service Unit in Republic vs.
Palacio; 2 (b) the deposits of the National Media Production Center in Traders Royal
Bank vs. Intermediate Appellate Court; 3 and (c) the deposits of the Bureau of Public
Highways with the PNB under a current account, which may be expended only for their
legitimate object as authorized by the corresponding legislative appropriation
in Commissioner of Public Highways vs. Diego. 4
Neither is Tiro vs. Hontanosas 5 squarely in point. The said case involved the validity
of Circular No. 21, series of 1969, issued by the Director of Public Schools which
directed that "henceforth no cashier or disbursing officer shall pay to attorneys-in-fact
or other persons who may be authorized under a power of attorney or other forms of
authority to collect the salary of an employee, except when the persons so designated
and authorized is an immediate member of the family of the employee concerned, and
in all other cases except upon proper authorization of the Assistant Executive Secretary
for Legal and Administrative Matters, with the recommendation of the Financial
Assistant." Private respondent Zafra Financing Enterprise, which had extended loans
to public school teachers in Cebu City and obtained from the latter promissory notes
and special powers of attorney authorizing it to take and collect their salary checks from
the Division Office in Cebu City of the Bureau of Public Schools, sought, inter alia, to
nullify the Circular. It is clear that the teachers had in fact assigned to or waived in favor
of Zafra their future salaries which were still public funds. That assignment or waiver
was contrary to public policy.
I would therefore vote to grant the petition only if the salary and RATA checks garnished
corresponds to an unexpired payroll period and RATA month, respectively.
Padilla, J., concurs.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 85419 March 9, 1993
DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,
vs.
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN
INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE
PHILIPPINES, defendants-respondents.
Yngson & Associates for petitioner.
Henry A. Reyes & Associates for Samso Tung & Asian Industrial Plastic Corporation.
Eduardo G. Castelo for Sima Wei.
Monsod, Tamargo & Associates for Producers Bank.
Rafael S. Santayana for Mary Cheng Uy.
CAMPOS, JR., J.:
On July 6, 1986, the Development Bank of Rizal (petitioner Bank for brevity) filed a
complaint for a sum of money against respondents Sima Wei and/or Lee Kian Huat,
Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation (Plastic
Corporation for short) and the Producers Bank of the Philippines, on two causes of
action:
(1) To enforce payment of the balance of P1,032,450.02 on a
promissory note executed by respondent Sima Wei on June 9, 1983;
and
(2) To enforce payment of two checks executed by Sima Wei,
payable to petitioner, and drawn against the China Banking
Corporation, to pay the balance due on the promissory note.
Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging
a common ground that the complaint states no cause of action. The trial court granted
the defendants' Motions to Dismiss. The Court of Appeals affirmed this decision, * to
which the petitioner Bank, represented by its Legal Liquidator, filed this Petition for
Review by Certiorari, assigning the following as the alleged errors of the Court of
Appeals:1
(1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE
PLAINTIFF-PETITIONER HAS NO CAUSE OF ACTION AGAINST
DEFENDANTS-RESPONDENTS HEREIN.
(2) THE COURT OF APPEALS ERRED IN HOLDING THAT
SECTION 13, RULE 3 OF THE REVISED RULES OF COURT ON
ALTERNATIVE DEFENDANTS IS NOT APPLICABLE TO HEREIN
DEFENDANTS-RESPONDENTS.
The antecedent facts of this case are as follows:
In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the
latter executed and delivered to the former a promissory note, engaging to pay the
petitioner Bank or order the amount of P1,820,000.00 on or before June 24, 1983 with
interest at 32% per annum. Sima Wei made partial payments on the note, leaving a
balance of P1,032,450.02. On November 18, 1983, Sima Wei issued two crossed
checks payable to petitioner Bank drawn against China Banking Corporation, bearing
respectively the serial numbers 384934, for the amount of P550,000.00 and 384935,
for the amount of P500,000.00. The said checks were allegedly issued in full settlement
of the drawer's account evidenced by the promissory note. These two checks were not
delivered to the petitioner-payee or to any of its authorized representatives. For reasons
not shown, these checks came into the possession of respondent Lee Kian Huat, who
deposited the checks without the petitioner-payee's indorsement (forged or otherwise)
to the account of respondent Plastic Corporation, at the Balintawak branch, Caloocan
City, of the Producers Bank. Cheng Uy, Branch Manager of the Balintawak branch of
Producers Bank, relying on the assurance of respondent Samson Tung, President of
Plastic Corporation, that the transaction was legal and regular, instructed the cashier
of Producers Bank to accept the checks for deposit and to credit them to the account
of said Plastic Corporation, inspite of the fact that the checks were crossed and payable
to petitioner Bank and bore no indorsement of the latter. Hence, petitioner filed the
complaint as aforestated.
The main issue before Us is whether petitioner Bank has a cause of action against any
or all of the defendants, in the alternative or otherwise.
A cause of action is defined as an act or omission of one party in violation of the legal
right or rights of another. The essential elements are: (1) legal right of the plaintiff; (2)
correlative obligation of the defendant; and (3) an act or omission of the defendant in
violation of said legal right.2
The normal parties to a check are the drawer, the payee and the drawee bank. Courts
have long recognized the business custom of using printed checks where blanks are
provided for the date of issuance, the name of the payee, the amount payable and the
drawer's signature. All the drawer has to do when he wishes to issue a check is to
properly fill up the blanks and sign it. However, the mere fact that he has done these
does not give rise to any liability on his part, until and unless the check is delivered to
the payee or his representative. A negotiable instrument, of which a check is, is not
only a written evidence of a contract right but is also a species of property. Just as a
deed to a piece of land must be delivered in order to convey title to the grantee, so
must a negotiable instrument be delivered to the payee in order to evidence its
existence as a binding contract. Section 16 of the Negotiable Instruments Law, which
governs checks, provides in part:
Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving
effect thereto. . . .
Thus, the payee of a negotiable instrument acquires no interest with respect thereto
until its delivery to him.3Delivery of an instrument means transfer of possession, actual
or constructive, from one person to another.4 Without the initial delivery of the
instrument from the drawer to the payee, there can be no liability on the instrument.
Moreover, such delivery must be intended to give effect to the instrument.
The allegations of the petitioner in the original complaint show that the two (2) China
Bank checks, numbered 384934 and 384935, were not delivered to the payee, the
petitioner herein. Without the delivery of said checks to petitioner-payee, the former did
not acquire any right or interest therein and cannot therefore assert any cause of
action, founded on said checks, whether against the drawer Sima Wei or against the
Producers Bank or any of the other respondents.
In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei on the
promissory note, and the alternative defendants, including Sima Wei, on the two
checks. On appeal from the orders of dismissal of the Regional Trial Court, petitioner
Bank alleged that its cause of action was not based on collecting the sum of money
evidenced by the negotiable instruments stated but on quasi-delict — a claim for
damages on the ground of fraudulent acts and evident bad faith of the alternative
respondents. This was clearly an attempt by the petitioner Bank to change not only the
theory of its case but the basis of his cause of action. It is well-settled that a party cannot
change his theory on appeal, as this would in effect deprive the other party of his day
in court.5
However, insofar as the other respondents are concerned, petitioner Bank has no
privity with them. Since petitioner Bank never received the checks on which it based its
action against said respondents, it never owned them (the checks) nor did it acquire
any interest therein. Thus, anything which the respondents may have done with respect
to said checks could not have prejudiced petitioner Bank. It had no right or interest in
the checks which could have been violated by said respondents. Petitioner Bank has
therefore no cause of action against said respondents, in the alternative or otherwise.
If at all, it is Sima Wei, the drawer, who would have a cause of action against her
co-respondents, if the allegations in the complaint are found to be true.
With respect to the second assignment of error raised by petitioner Bank regarding the
applicability of Section 13, Rule 3 of the Rules of Court, We find it unnecessary to
discuss the same in view of Our finding that the petitioner Bank did not acquire any
right or interest in the checks due to lack of delivery. It therefore has no cause of action
against the respondents, in the alternative or otherwise.
In the light of the foregoing, the judgment of the Court of Appeals dismissing the
petitioner's complaint is AFFIRMED insofar as the second cause of action is concerned.
On the first cause of action, the case is REMANDED to the trial court for a trial on the
merits, consistent with this decision, in order to determine whether respondent Sima
Wei is liable to the Development Bank of Rizal for any amount under the promissory
note allegedly signed by her.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Nocon, JJ., concur.

Notwithstanding the above, it does not necessarily follow that the drawer Sima Wei is
freed from liability to petitioner Bank under the loan evidenced by the promissory note
agreed to by her. Her allegation that she has paid the balance of her loan with the two
checks payable to petitioner Bank has no merit for, as We have earlier explained, these
checks were never delivered to petitioner Bank. And even granting, without admitting,
that there was delivery to petitioner Bank, the delivery of checks in payment of an
obligation does not constitute payment unless they are cashed or their value is impaired
through the fault of the creditor.6 None of these exceptions were alleged by respondent
Sima Wei.

Therefore, unless respondent Sima Wei proves that she has been relieved from liability
on the promissory note by some other cause, petitioner Bank has a right of action
against her for the balance due thereon.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 85419 March 9, 1993
DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,
vs.
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN
INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE
PHILIPPINES, defendants-respondents.
CAMPOS, JR., J.:
On July 6, 1986, the Development Bank of Rizal (petitioner Bank for brevity) filed a
complaint for a sum of money against respondents Sima Wei and/or Lee Kian Huat,
Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation (Plastic
Corporation for short) and the Producers Bank of the Philippines, on two causes of
action:
(1) To enforce payment of the balance of P1,032,450.02 on a
promissory note executed by respondent Sima Wei on June 9, 1983;
and
(2) To enforce payment of two checks executed by Sima Wei,
payable to petitioner, and drawn against the China Banking
Corporation, to pay the balance due on the promissory note.
Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging
a common ground that the complaint states no cause of action. The trial court granted
the defendants' Motions to Dismiss. The Court of Appeals affirmed this decision, * to
which the petitioner Bank, represented by its Legal Liquidator, filed this Petition for
Review by Certiorari, assigning the following as the alleged errors of the Court of
Appeals:1
(1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE
PLAINTIFF-PETITIONER HAS NO CAUSE OF ACTION AGAINST
DEFENDANTS-RESPONDENTS HEREIN.
(2) THE COURT OF APPEALS ERRED IN HOLDING THAT
SECTION 13, RULE 3 OF THE REVISED RULES OF COURT ON
ALTERNATIVE DEFENDANTS IS NOT APPLICABLE TO HEREIN
DEFENDANTS-RESPONDENTS.
The antecedent facts of this case are as follows:
In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the
latter executed and delivered to the former a promissory note, engaging to pay the
petitioner Bank or order the amount of P1,820,000.00 on or before June 24, 1983 with
interest at 32% per annum. Sima Wei made partial payments on the note, leaving a
balance of P1,032,450.02. On November 18, 1983, Sima Wei issued two crossed
checks payable to petitioner Bank drawn against China Banking Corporation, bearing
respectively the serial numbers 384934, for the amount of P550,000.00 and 384935,
for the amount of P500,000.00. The said checks were allegedly issued in full settlement
of the drawer's account evidenced by the promissory note. These two checks were not
delivered to the petitioner-payee or to any of its authorized representatives. For reasons
not shown, these checks came into the possession of respondent Lee Kian Huat, who
deposited the checks without the petitioner-payee's indorsement (forged or otherwise)
to the account of respondent Plastic Corporation, at the Balintawak branch, Caloocan
City, of the Producers Bank. Cheng Uy, Branch Manager of the Balintawak branch of
Producers Bank, relying on the assurance of respondent Samson Tung, President of
Plastic Corporation, that the transaction was legal and regular, instructed the cashier
of Producers Bank to accept the checks for deposit and to credit them to the account
of said Plastic Corporation, inspite of the fact that the checks were crossed and payable
to petitioner Bank and bore no indorsement of the latter. Hence, petitioner filed the
complaint as aforestated.
The main issue before Us is whether petitioner Bank has a cause of action against any
or all of the defendants, in the alternative or otherwise.
A cause of action is defined as an act or omission of one party in violation of the legal
right or rights of another. The essential elements are: (1) legal right of the plaintiff; (2)
correlative obligation of the defendant; and (3) an act or omission of the defendant in
violation of said legal right.2
The normal parties to a check are the drawer, the payee and the drawee bank. Courts
have long recognized the business custom of using printed checks where blanks are
provided for the date of issuance, the name of the payee, the amount payable and the
drawer's signature. All the drawer has to do when he wishes to issue a check is to
properly fill up the blanks and sign it. However, the mere fact that he has done these
does not give rise to any liability on his part, until and unless the check is delivered to
the payee or his representative. A negotiable instrument, of which a check is, is not
only a written evidence of a contract right but is also a species of property. Just as a
deed to a piece of land must be delivered in order to convey title to the grantee, so
must a negotiable instrument be delivered to the payee in order to evidence its
existence as a binding contract. Section 16 of the Negotiable Instruments Law, which
governs checks, provides in part:
Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving
effect thereto. . . .
Thus, the payee of a negotiable instrument acquires no interest with respect thereto
until its delivery to him.3Delivery of an instrument means transfer of possession, actual
or constructive, from one person to another. 4 Without the initial delivery of the right or interest in the checks due to lack of delivery. It therefore has no cause of action
instrument from the drawer to the payee, there can be no liability on the instrument. against the respondents, in the alternative or otherwise.
Moreover, such delivery must be intended to give effect to the instrument.
In the light of the foregoing, the judgment of the Court of Appeals dismissing the
The allegations of the petitioner in the original complaint show that the two (2) China petitioner's complaint is AFFIRMED insofar as the second cause of action is concerned.
Bank checks, numbered 384934 and 384935, were not delivered to the payee, the On the first cause of action, the case is REMANDED to the trial court for a trial on the
petitioner herein. Without the delivery of said checks to petitioner-payee, the former did merits, consistent with this decision, in order to determine whether respondent Sima
not acquire any right or interest therein and cannot therefore assert any cause of Wei is liable to the Development Bank of Rizal for any amount under the promissory
action, founded on said checks, whether against the drawer Sima Wei or against the note allegedly signed by her.
Producers Bank or any of the other respondents.
SO ORDERED.
In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei on the
promissory note, and the alternative defendants, including Sima Wei, on the two
checks. On appeal from the orders of dismissal of the Regional Trial Court, petitioner
Bank alleged that its cause of action was not based on collecting the sum of money
evidenced by the negotiable instruments stated but on quasi-delict — a claim for
damages on the ground of fraudulent acts and evident bad faith of the alternative
respondents. This was clearly an attempt by the petitioner Bank to change not only the
theory of its case but the basis of his cause of action. It is well-settled that a party cannot
change his theory on appeal, as this would in effect deprive the other party of his day
in court.5

Notwithstanding the above, it does not necessarily follow that the drawer Sima Wei is
freed from liability to petitioner Bank under the loan evidenced by the promissory note
agreed to by her. Her allegation that she has paid the balance of her loan with the two
checks payable to petitioner Bank has no merit for, as We have earlier explained, these
checks were never delivered to petitioner Bank. And even granting, without admitting,
that there was delivery to petitioner Bank, the delivery of checks in payment of an
obligation does not constitute payment unless they are cashed or their value is impaired
through the fault of the creditor.6 None of these exceptions were alleged by respondent
Sima Wei.

Therefore, unless respondent Sima Wei proves that she has been relieved from liability
on the promissory note by some other cause, petitioner Bank has a right of action
against her for the balance due thereon.

However, insofar as the other respondents are concerned, petitioner Bank has no
privity with them. Since petitioner Bank never received the checks on which it based its
action against said respondents, it never owned them (the checks) nor did it acquire
any interest therein. Thus, anything which the respondents may have done with respect
to said checks could not have prejudiced petitioner Bank. It had no right or interest in
the checks which could have been violated by said respondents. Petitioner Bank has
therefore no cause of action against said respondents, in the alternative or otherwise.
If at all, it is Sima Wei, the drawer, who would have a cause of action against her
co-respondents, if the allegations in the complaint are found to be true.

With respect to the second assignment of error raised by petitioner Bank regarding the
applicability of Section 13, Rule 3 of the Rules of Court, We find it unnecessary to
discuss the same in view of Our finding that the petitioner Bank did not acquire any
 FIRST DIVISION
[G. R. No. 112985. April 21, 1999]
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. MARTIN L. ROMERO and
ERNESTO C. RODRIGUEZ, accused-appellants.
DECISION
PARDO, J.:
The case before the Court is an appeal of accused Martin L. Romero and Ernesto C.
Rodriguez from the Joint Judgment1 of the Regional Trial Court, Branch 2, Butuan City,
convicting each of them of estafa under Article 315, par. 2 (d) of the Revised Penal
Code, in relation to Presidential Decree No. 1689, for widescale swindling, and
sentencing each of them to suffer the penalty of life imprisonment and to jointly and
severally pay Ernesto A. Ruiz the amount of one hundred fifty thousand pesos
(P150,000.00), with interest at the rate of twelve percent (12%) per annum, starting
September 14, 1989, until fully paid, and to pay ten thousand pesos (P10,000.00), as
moral damages.
On October 25, 1989, Butuan City acting fiscal Ernesto M. Brocoy filed with the
Regional Trial Court, Butuan City, an Information against the two (2) accused for
estafa,2 as follows:
That on or about September 14, 1989, at Butuan City, Philippines, and within the
jurisdiction of this Honorable Court, the above-named accused being the General
Manager and Operation Manager which solicit funds from the general public for
investment, conspiring, confederating together and mutually helping one another, by
means of deceit and false pretense, did then and there willfully, unlawfully and
feloniously deliberately defraud one Ernesto A. Ruiz by convincing the latter to invest
his money in the amount of P150,000.00 with a promise return of 800% profit within 21
days and in the process caused the issuance of Butuan City Rural Rural [sic] Bank
Check No. 158181 postdated to October 5, 1989 in the amount of One Million Two
Hundred Thousand Pesos (P1,200,000.00) Philippine Currency, that upon presentation
of said check to the drawee bank for payment the same was dishonored and that
notwithstanding repeated demands made on said accused to pay and/or change the
check to cash, they consistently failed and refused and still fail and refuse to pay or
redeem the check, to the damage and prejudice of the complainant in the aforestated
amount of P1,200,000.00.3cräläwvirtualibräry
On the same day, the city fiscal filed with the same court another information against
the two (2) accused for violation of Batas Pambansa Bilang 22, arising from the
issuance of the same check.4
On January 11, 1990, both accused were arraigned before the Regional Trial Court,
Branch 5,5 Butuan City, where they pleaded not guilty to both informations.
The prosecution presented its evidence on January 10, 1991, with complainant,
Ernesto A. Ruiz, and Daphne Parrocho, the usher/collector of the corporation being
managed by accused, testifying for the prosecution.
On August 12, 1991, the defense presented its only witness, accused Martin L.
Romero.
On November 13, 1992, the parties submitted a joint stipulation of facts, signed only by
their respective counsels. Thereafter, the case was submitted for decision.
On March 30, 1993, the trial court promulgated a Joint Judgment dated March 25, 1993.
The trial court acquitted the accused in Criminal Case No. 3806 6 based on reasonable
doubt, but convicted them in Criminal Case No. 3808 7 and accordingly sentenced each
of them, as follows:
IN VIEW OF THE FOREGOING, the Court hereby renders judgment, finding or
declaring -
(a) Accused Martin L. Romero and Ernesto C. Rodriguez innocent on reasonable doubt
in Criminal Case No. 3806, for violation of Batas Pambansa Bilang 22;
(b) Accused Martin L. Romero and Ernesto C .Rodriguez guilty beyond reasonable
doubt in Criminal Case No. 3808 for estafa under P.D. 1689 for wide scale [sic]
swindling and accordingly sentences them to suffer life imprisonment (Section 1 P.D.
1689) and ordered jointly and severally to return to Ernesto A. Ruiz the amount of One
Hundred Fifty Thousand Pesos (P150,000.00) with interest thereon at the rate of
Twelve percent (12%) per annum starting from September 14, 1989 until fully paid and
to pay the amount of Ten Thousand Pesos (P10,000.00) as moral damages.
In the service of their sentence, the accused pursuant to R.A. 6127, shall be credited
for the preventive imprisonment they have undergone (PP vs. Ortencio, 38 Phil 941;
PP vs. Gabriel, No. L-13756, October 30, 1959, cited in Gregorios Fundamentals of
Criminal Law Review, P. 178, Seventh Edition, 1985).8cräläwvirtualibräry
On March 31, 1993, accused filed their notice of appeal, which the trial court gave due
course on April 5, 1993. On March 16, 1994, this Court ordered the accused to file their
appellants brief.
Accused-appellants filed their brief on October 30, 1995, while the Solicitor General
filed the appellees brief on March 8, 1996.
During the pendency of the appeal, on November 12, 1997, accused Ernesto
Rodriguez died.9 As a consequence of his death before final judgment, his criminal and
civil liability ex delicto,were extinguished.10
Complainant Ernesto A. Ruiz was a radio commentator of Radio DXRB, Butuan City.
In August, 1989, he came to know the business of Surigao San Andres Industrial
Development Corporation (SAIDECOR), when he interviewed accused Martin Romero
and Ernesto Rodriguez regarding the corporations investment operations in Butuan
City and Agusan del Norte. Romero was the president and general manager of
SAIDECOR, while Rodriguez was the operations manager.
SAIDECOR started its operation on August 24, 1989 as a marketing business. Later, it
engaged in soliciting funds and investments from the public. The corporation
guaranteed an 800% return on investment within fifteen (15) or twenty one (21) days.
Investors were given coupons containing the capital and the return on the capital
collectible on the date agreed upon. It stopped operations in September, 1989.
On September 14, 1989, complainant Ernesto A. Ruiz went to SAIDECOR office in
Butuan City to make an investment, accompanied by his friend Jimmy Acebu, and
SAIDECOR collection agent Daphne Parrocho. After handing over the amount of one
hundred fifty thousand pesos (P150,000.00) to Ernesto Rodriguez, complainant
received a postdated Butuan City Rural Bank check instead of the usual redeemable
coupon. The check indicated P1,000,200.00 as the amount in words, but the amount
in figures was for P1,200,000.00, as the return on the investment. Complainant did not
notice the discrepancy.
When the check was presented to the bank for payment on October 5, 1989, it was
dishonored for insufficiency of funds, as evidenced by the check return slip issued by
the bank.11 Both accused could not be located and demand for payment was made
only sometime in November 1989 during the preliminary investigation of this case.
Accused responded that they had no money.
Daphne Parrocho,12 testified that on September 14, 1989, complainant, with his friend
Jimmy Acebu, approached her to invest the amount of P150,000.00 at SAIDECOR. As
she has reached her quota, and therefore, no longer authorized to receive the amount,
she accompanied them to the office of SAIDECOR at Ong Yiu District, Butuan City.
Accused Ernesto Rodriguez accepted the investment and issued the check signed by
him and Martin Romero.
For their defense, accused Martin Romero13 testified that on September 14, 1989, he
issued a check in the amount of P1,200,000.00 corresponding to the total of the
P150,000.00 investment and the 800% return thereon. He claimed that the corporation
had a deposit of fourteen million pesos (P14,000,000.00) at the time of the issuance of
the check and four million pesos (P4,000,000.00) at the time SAIDECOR stopped
operations. Romero knew these things because he used to monitor the funds of the
corporation with the bank. He was not aware that the check he issued was dishonored
because he never had the occasion to meet the complainant again after the September
14, 1989 transaction. He only came to know about this when the case was already filed
in court sometime in the second or third week of January 1990. 14
In this appeal, both accused did not deny that complainant made an investment with
SAIDECOR in the amount of P150,000.00. However, they denied that deceit was
employed in the transaction. They assigned as errors: (1) their conviction under P.D.
1689 due to the prosecutions failure to establish their guilt beyond reasonable doubt;
and (2) the trial courts failure to consider the joint stipulation of facts in their
favor.15 There is no merit in this appeal. We sustain accused-appellants conviction.
Under paragraph 2 (d) of Article 315, as amended by R.A. 4885, 16the elements of
estafa are: (1) a check was postdated or issued in payment of an obligation contracted
at the time it was issued; (2) lack or insufficiency of funds to cover the check; (3)
damage to the payee thereof.17 The prosecution has satisfactorily established all these
elements.
Fraud, in its general sense, is deemed to comprise anything calculated to deceive,
including all acts, omissions, and concealment involving a breach of legal or equitable
duty, trust, or confidences justly reposed, resulting in damage to another, or by which
an undue and unconscientious advantage is taken of another. 18 It is a generic term
embracing all multifarious means which human ingenuity can device, and which are
resorted to by one individual to secure an advantage over another by false suggestions
or by suppression of truth and includes all surprise, trick, cunning, dissembling and any
unfair way by which another is cheated.19
Deceit is a specie of fraud. It is actual fraud, and consists in any false representation
or contrivance whereby one person overreaches and misleads another, to his hurt.
Deceit excludes the idea of mistake.20 There is deceit when one is misled, either by
guide or trickery or by other means, to believe to be true what is really false. 21 In this
case, there was deception when accused fraudulently represented to complainant that
his investment with the corporation would have an 800% return in 15 or 21 days.
Upon receipt of the money, accused-appellant Martin Romero issued a postdated
check. Although accused-appellant contends that sufficient funds were deposited in the
bank when the check was issued, he presented no officer of the bank to substantiate
the contention. The check was dishonored when presented for payment, and the check
return slip submitted in evidence indicated that it was dishonored due to insufficiency
of funds.
Even assuming for the sake of argument that the check was dishonored without any
fraudulent pretense or fraudulent act of the drawer, the latters failure to cover the
amount within three days after notice creates a rebuttable presumption of fraud.22
Admittedly (1) the check was dishonored for insufficiency of funds as evidenced by the
check return slip; (2) complainant notified accused of the dishonor; and (3) accused
failed to make good the check within three days. Presumption of deceit remained since
accused failed to prove otherwise. Complainant sustained damage in the amount of
P150,000.00.
Accused-appellant also contends that had the trial court admitted the Admission and
Stipulation of Facts of November 9, 1992, it would prove that SAIDECOR had sufficient
funds in the bank.
Accused-appellant relies on the fact that there was a discrepancy between the amount
in words and the amount in figures in the check that was dishonored. The amount in
words was P1,000,200.00, while the amount in figures was P1,200,000.00. It is
admitted that the corporation had in the bank P1,144,760.00 on September 28,1989,
and P1,124,307.14 on April 2, 1990. The check was presented for payment on October
5, 1989. The rule in the Negotiable Instruments Law is that when there is ambiguity in
the amount in words and the amount in figures, it would be the amount in words that
would prevail.23
However, this rule of interpretation finds no application in the case. The agreement was
perfectly clear that at the end of twenty one (21) days, the investment of P150,000.00
would become P1,200,000.00. Even if the trial court admitted the stipulation of facts, it
would not be favorable to accused-appellant.
The factual narration in this case established a kind of Ponzi scheme. 24 This is an
investment swindle in which high profits are promised from fictitious sources and early
investors are paid off with funds raised from later ones. It is sometimes called a pyramid
scheme because a broader base of gullible investors must support the structure as time
passes.
In the recent case of People vs. Priscilla Balasa,25 this Court held that a transaction
similar to the case at hand is not an investment strategy but a gullibility scheme, which
works only as long as there is an ever increasing number of new investors joining the
scheme. It is difficult to sustain over a long period of time because the operator needs
an ever larger pool of later investors to continue paying the promised profits to early
investors. The idea behind this type of swindle is that the con-man collects his money
from his second or third round of investors and then absconds before anyone else
shows up to collect. Necessarily, these schemes only last weeks, or months at most,
just like what happened in this case.
The Court notes that one of the accused-appellants, Ernesto Rodriguez, died pending
appeal. Pursuant to the doctrine established in People vs. Bayotas,26 the death of the
accused pending appeal of his conviction extinguishes his criminal liability as well as
the civil liability ex delicto. The criminal action is extinguished inasmuch as there is no
longer a defendant to stand as the accused, the civil action instituted therein for
recovery of civil liability ex delicto isipso facto extinguished, grounded as it is on the
criminal case. Corollarily, the claim for civil liability survives notwithstanding the death
of the accused, if the same may also be predicated on a source of obligation other than
delict.27
Thus, the outcome of this appeal pertains only to the remaining accused-appellant,
Martin L. Romero. The trial court considered the swindling involved in this case as
having been committed by a syndicate28 and sentenced the accused to life
imprisonment based on the provisions of Presidential Decree 1689, which increased
the penalty for certain forms of swindling or estafa.29 However, the prosecution failed
to clearly establish that the corporation was a syndicate, as defined under the law. The
penalty of life imprisonment cannot be imposed. What would be applicable in the
present case is the second paragraph of Presidential Decree No. 1689, Section 1,
which provides that:
When not committed by a syndicate as above defined, the penalty imposable shall
be reclusion temporal to reclusion perpetua if the amount of the fraud exceeds 100,000
pesos.
Article 77 of the Revised Penal Code on complex penalties provides that whenever the
penalty prescribed does not have one of the forms specially provided for in this Code,
the periods shall be distributed, applying by analogy the prescribed rules, that is, those
in Articles 61 and 76.30 Hence, where as in this case, the penalty provided by Section
1 of Presidential Decree No. 1689 for estafa under Articles 315 and 316 of the Code
is reclusion temporal to reclusion perpetua, the minimum period thereof is twelve (12)
years and one (1) day to sixteen (16) years of reclusion temporal; the medium period
is sixteen (16) years and one (1) day to twenty (20) years of reclusion temporal; and
the maximum period is reclusion perpetua.
In the case at bar, no mitigating or aggravating circumstance has been alleged or
proved. Applying the rules in the Revised Penal Code for graduating penalties by
degrees31 to determine the proper period,32 the penalty for the offense of estafa under
Article 315, 2(d) as amended by P.D. 1689 involving the amount of P150,000.00 is the
medium of the period of the complex penalty in said Section 1, that is, sixteen (16)
years and one (1) day to twenty (20) years. This penalty, being that which is to be
actually imposed in accordance with the rules therefor and not merely imposable as a
general prescription under the law, shall be the maximum range of the indeterminate
sentence.33 The minimum thereof shall be taken, as aforesaid, from any period of the
penalty next lower in degree, which is, prision mayor.
To enable the complainant to obtain means, diversion or amusements that will serve to
alleviate the moral sufferings undergone by him, by reason of the failure of the accused
to return his money, moral damages are imposed against accused-appellant Martin L.
Romero in the amount of twenty thousand pesos (P20,000.00).34 To serve as an
example for the public good, exemplary damages are awarded against him in the
amount of fifteen thousand pesos (P15,000.00).35
WHEREFORE, the Court hereby AFFIRMS WITH MODIFICATION the appealed
judgment. The Court hereby sentences accused-appellant Martin Romero to suffer an
indeterminate penalty of ten (10) years and one (1) day of prision mayor, as minimum,
to sixteen (16) years and one (1) day of reclusion temporal, as maximum, to indemnify
Ernesto A. Ruiz in the amount of one hundred fifty thousand pesos (P150,000.00) with
interest thereon at six (6%) per centum per annum from September 14, 1989, until fully
paid, to pay twenty thousand pesos (P20,000.00) as moral damages and fifteen
thousand pesos (P15,000.00), as exemplary damages, and the costs.
SO ORDERED.
Davide, Jr., C.J.,Melo, and Kapunan , JJ., concur.
Ynares-Santiago, J. no part.
 G.R. No. 93073 December 21, 1992
REPUBLIC PLANTERS BANK, petitioner,
vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.
CAMPOS, JR., J.:
This is an appeal by way of a Petition for Review on Certiorari from the decision * of
the Court of Appeals in CA G.R. CV No. 07302, entitled "Republic Planters
Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and
Fermin Canlas, Defendant-Appellant", which affirmed the decision ** in Civil Case No.
82-5448 except that it completely absolved Fermin Canlas from liability under the
promissory notes and reduced the award for damages and attorney's fees. The RTC
decision, rendered on June 20, 1985, is quoted hereunder:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiff Republic Planters Bank, ordering defendant
Pinch Manufacturing Corporation (formerly Worldwide Garment
Manufacturing, Inc.) and defendants Shozo Yamaguchi and Fermin
Canlas to pay, jointly and severally, the plaintiff bank the following
sums with interest thereon at 16% per annum from the dates
indicated, to wit:
Under the promissory note (Exhibit "A"), the sum of P300,000.00 with
interest from January 29, 1981 until fully paid; under promissory note
(Exhibit "B"), the sum of P40,000.00 with interest from November 27,
1980; under the promissory note (Exhibit "C"), the sum of
P166,466.00 which interest from January 29, 1981; under the
promissory note (Exhibit "E"), the sum of P86,130.31 with interest
from January 29, 1981; under the promissory note (Exhibit "G"), the
sum of P12,703.70 with interest from November 27, 1980; under the
promissory note (Exhibit "H"), the sum of P281,875.91 with interest
from January 29, 1981; and under the promissory note (Exhibit "I"),
the sum of P200,000.00 with interest from January 29, 1981.
Under the promissory note (Exhibit "D") defendants Pinch
Manufacturing Corporation (formerly named Worldwide Garment
Manufacturing, Inc.), and Shozo Yamaguchi are ordered to pay
jointly and severally, the plaintiff bank the sum of P367,000.00 with
interest of 16% per annum from January 29, 1980 until fully paid
Under the promissory note (Exhibit "F") defendant corporation Pinch
(formerly Worldwide) is ordered to pay the plaintiff bank the sum of
P140,000.00 with interest at 16% per annum from November 27,
1980 until fully paid.
Defendant Pinch (formely Worldwide) is hereby ordered to pay the
plaintiff the sum of P231,120.81 with interest at 12% per annum from
July 1, 1981, until fully paid and the sum of P331,870.97 with interest
from March 28, 1981, until fully paid.
All the defendants are also ordered to pay, jointly and severally, the
plaintiff the sum of P100,000.00 as and for reasonable attorney's fee
and the further sum equivalent to 3% per annum of the respective
principal sums from the dates above stated as penalty charge until
fully paid, plus one percent (1%) of the principal sums as service
charge.
With costs against the defendants.
SO ORDERED. 1
From the above decision only defendant Fermin Canlas appealed to the then
Intermediate Court (now the Court Appeals). His contention was that inasmuch as he
signed the promissory notes in his capacity as officer of the defunct Worldwide Garment
Manufacturing, Inc, he should not be held personally liable for such authorized
corporate acts that he performed. It is now the contention of the petitioner Republic
Planters Bank that having unconditionally signed the nine (9) promissory notes with
Shozo Yamaguchi, jointly and severally, defendant Fermin Canlas is solidarity liable
with Shozo Yamaguchi on each of the nine notes.
We find merit in this appeal.
From the records, these facts are established: Defendant Shozo Yamaguchi and
private respondent Fermin Canlas were President/Chief Operating Officer and
Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of Board
Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private
respondent Fermin Canlas were authorized to apply for credit facilities with the
petitioner Republic Planters Bank in the forms of export advances and letters of
credit/trust receipts accommodations. Petitioner bank issued nine promissory notes,
marked as Exhibits A to I inclusive, each of which were uniformly worded in the
following manner:
___________, after date, for value received, I/we, jointly and
severaIly promise to pay to the ORDER of the REPUBLIC
PLANTERS BANK, at its office in Manila, Philippines, the sum of
___________ PESOS(....) Philippine Currency...
On the right bottom margin of the promissory notes appeared the signatures of Shozo
Yamaguchi and Fermin Canlas above their printed names with the phrase "and (in) his
personal capacity" typewritten below. At the bottom of the promissory notes appeared:
"Please credit proceeds of this note to:
________ Savings Account ______XX Current Account
 No. 1372-00257-6
of WORLDWIDE GARMENT MFG. CORP.
These entries were separated from the text of the notes with a bold line which ran
horizontally across the pages.
In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment
Manufacturing, Inc. was apparently rubber stamped above the signatures of defendant
and private respondent.
On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its
corporate name to Pinch Manufacturing Corporation.
On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of
money covered among others, by the nine promissory notes with interest thereon, plus
attorney's fees and penalty charges. The complainant was originally brought against
Worldwide Garment Manufacturing, Inc. inter alia, but it was later amended to drop
Worldwide Manufacturing, Inc. as defendant and substitute Pinch Manufacturing
Corporation it its place. Defendants Pinch Manufacturing Corporation and Shozo
Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-
trial conference despite due notice. Only private respondent Fermin Canlas filed an
Amended Answer wherein he, denied having issued the promissory notes in question
since according to him, he was not an officer of Pinch Manufacturing Corporation, but
instead of Worldwide Garment Manufacturing, Inc., and that when he issued said
promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the same were
in blank, the typewritten entries not appearing therein prior to the time he affixed his
signature.
In the mind of this Court, the only issue material to the resolution of this appeal is
whether private respondent Fermin Canlas is solidarily liable with the other defendants,
namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on the nine
promissory notes.
We hold that private respondent Fermin Canlas is solidarily liable on each of the
promissory notes bearing his signature for the following reasons:
The promissory motes are negotiable instruments and must be governed by the
Negotiable Instruments Law. 2
Under the Negotiable lnstruments Law, persons who write their names on the face of
promissory notes are makers and are liable as such. 3 By signing the notes, the maker
promises to pay to the order of the payee or any holder 4according to the tenor
thereof.5 Based on the above provisions of law, there is no denying that private
respondent Fermin Canlas is one of the co-makers of the promissory notes. As such,
he cannot escape liability arising therefrom.
Where an instrument containing the words "I promise to pay" is signed by two or more
persons, they are deemed to be jointly and severally liable thereon. 6 An instrument
which begins" with "I" ,We" , or "Either of us" promise to, pay, when signed by two or
more persons, makes them solidarily liable. 7 The fact that the singular pronoun is used
indicates that the promise is individual as to each other; meaning that each of the co-
signers is deemed to have made an independent singular promise to pay the notes in
full.
In the case at bar, the solidary liability of private respondent Fermin Canlas is made
clearer and certain, without reason for ambiguity, by the presence of the phrase "joint
and several" as describing the unconditional promise to pay to the order of Republic
Planters Bank. A joint and several note is one in which the makers bind themselves
both jointly and individually to the payee so that all may be sued together for its
enforcement, or the creditor may select one or more as the object of the suit. 8 A joint
and several obligation in common law corresponds to a civil law solidary obligation; that
is, one of several debtors bound in such wise that each is liable for the entire amount,
and not merely for his proportionate share. 9 By making a joint and several promise to
pay to the order of Republic Planters Bank, private respondent Fermin Canlas assumed
the solidary liability of a debtor and the payee may choose to enforce the notes against
him alone or jointly with Yamaguchi and Pinch Manufacturing Corporation as solidary
debtors.
As to whether the interpolation of the phrase "and (in) his personal capacity" below the
signatures of the makers in the notes will affect the liability of the makers, We do not
find it necessary to resolve and decide, because it is immaterial and will not affect to
the liability of private respondent Fermin Canlas as a joint and several debtor of the
notes. With or without the presence of said phrase, private respondent Fermin Canlas
is primarily liable as a co-maker of each of the notes and his liability is that of a solidary
debtor.
Finally, the respondent Court made a grave error in holding that an amendment in a
corporation's Articles of Incorporation effecting a change of corporate name, in this
case from Worldwide Garment manufacturing Inc to Pinch Manufacturing Corporation
extinguished the personality of the original corporation.
The corporation, upon such change in its name, is in no sense a new corporation, nor
the successor of the original corporation. It is the same corporation with a different
name, and its character is in no respect changed.10
A change in the corporate name does not make a new corporation, and whether
effected by special act or under a general law, has no affect on the identity of the
corporation, or on its property, rights, or liabilities. 11
The corporation continues, as before, responsible in its new name for all debts or other
liabilities which it had previously contracted or incurred. 12
As a general rule, officers or directors under the old corporate name bear no personal
liability for acts done or contracts entered into by officers of the corporation, if duly
authorized. Inasmuch as such officers acted in their capacity as agent of the old
corporation and the change of name meant only the continuation of the old juridical
entity, the corporation bearing the same name is still bound by the acts of its agents if
authorized by the Board. Under the Negotiable Instruments Law, the liability of a person
signing as an agent is specifically provided for as follows:
Sec. 20. Liability of a person signing as agent and so forth. Where
the instrument contains or a person adds to his signature words
indicating that he signs for or on behalf of a principal , or in a
representative capacity, he is not liable on the instrument if he was
duly authorized; but the mere addition of words describing him as an
agent, or as filling a representative character, without disclosing his
principal, does not exempt him from personal liability.
Where the agent signs his name but nowhere in the instrument has he disclosed the
fact that he is acting in a representative capacity or the name of the third party for whom
he might have acted as agent, the agent is personally liable to take holder of the
instrument and cannot be permitted to prove that he was merely acting as agent of
another and parol or extrinsic evidence is not admissible to avoid the agent's personal
liability. 13
On the private respondent's contention that the promissory notes were delivered to him
in blank for his signature, we rule otherwise. A careful examination of the notes in
question shows that they are the stereotype printed form of promissory notes generally
used by commercial banking institutions to be signed by their clients in obtaining loans.
Such printed notes are incomplete because there are blank spaces to be filled up on
material particulars such as payee's name, amount of the loan, rate of interest, date of
issue and the maturity date. The terms and conditions of the loan are printed on the
note for the borrower-debtor 's perusal. An incomplete instrument which has been
delivered to the borrower for his signature is governed by Section 14 of the Negotiable
Instruments Law which provides, in so far as relevant to this case, thus:
Sec. 14. Blanks: when may be filled. — Where the instrument is
wanting in any material particular, the person in possesion thereof
has a prima facie authority to complete it by filling up the blanks
therein. ... 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...
Proof that the notes were signed in blank was only the self-serving testimony of private
respondent Fermin Canlas, as determined by the trial court, so that the trial court
''doubts the defendant (Canlas) signed in blank the promissory notes". We chose to
believe the bank's testimony that the notes were filled up before they were given to
private respondent Fermin Canlas and defendant Shozo Yamaguchi for their signatures
as joint and several promissors. For signing the notes above their typewritten names,
they bound themselves as unconditional makers. We take judicial notice of the
customary procedure of commercial banks of requiring their clientele to sign promissory
notes prepared by the banks in printed form with blank spaces already filled up as per
agreed terms of the loan, leaving the borrowers-debtors to do nothing but read the
terms and conditions therein printed and to sign as makers or co-makers. When the
notes were given to private respondent Fermin Canlas for his signature, the notes were
complete in the sense that the spaces for the material particular had been filled up by
the bank as per agreement. The notes were not incomplete instruments; neither were
they given to private respondent Fermin Canlas in blank as he claims. Thus, Section
14 of the NegotiabIe Instruments Law is not applicable.
The ruling in case of Reformina vs. Tomol relied upon by the appellate court in reducing
the interest rate on the promissory notes from 16% to 12% per annum does not
squarely apply to the instant petition. In the abovecited case, the rate of 12% was
applied to forebearances of money, goods or credit and court judgemets thereon, only
in the absence of any stipulation between the parties.
In the case at bar however , it was found by the trial court that the rate of interest is 9%
per annum, which interest rate the plaintiff may at any time without notice, raise within
the limits allowed law. And so, as of February 16, 1984 , the plaintiff had fixed the
interest at 16% per annum.
This Court has held that the rates under the Usury Law, as amended by Presidential
Decree No. 116, are applicable only to interests by way of compensation for the use or
forebearance of money. Article 2209 of the Civil Code, on the other hand, governs
interests by way of damages.15 This fine distinction was not taken into consideration by
the appellate court, which instead made a general statement that the interest rate be
at 12% per annum.
Inasmuch as this Court had declared that increases in interest rates are not subject to
any ceiling prescribed by the Usury Law, the appellate court erred in limiting the interest
rates at 12% per annum. Central Bank Circular No. 905, Series of 1982 removed the
Usury Law ceiling on interest rates. 16
In the 1ight of the foregoing analysis and under the plain language of the statute and
jurisprudence on the matter, the decision of the respondent: Court of Appeals absolving
private respondent Fermin Canlas is REVERSED and SET ASIDE. Judgement is
hereby rendered declaring private respondent Fermin Canlas jointly and severally liable
on all the nine promissory notes with the following sums and at 16% interest per annum
from the dates indicated, to wit:
Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest
from January 29, 1981 until fully paid; under promissory note marked as Exhibit B, the
sum of P40,000.00 with interest from November 27, 1980: under the promissory note
denominated as Exhibit C, the amount of P166,466.00 with interest from January 29,
1981; under the promissory note denominated as Exhibit D, the amount of P367,000.00
with interest from January 29, 1981 until fully paid; under the promissory note marked
as Exhibit E, the amount of P86,130.31 with interest from January 29, 1981; under the
promissory note marked as Exhibit F, the sum of P140,000.00 with interest from
November 27, 1980 until fully paid; under the promissory note marked as Exhibit G, the
amount of P12,703.70 with interest from November 27, 1980; the promissory note
marked as Exhibit H, the sum of P281,875.91 with interest from January 29, 1981; and
the promissory note marked as Exhibit I, the sum of P200,000.00 with interest on
January 29, 1981.
The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide Republic of the Philippines
Garment Manufacturing, Inc.) and Shozo Yamaguchi, for not having appealed from the SUPREME COURT
decision of the trial court, shall be adjudged in accordance with the judgment rendered Manila
by the Court a quo.
EN BANC
With respect to attorney's fees, and penalty and service charges, the private
respondent Fermin Canlas is hereby held jointly and solidarity liable with defendants G.R. No. L-38816 November 3, 1933
for the amounts found, by the Court a quo. With costs against private respondent.
INSULAR DRUG CO., INC., plaintiff-appellee,
SO ORDERED. vs.
THE PHILIPPINE NATIONAL BANK, ET AL., defendants.
THE PHILIPPINE NATIONAL BANK, appellant

MALCOLM, J.:

This is an appeal taken by Philippine National Bank from a judgment of the Court of
First Instance of Manila requiring bank to pay to the Insular Drug Co., Inc., the sum of
P18,285.92 with legal interest and costs.

The record consists of the testimony of Alfred Von Arend, President and Manager of
the Insular Drug Co., Inc., and of exhibits obtained from the Philippine National Bank
showing transactions of U.E. Foerster with the bank. The Philippine National Bank was
content to submit the case without presenting evidence in its behalf. The meagre record
and the statement of facts agreed upon by the attorneys for the contending parties
disclose the following facts:

The Insular Drug Co., Inc., is a Philippine corporation with offices in the City of Manila.
U.E. Foerster was formerly a salesman of drug company for the Islands of Panay and
Negros. Foerster also acted as a collector for the company. He was instructed to take
the checks which came to his hands for the drug company to the Iloilo branch of the
Chartered Bank of India, Australia and China and deposit the amounts to the credit of
the drug company. Instead, Foerster deposited checks, including those of Juan
Llorente, Dolores Salcedo, Estanislao Salcedo, and a fourth party, with the Iloilo branch
of the Philippine National Bank. The checks were in that bank placed in the personal
account of Foerster. Some of the checks were drawn against the Bank of Philippine
National Bank. After the indorsement on the checks was written "Received payment
prior indorsement guaranteed by Philippine National bank, Iloilo Branch, Angel Padilla,
Manager." The indorsement on the checks took various forms, some being "Insular
Drug Company, Inc., By: (Sgd.) U. Foerster, Agent. (Sgd.) U. Foerster" other being
"Insular Drug Co., Inc., By: (Sgd.) Carmen E. de Foerster, Agent (Sgd.) Carmen E. de
Foerster"; others "Insular Drug Co., Inc., By: (Sgd.) Carmen E. de Foerster, Carmen E.
de Froster"; others "(Sgd.) Carmen E. de Foerster, (Sgd.) Carmen E. de Foerster"; one
(Sgd.) U. Foerster. (Sgd.) U. Foerster"; others; "Insular Drug Co., Inc., Carmen E. de
Foerster, By: (Sgd.) V. Bacaldo," etc. In this connection it should be explained that
Carmen E. de Foerster was his stenographer. As a consequence of the indorsements
on checks the amounts therein stated were subsequently withdrawn by U. E., Foerster
and Carmen E. de Foerster.
Eventually the Manila office of the drug company investigated the transactions of
Foerster. Upon the discovery of anomalies, Foerster committed suicide. But there is no
evidence showing that the bank knew that Foerster was misappropriating the funds of
his principal. The Insular Drug Company claims that it never received the face value of
132 checks here in the question covering a total of P18,285.92.lawphil.net
There is no Philippine authority which directly fits the proven facts. The case of Fulton
Iron Works Co., vs. China Banking Corporation ([1930], 55 Phil., 208), mentioned by
both parties rest on a different states of facts. However, there are elementary principles
governing the relationship between a bank and its customers which are controlling.
thus suffered no loss, but the bank has not done so. Much more could be said about
this case, but it suffices to state in conclusion that bank will have to stand the loss
occasioned by the negligence of its agents.
Overruling the errors assigned, judgment of the trial court will be affirmed, the costs of
this instance to be paid by appellant.
Villa-Real, Hull, Imperial, and Butte, JJ., concur.

In first place, the bank argues that the drug company was never defrauded at all. While
the evidence on the extent of the loss suffered by the drug company is not nearly as
clear as it should be, it is a sufficient answer to state that no such special defense was
relied upon by the bank in the trial court. The drug company saw fit to stand on the
proposition that checks drawn in its favor were improperly and illegally cashed by the
bank for Foerster and placed in his personal account, thus making it possible for
Foerster to defraud the drug company, and the bank did not try to go back of this
proposition.

The next point relied upon by the bank, to the effect that Foerster had implied authority
to indorse all checks made out in the name of the Insular Drug Co., Inc., has even less
force. Not only did the bank permit Foerster to indorse checks and then place them to
his personal account, but it went farther and permitted Foerster's wife and clerk to
indorse the checks. The right of an agent to indorse commercial paper is a very
responsible power and will not be lightly inferred. A salesman with authority to collect
money belonging to his principal does not have the implied authority to indorse checks
received in payment. Any person taking checks made payable to a corporation, which
can act only by agent does so at his peril, and must same by the consequences if the
agent who indorses the same is without authority. (Arcade Realty Co. vs. Bank of
Commerce [1919], 180 Cal., 318; Standard Steam Specialty Co., vs. Corn Exchange
Bank [1917], 220 N.Y., 278; People vs. Bank of North America [1879], 75 N.Y., 547;
Graham vs. United States Savings Institution [1870], 46 Mo., 186.) Further speaking to
the errors specified by the bank, it is sufficient to state that no trust fund was involved;
that the fact that bank acted in good faith does not relieve it from responsibility; that no
proof was adduced, admitting that Foerster had right to indorse the checks, indicative
of right of his wife and clerk to do the same , and that the checks drawn on the Bank of
the Philippine Islands can not be differentiated from those drawn on the Philippine
National Bank because of the indorsement by the latter.

In brief, this is a case where 132 checks made out in the name of the Insular Drug Co.,
Inc., were brought to the branch office of the Philippine National Bank in Iloilo by
Foerster, a salesman of the drug company, Foerster's wife, and Foerster's clerk. The
bank could tell by the checks themselves that the money belonged to the Insular Drug
Co., Inc., and not to Foerster or his wife or his clerk. When the bank credited those
checks to the personal account of Foerster and permitted Foerster and his wife to make
withdrawals without there being made authority from the drug company to do so, the
bank made itself responsible to the drug company for the amounts represented by the
checks. The bank could relieve itself from responsibility by pleading and proving that
after the money was withdrawn from the bank it passed to the drug company which
 Republic of the Philippines
SUPREME COURT
Manila
G.R. Nos. L-25836-37 January 31, 1981
THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee,
vs.
JOSE M. ARUEGO, defendant-appellant.
FERNANDEZ, J.:
The defendant, Jose M. Aruego, appealed to the Court of Appeals from the order of the
Court of First Instance of Manila, Branch XIII, in Civil Case No. 42066 denying his
motion to set aside the order declaring him in default, 1 and from the order of said court
in the same case denying his motion to set aside the judgment rendered after he was
declared in default. 2 These two appeals of the defendant were docketed as CA-G.R.
NO. 27734-R and CA-G.R. NO. 27940-R, respectively.
Upon motion of the defendant on July 25, 1960, 3 he was allowed by the Court of
Appeals to file one consolidated record on appeal of CA-G.R. NO. 27734-R and CA-
G.R. NO. 27940-R. 4
In a resolution promulgated on March 1, 1966, the Court of Appeals, First Division,
certified the consolidated appeal to the Supreme Court on the ground that only
questions of law are involved. 5
On December 1, 1959, the Philippine Bank of Commerce instituted against Jose M.
Aruego Civil Case No. 42066 for the recovery of the total sum of about P35,000.00 with
daily interest thereon from November 17, 1959 until fully paid and commission
equivalent to 3/8% for every thirty (30) days or fraction thereof plus attorney's fees
equivalent to 10% of the total amount due and costs. 6 The complaint filed by the
Philippine Bank of Commerce contains twenty-two (22) causes of action referring to
twenty-two (22) transactions entered into by the said Bank and Aruego on different
dates covering the period from August 28, 1950 to March 14, 1951. 7 The sum sought
to be recovered represents the cost of the printing of "World Current Events," a
periodical published by the defendant. To facilitate the payment of the printing the
defendant obtained a credit accommodation from the plaintiff. Thus, for every printing
of the "World Current Events," the printer, Encal Press and Photo Engraving, collected
the cost of printing by drawing a draft against the plaintiff, said draft being sent later to
the defendant for acceptance. As an added security for the payment of the amounts
advanced to Encal Press and Photo-Engraving, the plaintiff bank also required
defendant Aruego to execute a trust receipt in favor of said bank wherein said
defendant undertook to hold in trust for plaintiff the periodicals and to sell the same with
the promise to turn over to the plaintiff the proceeds of the sale of said publication to
answer for the payment of all obligations arising from the draft. 8
Aruego received a copy of the complaint together with the summons on December 2,
1959. 9 On December 14, 1959 defendant filed an urgent motion for extension of time
to plead, and set the hearing on December 16, 1959. 10At the hearing, the court denied
defendant's motion for extension. Whereupon, the defendant filed a motion to dismiss
the complaint on December 17, 1959 on the ground that the complaint states no cause
of action because:
a) When the various bills of exchange were presented to the defendant as drawee for
acceptance, the amounts thereof had already been paid by the plaintiff to the drawer
(Encal Press and Photo Engraving), without knowledge or consent of the defendant
drawee.
b) In the case of a bill of exchange, like those involved in the case at bar, the defendant
drawee is an accommodating party only for the drawer (Encal Press and Photo-
Engraving) and win be liable in the event that the accommodating party (drawer) fails
to pay its obligation to the plaintiff. 11
The complaint was dismissed in an order dated December 22, 1959, copy of which was
received by the defendant on December 24, 1959. 12
On January 13, 1960, the plaintiff filed a motion for reconsideration. 13 On March 7,
1960, acting upon the motion for reconsideration filed by the plaintiff, the trial court set
aside its order dismissing the complaint and set the case for hearing on March 15, 1960
at 8:00 in the morning. 14 A copy of the order setting aside the order of dismissal was
received by the defendant on March 11, 1960 at 5:00 o'clock in the afternoon according
to the affidavit of the deputy sheriff of Manila, Mamerto de la Cruz. On the following
day, March 12, 1960, the defendant filed a motion to postpone the trial of the case on
the ground that there having been no answer as yet, the issues had not yet been
joined. 15 On the same date, the defendant filed his answer to the complaint interposing
the following defenses: That he signed the document upon which the plaintiff sues in
his capacity as President of the Philippine Education Foundation; that his liability is only
secondary; and that he believed that he was signing only as an accommodation
party. 16
On March 15, 1960, the plaintiff filed an ex parte motion to declare the defendant in
default on the ground that the defendant should have filed his answer on March 11,
1960. He contends that by filing his answer on March 12, 1960, defendant was one day
late. 17 On March 19, 1960 the trial court declared the defendant in default. 18 The
defendant learned of the order declaring him in default on March 21, 1960. On March
22, 1960 the defendant filed a motion to set aside the order of default alleging that
although the order of the court dated March 7, 1960 was received on March 11, 1960
at 5:00 in the afternoon, it could not have been reasonably expected of the defendant
to file his answer on the last day of the reglementary period, March 11, 1960, within
office hours, especially because the order of the court dated March 7, 1960 was brought
to the attention of counsel only in the early hours of March 12, 1960. The defendant
also alleged that he has a good and substantial defense. Attached to the motion are
the affidavits of deputy sheriff Mamerto de la Cruz that he served the order of the court
dated March 7, 1960 on March 11, 1960, at 5:00 o'clock in the afternoon and the
affidavit of the defendant Aruego that he has a good and substantial defense. 19 The
trial court denied the defendant's motion on March 25, 1960. 20 On May 6, 1960, the
trial court rendered judgment sentencing the defendant to pay to the plaintiff the sum
of P35,444.35 representing the total amount of his obligation to the said plaintiff under
the twenty-two (22) causes of action alleged in the complaint as of November 15, 1957
and the sum of P10,000.00 as attorney's fees. 21
On May 9, 1960 the defendant filed a notice of appeal from the order dated March 25,
1961 denying his motion to set aside the order declaring him in default, an appeal bond
in the amount of P60.00, and his record on appeal. The plaintiff filed his opposition to
the approval of defendant's record on appeal on May 13, 1960. The following day, May
14, 1960, the lower court dismissed defendant's appeal from the order dated March 25,
1960 denying his motion to set aside the order of default. 22 On May 19, 1960, the
defendant filed a motion for reconsideration of the trial court's order dismissing his
appeal. 23 The plaintiff, on May 20, 1960, opposed the defendant's motion for
reconsideration of the order dismissing appeal. 24 On May 21, 1960, the trial court
reconsidered its previous order dismissing the appeal and approved the defendant's
record on appeal. 25 On May 30, 1960, the defendant received a copy of a notice from
the Clerk of Court dated May 26, 1960, informing the defendant that the record on
appeal filed ed by the defendant was forwarded to the Clerk of Court of Appeals. 26
On June 1, 1960 Aruego filed a motion to set aside the judgment rendered after he was
declared in default reiterating the same ground previously advanced by him in his
motion for relief from the order of default. 27 Upon opposition of the plaintiff filed on June
3, 1960, 28 the trial court denied the defendant's motion to set aside the judgment by
default in an order of June 11, 1960. 29 On June 20, 1960, the defendant filed his notice
of appeal from the order of the court denying his motion to set aside the judgment by
default, his appeal bond, and his record on appeal. The defendant's record on appeal
was approved by the trial court on June 25, 1960. 30 Thus, the defendant had two
appeals with the Court of Appeals: (1) Appeal from the order of the lower court denying
his motion to set aside the order of default docketed as CA-G.R. NO. 27734-R; (2)
Appeal from the order denying his motion to set aside the judgment by default docketed
as CA-G.R. NO. 27940-R.
In his brief, the defendant-appellant assigned the following errors:
I a representative capacity, as the then President of the Philippine Education Foundation
THE LOWER COURT ERRED IN HOLDING THAT THE
DEFENDANT WAS IN DEFAULT.
II
THE LOWER COURT ERRED IN ENTERTAINING THE MOTION
TO DECLARE DEFENDANT IN DEFAULT ALTHOUGH AT THE
TIME THERE WAS ALREADY ON FILE AN ANSWER BY HIM
WITHOUT FIRST DISPOSING OF SAID ANSWER IN AN
APPROPRIATE ACTION.
III
THE LOWER COURT ERRED IN DENYING DEFENDANT'S
PETITION FOR RELIEF OF ORDER OF DEFAULT AND FROM
JUDGMENT BY DEFAULT AGAINST DEFENDANT. 31
It has been held that to entitle a party to relief from a judgment taken against him
through his mistake, inadvertence, surprise or excusable neglect, he must show to the
court that he has a meritorious defense. 32 In other words, in order to set aside the order
of default, the defendant must not only show that his failure to answer was due to fraud,
accident, mistake or excusable negligence but also that he has a meritorious defense.
The record discloses that Aruego received a copy of the complaint together with the
summons on December 2, 1960; that on December 17, 1960, the last day for filing his
answer, Aruego filed a motion to dismiss; that on December 22, 1960 the lower court
dismissed the complaint; that on January 23, 1960, the plaintiff filed a motion for
reconsideration and on March 7, 1960, acting upon the motion for reconsideration, the
trial court issued an order setting aside the order of dismissal; that a copy of the order
was received by the defendant on March 11, 1960 at 5:00 o'clock in the afternoon as
shown in the affidavit of the deputy sheriff; and that on the following day, March 12,
1960, the defendant filed his answer to the complaint.
The failure then of the defendant to file his answer on the last day for pleading is
excusable. The order setting aside the dismissal of the complaint was received at 5:00
o'clock in the afternoon. It was therefore impossible for him to have filed his answer on
that same day because the courts then held office only up to 5:00 o'clock in the
afternoon. Moreover, the defendant immediately filed his answer on the following day.
However, while the defendant successfully proved that his failure to answer was due
to excusable negligence, he has failed to show that he has a meritorious defense. The
defendant does not have a good and substantial defense.
Defendant Aruego's defenses consist of the following:
a) The defendant signed the bills of exchange referred to in the plaintiff's complaint in
Company, publisher of "World Current Events and Decision Law Journal," printed by
Encal Press and Photo-Engraving, drawer of the said bills of exchange in favor of the
plaintiff bank;
b) The defendant signed these bills of exchange not as principal obligor, but as
accommodation or additional party obligor, to add to the security of said plaintiff bank.
The reason for this statement is that unlike real bills of exchange, where payment of
the face value is advanced to the drawer only upon acceptance of the same by the
drawee, in the case in question, payment for the supposed bills of exchange were made
before acceptance; so that in effect, although these documents are labelled bills of
exchange, legally they are not bills of exchange but mere instruments evidencing
indebtedness of the drawee who received the face value thereof, with the defendant as
only additional security of the same. 33
The first defense of the defendant is that he signed the supposed bills of exchange as
an agent of the Philippine Education Foundation Company where he is president.
Section 20 of the Negotiable Instruments Law provides that "Where the instrument
contains or a person adds to his signature words indicating that he signs for or on behalf
of a principal or in a representative capacity, he is not liable on the instrument if he was
duly authorized; but the mere addition of words describing him as an agent or as filing
a representative character, without disclosing his principal, does not exempt him from
personal liability."
An inspection of the drafts accepted by the defendant shows that nowhere has he
disclosed that he was signing as a representative of the Philippine Education
Foundation Company. 34 He merely signed as follows: "JOSE ARUEGO (Acceptor)
(SGD) JOSE ARGUEGO For failure to disclose his principal, Aruego is personally liable
for the drafts he accepted.
The defendant also contends that he signed the drafts only as an accommodation party
and as such, should be made liable only after a showing that the drawer is incapable
of paying. This contention is also without merit.
An accommodation party is one who has signed the instrument as maker, drawer,
indorser, without receiving value therefor and for the purpose of lending his name to
some other person. Such person is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of the taking of the instrument knew him to be
only an accommodation party.35 In lending his name to the accommodated party, the
accommodation party is in effect a surety for the latter. He lends his name to enable
the accommodated party to obtain credit or to raise money. He receives no part of the
consideration for the instrument but assumes liability to the other parties thereto
because he wants to accommodate another. In the instant case, the defendant signed
as a drawee/acceptor. Under the Negotiable Instrument Law, a drawee is primarily
liable. Thus, if the defendant who is a lawyer, he should not have signed as an
acceptor/drawee. In doing so, he became primarily and personally liable for the drafts.
The defendant also contends that the drafts signed by him were not really bills of
exchange but mere pieces of evidence of indebtedness because payments were made
before acceptance. This is also without merit. Under the Negotiable Instruments Law,
a bill of exchange is an unconditional order in writting addressed by one person to
another, signed by the person giving it, requiring the person to whom it is addressed to
pay on demand or at a fixed or determinable future time a sum certain in money to
order or to bearer. 36 As long as a commercial paper conforms with the definition of a
bill of exchange, that paper is considered a bill of exchange. The nature of acceptance
is important only in the determination of the kind of liabilities of the parties involved, but
not in the determination of whether a commercial paper is a bill of exchange or not.
It is evident then that the defendant's appeal can not prosper. To grant the defendant's
prayer will result in a new trial which will serve no purpose and will just waste the time
of the courts as well as of the parties because the defense is nil or ineffective. 37
WHEREFORE, the order appealed from in Civil Case No. 42066 of the Court of First
Instance of Manila denying the petition for relief from the judgment rendered in said
case is hereby affirmed, without pronouncement as to costs.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 108747 April 6, 1995
PABLO C. FRANCISCO, petitioner,
vs.
COURT OF APPEALS AND THE HONORABLE MAXIMO C.
CONTRERAS, respondents.
BELLOSILLO, J.:
Probation is a special privilege granted by the state to a penitent qualified offender. It
essentially rejects appeals and encourages an otherwise eligible convict to immediately
admit his liability and save the state of time, effort and expenses to jettison an appeal.
The law expressly requires that an accused must not have appealed his conviction
before he can avail of probation. This outlaws the element of speculation on the part of
the accused — to wager on the result of his appeal — that when his conviction is finally
affirmed on appeal, the moment of truth well-nigh at hand, and the service of his
sentence inevitable, he now applies for probation as an "escape hatch" thus rendering
nugatory the appellate court's affirmance of his conviction. Consequently, probation
should be availed of at the first opportunity by convicts who are willing to be reformed
and rehabilitated, who manifest spontaneity, contrition and remorse.
As conceptualized, is petitioner entitled to probation within the purview of P.D. 968, as
amended by P.D. 1257 and P.D. 1990?
Petitioner's woes started when as President and General Manager of ASPAC Trans.
Company he failed to control his outburst and blurted —
You employees in this office are all tanga, son of a bitches (sic),
bullshit. Puro kayo walang utak . . . . Mga anak ng puta . . .
. Magkano ba kayo . . . God damn you all.
Thus for humiliating his employees he was accused of multiple grave oral defamation
in five (5) separate Informations instituted by five (5) of his employees, each Information
charging him with gravely maligning them on four different days, i.e., from 9 to 12 April
1980.
On 2 January 1990, after nearly ten (10) years, the Metropolitan Trial Court of Makati,
Br. 61, found petitioner guilty of grave oral defamation in four (4) of the five (5) cases
filed against him, i.e., Crim. Cases Nos. 105206, 105207, 105209 and 105210,
sentenced him to a prison term of one (1) year and one (l) day to one (1) year and eight
(8) months of prision correccional "in each crime committed on each date of each case,
as alleqed in the information(s)," ordered him to indemnify each of the offended parties,
Victoria Gatchalian, Rowena Ruiz, Linda Marie Ayala Pigar and Marie Solis,
P10,000.00 as exemplary damages, and P5,000.00 for attorney's fees, plus costs of
suit.1 He was however acquitted in Crim. Case No. 105208 for persistent failure of the
offended party, Edgar Colindres, to appear and testify.
Not satisfied with the Decision of the MeTC, and insisting on his innocence, petitioner
elevated his case to the Regional Trial Court.
On 5 August 1991 the Regional Trial Court of Makati, Br. 59, affirmed his conviction but
appreciated in his favor a mitigating circumstance analogous to passion or obfuscation.
Thus —
. . . (he) was angry and shouting when he uttered the defamatory
words complained of . . . . he must have been angry and worried
"about some missing documents . . . as well as the letter of the
Department of Tourism advising ASPAC about its delinquent tax of
P1.2 million . . . . " the said defamatory words must have been uttered
in the heat of anger which is a mitigating circumstance analogous to
passion or obfuscation.2
Accordingly, petitioner was sentenced "in each case to a STRAIGHT penalty of EIGHT
(8) MONTHS imprisonment . . . . "3 After he failed to interpose an appeal therefrom the
decision.of the RTC became final. The case was then set for execution of judgment by
the MeTC which, as a consequence, issued a warrant of arrest. But·before he could be
arrested petitioner filed an application for probation which the MeTC denied "in the light
of the ruling of the Supreme Court in Llamado v. Court of Appeals, G.R. No, 84850, 29
June 1989, 174 SCRA 566 . . . ."4
Forthwith he went to the Court of Appeals on certiorari which on 2 July 1992 dismissed
his petition on the following grounds —
Initially, the Court notes that the petitioner has failed to comply with
the provisions of Supreme Court Circular No. 28-91 of September 4,
1991. Violation of the circular is sufficient cause for dismissal of the
petition.
Secondly, the petitioner does not allege anywhere in the petition that
he had asked the respondent court to reconsider its above order; in
fact, he had failed to give the court an.opportunity to correct itself if it
had, in fact, committed any error on the matter. He is, however,
required to move for reconsideration of the questioned
order before filing a petition for certiorari (Sy It v. Tiangco, 4 SCRA
436). This failure is fatal to his cause. It is a ground for dismissal of
his petition (Santos v. Vda. de Cerdenola, 5 SCRA 823; Acquiao v.
Estenso, 14 SCRA 18; Del Pilar Transit, Inc. v. Public Service
Commission, 31-SCRA 372).
Thirdly, it is obvious that respondent court did not commit any
capricious, arbitrary, despotic or whimsical exercise of power in
denying the petitioner's application for probation . . . .
Fourthly, the petition for probation was filed by the petitioner out of
time . . . .
Fifthly, the Court notes that Section 4 of PD 968 allows the trial court to grant probation
after conviction, upon an application by the defendant within the period of appeal, upon
terms and conditions and period appropriate to each case, but expressly rules out
probation where an appeal has been taken . . . . 5
The motion for reconsideration was likewise denied.
In the present recourse, petitioner squirms out of each ground and seeks this Court's
compassion in dispensing with the minor technicalities which may militate against his
petition as he now argues before us that he has not yet lost his right to avail of probation
notwithstanding his appeal from the MeTC to the RTC since "[t]he reason for his appeal
was precisely to enable him to avail himself of the benefits of the Probation Law
because the original Decision of the (Metropolitan) Trial Court was such that he would
not then be entitled to probation." 6 He contends that "he appealed from the judgment
of the trial court precisely for the purpose of reducing the penalties imposed upon him
by the said court to enable him to qualify for probation." 7
The central issue therefore is whether petitioneris still qualified to avail of probation
even after appealing his conviction to the RTC which affirmed the MeTC except with
regard to the duration of the penalties imposed.
Petitioner is no longer eligible for probation.
First. Probation is a mere privilege, not a right. 8 Its benefits cannot extend to those not
expressly included. Probation is not a right of an accused, but rather an act of grace
and clemency or immunity conferred by the state which may be granted by the court to
a seemingly deserving defendant who thereby escapes the extreme rigors of the
penalty imposed by law for the offense of which he stands convicted. 9 It is a special
prerogative granted by law to a person or group of persons not enjoyed by others or by
all. Accordingly, the grant of probation rests solely upon the discretion of the court which
is to be exercised primarily for the benefit of organized society, and only incidentally for
the benefit of the accused.10 The Probation Law should not therefore be permitted to
divest the state or its government of any of the latter's prerogatives, rights or remedies,
unless the intention of the legislature to this end is clearly expressed, and no person
should benefit from the terms of the law who is not clearly within them.
Neither Sec. 4 of the Probation Law, as amended, which clearly mandates that "no
application for probation shall be entertained or granted if the defendant has perfected
the appeal from the judgment of conviction," nor Llamado v. Court of Appeals 11 which
interprets the quoted provision, offers any ambiguity or qualification. As such, the
application of the law should not be subjected to any to suit the case of petitioner. While
the proposition that an appeal should not bar the accused from applying for probation
if the appealis solely to reduce the penalty to within the probationable limit may be
equitable, we are not yet prepared to accept this interpretation under existing law and
jurisprudence. Accordingly, we quote Mr. Justice Feliciano speaking for the Court en
banc in Llamado v. Court of Appeals—
. . . we note at the outset that Probation Law is not a penal statute.
We, however, understand petitioner's argument to be really that any
statutory language that appears to favor the accused in acriminal
case should be given.a "liberal interpretation." Courts . . . have no
authority to invoke "liberal interpretation" or "the spirit of the law"
where the words of the statute themselves, and·as illuminated by the
history of that statute, leave no room for doubt or interpretation. We
do not believe that "the spirit of·the law" may legitimately be invoked
to set at naught words which have a clear and definite meaning
imparted to them by our procedural law. The "true legislative intent"
must obviously be given effect by judges and all others who are
charged with the application and implementation of a statute. It is
absolutely essential to bear in mind, however, that the spirit of the
law and the intent that is to be given effect are derived from the words
actually used by the law-maker, and not from some external, mystical
or metajuridical source independent of and transcending the words
of the legislature.
The Court is not here to be understood as giving a "strict
interpretation" rather than a "liberal" one to Section 4 of the Probation
Law of 1976 as amended by P.D. No. 1990. "Strict" and "liberal" are
adjectives which too frequently impede a disciplined and principled
search for the meaning which the law-making authority projected
when it promulgated the language which we must apply. That
meaning is clearly visible in the text of Section 4, as plain and
unmistakable as the nose on a man's face. The Courtis
simply·reading Section 4 as it is in fact written. There is no need for
the involved process of construction that petitioner invites us to
engage in, a process made necessary only because petitioner
rejects the conclusion or meaning which shines through the words of
the statute. The first duty of the judge is to take and apply a statute
as he finds it, not as he would like·it to be. Otherwise, as this Court
in Yangco v. Court of First Instance warned, confusion and
uncertainty will surely follow, making, we might add, stability and
continuity in the law much more difficult to achieve:
. . . [w]here language is plain, subtle refinements
which tinge words as to give them the color of a
particular judicial theory are not only unnecessary
but decidedly harmful. That which has caused so
much confusion in the law, which has made it so
difficult for the public to understand and know what
the law is with respect to a given matter, is in
considerable measure the unwarranted
interference by judicial tribunals with the English
language as found in statutes and contracts,
cutting the words here and inserting them there,
making them fit personal ideas of what the
legislature ought to have done or what parties
should have agreed upon, giving them meanings
which they do not ordinarily have cutting, trimming,
fitting, changing and coloring until lawyers
themselves are unable to advise their clients as to
the meaning of a given statute or contract until it
has been submitted to some court for its
interpretation and construction.
The point in this warning may be expected to become sharper as our
people's grasp of English is steadily attenuated. 12
Therefore, that an appeal should not·bar the accused from applying for probation if the
appeal is taken solely to reduce the penalty is simply contrary to the clear and express
mandate of Sec, 4 of the Probation Law, as amended, which opens with a
negativeclause, "no application for probation shall be entertained or granted if the
defendant has perfected the appeal from the judgment of conviction." In Bersabal v.
Salvador, 13 we said —
By its very language, the Rule is mandatory. Under the rule of
statutory construction. negative words and phrases are to be
regarded as mandatory while those in the affirmative are merely
directory. . . . the use of the term "shall" further emphasizes its
mandatory character and means that it is imperative, operating to
impose a duty which may be enforced.
And where the law does not distinguish the courts should not distinguish; where the
law does not make exception the court should not except.
Second. At the outset, the penalties imposed by the MeTC were already probationable.
Hence, there was no need to appeal if only to reduce the penalties to within the
probationable period. Multiple prison terms imposed against an accused found guilty of
several offenses in one decision are not, and should not be, added up. And, the sum
of the multiple prison terms imposed against an applicant should not be determinative
of his eligibility for, nay his disqualification from, probation. The multiple prison terms
are distinct from each other, and if none of the terms exceeds the limit set out in the
Probation Law,i.e., not more than six (6) years, then he is entitled to probation, unless
he is otherwise specifically disqualified. The number of offenses is immaterial as long
as all the penalties imposed, taken separately, are within the probationable period. For,
Sec. 9, par. (a), P.D. 968, as amended, uses the word maximum not total when it says
that "[t]he benefits of this Decree shall not be extended to those . . . . sentenced to
serve a maximum term of imprisonment of more than six years." Evidently, the law does
not intend to sum up the penalties imposed but to take each penalty separately and
distinctly with the others. Consequently, even if petitioner was supposed to have served
his prison term of one (1) year and one (1) day to one (1) year and eight (8) months
of prision correccional sixteen (16) times as he was sentenced to serve the prison term
for "each crime committed on each date of each case, as alleged in the information(s),"
and in each of the four (4) informations, he was charged with.having defamed the four
(4) private complainants on four (4) different, separate days, he was still·eligible for
probation, as each prison term imposed on petitioner was probationable.
Fixing the cut-off point at a maximum term of six (6) years imprisonment for probation
is based on the assumption that those sentenced to higher penalties pose too great a
risk to society, not just because of their demonstrated capability for serious wrong doing
but because of the gravity and serious consequences of the offense they might further
commit. 14 The Probation Law, as amended, disqualifies only those who have been
convicted of grave felonies as defined in Art. 9 in relation to Art. 25 of The Revised
Penal Code, 15 and not necessarily those who have been convicted of multiple offenses
in a single proceeding who are deemed to be less perverse. Hence, the basis of the
disqualification is principally the gravity of the offense committed and the concomitant
degree of penalty imposed. Those sentenced to a maximum term not exceeding six (6)
years are not generally considered callous, hard core criminals, and thus may avail of
probation.
To demonstrate the point, let ustake for instance one who is convicted in a single
decision of, say, thirteen (13) counts of grave oral defamation (for having defamed
thirteen [13] individuals in one outburst) and sentenced to a total prison term of thirteen
(13) years, and another who has been found guilty of mutilation and sentenced to six
(6) years and one (l) day of prision mayor minimum as minimum to twelve (l2) years
and one (1) day of reclusion temporal minimum as maximuin. Obviously, the latter
offender is more perverse and is disqualified from availing of probation.
Petitioner thus proceeds on an erroneous assumption that under the MeTC Decision
he could not have availed of the benefits of probation. Since he could have, although
he did not, his appeal now precludes him from applying for probation.
And, even if we go along with the premise of petitioner, however erroneous it may be,
that the penalties imposed against him should be summed up, still he would not have
qualified under the Decision rendered by the RTC since if the "STRAIGHT penalty of
EIGHT (8) MONTHS imprisonment" imposed by the RTC is multiplied sixteen (16)
times, the total imposable penalty would be ten (10) years and eight (8) months, which
is still way beyond the limit of not more than six (6) years provided for in the Probation
Law, as amended. To illustrate: 8 months multiplied by 16 cases = 128 months; 128
months divided by 12 months (in a year) = 10 years and 8 months, hence, following his
argument, petitioner cannot still be eligible for probation as the total of his penalties
exceeds six (6) years.
The assertion that the Decision of the RTC should be multiplied only four (4) times since
there are only four (4) Informations thereby allowing petitioner to qualify for probation,
instead of sixteen (16) times, is quite difficult to understand. The penalties imposed by
the MeTC cannot be any clearer — "one (1) year and one (1) day to one (1) year and
eight (8) months of prision correccional, in each crime committed on each date of each
case, as alleged in the information(s). "Hence, petitioner should suffer the imposed
penalties sixteen (16) times. On the other hand, the RTC affirmed, the judgment of
conviction and merely reduced the duration of each penalty imposed by the MeTC "in
each case to a STRAIGHT penalty of EIGHT (8) MONTHS imprisonment" on account
of a mitigating circumstance for each case, count or incident of grave oral
defamation·There is no valid reason therefore why the penalties imposed by the RTC
should be multiplied only four (4) times, and not sixteen (16) times, considering that the
RTC merely affirmed the MeTC as regards the culpability of petitioner in each of the
sixteen (16) cases and reducing only the duration of the penalties imposed therein.
Thus —
Premises considered, the judgment of conviction rendered by the
trial court is AFFIRMED with modification, as follows:
WHEREFORE, the Court hereby finds the accused Pablo C.
Francisco GUILTY beyond reasonable doubt in each of the above
entitled cases and appreciating in his favor the mitigating
circumstance which is analogous to passion or obfuscation, the
Court hereby sentences the said accused in each case to a straight
penalty of EIGHT (8) MONTHS imprisonment, with the accessory
penalties prescribed by law; and to pay the costs. 16
Nowhere in the RTC Decision is it stated or even hinted at that the accused was
acquitted or absolved in any of the four (4) counts under each of the four (4)
Informatfons, or that any part of thejudgment of conviction was reversed, or that any of
the cases, counts or incidents was dismissed. Otherwise, we will have to account for
the twelve (12) other penalties imposed by the MeTC. Can we? What is clear is that
the judgment of conviction rendered by the was affirmed with the sole modification on
the duration of the penalties.
In fine, considering that the multiple prison terms should not be summed up but taken
separately as the totality of all the penalties is not the test, petitioner should have
immediately filed an application for probation as he was already qualified after being
convicted by the MeTC, if indeed thereafter he felt humbled, was ready to
unconditionally accept the verdict of the court and admit his liability. Consequently, in
appealing the Decision of the MeTC to the RTC, petitioner lost his right to probation.
For, plainly, the law considers appeal and probation mutually exclusive remedies. 17
Third. Petitioner appealed to the RTC not to reduce or even correct the penalties
imposed by the MeTC, but to assert his innocence. Nothing more. The cold fact is that
petitioner appealed his conviction to the RTC not for the sole purpose of reducing his
penalties to make him eligible for probation — since he was already qualified under the
MeTC Decision — but rather to insist on his innocence. The appeal record is wanting
of any other purpose. Thus, in his Memorandum before the RTC, he raised only three
(3) statements of error purportedly committed by the MeTC all aimed at his acquittal:
(a) in finding that the guilt of the accused has been established because of his positive
identification by the witness for the prosecution; (b) in giving full faith and credence to
the bare statements of the private complainants despite the absence of corroborating
testimonies; and, (c)in not acquitting him in all the cases," 18 Consequently, petitioner
insisted that the trial court committed an error in relying on his positive identification
considering that private complainants could not have missed identifying him who was
their President and General Manager with whom they worked for a good number of
years. Petitioner further argued that although the alleged defamatory words were
uttered in the presence of other persons, mostly private complainants, co-employees
and clients, not one of them was presented as a witness. Hence, according to petitioner,
the trial court could not have convicted him on the basis of the uncorroborative
testimony of private complainants. 19
Certainly, the protestations of petitioner connote profession of guiltlessness, if not
complete innocence, and do not simply put in issue the propriety of the penalties
imposed. For sure, the accused never manifested that he was appealing only for the
purpose of correcting a wrong penalty — to reduce it to within the probationable range.
Hence, upon interposing an appeal, more so after asserting his innocence therein,
petitioner should be precluded from seeking probation. By perfecting his appeal,
petitioner ipso facto relinquished his alternative remedy of availing of the Probation Law
the purpose of which is simply to prevent speculation or opportunism on the part of an
accused who although already eligible does not at once apply for probation, but doing
so only after failing in his appeal.
The fact that petitioner did not elevate the affirmance of his conviction by the RTC to
the Court of Appeals does not necessarily mean that his appeal to the RTC was solely
to reduce his penalties. Conversely, he was afraid that the Court of Appeals would
increase his penalties, which could be worse for him. Besides, the RTC Decision had
already become final and executory because of the negligence, according to him, of
his former counsel who failed to seek possible remedies within the period allowed by
law.
Perhaps it should be mentioned that at the outset petitioner, in accordance with Sec 3,
par. (e), Rule 117 of the Rules of Court, 20 should have moved to quash as each of the
four (4) Informations filed against him charged four (4) separate crimes of grave oral
defamation, committed on four (4) separate days. His failure to do so however may
now be deemed a waiver under Sec. 8 of the same Rule 21 and he can be validly
convicted, as in the instant case, of as many crimes charged in the Information.
Fourth. The application for probation was filed way beyond the period allowed by law.
This is vital way beyond the period allowed by law and crucial. From the records it is
clear that the application for probation was filed "only after a warrant for the arrest of
petitioner had been issued . . . (and) almost two months after (his) receipt of the
Decision" 22of the RTC. This is a significant fact which militates against the instant
petition. We quote with affirmance the well-written, albeit assailed, ponencia of now
Presiding Justice of the Court of Appeals Nathanael P. De Pano, Jr., on the specific
issue —
. . . the petition for probation was filed by the petitioner out of time.
The law in point, Section 4 of P.D. 968, as amended, provides thus:
Sec. 4. Grant of Probation. — Subject to the
provisions of this Decree, the trial court may, after
it shall have convicted and sentenced a defendant,
and upon application by said defendant within the
period for perfecting an appeal. . . . place the
defendant on probation . . . .
Going to the extreme, and assuming that an application for probation
from one who had appealed the trial court's judgment is allowed by
law, the petitioner's plea for probation was filed out of time. In the
petition is a clear statement that the petitioner was up for execution
of judgment before he filed his application for probation. P.D. No. 968
says that the application for probation must be filed "within the period
for perfecting an appeal;" but in this case, such period for appeal had
passed, meaning to say that the Regional Trial Court's decision had
attained finality, and no appeal therefrom was possible under the law.
Even granting that an appeal from the appellate court's judgment is
contemplated by P.D. 968, in addition to the judgment rendered by
the trial court, that appellate judgment had become final and was, in
fact, up for actual execution before the application for probation was
attempted by the petitioner. The petitioner did not file his application
for probation before the finality of the said judgment; therefore, the
petitioner's attempt at probation was filed too late.
Our minds cannot simply rest easy on. the proposition that an application for probation
may yet be granted even if it was filed only after judgment has become final, the
conviction already set for execution and a warrant of arrest issued for service of
sentence.
The argument that petitioner had to await the remand of the case to the MeTC, which
necessarily must be after the decision of the RTC had become final, for him to file the
application for probation with the trial court, is to stretch the law beyond comprehension.
The law, simply, does not allow probation after an appeal has been perfected.
Accordingly, considering that prevailing jurisprudence treats appeal and probation as
mutually exclusive remedies, and petitioner appealed from his conviction by the MeTC
although the imposed penalties were already probationable, and in his appeal, he
asserted only his innocence and did not even raise the issue of the propriety of the
penalties imposed on him, and finally, he filed an application for probation outside the
period for perfecting an appeal granting he was otherwise eligible for probation, the
instant petition for review should be as it is hereby DENIED.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin and Regalado, JJ., concur.
 SECOND DIVISION
G.R. No. 136729. September 23 ,2003]
ASTRO ELECTRONICS CORP. and PETER ROXAS, Petitioner, vs.PHILIPPINE
EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court is
the decision of the Court of Appeals in CA-G.R. CV No. 41274,1affirming the decision
of the Regional Trial Court (Branch 147) of Makati, then Metro Manila, whereby
petitioners Peter Roxas and Astro Electronics Corp. (Astro for brevity) were ordered to
pay respondent Philippine Export and Foreign Loan Guarantee Corporation
(Philguarantee), jointly and severally, the amount of P3,621,187.52 with interests and
costs.
The antecedent facts are undisputed.
Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting
to P3,000,000.00 with interest and secured by three promissory notes: PN NO. PFX-
254 dated December 14, 1981 for P600,000.00, PN No. PFX-258 also dated December
14, 1981 for P400,000.00 and PN No. 15477 dated August 27, 1981 for P2,000,000.00.
In each of these promissory notes, it appears that petitioner Roxas signed twice, as
President of Astro and in his personal capacity.2 Roxas also signed a Continuing Surety
ship Agreement in favor of Philtrust Bank, as President of Astro and as
surety.3cräläwvirtualibräry
Thereafter, Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust
the payment of 70% of Astros loan,4 subject to the condition that upon payment by
Philguanrantee of said amount, it shall be proportionally subrogated to the rights of
Philtrust against Astro.5cräläwvirtualibräry
As a result of Astros failure to pay its loan obligations, despite demands, Philguarantee
paid 70% of the guaranteed loan to Philtrust. Subsequently, Philguarantee filed against
Astro and Roxas a complaint for sum of money with the RTC of Makati.
In his Answer, Roxas disclaims any liability on the instruments, alleging, inter alia, that
he merely signed the same in blank and the phrases in his personal capacity and in his
official capacity were fraudulently inserted without his knowledge. 6cräläwvirtualibräry
After trial, the RTC rendered its decision in favor of Philguarantee with the following
dispositive portion:
WHEREFORE, in view of all the foregoing, the Court hereby renders judgment in favor
or (sic) the plaintiff and against the defendants Astro Electronics Corporation and Peter
T. Roxas, ordering the then (sic) to pay, jointly and severally, the plaintiff the sum of
P3,621.187.52 representing the total obligation of defendants in favor of plaintiff
Philguarantee as of December 31, 1984 with interest at the stipulated rate of 16% per
annum and stipulated penalty charges of 16% per annum computed from January 1,
1985 until the amount is fully paid. With costs.
SO ORDERED.7cräläwvirtualibräry
The trial court observed that if Roxas really intended to sign the instruments merely in
his capacity as President of Astro, then he should have signed only once in the
promissory note.8cräläwvirtualibräry
On appeal, the Court of Appeals affirmed the RTC decision agreeing with the trial court
that Roxas failed to explain satisfactorily why he had to sign twice in the contract and
therefore the presumption that private transactions have been fair and regular must be
sustained.9cräläwvirtualibräry
In the present petition, the principal issue to be resolved is whether or not Roxas should
be jointly and severally liable (solidary) with Astro for the sum awarded by the RTC.
The answer is in the affirmative.
Astros loan with Philtrust Bank is secured by three promissory notes. These promissory
notes are valid and binding against Astro and Roxas. As it appears on the notes, Roxas
signed twice: first, as president of Astro and second, in his personal capacity. In signing
his name aside from being the President of Asro, Roxas became a co-maker of the
promissory notes and cannot escape any liability arising from it. Under the Negotiable
Instruments Law, persons who write their names on the face of promissory notes are
makers,10 promising that they will pay to the order of the payee or any holder according
to its tenor.11 Thus, even without the phrase personal capacity, Roxas will still be
primarily liable as a joint and several debtor under the notes considering that his
intention to be liable as such is manifested by the fact that he affixed his signature on
each of the promissory notes twice which necessarily would imply that he is undertaking
the obligation in two different capacities, official and personal.
Unnoticed by both the trial court and the Court of Appeals, a closer examination of the
signatures affixed by Roxas on the promissory notes, Exhibits A-4 and 3-A and B-4 and
4-A readily reveals that portions of his signatures covered portions of the typewritten
words personal capacity indicating with certainty that the typewritten words were
already existing at the time Roxas affixed his signatures thus demolishing his claim that
the typewritten words were just inserted after he signed the promissory notes. If what
he claims is true, then portions of the typewritten words would have covered portions
of his signatures, and not vice versa.
As to the third promissory note, Exhibit C-4 and 5-A, the copy submitted is not clear so
that this Court could not discern the same observations on the notes, Exhibits A-4 and
3-A and B-4 and 4-A.
Nevertheless, the following discussions equally apply to all three promissory notes. transferee of all the rights of Philtrust as against Roxas and Astro because the
guarantor who pays is subrogated by virtue thereof to all the rights which the creditor
The three promissory notes uniformly provide: FOR VALUE RECEIVED, I/We jointly, had against the debtor.23cräläwvirtualibräry
severally and solidarily, promise to pay to PHILTRUST BANK or order... 12 An
instrument which begins with I, We, or Either of us promise to pay, when signed by two WHEREFORE, finding no error with the decision of the Court of Appeals dated
or more persons, makes them solidarily liable.13 Also, the phrase joint and several binds December 10, 1998, the same is hereby AFFIRMED in toto.
the makers jointly and individually to the payee so that all may be sued together for its
enforcement, or the creditor may select one or more as the object of the suit.14 Having SO ORDERED.
signed under such terms, Roxas assumed the solidary liability of a debtor and Philtrust
Bank may choose to enforce the notes against him alone or jointly with Astro.
Bellosillo, (Chairman), Callejo, Sr., and Tinga, JJ., concur.
Roxas claim that the phrases in his personal capacity and in his official capacity were
inserted on the notes without his knowledge was correctly disregarded by the RTC and Quisumbing, J., in the result.
the Court of Appeals. It is not disputed that Roxas does not deny that he signed the
notes twice. As aptly found by both the trial and appellate court, Roxas did not offer any
explanation why he did so. It devolves upon him to overcome the presumptions that
private transactions are presumed to be fair and regular15 and that a person takes
ordinary care of his concerns.16 Aside from his self-serving allegations, Roxas failed to
prove the truth of such allegations. Thus, said presumptions prevail over his claims.
Bare allegations, when unsubstantiated by evidence, documentary or otherwise, are
not equivalent to proof under our Rules of Court.17cräläwvirtualibräry

Roxas is the President of Astro and reasonably, a businessman who is presumed to

take ordinary care of his concerns. Absent any countervailing evidence, it cannot be
gainsaid that he will not sign document without first informing himself of its contents
and consequences. Clearly, he knew the nature of the transactions and documents
involved as he not only executed these notes on two different dates but he also
executed, and again, signed twice, a continuing Surety ship Agreement notarized on
July 31, 1981, wherein he guaranteed, jointly and severally with Astro the repayment
of P3,000,000.00 due to Philtrust. Such continuing suretyship agreement even re-
enforced his solidary liability Philtrust because as a surety, he bound himself jointly and
severally with Astros obligation.18Roxas cannot now avoid liability by hiding under the
convenient excuse that he merely signed the notes in blank and the phrases in personal
capacity and in his official capacity were fraudulently inserted without his knowledge.

Lastly, Philguarantee has all the right to proceed against petitioner, it is subrogated to
the rights of Philtrust to demand for and collect payment from both Roxas and Astro
since it already paid the value of 70% of roxas and Astro Electronics Corp.s loan
obligation. In compliance with its contract of Guarantee in favor of Philtrust.

Subrogation is the transfer of all the rights of the creditor to a third person, who
substitutes him in all his rights.19 It may either be legal or conventional. Legal
subrogation is that which takes place without agreement but by operation of law
because of certain acts.20 Instances of legal subrogation are those provided in Article
1302 of the Civil Code. Conventional subrogation, on the other hand, is that which takes
place by agreement of the parties.21cräläwvirtualibräry

Roxas acquiescence is not necessary for subrogation to take place because the instant
case is one of the legal subrogation that occurs by operation of law, and without need
of the debtors knowledge.22 Further, Philguarantee, as guarantor, became the