NEGO 1

1. CALTEX PHIL VS CA

FACTS:

Security bank issued Certificates of Time Deposits to Angel dela Cruz. The same were given by Dela Cruz to petitioner in connection to his purchase

of fuel products of the latter. On a later date, Dela Cruz approached the bank

manager, communicated the loss of the certificates and requested for a

reissuance. Upon compliance with some formal requirements, he was issued replacements. Thereafter, he secured a loan from the bank

where he assigned the certificates as security. Here comes the petitioner,

averred that the certificates were not actually lost but were given as security for payment for fuel purchases. The bank demanded some

proof of the agreement but the petitioner failed to comply. The loan matured and the time deposits were terminated and then applied to

the payment of the loan. Petitioner demands the payment of the certificates but to no avail.

SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%

Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____

This is to Certify that B E A R E R has deposited in this Bank the sum of

PESOS: FOUR THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 &
00 CTS Pesos, Philippine Currency, repayable to said depositor 731 days.
after date, upon presentation and surrender of this certificate, with interest
at the rate of 16% per cent per annum.

(Sgd. Illegible) (Sgd. Illegible)

—————————— ———————————

AUTHORIZED SIGNATURES

HELD:

CTDs are negotiable instruments. The documents provide that the amounts

deposited shall be repayable to the depositor. And who, according to the document, is the depositor? It is the "bearer." The documents do

not say that the depositor is Angel de la Cruz and that the amounts deposited are

repayable specifically to him. Rather, the amounts are to be repayable to

the bearer of the documents or, for that matter, whosoever may be the bearer at the time of presentment.

If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so expressed that fact

in clear and categorical terms in the documents, instead of having the word "BEARER" stamped on the space provided for the name of the

depositor in each CTD. On the wordings of the documents, therefore, the amounts
deposited are repayable to whoever may be the bearer thereof. Thus, petitioner's aforesaid witness merely declared that Angel de la Cruz is
the

depositor "insofar as the bank is concerned," but obviously other parties

not privy to the transaction between them would not be in a position to know that the depositor is not the bearer stated in the CTDs.

Hence, the situation would require any party dealing with the CTDs to go behind the

plain import of what is written thereon to unravel the agreement of the

parties thereto through facts aliunde. This need for resort to extrinsic

evidence is what is sought to be avoided by the Negotiable Instruments

Law and calls for the application of the elementary rule that the
interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.

The next query is whether petitioner can rightfully recover on the CTDs. This time, the answer is in the negative. The records reveal that
Angel de la Cruz, whom petitioner chose not to implead in this suit for reasons of its own, delivered the CTDs amounting to P1,120,000.00 to
petitioner without informing respondent bank thereof at any time. Unfortunately for petitioner, although the CTDs are bearer
instruments, a valid negotiation thereof for the true purpose and agreement between it and De la Cruz, as ultimately ascertained, requires both
delivery and indorsement. For, although petitioner seeks to deflect this fact, the CTDs were in reality delivered to it as a security for De la
Cruz' purchases of its fuel products. Any doubt as to whether the CTDs were delivered as payment for the fuel products or as a security has been
dissipated and resolved in favor of the latter by petitioner's own authorized and responsible representative himself.

In a letter dated November 26, 1982 addressed to respondent Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . . These
certificates of deposit were negotiated to us by Mr. Angel dela Cruz to guarantee his purchases of fuel products." This admission is
conclusive upon petitioner, its protestations notwithstanding. Under the doctrine of estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon

2. CHAN WON VS TANKIM

(FULL TEXT)

CHAN WAN, plaintiff-appellant,

vs.
TAN KIM and CHEN SO, defendants-appellees.

Manuel Domingo for appellant.

C.M. de los Reyes for appellees.

BENGZON, J.:

This suit to collect eleven checks totalling P4,290.00 is here for decision because it involves no issue of fact.

Such checks payable to "cash or bearer" and drawn by defendant Tan Kim (the other defendant is her husband) upon the Equitable Banking
Corporation, were all presented for payment by Chan Wan to the drawee bank, but they "were all dishonored and returned to him unpaid due to
insufficient funds and/or causes attributable to the drawer."

At the hearing of the case, in the Manila court of first instance, the plaintiff did not take the witness stand. His attorney, however, testified only to
identify the checks — which are Exhibits A to K — plus the letters of demand upon defendants.

On the other hand, Tan Kim declared without contradiction that the checks had been issued to two persons named Pinong and Muy for some shoes
the former had promised to make and "were intended as mere receipts".

In view of such circumstances, the court declined to order payment for two principal reasons: (a) plaintiff failed to prove he was a holder in due
course, and (b) the checks being crossed checks should not have been deposited instead with the bank mentioned in the crossing.
It may be stated in this connection, that defendants asserted a counterclaim, the court dismissed it for failure of proof, and from such dismissal
they did not appeal.

The only issue is, therefore, the plaintiff's right to collect on the eleven commercial documents.

The Negotiable Instruments Law regulating the issuance of negotiable checks, the rights and the liabilities arising therefrom, does not mention
"crossed checks". Art. 541 of the Code of Commerce refers to such instruments. 1 The bills of Exchange Act of England of 1882, contains several
provisions about them, some of which are quoted in the margin. 2 In the Philippine National Bank vs. Zulueta, 101 Phil., 1071; 55 Off. Gaz., 222, we
applied some provisions of said Bills of Exchange Act because the Negotiable Law, originating from England and codified in the United States,
permits resort thereto in matters not covered by it and local legislation.3

Eight of the checks here in question bear across their face two parallel transverse lines between which these words are written: non-negotiable —
China Banking Corporation. These checks have, therefore, been crossed specially to the China Banking Corporation, and should have been
presented for payment by China Banking, and not by Chan Wan.4 Inasmuch as Chan Wan did present them for payment himself — the Manila court
said — there was no proper presentment, and the liability did not attach to the drawer.

We agree to the legal premises and conclusion. It must be remembered, at this point, that the drawer in drawing the check engaged that "on due
presentment, the check would be paid, and that if it be dishonored . . . he will pay the amount thereof to the holder". 5 Wherefore, in the absence
of due presentment, the drawer did not become liable.

Nevertheless we find, on the backs of the checks, endorsements which apparently show they had been deposited with the China Banking
Corporation and were, by the latter, presented to the drawee bank for collection. For instance, on the back of the check Exhibit A (same as in Exh.
B), this endorsement appears:

For deposit to the account of White House Shoe Supply with the China Banking Corporation.

and then this:

Cleared through the clearing office of Central Bank of the Philippines. All prior endorsements and/or lack of endorsements guaranteed.
China Banking Corporation.

And on the back of Exh. G:

For deposit to the credit of our account. Viuda e Hijos de Chua Chiong Pio. People's Shoe Company.

followed by the endorsement of China Banking Corporation as in Exhibits A and B. All the crossed checks have the "clearance" endorsement of
China Banking Corporation.

These circumstances would seem to show deposit of the checks with China Banking Corporation and subsequent presentation by the latter through
the clearing office; but as drawee had no funds, they were unpaid and returned, some of them stamped "account closed". How they reached his
hands, plaintiff did not indicate. Most probably, as the trial court surmised, — this is not a finding of fact — he got them after they had been
thus returned, because he presented them in court with such "account closed" stamps, without bothering to explain. Naturally and rightly, the
lower court held him not to be a holder in due course under the circumstances, since he knew, upon taking them up, that the checks had already
been dishonored.6

Yet it does not follow as a legal proposition, that simply because he was not a holder in due course Chan Wan could not recover on the checks. The
Negotiable Instruments Law does not provide that a holder 7 who is not a holder in due course, may not in any case, recover on the instrument. If B
purchases an overdue negotiable promissory note signed by A, he is not a holder in due course; but he may recover from A, 8 if the latter has no
valid excuse for refusing payment. The only disadvantage of holder who is not a holder in due course is that the negotiable instrument is subject to
defense as if it were non- negotiable.9

Now what defense did the defendant Tan Kim prove? The lower court's decision does not mention any; evidently His Honor had in mind the
defense pleaded in defendant's answer, but though it unnecessary to specify, because the "crossing" and presentation incidents sufficed to bar
recovery, in his opinion.1awphîl.nèt

Tan Kim admitted on cross-examination either that the checks had been issued as evidence of debts to Pinong and Muy, and/or that they had been
issued in payment of shoes which Pinong had promised to make for her.
Seeming to imply that Pinong had to make the shoes, she asserted Pinong had "promised to pay the checks for me". Yet she did not complete the
idea, perhaps because she was just answering cross- questions, her main testimony having referred merely to their counter-claim.

Needless to say, if it were true that the checks had been issued in payment for shoes that were never made and delivered, Tan Kim would have a
good defense as against a holder who is not a holder in due course. 10

Considering the deficiency of important details on which a fair adjudication of the parties' right depends, we think the record should be and is
hereby returned, in the interest of justice, to the court below for additional evidence, and such further proceedings as are not inconsistent with this
opinion. With the understanding that, as defendants did not appeal, their counterclaim must be and is hereby definitely dismissed. So ordered.

//………….//

FACTS:

Tam Kim issued 11 checks payable to cash or bearer. Chan Wan presented
these for payment but were dishonored for insufficiency of funds. This
prompted Chan Wan to institute an action against Tam Kim. She didn't take the witness stand and merely presented the checks for
payment. Tan Kim on the other hand alleged that the checks were for mere receipts
only. The trial court dismissed the complaint as Chan Wan failed to show that she was a holder in due course.

HELD:

Eight of the checks were crossed checks specially to Chinabank and should
have been presented for payment by Chinabank and not by Chan Wan. Inasmuch as Chan Wan didn't present them for payment himself
, there was no proper presentment, and the liability didn't attach to the drawer.

The facts show that the checks were indeed deposited with Chinabank and were by the latter presented for collection to the drawee bank. But as
the account had no sufficient funds, they were unpaid and returned, some of them stamped “account closed”. How it reached the hands of Chan
Wan, she didn't indicate. Most probably, as the trial court surmised, she acquired them after they have been dishonored.

Chan Wan is then not a holder in due course. Nonetheless, it doesn't mean that she couldn't collect on the checks. He can still collect against Tan
Kim if the latter has no valid excuse for refusing payment. The only
disadvantage for Chan Kim is that she is susceptible to defenses of Tan Kim but what are the defenses of latter? This has to be further
deliberated by the trial court.

3. DEV BANK OF RIZAL VS SIMA WEI

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; andchanrobles
virtual law library

(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.chanroblesvirtualawlibrarychanrobles virtual law library

(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:chanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

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.
2chanrobles virtual law library

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. 3 Delivery 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.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

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. 5chanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles
virtual law library

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.

//……//

FACTS:
Respondent Sima Wei executed and delivered to petitioner Bank a promissory note engaging to pay the petitioner Bank or order the amount of
P1,820,000.00. Sima Wei subsequently issued two crossed checks payable to petitioner Bank drawn against China Banking Corporation in full
settlement of the drawer's account evidenced by the promissory note. These two checks however were not delivered to the petitioner-payee or to
any of its authorized representatives but instead came into the possession of respondent Lee Kian Huat, who deposited the checks without the
petitioner-payee's indorsement to the account of respondent Plastic Corporation with Producers Bank. Inspite of the fact that the checks were
crossed and payable to petitioner Bank and bore no indorsement of the latter, the Branch Manager of Producers Bank authorized the acceptance
of the checks for deposit and credited them to the account of said Plastic Corporation.

ISSUE:
Whether petitioner Bank has a cause of action against Sima Wei for the undelivered checks.

RULING:
No. A negotiable instrument must be delivered to the payee in order to evidence its existence as a binding contract. Section 16 of the NIL provides
that 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. Without the initial delivery
of the instrument from the drawer to the payee, there can be no liability on the instrument. Petitioner however has a right of action against Sima
Wei for the balance due on the promissory note.
//…………..//
4. CONSOLIDATED PLYWOOD INDUSTRIES VS IFC LEASING AND ACCEPTANCE CORP

FACTS:

Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company Industrial Products Marketing, two used tractors. Petitioner
was issued a sales invoice for the two used tractors. At the same time, the deed of sale with chattel mortgage with promissory note
was issued.

Simultaneously, the seller assigned the deed of sale with chattel mortgage and promissory note to respondent. The used tractors were then
delivered but barely 14 days after, the tractors broke down. The seller sent mechanics but the tractors were not repaired accordingly as
they were no longer serviceable. Petitioner would delay the payments on the promissory notes until the seller completes its obligation under the
warranty.

Thereafter, a collection suit was filed against petitioner for the payment of the promissory note.

HELD:

It is patent that the seller is liable for the breach in warranty against the petitioner. This liability as a general rule extends to the corporation
to whom it assigned its rights and interests unless the assignee is a holder in due course of the promissory note in question, assuming the
note is negotiable, in which case, the latter’s rights are based on a negotiable instrument and assuming further that the petitioner’s
defense may not prevail against it.

The promissory note in question is not a negotiable instrument. The promissory note in question lacks the so-called words of negotiability.
And as such, it follows that the respondent can never be a holder in due course but remains merely an assignee of the note in question.
Thus, the petitioner may raise against the respondents all defenses available to it against the seller.

//………………//

Lessons Applicable: Requisites of negotiability to antedated and postdated instruments (Negotiable Instruments Law)
FACTS: Consolidated (buyer pays promossor note) > IPM (seller-assignor who violated warranty) > IFC (holder in due course or merely an assignee?)

Consolidated Plywood Industries, Inc (Consolidated) is a corporation engaged in the logging business

For the purpose of opening of additional roads and simultaneous logging operations along the route of roads, it needed 2 additional units of
tractors

Atlantic Gulf & Pacific Company of Manila, through its sister company and marketing arm, Industrial Products Marketing (IPM) (seller-assignor)
offered to sell 2 "Used" Allis Crawler Tractors

IPM inspected the job site and assured that the tractors were fit for the job and gave a 90-days performance warranty of the machines and
availability of parts.

Consolidated purchased on installment.

It paid the down payment of P210,000

April 5, 1978: IPM issued the sales invoice and the deed of sale with chattel mortgage with promissory note was executed

IPM, by means of a deed of assignment, assigned its rights and interest in the chattel mortgage in favor of IFC Leasing and Acceptance Corp. (IFC)

After 14 days, one of the tractors broke down and after another 9 days, the other tractor too

Because of the breaking down of the tractors, the road building and simultaneous logging operations were delayed

Consolidated unilaterally rescinded the contract w/ IPM

April 7, 1979: Wee of Consolidated asked IPM to pull out the units and have them reconditioned, and thereafter to offer them for sale.

The proceeds were to be given to IFC and the excess will be divided between:

IPM

Consolidated which offered to bear one-half 1/2 of the reconditioning cost

IPM didn't do anything

IFC filed against Consolidated for the recovery of the principal sum P1,093,789.71, interest and attorney's fees

RTC and CA: favored IFC

breach of warranty if any, is not a defense available to Consolidated either to withdraw from the contract and/or demand a proportionate
reduction of the price with damages in either case

ISSUE: W/N IFC is a holder in due course of the negotiable promissory note so as to bar completely all the available defenses of the Consolidated
against IPM

HELD: CA reversed and set aside

Consolidated is a victim of warranrty

The Civil Code provides that:

ART. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for
the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he
would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may
be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known
them.chanroblesvirtualawlibrary chanrobles virtual law library

ART. 1562. In a sale of goods, there is an implied warranty or condition as to the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication makes known to the seller the particular purpose for which the goods are acquired, and it appears
that the buyer relies on the sellers skill or judge judgment (whether he be the grower or manufacturer or not), there is an implied warranty that the
goods shall be reasonably fit for such purpose;

xxx xxx xxx chanrobles virtual law library

ART. 1564. An implied warranty or condition as to the quality or fitness for a particular purpose may be annexed by the usage of
trade.chanroblesvirtualawlibrary chanrobles virtual law library

xxx xxx xxx chanrobles virtual law library

ART. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold even though he was not aware thereof.

This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold.
(Emphasis supplied).

GR: extends to the corporation to whom it assigned its rights and interests

EX: assignee is a holder in due course of the promissory note

assuming the note is negotiable

Consolidated's defenses may not prevail against it.chanroblesvirtualawlibrary chanrobles virtual law library

Articles 1191 and 1567 of the Civil Code provide that:

ART. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him.

The injured party may choose between the fulfillment and the rescission of the obligation with the payment of damages in either case. He may also
seek rescission, even after he has chosen fulfillment, if the latter should become impossible.chanroblesvirtualawlibrary chanrobles virtual law
library

xxx xxx xxx chanrobles virtual law library

ART. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding
a proportionate reduction of the price, with damages in either case. (Emphasis supplied)

Consolidated, having unilaterally and extrajudicially rescinded its contract with the seller-assignor, can no longer sue IPM except by way of
counterclaim if IPM sues it because of the rescission

Considering that paragraph (d), Section 1 of the Negotiable Instruments Law requires that a promissory note "must be payable to order or bearer" -
in this case it is non-negotiable

= expression of consent that the instrument may be transferred

consent is indispensable since a maker assumes greater risk under a negotiable instrument than under a non-negotiable one

When instrument is payable to order

SEC. 8. WHEN PAYABLE TO ORDER. - The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his
order. . . .

Without the words "or order" or"to the order of, "the instrument is payable only to the person designated therein and is therefore non-negotiable.

Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument but will merely "step into the shoes"
of the person designated in the instrument and will thus be open to all defenses available against the latter
Even conceding for purposes of discussion that the promissory note in question is a negotiable instrument, the IFC cannot be a holder in due course
due to absence of GF for knowing that the tractors were defective

SEC. 52. WHAT CONSTITUTES A HOLDER IN DUE COURSE. - A holder in due course is a holder who has taken the instrument under the following
conditions: chanrobles virtual law library

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(c) That he took it in good faith and for value

(d) That the time it was negotiated by him he had no notice of any infirmity in the instrument of deffect in the title of the person negotiating it

SEC. 56. WHAT CONSTITUTES NOTICE OF DEFFECT. - To constitute notice of an infirmity in the instrument or defect in the title of the person
negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts
that his action in taking the instrument amounts to bad faith. (Emphasis supplied)

We believe the finance company is better able to bear the risk of the dealer's insolvency than the buyer and in a far better position to protect his
interests against unscrupulous and insolvent dealers. . .

5. BANCO DE ORO VS EQUITABLE BANK

Equitable Bank drew six crossed manager’s check payable to certain member establishments of Visa Card. Subsequently, the checks were
deposited with Banco De Oro (BDO) to the credit of its depositor. Following normal procedures and after stamping at the back of the checks the
usual endorsements,BDOsent the checks for clearing through the Philippine Clearing House Corporation (PCHC). Accordingly, Equitable Banking
paid the checks; its clearing account was debited for the value of the checks and BDO’s clearing account was credited for the same amount.
Thereafter, Equitable Banking discovered that the endorsements appearing at the back of the checks and purporting to be that of the payees were
forged and/or unauthorized or otherwise belong to persons other than the payees.Equitable Banking presented the checks directly to BDO for the
purpose of claiming reimbursement from the latter. However, BDO refused to accept such direct presentation and to reimburse Equitable Banking
for the value of the checks.

ISSUES

(a) Whether or not BDO is estopped from claiming that checks under consideration are non-negotiable instruments.

(b) Whether or not BDO can escape liability by reasons of forgery.

(c) Whether or not only negotiable checks are within the jurisdiction of PCHC.

RULING

(a) YES. BDO having stamped its guarantee of “all prior endorsements and/or lack of endorsements” is now estopped from claiming that the checks
under consideration are not negotiable instruments. The checks were accepted for deposit by the petitioner stamping thereon its guarantee, in
order that it can clear the said checks with the respondent bank. By such deliberate and positive attitude of the petitioner it has for all legal intents
and purposes treated the said cheeks as negotiable instruments and accordingly assumed the warranty of the endorser when it stamped its
guarantee of prior endorsements at the back of the checks. It led the said respondent to believe that it was acting as endorser of the checks and on
the strength of this guarantee said respondent cleared the checks in question and credited the account of the petitioner. Petitioner is now barred
from taking an opposite posture by claiming that the disputed checks are not negotiable instrument.

(b) NO. A commercial bank cannot escape the liability of an endorser of a check and which may turn out to be a forged endorsement. Whenever
any bank treats the signature at the back of the checks as endorsements and thus logically guarantees the same as such there can be no doubt said
bank has considered the checks as negotiable.The collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the
genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party
making the presentment has done its duty to ascertain the genuineness of the endorsements.

(c) NO. PCHC’s jurisdiction is not limited to negotiable checks only. The term check as used in the said Articles of Incorporation of PCHC can only
connote checks in general use in commercial and business activities. Thus, no distinction. Ubi lex non distinguit, nec nos distinguere debemus.
Checks are used between banks and bankers and their customers, and are designed to facilitate banking operations. It is of the essence to be
payable on demand, because the contract between the banker and the customer is that the money is needed on demand.

6. SALAS VS COURT OF APPEALS

Assailed in this petition for review on certiorari is the decision of the Court of Appeals in C.A.-G.R. CV No. 00757 entitled "Filinvest Finance &
Leasing Corporation v. Salas", which modified the decision of the Regional Trial Court of San Fernando, Pampanga in Civil Case No. 5915, a
collection suit between the same parties.

Records disclose that on February 6, 1980, Juanita Salas (hereinafter referred to as petitioner) bought a motor vehicle from the Violago Motor Sales
Corporation (VMS for brevity) for P58,138.20 as evidenced by a promissory note. This note was subsequently endorsed to Filinvest Finance &
Leasing Corporation (hereinafter referred to as private respondent) which financed the purchase.

Petitioner defaulted in her installments beginning May 21, 1980 allegedly due to a discrepancy in the engine and chassis numbers of the vehicle
delivered to her and those indicated in the sales invoice, certificate of registration and deed of chattel mortgage, which fact she discovered when
the vehicle figured in an accident on 9 May 1980.

This failure to pay prompted private respondent to initiate Civil Case No. 5915 for a sum of money against petitioner before the Regional Trial Court
of San Fernando, Pampanga.

In its decision dated September 10, 1982, the trial court held, thus:

WHEREFORE, and in view of all the foregoing, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of
P28,414.40 with interest thereon at the rate of 14% from October 2, 1980 until the said sum is fully paid; and the further amount of
P1,000.00 as attorney's fees.

The counterclaim of defendant is dismissed.

With costs against defendant. 1

Both petitioner and private respondent appealed the aforesaid decision to the Court of Appeals.

Imputing fraud, bad faith and misrepresentation against VMS for having delivered a different vehicle to petitioner, the latter prayed for a reversal
of the trial court's decision so that she may be absolved from the obligation under the contract.

On October 27, 1986, the Court of Appeals rendered its assailed decision, the pertinent portion of which is quoted hereunder:

The allegations, statements, or admissions contained in a pleading are conclusive as against the pleader. A party cannot subsequently
take a position contradictory of, or inconsistent with his pleadings (Cunanan vs. Amparo, 80 Phil. 227). Admissions made by the parties in
the pleadings, or in the course of the trial or other proceedings, do not require proof and cannot be contradicted unless previously shown
to have been made through palpable mistake (Sec. 2, Rule 129, Revised Rules of Court; Sta. Ana vs. Maliwat, L-23023, Aug. 31, 1968, 24
SCRA 1018).

When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the
preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath,
specifically denied them, and sets forth what he claims to be the facts (Sec. 8, Rule 8, Revised Rules of Court; Hibbered vs. Rohde and
McMillian, 32 Phil. 476).

A perusal of the evidence shows that the amount of P58,138.20 stated in the promissory note is the amount assumed by the plaintiff in
financing the purchase of defendant's motor vehicle from the Violago Motor Sales Corp., the monthly amortization of winch is Pl,614.95
for 36 months. Considering that the defendant was able to pay twice (as admitted by the plaintiff, defendant's account became
delinquent only beginning May, 1980) or in the total sum of P3,229.90, she is therefore liable to pay the remaining balance of P54,908.30
at l4% per annum from October 2, 1980 until full payment.

WHEREFORE, considering the foregoing, the appealed decision is hereby modified ordering the defendant to pay the plaintiff the sum of
P54,908.30 at 14% per annum from October 2, 1980 until full payment. The decision is AFFIRMED in all other respects. With costs to
defendant. 2
Petitioner's motion for reconsideration was denied; hence, the present recourse.

In the petition before us, petitioner assigns twelve (12) errors which focus on the alleged fraud, bad faith and misrepresentation of Violago Motor
Sales Corporation in the conduct of its business and which fraud, bad faith and misrepresentation supposedly released petitioner from any liability
to private respondent who should instead proceed against VMS. 3

Petitioner argues that in the light of the provision of the law on sales by description 4 which she alleges is applicable here, no contract ever existed
between her and VMS and therefore none had been assigned in favor of private respondent.

She contends that it is not necessary, as opined by the appellate court, to implead VMS as a party to the case before it can be made to answer for
damages because VMS was earlier sued by her for "breach of contract with damages" before the Regional Trial Court of Olongapo City, Branch
LXXII, docketed as Civil Case No. 2916-0. She cites as authority the decision therein where the court originally ordered petitioner to pay the
remaining balance of the motor vehicle installments in the amount of P31,644.30 representing the difference between the agreed consideration of
P49,000.00 as shown in the sales invoice and petitioner's initial downpayment of P17,855.70 allegedly evidenced by a receipt. Said decision was
however reversed later on, with the same court ordering defendant VMS instead to return to petitioner the sum of P17,855.70. Parenthetically,
said decision is still pending consideration by the First Civil Case Division of the Court of Appeals, upon an appeal by VMS, docketed as AC-G.R. No.
02922. 5

Private respondent in its comment, prays for the dismissal of the petition and counters that the issues raised and the allegations adduced therein
are a mere rehash of those presented and already passed upon in the court below, and that the judgment in the "breach of contract" suit cannot
be invoked as an authority as the same is still pending determination in the appellate court.

We see no cogent reason to disturb the challenged decision.

The pivotal issue in this case is whether the promissory note in question is a negotiable instrument which will bar completely all the available
defenses of the petitioner against private respondent.

Petitioner's liability on the promissory note, the due execution and genuineness of which she never denied under oath is, under the foregoing
factual milieu, as inevitable as it is clearly established.

The records reveal that involved herein is not a simple case of assignment of credit as petitioner would have it appear, where the assignee merely
steps into the shoes of, is open to all defenses available against and can enforce payment only to the same extent as, the assignor-vendor.

Recently, in the case of Consolidated Plywood Industries Inc. v. IFC Leasing and Acceptance Corp., 6 this Court had the occasion to clearly distinguish
between a negotiable and a non-negotiable instrument.

Among others, the instrument in order to be considered negotiable must contain the so-called "words of negotiability — i.e., must be payable to
"order" or "bearer"". Under Section 8 of the Negotiable Instruments Law, there are only two ways by which an instrument may be made payable to
order. There must always be a specified person named in the instrument and the bill or note is to be paid to the person designated in the
instrument or to any person to whom he has indorsed and delivered the same. Without the words "or order or "to the order of", the instrument is
payable only to the person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of
being a holder of a negotiable instrument, but will merely "step into the shoes" of the person designated in the instrument and will thus be open to
all defenses available against the latter. Such being the situation in the above-cited case, it was held that therein private respondent is not a holder
in due course but a mere assignee against whom all defenses available to the assignor may be raised. 7

In the case at bar, however, the situation is different. Indubitably, the basis of private respondent's claim against petitioner is a promissory note
which bears all the earmarks of negotiability.

The pertinent portion of the note reads:

PROMISSORY NOTE
(MONTHLY)

P58,138.20
San Fernando, Pampanga, Philippines
Feb. 11, 1980
 For value received, I/We jointly and severally, promise to pay Violago Motor Sales Corporation or order, at its office in San
Fernando, Pampanga, the sum of FIFTY EIGHT THOUSAND ONE HUNDRED THIRTY EIGHT & 201/100 ONLY (P58,138.20) Philippine
currency, which amount includes interest at 14% per annum based on the diminishing balance, the said principal sum, to be payable,
without need of notice or demand, in installments of the amounts following and at the dates hereinafter set forth, to
wit: P1,614.95 monthly for "36" months due and payable on the 21st day of each month starting March 21, 1980 thru and inclusive of
February 21, 1983. P_________ monthly for ______ months due and payable on the ______ day of each month starting _____198__ thru
and inclusive of _____, 198________ provided that interest at 14% per annum shall be added on each unpaid installment from maturity
hereof until fully paid.

xxx xxx xxx

Maker; Co-Maker:

(SIGNED) JUANITA SALAS _________________

Address:

____________________ ____________________

WITNESSES

SIGNED: ILLEGIBLE SIGNED: ILLEGIBLE

TAN # TAN #

PAY TO THE ORDER OF

FILINVEST FINANCE AND LEASING CORPORATION

VIOLAGO MOTOR SALES CORPORATION

BY: (SIGNED) GENEVEVA V. BALTAZAR
Cash Manager 8

A careful study of the questioned promissory note shows that it is a negotiable instrument, having complied with the requisites under the law as
follows: [a] it is in writing and signed by the maker Juanita Salas; [b] it contains an unconditional promise to pay the amount of P58,138.20; [c] it is
payable at a fixed or determinable future time which is "P1,614.95 monthly for 36 months due and payable on the 21 st day of each month starting
March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is payable to Violago Motor Sales Corporation, or order and as such, [e] the drawee is
named or indicated with certainty. 9

It was negotiated by indorsement in writing on the instrument itself payable to the Order of Filinvest Finance and Leasing Corporation 10 and it is an
indorsement of the entire instrument. 11

Under the circumstances, there appears to be no question that Filinvest is a holder in due course, having taken the instrument under the following
conditions: [a] it is complete and regular upon its face; [b] it became the holder thereof before it was overdue, and without notice that it had
previously been dishonored; [c] it took the same in good faith and for value; and [d] when it was negotiated to Filinvest, the latter had no notice of
any infirmity in the instrument or defect in the title of VMS Corporation. 12

Accordingly, respondent corporation holds the instrument free from any defect of title of prior parties, and free from defenses available to prior
parties among themselves, and may enforce payment of the instrument for the full amount thereof. 13 This being so, petitioner cannot set up
against respondent the defense of nullity of the contract of sale between her and VMS.

Even assuming for the sake of argument that there is an iota of truth in petitioner's allegation that there was in fact deception made upon her in
that the vehicle she purchased was different from that actually delivered to her, this matter cannot be passed upon in the case before us, where
the VMS was never impleaded as a party.

Whatever issue is raised or claim presented against VMS must be resolved in the "breach of contract" case.

Hence, we reach a similar opinion as did respondent court when it held:

 We can only extend our sympathies to the defendant (herein petitioner) in this unfortunate incident. Indeed, there is nothing We can do
as far as the Violago Motor Sales Corporation is concerned since it is not a party in this case. To even discuss the issue as to whether or
not the Violago Motor Sales Corporation is liable in the transaction in question would amount, to denial of due process, hence, improper
and unconstitutional. She should have impleaded Violago Motor Sales.14

IN VIEW OF THE FOREGOING, the assailed decision is hereby AFFIRMED. With costs against petitioner.

SO ORDERED.

//………………………//

Petitioner bought a car from Viologo Motor Sales Company, which was secured by a promissory note, which was later on indorsed to
Filinvest Finance, which financed the transaction. Petitioner later on defaulted in her installment payments, allegedly due to the fraud
imputed by VMS in

selling her a different vehicle from what was agreed upon. This default in payment prompted Filinvest Finance to initiate a case against
petitioner. The trial court decided in favor of Filinvest, to which the appellate court upheld by increasing the amount to be paid.

It is the contention of petitioner that since the agreement between her and the motor company was inexistent, none had been assigned in
favor of private respondent.

HELD:

Petitioner’s liability on the promissory note, the due execution and genuineness of which she never denied under oath, is under the foregoing
factual milieu, as inevitable as it is clearly established.

The records reveal that involved herein is not a simple case of assignment of credit as petitioner would have it appear, where the assignee
merely steps into the shoes of, is open to all defenses available against and can enforce payment only to the same extent as, the assignor-
vendor.

The instrument to be negotiable must contain the so-called words of negotiability. There are only 2 ways for an instrument to be
payable to order. There must always be a specified person named in the instrument and the bill or note is to be paid to the person designated in
the instrument or to any person to whom he has indorsed and delivered the same. Without the words “or order” or “to the order of”, the
instrument is payable only to the person designated therein and is thus non-negotiable. Any subsequent purchaser thereof will not enjoy
the advantages of being a holder in due course but will merely step into the shoes of the person designated in the instrument and will
thus be open to the defenses available against the latter.

In the case at bar, the promissory notes is earmarked with negotiability and Filinvest is a holder in due course.

7. SESBRENO VS CA
//……..//
8. SALUDO VS CA

Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of respondent Court of Appeals1 which affirmed the decision
of the trial court2 dismissing for lack of evidence herein petitioners' complaint in Civil Case No R-2101 of the then Court of First Instance of
Southern Leyte, Branch I.

The facts, as recounted by the court a quo and adopted by respondent court after "considering the evidence on record," are as follows:

After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, (on) October 23, 1976 (Exh. A), Pomierski and
Son Funeral Home of Chicago, made the necessary preparations and arrangements for the shipment, of the remains from
Chicago to the Philippines. The funeral home had the remains embalmed (Exb. D) and secured a permit for the disposition of
dead human body on October 25, 1976 (Exh. C), Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m.
on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a hermetically sealed casket
that is airtight and waterproof wherein was contained the remains of Crispina Saludo Galdo (sic) (Exb. B). On the same date,
October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which
made the necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers to
throughout the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in, and they see that the remains are
taken to the proper air freight terminal (Exh. 6-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care
International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079-01180454
Ordinary was issued wherein the requested routing was from Chicago to San Francisco on board TWA Flight 131 of October 27,
1976 and from San Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL
Flight 149 of October 29, 1976 (See Exh. E., Also Exh. 1-PAL).

In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were booked with United Airlines
from Chicago to California, and with PAL from California to Manila. She then went to the funeral director of Pomierski Funeral
Home who had her mother's remains and she told the director that they were booked with United Airlines. But the director told
her that the remains were booked with TWA flight to California. This upset her, and she and her brother had to change
reservations from UA to the TWA flight after she confirmed by phone that her mother's remains should be on that TWA flight.
They went to the airport and watched from the look-out area. She saw no body being brought. So, she went to the TWA
counter again, and she was told there was no body on that flight. Reluctantly, they took the TWA flight upon assurance of her
cousin, Ani Bantug, that he would look into the matter and inform her about it on the plane or have it radioed to her. But no
confirmation from her cousin reached her that her mother was on the West Coast.

Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her mother's remains.
She was told they did not know anything about it.

She then called Pomierski that her mother's remains were not at the West Coast terminal, and Pomierski immediately called
C.M.A.S., which in a matter of 10 minutes informed him that the remains were on a plane to Mexico City, that there were two
bodies at the terminal, and somehow they were switched; he relayed this information to Miss Saludo in California; later
C.M.A.S. called and told him they were sending the remains back to California via Texas (see Exh. 6-TWA).

It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-01180454 on TWA Flight 603 of October 27,
1976, a flight earlier than TWA Flight 131 of the same date. TWA delivered or transferred the said shipment said to contain
human remains to PAL at 1400H or 2:00 p.m. of the same date, October 27, 1976 (Bee Exh. 1- TWA). "Due to a switch(ing) in
Chicago", this shipment was withdrawn from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-PAL,
see Exh. 3-a-PAL).

What transpired at the Chicago (A)irport is explained in a memo or incident report by Pomierski (Exh. 6-TWA) to Pomierski's
lawyers who in turn referred to said' memo and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to herein
plaintiff's counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6-TWA), it is stated that the remains (of Crispina
Saludo) were taken to CMAS at the airport; that there were two bodies at the (Chicago Airport) terminal, and somehow they
were switched, that the remains (of Crispina Saludo) were on a plane to Mexico City; that CMAS is a national service used by
undertakers throughout the nation (U.S.A.), makes all the necessary arrangements, such as flights, transfers, etc., and see(s) to
it that the remains are taken to the proper air freight terminal.

The following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San Francisco from Mexico on
board American Airlines. This shipment was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL).
This casket bearing the remains of Crispina Saludo, which was mistakenly sent to Mexico and was opened (there), was resealed
by Crispin F. Patagas for shipment to the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for
Manila that same evening and arrived (in) Manila on October 30, 1976, a day after its expected arrival on October 29, 1976.3
In a letter dated December 15, 1976,4 petitioners' counsel informed private respondent Trans World Airlines (TWA) of the misshipment and
eventual delay in the delivery of the cargo containing the remains of the late Crispin Saludo, and of the discourtesy of its employees to petitioners
Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-respondent Philippine Airlines
(PAL),5 petitioners stated that they were holding PAL liable for said delay in delivery and would commence judicial action should no favorable
explanation be given.

Both private respondents denied liability. Thus, a damage suit6 was filed by petitioners before the then Court of First Instance, Branch III, Leyte,
praying for the award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorney's fees and costs of suit.

As earlier stated, the court below absolved the two respondent airlines companies of liability. The Court of Appeals affirmed the decision of the
lower court in toto, and in a subsequent resolution,7 denied herein petitioners' motion for reconsideration for lack of merit.

In predictable disagreement and dissatisfaction with the conclusions reached by respondent appellate court, petitioners now urge this Court to
review the appealed decision and to resolve whether or not (1) the delay in the delivery of the casketed remains of petitioners' mother was due to
the fault of respondent airline companies, (2) the one-day delay in the delivery of the same constitutes contractual breach as would entitle
petitioners to damages, (3) damages are recoverable by petitioners for the humiliating, arrogant and indifferent acts of the employees of TWA and
PAL, and (4) private respondents should be held liable for actual, moral and exemplary damages, aside from attorney's fees and litigation
expenses.8

At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be stressed that only questions of law may be raised in a
petition filed in this Court to review on certiorari the decision of the Court of Appeals.9 This being so, the factual findings of the Court of Appeals
are final and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where there
is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures;(c) when the inference made is
manifestly-mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the
factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary
to the admissions of both appellant and appellee; 10 (g) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties and which, if properly considered, would justify a different conclusion; 11 and (h) where the findings of fact of the Court of Appeals are
contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts of set forth by the petitioner
are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record. 12

To distinguish, a question of law is one which involves a doubt or controversy on what the law is on a certain state of facts; and, a question of fact,
contrarily, is one in which there is a doubt or difference as to the truth or falsehood of the alleged facts. 13 One test, it has been held, is whether
the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it
will be a question of fact.14

Respondent airline companies object to the present recourse of petitioners on the ground that this petition raises only factual
questions. 15 Petitioners maintain otherwise or, alternatively, they are of the position that, assuming that the petition raises factual questions, the
same are within the recognized exceptions to the general rule as would render the petition cognizable and worthy of review by the Court. 16

Since it is precisely the soundness of the inferences or conclusions that may be drawn from the factual issues which are here being assayed, we find
that the issues raised in the instant petition indeed warrant a second look if this litigation is to come to a reasonable denouement. A
discussion seriatim of said issues will further reveal that the sequence of the events involved is in effect disputed. Likewise to be settled is whether
or not the conclusions of the Court of Appeals subject of this review indeed find evidentiary and legal support.

I. Petitioners fault respondent court for "not finding that private respondents failed to exercise extraordinary diligence required by law which
resulted in the switching and/or misdelivery of the remains of Crispina Saludo to Mexico causing gross delay in its shipment to the Philippines, and
consequently, damages to petitioners." 17

Petitioner allege that private respondents received the casketed remains of petitioners' mother on October 26, 1976, as evidenced by the issuance
of PAL Air Waybill No. 079-01180454 18 by Air Care International as carrier's agent; and from said date, private respondents were charged with the
responsibility to exercise extraordinary diligence so much so that for the alleged switching of the caskets on October 27, 1976, or one day after
private respondents received the cargo, the latter must necessarily be liable.

To support their assertion, petitioners rely on the jurisprudential dictum, both under American and Philippine law, that "(t)he issuance of a bill of
lading carries the presumption that the goods were delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned
that a bill of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of convincing testimony establishing
mistake, recitals in the bill of lading showing that the carrier received the goods for shipment on a specified date control (13 C.J.S. 235)." 19
A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to transport and deliver them at a specified place to a
person named or on his order. Such instrument may be called a shipping receipt, forwarder's receipt and receipt for transportation. 20 The
designation, however, is immaterial. It has been hold that freight tickets for bus companies as well as receipts for cargo transported by all forms of
transportation, whether by sea or land, fall within the definition. Under the Tariff and Customs Code, a bill of lading includes airway bills of
lading. 21 The two-fold character of a bill of lading is all too familiar; it is a receipt as to the quantity and description of the goods shipped and a
contract to transport the goods to the consignee or other person therein designated, on the terms specified in such instrument. 22

Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the goods to the carrier normally precedes the issuance
of the bill; or, to some extent, delivery of the goods and issuance of the bill are regarded in commercial practice as simultaneous acts. 23 However,
except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is, the execution of the bill of lading even prior to
actual possession and control by the carrier of the cargo to be transported. There is no law which requires that the delivery of the goods for
carriage and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that the former should precede the latter.

Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for transportation but, when issued, is competent and prima
facie, but not conclusive, evidence of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper, is evidence that
the carrier has received the goods described therein for shipment. Except as modified by statute, it is a general rule as to the parties to a contract
of carriage of goods in connection with which a bill of lading is issued reciting that goods have been received for transportation, that the recital
being in essence a receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or other evidence. 24

While we agree with petitioners' statement that "an airway bill estops the carrier from denying receipt of goods of the quantity and quality
described in the bill," a further reading and a more faithful quotation of the authority cited would reveal that "(a) bill of lading may contain
constituent elements of estoppel and thus become something more than a contract between the shipper and the carrier. . . . (However), as
between the shipper and the carrier, when no goods have been delivered for shipment no recitals in the bill can estop the carrier from showing the
true facts . . . Between the consignor of goods and receiving carrier, recitals in a bill of lading as to the goods shipped raise only a rebuttable
presumption that such goods were delivered for shipment. As between the consignor and a receiving carrier, the fact must outweigh the
recital." 25 (Emphasis supplied)

For this reason, we must perforce allow explanation by private respondents why, despite the issuance of the airway bill and the date thereof, they
deny having received the remains of Crispina Saludo on October 26, 1976 as alleged by petitioners.

The findings of the trial court, as favorably adopted by the Court of Appeals and which we have earner quoted, provide us with the explanation that
sufficiently over comes the presumption relied on by petitioners in insisting that the remains of their mother were delivered to and received by
private respondents on October 26, 1976. Thus —

. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski & Son
Funeral Home, sealed the shipping case containing a hermetically sealed casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date October 26, 1976, Pomierski brought the
remains to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary arrangements such
as flights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout the nation (U.S.A.), they furnish the air
pouch which the casket is enclosed in, and they see that the remains are taken to the proper air freight terminal (Exh. G-TWA).
C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and
Mario (Maria) Saludo as the consignee. PAL Airway Bill No. 079- 01180454 Ordinary was issued wherein the requested routing
was from Chicago to San Francisco on board TWA Flight-131 of October 27;1976, and from San Francisco to Manila on board
PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E, also Exh.
1-PAL).26 (Emphasis ours.)

Moreover, we are persuaded to believe private respondent PAL's account as to what transpired October 26, 1976:

. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of Pomierski, F.H., the shipper requested booking of
the casketed remains of Mrs. Cristina (sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on October 27, 1976.

2. To signify acceptance and confirmation of said booking, PAL issued to said Pomierski F.H., PAL Airway Bill No. 079-01180454
dated October 27, 1976 (sic, "10/26/76"). PAL confirmed the booking and transporting of the shipment on board of its Flight PR
107 on October 27, 1976 on the basis of the representation of the shipper and/or CMAS that the said cargo would arrive in San
Francisco from Chicago on board United Airlines Flight US 121 on 27 October 1976.27

In other words, on October 26, 1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107
leaving San Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as evidence of receipt of delivery of the
cargo on October 26, 1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila flight scheduled on October 27,
1976. Actually, it was not until October 28, 1976 that PAL received physical delivery of the body at San Francisco, as duly evidenced by the Interline
Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said date.28

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary responsibility of the common carrier begins from the time the goods
are delivered to the carrier. This responsibility remains in full force and effect even when they are temporarily unloaded or stored in transit, unless
the shipper or owner exercises the right of stoppage in transitu, 29 and terminates only after the lapse of a reasonable time for the acceptance, of
the goods by the consignee or such other person entitled to receive them. 30 And, there is delivery to the carrier when the goods are ready for and
have been placed in the exclusive possession, custody and control of the carrier for the purpose of their immediate transportation and the carrier
has accepted them. 31 Where such a delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti. 32

Hence, while we agree with petitioners that the extraordinary diligence statutorily required to be observed by the carrier instantaneously
commences upon delivery of the goods thereto, for such duty to commence there must in fact have been delivery of the cargo subject of the
contract of carriage. Only when such fact of delivery has been unequivocally established can the liability for loss, destruction or deterioration of
goods in the custody of the carrier, absent the excepting causes under Article 1734, attach and the presumption of fault of the carrier under Article
1735 be invoked.

As already demonstrated, the facts in the case at bar belie the averment that there was delivery of the cargo to the carrier on October 26, 1976.
Rather, as earlier explained, the body intended to be shipped as agreed upon was really placed in the possession and control of PAL on October 28,
1976 and it was from that date that private respondents became responsible for the agreed cargo under their undertakings in PAL Airway Bill No.
079-01180454. Consequently, for the switching of caskets prior thereto which was not caused by them, and subsequent events caused thereby,
private respondents cannot be held liable.

Petitioners, proceeding on the premise that there was delivery of the cargo to private respondents on October 26,1976 and that the latter's
extraordinary responsibility had by then become operative, insist on foisting the blame on private respondents for the switching of the two caskets
which occurred on October 27, 1976. It is argued that since there is no clear evidence establishing the fault Continental Mortuary Air Services
(CMAS) for the mix-up, private respondents are presumably negligent pursuant to Article 1735 of the Civil Code and, for failure to rebut such
presumption, they must necessarily be held liable; or, assuming that CMAS was at fault, the same does not absolve private respondents of liability
because whoever brought the cargo to the airport or loaded it on the plane did so as agent of private respondents.

This contention is without merit. As pithily explained by the Court of Appeals:

The airway bill expressly provides that "Carrier certifies goods described below were received for carriage", and said cargo was
"casketed human remains of Crispina Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air Care
International as carrier's agent." On the face of the said airway bill, the specific flight numbers, specific routes of shipment and
dates of departure and arrival were typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San Francisco by
PAL 107 on, October 27, 1976 to Philippines and to Cebu via PAL Flight 149 on October 29, 1976. The airway bill also contains
the following typewritten words, as follows: all documents have been examined (sic). Human remains of Crispina Saludo. Please
return back (sic) first available flight to SFO.

But, as it turned out and was discovered later the casketed human remains which was issued PAL Airway Bill #079-1180454 was
not the remains of Crispina Saludo, the casket containing her remains having been shipped to Mexico City.

However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's remains, hired Continental Mortuary Services
(hereafter referred to as C.M.A.S.), which is engaged in the business of transporting and forwarding human remains. Thus,
C.M.A.S. made all the necessary arrangements such as flights, transfers, etc. — for shipment of the remains of Crispina Saludo.

The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These people made all the
necessary arrangements, such as flights, transfers, etc. This is a national service used by undertakers
throughout the nation. They furnished the air pouch which the casket is enclosed in, and they see that the
remains are taken to the proper air frieght terminal. I was very surprised when Miss Saludo called me to say
that the remains were not at the west coast terminal. I immediately called C.M.A.S. They called me back in a
matter of ten minutes to inform me that the remains were on a plane to Mexico City. The man said that
there were two bodies at the terminal, and somehow they were switched. . . . (Exb. 6 — "TWA", which is the
memo or incident report enclosed in the stationery of Walter Pomierski & Sons Ltd.)

Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment, which was supposed to
contain the remains of Crispina Saludo, Air Care International and/or TWA, had no way of determining its actual contents, since
the casket was hermetically sealed by the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air
Care International and/or TWA had to rely on the information furnished by the shipper regarding the cargo's content. Neither
 could Air Care International and/or TWA open the casket for further verification, since they were not only without authority to
do so, but even prohibited.

Thus, under said circumstances, no fault and/or negligence can be attributed to PAL (even if Air Care International should be
considered as an agent of PAL) and/or TWA, the entire fault or negligence being exclusively with C.M.A.S.33 (Emphasis supplied.)

It can correctly and logically be concluded, therefore, that the switching occurred or, more accurately, was discovered on October 27, 1976; and
based on the above findings of the Court of appeals, it happened while the cargo was still with CMAS, well before the same was place in the
custody of private respondents.

Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 197634 was signed by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same
date, thereby indicating acknowledgment by PAL of the transfer to them by TWA of what was in truth the erroneous cargo, said misshipped cargo
was in fact withdrawn by CMAS from PAL as shown by the notation on another copy of said manifest35 stating "Received by CMAS — Due to switch
in Chicago 10/27-1805H," the authenticity of which was never challenged. This shows that said misshipped cargo was in fact withdrawn by CMAS
from PAL and the correct shipment containing the body of Crispina Saludo was received by PAL only on October 28, 1976, at 1945H, or 7:45 P.M.,
per American Airlines Interline Freight Transfer Manifest No. AA204312.36

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:

ATTY. JUAN COLLAS, JR.:

On that date, do (sic) you have occasion to handle or deal with the transfer of cargo from TWA Flight No.
603 to PAL San Francisco?

MICHAEL GIOSSO:

Yes, I did.

ATTY. JUAN COLLAS, JR.:

What was your participation with the transfer of the cargo?

MICHAEL GIOSSO:

I manifested the freight on a transfer manifest and physically moved it to PAL and concluded the transfer by
signing it off.

ATTY. JUAN COLLAS, JR.:

You brought it there yourself?

MICHAEL GIOSSO:

Yes sir.

ATTY. JUAN COLIAS, JR.:

Do you have anything to show that PAL received the cargo from TWA on October 27, 1976?

MICHAEL GIOSSO:

Yes, I do.

(Witness presenting a document)

ATTY. JUAN COLLAS, JR.:

 For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.

xxx xxx xxx

ATTY. JUAN COLLAS, JR.:

This Exhibit I-TWA, could you tell what it is, what it shows?

MICHAEL GIOSSO:

It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two signatures as it completed
the transfer.

ATTY. JUAN COLLAS, JR.:

Very good,. Who was the PAL employee who received the cargo?

MICHAEL GIOSSO:

The name is Garry Marcial." 37

The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as deponent-witness for PAL, makes this further clarification:

ATTY. CESAR P. MANALAYSAY:

You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL Airway Bill Number 01180454 which for
purposes of evidence, I would like to request that the same be marked as evidence Exhibit I for PAL.

xxx xxx xxx

In what circumstances did you encounter Exhibit I-PAL?

ALBERTO A. LIM:

If I recall correctly, I was queried by Manila, our Manila office with regard to a certain complaint that a
consignee filed that this shipment did not arrive on the day that the consignee expects the shipment to
arrive.

ATTY CESAR P. MANALAYSAY:

Okay. Now, upon receipt of that query from your Manila office, did you conduct any investigation to
pinpoint the possible causes of mishandling?

ALBERTO A. LIM:

Yes.

xxx xxx xxx

ATTY. CESAR P. MANALAYSAY:

What is the result of your investigation?

ALBERTO A. LIM:
In the course of my investigation, I found that we received the body on October 28, 1976, from American
Airlines.

ATTY. CESAR P. MANALAYSAY:

What body are you referring to?

xxx xxx xxx

ALBERTO A. LIM:

The remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MANALAYSAY:

Is that the same body mentioned in this Airway Bill?

ALBERTO A. LIM:

Yes.

ATTY. CESAR P. MANALAYSAY:

What time did you receive said body on October 28, 1976?

ALBERTO A. LIM:

If I recall correctly, approximately 7:45 of October 28, 1976.

ATTY. CESAR P. MANALAYSAY:

Do you have any proof with you to back the statement?

ALBERTO A. LIM:

Yes. We have on our records a Transfer Manifest from American Airlines Number 204312 showing that we
received a human remains shipment belong to Mrs. Cristina (sic) Saludo or the human remains of Mrs.
Cristina (sic) Saludo.

ATTY. CESAR P. MAIALAYSAY:

At this juncture, may I request that the Transfer Manifest referred to by the witness be marked as an
evidence as Exhibit II-PAL.

xxx xxx xxx

Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit I evidence tending to show that on
October 27, 1976 at about 2:00 in the, afternoon they delivered to you a cargo bearing human remains.
Could you go over this Exhibit I and please give us your comments as to that exhibit?

ATTY. ALBERTO C. MENDOZA:

That is a vague question. I would rather request that counsel propound specific questions rather than asking
for comments on Exhibit I-TWA.

ATTY. CESAR P. MANALAYSAY:

 In that case, I will reform my question. Could you tell us whether TWA in fact delivered to you the human
remains as indicated in that Transfer Manifest?

ALBERTO A. LIM:

Yes, they did.

ATTY. CESAR P. MANALAYSAY:

I noticed that the Transfer Manifest of TWA marked as Exhibit I-TWA bears the same numbers or the same
entries as the Airway Bill marked as Exhibit I-A PAL tending to show that this is the human remains of Mrs
Cristina (sic) Saludo. Could you tell us whether this is true?

ALBERTO A. LIM:

It is true that we received human remains shipment from TWA as indicated on this Transfer Manifest. But in
the course of investigation, it was found out that the human remains transferred to us is not the remains of
Mrs. Cristina (sic) Saludo this is the reason why we did not board it on our flight. 38

Petitioners consider TWA's statement that "it had to rely on the information furnished by the shipper" a lame excuse and that its failure to prove
that its personnel verified and identified the contents of the casket before loading the same constituted negligence on the part of TWA.39

We upbold the favorable consideration by the Court of Appeals of the following findings of the trial court:

It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home delivered the casket containing the remains of
Crispina Saludo. TWA would have no knowledge therefore that the remains of Crispina Saludo were not the ones inside the
casket that was being presented to it for shipment. TWA would have to rely on there presentations of C.M.A.S. The casket was
hermetically sealed and also sealed by the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not have
opened such a sealed casket just for the purpose of ascertaining whose body was inside and to make sure that the remains
inside were those of the particular person indicated to be by C.M.A.S. TWA had to accept whatever information was being
furnished by the shipper or by the one presenting the casket for shipment. And so as a matter of fact, TWA carried to San
Francisco and transferred to defendant PAL a shipment covered by or under PAL Airway Bill No. 079-ORD-01180454, the airway
bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out later, while the casket was already with PAL,
that what was inside the casket was not the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from
PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing the remains of Crispina Saludo was
transshipped from Mexico and arrived in San Francisco the following day on board American Airlines. It was immediately loaded
by PAL on its flight for Manila.

The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the ONE responsible for the switching or
mix-up of the two bodies at the Chicago Airport terminal, and started a chain reaction of the misshipment of the body of
Crispina Saludo and a one-day delay in the delivery thereof to its destination.40

Verily, no amount of inspection by respondent airline companies could have guarded against the switching that had already taken place. Or,
granting that they could have opened the casket to inspect its contents, private respondents had no means of ascertaining whether the body
therein contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male person and such fact was visually apparent
upon opening the casket. However, to repeat, private respondents had no authority to unseal and open the same nor did they have any reason or
justification to resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver goods to be carried, or enter into contracts with it, and
inasmuch as the freight may depend on the value of the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily,
too, it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of their value before it consents to carry them;
and its failure to do so cannot defeat the shipper's right to recovery of the full value of the package if lost, in the absence of showing of fraud or
deceit on the part of the shipper. In the absence of more definite information, the carrier has a the right to accept shipper's marks as to the
contents of the package offered for transportation and is not bound to inquire particularly about them in order to take advantage of a false
classification and where a shipper expressly represents the contents of a package to be of a designated character, it is not the duty of the carrier to
ask for a repetition of the statement nor disbelieve it and open the box and see for itself. 41 However, where a common carrier has reasonable
ground to suspect that the offered goods are of a dangerous or illegal character, the carrier has the right to know the character of such goods and
to insist on an inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods. 42
It can safely be said then that a common carrier is entitled to fair representation of the nature and value of the goods to be carried, with the
concomitant right to rely thereon, and further noting at this juncture that a carrier has no obligation to inquire into the correctness or sufficiency of
such information. 43 The consequent duty to conduct an inspection thereof arises in the event that there should be reason to doubt the veracity of
such representations. Therefore, to be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there
must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to
accept carriage of the same; and it is the failure of the carrier to act accordingly in the face of such proof that constitutes the basis of the common
carrier's liability. 44

In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper's representations. The airway bill expressly
providing that "carrier certifies goods received below were received for carriage," and that the cargo contained "casketed human remains of
Crispina Saludo," was issued on the basis of such representations. The reliance thereon by private respondents was reasonable and, for so doing,
they cannot be said to have acted negligently. Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo presented for
transportation was anything other than what it was declared to be, as would require more than routine inspection or call for the carrier to insist
that the same be opened for scrutiny of its contents per declaration.

Neither can private respondents be held accountable on the basis of petitioners' preposterous proposition that whoever brought the cargo to the
airport or loaded it on the airplane did so as agent of private respondents, so that even if CMAS whose services were engaged for the transit
arrangements for the remains was indeed at fault, the liability therefor would supposedly still be attributable to private respondents.

While we agree that the actual participation of CMAS has been sufficiently and correctly established, to hold that it acted as agent for private
respondents would be both an inaccurate appraisal and an unwarranted categorization of the legal position it held in the entire transaction.

It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the transportation of the human remains of Crispina
Saludo to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners' mother for
shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through the carrier's agent, Air Care
International. 45 With its aforestated functions, CMAS may accordingly be classified as a forwarder which, by accepted commercial practice, is
regarded as an agent of the shipper and not of the carrier. As such, it merely contracts for the transportation of goods by carriers, and has no
interest in the freight but receives compensation from the shipper as his agent. 46

At this point, it can be categorically stated that, as culled from the findings of both the trial court and appellate courts, the entire chain of events
which culminated in the present controversy was not due to the fault or negligence of private respondents. Rather, the facts of the case would
point to CMAS as the culprit. Equally telling of the more likely possibility of CMAS' liability is petitioners' letter to and demanding an explanation
from CMAS regarding the statement of private respondents laying the blame on CMAS for the incident, portions of which, reading as follows:

. . . we were informed that the unfortunate a mix-up occurred due to your negligence. . . .

Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence were presented to prove that allegation.

On the face of this overwhelming evidence we could and should have filed a case against you. . . . 47

clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners that they consider private respondents without fault,
or is at the very least indicative of the fact that petitioners entertained serious doubts as to whether herein private respondents were responsible
for the unfortunate turn of events.

Undeniably, petitioners' grief over the death of their mother was aggravated by the unnecessary inconvenience and anxiety that attended their
efforts to bring her body home for a decent burial. This is unfortunate and calls for sincere commiseration with petitioners. But, much as we would
like to give them consolation for their undeserved distress, we are barred by the inequity of allowing recovery of the damages prayed for by them
at the expense of private respondents whose fault or negligence in the very acts imputed to them has not been convincingly and legally
demonstrated.

Neither are we prepared to delve into, much less definitively rule on, the possible liability of CMAS as the evaluation and adjudication of the same
is not what is presently at issue here and is best deferred to another time and addressed to another forum.

II. Petitioners further fault the Court of Appeals for ruling that there was no contractual breach on the part of private respondents as would entitle
petitioners to damages.

Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners' mother on its Flight 131 from Chicago to San Francisco
on October 27, 1976, made itself a party to the contract of carriage and, therefore, was bound by the terms of the issued airway bill. When TWA
undertook to ship the remains on its Flight 603, ten hours earlier than scheduled, it supposedly violated the express agreement embodied in the
airway bill. It was allegedly this breach of obligation which compounded, if not directly caused, the switching of the caskets.

In addition, petitioners maintain that since there is no evidence as to who placed the body on board Flight 603, or that CMAS actually put the cargo
on that flight, or that the two caskets at the Chicago airport were to be transported by the same airline, or that they came from the same funeral
home, or that both caskets were received by CMAS, then the employees or agents of TWA presumably caused the mix-up by loading the wrong
casket on the plane. For said error, they contend, TWA must necessarily be presumed negligent and this presumption of negligence stands
undisturbed unless rebutting evidence is presented to show that the switching or misdelivery was due to circumstances that would exempt the
carrier from liability.

Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo to its co-respondent PAL on October 27, 1976 at 2:00
P.M., as supported by the TWA Transfer Manifest, TWA faithfully complied with its obligation under the airway bill. Said faithful compliance was
not affected by the fact that the remains were shipped on an earlier flight as there was no fixed time for completion of carriage stipulated on.
Moreover, the carrier did not undertake to carry the cargo aboard any specified aircraft, in view of the condition on the back of the airway bill
which provides:

CONDITIONS OF CONTRACT

xxx xxx xxx

It is agreed that no time is fixed for the completion of carriage hereunder and that Carrier may without notice substitute
alternate carriers or aircraft. Carrier assumes no obligation to carry the goods by any specified aircraft or over any particular
route or routes or to make connection at any point according to any particular schedule, and Carrier is hereby authorized to
select, or deviate from the route or routes of shipment, notwithstanding that the same may be stated on the face hereof. The
shipper guarantees payment of all charges and advances.48

Hence, when respondent TWA shipped the body on earlier flight and on a different aircraft, it was acting well within its rights. We find this
argument tenable.

The contention that there was contractual breach on the part of private respondents is founded on the postulation that there was ambiguity in the
terms of the airway bill, hence petitioners' insistence on the application of the rules on interpretation of contracts and documents. We find no such
ambiguity. The terms are clear enough as to preclude the necessity to probe beyond the apparent intendment of the contractual provisions.

The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the parties, the same having the force of law between
them. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of the parties,
the terms are to be understood literally just as they appear on the face of the contract.49 The various stipulations of a contract shall be interpreted
together50 and such a construction is to be adopted as will give effect to all provisions thereof.51 A contract cannot be construed by parts, but its
clauses should be interpreted in relation to one another. The whole contract must be interpreted or read together in order to arrive at its true
meaning. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily determine the
character of a contract. The legal effect of the contract is not to be determined alone by any particular provision disconnected from all others, but
in the ruling intention of the parties as gathered from all the language they have used and from their contemporaneous and subsequent acts. 52

Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-01180454, respondent court approvingly quoted the trial
court's disquisition on the aforequoted condition appearing on the reverse side of the airway bill and its disposition of this particular assigned
error:

The foregoing stipulation fully answers plaintiffs' objections to the one-day delay and the shipping of the remains in TWA Flight
603 instead of TWA Flight 131. Under the stipulation, parties agreed that no time was fixed to complete the contract of carriage
and that the carrier may, without notice, substitute alternate carriers or aircraft. The carrier did not assume the obligation to
carry the shipment on any specified aircraft.

xxx xxx xxx

Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air Waybill are big enough to be read and
noticed. Also, the mere fact that the cargo in question was shipped in TWA Flight 603, a flight earlier on the same day than TWA
Flight 131, did not in any way cause or add to the one-day delay complained of and/or the switching or mix-up of the bodies.53

Indubitably, that private respondent can use substitute aircraft even without notice and without the assumption of any obligation whatsoever to
carry the goods on any specified aircraft is clearly sanctioned by the contract of carriage as specifically provided for under the conditions thereof.
Petitioners' invocation of the interpretative rule in the Rules of Court that written words control printed words in documents, 54 to bolster their
assertion that the typewritten provisions regarding the routing and flight schedule prevail over the printed conditions, is tenuous. Said rule may be
considered only when there is inconsistency between the written and printed words of the contract.

As previously stated, we find no ambiguity in the contract subject of this case that would call for the application of said rule. In any event, the
contract has provided for such a situation by explicitly stating that the above condition remains effective "notwithstanding that the same (fixed
time for completion of carriage, specified aircraft, or any particular route or schedule) may be stated on the face hereof." While petitioners hinge
private respondents' culpability on the fact that the carrier "certifies goods described below were received for carriage," they may have overlooked
that the statement on the face of the airway bill properly and completely reads —

Carrier certifies goods described below were received for carriage subject to the Conditions on the reverse hereof the goods
then being in apparent good order and condition except as noted hereon. 55 (Emphasis ours.)

Private respondents further aptly observe that the carrier's certification regarding receipt of the goods for carriage "was of a smaller print than the
condition of the Air Waybill, including Condition No. 5 — and thus if plaintiffs-appellants had recognized the former, then with more reason they
were aware of the latter. 56

In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the typewritten specifications of the flight, routes and
dates of departures and arrivals on the face of the airway bill constitute a special contract which modifies the printed conditions at the back
thereof. We reiterate that typewritten provisions of the contract are to be read and understood subject to and in view of the printed conditions,
fully reconciling and giving effect to the manifest intention of the parties to the agreement.

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a special contract, a carrier is not an insurer against delay in
transportation of goods. When a common carrier undertakes to convey goods, the law implies a contract that they shall be delivered at destination
within a reasonable time, in the absence, of any agreement as to the time of delivery. 57 But where a carrier has made an express contract to
transport and deliver property within a specified time, it is bound to fulfill its contract and is liable for any delay, no matter from what cause it may
have arisen. 58 This result logically follows from the well-settled rule that where the law creates a duty or charge, and the party is disabled from
performing it without any default in himself, and has no remedy over, then the law will excuse him, but where the party by his own contract
creates a duty or charge upon himself, he is bound to make it good notwithstanding any accident or delay by inevitable necessity because he might
have provided against it by contract. Whether or not there has been such an undertaking on the part of the carrier to be determined from the
circumstances surrounding the case and by application of the ordinary rules for the interpretation of contracts. 59

Echoing the findings of the trial court, the respondent court correctly declared that —

In a similar case of delayed delivery of air cargo under a very similar stipulation contained in the airway bill which reads: "The
carrier does not obligate itself to carry the goods by any specified aircraft or on a specified time. Said carrier being hereby
authorized to deviate from the route of the shipment without any liability therefor", our Supreme Court ruled that common
carriers are not obligated by law to carry and to deliver merchandise, and persons are not vested with the right to prompt
delivery, unless such common carriers previously assume the obligation. Said rights and obligations are created by a specific
contract entered into by the parties (Mendoza vs. PAL, 90 Phil. 836).

There is no showing by plaintiffs that such a special or specific contract had been entered into between them and the
defendant airline companies.

And this special contract for prompt delivery should call the attention of the carrier to the circumstances surrounding the case
and the approximate amount of damages to be suffered in case of delay (See Mendoza vs. PAL, supra). There was no such
contract entered into in the instant case.60

Also, the theory of petitioners that the specification of the flights and dates of departure and arrivals constitute a special contract that could prevail
over the printed stipulations at the back of the airway bill is vacuous. To countenance such a postulate would unduly burden the common carrier
for that would have the effect of unilaterally transforming every single bill of lading or trip ticket into a special contract by the simple expedient of
filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have
been ready or willing to assume had it been timely, advised thereof.

Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill militate against its binding effect on petitioners
as parties to the contract, for there were sufficient indications on the face of said bill that would alert them to the presence of such additional
condition to put them on their guard. Ordinary prudence on the part of any person entering or contemplating to enter into a contract would
prompt even a cursory examination of any such conditions, terms and/or stipulations.
There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises a presumption that all terms therein were
brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped from thereafter denying that
he assented to such terms. This rule applies with particular force where a shipper accepts a bill of lading with full knowledge of its contents, and
acceptance under such circumstances makes it a binding contract. In order that any presumption of assent to a stipulation in a bill of lading limiting
the liability of a carrier may arise, it must appear that the clause containing this exemption from liability plainly formed a part of the contract
contained in the bill of lading. A stipulation printed on the back of a receipt or bill of lading or on papers attached to such receipt will be quite as
effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper accepts a receipt which states that its
conditions are to be found on the back, such receipt comes within the general rule, and the shipper is held to have accepted and to be bound by
the conditions there to be found. 61

Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as such must be construed strictly against the party
who drafted the same or gave rise to any ambiguity therein, it should be borne in mind that a contract of adhesion may be struck down as void and
unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in dealing with the dominant bargaining party
and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. 62 However, Ong Yiu
vs. Court of Appeals, et al 63 instructs us that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres, be gives his consent. Accordingly, petitioners, far from being the weaker party in this situation, duly signified
their presumed assent to all terms of the contract through their acceptance of the airway bill and are consequently bound thereby. It cannot be
gainsaid that petitioners' were not without several choices as to carriers in Chicago with its numerous airways and airliner servicing the same.

We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is productive of mischief as it would validate delay in delivery,
sanction violations of contractual obligations with impunity or put a premium on breaches of contract.

Just because we have said that condition No. 5 of the airway bill is binding upon the parties to and fully operative in this transaction, it does not
mean, and let this serve as fair warning to respondent carriers, that they can at all times whimsically seek refuge from liability in the exculpatory
sanctuary of said Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves to
insulate the carrier from liability in those instances when changes in routes, flights and schedules are clearly justified by the peculiar circumstances
of a particular case, or by general transportation practices, customs and usages, or by contingencies or emergencies in aviation such as weather
turbulence, mechanical failure, requirements of national security and the like. And even as it is conceded that specific routing and other
navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the discretion of the carrier in the absence of
specific routing instructions or directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights with due deference to the
rights, interests and convenience of its customers.

A common carrier undertaking to transport property has the implicit duty to carry and deliver it within reasonable time, absent any particular
stipulation regarding time of delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages
immediately and proximately resulting from such neglect of duty. 64 As found by the trial court, the delay in the delivery of the remains of Crispina
Saludo, undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private respondents, 65 a conclusion
concurred in by respondent court and which we are not inclined to disturb.

We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an earlier flight, it did so in the exercise of sound
discretion and with reasonable prudence, as shown by the explanation of its counsel in his letter of February 19, 1977 in response to petitioners'
demand letter:

Investigation of TWA's handling of this matter reveals that although the shipment was scheduled on TWA Flight 131 of October
27, 1976, it was actually boarded on TWA Flight 603 of the same day, approximately 10 hours earlier, in order to assure that the
shipment would be received in San Francisco in sufficient time for transfer to PAL. This transfer was effected in San Francisco at
2:00 P.M. on October 27, 1976. 66

Precisely, private respondent TWA knew of the urgency of the shipment by reason of this notation on the lower portion of the airway bill: "All
documents have been certified. Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO." Accordingly, TWA took it
upon itself to carry the remains of Crispina Saludo on an earlier flight, which we emphasize it could do under the terms of the airway bill, to make
sure that there would be enough time for loading said remains on the transfer flight on board PAL.

III. Petitioners challenge the validity of respondent court's finding that private respondents are not liable for tort on account of the humiliating,
arrogant and indifferent acts of their officers and personnel. They posit that since their mother's remains were transported ten hours earlier than
originally scheduled, there was no reason for private respondents' personnel to disclaim knowledge of the arrival or whereabouts of the same
other than their sheer arrogance, indifference and extreme insensitivity to the feelings of petitioners. Moreover, being passengers and not merely
consignors of goods, petitioners had the right to be treated with courtesy, respect, kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely with all clients, customers and the public in general. PAL, on the other hand,
declares that in the performance of its obligation to the riding public, other customers and clients, it has always acted with justice, honesty,
courtesy and good faith.

Respondent appellate court found merit in and reproduced the trial court's refutation of this assigned error:

About the only evidence of plaintiffs that may have reference to the manner with which the personnel of defendants treated
the two plaintiffs at the San Francisco Airport are the following pertinent portions of Maria Saludo's testimony:

Q When you arrived there, what did you do, if any?

A I immediately went to the TWA counter and I inquired about whether my mother was there or if' they
knew anything about it.

Q What was the answer?

A They said they do not know. So, we waited.

Q About what time was that when you reached San Francisco from Chicago?

A I think 5 o'clock. Somewhere around that in the afternoon.

Q You made inquiry it was immediately thereafter?

A Right after we got off the plane.

Q Up to what time did you stay in the airport to wait until the TWA people could tell you the whereabouts?

A Sorry, Sir, but the TWA did not tell us anything. We stayed there until about 9 o'clock. They have not
heard anything about it. They did not say anything.

Q Do you want to convey to the Court that from 5 up to 9 o'clock in the evening you yourself went back to
the TWA and they could not tell you where the remains of your mother were?

A Yes sir.

Q And after nine o'clock, what did you do?

A I told my brother my Mom was supposed to be on the Philippine Airlines flight. "Why don't" we check
with PAL instead to see if she was there?" We tried to comfort each other. I told him anyway that was a
shortest flight from Chicago to California. We will be with our mother on this longer flight. So, we checked
with the PAL.

Q What did you find?

A We learned, Yes, my Mom would be on the flight.

Q Who was that brother?

A Saturnino Saludo.

Q And did you find what was your flight from San Francisco to the Philippines?

A I do not know the number. It was the evening flight of the Philippine Airline(s) from San Francisco to
Manila.
 Q You took that flight with your mother?

A We were scheduled to, Sir.

Q Now, you could not locate the remains of your mother in San Francisco could you tell us what did you
feel?

A After we were told that my mother was not there?

Q After you learned that your mother could not fly with you from Chicago to California?

A Well, I was very upset. Of course, I wanted the confirmation that my mother was in the West Coast. The
fliqht was about 5 hours from Chicago to California. We waited anxiously all that time on the plane. I
wanted to be assured about my mother's remains. But there was nothing and we could not get any
assurance from anyone about it.

Q Your feeling when you reached San Francisco and you could not find out from the TWA the whereabouts
of the remains, what did you feel?

A Something nobody would be able to describe unless he experiences it himself. It is a kind of panic. I think
it's a feeling you are about to go crazy. It is something I do not want to live through again. (Inting, t.s.n.,
Aug. 9, 1983, pp. 14-18).

The foregoing does not show any humiliating or arrogant manner with which the personnel of both defendants treated the two
plaintiffs. Even their alleged indifference is not clearly established. The initial answer of the TWA personnel at the counter that
they did not know anything about the remains, and later, their answer that they have not heard anything about the remains,
and the inability of the TWA counter personnel to inform the two plaintiffs of the whereabouts of the remains, cannot be said
to be total or complete indifference to the said plaintiffs. At any rate, it is any rude or discourteous conduct, malfeasance or
neglect, the use of abusive or insulting language calculated to humiliate and shame passenger or had faith by or on the part of
the employees of the carrier that gives the passenger an action for damages against the carrier (Zulueta vs. Pan American
World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan American World Airways, 16
SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is obtaining in the instant case. 67

We stand by respondent court's findings on this point, but only to the extent where it holds that the manner in which private respondent TWA's
employees dealt with petitioners was not grossly humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and
lay the basis for an award of the damages claimed. It must however, be pointed out that the lamentable actuations of respondent TWA's
employees leave much to be desired, particularly so in the face of petitioners' grief over the death of their mother, exacerbated by the tension and
anxiety wrought by the impasse and confusion over the failure to ascertain over an appreciable period of time what happened to her remains.

Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct but to strictly require their personnel to be more
accommodating towards customers, passengers and the general public. After all, common carriers such as airline companies are in the business of
rendering public service, which is the primary reason for their enfranchisement and recognition in our law. Because the passengers in a contract of
carriage do not contract merely for transportation, they have a right to be treated with kindness, respect, courtesy and consideration. 68 A contract
to transport passengers is quite different in kind and degree from any other contractual relation, and generates a relation attended with public
duty. The operation of a common carrier is a business affected with public interest and must be directed to serve the comfort and convenience of
passengers. 69 Passengers are human beings with human feelings and emotions; they should not be treated as mere numbers or statistics for
revenue.

The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for nearly five hours, over the possibility of losing their
mother's mortal remains, unattended to and without any assurance from the employees of TWA that they were doing anything about the situation.
This is not to say that petitioners were to be regaled with extra special attention. They were, however, entitled to the understanding and humane
consideration called for by and commensurate with the extraordinary diligence required of common carriers, and not the cold insensitivity to their
predicament. It is hard to believe that the airline's counter personnel were totally helpless about the situation. Common sense would and should
have dictated that they exert a little extra effort in making a more extensive inquiry, by themselves or through their superiors, rather than just
shrug off the problem with a callous and uncaring remark that they had no knowledge about it. With all the modern communications equipment
readily available to them, which could have easily facilitated said inquiry and which are used as a matter of course by airline companies in their
daily operations, their apathetic stance while not legally reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is a painful experience. Our culture accords the tenderest human feelings toward and in reverence to
the dead. That the remains of the deceased were subsequently delivered, albeit belatedly, and eventually laid in her final resting place is of little
consolation. The imperviousness displayed by the airline's personnel, even for just that fraction of time, was especially condemnable particularly in
the hour of bereavement of the family of Crispina Saludo, intensified by anguish due to the uncertainty of the whereabouts of their mother's
remains. Hence, it is quite apparent that private respondents' personnel were remiss in the observance of that genuine human concern and
professional attentiveness required and expected of them.

The foregoing observations, however, do not appear to be applicable or imputable to respondent PAL or its employees. No attribution of
discourtesy or indifference has been made against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was to PAL that they
repaired after failing to receive proper attention from TWA. It was from PAL that they received confirmation that their mother's remains would be
on the same flight to Manila with them.

We find the following substantiation on this particular episode from the deposition of Alberto A. Lim, PAL's cargo supervisor earlier adverted to,
regarding their investigation of and the action taken on learning of petitioner's problem:

ATTY. ALBERTO C. MENDOZA:

Yes.

Mr. Lim, what exactly was your procedure adopted in your so called investigation?

ALBERTO A. LIM:

I called the lead agent on duty at that time and requested for a copy of airway bill, transfer manifest and
other documents concerning the shipment.

ATTY ALBERTO C. MENDOZA:

Then, what?

ALBERTO A. LIM:

They proceeded to analyze exactly where PAL failed, if any, in forwarding the human remains of Mrs.
Cristina (sic) Saludo. And I found out that there was not (sic) delay in shipping the remains of Mrs. Saludo to
Manila. Since we received the body from American Airlines on 28 October at 7:45 and we expedited the
shipment so that it could have been loaded on our flight leaving at 9:00 in the evening or just barely one
hour and 15 minutes prior to the departure of the aircraft. That is so (sic) being the case, I reported to
Manila these circumstances. 70

IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother's remains allegedly caused by wilful contractual breach,
on their entitlement to actual, moral and exemplary damages as well as attorney's fees, litigation expenses, and legal interest.

The uniform decisional tenet in our jurisdiction bolds that moral damages may be awarded for wilful or fraudulent breach of contract 71 or when
such breach is attended by malice or bad faith. 72 However, in the absence of strong and positive evidence of fraud, malice or bad faith, said
damages cannot be awarded.73 Neither can there be an award of exemplary damages 74 nor of attorney's fees 75 as an item of damages in the
absence of proof that defendant acted with malice, fraud or bad faith.

The censurable conduct of TWA's employees cannot, however, be said to have approximated the dimensions of fraud, malice or bad faith. It can be
said to be more of a lethargic reaction produced and engrained in some people by the mechanically routine nature of their work and a racial or
societal culture which stultifies what would have been their accustomed human response to a human need under a former and different ambience.

Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance with the degree of diligence required by law to be
exercised by every common carrier was violated by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and
2222 of the Civil Code make it clear that nominal damages are not intended for indemnification of loss suffered but for the vindication or
recognition of a right violated of invaded. They are recoverable where some injury has been done but the amount of which the evidence fails to
show, the assessment of damages being left to the discretion of the court according to the circumstances of the case. 76 In the exercise of our
discretion, we find an award of P40,000.00 as nominal damages in favor of, petitioners to be a reasonable amount under the circumstances of this
case.
WHEREFORE, with the modification that an award of P40,000.00 as and by way of nominal damages is hereby granted in favor of petitioners to be
paid by respondent Trans World Airlines, the appealed decision is AFFIRMED in all other respects.

SO ORDERED.

9. METROBANK VS CA

//……………….//

Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants. All warrants were subsequently indorsed by Gloria
Castillo as Cashier of Golden Savings and deposited to its Savings account in Metrobank branch in Calapan, Mindoro. They were sent for clearance.
Meanwhile, Gomez is not allowed to withdraw from his account, later, however, “exasperated” over Floria repeated inquiries and also as an
accommodation for a “valued” client Metrobank decided to allow Golden Savings to withdraw from proceeds of the warrants. In turn, Golden
Savings subsequently allowed Gomez to make withdrawals from his own account. Metrobank informed Golden Savings that 32 of the warrants had
been dishonored by the Bureau of Treasury and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up
the deficit in its account. The demand was rejected. Metrobank then sued Golden Savings.

Issue:
1. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the amount withdraws to make up with the deficit as a
result of the dishonored treasury warrants.
 2. Whether or not treasury warrants are negotiable instruments

Held:
No. Metrobank is negligent in giving Golden Savings the impression that the treasury warrants had been cleared and that, consequently, it
was safe to allow Gomez to withdraw. Without such assurance, Golden Savings would not have allowed the withdrawals. Indeed, Golden Savings
might even have incurred liability for its refusal to return the money that all appearances belonged to the depositor, who could therefore withdraw
it anytime and for any reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to its account with Metrobank.
Golden Savings had no clearing facilities of its own. It relied on Metrobank to determine the validity of the warrants through its own services. The
proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit.
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were genuine and in all respects what
they purport to be,” in accordance with Sec. 66 of NIL. The simple reason that NIL is not applicable to non negotiable instruments, treasury
warrants.

No. The treasury warrants are not negotiable instruments. Clearly stamped on their face is the word: non negotiable.” Moreover, and this is
equal significance, it is indicated that they are payable from a particular fund, to wit, Fund 501. An instrument to be negotiable instrument must
contain an unconditional promise or orders to pay a sum certain in money. As provided by Sec 3 of NIL an unqualified order or promise to pay is
unconditional though coupled with: 1st, an indication of a particular fund out of which reimbursement is to be made or a particular account to be
debited with the amount; or 2nd, a statement of the transaction which give rise to the instrument. But an order to promise to pay out of particular
fund is not unconditional. The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or
promise to pay “not conditional” and the warrants themselves non-negotiable. There should be no question that the exception on Section 3 of NIL
is applicable in the case at bar.

10. PNB VS MANILA OIL REFINING AND BY PRODUCTS CORP

fraud, because under these instruments the promissor bargains away his right to a day in court, and because the effect of the instrument is to
strike down the right of appeal accorded by statute. The recognition of such a form of obligation would bring about a complete reorganization of
commercial customs and practices, with reference to short-term obligations. It can readily be seen that judgement notes, instead of resulting to the
advantage of commercial life in the Philippines might be the source of abuse and oppression, and make the courts involuntary parties thereto. If
the bank has a meritorious case, the judgement is ultimately certain in the courts.chanroblesvirtualawlibrary chanrobles virtual law library

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

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

19. SAN MIGUEL CORP VS BARTOLOME PUZON JR.

Our Ruling

The petition has no merit.

Preliminary Matters

At the outset we find that as pointed out by Puzon, SMC raises questions of fact. The resolution of the first issue raised by SMC of whether
respondent stole the subject check, which calls for the Court to determine whether respondent is guilty of a felony, first requires that the facts be
duly established in the proper forum and in accord with the proper procedure. This issue cannot be resolved based on mere allegations of facts and
affidavits. The same is true with the second issue raised by petitioner, to wit: whether the checks issued by Puzon were payments for his purchases
or were intended merely as security to ensure payment. These issues cannot be properly resolved in the present petition for review on certiorari
which is rooted merely on the resolution of the prosecutor finding no probable cause for the filing of an information for theft.

The third issue raised by petitioner, on the other hand, would entail venturing into constitutional matters for a complete resolution. This route is
unnecessary in the present case considering that the main matter for resolution here only concerns grave abuse of discretion and the existence of
probablecause for theft, which at this point is more properly resolved through another more clear cut route.

Probable Cause for Theft

"Probable cause is defined as such facts and circumstances that will engender a well-founded belief that a crime has been committed and that the
respondent is probably guilty thereof and should be held for trial."9cralaw On the fine points of the determination of probable cause, Reyes v.
Pearlbank Securities, Inc.10cralaw comprehensively elaborated that:chanroblesvirtuallawlibrar

The determination of [the existence or absence of probable cause] lies within the discretion of the prosecuting officers after conducting a
preliminary investigation upon complaint of an offended party. Thus, the decision whether to dismiss a complaint or not is dependent upon the
sound discretion of the prosecuting fiscal. He may dismiss the complaint forthwith, if he finds the charge insufficient in form or substance or
without any ground. Or he may proceed with the investigation if the complaint in his view is sufficient and in proper form. To emphasize, the
determination of probable cause for the filing of information in court is an executive function, one that properly pertains at the first instance to the
public prosecutor and, ultimately, to the Secretary of Justice, who may direct the filing of the corresponding information or move for the dismissal
of the case. Ultimately, whether or not a complaint will be dismissed is dependent on the sound discretion of the Secretary of Justice. And unless
made with grave abuse of discretion, findings of the Secretary of Justice are not subject to review.

For this reason, the Court considers it sound judicial policy to refrain from interfering in the conduct of preliminary investigations and to leave the
Department of Justice ample latitude of discretion in the determination of what constitutes sufficient evidence to establish probable cause for the
prosecution of supposed offenders. Consistent with this policy, courts do not reverse the Secretary of Justice's findings and conclusions on the
matter of probable cause except in clear cases of grave abuse of discretion.

In the present case, we are also not sufficiently convinced to deviate from the general rule of non-interference. Indeed the CA did not err in
dismissing the petition for certiorari before it, absent grave abuse of discretion on the part of the DOJ Secretary in not finding probable cause
against Puzon for theft.

The Revised Penal Code provides:chanroblesvirtuallawlibrar

Art. 308. Who are liable for theft. - cralawTheft is committed by any person who, with intent to gain but without violence against, or intimidation of
persons nor force upon things, shall take personal property of another without the latter's consent.

xxx
"[T]he essential elements of the crime of theft are the following: (1) that there be a taking of personal property; (2) that said property belongs to
another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be
accomplished without the use of violence or intimidation against persons or force upon things."11cralaw

Considering that the second element is that the thing taken belongs to another, it is relevant to determine whether ownership of the subject check
was transferred to petitioner. On this point the Negotiable Instruments Law provides:chanroblesvirtuallawlibrar

Sec. 12. Antedated and postdated - The instrument is not invalid for the reason only that it is antedated or postdated, provided this is not done for
an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.
(Underscoring supplied.)chanroblesvirtualawlibrary

Note however that delivery as the term is used in the aforementioned provision means that the party delivering did so for the purpose of giving
effect thereto.12cralaw Otherwise, it cannot be said that there has been delivery of the negotiable instrument. Once there is delivery, the person
to whom the instrument is delivered gets the title to the instrument completely and irrevocably.

If the subject check was given by Puzon to SMC in payment of the obligation, the purpose of giving effect to the instrument is evident thus title to
or ownership of the check was transferred upon delivery. However, if the check was not given as payment, there being no intent to give effect to
the instrument, then ownership of the check was not transferred to SMC.

The evidence of SMC failed to establish that the check was given in payment of the obligation of Puzon. There was no provisional receipt or official
receipt issued for the amount of the check. What was issued was a receipt for the document, a"POSTDATED CHECK SLIP."13cralaw

Furthermore, the petitioner's demand letter sent to respondent states "As per company policies on receivables, all issuances are to be covered by
post-dated checks. However, you have deviated from this policy by forcibly taking away the check you have issued to us to cover the December
issuance."14cralaw Notably, the term "payment" was not used instead the terms "covered" and "cover" were used.

Although the petitioner's witness, Gregorio L. Joven III, states in paragraph 6 of his affidavit that the check was given in payment of the obligation
of Puzon, the same is contradicted by his statements in paragraph 4, where he states that "As a standard company operating procedure, all beer
purchases by dealers on credit shall be covered by postdated checks equivalent to the value of the beer products purchased"; in paragraph 9 where
he states that "the transaction covered by the said check had not yet been paid for," and in paragraph 8 which clearly shows that partial payment is
expected to be made by the return of beer empties, and not by the deposit or encashment of the check. Clearly the term "cover" was not meant to
be used interchangeably with "payment."

When taken in conjunction with the counter-affidavit of Puzon - where he states that "As the [liquid beer] contents are paid for, SMC return[s] to
me the corresponding PDCs or request[s] me to replace them with whatever was the unpaid balance."15cralaw - it becomes clear that both parties
did not intend for the check to pay for the beer products. The evidence proves that the check was accepted, not as payment, but in accordance
with the long-standing policy of SMC to require its dealers to issue postdated checks to cover its receivables. The check was only meant to cover
the transaction and in the meantime Puzon was to pay for the transaction by some other means other than the check. This being so, title to the
check did not transfer to SMC; it remained with Puzon. The second element of the felony of theft was therefore not established. Petitioner was not
able to show that Puzon took a check that belonged to another. Hence, the prosecutor and the DOJ were correct in finding no probable cause for
theft.

Consequently, the CA did not err in finding no grave abuse of discretion committed by the DOJ in sustaining the dismissal of the case for theft for
lack of probable cause.

WHEREFORE, the petition is DENIED. The December 21, 2004 Decision and March 28, 2005 Resolution of the Court of Appeals in CA-G.R. SP. No.
83905 are AFFIRMED.

SO ORDERED.