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PARAGAS V.

HEIRS OFDOMINADOR BALACANO


Facts:
Gregorio Balacano was the registered owner of two lots inIsabela. His wife died earlier than he did. Prior to his
death,Gregorio was admitted at the Veterans General Hospital inNueva Vizcaya and was transferred on July 19,
1996 to theVeterans Memorial Hospital in Quezon City where he wasconfined until his death.
Gregorio purportedly sold on July 22, 1996, or barely a weekprior to his death, a portion of one of the lots and the
wholeother lot to Spouses Rudy and Corazon Paragas for the totalconsideration of 500K. This sale appeared in a
deed of absolute sale notarized by Atty. De Guzman, notary public of Santiago City on the same date and
witnessed by 2 other people. Gregorios certificates of title were cancelled andnew certificates were issued to the
Spouses Paragas.
Spouses Paragas then sold a portion of one lot to Catalino.
Domingos children filed on October 22, 1996 a complaint for annulment of sale and partition against Catalino and
the Spouses Paragas. They alleged that: (1) their grandfather Gregorio could not have appeared before the notary
publicas he was confined; (2) at the time of the alleged executionof the deed of sale, Gregorio was seriously ill, in
fact dying atthat time, which vitiated his consent to the disposal of theproperty ; and (3) Catalino manipulated the
execution of thedeed and prevailed upon the dying Gregorio to sign hisname on a paper the contents of which he
never understoodbecause of his serious condition. Also, assuming thatGregorio of was sound and disposing mind,
he could onlytransfer a half portion of the lots as the other half belongedto their grandmother who predeceased
Gregorio. Theyclaimed that the lots formed part of the conjugal partnershipproperties.
The appellants then filed a motion to dismiss on the grounds:(1) plaintiffs had no legal capacity; (2) an
indispensable partyis not impleaded; and (3) the complaint states no cause of action that they failed to allege a
ground for the annulmentof the deed of sale; they did not cite any mistake, violence,intimidation, undue influence,
or fraud.
The lower court denied the motion to dismiss.
The appellants filed their Answer with Counterclaim, denyingthe material allegations of the complaint.
Additionally, theyclaimed that (1) the deed of sale was actually executedbefore Gregorio was transferred to QC; (2)
the Notary Publicpersonally went to the Hospital in Nueva Vizcaya to notarizethe deed; (3) at the time Gregorio
signed, he was strong andof sound and disposing mind; (4) Lots were Gregoriosseparate capital; (5) the entire
area were sold to theSpouses.
Witnesses for both sides were presented and they alsopresented in evidence Gregorios medical records and
deathcertificate.
The lower court decided declaring null and void the deed of sale purportedly executed. They also declared that the
lotsbelong to the estate of Gregorio and his wife. They initiallynoted that at the time that Gregorio executed the
deed, hewas ill. Lower courts reasoning may be summarized asfollows: (1) the deed of sale was improperly
notarized; (2) asa private document, the deed of sales due execution mustbe proved in accordance with the
Revised Rules onEvidence; (3) it was incumbent upon the Spouses Paragasto prove the deed of sales due
execution but failed to do so the witness, Antonio is not credible while Atty. De Guzman(notary) is not reliable.
(Antonio is the driver of the spousesParagas)

They also noted that the only portion that the court believedfrom the witness Antionios testimony was that he
signed thedocument. how could the Court believe that he brought acamera with him just to take pictures of the
signing? If thepurpose was to record the proceeding for posterity, why didhe not take the picture of Atty. De
Guzman explaining toGregorio the focument? The picture only shows a documentbut only a hand with a ball pen
is shown with it.
The Court of Appeals affirmed the Decision of the trial court,with the modification that the lots were adjudged
asbelonging to the estate of Gregorio.The Supreme Court Denied the petition and Affirmed thedecision of the
Court of Appeals.
1. A contract of the sale executed by one who is already of advanced age and senile is null and void; while
thegeneral rule is that a person is not incompetent tocontract merely because of advanced years or by reason of
physical infirmities, when such age or infirmities have impaired the mental faculties so as to prevent the person
from properly, intelligently or firmly protecting his property rights, then he is undeniably incapacitated; the
circumstances that the seller was anoctogenarian at the time of alleged execution of theDeed of Sale and was
suffering from liver cirrhosis at that raise grave doubts on his physical and mental capacity to freely give consent to
the contract.2. The Court of Appeals concluded that Gregoriosconsent to the sale of the lots was absent, making
thecontract null and void. Consequently, the spousesParagas could not have made a subsequent transfer of the
property to Catalino Balacano. Indeed, nemo dat quod non habet. Nobody can dispose of that whichdoes not
belong to him.

Negotiable Instruments Case Digest: Traders Royal Bank v. CA (1997)


G.R. No. 93397 March 3, 1997
Lessons Applicable: Requisites of negotiability to antedated and postdated instruments
(Negotiable Instrument Law)
FACTS: Filriters (assigned) > Philfinance (still under the name of Filriters assigned) >
Traders Royal Bank = ? (valid or not)

November 27, 1979: Filriters Guaranty Assurance Corporation (Filriters) executed a


"Detached Assignment whereby Filriters, as registered owner, sold, transferred,
assigned and delivered unto Philippine Underwriters Finance Corporation
(Philfinance) all its rights and title to Central Bank Certificates of Indebtedness
(CBCI) of P500k and having an aggregate value of P3.5M

The Detached Assignment contains an express authorization executed by the


transferor intended to complete the assignment through the registration of
the transfer in the name of PhilFinance

February 4, 1981: Traders Royal Bank (Traders) entered into a Repurchase


Agreement w/ PhilFinance whereby in consideration of the sum of P500,000.00,
PhilFinance sold, transferred and delivered a CBCI w/ a face value of P500K which
CBCI was among those previously acquired by PhilFinance from Filriters

PhilFinance failed to repurchase on the agreed date of maturity, April 27, 1981, when
the checks it issued in favor of petitioner were dishonored for insufficient funds

Philfinance transferred and assigned all, its rights and title in the CBCI to Traders

Respondent failed and refused to register the transfer as requested, and continues to
do so notwithstanding petitioner's valid and just title over the same and despite
repeated demands in writing

Traders prayed for the registration by the Central Bank of the subject CBCI in its
name.

CA affirmed RTC: subsequent assignment in favor of Traders Royal Bank null and
void and of no force and effect.

Philfinance acquired no title or rights under CBCI which it could assign or


transfer to Traders and which it can register with the Central Bank

instrument is payable only to Filriters, the registered owner

ISSUE: W/N the CBCI is a negotiable instrument


HELD: NO. Petition is dismissed. CA affirmed.

CBCI is not a negotiable instrument in the absence of words of negotiability within


the meaning of the negotiable instruments law (Act 2031)

certificate of indebtedness

= certificates for the creation and maintenance of a permanent improvement


revolving fund

similar to a "bond"

properly understood as acknowledgment of an obligation to pay a fixed


sum of money

usually used for the purpose of long term loans

Philfinance merely borrowed the CBCI from Filriters, a sister corporation.

lack of any consideration = assignment is a complete nullity

Filriters to Philfinance did not conform to the "Rules and Regulations Governing
Central Bank Certificates of Indebtedness" (Central Bank Circular No. 769, series of
1980) under which the note was issued.

Published in the Official Gazette on November 19, 1980, Section 3 thereof


provides that any assignment of registered certificates shall not be valid
unless made . . . by the registered owner thereof in person or by his
representative duly authorized in writing

Alfredo O. Banaria, who signed the deed of assignment purportedly for


and on behalf of Filriters, did not have the necessary written
authorization from the BOD

Traders, being a commercial bank, cannot feign ignorance of Central Bank


Circular 769, and its requirements.

The fact that Filfinance owns majority shares in Filriters is not by itself a ground to
disregard the independent corporate status of Filriters.

Traders knew that Philfinance is not registered owner of the CBCI.

The fact that a non-owner was disposing of the registered CBCI owned by
another entity was a good reason for petitioner to verify of inquire as to the
title Philfinance to dispose to the CBCI.

Ang Tek Lian vs. Court of Appeals [GR L-2516, 25 September


1950]
En Banc, Bengzon (J): 6 concur
Facts:
Knowing he had no funds therefor, Ang Tek Lian drew on Saturday, 16 November 1946, a check uponthe
China Banking Corporation for the sum of P4,000, payable to the order of "cash". He delivered it to
LeeHua Hong in exchange for money which the latter handed in the act. On 18 November 1946, the next
businessday, the check was presented by Lee Hua Hong to the drawee bank for payment, but it was
dishonored forinsufficiency of funds, the balance of the deposit of Ang Tek Lian on both dates being P335
only. Ang TekLian was charged and was convicted of estafa in the Court of First Instance of Manila. The
Court of Appealsaffirmed the verdict.
Issue:

Whether indorsement is necessary for the presentation of a bearer instrument for payment.
Held:
Under Section 9(d) of the Negotiable Instruments Law, a check drawn payable to the order of "cash" isa
check payable to bearer, and the bank may pay it to the person presenting it for payment
without thedrawer's indorsement. A check payable to the order of cash is a bearer
instrument. Where a check is made payable to the order of cash, the word cash does not purport
to be the name of any person, and hence theinstrument is payable to bearer. The drawee bank need not
obtain any indorsement of the check, but may payit to the person presenting it without any
indorsement." Of course, if the bank is not sure of the bearer'sidentity or financial
solvency, it has the right to demand identification and/or assurance against
possiblecomplications, for instance, (a) forgery of drawer's signature, (b) loss of the check by the
rightful owner,(c) raising of the amount payable, etc. The bank may therefore require, for its protection,
that the indorsementof the drawer or of some other person known to it be obtained. But where the
Bank is satisfied of theidentity and/or the economic s tanding of the bearer who tenders the
check for collection, it will pay theinstrument without further question; and it would incur
no liability to the drawer in thus acting. A check payable to bearer is authority for payment to the
holder. Where a check is in the ordinary form, and is payableto bearer, so that no indorsement is required, a
bank, to which it is presented for payment, need not have theholder identified, and is not negligent
in failing to do so. Consequently, a drawee bank to which a bearerchec k is presented for
payment need not necessarily have the holder identified and ordinarily may not be
charged with negligence in failing to do so. If the bank has no reasonable
c a u s e f o r s u s p e c t i n g a n y irregularity, it will be protected in paying a bearer check, no
matter what facts unknown to it may have occurred prior to the presentment. Although a bank is
entitled to pay the amount of a bearer check withoutfurther inquiry, it is entirely reasonable for the
bank to insist that the holder give satisfactory proof of his identity. Herein anyway, it is
significant, and conclusive, that the form of the check was totally unconnectedwith its dishonor. It was
returned unsatisfied because the drawer had insufficient funds not because thedrawer's indorsement was
lacking.