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G.R. No.

L-10221 February 28, 1958 The other three notes were couched in the same terms, except as to amounts
and dates.
Intestate of Luther Young and Pacita Young, spouses. PACIFICA
JIMENEZ, petitioner-appellee, There can be no serious question that the notes were promises to pay "six
vs. months after the war," the amounts mentioned.
DR. JOSE BUCOY, administrator-appellant.
But the important question, which obviously compelled the administrator to
Frank W. Brady and Pablo C. de Guia, Jr. for appellee. appeal, is whether the amounts should be paid, peso for peso, or whether a
E. A. Beltran for appellant. reduction should be made in accordance with the well-known Ballantyne
This matter of payment of loans contracted during the Japanese occupation
In this intestate of Luther Young and Pacita Young who died in 1954 and has received our attention in many litigations after the liberation. The gist of
1952 respectively, Pacifica Jimenez presented for payment four promissory our adjudications, in so far as material here, is that if the loan should be paid
notes signed by Pacita for different amounts totalling twenty-one thousand during the Japanese occupation, the Ballantyne schedule should apply with
pesos (P21,000). corresponding reduction of the amount.1 However, if the loan was expressly
agreed to be payable only after the war or after liberation, or became
Acknowledging receipt by Pacita during the Japanese occupation, in the payable after those dates, no reduction could be effected, and peso-for-peso
payment shall be ordered in Philippine currency. 2
currency then prevailing, the administrator manifested willingness to pay
provided adjustment of the sums be made in line with the Ballantyne
schedule. The Ballantyne Conversion Table does not apply where the
monetary obligation, under the contract, was not payable during
The claimant objected to the adjustment insisting on full payment in the Japanese occupation but until after one year counted for the
date of ratification of the Treaty of Peace concluding the Greater
accordance with the notes.
East Asia War. (Arellano vs. De Domingo, 101 Phil., 902.)
Applying doctrines of this Court on the matter, the Hon. Primitive L.
Gonzales, Judge, held that the notes should be paid in the currency When a monetary obligation is contracted during the Japanese
occupation, to be discharged after the war, the payment should be
prevailing after the war, and that consequently plaintiff was entitled to
made in Philippine Currency. (Kare et al. vs. Imperial et al., 102
recover P21,000 plus attorneys fees for the sum of P2,000.
Phil., 173.)
Hence this appeal.
Now then, as in the case before us, the debtor undertook to pay "six months
after the war," peso for peso payment is indicated.
Executed in the month of August 1944, the first promissory note read as
The Ang Lam3 case cited by appellant is not controlling, because the loan
therein given could have been repaid during the Japanese occupation. Dated
Received from Miss Pacifica Jimenez the total amount of P10,000) December 26, 1944, it was payable within one year. Payment could
ten thousand pesos payable six months after the war, without therefore have been made during January 1945. The notes here in question
interest. were payable only after the war.
The appellant administrator calls attention to the fact that the notes and the case is tried and decided upon that theory in the court
contained no express promise to pay a specified amount. We declare the below, he will not be permitted to change his theory on appeal
point to be without merit. In accordance with doctrines on the matter, the because, to permit him to do so, would be unfair to the adverse
note herein-above quoted amounted in effect to "a promise to pay ten party. (Rules of Court by Moran-1957 Ed. Vol. I p. 715 citing
thousand pesos six months after the war, without interest." And so of the Agoncillo vs. Javier, 38 Phil., 424; American Express Company vs.
other notes. Natividad, 46 Phil., 207; San Agustin vs. Barrios, 68 Phil., 475,
480; Toribio vs. Dacasa, 55 Phil., 461.)
"An acknowledgment may become a promise by the addition of words by
which a promise of payment is naturally implied, such as, "payable," Appellant's last assignment of error concerns attorneys fees. He says there
"payable" on a given day, "payable on demand," "paid . . . when called for," was no reason for making this and exception to the general rule that
. . . (10 Corpus Juris Secundum p. 523.) attorney's fees are not recoverable in the absence of stipulation.

"To constitute a good promissory note, no precise words of contract are Under the new Civil Code, attorney's fees and expenses of litigation new be
necessary, provided they amount, in legal effect, to a promise to pay. In awarded in this case if defendant acted in gross and evident bad faith in
other words, if over and above the mere acknowledgment of the debt there refusing to satisfy plaintiff's plainly valid, just and demandable claim" or
may be collected from the words used a promise to pay it, the instrument "where the court deems it just and equitable that attorney's fees be
may be regarded as a promissory note. 1 Daniel, Neg. Inst. sec. 36 et seq.; recovered" (Article 2208 Civil Code). These are — if applicable — some of
Byles, Bills, 10, 11, and cases cited . . . "Due A. B. $325, payable on the exceptions to the general rule that in the absence of stipulation no
demand," or, "I acknowledge myself to be indebted to A in $109, to be paid attorney's fees shall be awarded.
on demand, for value received," or, "I O. U. $85 to be paid on May 5th," are
held to be promissory notes, significance being given to words of payment The trial court did not explain why it ordered payment of counsel fees.
as indicating a promise to pay." 1 Daniel Neg. Inst. see. 39, and cases cited. Needless to say, it is desirable that the decision should state the reason why
(Cowan vs. Hallack, (Colo.) 13 Pacific Reporter 700, 703.) such award is made bearing in mind that it must necessarily rest on an
exceptional situation. Unless of course the text of the decision plainly shows
Another argument of appellant is that as the deceased Luther Young did not the case to fall into one of the exceptions, for instance "in actions for legal
sign these notes, his estate is not liable for the same. This defense, however, support," when exemplary damages are awarded," etc. In the case at bar,
was not interposed in the lower court. There the only issue related to the defendant could not obviously be held to have acted in gross and evident
amount to be amount, considering that the money had been received in bad faith." He did not deny the debt, and merely pleaded for adjustment,
Japanese money. It is now unfair to put up this new defense, because had it invoking decisions he thought to be controlling. If the trial judge considered
been raised in the court below, appellees could have proved, what they now it "just and equitable" to require payment of attorney's fees because the
alleged that Pacita contracted the obligation to support and maintain herself, defense — adjustment under Ballantyne schedule — proved to be untenable
her son and her husband (then concentrated at Santo Tomas University) in view of this Court's applicable rulings, it would be error to uphold his
during the hard days of the occupation. view. Otherwise, every time a defendant loses, attorney's fees would follow
as a matter of course. Under the article above cited, even a clearly untenable
It is now settled practice that on appeal a change of theory is not permitted. defense would be no ground for awarding attorney's fees unless it amounted
to "gross and evident bad faith."
In order that a question may be raised on appeal, it is essential that
it be within the issues made by the parties in their pleadings. Plaintiff's attorneys attempt to sustain the award on the ground of
Consequently, when a party deliberately adopts a certain theory, defendant's refusal to accept her offer, before the suit, to take P5,000 in full
settlement of her claim. We do not think this is tenable, defendant's attitude the promise to pay burdened with the terms and conditions of the chattel
being merely a consequence of his line of defense, which though erroneous mortgage, the promissory note was still negotiable.
does not amount to "gross and evident bad faith." For one thing, there is a
point raised by defendant, which so far as we are informed, has not been NOTE: Digest courtesy of Jimenez Transcripts (Negotiable Instruments
directly passed upon in this jurisdiction: the notes contained no express Law). [Can’t find the full text of the case]
promise to pay a definite amount.
G.R. No. 88866 February 18, 1991
There being no circumstance making it reasonable and just to require
defendant to pay attorney's fees, the last assignment of error must be upheld.
Wherefore, in view of the foregoing considerations, the appealed decision is COURT OF APPEALS, GOLDEN SAVINGS & LOAN
affirmed, except as to the attorney's fees which are hereby disapproved. So ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and
ordered. GLORIA CASTILLO, respondents.

Elizalde Company vs Biñan Transportation Company Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Magno and
February 29, 2012 Lucia Castillo.
No comments Agapito S. Fajardo and Jaime M. Cabiles for respondent Golden Savings &
ADVERTISEMENTS Loan Association, Inc.

Negotiable Instruments Law – Negotiable Instruments in General – 58 OG
5886 – Unconditional Promise To Pay
This case, for all its seeming complexity, turns on a simple question of
negligence. The facts, pruned of all non-essentials, are easily told.
Biñan Transportation Company bought two motor vehicles. They signed a
promissory note and to secure payment, they mortgaged the motor vehicles.
The Metropolitan Bank and Trust Co. is a commercial bank with branches
The promissory notes were negotiated and were not paid. So Elizalde who
throughout the Philippines and even abroad. Golden Savings and Loan
was holding the promissory note sued. Biñan’s defense was that the
Association was, at the time these events happened, operating in Calapan,
promissory note was not negotiable because it was mentioned that it was Mindoro, with the other private respondents as its principal officers.
subject to chattel mortgage.
In January 1979, a certain Eduardo Gomez opened an account with Golden
ISSUE: Whether the note was negotiable.
Savings and deposited over a period of two months 38 treasury warrants
with a total value of P1,755,228.37. They were all drawn by the Philippine
HELD: Yes. For reference to mortgage to destroy negotiability, the Fish Marketing Authority and purportedly signed by its General Manager
promise to pay must be burdened with the terms and conditions of the and countersigned by its Auditor. Six of these were directly payable to
chattel mortgage. Since the reference to the chattel mortgage did not make
Gomez while the others appeared to have been indorsed by their respective ACCORDINGLY, judgment is hereby rendered:
payees, followed by Gomez as second indorser.1
1. Dismissing the complaint with costs against the plaintiff;
On various dates between June 25 and July 16, 1979, all these warrants
were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings 2. Dissolving and lifting the writ of attachment of the properties of
and deposited to its Savings Account No. 2498 in the Metrobank branch in defendant Golden Savings and Loan Association, Inc. and
Calapan, Mindoro. They were then sent for clearing by the branch office to defendant Spouses Magno Castillo and Lucia Castillo;
the principal office of Metrobank, which forwarded them to the Bureau of
Treasury for special clearing.2
3. Directing the plaintiff to reverse its action of debiting Savings
Account No. 2498 of the sum of P1,754,089.00 and to reinstate and
More than two weeks after the deposits, Gloria Castillo went to the Calapan credit to such account such amount existing before the debit was
branch several times to ask whether the warrants had been cleared. She was made including the amount of P812,033.37 in favor of defendant
told to wait. Accordingly, Gomez was meanwhile not allowed to withdraw Golden Savings and Loan Association, Inc. and thereafter, to allow
from his account. Later, however, "exasperated" over Gloria's repeated defendant Golden Savings and Loan Association, Inc. to withdraw
inquiries and also as an accommodation for a "valued client," the petitioner the amount outstanding thereon before the debit;
says it finally decided to allow Golden Savings to withdraw from the
proceeds of the
4. Ordering the plaintiff to pay the defendant Golden Savings and
warrants.3 Loan Association, Inc. attorney's fees and expenses of litigation in
the amount of P200,000.00.
The first withdrawal was made on July 9, 1979, in the amount of
P508,000.00, the second on July 13, 1979, in the amount of P310,000.00,
5. Ordering the plaintiff to pay the defendant Spouses Magno
and the third on July 16, 1979, in the amount of P150,000.00. The total
Castillo and Lucia Castillo attorney's fees and expenses of
withdrawal was P968.000.00.4 litigation in the amount of P100,000.00.

In turn, Golden Savings subsequently allowed Gomez to make withdrawals

from his own account, eventually collecting the total amount of
P1,167,500.00 from the proceeds of the apparently cleared warrants. The
last withdrawal was made on July 16, 1979. On appeal to the respondent court,6 the decision was affirmed, prompting
Metrobank to file this petition for review on the following grounds:
On July 21, 1979, Metrobank informed Golden Savings that 32 of the
warrants had been dishonored by the Bureau of Treasury on July 19, 1979, 1. Respondent Court of Appeals erred in disregarding and failing to
and demanded the refund by Golden Savings of the amount it had apply the clear contractual terms and conditions on the deposit
previously withdrawn, to make up the deficit in its account. slips allowing Metrobank to charge back any amount erroneously
The demand was rejected. Metrobank then sued Golden Savings in the
Regional Trial Court of Mindoro.5 After trial, judgment was rendered in (a) Metrobank's right to charge back is not limited to
favor of Golden Savings, which, however, filed a motion for instances where the checks or treasury warrants are forged
reconsideration even as Metrobank filed its notice of appeal. On November or unauthorized.
4, 1986, the lower court modified its decision thus:
(b) Until such time as Metrobank is actually paid, its The argument of Metrobank that Golden Savings should have exercised
obligation is that of a mere collecting agent which cannot more care in checking the personal circumstances of Gomez before
be held liable for its failure to collect on the warrants. accepting his deposit does not hold water. It was Gomez who was entrusting
the warrants, not Golden Savings that was extending him a loan; and
2. Under the lower court's decision, affirmed by respondent Court moreover, the treasury warrants were subject to clearing, pending which the
of Appeals, Metrobank is made to pay for warrants already depositor could not withdraw its proceeds. There was no question of
dishonored, thereby perpetuating the fraud committed by Eduardo Gomez's identity or of the genuineness of his signature as checked by
Gomez. Golden Savings. In fact, the treasury warrants were dishonored allegedly
because of the forgery of the signatures of the drawers, not of Gomez as
payee or indorser. Under the circumstances, it is clear that Golden Savings
3. Respondent Court of Appeals erred in not finding that as
acted with due care and diligence and cannot be faulted for the withdrawals
between Metrobank and Golden Savings, the latter should bear the
it allowed Gomez to make.

4. Respondent Court of Appeals erred in holding that the treasury By contrast, Metrobank exhibited extraordinary carelessness. The amount
involved was not trifling — more than one and a half million pesos (and this
warrants involved in this case are not negotiable instruments.
was 1979). There was no reason why it should not have waited until the
treasury warrants had been cleared; it would not have lost a single centavo
The petition has no merit. by waiting. Yet, despite the lack of such clearance — and notwithstanding
that it had not received a single centavo from the proceeds of the treasury
From the above undisputed facts, it would appear to the Court that warrants, as it now repeatedly stresses — it allowed Golden Savings to
Metrobank was indeed negligent in giving Golden Savings the impression withdraw — not once, not twice, but thrice — from the uncleared treasury
that the treasury warrants had been cleared and that, consequently, it was warrants in the total amount of P968,000.00
safe to allow Gomez to withdraw the proceeds thereof from his account
with it. Without such assurance, Golden Savings would not have allowed Its reason? It was "exasperated" over the persistent inquiries of Gloria
the withdrawals; with such assurance, there was no reason not to allow the Castillo about the clearance and it also wanted to "accommodate" a valued
withdrawal. Indeed, Golden Savings might even have incurred liability for client. It "presumed" that the warrants had been cleared simply because of
its refusal to return the money that to all appearances belonged to the "the lapse of one week."8 For a bank with its long experience, this
depositor, who could therefore withdraw it any time and for any reason he explanation is unbelievably naive.
saw fit.
And now, to gloss over its carelessness, Metrobank would invoke the
It was, in fact, to secure the clearance of the treasury warrants that Golden conditions printed on the dorsal side of the deposit slips through which the
Savings deposited them to its account with Metrobank. Golden Savings had treasury warrants were deposited by Golden Savings with its Calapan
no clearing facilities of its own. It relied on Metrobank to determine the branch. The conditions read as follows:
validity of the warrants through its own services. The proceeds of the
warrants were withheld from Gomez until Metrobank allowed Golden
Kindly note that in receiving items on deposit, the bank obligates
Savings itself to withdraw them from its own deposit.7 It was only when
itself only as the depositor's collecting agent, assuming no
Metrobank gave the go-signal that Gomez was finally allowed by Golden
responsibility beyond care in selecting correspondents, and until
Savings to withdraw them from his own account.
such time as actual payment shall have come into possession of
this bank, the right is reserved to charge back to the depositor's
account any amount previously credited, whether or not such item have been no express clearance, as Metrobank insists (although this is
is returned. This also applies to checks drawn on local banks and refuted by Golden Savings) but in any case that clearance could be implied
bankers and their branches as well as on this bank, which are from its allowing Golden Savings to withdraw from its account not only
unpaid due to insufficiency of funds, forgery, unauthorized once or even twice but three times. The total withdrawal was in excess of its
overdraft or any other reason. (Emphasis supplied.) original balance before the treasury warrants were deposited, which only
added to its belief that the treasury warrants had indeed been cleared.
According to Metrobank, the said conditions clearly show that it was acting
only as a collecting agent for Golden Savings and give it the right to "charge Metrobank's argument that it may recover the disputed amount if the
back to the depositor's account any amount previously credited, whether or warrants are not paid for any reason is not acceptable. Any reason does not
not such item is returned. This also applies to checks ". . . which are unpaid mean no reason at all. Otherwise, there would have been no need at all for
due to insufficiency of funds, forgery, unauthorized overdraft of any other Golden Savings to deposit the treasury warrants with it for clearance. There
reason." It is claimed that the said conditions are in the nature of contractual would have been no need for it to wait until the warrants had been cleared
stipulations and became binding on Golden Savings when Gloria Castillo, before paying the proceeds thereof to Gomez. Such a condition, if
as its Cashier, signed the deposit slips. interpreted in the way the petitioner suggests, is not binding for being
arbitrary and unconscionable. And it becomes more so in the case at bar
Doubt may be expressed about the binding force of the conditions, when it is considered that the supposed dishonor of the warrants was not
considering that they have apparently been imposed by the bank communicated to Golden Savings before it made its own payment to
unilaterally, without the consent of the depositor. Indeed, it could be argued Gomez.
that the depositor, in signing the deposit slip, does so only to identify
himself and not to agree to the conditions set forth in the given permit at the The belated notification aggravated the petitioner's earlier negligence in
back of the deposit slip. We do not have to rule on this matter at this time. giving express or at least implied clearance to the treasury warrants and
At any rate, the Court feels that even if the deposit slip were considered a allowing payments therefrom to Golden Savings. But that is not all. On top
contract, the petitioner could still not validly disclaim responsibility of this, the supposed reason for the dishonor, to wit, the forgery of the
thereunder in the light of the circumstances of this case. signatures of the general manager and the auditor of the drawer corporation,
has not been established.9 This was the finding of the lower courts which
In stressing that it was acting only as a collecting agent for Golden Savings, we see no reason to disturb. And as we said in MWSS v. Court of
Metrobank seems to be suggesting that as a mere agent it cannot be liable to Appeals:10
the principal. This is not exactly true. On the contrary, Article 1909 of the
Civil Code clearly provides that — Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139
SCRA 238). It must be established by clear, positive and
Art. 1909. — The agent is responsible not only for fraud, but also convincing evidence. This was not done in the present case.
for negligence, which shall be judged 'with more or less rigor by
the courts, according to whether the agency was or was not for a A no less important consideration is the circumstance that the treasury
compensation. warrants in question are not negotiable instruments. Clearly stamped on
their face is the word "non-negotiable." Moreover, and this is of equal
The negligence of Metrobank has been sufficiently established. To repeat significance, it is indicated that they are payable from a particular fund, to
for emphasis, it was the clearance given by it that assured Golden Savings it wit, Fund 501.
was already safe to allow Gomez to withdraw the proceeds of the treasury
warrants he had deposited Metrobank misled Golden Savings. There may
The following sections of the Negotiable Instruments Law, especially the the exception on Section 3 of the Negotiable Instruments Law is applicable
underscored parts, are pertinent: in the case at bar. This conclusion conforms to Abubakar vs. Auditor
General11 where the Court held:
Sec. 1. — Form of negotiable instruments. — An instrument to be
negotiable must conform to the following requirements: The petitioner argues that he is a holder in good faith and for value
of a negotiable instrument and is entitled to the rights and
(a) It must be in writing and signed by the maker or drawer; privileges of a holder in due course, free from defenses. But this
treasury warrant is not within the scope of the negotiable
instrument law. For one thing, the document bearing on its face the
(b) Must contain an unconditional promise or order to pay a sum
words "payable from the appropriation for food administration, is
certain in money;
actually an Order for payment out of "a particular fund," and is not
unconditional and does not fulfill one of the essential requirements
(c) Must be payable on demand, or at a fixed or determinable of a negotiable instrument (Sec. 3 last sentence and section [1(b)]
future time; of the Negotiable Instruments Law).

(d) Must be payable to order or to bearer; and Metrobank cannot contend that by indorsing the warrants in general, Golden
Savings assumed that they were "genuine and in all respects what they
(e) Where the instrument is addressed to a drawee, he must be purport to be," in accordance with Section 66 of the Negotiable Instruments
named or otherwise indicated therein with reasonable certainty. Law. The simple reason is that this law is not applicable to the non-
negotiable treasury warrants. The indorsement was made by Gloria Castillo
xxx xxx xxx not for the purpose of guaranteeing the genuineness of the warrants but
merely to deposit them with Metrobank for clearing. It was in fact
Sec. 3. When promise is unconditional. — An unqualified order or Metrobank that made the guarantee when it stamped on the back of the
promise to pay is unconditional within the meaning of this Act warrants: "All prior indorsement and/or lack of endorsements guaranteed,
though coupled with — Metropolitan Bank & Trust Co., Calapan Branch."

(a) An indication of a particular fund out of which reimbursement The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the
is to be made or a particular account to be debited with the amount; Philippine Islands,12 but we feel this case is inapplicable to the present
or controversy.1âwphi1 That case involved checks whereas this case involves
treasury warrants. Golden Savings never represented that the warrants were
negotiable but signed them only for the purpose of depositing them for
(b) A statement of the transaction which gives rise to the
clearance. Also, the fact of forgery was proved in that case but not in the
instrument judgment.
case before us. Finally, the Court found the Jai Alai Corporation negligent
in accepting the checks without question from one Antonio Ramirez
But an order or promise to pay out of a particular fund is not notwithstanding that the payee was the Inter-Island Gas Services, Inc. and it
unconditional. did not appear that he was authorized to indorse it. No similar negligence
can be imputed to Golden Savings.
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 unconditional" and
the warrants themselves non-negotiable. There should be no question that
We find the challenged decision to be basically correct. However, we will
have to amend it insofar as it directs the petitioner to credit Golden Savings
with the full amount of the treasury checks deposited to its account. DIZON, J.:

The total value of the 32 treasury warrants dishonored was P1,754,089.00, An appeal from a decision of the Court of First Instance of Manila
from which Gomez was allowed to withdraw P1,167,500.00 before Golden dismissing the complaint filed by the Philippine Education Co., Inc. against
Savings was notified of the dishonor. The amount he has withdrawn must Mauricio A. Soriano, Enrico Palomar and Rafael Contreras.
be charged not to Golden Savings but to Metrobank, which must bear the
consequences of its own negligence. But the balance of P586,589.00 should
On April 18, 1958 Enrique Montinola sought to purchase from the Manila
be debited to Golden Savings, as obviously Gomez can no longer be
Post Office ten (10) money orders of P200.00 each payable to E.P.
permitted to withdraw this amount from his deposit because of the dishonor
Montinola withaddress at Lucena, Quezon. After the postal teller had made
of the warrants. Gomez has in fact disappeared. To also credit the balance to
out money orders numbered 124685, 124687-124695, Montinola offered to
Golden Savings would unduly enrich it at the expense of Metrobank, let pay for them with a private checks were not generally accepted in payment
alone the fact that it has already been informed of the dishonor of the of money orders, the teller advised him to see the Chief of the Money Order
treasury warrants.
Division, but instead of doing so, Montinola managed to leave building with
his own check and the ten(10) money orders without the knowledge of the
WHEREFORE, the challenged decision is AFFIRMED, with the teller.
modification that Paragraph 3 of the dispositive portion of the judgment of
the lower court shall be reworded as follows: On the same date, April 18, 1958, upon discovery of the disappearance of
the unpaid money orders, an urgent message was sent to all postmasters,
3. Debiting Savings Account No. 2498 in the sum of P586,589.00 and the following day notice was likewise served upon all banks, instructing
only and thereafter allowing defendant Golden Savings & Loan them not to pay anyone of the money orders aforesaid if presented for
Association, Inc. to withdraw the amount outstanding thereon, if payment. The Bank of America received a copy of said notice three days
any, after the debit. later.

SO ORDERED. On April 23, 1958 one of the above-mentioned money orders numbered
124688 was received by appellant as part of its sales receipts. The following
G.R. No. L-22405 June 30, 1971 day it deposited the same with the Bank of America, and one day thereafter
the latter cleared it with the Bureau of Posts and received from the latter its
PHILIPPINE EDUCATION CO., INC., plaintiff-appellant, face value of P200.00.
MAURICIO A. SORIANO, ET AL., defendant-appellees. On September 27, 1961, appellee Mauricio A. Soriano, Chief of the Money
Order Division of the Manila Post Office, acting for and in behalf of his co-
Marcial Esposo for plaintiff-appellant. appellee, Postmaster Enrico Palomar, notified the Bank of America that
money order No. 124688 attached to his letter had been found to have been
irregularly issued and that, in view thereof, the amount it represented had
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General
Antonio G. Ibarra and Attorney Concepcion Torrijos-Agapinan for been deducted from the bank's clearing account. For its part, on August 2 of
defendants-appellees. the same year, the Bank of America debited appellant's account with the
same amount and gave it advice thereof by means of a debit memo.
On October 12, 1961 appellant requested the Postmaster General to On November 17, 1962, after the parties had submitted the stipulation of
reconsider the action taken by his office deducting the sum of P200.00 from facts reproduced at pages 12 to 15 of the Record on Appeal, the above-
the clearing account of the Bank of America, but his request was denied. So named court rendered judgment as follows:
was appellant's subsequent request that the matter be referred to the
Secretary of Justice for advice. Thereafter, appellant elevated the matter to WHEREFORE, judgment is hereby rendered, ordering the
the Secretary of Public Works and Communications, but the latter sustained defendants to countermand the notice given to the Bank of
the actions taken by the postal officers. America on September 27, 1961, deducting from said
Bank's clearing account the sum of P200.00 representing
In connection with the events set forth above, Montinola was charged with the amount of postal money order No. 124688, or in the
theft in the Court of First Instance of Manila (Criminal Case No. 43866) but alternative, to indemnify the plaintiff in the said sum of
after trial he was acquitted on the ground of reasonable doubt. P200.00 with interest thereon at the rate of 8-½% per
annum from September 27, 1961 until fully paid; without
On January 8, 1962 appellant filed an action against appellees in the any pronouncement as to cost and attorney's fees.
Municipal Court of Manila praying for judgment as follows:
The case was appealed to the Court of First Instance of Manila where, after
WHEREFORE, plaintiff prays that after hearing the parties had resubmitted the same stipulation of facts, the appealed
defendants be ordered: decision dismissing the complaint, with costs, was rendered.

(a) To countermand the notice given to the Bank of The first, second and fifth assignments of error discussed in appellant's brief
America on September 27, 1961, deducting from the said are related to the other and will therefore be discussed jointly. Apellant raise
Bank's clearing account the sum of P200.00 represented this main issue: that the postal money order in question is a negotiable
by postal money order No. 124688, or in the alternative instrument; that its nature as such is not in anyway affected by the letter
indemnify the plaintiff in the same amount with interest at dated October 26, 1948 signed by the Director of Posts and addressed to all
8-½% per annum from September 27, 1961, which is the banks with a clearing account with the Post Office, and that money orders,
rate of interest being paid by plaintiff on its overdraft once issued, create a contractual relationship of debtor and creditor,
account; respectively, between the government, on the one hand, and the remitters
payees or endorses, on the other.
(b) To pay to the plaintiff out of their own personal funds,
jointly and severally, actual and moral damages in the It is not disputed that our postal statutes were patterned after statutes in
amount of P1,000.00 or in such amount as will be proved force in the United States. For this reason, ours are generally construed in
and/or determined by this Honorable Court: exemplary accordance with the construction given in the United States to their own
damages in the amount of P1,000.00, attorney's fees of postal statutes, in the absence of any special reason justifying a departure
P1,000.00, and the costs of action. from this policy or practice. The weight of authority in the United States is
that postal money orders are not negotiable instruments (Bolognesi vs. U.S.
189 Fed. 395; U.S. vs. Stock Drawers National Bank, 30 Fed. 912), the
Plaintiff also prays for such other and further relief as
reason behind this rule being that, in establishing and operating a postal
may be deemed just and equitable.
money order system, the government is not engaging in commercial
transactions but merely exercises a governmental power for the public
It is to be noted in this connection that some of the restrictions imposed WHEREFORE, the appealed decision being in accordance with law, the
upon money orders by postal laws and regulations are inconsistent with the same is hereby affirmed with costs.
character of negotiable instruments. For instance, such laws and regulations
usually provide for not more than one endorsement; payment of money
orders may be withheld under a variety of circumstances (49 C.J. 1153).

Of particular application to the postal money order in question are the

conditions laid down in the letter of the Director of Posts of October 26,
1948 (Exhibit 3) to the Bank of America for the redemption of postal
money orders received by it from its depositors. Among others, the
condition is imposed that "in cases of adverse claim, the money order or
money orders involved will be returned to you (the bank) and the,
corresponding amount will have to be refunded to the Postmaster, Manila,
who reserves the right to deduct the value thereof from any amount due you
if such step is deemed necessary." The conditions thus imposed in order to
enable the bank to continue enjoying the facilities theretofore enjoyed by its
depositors, were accepted by the Bank of America. The latter is therefore
bound by them. That it is so is clearly referred from the fact that, upon
receiving advice that the amount represented by the money order in question
had been deducted from its clearing account with the Manila Post Office, it
did not file any protest against such action.

Moreover, not being a party to the understanding existing between the

postal officers, on the one hand, and the Bank of America, on the other,
appellant has no right to assail the terms and conditions thereof on the
ground that the letter setting forth the terms and conditions aforesaid is void
because it was not issued by a Department Head in accordance with Sec. 79
(B) of the Revised Administrative Code. In reality, however, said legal
provision does not apply to the letter in question because it does not provide
for a department regulation but merely sets down certain conditions upon
the privilege granted to the Bank of Amrica to accept and pay postal money
orders presented for payment at the Manila Post Office. Such being the
case, it is clear that the Director of Posts had ample authority to issue it
pursuant to Sec. 1190 of the Revised Administrative Code.

In view of the foregoing, We do not find it necessary to resolve the issues

raised in the third and fourth assignments of error.