SAN MIGUEL CORP (SMC) VS. BARTOLOME PUZON
PEOPLE
FACTS:
Puzon was a dealer of SMC. Puzon purchased SMC products on
credit. SMC requires him to issue postdated checks equivalent
to the products purchased to ensure payment. The checks are
to be return once he settles his credit. In one instance, Puzon
went to SMC Sales Office and allegedly requested to see the
checks he issued before. When he got hold of them, he
allegedly immediately left the office with the checks.
SMC demanded its return which Puzon ignored. As such, SMC
filed a complaint against him for the crime of theft. The
prosecutor dismissed the complaint on the ground that the
prosecutor found no probable cause for theft because the
relationship of the parties is one of creditor and debtor.
ISSUE/s:
Whether or not ownership of postdated check was transferred
upon delivery of Puzon to SMC.
RULING:
NO. The ownership of postdated check was not transferred
upon delivery of Puzon to SMC.
Under Section 12 of Negotiable Instruments Law 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. The delivery as the term is used in the aforementioned
provision means that the party delivering did so for the purpose
of giving effect thereto. 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, in the case at bar, 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."
Evidently, 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.
JOHN DY VS.
FACTS:
Since 1990, John Dy has been a distributor of W.L. Foods. Dy
would pay WL Foods in either cash or check upon pick up of
stocks at their branch or main office. At times, he would entrust
the payment to one of his drivers.
June 24, 1992, Dy's driver went to the branch office of W.L.
Foods to pick up stocks, in return, the driver handed her a blank
Far East Bank and Trust Company (FEBTC) Check postdated July
22, 1992 signed by Dy. July 1, 1992, the driver obtained snack
in exchange for a blank FEBTC Check postdated July 31, 1992.
In both instances, the driver was issued an unsigned delivery
receipt.
When presented for payment, FEBTC dishonored the checks for
insufficiency of funds. When William Lim, owner of W.L. Foods,
phoned Dy about the matter, the latter explained that he could
not pay since he had no funds yet. This prompted the former to
send petitioner a demand letter, which the latter ignored. RTC
convicted Dy on two counts each of estafa and violation of B.P.
Blg. 22. Which was affirmed by the CA. Dy contends that the
checks were ineffectively issued and that W.L. Foods'
accountant had no authority to fill the amounts
ISSUE/s:
Whether or not holder of a check has a prima facie authority to
fill the blank.
RULING:
YES. When the checks were delivered to Lim, through his
employee, he became a holder with prima facie authority to fill
the blanks.
Section 14 of the Negotiable Instruments Law provides that,
where the instrument is wanting in any material particular, the
person in possession thereof has a prima facie authority to
complete it by filling up the blanks therein. And a signature on
a blank paper delivered by the person making the signature in
order that the paper may be converted into a negotiable
instrument operates as a prima facie authority to fill it up as
such for any amount.
Hence, the law merely requires that the instrument be in the
possession of a person other than the drawer or maker. From
such possession, together with the fact that the instrument is
wanting in a material particular, the law presumes agency to fill
up the blanks. Because of this, the burden of proving want of
authority or that the authority granted was exceeded, is placed
on the person questioning such authority. Petitioner failed to
fulfil this requirement
LUNARIA VS. PEOPLE
FACTS:
Lunaria entered into a partnership agreement with private
complainant Arnaiz, in the conduct of money lending. Lunaria
being industrial partner and Arnaiz as a financer. At the start of
the business, Lunariawould inform Arnaiz of the proposed loan
then Arnaiz would issue a check, in which the proceeds would
go to the borrower, while in return Lunaria would return a
check to Artaiz with the lent amount plus agreed share of
interest. As the business progressed and relationship has been
established, partners both agreed to issue to each other pre-
signed check with no payee’s name as well as amount.
Arrangement ended when Artaiz was no longer willing to
continue. One of the checks issued by Lunaria in favour of
Arnaiz was dishonered. The parties, upon numerous attempt to
settle failed to reconcile. Thus, Arnaiz filed a case against
Lunaria.
ISSUE/s:
Whether or not the Arnaiz has the authority to fill blank checks.
RULING:
YES. Arnaiz has the authority to fill blank checks.
Under the Negotiable Instruments Law, Section 14, where the
instrument is wanting in any material particular, the person in
possession thereof has prima facie authority to complete it by
filling up the blanks therein.
It should be borne in mind that the exchange of the pre-signed
checks without date and amount between the parties had been
their practice for almost a year by virtue of their money-lending
business. They had authority to fill up blanks upon information
that a check can then be issued. Additionally, because of the
presumption of authority, the burden of proof that there was
no authority or that authority granted was exceeded is carried
by the person who questions such authority.
Records show that Lunaria had not proven lack of authority on
the part of Artaiz to fill up such blanks. Thus, having failed to
prove lack of authority, it can be presumed that Artaiz was
within his rights to fill up blanks on the check.
PATRIMONIO VS. GUTIERREZ
FACTS:
The Patrimonio and Gutierrez entered into a business venture
under the name of Slam Dunk Corporation, a production outfit
that produced mini-concerts and shows related to basketball.
Patrimonio pre-signed several checks to answer for the
expenses of Slam Dunk. Although signed, these checks had no
payee’s name, date or amount. The blank checks were
entrusted to Gutierrez with the specific instruction not to fill
them out without previous notification to and approval by the
petitioner.
Without the petitioner’s knowledge and consent, Gutierrez
went to Marasigan to secure a loan in the amount of
P200,000.00 with interest of 5% per month. Marasigan
acceded to Gutierrez’ request and gave him P200,000.00.
Gutierrez simultaneously delivered to Marasigan one of the
blank checks the petitioner pre-signed with Pilipinas Bank with
the blank portions filled out with the words “Cash” “Two
Hundred Thousand Pesos Only”, and the amount of
“P200,000.00.”
Marasigan deposited the check but it was dishonored for the
reason “ACCOUNT CLOSED.” Marasigan sought recovery from
Gutierrez, to no avail. He thereafter sent several demand, but
his demands went unheeded. Consequently, he filed a criminal
case for violation of B.P. 22 against the petitioner.
RTC ruled in favour of Marasigan which was affirmed by the CA.
ISSUE/s:
(1) Whether or not an instrument can be issued by the holder
not in due course prior to the instrument’s completion.
(2) Whether or not Marasigan is a holder in due course.
RULING:
Yes. An instrument can be issued by a holder not in due course
prior to the completion of the instrument.
Under the rule, if the maker or drawer delivers a pre-signed
blank paper to another person for the purpose of converting it
into a negotiable instrument, that person is deemed to have
prima facie authority to fill it up. It merely requires that the
instrument be in the possession of a person other than the
drawer or maker and from such possession, together with the
fact that the instrument is wanting in a material particular, the
law presumes agency to fill up the blanks.
In order however that one who is not a holder in due course
can enforce the instrument against a party prior to the
instrument’s completion, two requisites must exist: (1) that the
blank must be filled strictly in accordance with the authority
given; and (2) it must be filled up within a reasonable time. If it
was proven that the instrument had not been filled up strictly
in accordance with the authority given and within a reasonable
time, the maker can set this up as a personal defense and avoid
liability. However, if the holder is a holder in due course, there
is a conclusive presumption that authority to fill it up had been
given and that the same was not in excess of authority.
In the present case, the petitioner contends that there is no
legal basis to hold him liable both under the contract and loan
and under the check because: first, the subject check was not
completely filled out strictly under the authority he has given
and second, Marasigan was not a holder in due course.
CHING VS. NICDAO
FACTS:
Nicdao was charged eleven (11) counts of violation of Batas
Pambansa Bilang (BP) 22. MTC found her guilty of said offenses.
RTC affirmed. Nicdao filed an appeal to the Court of Appeals.
CA reversed the decision and acquitted accused. Ching is now
appealing the civil aspect of the case to the Supreme Court.
Ching vigorously argues that notwithstanding respondent
Nicdao’s acquittal by the CA, the Supreme Court has the
jurisdiction and authority to resolve and rule on her civil
liability. He anchors his contention on Rule 111, Sec 1B: The
criminal action for violation of Batas Pambansa Blg. 22 shall be
deemed to necessarily include the corresponding civil action,
and no reservation to file such civil action separately shall be
allowed or recognized. Moreover, under the above-quoted
provision, the criminal action for violation of BP 22 necessarily
includes the corresponding civil action, which is the recovery of
the amount of the dishonored check representing the civil
obligation of the drawer to the payee. Nicdao’s defense: Sec 2
of Rule 111 — Except in the cases provided for in Section 3
hereof, after the criminal action has been commenced, the civil
action which has been reserved cannot be instituted until final
judgment in the criminal action. According to her, CA’s decision
is equivalent to a finding that the facts upon which her civil
liability may arise do not exist. The instant petition, which seeks
to enforce her civil liability based on the eleven (11) checks, is
thus allegedly already barred by the final and executory
decision acquitting her. Statement of the case: This is a petition
for review on certiorari filed by Samson Ching of the Decision
dated November 22, 1999 of the Court of Appeals (CA) in CA-
G.R. CR No. 23055. Which rooted from 11 informations filed for
violation of BP 22 from the Municipal Trial Court in Bataan
against the respondent.
ISSUE:
1. WON Ching may appeal the civil aspect of the case within the
reglementary period?
2. WON Nicdao is civilly liable?
RULING:
1. Ching is entitled to appeal the civil aspect of the case within
the reglementary period. “Every person criminally liable for a
felony is also civilly liable. Extinction of the penal action does
not carry with it extinction of the civil, unless the extinction
proceeds from a declaration in a final judgment that the fact
from which the civil might arise did not exist. Petitioner Ching
correctly argued that he, as the offended party, may appeal the
civil aspect of the case notwithstanding respondent Nicdao’s
acquittal by the CA. The civil action was impliedly instituted with
the criminal action since he did not reserve his right to institute
it separately nor did he institute the civil action prior to the
criminal action. If the accused is acquitted on reasonable doubt
but the court renders judgment on the civil aspect of the
criminal case, the prosecution cannot appeal from the
judgment of acquittal as it would place the accused in double
jeopardy. However, the aggrieved party, the offended party or
the accused or both may appeal from the judgment on the civil
aspect of the case within the period therefore. Civil liability is
not extinguished by acquittal: 1. where the acquittal is based
on reasonable doubt;
2. Where the court expressly declares that the liability of the
accused is not criminal but only civil in nature;
3. Where the civil liability is not derived from or based on the
criminal act of which the accused is acquitted. 2. A painstaking
review of the case leads to the conclusion that respondent
Nicdao’s acquittal likewise carried with it the extinction of the
action to enforce her civil liability. There is simply no basis to
hold respondent Nicdao civilly liable to petitioner Ching. CA’s
acquittal of respondent Nicdao is not merely based on
reasonable doubt. Rather, it is based on the finding that she did
not commit the act penalized under BP 22. In particular, the CA
found that the P20,000,000.00 check was a stolen check which
was never issued nor delivered by respondent Nicdao to
petitioner Ching.
BANK OF AMERICA VS. PHIL. CLUB
FACTS:
Plaintiff PRCI is a domestic corporation which maintains a
current account with petitioner Bank of America. Its authorized
signatories are the company President and Vice-President. By
virtue of a travel abroad for these officers, they pre-signed
checks to accommodate any expenses that may come up while
they were abroad for a business trip. The said pre-signed checks
were left for safekeeping by PRCs accounting officer.
On the space where the name of the payee should be indicated
(Pay To The Order Of) the following 2-line entries were instead
typewritten: on the upper line was the word CASH while the
lower line had the following typewritten words, viz: ONE
HUNDRED TEN THOUSAND PESOS ONLY.
2. Clearly there was an irregularity with the filling up of the
blank checks as both showed similar infirmities and irregularities
and yet, the petitioner bank did not try to verify with the
corporation and proceeded to encash the checks.
3. PRC filed an action for damages against the bank. The lower
court awarded actual and exemplary damages. On appeal, the
CA affirmed the lower court’s decision and held that the bank
was negligent. Hence this appeal. Petitioner contends that it
was merely doing its obligation under the law and contract in
encashing the checks, since the signatures in the checks are
genuine.
ISSUES:
(1) WON the bank was negligent
(2) WON Section 14 of the Negotiable Instruments Law must be
applied
RULING:
Petitioner insists that it merely fulfilled its obligation under law
and contract when it encashed the aforesaid checks. Invoking
Sections 126[7] and 185[8] of the Negotiable Instruments Law
(NIL), petitioner claims that its duty as a drawee bank to a
drawer-client maintaining a checking account with it is to pay
orders for checks bearing the drawer-clients genuine
signatures. Thus, pursuant to the said obligation, the drawee
bank has the duty to determine whether the signatures
appearing on the check are the drawer-clients or its duly
authorized signatories. If the signatures are genuine, the bank
has the unavoidable legal and contractual duty to pay. If the
signatures are forged and falsified, the drawee bank has the
corollary, but equally unavoidable legal and contractual, duty
not to pay.
Although not in the strict sense material alterations, the
misplacement of the typewritten entries for the payee and the
amount on the same blank and the repetition of the amount
using a check writer were glaringly obvious irregularities on the
face of the check. Clearly, someone made a mistake in filling up
the checks and the repetition of the entries was possibly an
attempt to rectify the mistake.
Indeed, it is highly uncommon for a corporation to make out
checks payable to CASH for substantial amounts such as in this
case. If each irregular circumstance in this case were taken
singly or isolated, the banks employees might have been
justified in ignoring them. However, the confluence of the
irregularities on the face of the checks and circumstances that
depart from the usual banking practice of respondent should
have put petitioners employees on guard that the checks were
possibly not issued by the respondent in due course of its
business. Petitioners subtle sophistry cannot exculpate it from
behavior that fell extremely short of the highest degree of care
and diligence required of it as a banking institution.
Sec. 14. Blanks, when may be filled. Where the instrument is
wanting in any material particular, the person in possession
thereof has a prima facie authority to complete it by filling up
the blanks therein. And a signature on a blank paper delivered
by the person making the signature in order that the paper may
be converted into a negotiable instrument operates as a prima
facie authority to fill it up as such for any amount. In order,
however, that any such instrument when completed may be
enforced against any person who became a party thereto prior
to its completion, it must be filled up strictly in accordance with
the authority given and within a reasonable time. But if any
such instrument, after completion, is negotiated to a holder in
due course, it is valid and effectual for all purposes in his hands,
and he may enforce it as if it had been filled up strictly in
accordance with the authority given and within a reasonable
time.
Sec. 16, Delivery; when effectual; when presumed. Every
contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of
giving effect thereto. As between immediate parties, and as
regards a remote party other than a holder in due course, the
delivery in order to be effectual, must be made either by or
under the authority of the party making, drawing, accepting, or
indorsing as the case may be; and in such case the delivery may
be shown to have been conditional, or for a special purpose
only, and not for the purpose of transferring the property in the
instrument. But where the instrument is in the hands of a
holder of a due course, a valid delivery thereof by all parties
prior to him so as to make them liable to him is conclusively
presumed. And where the instrument is no longer in the
possession of a party whose signature appears thereon, a valid
and intentional delivery by him is presumed until the contrary
is proved.
In defense of its cashier/tellers questionable action, petitioner
insists that pursuant to Sections 14 and 16 of the NIL, it could
validly presume, upon presentation of the checks, that the
party who filled up the blanks had authority and that a valid and
intentional delivery to the party presenting the checks had
taken place. Thus, in petitioners view, the sole blame for this
debacle should be shifted to respondent for having its
signatories pre-sign and deliver the subject checks.
Petitioners contention would have been correct if the subject
checks were correctly and properly filled out by the thief and
presented to the bank in good order. In that instance, there
would be nothing to give notice to the bank of any infirmity in
the title of the holder of the checks and it could validly presume
that there was proper delivery to the holder. The bank could
not be faulted if it encashed the checks under those
circumstances. However, the undisputed facts plainly show
that there were circumstances that should have alerted the
bank to the likelihood that the checks were not properly
delivered to the person who encashed the same. In all, we see
no reason to depart from the finding in the assailed CA Decision
that the subject checks are properly characterized as
incomplete and undelivered instruments thus making Section
15 [20] of the NIL applicable in this case.
RIZAL BANKING CORP. VS. HI0TRI DEVELOPMENT CORP.
FACTS:
Luz Bakunawa and her husband Manuel, now deceased
(Spouses Bakunawa) are registered owners of six (6) parcels of
land covered by TCT Nos. 324985 and 324986 of the Quezon
City Register of Deeds, and TCT Nos. 103724, 98827, 98828 and
98829 of the Marikina Register of Deeds. These lots were
sequestered by the Presidential Commission on Good
Government [(PCGG)]. Sometime in 1990, a certain Teresita
Millan (Millan), through her representative, Jerry Montemayor,
offered to buy said lots for ₱6,724,085.71, with the promise
that she will take care of clearing whatever preliminary
obstacles there may be to effect a completion of the sale. The
Spouses Bakunawa gave to Millan the Owners Copies of said
TCTs and in turn, Millan made a downpayment of
₱1,019,514.29 for the intended purchase. However, for one
reason or another, Millan was not able to clear said obstacles.
As a result, the Spouses Bakunawa rescinded the sale and
offered to return to Millan her downpayment of ₱1,019,514.29.
However, Millan refused to accept back the ₱1,019,514.29
down[]payment. Consequently, the Spouses Bakunawa,
through their company, the Hi-Tri Development Corporation
(Hi-Tri) took out on October 28, 1991, a Managers Check from
RCBC-Ermita in the amount of ₱1,019,514.29, payable to
Millan’s company Rosmil Realty and Development Corporation
(Rosmil) c/o Teresita Millan and used this as one of their basis
for a complaint against Millan and Montemayor which they
filed with the Regional Trial Court of Quezon City, Branch 99. On
January 31, 2003, during the pendency of the above mentioned
case and without the knowledge of [Hi-Tri and Spouses
Bakunawa], RCBC reported the ₱1,019,514.29-credit existing in
favor of Rosmil to the Bureau of Treasury as among its
unclaimed balances as of January 31, 2003. Allegedly, a copy of
the Sworn Statement executed by Florentino N. Mendoza,
Manager and Head of RCBCs Asset Management, Disbursement
& Sundry Department (AMDSD) was posted within the
premises of RCBC-Ermita.
ISSUE:
Whether or not the escheat of the account in RCBC is proper.
RULING:
No. An ordinary check refers to a bill of exchange drawn by a
depositor (drawer) on a bank (drawee), requesting the latter to
pay a person named therein (payee) or to the order of the
payee or to the bearer, a named sum of money. The issuance
of the check does not of itself operate as an assignment of any
part of the funds in the bank to the credit of the drawer. Here,
the bank becomes liable only after it accepts or certifies the
check. After the check is accepted for payment, the bank would
then debit the amount to be paid to the holder of the check
from the account of the depositor-drawer.
There are checks of a special type called managers or cashiers
checks. These are bills of exchange drawn by the banks
manager or cashier, in the name of the bank, against the bank
itself. Typically, a managers or a cashiers check is procured from
the bank by allocating a particular amount of funds to be
debited from the depositors account or by directly paying or
depositing to the bank the value of the check to be drawn. Since
the bank issues the check in its name, with itself as the drawee,
the check is deemed accepted in advance. Ordinarily, the check
becomes the primary obligation of the issuing bank and
constitutes its written promise to pay upon demand.
Nevertheless, the mere issuance of a managers check does not
ipso facto work as an automatic transfer of funds to the account
of the payee. In case the procurer of the managers or cashiers
check retains custody of the instrument, does not tender it to
the intended payee, or fails to make an effective delivery, we
find the following provision on undelivered instruments under
the Negotiable Instruments Law applicable:
Sec. 16. Delivery; when effectual; when presumed. Every
contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of
giving effect thereto. As between immediate parties and as
regards a remote party other than a holder in due course, the
delivery, in order to be effectual, must be made either by or
under the authority of the party making, drawing, accepting, or
indorsing, as the case may be; and, in such case, the delivery
may be shown to have been conditional, or for a special
purpose only, and not for the purpose of transferring the
property in the instrument. But where the instrument is in the
hands of a holder in due course, a valid delivery thereof by all
parties prior to him so as to make them liable to him is
conclusively presumed. And where the instrument is no longer
in the possession of a party whose signature appears thereon,
a valid and intentional delivery by him is presumed until the
contrary is proved.
Since there was no delivery, presentment of the check to the
bank for payment did not occur. An order to debit the account
of respondents was never made. In fact, petitioner confirms
that the Managers Check was never negotiated or presented
for payment to its Ermita Branch, and that the allocated fund is
still held by the bank. As a result, the assigned fund is deemed
to remain part of the account of Hi-Tri, which procured the
Managers Check. The doctrine that the deposit represented by
a managers check automatically passes to the payee is
inapplicable, because the instrument although accepted in
advance remains undelivered. Hence, respondents should have
been informed that the deposit had been left inactive for more
than 10 years, and that it may be subjected to escheat
proceedings if left unclaimed.
REPUBLIC PLANTERS BANK VS. CA
FACTS:
In 1979, World Garment Manufacturing, through its board
authorized Shozo Yamaguchi (president) and Fermin Canlas
(treasurer) to obtain credit facilities from Republic Planters
Bank (RPB). For this, 9 promissory notes were executed. Each
promissory note was uniformly written in the following
manner:
___________, after date, for value received, I/we, jointly and
severally promise to pay to the ORDER of the REPUBLIC
PLANTERS BANK, at its office in Manila, Philippines, the sum of
___________ PESOS(….) Philippine Currency…
Please credit proceeds of this note to:
________ Savings Account ______XX Current Account
No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP.
Sgd. Shozo Yamaguchi
Sgd. Fermin Canlas
The note became due and no payment was made. RPB
eventually sued Yamaguchi and Canlas. Canlas, in his defense,
averred that he should not be held personally liable for such
authorized corporate acts that he performed inasmuch as he
signed the promissory notes in his capacity as officer of the
defunct Worldwide Garment Manufacturing.
ISSUE:
Whether or not Canlas should be held liable for the promissory
notes.
RULING:
Yes. The solidary liability of private respondent Fermin Canlas
is made clearer and certain, without reason for ambiguity, by
the presence of the phrase “joint and several” as describing the
unconditional promise to pay to the order of Republic Planters
Bank. Where an instrument containing the words “I promise to
pay” is signed by two or more persons, they are deemed to be
jointly and severally liable thereon.
Canlas is solidarily liable on each of the promissory notes
bearing his signature for the following reasons:
The promissory notes are negotiable instruments and must be
governed by the Negotiable Instruments Law.
Under the Negotiable lnstruments Law, persons who write their
names on the face of promissory notes are makers and are
liable as such. By signing the notes, the maker promises to pay
to the order of the payee or any holder according to the tenor
thereof.
SPOUSES EDUARDO EVANGELISTA VS. FINANCE CORP.
FACTS:
Spouses Eduardo B. Evangelista and Epifania C. Evangelista filed
a complaint for annulment of titles against Mercator Finance
Corp. Lydia P. Salazar, Lamecs Realty and Development
Corporation, and the Register of Deeds of Bulacan. The spouses
Evangelista claimed being the registered owners of 5 parcels of
land contained in the Real Estate Mortgage executed by them
and Embassy Farms, Inc. They alleged that they executed the
Real Estate Mortgage in favor of Mercator only as officers of
Embassy Farms. They did not receive the proceeds of the loan
evidenced by a promissory note, as all of it went to Embassy
Farms. Thus, they contended that the mortgage was without
any consideration as to them since they did not personally
obtain any loan or credit accommodations. There being no
principal obligation on which the mortgage rests, the real
estate mortgage is void. With the void mortgage, they assailed
the validity of the foreclosure proceedings conductedby
Mercator, the sale to it as the highest bidder in the public
auction, the issuance of the transfer certificates of title to it, the
subsequent sale of the same parcels of land to Lydia P. Salazar,
and the transfer of the titles to her name, and lastly, the sale
and transfer of the properties to respondent Lamecs Realty &
Development Corporation. Mercator admitted that the
spousesEvangelista were the owners of the subject parcels of
land. It, however, contended that on 16 February 1982, the
spouses executed a Mortgage in favor of Mercator for and in
consideration of certain loans, and/or other forms of credit
accommodations obtained from the Mortgagee (Mercator)
amounting to P844,625.78 and to secure the payment of the
sameand those others that the Mortgagee may extend to the
mortgagor. It contended that since the spouses and Embassy
Farms signed the promissory note as co-makers, aside from the
Continuing Suretyship Agreement subsequently executed to
guarantee the indebtedness of Embassy Farms, and the
succeeding promissory notes[8] restructuring the loan, then
the spouses are jointly and severally liable with Embassy Farms.
Due to their failure to pay the obligation, the foreclosure and
subsequent sale of the mortgaged properties are valid. Salazar
and Lamecs asserted that they are innocent purchasers for
value and in good faith, relying on the validity of the title of
Mercator. Lamecs admitted the prior ownership of the spouses
of the subject parcels of land, but alleged that they are the
present registered owner. Salazar and Lamecs likewise assailed
the long silence and inaction by the spouses as it was only after
a lapse of almost 10 years from the foreclosure of the property
and the subsequent sales that they made their claim. Thus,
Salazar and Lamecs averred that petitioners are in estoppel and
guilty of laches. After pre-trial, Mercator moved for summary
judgment on the ground that except as to the amount of
damages, there is no factual issue to be litigated. Mercator
argued that petitioners had admitted in their pre-trial brief the
existence of the promissory note, the continuing suretyship
agreement and the subsequent promissory notes restructuring
the loan, hence, there is no genuine issue regarding their
liability.
The mortgage, foreclosure proceedings and the subsequent
sales are valid and the complaint must be dismissed. The
spouses opposed the motion for summary judgmentclaiming
that because their personal liability to Mercator is at issue,
there is a need for a full-blown trial. The RTC granted the
motion for summary judgment and dismissed the complaint.
The spouses’ motion for reconsideration was denied for lack of
merit. Thus, the spouses went up to the Court of Appeals, but
again were unsuccessful. A motion for reconsiderationby the
spouses was likewise denied for lack of merit. The spouses filed
the Petition for Review on Certiorari. The spouses allege, inter
alia, that there is an ambiguity in the wording of the promissory
note and claim that since it was Mercator who provided the
form, then the ambiguity should be resolved against it.
ISSUE:
Whether the spouses are solidarily liable with Embassy Farms,
in light of the promissory note signed by them.
RULING:
The promissory note and the Continuing Suretyship Agreement
prove that the spouses are solidary obligors with Embassy
Farms. The promissory notes subsequently executed by the
spouses and Embassy Farms, restructuring their loan, likewise
prove that the spouses are solidarily liable with Embassy Farms.
The spouses allege that there is an ambiguity in the wording of
the promissory note and claim that since it was Mercator who
provided the form, then the ambiguity should be resolved
against it. Courts can interpret a contract only if there is doubt
in its letter. But, an examination of the promissory note shows
no such ambiguity.
Besides, assuming arguendo that there is an ambiguity, Section
17 of the Negotiable Instruments Law states that "Where the
language of the instrument is ambiguous or there are omissions
therein, the following rules of construction apply: (g) Where an
instrument containing the word 'I promise to pay' is signed by
two or more persons, they are deemed to be jointly and
severally liable thereon." Further, even if the spouses intended
to sign the note merely as officers of Embassy Farms, still this
does not erase the fact that they subsequently executed a
continuing suretyship agreement. A surety is one who is
solidarily liable with the principal.
The spouses cannot claim that they did not personally receive
any consideration for the contract for well-entrenched is the
rule that the consideration necessary to support a surety
obligation need not pass directly to the surety, a consideration
moving to the principal alone being sufficient. A surety is bound
by the same consideration that makes the contract effective
between the principal parties thereto. Having executed the
suretyship agreement, there can be no dispute on the personal
liability of the spouses.
ADALIA FRANCISCO VS CA
FACTS:
A. Francisco Realty & Development Corporation (AFRDC), of
which petitioner Francisco is the president, entered into a Land
Development and Construction Contract with private
respondent Herby Commercial & Construction Corporation
(HCCC), represented by its President and General Manager
private respondent Ong. Under the contract, HCCC was to be
paid on the basis of the completed houses and developed lands
delivered to and accepted by AFRDC and the GSIS. Sometime
in 1979, Ong discovered that Diaz and Francisco, the Vice-
President of GSIS, had executed and signed seven checks of
various dates and amounts payable to HCCC for completed and
delivered work under the contract. Ong, however, claims that
these checks were never delivered to HCCC. It turned out that
Francisco forged the indorsement of Ong on the checks and
indorsed the checks for a second time by signing her name at
the back of the checks, petitioner then deposited said checks in
her savings account. A case was brought by private
respondents against petitioner to recover the value of said
checks. Petitioner however claims that she was authorized to
sign Ong's name on the checks by virtue of the Certification
executed by Ong in her favor giving her the authority to collect
all the receivables of HCCC from the GSIS, including the
questioned checks.
ISSUE:
Whether petitioner cannot be held liable on the questioned
checks by virtue of the Certification executed by Ong giving her
the authority to collect such checks from the GSIS.
RULING:
Petitioner is liable. The Negotiable Instruments Law provides
that where any person is under obligation to indorse in a
representative capacity, he may indorse in such terms as to
negative personal liability. An agent, when so signing, should
indicate that he is merely signing in behalf of the principal and
must disclose the name of his principal; otherwise he shall be
held personally liable. Even assuming that Francisco was
authorized by HCCC to sign Ong's name, still, Francisco did not
indorse the instrument in accordance with law. Instead of
signing Ong's name, Francisco should have signed her own
name and expressly indicated that she was signing as an agent
of HCCC. Thus, the Certification cannot be used by Francisco to
validate her act of forgery.
EQUITABLE PCI BANK VS ROWENA ONG
FACTS:
Warliza Sarande deposited in her account at Philippine
Commercial International (PCI) Bank a PCI Bank TCBT Check of
P225K. December 5 1991: Upon inquiry by Serande at PCI Bank
on whether the TCBT Check had been cleared, she received an
affirmative answer. Relying on this assurance, she issued 2
checks drawn against the proceeds of TCBT Check.
PCI Bank Check No. 073661 dated 5 December 1991 for P132K
which Sarande issued to respondent Rowena Ong owing to a
business transaction. On the same day, Ong presented to PCI
Bank requesting PCI Bank to convert the proceeds into a
manager's check, which the PCI Bank obliged.
December 6 1991: Ong deposited PCI Bank Manager's Check in
her account with Equitable Banking Corporation December 9
1991: she received a check return-slip informing her that PCI
Bank had stopped the payment of the check on the ground of
irregular issuance. Despite several demands made, it was
refused. Ong was constrained to file a Complaint for sum of
money, damages and attorney's fees against PCI Bank
CA affirmed RTC: favored Ong
ISSUE:
Whether or not Ong can hold PCI liable.
RULING:
YES. Petition is DENIED. CA affirmed.
By admitting it committed an error, clearing the check of
Sarande and issuing in favor of Ong not just any check but a
manager's check for that matter, PCI Bank's liability is fixed
certification = acceptance,
Equitable PCI as drawee bank is bound on the instrument upon
certification and it is immaterial to such liability in favor of Ong
who is a holder in due course whether the drawer (Warliza
Sarande) had funds or not with the Equitable PCI Bank
No unjust enrichment
SECTION 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:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and
without notice it had been previously dishonored, if such was
the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice
of any infirmity in the instrument or defect in the title of the
person negotiating it.
The same law provides further:
Sec. 24. Presumption of consideration. – Every negotiable
instrument is deemed prima facie to have been issued for a
valuable consideration; and every person whose signature
appears thereon to have become a party thereto for value.
Sec. 26. What constitutes holder for value. – Where value has
at any time been given for the instrument, the holder is deemed
a holder for value in respect to all parties who become such
prior to that time.
Sec. 28. Effect of want of consideration. – Absence or failure of
consideration is a matter of defense as against any person not
a holder in due course; and partial failure of consideration is a
defense pro tanto, whether the failure is an ascertained and
liquidated amount or otherwise.
Manager's Check
 an order of the bank to pay, drawn upon itself,
committing in effect its total resources, integrity and
honor behind its issuance
 regarded substantially to be as good as the money it
represents
 same footing as a certified check
The object of certifying a check, as regards both parties, is to
enable the holder to use it as money.
check operates as an assignment of a part of the funds to the
creditors
Sec. 187. Certification of check; effect of. – Where a check is
certified by the bank on which it is drawn, the certification is
equivalent to an acceptance
Section 63 of the Central Bank Act to the effect "that a check
which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor in cash
in an amount equal to the amount credited to his account
Sec. 62. Liability of acceptor. – The acceptor by accepting the
instruments engages that he will pay it according to the tenor
of his acceptance; and admits –
(a) The existence of the drawer, the genuineness of his
signature, and his capacity and authority to draw the
instrument; and
(b) The existence of the payee and his then capacity to indorse.
BANK OF THE PHILIPPINE ISLANDS v. CASA MONTESSORI
INTERNATIONALE
FACTS:
CASA Montessori International opened a current account with
BPI with CASAs President Ms. Ma. Carina C. Lebron as one of its
authorized signatories. In 1991, after conducting an
investigation, plaintiff discovered that nine (9) of its checks had
been encashed by a certain Sonny D. Santos since 1990 in the
total amount of P782,000.00. It turned out that Sonny D. Santos
with account at BPIs Greenbelt Branch [was] a fictitious name
used by third party defendant Leonardo T. Yabut who worked
as external auditor of CASA. Third party defendant voluntarily
admitted that he forged the signature of Ms. Lebron and
encashed the checks.
The PNP Crime Laboratory conducted an examination of
the nine (9) checks and concluded that the handwritings
thereon compared to the standard signature of Ms. Lebron
were not written by the latter.
On March 4, 1991, plaintiff filed the herein Complaint for
Collection with Damages against defendant bank.
ISSUE:
(1) Was there forgery under the Negotiable Instruments Law
(NIL)?
(2) Is BPI liable as the drawee bank for allowing payment on
the checks to a wrongful and fictitious payee?
RULING:
(1) YES. Forgery cannot be presumed. It must be established
by clear, positive and convincing evidence. Under the best
evidence rule as applied to documentary evidence like the
checks in question, no secondary or substitutionary
evidence may inceptively be introduced, as the original
writing itself must be produced in court. But when, without
bad faith on the part of the offeror, the original checks
have already been destroyed or cannot be produced in
court, secondary evidence may be produced. Without bad
faith on its part, CASA proved the loss or destruction of the
 original checks through the Affidavit of the one person who
knew of that fact- Yabut. He clearly admitted to discarding
the paid checks to cover up his misdeed. In such a situation,
secondary evidence like microfilm copies may be
introduced in court.
Even with respect to documentary evidence, the best
evidence rule applies only when the contents of a document --
such as the drawers signature on a check -- is the subject of
inquiry.
(2) YES. BPI -- the drawee bank -- becomes liable to its
depositor-drawer for allowing payment on the checks to a
wrongful and fictitious payee. Since the encashing bank is
one of its branches, BPI can easily go after it and hold it
liable for reimbursement. It may not debit the drawers
account and is not entitled to indemnification from the
drawer. In both law and equity, when one of two innocent
persons must suffer by the wrongful act of a third person,
the loss must be borne by the one whose negligence was
the proximate cause of the loss or who put it into the
power of the third person to perpetrate the wrong.
A bank is bound to know the signatures of its customers;
and if it pays a forged check, it must be considered as making
the payment out of its own funds, and cannot ordinarily charge
the amount so paid to the account of the depositor whose
name was forged.
RAMON ILUSORIO VS CA
FACTS:
Ilusorio was a businessman who was in charge of 20 or so
corporations. He was a depositor in good standing of Manila
Banking Corporation. As he was in charge of a big number of
corporations, he was usually out of the country for business. He
then entrusted his credit cards, checkbook, blank checks,
passbooks, etc to his secretary, Katherine Eugenio. Eugenio was
also in charge of verifying and reconciling the statements of
Ilusorio’s checking account.
Eugenio was able to encash and deposit to her personal
account checks drawn against Ilusorio’s account with an
aggregate amount of 119K. Ilusorio didn’t bother to check his
statement of account until a business partner informed him
that he saw Eugenio using his credit cards. Ilusorio then fired
her and instituted criminal case of Estafa thru falsification
against Eugenio. Manila Banking Corp. also instituted a
complaint of estafa against Eugenio based on the affidavit of
Dante Razon, an employee. Razon stated that he personally
examined and scrutinized the encashed checks in accordance
with their verification procedures.
Manila Bank sought the expertise of NBI in determining the
genuineness of the checks but Ilusorio failed to submit
specimen signatures and thus, NBI could not conduct the
examination.
ISSUE:
W/N Manila Bank is liable for damages for failing to detect a
forged check
RULING:
No. To be entitled to damages, Ilusorio has the burden of
poving that the bank was negligent in failing to detect the
discrepancy in the signatures on the checks. Ilusorio had to
establish the fact of forgery which he failed to do by failing to
submit his specimen signatures for NBI to conclusively establish
forgery.
Furthermore, the Bank was not negligent in verifying the checks
as they verified the drawer’s signatures against their specimen
signatures and in doubt, referred to more experienced verifier
for further verification.
On the contrary, it was Ilusorio who was found to be negligent.
He accorded his secretary with an unusual degree of trust and
unrestricted access to his finances. Furthermore, despite the
fact that the bank was regularly sending statements of account,
he failed to check them until he found out that his secretary
was using his credit cards.
Sec. 23 of the Negotiable Instruments law provides that a
forged check is inoperative, meaning there was no right to
enforce payment against any party. But it also provides an
exception: “unless the party against whom it is sought enforce
such right is precluded from setting up the forgery or want of
authority”. This case falls under the exception since Ilusorio is
precluded from setting up forgery due to his own negligence
considering that he allowed his secretary access to his credit
cards, checkbook, and allowed his secretary to verify his
statements of account.
METROPOLITAN BANK & TRUST COMPANY VS. COURT OF
APPEALS
FACTS:
Eduardo Gomez opened an account with Golden Savings and
Loan Association and deposited over a period of two months 38
treasury warrants with a total value of P1,755,228.37. All these
warrants were subsequently indorsed by Gloria Castillo as
Cashier of Golden Savings and deposited to its savings account
in the Metrobank branch in Calapan, Mindoro. They were then
sent for clearing by the branch office to the principal office of
Metrobank, which forwarded them to the Bureau of Treasury
for special clearing. Before they were cleared, petitioner
decided to allow Golden Savings to withdraw from the
proceeds of the warrants. Golden Savings in turn subsequently
allowed Gomez to make withdrawals from his own account.
Subsequently, 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.
Metrobank contends 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 Section
66 of the Negotiable Instruments Law.
ISSUE:
Whether petitioner can hold Golden Savings liable as an
indorser of the treasury warrants based on the predication that
the treasury warrants involved in this case are negotiable
instruments.
RULING:
Clearly stamped on the face of the treasury warrants is the
word "non-negotiable." It is also indicated that they are
payable from a particular fund, to wit, Fund 501. 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.
Petitioner cannot hold Golden Savings liable as an indorser
under Section 66 of the NIL for the simple reason that this law
is not applicable to the non-negotiable treasury warrants.
SAMSUNG VS. FEBTC
FACTS:
A check drawn against petitioner was presented for payment to
respondent Bank. Satisfied with the authenticity of the
signature appearing thereon, the check was encashed. The
following day, petitioner’s accountant who had custody of the
company checks discovered that a check was missing and
reported the petitioner’s project manager who is also the sole
signatory to its checking account. Petitioner demanded that it
be reimbursed for the proceeds of the check.
ISSUE(S):
Whether or not respondent bank is liable to reimburse for the
payment of the forged check.
RULING:
YES. Banks are engaged in a business impressed with public
interest, and it is their duty to protect in return their many
clients and depositors who transact business with them. They
have the obligation to treat their client’s account meticulously
and with the highest degree of care, considering the fiduciary
nature of their relationship. The diligence required of banks,
therefore, is more than that of a good father of a family. Given
the circumstances, extraordinary diligence dictates that FEBTC
should have ascertained from Jong personally that the
signature in the questionable check was his. Since the drawer,
Samsung Construction, is not precluded by negligence from
setting up the forgery, the general rule should apply.
Consequently, if a bank pays a forged check, it must be
considered as paying out of its funds and cannot charge the
amount so paid to the account of the depositor. A bank is liable,
irrespective of its good faith, in paying a forged check.
ENGR. JOSE CAYANAN VS NORTH STAR
FACTS:
North Star International Travel Incorporated (North Star) is a
corporation engaged in the travel agency business while
petitioner is the owner/general manager of JEAC International
Management and Contractor Services, a recruitment agency.
On March 17, 1994, Virginia Balagtas, the General Manager of
North Star, in accommodation and upon the instruction of its
client, petitioner herein, sent the amount of US$60,000 to View
Sea Ventures Ltd., in Nigeria from her personal account in
Citibank Makati. On March 29, 1994, Virginia again sent
US$40,000 to View Sea Ventures by telegraphic transfer, with
US$15,000 coming from petitioner. Likewise, on various dates,
North Star extended credit to petitioner for the airplane tickets
of his clients, with the total amount of such indebtedness under
the credit extensions eventually reaching P510,035.47. To
cover payment of the foregoing obligations, petitioner issued
five checks to North Star. When presented for payment, the
checks in the amount of P1,500,000 and P35,000 were
dishonored for insufficiency of funds while the other three
checks were dishonored because of a stop payment order from
petitioner. North Star, through its counsel, wrote petitioner on
September 14, 1994 informing him that the checks he issued
had been dishonored. North Star demanded payment, but
petitioner failed to settle his obligations. Hence, North Star
instituted Criminal Case Nos. 166549-53 charging petitioner
with violation of Batas Pambansa Blg. 22, or the Bouncing
Checks Law before the Metropolitan Trial Court (MeTC) of
Makati City.
ISSUE:
Whether or not the checks were issued for a valuable
consideration entitling respondent to damages.
RULING:
Yes. We have held that upon issuance of a check, in the
absence of evidence to the contrary, it is presumed that the
same was issued for valuable consideration which may consist
either in some right, interest, profit or benefit accruing to the
party who makes the contract, or some forbearance,
detriment, loss or some responsibility, to act, or labor, or
service given, suffered or undertaken by the other side. Under
the Negotiable Instruments Law , it is presumed that every
party to an instrument acquires the same for a consideration or
for value. As petitioner alleged that there was no consideration
for the issuance of the subject checks, it devolved upon him to
present convincing evidence to overthrow the presumption
and prove that the checks were in fact issued without valuable
consideration. Sadly, however, petitioner has not presented
any credible evidence to rebut the presumption, as well as
North Stars assertion, that the checks were issued as payment
for the US$85,000 petitioner owed.
Petitioner claims that North Star did not give any valuable
consideration for the checks since the US$85,000 was taken
from the personal dollar account of Virginia and not the
corporate funds of North Star. The contention, however,
deserves scant consideration. The subject checks, bearing
petitioners signature, speak for themselves. The fact that
petitioner himself specifically named North Star as the payee of
the checks is an admission of his liability to North Star and not
to Virginia Balagtas, who as manager merely facilitated the
transfer of funds. Indeed, it is highly inconceivable that an
experienced businessman like petitioner would issue various
checks in sizeable amounts to a payee if these are without
consideration. Moreover, we note that Virginia Balagtas
averred in her Affidavit that North Star caused the payment of
the US$60,000 and US$25,000 to View Sea Ventures to
accommodate petitioner, which statement petitioner failed to
refute. In addition, petitioner did not question the Statement
of Account No. 8639 dated August 31, 1994 issued by North
Star which contained itemized amounts including the
US$60,000 and US$25,000 sent through telegraphic transfer to
View Sea Ventures per his instruction. Thus, the inevitable
conclusion is that when petitioner issued the subject checks to
North Star as payee, he did so to settle his obligation with North
Star for the US$85,000. And since the only payment petitioner
made to North Star was in the amount of P220,000.00, which
was applied to interest due, his liability is not extinguished.
Having failed to fully settle his obligation under the checks, the
appellate court was correct in holding petitioner liable to pay
the value of the five checks he issued in favor of North Star.
LEODEGARIO BAYANI VS CA
FACTS:
On August 20, 1992, Alicia Rubia arrived at the grocery store of
Dolores Evangelista in Candelaria,Quezon, and asked the latter
to rediscount a PSBank Check in the amount of P55,000.00. The
check wasdrawn by Leodegario Bayani against his account with
the PSBank and postdated August 29, 1992. Rubiatold
Evangelista that Bayani asked her to rediscount the check for
him because he needed the money.Considering that Rubia and
Bayani were long-time customers at the store and she knew
Bayani to be agood man, Evangelista agreed to rediscount the
check. Rubia endorsed the check, and Evangelista gaveher
P55,000.00. However, when Evangelista deposited the check in
her account with the Far East Bank &Trust Company on
September 11, 1992, it was dishonored by the drawee bank for
the reason that onSeptember 1, 1992, Bayani closed his
account with the PSBank. As of August 27, 1992, the balance
ofBayani’s account with the bank was P2,414.96. Evangelista
then informed Rubia of the dishonor of thecheck and
demanded the return of her P55,000.00. Bayani testified that
sometime in 1992, he changedhis residence and in the process,
his wife lost four (4) blank checks, one of which was the subject
CheckNo. 054936. He did not report however the loss to the
police authorities. He reported such loss to thebank only after
Evangelista demanded the refund of the P55,000.00 from his
wife. He then closed hisaccount with the bank on September
11, 1992, but was informed that he had closed his account
muchearlier. Petitioner contend that the prosecution failed to
prove that the check was issued for valuableconsideration
because he denied ever receiving the amount of P55,000.00
from Rubia.
ISSUE:
(1) Whether or not there was absence or failure of
consideration.
(2) WON Bayani is guilty of violating B.P. 22
RULING:
(1) No.The presumption of consideration is proven when the
Court noted that the evidence on record shows that
Evangelista rediscounted the check and gave P55,000.00
to Rubia after the latter endorsed the same. As such,
Evangelista is a holder of the check in due course. Under
Section 28 of the Negotiable Instruments Law, absence or
failure of consideration is a matter of defense only as
against any person not a holder in due course, thus, Bayani
is liable. Such presumption cannot be overcome by the
petitioner’s bare denial of receipt of the amount of
P55,000.00 from Rubia.
(2) Yes. In this case, the prosecution adduced documentary
evidence that when the petitioner issued the subject check
on or about August 20, 1992, the balance of his account
with the drawee bank was only P2,414.96. During the
conference in the office of Atty. Emmanuel Velasco,
Evangelista showed to the petitioner and his wife a
photocopy of the subject check, with the notation at its
dorsal portion that it was dishonored for the reason
account closed. Despite Evangelista ’s demands, the
petitioner refused to pay the amount of the check and,
with his wife, pointed to Rubia as the one liable for the
amount. The collective evidence of the prosecution points
to the fact that at the time the petitioner drew and issued
the check, he knew that the residue of the funds in his
account with the drawee bank was insufficient to pay the
amount of the check.
TOMAS ANG VS. ASSOCIATED BANK
FACTS:
On August 28, 1990, respondent Associated Bank (formerly
Associated Banking Corporation and now known as United
Overseas Bank Philippines) filed a collection suit against
Antonio Ang Eng Liong and petitioner Tomas Ang for the two
(2) promissory notes that they executed as principal debtor and
co-maker, respectively. In the Complaint, respondent Bank
alleged that on October 3 and 9, 1978, the defendants obtained
a loan of P evidenced by a promissory note bearing PN-No.
DVO-78-382, and P 50,000, 30,000, evidenced by a promissory
note bearing PNNo. DVO-78-390. As agreed, the loan would be
payable, jointly and severally, on January 31, 1979 and
December 8, 1978, respectively. In addition, subsequent
amendments to the promissory notes as well as the disclosure
statements6 stipulated that the loan would earn 14% interest
rate per annum, 2% service charge per annum, 1% penalty
charge per month from due date until fully paid, and attorney’s
fees equivalent to 20% of the outstanding obligation. Despite
repeated demands for payment, the latest of which were on
September 13, 1988 and September 9, 1986, on Antonio Ang
Eng Liong and Tomas Ang, respectively, respondent Bank
claimed that the defendants failed and refused to settle their
obligation, resulting in a total indebtedness of P 539,638.96 as
of July 31, 1990. In his Answer, Antonio Ang Eng Liong only
admitted to have secured a loan amounting to P 80,000. He
pleaded though that the bank “be ordered to submit a more
reasonable computation” considering that there had been “no
correct and reasonable statement of account” sent to him by
the bank, which was allegedly collecting excessive interest,
penalty charges, and attorney’s fees despite knowledge that his
business was destroyed by fire, hence, he had no source of
income for several years. For his part, petitioner Tomas Ang
filed an Answer with Counterclaim and Cross-claim. He
interposed the affirmative defenses that: the bank is not the
real party in interest as it is not the holder of the promissory
notes, much less a holder for value or a holder in due course;
the bank knew that he did not receive any valuable
consideration for affixing his signatures on the notes but merely
lent his name as an accommodation party; he accepted the
promissory notes in blank, with only the printed provisions and
the signature of Antonio Ang Eng Liong appearing therein.
ISSUE:
Whether or not Petitioner is liable to the obligation despite
being a mere co-maker and accommodation party.
RULING:
Yes. Notably, Section 29 of the NIL defines an accommodation
party as a person “who has signed the instrument as maker,
drawer, acceptor, or indorser, without receiving value therefor,
and for the purpose of lending his name to some other person.”
As gleaned from the text, an accommodation party is one who
meets all the three requisites, viz: (1) he must be a party to the
instrument, signing as maker, drawer, acceptor, or indorser; (2)
he must not receive value therefor; and (3) he must sign for the
purpose of lending his name or credit to some other person. An
accommodation party lends his name to enable the
accommodated party to obtain credit or to raise money; he
receives no part of the consideration for the instrument but
assumes liability to the other party/ies thereto. The
accommodation party is liable on the instrument to a holder for
value even though the holder, at the time of taking the
instrument, knew him or her to be merely an accommodation
party, as if the contract was not for accommodation.
As petitioner acknowledged it to be, the relation between an
accommodation party and the accommodated party is one of
principal and surety – the accommodation party being the
surety. from the beginning; As such, he is deemed an original
promisor and debtor he is considered in law as the same party
as the debtor in relation to whatever is adjudged touching the
obligation of the latter since their liabilities are interwoven as
to be inseparable. Although a contract of suretyship is in
essence accessory or collateral to a valid principal obligation,
the surety’s liability to the creditor is immediate, primary and
absolute; he is directly and equally bound with the principal. As
an equivalent of a regular party to the undertaking, a surety
becomes liable to the debt and duty of the principal obligor
even without possessing a direct or personal interest in the
obligations nor does he receive any benefit therefrom.
In the instant case, petitioner agreed to be “jointly and
severally” liable under the two promissory notes that he co-
signed with Antonio Ang Eng Liong as the principal debtor. This
being so, it is completely immaterial if the bank would opt to
proceed only against petitioner or Antonio Ang Eng Liong or
both of them since the law confers upon the creditor the
prerogative to choose whether to enforce the entire obligation
against any one, some or all of the debtors. Nonetheless,
petitioner, as an accommodation party, may seek
reimbursement from Antonio Ang Eng Liong, being the party
accommodated.
Consequently, in issuing the two promissory notes, petitioner
as accommodating party warranted to the holder in due course
that he would pay the same according to its tenor. value
therefore It is no defense to state on his part that he did not
receive any because the phrase “without receiving value
therefor” used in Sec. 29 of the NIL means “without receiving
value by virtue of the instrument” and not as it is apparently
supposed to mean, “without receiving payment for lending his
name.” Stated differently, when a third person advances the
face value of the note to the accommodated party at the time
of its creation, the consideration for the note as regards its
maker is the money advanced to the accommodated party. It is
enough that value was given for the note at the time of its
creation. As in the instant case, a sum of money was received
by virtue of the notes, hence, it is immaterial so far as the bank
is concerned whether one of the signers, particularly petitioner,
has or has not received anything in payment of the use of his
name.
Furthermore, since the liability of an accommodation party
remains not only primary but also unconditional to a holder for
value, even if the accommodated party receives an extension
of the period for payment without the consent of the
accommodation party, the latter is still liable for the whole
obligation and such extension does not release him because as
far as a holder for value is concerned, he is a solidary co-debtor.
EULALIO PRUDENCIO VS COURT OF APPEALS
FACTS:
In 1955, Concepcion and Tamayo Construction Enterprise had
a contract with the Bureau of Public Works. The firm needed
fund to push through with the contract so it convinced spouses
Eulalio and Elisa Prudencio to mortgage their parcel of land with
the Philippine National Bank for P10,000.00. Prudencio,
without consideration, agreed and so he mortgaged the land
and executed a promissory note for P10k in favor of PNB.
Prudencio also authorized PNB to issue the P10k check to the
construction firm.
In December 1955, the firm executed a Deed of Assignment in
favor of PNB which provides that any payment from the Bureau
of Public Works in consideration of work done (by the firm) so
far shall be paid directly to PNB – this will also ensure that the
loan gets to be paid off before maturity.
Notwithstanding the provision in the Deed of Assignment, the
Bureau of Public Works asked PNB if it can make the payments
instead to the firm because the firm needs the money to buy
construction materials to complete the project.
Notwithstanding the provision of the Deed of Assignment, PNB
agreed. And so the loan matured without PNB actually receiving
any payment from the Bureau of Public Works. Prudencio, upon
learning that no payment was made on the loan, petitioned to
have the mortgage canceled (to save his property from
foreclosure). The trial court ruled against Prudencio; the Court
of Appeals affirmed the trial court.
ISSUE:
Whether or not Prudencio should pay the promissory note to
PNB.
RULIG:
No. PNB is not a holder in due course.
Prudencio is an accommodation party for he signed the
promissory note as maker but he did not receive value or
consideration therefor. He expected the firm (accommodated
party) to pay the loan – this obligation was shifted to the Bureau
of Public Works by way of the Deed of Assignment). As a general
rule, an accommodation party is liable on the instrument to a
holder for value/in due course, notwithstanding such holder at
the time of taking the instrument knew him to be only an
accommodation party. The exception is that if the holder, in this
case PNB, is not a holder in due course. The court finds that PNB
is not a holder in due course because it has not acted in good
faith (pursuant to Section 52 of the Negotiable Instruments
Law) when it waived the supposed payments from the Bureau
of Public Works contrary to the Deed of Assignment. Had the
Deed been followed, the loan would have been paid off at
maturity.
BAUTISTA VS. AUTO PLUS TRADERS
FACTS:
Bautista, in his capacity as President of Cruiser Bus Lines and
Transport Corporation, purchased various spare parts from
Auto Plus Traders, Inc. (Auto Plus) and issued 2 post-dated
checks amounting to P151,200.00 and P97,500.00 to cover his
purchases. The checks were subsequently dishonored. Auto
Plus then executed an affidavit-complaint for violation of BP.
Blg. 22 against Bautista. Consequently, 2Informations for
violation of BP Blg. 22 were filed with the Municipal Trial Court
inCities (MTCC) of Davao against Bautista. The first decision of
the MTCC directed Cruiser Bus Line[s] and Transport
Corporation, through Bautista to pay the complainant the value
of the twochecks plus interests and other fees such as filing
fees.It was modified, and Bautista himself was directed to pay
for the liabilities to Auto Plus. The CA affirmed the decision.
Bautista asserts that BP Blg. 22 merely pertains to the criminal
liability of the accused and that the corporation, which has a
separate personality from its officers, is solely liable for the
value of the two checks. Auto Plus counters that Bautista should
be held personally liable for both checks, alleging that Bautista
issued two post-dated checks: a personal check in his and a
corporation check under the account of Cruiser Bus Lines.
According to Autoplus, Bautista, by issuing his check to cover
the obligation of the corporation, became an accommodation
party.
ISSUE:
W/N Bautista became an accommodation party, making him
personally and civilly liable to the Auto Plus for the value of the
two checks.
RULING
No. Contrary to Autoplus's contentions, Bautista cannot be
considered liable as an accommodation party. Section 29 of the
Negotiable Instruments Law defines an accommodation party
asa person "who has signed the instrument as maker, drawer,
acceptor, or indorser, without receiving valuetherefor, and for
the purpose of lending his name to some other person." As
gleaned from the text, an accommodation party is one who
meets all the three requisites:1. He must be a party to the
instrument, signing as maker, drawer, acceptor, or indorser;2.
He must not receive value therefor; and3. He must sign for the
purpose of lending his name or credit to some other person. An
accommodation party lends his name to enable the
accommodated party to obtain credit or to raise money; he
receives no part of the consideration for the instrument but
assumes liability to the other party/ies thereto. The first two
elements are present here, however there is insufficient
evidence presented in the instant case to show the presence of
the third requisite. All that the evidence shows is that petitioner
signed Check No. 58832, which is drawn against his personal
account. The said check, dated December 15, 2000,
corresponds to the value of 24 sets of tires received by Cruiser
Bus Lines and Transport Corporation on August 29, 2000. There
is no showing of when petitioner issued the check and in what
capacity. In the absence of concrete evidence it cannot just be
assumed that petitioner intended to lend his name to the
corporation. Hence, petitioner cannot be considered as an
accommodation party.
GONZALES V. PCIB
FACTS:
Petitioner was a client of PCIB for a good 15 years and was
granted a credit line with the aggregate amount of his accounts
as collateral for the availment of the said line. Petitioner served
as an accommodation party to spouses Panlilio who obtained
loans covered by promissory notes, notably stating that
petitioner is solidary liable with the spouses for the payment of
the loans. The loan was granted and the spouses received the
proceeds but subsequently defaulted in the payment of said
dues. As a result, the credit line was terminated and the FCD
account of petitioner was frozen. In the meantime, Gonzales
issued a check but was dishonored which resulted to a falling
out and a heated argument causing him great embarrassment
and humiliation. Petitioner filed a case with the RTC on account
of the alleged unjust dishonor of the check. RTC ruled in favor
of PCIB. CA affirmed in toto.
ISSUE:
Whether or not PCIB acted in bad faith by dishonoring the
check of petitioner.
RULING: YES.
In the instant case, Gonzales suffered from the negligence and
bad faith of PCIB. From the testimonies of Gonzales’ witnesses,
particularly those of Dominador Santos and Freddy Gomez, the
embarrassment and humiliation Gonzales has to endure not
only before his former close friend Unson but more from the
members and families of his friends and associates in the PCA,
which he continues to experience considering the
confrontation he had with Unson and the consequent loss of
standing and credibility among them from the fact of the
apparent bouncing check he issued. Credit is very important to
businessmen and its loss or impairment needs to be recognized
and compensated.
Even in the absence of malice or bad faith, a depositor still has
the right to recover reasonable moral damages, if the depositor
suffered mental anguish, serious anxiety, embarrassment, and
humiliation. Although incapable of pecuniary estimation, moral
damages are certainly recoverable if they are the proximate
result of the defendant’s wrongful act or omission. The factual
antecedents bolstered by undisputed testimonies likewise
show the mental anguish and anxiety Gonzales had to endure
with the threat of Unson to file a suit. Gonzales had to pay
Unson PhP 250,000, while his FCD account in PCIB was frozen,
prompting Gonzales to demand from PCIB and to file the
instant suit.