Republic of the Philippines with Rene C. Naybe and Gregorio D.
Pantanosas on
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 96405 June 26, 1996
BALDOMERO INCIONG, JR., petitioner,
vs.
COURT OF APPEALS and PHILIPPINE BANK
OF COMMUNICATIONS, respondents.
ROMERO, J.:p
This is a petition for review on certiorari of the
decision of the Court of Appeals affirming that of
the Regional Trial Court of Misamis Oriental,
Branch 18,1 which disposed of Civil Case No.
10507 for collection of a sum of money and
damages, as follows:
WHEREFORE, defendant
BALDOMERO L. INCIONG, JR. is
adjudged solidarily liable and
ordered to pay to the plaintiff
Philippine Bank of Communications,
Cagayan de Oro City, the amount of
FIFTY THOUSAND PESOS
(P50,000.00), with interest thereon
from May 5, 1983 at 16% per
annum until fully paid; and 6% per
annum on the total amount due, as
liquidated damages or penalty from
May 5, 1983 until fully paid; plus
10% of the total amount due for
expenses of litigation and attorney's
fees; and to pay the costs.
The counterclaim, as well as the
cross claim, are dismissed for lack of
merit.
SO ORDERED.
Petitioner's liability resulted from the promissory
note in the amount of P50,000.00 which he signed
February 3, 1983, holding themselves jointly and
severally liable to private respondent Philippine
Bank of Communications, Cagayan de Oro City
branch. The promissory note was due on May 5,
1983.
Said due date expired without the promissors having
paid their obligation. Consequently, on November
14, 1983 and on June 8, 1984, private respondent
sent petitioner telegrams demanding payment
thereof.2 On December 11, 1984 private respondent
also sent by registered mail a final letter of demand
to Rene C. Naybe. Since both obligors did not
respond to the demands made, private respondent
filed on January 24, 1986 a complaint for collection
of the sum of P50,000.00 against the three obligors.
On November 25, 1986, the complaint was
dismissed for failure of the plaintiff to prosecute the
case. However, on January 9, 1987, the lower court
reconsidered the dismissal order and required the
sheriff to serve the summonses. On January 27,
1987, the lower court dismissed the case against
defendant Pantanosas as prayed for by the private
respondent herein. Meanwhile, only the summons
addressed to petitioner was served as the sheriff
learned that defendant Naybe had gone to Saudi
Arabia.
In his answer, petitioner alleged that sometime in
January 1983, he was approached by his friend,
Rudy Campos, who told him that he was a partner
of Pio Tio, the branch manager of private
respondent in Cagayan de Oro City, in the falcata
logs operation business. Campos also intimated to
him that Rene C. Naybe was interested in the
business and would contribute a chainsaw to the
venture. He added that, although Naybe had no
money to buy the equipment, Pio Tio had assured
Naybe of the approval of a loan he would make
with private respondent. Campos then persuaded
petitioner to act as a "co-maker" in the said loan.
Petitioner allegedly acceded but with the
understanding that he would only be a co-maker for
the loan of P50,000.00.
Petitioner alleged further that five (5) copies of a
blank promissory note were brought to him by
Campos at his office. He affixed his signature
thereto but in one copy, he indicated that he bound
himself only for the amount of P5,000.00. Thus, it
was by trickery, fraud and misrepresentation that he
was made liable for the amount of P50,000.00.
In the aforementioned decision of the lower court, it
noted that the typewritten figure "-- 50,000 --"
clearly appears directly below the admitted
signature of the petitioner in the promissory
note. 3 Hence, the latter's uncorroborated testimony
on his limited liability cannot prevail over the
presumed regularity and fairness of the transaction,
under Sec. 5 (q) of Rule 131. The lower court added
that it was "rather odd" for petitioner to have
indicated in a copy and not in the original, of the
promissory note, his supposed obligation in the
amount of P5,000.00 only. Finally, the lower court
held that, even granting that said limited amount
had actually been agreed upon, the same would
have been merely collateral between him and Naybe
and, therefore, not binding upon the private
respondent as creditor-bank.
The lower court also noted that petitioner was a
holder of a Bachelor of Laws degree and a labor
consultant who was supposed to take due care of his
concerns, and that, on the witness stand, Pio Tio
denied having participated in the alleged business
venture although he knew for a fact that the falcata
logs operation was encouraged by the bank for its
export potential.
Petitioner appealed the said decision to the Court of
Appeals which, in its decision of August 31, 1990,
affirmed that of the lower court. His motion for
reconsideration of the said decision having been
denied, he filed the instant petition for review
on certiorari.
On February 6, 1991, the Court denied the petition
for failure of petitioner to comply with the Rules of
Court and paragraph 2 of Circular
No. 1-88, and to sufficiently show that respondent
court had committed any reversible error in its
questioned decision.4 His motion for the
reconsideration of the denial of his petition was
likewise denied with finality in the Resolution of
April 24, 1991.5 Thereafter, petitioner filed a motion
for leave to file a second motion for reconsideration
which, in the Resolution of May 27, 1991, the Court
denied. In the same Resolution, the Court ordered
the entry of judgment in this case.6
Unfazed, petitioner filed a notion for leave to file a
motion for clarification. In the latter motion, he
asserted that he had attached Registry Receipt No.
3268 to page 14 of the petition in compliance with
Circular No. 1-88. Thus, on August 7, 1991, the
Court granted his prayer that his petition be given
due course and reinstated the same.7
Nonetheless, we find the petition unmeritorious.
Annexed to the petition is a copy of an affidavit
executed on May 3, 1988, or after the rendition of
the decision of the lower court, by Gregorio
Pantanosas, Jr., an MTCC judge and petitioner's co-
maker in the promissory note. It supports
petitioner's allegation that they were induced to sign
the promissory note on the belief that it was only for
P5,000.00, adding that it was Campos who caused
the amount of the loan to be increased to
P50,000.00.
The affidavit is clearly intended to buttress
petitioner's contention in the instant petition that the
Court of Appeals should have declared the
promissory note null and void on the following
grounds: (a) the promissory note was signed in the
office of Judge Pantanosas, outside the premises of
the bank; (b) the loan was incurred for the purpose
of buying a second-hand chainsaw which cost only
P5,000.00; (c) even a new chainsaw would cost
only P27,500.00; (d) the loan was not approved by
the board or credit committee which was the
practice, as it exceeded P5,000.00; (e) the loan had
no collateral; (f) petitioner and Judge Pantanosas
were not present at the time the loan was released in
contravention of the bank practice, and (g) notices
of default are sent simultaneously and separately but
no notice was validly sent to him.8 Finally,
petitioner contends that in signing the promissory
note, his consent was vitiated by fraud as, contrary
to their agreement that the loan was only for the
amount of P5,000.00, the promissory note stated the
amount of P50,000.00.
The above-stated points are clearly factual.
Petitioner is to be reminded of the basic rule that
this Court is not a trier of facts. Having lost the
chance to fully ventilate his factual claims below,
petitioner may no longer be accorded the same
opportunity in the absence of grave abuse of
discretion on the part of the court below. Had he
presented Judge Pantanosas affidavit before the
lower court, it would have strengthened his claim
that the promissory note did not reflect the correct
amount of the loan.
Nor is there merit in petitioner's assertion that since
the promissory note "is not a public deed with the
formalities prescribed by law but . . . a mere
commercial paper which does not bear the signature
of . . . attesting witnesses," parol evidence may
"overcome" the contents of the promissory
note.9 The first paragraph of the parol evidence
rule 10 states:
When the terms of an agreement
have been reduced to writing, it is
considered as containing all the
terms agreed upon and there can be,
between the parties and their
successors in interest, no evidence of
such terms other than the contents of
the written agreement.
Clearly, the rule does not specify that the
written agreement be a public document.
What is required is that the agreement be in
writing as the rule is in fact founded on "long
experience that written evidence is so much more
certain and accurate than that which rests in fleeting
memory only, that it would be unsafe, when parties
have expressed the terms of their contract in
writing, to admit weaker evidence to control and
vary the stronger and to show that the
parties intended a different contract from that
expressed in the writing signed by them." 11 Thus,
for the parol evidence rule to apply, a written
contract need not be in any particular form, or be
signed by both parties. 12 As a general rule, bills,
notes and other instruments of a similar nature are
not subject to be varied or contradicted by parol or
extrinsic evidence. 13
By alleging fraud in his answer, 14 petitioner was
actually in the right direction towards proving that
he and his co-makers agreed to a loan of P5,000.00
only considering that, where a parol
contemporaneous agreement was the inducing and
moving cause of the written contract, it may be
shown by parol evidence. 15 However, fraud must be
established by clear and convincing evidence, mere
preponderance of evidence, not even being
adequate. 16Petitioner's attempt to prove fraud must,
therefore, fail as it was evidenced only by his own
uncorroborated and, expectedly, self-serving
testimony.
Petitioner also argues that the dismissal of the
complaint against Naybe, the principal debtor, and
against Pantanosas, his co-maker, constituted a
release of his obligation, especially because the
dismissal of the case against Pantanosas was upon
the motion of private respondent itself. He cites as
basis for his argument, Article 2080 of the Civil
Code which provides that:
The guarantors, even though they be
solidary, are released from their
obligation whenever by some act of
the creditor, they cannot be
subrogated to the rights, mortgages,
and preferences of the latter.
It is to be noted, however, that petitioner signed the
promissory note as a solidary co-maker and not as a
guarantor. This is patent even from the first sentence
of the promissory note which states as follows:
Ninety one (91) days after date, for
value received, I/we, JOINTLY and
SEVERALLY promise to pay to the
PHILIPPINE BANK OF
COMMUNICATIONS at its office in
the City of Cagayan de Oro,
Philippines the sum of FIFTY
THOUSAND ONLY (P50,000.00)
Pesos, Philippine Currency, together
with interest . . . at the rate of
SIXTEEN (16) per cent per
annum until fully paid.
A solidary or joint and several obligation is one in
which each debtor is liable for the entire obligation,
and each creditor is entitled to demand the whole
obligation. 17 on the other hand, Article 2047 of the
Civil Code states:
By guaranty a person, called the
guarantor, binds himself to the
creditor to fulfill the obligation of the
principal debtor in case the latter
should fail to do so.
If a person binds himself solidarily
with the principal debtor, the
 provisions of Section 4, Chapter 3,
Title I of this Book shall be
observed. In such a case the contract
is called a suretyship. (Emphasis
supplied.)
While a guarantor may bind himself
solidarily with the principal debtor, the
liability of a guarantor is different from that
of a solidary debtor. Thus, Tolentino
explains:
As regards Naybe, suffice it to say that the court
never acquired jurisdiction over him. Petitioner,
therefore, may only have recourse against his co-
makers, as provided by law.
WHEREFORE, the instant petition for review
on certiorari is hereby DENIED and the questioned
decision of the Court of Appeals is AFFIRMED.
Costs against petitioner.
SO ORDERED.

A guarantor who binds himself in

solidum with the principal debtor
under the provisions of the second
paragraph does not become a
solidary co-debtor to all intents and
purposes. There is a difference
between a solidary co-debtor and
a fiador in solidum (surety). The
latter, outside of the liability he
assumes to pay the debt before the
property of the principal debtor has
been exhausted, retains all the other
rights, actions and benefits which
pertain to him by reason of
the fiansa; while a solidary co-debtor
has no other rights than those
bestowed upon him in Section 4,
Chapter 3, Title I, Book IV of the
Civil Code. 18

Section 4, Chapter 3, Title I, Book IV of the Civil

Code states the law on joint and several obligations.
Under Art. 1207 thereof, when there are two or
more debtors in one and the same obligation, the
presumption is that the obligation is joint so that
each of the debtors is liable only for a proportionate
part of the debt. There is a solidary liability only
when the obligation expressly so states, when the
law so provides or when the nature of the obligation
so requires. 19

Because the promissory note involved in this case

expressly states that the three signatories therein
are jointly and severally liable, any one, some or all
of them may be proceeded against for the entire
obligation. 20 The choice is left to the solidary
creditor to determine against whom he will enforce Republic of the Philippines
collection. 21 Consequently, the dismissal of the case SUPREME COURT
against Judge Pontanosas may not be deemed as Manila
having discharged petitioner from liability as well.
 EN BANC
G.R. No. L-27782 July 31, 1970
OCTAVIO A. KALALO, plaintiff-appellee,
vs.
ALFREDO J. LUZ, defendant-appellant.
Amelia K. del Rosario for plaintiff-appellee.
Pelaez, Jalandoni & Jamir for defendant-appellant.
ZALDIVAR, J.:
Appeal from the decision, dated, February 10, 1967,
of the Court of First Instance of Rizal (Branch V,
Quezon City) in its Civil Case No. Q-6561.
On November 17, 1959, plaintiff-appellee Octavio
A. Kalalo hereinafter referred to as appellee), a
licensed civil engineer doing business under the
firm name of O. A. Kalalo and Associates, entered
into an agreement (Exhibit A )1 with defendant-
appellant Alfredo J . Luz (hereinafter referred to
as appellant), a licensed architect, doing business
under firm name of A. J. Luz and Associates,
whereby the former was to render engineering
design services to the latter for fees, as stipulated in
the agreement. The services included design
computation and sketches, contract drawing and
technical specifications of all engineering phases of
the project designed by O. A. Kalalo and Associates
bill of quantities and cost estimate, and consultation
and advice during construction relative to the work.
The fees agreed upon were percentages of the
architect's fee, to wit: structural engineering, 12-½
%; electrical engineering, 2-½%. The agreement
was subsequently supplemented by a "clarification
to letter-proposal" which provided, among other
things, that "the schedule of engineering fees in this
agreement does not cover the following: ... D.
Foundation soil exploration, testing and evaluation;
E. Projects that are principally engineering works
such as industrial plants, ..." and "O. A. Kalalo and
Associates reserve the right to increase fees on
projects ,which cost less than
P100,000 ...."2 Pursuant to said agreement, appellee
rendered engineering services to appellant in the
following projects:
(a) Fil-American Life Insurance
Building at Legaspi City;
(b) Fil-American Life Insurance
Building at Iloilo City;
(c) General Milling Corporation
Flour Mill at Opon Cebu;
(d) Menzi Building at Ayala Blvd.,
Makati, Rizal;
(e) International Rice Research
Institute, Research center Los Baños,
Laguna;
(f) Aurelia's Building at Mabini,
Ermita, Manila;
(g) Far East Bank's Office at Fil-
American Life Insurance Building at
Isaac Peral Ermita, Manila;
(h) Arthur Young's residence at
Forbes Park, Makati, Rizal;
(i) L & S Building at Dewey Blvd.,
Manila; and
(j) Stanvac Refinery Service
Building at Limay, Bataan.
On December 1 1, '1961, appellee sent to appellant
a statement of account (Exhibit "1"),3 to which was
attached an itemized statement of defendant-
appellant's account (Exh. "1-A"), according to
which the total engineering fee asked by appellee
for services rendered amounted to P116,565.00
from which sum was to be deducted the previous
payments made in the amount of P57,000.00, thus
leaving a balance due in the amount of P59,565.00.
On May 18, 1962 appellant sent appellee a resume
of fees due to the latter. Said fees, according to
appellant. amounted to P10,861.08 instead of the
amount claimed by the appellee. On June 14, 1962
appellant sent appellee a check for said amount,
which appellee refused to accept as full payment of
the balance of the fees due him.
On August 10, 1962, appellee filed a complaint
against appellant, containing four causes of action.
In the first cause of action, appellee alleged that for
services rendered in connection with the different
projects therein mentioned there was due him fees
in sum s consisting of $28,000 (U.S.) and
P100,204.46, excluding interests, of which sums
only P69,323.21 had been paid, thus leaving unpaid
the $28,000.00 and the balance of P30,881.25. In
the second cause of action, appellee claimed
P17,000.00 as consequential and moral damages; in
the third cause of action claimed P55,000.00 as
moral damages, attorney's fees and expenses of
litigation; and in the fourth cause of action he
claimed P25,000.00 as actual damages, and also for
attorney's fees and expenses of litigation.
In his answer, appellant admitted that appellee
rendered engineering services, as alleged in the first
cause of action, but averred that some of appellee's
services were not in accordance with the agreement
and appellee's claims were not justified by the
services actually rendered, and that the aggregate
amount actually due to appellee was only
P80,336.29, of which P69,475.21 had already been
paid, thus leaving a balance of only P10,861.08.
Appellant denied liability for any damage claimed
by appellee to have suffered, as alleged in the
second, third and fourth causes of action. Appellant
also set up affirmative and special defenses,
alleging that appellee had no cause of action, that
appellee was in estoppel because of certain acts,
representations, admissions and/or silence, which
led appellant to believe certain facts to exist and to
act upon said facts, that appellee's claim regarding
the Menzi project was premature because appellant
had not yet been paid for said project, and that
appellee's services were not complete or were
performed in violation of the agreement and/or
otherwise unsatisfactory. Appellant also set up a
counterclaim for actual and moral damages for such
amount as the court may deem fair to assess, and for
attorney's fees of P10,000.00.
Inasmuch as the pleadings showed that the
appellee's right to certain fees for services rendered
was not denied, the only question being the
assessment of the proper fees and the balance due to
appellee after deducting the admitted payments
made by appellant, the trial court, upon agreement
of the parties, authorized the case to be heard before
a Commissioner. The Commissioner rendered a
report which, in resume, states that the amount due
to appellee was $28,000.00 (U.S.) as his fee in the
International Research Institute Project which was
twenty percent (20%) of the $140,000.00 that was
paid to appellant, and P51,539.91 for the other
projects, less the sum of P69,475.46 which was
already paid by the appellant. The Commissioner
also recommended the payment to appellee of the
sum of P5,000.00 as attorney's fees.
At the hearing on the Report of the Commissioner,
the respective counsel of the parties manifested to
the court that they had no objection to the findings
of fact of the Commissioner contained in the
Report, and they agreed that the said Report posed
only two legal issues, namely: (1) whether under the
facts stated in the Report, the doctrine of estoppel
would apply; and (2) whether the recommendation
in the Report that the payment of the amount. due to
the plaintiff in dollars was legally permissible, and
if not, at what rate of exchange it should be paid in
pesos. After the parties had submitted their
respective memorandum on said issues, the trial
court rendered its decision dated February 10, 1967,
the dispositive portion of which reads as follows:
WHEREFORE, judgment is
rendered in favor of plaintiff and
against the defendant, by ordering
the defendant to pay plaintiff the sum
of P51,539.91 and $28,000.00, the
latter to be converted into the
Philippine currency on the basis of
the current rate of exchange at the
time of the payment of this
judgment, as certified to by the
Central Bank of the Philippines,
from which shall be deducted the
sum of P69,475.46, which the
defendant had paid the plaintiff, and
the legal rate of interest thereon from
the filing of the complaint in the case
until fully paid for; by ordering the
defendant to pay to plaintiff the
further sum of P8,000.00 by way of
attorney's fees which the Court finds
to be reasonable in the premises,
with costs against the defendant. The
counterclaim of the defendant is
ordered dismissed.
From the decision, this appeal was brought, directly
to this Court, raising only questions of law.
During the pendency of this appeal, appellee filed a
petition for the issuance of a writ of attachment
under Section 1 (f) of Rule 57 of the Rules of Court
upon the ground that appellant is presently residing
in Canada as a permanent resident thereof. On June
3, 1969, this Court resolved, upon appellee's posting
a bond of P10,000.00, to issue the writ of
attachment, and ordered the Provincial Sheriff of
Rizal to attach the estate, real and personal, of
appellant Alfredo J. Luz within the province, to the
value of not less than P140,000.00.
The appellant made the following assignments of
errors:
I. The lower court erred in not
declaring and holding that plaintiff-
appellee's letter dated December 11,
1961 (Exhibit "1") and the statement
of account (Exhibit "1-A") therein
enclosed, had the effect,
cumulatively or alternatively, of
placing plaintiff-appellee in estoppel
from thereafter modifying the
representations made in said exhibits,
or of making plaintiff-appellee
otherwise bound by said
representations, or of being of
decisive weight in determining the
true intent of the parties as to the
nature and extent of the engineering
services rendered and/or the amount
of fees due.
II. The lower court erred in declaring
and holding that the balance owing
from defendant-appellant to plaintiff-
appellee on the IRRI Project should
be paid on the basis of the rate of
exchange of the U.S. dollar to the
Philippine peso at the time of
payment of judgment. .
III. The lower court erred in not
declaring and holding that the
aggregate amount of the balance due
from defendant-appellant to plaintiff-
appellee is only P15,792.05.
IV. The lower court erred in
awarding attorney's fees in the sum
of P8,000.00, despite the
commissioner's finding, which
plaintiff-appellee has accepted and
has not questioned, that said fee be
only P5,000.00; and
V. The lower court erred in not
granting defendant-appellant relief
on his counter-claim.
1. In support of his first assignment of error
appellant argues that in Exhibit 1-A, which is a
statement of accounts dated December 11, 1961,
sent by appellee to appellant, appellee specified the
various projects for which he claimed engineering
fees, the precise amount due on each particular
engineering service rendered on each of the various
projects, and the total of his claims; that such a
statement barred appellee from asserting any claim
contrary to what was stated therein, or from taking
any position different from what he asserted therein
with respect to the nature of the engineering
services rendered; and consequently the trial court
could not award fees in excess of what was stated in
said statement of accounts. Appellant argues that for
estoppel to apply it is not necessary, contrary to the
ruling of the trial court, that the appellant should
have actually relied on the representation, but that it
is sufficient that the representations were intended
to make the defendant act there on; that
assuming arguendo that Exhibit 1-A did not put
appellee in estoppel, the said Exhibit 1-A
nevertheless constituted a formal admission that
would be binding on appellee under the law on
evidence, and would not only belie any inconsistent
claim but also would discredit any evidence
adduced by appellee in support of any claim
inconsistent with what appears therein; that,
moreover, Exhibit 1-A, being a statement of
account, establishes prima facie the accuracy and
correctness of the items stated therein and its
correctness can no longer be impeached except for
fraud or mistake; that Exhibit 1-A furthermore,
constitutes appellee's own interpretation of the
contract between him and appellant, and hence, is
conclusive against him.
On the other hand, appellee admits that Exhibit 1-A
itemized the services rendered by him in the various
construction projects of appellant and that the total
engineering fees charged therein was P116,565.00,
but maintains that he was not in estoppel: first,
because when he prepared Exhibit 1-A he was
laboring under an innocent mistake, as found by the
trial court; second, because appellant was not
ignorant of the services actually rendered by
appellee and the fees due to the latter under the
original agreement, Exhibit "A."
We find merit in the stand of appellee.
The statement of accounts (Exh. 1-A) could not
estop appellee, because appellant did not rely
thereon as found by the Commissioner, from whose
Report we read:
While it is true that plaintiff
vacillated in his claim, yet, defendant
did not in anyway rely or believe in
the different claims asserted by the
plaintiff and instead insisted on a
claim that plaintiff was only entitled
to P10,861.08 as per a separate
resume of fees he sent to the plaintiff
on May 18, 1962 (See Exhibit 6).4
The foregoing finding of the Commissioner, not
disputed by appellant, was adopted by the trial court
in its decision. Under article 1431 of the Civil Code,
in order that estoppel may apply the person, to
whom representations have been made and who
claims the estoppel in his favor must have relied or
acted on such representations. Said article provides:
Art. 1431. Through estoppel an
admission or representation is
rendered conclusive upon the person
making it, and cannot be denied or
disproved as against the person
relying thereon.
An essential element of estoppel is that the person
invoking it has been influenced and has relied on
the representations or conduct of the person sought
to be estopped, and this element is wanting in the
instant case. In Cristobal vs. Gomez,5 this Court
held that no estoppel based on a document can be
invoked by one who has not been mislead by the
false statements contained therein. And in Republic
of the Philippines vs. Garcia, et al.,6 this Court ruled
that there is no estoppel when the statement or
action invoked as its basis did not mislead the
adverse party-Estoppel has been characterized as
harsh or odious and not favored in law.7 When
misapplied, estoppel becomes a most effective
weapon to accomplish an injustice, inasmuch as it
shuts a man's mouth from speaking the truth and
debars the truth in a particular case.8 Estoppel
cannot be sustained by mere argument or doubtful
inference: it must be clearly proved in all its
essential elements by clear, convincing and
satisfactory evidence.9 No party should be
precluded from making out his case according to its
truth unless by force of some positive principle of
law, and, consequently, estoppel in pains must be
applied strictly and should not be enforced unless
substantiated in every particular. 1 0
The essential elements of estoppel in pais may be
considered in relation to the party sought to be
estopped, and in relation to the party invoking the
estoppel in his favor. As related to the party to be
estopped, the essential elements are: (1) conduct
amounting to false representation or concealment of
material facts or at least calculated to convey the
impression that the facts are otherwise than, and
inconsistent with, those which the party
subsequently attempts to assert; (2) intent, or at least
expectation that his conduct shall be acted upon by,
or at least influence, the other party; and (3)
knowledge, actual or constructive, of the real facts.
As related to the party claiming the estoppel, the
essential elements are (1) lack of knowledge and of
the means of knowledge of the truth as the facts in
questions; (2) (reliance, in good faith, upon the
conduct or statements of the party to be estopped;
(3) action or inaction based thereon of such
character as To change the position or status of the
party claiming the estoppel, to his injury, detriment
or prejudice. 1 1
The first essential element in relation to the party
sought to be estopped does not obtain in the instant
case, for, as appears in the Report of the
Commissioner, appellee testified "that when he
wrote Exhibit 1 and prepared Exhibit 1-A, he had
not yet consulted the services of his counsel and it
was only upon advice of counsel that the terms of
the contract were interpreted to him resulting in his
subsequent letters to the defendant demanding
payments of his fees pursuant to the contract
Exhibit A." 1 2 This finding of the Commissioner
was adopted by the trial court. 1 3 It is established ,
therefore, that Exhibit 1-A was written by appellee
through ignorance or mistake. Anent this matter, it
has been held that if an act, conduct or
misrepresentation of the party sought to be estopped
is due to ignorance founded on innocent mistake,
estoppel will not arise. 1 4 Regarding the essential
elements of estoppel in relation to the party
claiming the estoppel, the first element does not
obtain in the instant case, for it cannot be said that
appellant did not know, or at least did not have the
means of knowing, the services rendered to him by
appellee and the fees due thereon as provided in
Exhibit A. The second element is also wanting, for,
as adverted to, appellant did not rely on Exhibit 1-A
but consistently denied the accounts stated therein.
Neither does the third element obtain, for appellant
did not act on the basis of the representations in
Exhibit 1-A, and there was no change in his
position, to his own injury or prejudice.
Appellant, however, insists that if Exhibit 1-A did
not put appellee in estoppel, it at least constituted an
admission binding upon the latter. In this
connection, it cannot be gainsaid that Exhibit 1-A is
not a judicial admission. Statements which are not
estoppels nor judicial admissions have no quality of
conclusiveness, and an opponent. whose admissions
have been offered against him may offer any
evidence which serves as an explanation for his
former assertion of what he now denies as a fact.
This may involve the showing of a mistake.
Accordingly, in Oas vs. Roa, 1 6 it was held that
when a party to a suit has made an admission of any
fact pertinent to the issue involved, the admission
can be received against him; but such an admission
is not conclusive against him, and he is entitled to
present evidence to overcome the effect of the
admission. Appellee did explain, and the trial court
concluded, that Exhibit 1-A was based on either his
ignorance or innocent mistake and he, therefore, is
not bound by it.
Appellant further contends that Exhibit 1-A being a
statement of account, establishes prima facie the
accuracy and correctness of the items stated therein.
If prima facie, as contended by appellant, then it is
not absolutely conclusive upon the parties. An
account stated may be impeached for fraud, mistake
or error. In American Decisions, Vol. 62, p. 95, cited
as authority by appellant himself. we read thus:
An account stated or settled is a mere
admission that the account is correct.
It is not an estoppel. The account is
still open to impeachment for
mistakes or errors. Its effect is to
establish, prima facie, the accuracy
of the items without other proof; and
the party seeking to impeach it is
bound to show affirmatively the
mistake or error alleged. The force of
the admission and the strength of the
evidence necessary to overcome it
will depend upon the circumstances
of the case.
In the instant case, it is Our view that the ignorance
mistake that attended the writing of Exhibit 1-A by
appellee was sufficient to overcome the prima
facie evidence of correctness and accuracy of said
Exhibit 1-A.
Appellant also urges that Exhibit 1-A constitutes
appellee's own interpretation of the contract, and is,
therefore, conclusive against him. Although the
practical construction of the contract by one party,
evidenced by his words or acts, can be used against
him in behalf of the other party, 1 7 yet, if one of the
parties carelessly makes a wrong interpretation of
the words of his contract, or performs more than the
contract requires (as reasonably interpreted
independently of his performance), as happened in
the instant case, he should be entitled to a
restitutionary remedy, instead of being bound to
continue to his erroneous interpretation or his
erroneous performance and "the other party should
not be permitted to profit by such mistake unless he
can establish an estoppel by proving a material
change of position made in good faith. The rule as
to practical construction does not nullify the
equitable rules with respect to performance by
mistake." 1 8 In the instant case, it has been shown
that Exhibit 1-A was written through mistake by
appellee and that the latter is not estopped by it.
Hence, even if said Exhibit 1-A be considered as
practical construction of the contract by appellee, he
cannot be bound by such erroneous interpretation. It
has been held that if by mistake the parties followed
a practice in violation of the terms of the agreement,
the court should not perpetuate the error. 1 9
2. In support of the second assignment of error, that
the lower court erred in holding that the balance
from appellant on the IRRI project should be paid
on the basis of the rate of exchange of the U.S.
dollar to the Philippine peso at the time of payment
of the judgment, appellant contends: first, that the
official rate at the time appellant received his
architect's fees for the IRRI project, and
correspondingly his obligation to appellee's fee on
August 25, 1961, was P2.00 to $1.00, and cites in
support thereof Section 1612 of the Revised
Administrative Code, Section 48 of Republic Act
265 and Section 6 of Commonwealth Act No. 699;
second, that the lower court's conclusion that the
rate of exchange to be applied in the conversion of
the $28,000.00 is the current rate of exchange at the
time the judgment shall be satisfied was based
solely on a mere presumption of the trial court that
the defendant did not convert, there being no
showing to that effect, the dollars into Philippine
currency at the official rate, when the legal
presumption should be that the dollars were
converted at the official rate of $1.00 to P2.00
because on August 25, 1961, when the IRRI project
became due and payable, foreign exchange controls
were in full force and effect, and partial
decontrol was effected only afterwards, during the
Macapagal administration; third, that the other
ground advanced by the lower court for its ruling, to
wit, that appellant committed a breach of his
obligation to turn over to the appellee the
engineering fees received in U.S. dollars for the
IRRI project, cannot be upheld, because there was
no such breach, as proven by the fact that appellee
never claimed in Exhibit 1-A that he should be paid
in dollars; and there was no provision in the basic
contract (Exh. "A") that he should be paid in
dollars; and, finally, even if there were such
provision, it would have no binding effect under the
provision of Republic Act 529; that, moreover, it
cannot really be said that no payment was made on
that account for appellant had already paid
P57,000.00 to appellee, and under Article 125 of the
Civil Code, said payment could be said to have been
applied to the fees due from the IRRI project, this
project being the biggest and this debt being the
most onerous.
In refutation of appellant's argument in support of
the second assignment of error, appellee argues that
notwithstanding Republic Act 529, appellant can be
compelled to pay the appellee in dollars in view of
the fact that appellant received his fees in dollars,
and appellee's fee is 20% of appellant's fees; and
that if said amount is be converted into Philippine
Currency, the rate of exchange should be that at the
time of the execution of the judgment. 2 0
We have taken note of the fact that on August 25,
1961, the date when appellant said his obligation to
pay appellee's fees became due, there was two rates
of exchange, to wit: the preferred rate of P2.00 to
$1.00, and the free market rate. It was so provided
in Circular No. 121 of the Central Bank of the
Philippines, dated March 2, 1961. amending an
earlier Circular No. 117, and in force until January
21, 1962 when it was amended by Circular No. 133,
thus:
1. All foreign exchange receipts shall
be surrendered to the Central Bank
of those authorized to deal in foreign
exchange as follows:
Percentage of Total to be surrendered
at
Preferred: Free Market Rate: Rate:
(a) Export Proceeds, U.S.
Government Expenditures invisibles
other than those specifically
mentioned
below. ................................................
25 75
(b) Foreign Investments, Gold
Proceeds, Tourists and Inward
Remittances of Veterans and Filipino
Citizens; and Personal Expenses of
Diplomatic Per
personnel .................................
100"2 1
The amount of $140,000.00 received by appellant
foil the International Rice Research Institute project
is not within the scope of sub-paragraph (a) of
paragraph No. 1 of Circular No. 121. Appellant has
not shown that 25% of said amount had to be
surrendered to the Central Bank at the preferred rate
because it was either export proceeds, or U.S.
Government expenditures, or invisibles not included
in sub-paragraph (b). Hence, it cannot be said that
the trial court erred in presuming that appellant
converted said amount at the free market rate. It is
hard to believe that a person possessing dollars
would exchange his dollars at the preferred rate of
P2.00 to $1.00, when he is not obligated to do so,
rather than at the free market rate which is much
higher. A person is presumed to take ordinary care
of his concerns, and that the ordinary course of
business has been
followed. 2 2
Under the agreement, Exhibit A, appellee was
entitled to 20% of $140,000.00, or the amount of
$28,000.00. Appellee, however, cannot oblige the
appellant to pay him in dollars, even if appellant
himself had received his fee for the IRRI project in
dollars. This payment in dollars is prohibited by
Republic Act 529 which was enacted on June 16,
1950. Said act provides as follows:
SECTION 1. Every provision
contained in, or made with respect
to, any obligation which provision
purports to give the obligee the right
to require payment in gold or in a
particular kind of coin or currency
other than Philippine currency or in
an amount of money of the
Philippines measured thereby, be as
it is hereby declared against public
policy, and null, void and of no
effect, and no such provision shall be
contained in, or made with respect
to, any obligation hereafter incurred.
Every obligation heretofore or here
after incurred, whether or not any
such provision as to payment is
contained therein or made with
respect thereto, shall be discharged
upon payment in any coin or
currency which at the time of
payment is legal tender for public
and private debts: Provided, That,
( a) if the obligation was incurred
prior to the enactment of this Act and
required payment in a particular kind
of coin or currency other than
Philippine currency, it shall be
discharged in Philippine currency
measured at the prevailing rate of
exchange at the time the obligation
was incurred, (b) except in case of a
loan made in a foreign currency
stipulated to be payable in the same
currency in which case the rate of
exchange prevailing at the time of
the stipulated date of payment shall
prevail. All coin and currency,
including Central Bank notes,
heretofore or hereafter issued and
declared by the Government of the
Philippines shall be legal tender for
all debts, public and private.
Under the above-quoted provision of Republic Act
529, if the obligation was incurred prior to the
enactment of the Act and require payment in a
particular kind of coin or currency other than the
Philippine currency the same shall be discharged in
Philippine currency measured at the prevailing rate
of exchange at the time the obligation was incurred.
As We have adverted to, Republic Act 529 was
enacted on June 16, 1950. In the case now before
Us the obligation of appellant to pay appellee the
20% of $140,000.00, or the sum of $28,000.00,
accrued on August 25, 1961, or after the enactment
of Republic Act 529. It follows that the provision of
Republic Act 529 which requires payment at the
prevailing rate of exchange when the obligation was
incurred cannot be applied. Republic Act 529 does
not provide for the rate of exchange for the payment
of obligation incurred after the enactment of said
Act. The logical Conclusion, therefore, is that the
rate of exchange should be that prevailing at the
time of payment. This view finds support in the
ruling of this Court in the case of Engel vs. Velasco
& Co. 2 3 where this Court held that even if the
obligation assumed by the defendant was to pay the
plaintiff a sum of money expressed in American
currency, the indemnity to be allowed should be
expressed in Philippine currency at the rate of
exchange at the time of judgment rather than at the
rate of exchange prevailing on the date of
defendant's breach. This is also the ruling of
American court as follows:
The value in domestic money of a
payment made in foreign money is
fixed with respect to the rate of
exchange at the time of payment. (70
CJS p. 228)
According to the weight of authority
the amount of recovery depends
upon the current rate of exchange,
and not the par value of the particular
money involved. (48 C.J. 605-606)
The value in domestic money of a
payment made in foreign money is
fixed in reference to the rate of
 exchange at the time of such
payment. (48 C.J. 605)
It is Our considered view, therefore, that appellant
should pay the appellee the equivalent in pesos of
the $28,000.00 at the free market rate of exchange
at the time of payment. And so the trial court did not
err when it held that herein appellant should pay
appellee $28,000.00 "to be converted into the
Philippine currency on the basis of the current rate
of exchange at the time of payment of this
judgment, as certified to by the Central Bank of the
Philippines, ...." 24
Appellant also contends that the P57,000.00 that he
had paid to appellee should have been applied to the
due to the latter on the IRRI project because such
debt was the most onerous to appellant. This
contention is untenable. The Commissioner who
was authorized by the trial court to receive evidence
in this case, however, reports that the appellee had
not been paid for the account of the $28,000.00
which represents the fees of appellee equivalent to
20% of the $140,000.00 that the appellant received
as fee for the IRRI project. This is a finding of fact
by the Commissioner which was adopted by the
trial court. The parties in this case have agreed that
they do not question the finding of fact of the
Commissioner. Thus, in the decision appealed from
the lower court says:
At the hearing on the Report of the
Commissioner on February 15, 1966,
the counsels for both parties
manifested to the court that they
have no objection to the findings of
facts of the Commissioner in his
report; and agreed that the said report
only poses two (2)legal issues,
namely: (1) whether under the facts
stated in the Report, the doctrine of
estoppel will apply; and (2) whether
the recommendation in the Report
that the payment of amount due to
the plaintiff in dollars is permissible
under the law, and, if not, at what
rate of exchange should it be paid in
pesos (Philippine currency) .... 2 5
In the Commissioner's report, it is spetifically
recommended that the appellant be ordered to pay
the plaintiff the sum of "$28,000. 00 or its
equivalent as the fee of the plaintiff under Exhibit A
on the IRRI project." It is clear from this report of
the Commissioner that no payment for the account
of this $28,000.00 had been made. Indeed, it is not
shown in the record that the peso equivalent of the
$28,000.00 had been fixed or agreed upon by the
parties at the different times when the appellant had
made partial payments to the appellee.
3. In his third assignment of error, appellant
contends that the lower court erred in not declaring
that the aggregate amount due from him to appellee
is only P15,792.05. Appellant questions the
propriety or correctness of most of the items of fees
that were found by the Commissioner to be due to
appellee for services rendered. We believe that it is
too late for the appellant to question the propriety or
correctness of those items in the present appeal. The
record shows that after the Commissioner had
submitted his report the lower court, on February
15, 1966, issued the following order:
When this case was called for
hearing today on the report of the
Commissioner, the counsels of the
parties manifested that they have no
objection to the findings of facts in
the report. However, the report poses
only legal issues, namely: (1)
whether under the facts stated in the
report, the doctrine of estoppel will
apply; and (2) whether the
recommendation in the report that
the alleged payment of the defendant
be made in dollars is permissible by
law and, if not, in what rate it should
be paid in pesos (Philippine
Currency). For the purpose of
resolving these issues the parties
prayed that they be allowed to file
their respective memoranda which
will aid the court in the
determination of said issues. 2 6
In consonance with the afore-quoted order of the
trial court, the appellant submitted his memorandum
which opens with the following statements:
As previously manifested, this
Memorandum shall be confined to:
(a) the finding in the Commissioner's
Report that defendant's defense of
estoppel will not lie (pp. 17-18,
Report); and
(b) the recommendation in the
Commissioner's Report that
defendant be ordered to pay plaintiff
the sum of '$28,000.00 (U.S.) or its
equivalent as the fee of the plaintiff
under Exhibit 'A' in the IRRI project.'
More specifically this Memorandum
proposes to demonstrate
the affirmative of three legal
issues posed, namely:
First: Whether or not plaintiff's letter
dated December 11, 1961 (Exhibit
'I') and/or Statement of Account
(Exhibit '1-A') therein enclosed has
the effect of placing plaintiff in
estoppel from thereafter modifying
the representations made in said
letter and Statement of Account or of
making plaintiff otherwise bound
thereby; or of being decisive or great
weight in determining the true intent
of the parties as to the amount of the
engineering fees owing from
defendant to plaintiff;
Second: Whether or not defendant
can be compelled to pay whatever
balance is owing to plaintiff on the
IRRI (International Rice and
Research Institute) project in United
States dollars; and
Third: Whether or not in case the
ruling of this Honorable Court be
that defendant cannot be compelled
to pay plaintiff in United States
dollars, the dollar-to-peso convertion
rate for determining the peso
equivalent of whatever balance is
owing to plaintiff in connection with
the IRRI project should be the 2 to 1
official rate and not any other
rate. 2 7
It is clear, therefore, that what was submitted by
appellant to the lower court for resolution did not
include the question of correctness or propriety of
the amounts due to appellee in connection with the
different projects for which the appellee had
rendered engineering services. Only legal questions,
as above enumerated, were submitted to the trial
court for resolution. So much so, that the lower
court in another portion of its decision said, as
follows:
The objections to the
Commissioner's Report embodied in
defendant's memorandum of
objections, dated March 18, 1966,
cannot likewise be entertained by the
Court because at the hearing of the
Commissioner's Report the parties
had expressly manifested that they
had no objection to the findings of
facts embodied therein.
We, therefore hold that the third assignment of error
of the appellant has no merit.
4. In his fourth assignment of error, appellant
questions the award by the lower court of P8,000.00
for attorney's fees. Appellant argues that the
Commissioner, in his report, fixed the sum of
P5,000.00 as "just and reasonable" attorney's fees,
to which amount appellee did not interpose any
objection, and by not so objecting he is bound by
said finding; and that, moreover, the lower court
gave no reason in its decision for increasing the
amount to P8,000.00.
Appellee contends that while the parties had not
objected to the findings of the Commissioner, the
assessment of attorney's fees is always subject to the
court's appraisal, and in increasing the
recommended fees from P5,000.00 to P8,000.00 the
trial court must have taken into consideration
certain circumstances which warrant the award of
P8,000.00 for attorney's fees.
We believe that the trial court committed no error in
this connection. Section 12 of Rule 33 of the Rules
of Court, on which the fourth assignment of error is
presumably based, provides that when the parties
stipulate that a commissioner's findings of fact shall
be final, only questions of law arising from the facts
mentioned in the report shall thereafter be
considered. Consequently, an agreement by the It is true, as appellant contends, that the trial court
parties to abide by the findings of fact of the did not state in the decision the reasons for
commissioner is equivalent to an agreement of facts increasing the attorney's fees. The trial court,
binding upon them which the court cannot however, had adopted the report of the
disregard. The question, therefore, is whether or not Commissioner, and in adopting the report the trial
the estimate of the reasonable fees stated in the court is deemed to have adopted the reasons given
report of the Commissioner is a finding of fact. by the Commissioner in awarding attorney's fees, as
stated in the above-quoted portion of the report.
The report of the Commissioner on this matter reads Based on the reasons stated in the report, the trial
as follows: court must have considered that the reasonable
attorney's fees should be P8,000.00. Considering
As regards attorney's fees, under the provisions of that the judgment against the appellant would
Art 2208, par (11), the same may be awarded, and amount to more than P100,000.00, We believe that
considering the number of hearings held in this the award of P8,000.00 for attorney's fees is
case, the nature of the case (taking into account the reasonable.
technical nature of the case and the voluminous
exhibits offered in evidence), as well as the way the 5. In his fifth assignment of error appellant urges
case was handled by counsel, it is believed, subject that he is entitled to relief on his counterclaim. In
to the Court's appraisal of the matter, that the sum view of what We have stated in connection with the
of P5,000.00 is just and reasonable as attorney's preceding four assignments of error, We do not
fees." 28 consider it necessary to dwell any further on this
assignment of error.
It is thus seen that the estimate made by the
Commissioner was an expression of belief, or an WHEREFORE, the decision appealed from is
opinion. An opinion is different from a fact. The affirmed, with costs against the defendant-appellant.
generally recognized distinction between a It is so ordered. Republic of the Philippines
statement of "fact" and an expression of "opinion" is
that whatever is susceptible of exact knowledge is a
matter of fact, while that not susceptible of exact
knowledge is generally regarded as an expression of
opinion. 2 9 It has also been said that the word
"fact," as employed in the legal sense includes
"those conclusions reached by the trior from
shifting testimony, weighing evidence, and passing
on the credit of the witnesses, and it does not denote
those inferences drawn by the trial court from the
facts ascertained and settled by it. 3 0 In the case at
bar, the estimate made by the Commissioner of the
attorney's fees was an inference from the facts
ascertained by him, and is, therefore, not a finding
of facts. The trial court was, consequently, not
bound by that estimate, in spite of the manifestation
of the parties that they had no objection to the
findings of facts of the Commissioner in his report.
Moreover, under Section 11 of Rule 33 of the Rules
of Court, the court may adopt, modify, or reject the
report of the commissioner, in whole or in part, and
hence, it was within the trial court's authority to
increase the recommended attorney's fees of SUPREME COURT
P5,000.00 to P8,000.00. It is a settled rule that the Manila
amount of attorney's fees is addressed to the sound
discretion of the court. 3 1
 EN BANC
G.R. No. L-2516 September 25, 1950
ANG TEK LIAN, petitioner,
vs.
THE COURT OF APPEALS, respondent.
Laurel, Sabido, Almario and Laurel for petitioner.
Office of the Solicitor General Felix Bautista
Angelo and Solicitor Manuel Tomacruz for
respondent.
BENGZON, J.:
For having issued a rubber check, Ang Tek Lian was
convicted of estafa in the Court of First Instance of
Manila. The Court of Appeals affirmed the verdict.
It appears that, knowing he had no funds therefor,
Ang Tek Lian drew on Saturday, November 16,
1946, the check Exhibits A upon the China Banking
Corporation for the sum of P4,000, payable to the
order of "cash". He delivered it to Lee Hua Hong in
exchange for money which the latter handed in act.
On November 18, 1946, the next business day, the
check was presented by Lee Hua Hong to the
drawee bank for payment, but it was dishonored for
insufficiency of funds, the balance of the deposit of
Ang Tek Lian on both dates being P335 only.
The Court of Appeals believed the version of Lee
Huan Hong who testified that "on November 16,
1946, appellant went to his (complainant's) office, at
1217 Herran, Paco, Manila, and asked him to
exchange Exhibit A — which he (appellant) then
brought with him — with cash alleging that he
needed badly the sum of P4,000 represented by the
check, but could not withdraw it from the bank, it
being then already closed; that in view of this
request and relying upon appellant's assurance that
he had sufficient funds in the blank to meet Exhibit
A, and because they used to borrow money from
each other, even before the war, and appellant owns
a hotel and restaurant known as the North Bay
Hotel, said complainant delivered to him, on the
same date, the sum of P4,000 in cash; that despite
repeated efforts to notify him that the check had
been dishonored by the bank, appellant could not be
located any-where, until he was summoned in the
City Fiscal's Office in view of the complaint
for estafa filed in connection therewith; and that
appellant has not paid as yet the amount of the
check, or any part thereof."
Inasmuch as the findings of fact of the Court of
Appeals are final, the only question of law for
decision is whether under the facts found, estafa had
been accomplished.
Article 315, paragraph (d), subsection 2 of the
Revised Penal Code, punishes swindling committed
"By post dating a check, or issuing such check in
payment of an obligation the offender knowing that
at the time he had no funds in the bank, or the funds
deposited by him in the bank were not sufficient to
cover the amount of the check, and without
informing the payee of such circumstances".
We believe that under this provision of law Ang Tek
Lian was properly held liable. In this connection, it
must be stated that, as explained in People vs.
Fernandez (59 Phil., 615), estafa is committed by
issuing either a postdated check or an ordinary
check to accomplish the deceit.
It is argued, however, that as the check had been
made payable to "cash" and had not been endorsed
by Ang Tek Lian, the defendant is not guilty of the
offense charged. Based on the proposition that "by
uniform practice of all banks in the Philippines a
check so drawn is invariably dishonored," the
following line of reasoning is advanced in support
of the argument:
. . . When, therefore, he (the offended party )
accepted the check (Exhibit A) from the
appellant, he did so with full knowledge that
it would be dishonored upon presentment. In
that sense, the appellant could not be said to
have acted fraudulently because the
complainant, in so accepting the check as it
was drawn, must be considered, by every
rational consideration, to have done so fully
aware of the risk he was running thereby."
(Brief for the appellant, p. 11.)
We are not aware of the uniformity of such practice.
Instances have undoubtedly occurred wherein the
Bank required the indorsement of the drawer before
honoring a check payable to "cash." But cases there
are too, where no such requirement had been made .
It depends upon the circumstances of each
transaction.
Under the Negotiable Instruments Law (sec. 9 [d], a
check drawn payable to the order of "cash" is a
check payable to bearer, and the bank may pay it to
the person presenting it for payment without the
drawer's indorsement.
A check payable to the order of cash is a
bearer instrument. Bacal vs. National City
Bank of New York (1933), 146 Misc., 732;
262 N. Y. S., 839; Cleary vs. De Beck Plate
Glass Co. (1907), 54 Misc., 537; 104 N. Y.
S., 831; Massachusetts Bonding & Insurance
Co. vs. Pittsburgh Pipe & Supply Co. (Tex.
Civ. App., 1939), 135 S. W. (2d), 818. See
also H. Cook & Son vs. Moody (1916), 17
Ga. App., 465; 87 S. E., 713.
Where a check is made payable to the order
of "cash", the word cash "does not purport to
be the name of any person", and hence the
instrument is payable to bearer. The drawee
bank need not obtain any indorsement of the
check, but may pay it to the person
presenting it without any indorsement. . . .
(Zollmann, Banks and Banking, Permanent
Edition, Vol. 6, p. 494.)
Of course, if the bank is not sure of the bearer's
identity or financial solvency, it has the right to
demand identification and /or assurance against
possible complications, — for instance, (a) forgery
of drawer's signature, (b) loss of the check by the
rightful owner, (c) raising of the amount payable,
etc. The bank may therefore require, for its
protection, that the indorsement of the drawer — or
of some other person known to it — be obtained.
But where the Bank is satisfied of the identity
and /or the economic standing of the bearer who
tenders the check for collection, it will pay the
instrument without further question; and it would
incur no liability to the drawer in thus acting.
A check payable to bearer is authority for
payment to holder. Where a check is in the
ordinary form, and is payable to bearer, so
that no indorsement is required, a bank, to
which it is presented for payment, need not
have the holder identified, and is not
negligent in falling to do so. . . . (Michie on
Banks and Banking, Permanent Edition, Vol.
5, p. 343.)
. . . Consequently, a drawee bank to which a
bearer check is presented for payment need
not necessarily have the holder identified
and ordinarily may not be charged with
negligence in failing to do so. See Opinions
6C:2 and 6C:3 If the bank has no reasonable
cause for suspecting any irregularity, it will
be protected in paying a bearer check, "no
matter what facts unknown to it may have
occurred prior to the presentment." 1 Morse,
Banks and Banking, sec. 393.
Although a bank is entitled to pay the
amount of a bearer check without further
inquiry, it is entirely reasonable for the bank
to insist that holder give satisfactory proof of
his identity. . . . (Paton's Digest, Vol. I, p.
1089.)
Anyway, it is significant, and conclusive, that the
form of the check Exhibit A was totally
unconnected with its dishonor. The Court of
Appeals declared that it was returned
unsatisfied because the drawer had insufficient
funds— not because the drawer's indorsement was
lacking.
Wherefore, there being no question as to the
correctness of the penalty imposed on the appellant,
the writ of certiorari is denied and the decision of
the Court of Appeals is hereby affirmed, with costs.
Moran, C. J., Ozaeta, Paras, Pablo, Tuason, and
Reyes, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 97753 August 10, 1992
CALTEX (PHILIPPINES), INC., petitioner,
vs.
COURT OF APPEALS and SECURITY BANK
AND TRUST COMPANY, respondents.
Bito, Lozada, Ortega & Castillo for petitioners.
Nepomuceno, Hofileña & Guingona for private.
REGALADO, J.:
This petition for review on certiorari impugns and
seeks the reversal of the decision promulgated by
respondent court on March 8, 1991 in CA-G.R. CV
No. 23615 1 affirming with modifications, the
earlier decision of the Regional Trial Court of
Manila, Branch XLII, 2 which dismissed the
complaint filed therein by herein petitioner against
respondent bank.
The undisputed background of this case, as found
by the court a quo and adopted by respondent court,
appears of record:
1. On various dates, defendant, a
commercial banking institution,
through its Sucat Branch issued 280
certificates of time deposit (CTDs) in
favor of one Angel dela Cruz who
deposited with herein defendant the
aggregate amount of P1,120,000.00,
as follows: (Joint Partial Stipulation
of Facts and Statement of Issues,
Original Records, p. 207;
Defendant's Exhibits 1 to 280);
CTD CTD
Dates Serial Nos. Quantity Amount
22 Feb. 82 90101 to 90120 20
P80,000
26 Feb. 82 74602 to 74691 90
360,000
2 Mar. 82 74701 to 74740 40
160,000
4 Mar. 82 90127 to 90146 20 80,000
5 Mar. 82 74797 to 94800 4 16,000
5 Mar. 82 89965 to 89986 22 88,000
5 Mar. 82 70147 to 90150 4 16,000
8 Mar. 82 90001 to 90020 20 80,000
9 Mar. 82 90023 to 90050 28
112,000
9 Mar. 82 89991 to 90000 10 40,000
9 Mar. 82 90251 to 90272 22 88,000
——— ————
Total 280 P1,120,000
===== ========
2. Angel dela Cruz delivered the said
certificates of time (CTDs) to herein
plaintiff in connection with his
purchased of fuel products from the
latter (Original Record, p. 208).
3. Sometime in March 1982, Angel
dela Cruz informed Mr. Timoteo
Tiangco, the Sucat Branch Manger,
that he lost all the certificates of time
deposit in dispute. Mr. Tiangco
advised said depositor to execute and
submit a notarized Affidavit of Loss,
as required by defendant bank's
procedure, if he desired replacement
of said lost CTDs (TSN, February 9,
1987, pp. 48-50).
4. On March 18, 1982, Angel dela
Cruz executed and delivered to
defendant bank the required
Affidavit of Loss (Defendant's
Exhibit 281). On the basis of said
affidavit of loss, 280 replacement
CTDs were issued in favor of said
depositor (Defendant's Exhibits 282-
561).
5. On March 25, 1982, Angel dela
Cruz negotiated and obtained a loan
from defendant bank in the amount
of Eight Hundred Seventy Five
Thousand Pesos (P875,000.00). On
the same date, said depositor
executed a notarized Deed of
Assignment of Time Deposit
(Exhibit 562) which stated, among
others, that he (de la Cruz)
surrenders to defendant bank "full
control of the indicated time deposits
from and after date" of the
assignment and further authorizes
said bank to pre-terminate, set-off
and "apply the said time deposits to
the payment of whatever amount or
amounts may be due" on the loan
upon its maturity (TSN, February 9,
1987, pp. 60-62).
6. Sometime in November, 1982, Mr.
Aranas, Credit Manager of plaintiff
Caltex (Phils.) Inc., went to the
defendant bank's Sucat branch and
presented for verification the CTDs
declared lost by Angel dela Cruz
alleging that the same were delivered
to herein plaintiff "as security for
purchases made with Caltex
Philippines, Inc." by said depositor
(TSN, February 9, 1987, pp. 54-68).
7. On November 26, 1982, defendant
received a letter (Defendant's Exhibit
563) from herein plaintiff formally
informing it of its possession of the
CTDs in question and of its decision
to pre-terminate the same.
8. On December 8, 1982, plaintiff
was requested by herein defendant to
furnish the former "a copy of the
document evidencing the guarantee
agreement with Mr. Angel dela Cruz"
as well as "the details of Mr. Angel
dela Cruz" obligation against which
plaintiff proposed to apply the time
deposits (Defendant's Exhibit 564).
9. No copy of the requested
documents was furnished herein
defendant.
10. Accordingly, defendant bank
rejected the plaintiff's demand and
claim for payment of the value of the
CTDs in a letter dated February 7,
1983 (Defendant's Exhibit 566).
11. In April 1983, the loan of Angel
dela Cruz with the defendant bank
matured and fell due and on August
5, 1983, the latter set-off and applied
the time deposits in question to the
payment of the matured loan (TSN,
February 9, 1987, pp. 130-131).
12. In view of the foregoing, plaintiff
filed the instant complaint, praying
that defendant bank be ordered to
pay it the aggregate value of the
certificates of time deposit of
P1,120,000.00 plus accrued interest
and compounded interest therein at
16% per annum, moral and
exemplary damages as well as
attorney's fees.
After trial, the court a quo rendered
its decision dismissing the instant
complaint. 3
On appeal, as earlier stated, respondent court
affirmed the lower court's dismissal of the
complaint, hence this petition wherein petitioner
faults respondent court in ruling (1) that the subject
certificates of deposit are non-negotiable despite
being clearly negotiable instruments; (2) that
petitioner did not become a holder in due course of
the said certificates of deposit; and (3) in
disregarding the pertinent provisions of the Code of
Commerce relating to lost instruments payable to
bearer. 4
The instant petition is bereft of merit.
A sample text of the certificates of time deposit is
reproduced below to provide a better understanding
of the issues involved in this recourse.
SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23,
1984 FEB 22, 1982, 19____
This is to Certify
that B E A R E R has
deposited in this Bank
the sum of PESOS:
FOUR THOUSAND
 ONLY, SECURITY
BANK SUCAT
OFFICE P4,000 & 00
CTS Pesos, Philippine
Currency, repayable
to said depositor 731
days. after date, upon
presentation and
surrender of this
certificate, with
interest at the rate
of 16% per cent per
annum.
(Sgd. Illegible) (Sgd. Illegible)
—————————— ————
———————
AUTHORIZED SIGNATURES 5
Respondent court ruled that the CTDs in question
are non-negotiable instruments, nationalizing as
follows:
. . . While it may be true that the
word "bearer" appears rather boldly
in the CTDs issued, it is important to
note that after the word "BEARER"
stamped on the space provided
supposedly for the name of the
depositor, the words "has deposited"
a certain amount follows. The
document further provides that the
amount deposited shall be "repayable
to said depositor" on the period
indicated. Therefore, the text of the
instrument(s) themselves manifest
with clarity that they are payable, not
to whoever purports to be the
"bearer" but only to the specified
person indicated therein, the
depositor. In effect, the appellee bank
acknowledges its depositor Angel
dela Cruz as the person who made
the deposit and further engages itself
to pay said depositor the amount
indicated thereon at the stipulated
date. 6
We disagree with these findings and conclusions,
and hereby hold that the CTDs in question are
negotiable instruments. Section 1 Act No. 2031,
otherwise known as the Negotiable Instruments
Law, enumerates the requisites for an instrument to
become negotiable, viz:
(a) It must be in writing and signed
by the maker or drawer;
(b) Must contain an unconditional
promise or order to pay a sum certain
in money;
(c) Must be payable on demand, or at
a fixed or determinable future time;
(d) Must be payable to order or to
bearer; and
(e) Where the instrument is
addressed to a drawee, he must be
named or otherwise indicated therein
with reasonable certainty.
The CTDs in question undoubtedly meet the
requirements of the law for negotiability. The
parties' bone of contention is with regard to
requisite (d) set forth above. It is noted that Mr.
Timoteo P. Tiangco, Security Bank's Branch
Manager way back in 1982, testified in open court
that the depositor reffered to in the CTDs is no other
than Mr. Angel de la Cruz.
xxx xxx xxx
Atty. Calida:
q In other words Mr.
Witness, you are
saying that per books
of the bank, the
depositor referred
(sic) in these
certificates states that
it was Angel dela
Cruz?
witness:
a Yes, your Honor,
and we have the
record to show that
Angel dela Cruz was
 the one who cause Contrary to what respondent court held, the CTDs
(sic) the amount. are negotiable instruments. The documents provide
that the amounts deposited shall be repayable to the
Atty. Calida: depositor. And who, according to the document, is
the depositor? It is the "bearer." The documents do
q And no other person not say that the depositor is Angel de la Cruz and
or entity or company, that the amounts deposited are repayable
Mr. Witness? specifically to him. Rather, the amounts are to be
repayable to the bearer of the documents or, for that
witness: matter, whosoever may be the bearer at the time of
presentment.
a None, your Honor. 7
If it was really the intention of respondent bank to
xxx xxx xxx pay the amount to Angel de la Cruz only, it could
have with facility so expressed that fact in clear and
Atty. Calida: categorical terms in the documents, instead of
having the word "BEARER" stamped on the space
q Mr. Witness, who is provided for the name of the depositor in each CTD.
the depositor On the wordings of the documents, therefore, the
identified in all of amounts deposited are repayable to whoever may be
these certificates of the bearer thereof. Thus, petitioner's aforesaid
time deposit insofar as witness merely declared that Angel de la Cruz is the
the bank is depositor "insofar as the bank is concerned," but
concerned? obviously other parties not privy to the transaction
between them would not be in a position to know
witness: that the depositor is not the bearer stated in the
CTDs. Hence, the situation would require any party
a Angel dela Cruz is dealing with the CTDs to go behind the plain import
the depositor. 8 of what is written thereon to unravel the agreement
of the parties thereto through facts aliunde. This
xxx xxx xxx need for resort to extrinsic evidence is what is
sought to be avoided by the Negotiable Instruments
On this score, the accepted rule is that the Law and calls for the application of the elementary
negotiability or non-negotiability of an instrument is rule that the interpretation of obscure words or
determined from the writing, that is, from the face stipulations in a contract shall not favor the party
of the instrument itself.9 In the construction of a bill who caused the obscurity. 12
or note, the intention of the parties is to control, if it
can be legally ascertained. 10 While the writing may The next query is whether petitioner can rightfully
be read in the light of surrounding circumstances in recover on the CTDs. This time, the answer is in the
order to more perfectly understand the intent and negative. The records reveal that Angel de la Cruz,
meaning of the parties, yet as they have constituted whom petitioner chose not to implead in this suit for
the writing to be the only outward and visible reasons of its own, delivered the CTDs amounting
expression of their meaning, no other words are to to P1,120,000.00 to petitioner without informing
be added to it or substituted in its stead. The duty of respondent bank thereof at any time. Unfortunately
the court in such case is to ascertain, not what the for petitioner, although the CTDs are bearer
parties may have secretly intended as instruments, a valid negotiation thereof for the true
contradistinguished from what their words express, purpose and agreement between it and De la Cruz,
but what is the meaning of the words they have as ultimately ascertained, requires both delivery and
used. What the parties meant must be determined by indorsement. For, although petitioner seeks to
what they said. 11 deflect this fact, the CTDs were in reality delivered
to it as a security for De la Cruz' purchases of its
fuel products. Any doubt as to whether the CTDs
were delivered as payment for the fuel products or . . . Adverting again to the Court's
as a security has been dissipated and resolved in pronouncements in Lopez, supra, we
favor of the latter by petitioner's own authorized and quote therefrom:
responsible representative himself.
The character of the
In a letter dated November 26, 1982 addressed to transaction between
respondent Security Bank, J.Q. Aranas, Jr., Caltex the parties is to be
Credit Manager, wrote: ". . . These certificates of determined by their
deposit were negotiated to us by Mr. Angel dela intention, regardless
Cruz to guarantee his purchases of fuel products" of what language was
(Emphasis ours.) 13 This admission is conclusive used or what the form
upon petitioner, its protestations notwithstanding. of the transfer was. If
Under the doctrine of estoppel, an admission or it was intended to
representation is rendered conclusive upon the secure the payment of
person making it, and cannot be denied or disproved money, it must be
as against the person relying thereon. 14 A party may construed as a pledge;
not go back on his own acts and representations to but if there was some
the prejudice of the other party who relied upon other intention, it is
them. 15 In the law of evidence, whenever a party not a pledge.
has, by his own declaration, act, or omission, However, even
intentionally and deliberately led another to believe though a transfer, if
a particular thing true, and to act upon such belief, regarded by itself,
he cannot, in any litigation arising out of such appears to have been
declaration, act, or omission, be permitted to falsify absolute, its object
it. 16 and character might
still be qualified and
If it were true that the CTDs were delivered as explained by
payment and not as security, petitioner's credit contemporaneous
manager could have easily said so, instead of using writing declaring it to
the words "to guarantee" in the letter aforequoted. have been a deposit of
Besides, when respondent bank, as defendant in the the property as
court below, moved for a bill of particularity collateral security. It
therein 17 praying, among others, that petitioner, as has been said that a
plaintiff, be required to aver with sufficient transfer of property
definiteness or particularity (a) the due date or dates by the debtor to a
of payment of the alleged indebtedness of Angel de creditor, even if
la Cruz to plaintiff and (b) whether or not it issued a sufficient on its face
receipt showing that the CTDs were delivered to it to make an absolute
by De la Cruz as payment of the latter's alleged conveyance, should
indebtedness to it, plaintiff corporation opposed the be treated as a pledge
motion. 18 Had it produced the receipt prayed for, it if the debt continues
could have proved, if such truly was the fact, that in inexistence and is
the CTDs were delivered as payment and not as not discharged by the
security. Having opposed the motion, petitioner now transfer, and that
labors under the presumption that evidence willfully accordingly the use of
suppressed would be adverse if produced. 19 the terms ordinarily
importing conveyance
Under the foregoing circumstances, this disquisition of absolute ownership
in Intergrated Realty Corporation, et al. vs. will not be given that
Philippine National Bank, et al. 20 is apropos: effect in such a
transaction if they are
also commonly used
 in pledges and
mortgages and
therefore do not
unqualifiedly indicate
a transfer of absolute
ownership, in the
absence of clear and
unambiguous
language or other
circumstances
excluding an intent to
pledge.
Petitioner's insistence that the CTDs were
negotiated to it begs the question. Under the
Negotiable Instruments Law, an instrument is
negotiated when it is transferred from one person to
another in such a manner as to constitute the
transferee the holder thereof, 21 and a holder may be
the payee or indorsee of a bill or note, who is in
possession of it, or the bearer thereof. 22 In the
present case, however, there was no negotiation in
the sense of a transfer of the legal title to the CTDs
in favor of petitioner in which situation, for obvious
reasons, mere delivery of the bearer CTDs would
have sufficed. Here, the delivery thereof only as
security for the purchases of Angel de la Cruz (and
we even disregard the fact that the amount involved
was not disclosed) could at the most constitute
petitioner only as a holder for value by reason of his
lien. Accordingly, a negotiation for such purpose
cannot be effected by mere delivery of the
instrument since, necessarily, the terms thereof and
the subsequent disposition of such security, in the
event of non-payment of the principal obligation,
must be contractually provided for.
The pertinent law on this point is that where the
holder has a lien on the instrument arising from
contract, he is deemed a holder for value to the
extent of his lien. 23 As such holder of collateral
security, he would be a pledgee but the requirements
therefor and the effects thereof, not being provided
for by the Negotiable Instruments Law, shall be
governed by the Civil Code provisions on pledge of
incorporeal rights, 24 which inceptively provide:
Art. 2095. Incorporeal rights,
evidenced by negotiable instruments,
. . . may also be pledged. The
instrument proving the right pledged
shall be delivered to the creditor, and
if negotiable, must be indorsed.
Art. 2096. A pledge shall not take
effect against third persons if a
description of the thing pledged and
the date of the pledge do not appear
in a public instrument.
Aside from the fact that the CTDs were only
delivered but not indorsed, the factual findings of
respondent court quoted at the start of this opinion
show that petitioner failed to produce any document
evidencing any contract of pledge or guarantee
agreement between it and Angel de la
Cruz. 25 Consequently, the mere delivery of the
CTDs did not legally vest in petitioner any right
effective against and binding upon respondent bank.
The requirement under Article 2096 aforementioned
is not a mere rule of adjective law prescribing the
mode whereby proof may be made of the date of a
pledge contract, but a rule of substantive law
prescribing a condition without which the execution
of a pledge contract cannot affect third persons
adversely. 26
On the other hand, the assignment of the CTDs
made by Angel de la Cruz in favor of respondent
bank was embodied in a public instrument. 27 With
regard to this other mode of transfer, the Civil Code
specifically declares:
Art. 1625. An assignment of credit,
right or action shall produce no
effect as against third persons, unless
it appears in a public instrument, or
the instrument is recorded in the
Registry of Property in case the
assignment involves real property.
Respondent bank duly complied with this statutory
requirement. Contrarily, petitioner, whether as
purchaser, assignee or lien holder of the CTDs,
neither proved the amount of its credit or the extent
of its lien nor the execution of any public instrument
which could affect or bind private respondent.
Necessarily, therefore, as between petitioner and
respondent bank, the latter has definitely the better
right over the CTDs in question.
Finally, petitioner faults respondent court for
refusing to delve into the question of whether or not
private respondent observed the requirements of the
law in the case of lost negotiable instruments and
the issuance of replacement certificates therefor, on
the ground that petitioner failed to raised that issue
in the lower court. 28
On this matter, we uphold respondent court's finding
that the aspect of alleged negligence of private
respondent was not included in the stipulation of the
parties and in the statement of issues submitted by
them to the trial court. 29 The issues agreed upon by
them for resolution in this case are:
1. Whether or not the CTDs as
worded are negotiable instruments.
2. Whether or not defendant could
legally apply the amount covered by
the CTDs against the depositor's loan
by virtue of the assignment (Annex
"C").
3. Whether or not there was legal
compensation or set off involving the
amount covered by the CTDs and the
depositor's outstanding account with
defendant, if any.
4. Whether or not plaintiff could
compel defendant to preterminate the
CTDs before the maturity date
provided therein.
5. Whether or not plaintiff is entitled
to the proceeds of the CTDs.
6. Whether or not the parties can
recover damages, attorney's fees and
litigation expenses from each other.
As respondent court correctly observed, with
appropriate citation of some doctrinal authorities,
the foregoing enumeration does not include the
issue of negligence on the part of respondent bank.
An issue raised for the first time on appeal and not
raised timely in the proceedings in the lower court is
barred by estoppel. 30 Questions raised on appeal
must be within the issues framed by the parties and,
consequently, issues not raised in the trial court
cannot be raised for the first time on appeal. 31
Pre-trial is primarily intended to make certain that
all issues necessary to the disposition of a case are
properly raised. Thus, to obviate the element of
surprise, parties are expected to disclose at a pre-
trial conference all issues of law and fact which they
intend to raise at the trial, except such as may
involve privileged or impeaching matters. The
determination of issues at a pre-trial conference bars
the consideration of other questions on appeal. 32
To accept petitioner's suggestion that respondent
bank's supposed negligence may be considered
encompassed by the issues on its right to
preterminate and receive the proceeds of the CTDs
would be tantamount to saying that petitioner could
raise on appeal any issue. We agree with private
respondent that the broad ultimate issue of
petitioner's entitlement to the proceeds of the
questioned certificates can be premised on a
multitude of other legal reasons and causes of
action, of which respondent bank's supposed
negligence is only one. Hence, petitioner's
submission, if accepted, would render a pre-trial
delimitation of issues a useless exercise. 33
Still, even assuming arguendo that said issue of
negligence was raised in the court below, petitioner
still cannot have the odds in its favor. A close
scrutiny of the provisions of the Code of Commerce
laying down the rules to be followed in case of lost
instruments payable to bearer, which it invokes, will
reveal that said provisions, even assuming their
applicability to the CTDs in the case at bar, are
merely permissive and not mandatory. The very first
article cited by petitioner speaks for itself.
Art 548. The dispossessed owner, no
matter for what cause it may
be, may apply to the judge or court
of competent jurisdiction, asking that
the principal, interest or dividends
due or about to become due, be not
paid a third person, as well as in
order to prevent the ownership of the
instrument that a duplicate be issued
him. (Emphasis ours.)
xxx xxx xxx
The use of the word "may" in said provision shows
that it is not mandatory but discretionary on the part
of the "dispossessed owner" to apply to the judge or
court of competent jurisdiction for the issuance of a
duplicate of the lost instrument. Where the
provision reads "may," this word shows that it is not
mandatory but discretional. 34 The word "may" is
usually permissive, not mandatory. 35 It is an
auxiliary verb indicating liberty, opportunity,
permission and possibility. 36

Moreover, as correctly analyzed by private

respondent, 37 Articles 548 to 558 of the Code of
Commerce, on which petitioner seeks to anchor
respondent bank's supposed negligence, merely
established, on the one hand, a right of recourse in
favor of a dispossessed owner or holder of a bearer
instrument so that he may obtain a duplicate of the
same, and, on the other, an option in favor of the
party liable thereon who, for some valid ground,
may elect to refuse to issue a replacement of the
instrument. Significantly, none of the provisions
cited by petitioner categorically restricts or prohibits
the issuance a duplicate or replacement
instrument sans compliance with the procedure
outlined therein, and none establishes a mandatory
precedent requirement therefor.

WHEREFORE, on the modified premises above set

forth, the petition is DENIED and the appealed
decision is hereby AFFIRMED.

SO ORDERED.