Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-22405 June 30, 1971

PHILIPPINE EDUCATION CO., INC., plaintiff-appellant, vs.MAURICIO A. SORIANO, ET AL., defendant-appellees.

Marcial Esposo for plaintiff-appellant.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio G. Ibarra and Attorney Concepcion Torrijos-Agapinan for defendants-appellees. 

DIZON, J.:

An appeal from a decision of the Court of First Instance of Manila dismissing the complaint filed by the Philippine Education Co., Inc. against Mauricio A. Soriano, Enrico Palomar and Rafael Contr-eras.

On April 18, 1958 Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders of P200.00 each payable to E.P. Montinola withaddress at Lucena, Quezon. After the postal teller had made out money ordersnumbered 124685, 124687-124695, Montinola of-fered to pay for them with a private checks were not generally accepted in payment of money or-ders, the teller advised him to see the Chief of the Money Order Division, but instead of doing so, Montinola managed to leave building with his own check and the ten(10) money orders without the knowledge of the teller.

On the same date, April 18, 1958, upon discovery of the disappearance of the unpaid money or-ders, an urgent message was sent to all postmasters, and the following day notice was likewise served upon all banks, instructing them not to pay anyone of the money orders aforesaid if pre-sented for payment. The Bank of America received a copy of said notice three days later.

On April 23, 1958 one of the above-mentioned money orders numbered 124688 was received by appellant as part of its sales receipts. The following day it deposited the same with the Bank of America, and one day thereafter the latter cleared it with the Bureau of Posts and received from the latter its face value of P200.00.

On September 27, 1961, appellee Mauricio A. Soriano, Chief of the Money Order Division of the Manila Post Office, acting for and in behalf of his co-appellee, Postmaster Enrico Palomar, notified the Bank of America that money order No. 124688 attached to his letter had been found to have been irregularly issued and that, in view thereof, the amount it represented had been deducted from the bank's clearing account. For its part, on August 2 of the same year, the Bank of America

debited appellant's account with the same amount and gave it advice thereof by means of a debit memo.

On October 12, 1961 appellant requested the Postmaster General to reconsider the action taken by his office deducting the sum of P200.00 from the clearing account of the Bank of America, but his request was denied. So was appellant's subsequent request that the matter be referred to the Secretary of Justice for advice. Thereafter, appellant elevated the matter to the Secretary of Public Works and Communications, but the latter sustained the actions taken by the postal officers.

In connection with the events set forth above, Montinola was charged with theft in the Court of First Instance of Manila (Criminal Case No. 43866) but after trial he was acquitted on the ground of reasonable doubt.

On January 8, 1962 appellant filed an action against appellees in the Municipal Court of Manila praying for judgment as follows:

WHEREFORE, plaintiff prays that after hearing defendants be ordered:

(a) To countermand the notice given to the Bank of America on September 27, 1961, deducting from the said Bank's clearing account the sum of P200.00 repre-sented by postal money order No. 124688, or in the alternative indemnify the plaintiff in the same amount with interest at 8-½% per annum from September 27, 1961, which is the rate of interest being paid by plaintiff on its overdraft account;

(b) To pay to the plaintiff out of their own personal funds, jointly and severally, ac-tual and moral damages in the amount of P1,000.00 or in such amount as will be proved and/or determined by this Honorable Court: exemplary damages in the amount of P1,000.00, attorney's fees of P1,000.00, and the costs of action.

Plaintiff also prays for such other and further relief as may be deemed just and equitable.

On November 17, 1962, after the parties had submitted the stipulation of facts reproduced at pages 12 to 15 of the Record on Appeal, the above-named court rendered judgment as follows:

WHEREFORE, judgment is hereby rendered, ordering the defendants to counter-mand the notice given to the Bank of America on September 27, 1961, deducting from said Bank's clearing account the sum of P200.00 representing the amount of postal money order No. 124688, or in the alternative, to indemnify the plaintiff in the said sum of P200.00 with interest thereon at the rate of 8-½% per annum from September 27, 1961 until fully paid; without any pronouncement as to cost and at-torney's fees.

The case was appealed to the Court of First Instance of Manila where, after the parties had resub-mitted the same stipulation of facts, the appealed decision dismissing the complaint, with costs, was rendered.

The first, second and fifth assignments of error discussed in appellant's brief are related to the other and will therefore be discussed jointly. They raise this main issue: that the postal money or-der in question is a negotiable instrument; that its nature as such is not in anyway affected by the letter dated October 26, 1948 signed by the Director of Posts and addressed to all banks with a clearing account with the Post Office, and that money orders, once issued, create a contractual re-lationship of debtor and creditor, respectively, between the government, on the one hand, and the remitters payees or endorses, on the other.

It is not disputed that our postal statutes were patterned after statutes in force in the United States. For this reason, ours are generally construed in accordance with the construction given in the United States to their own postal statutes, in the absence of any special reason justifying a depar-ture from this policy or practice. The weight of authority in the United States is that postal money orders are not negotiable instruments (Bolognesi vs. U.S. 189 Fed. 395; U.S. vs. Stock Drawers National Bank, 30 Fed. 912), the reason behind this rule being that, in establishing and operating a postal money order system, the government is not engaging in commercial transactions but merely exercises a governmental power for the public benefit.

It is to be noted in this connection that some of the restrictions imposed upon money orders by postal laws and regulations are inconsistent with the character of negotiable instruments. For in-stance, such laws and regulations usually provide for not more than one endorsement; payment of money orders may be withheld under a variety of circumstances (49 C.J. 1153).

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

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

In view of the foregoing, We do not find it necessary to resolve the issues raised in the third and fourth assignments of error. WHEREFORE, the appealed decision being in accordance with law, the same is hereby affirmed with costs.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-49188 January 30, 1990

PHILIPPINE AIRLINES, INC., petitioner, vs.HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance, Manila, and AMELIA TAN,respondents. 

GUTIERREZ, JR., J.:

Behind the simple issue of validity of an alias writ of execution in this case is a more fundamental question. Should the Court allow a too literal interpretation of the Rules with an open invitation to knavery to prevail over a more discerning and just approach? Should we not apply the ancient rule of statutory construction that laws are to be interpreted by the spirit which vivifies and not by the letter which killeth?

This is a petition to review on certiorari the decision of the Court of Appeals in CA-G.R. No. 07695 entitled "Philippine Airlines, Inc. v. Hon. Judge Ricardo D. Galano, et al.", dismissing the petition for certiorari against the order of the Court of First Instance of Manila which issued an alias writ of execution against the petitioner.

The petition involving the alias writ of execution had its beginnings on November 8, 1967, when respondent Amelia Tan, under the name and style of Able Printing Press commenced a complaint for damages before the Court of First Instance of Manila. The case was docketed as Civil Case No. 71307, entitled Amelia Tan, et al. v. Philippine Airlines, Inc.

After trial, the Court of First Instance of Manila, Branch 13, then presided over by the late Judge Jesus P. Morfe rendered judgment on June 29, 1972, in favor of private respondent Amelia Tan and against petitioner Philippine Airlines, Inc. (PAL) as follows:

WHEREFORE, judgment is hereby rendered, ordering the defendant Philippine Air Lines:

1. On the first cause of action, to pay to the plaintiff the amount of P75,000.00 as actual damages, with legal interest thereon from plaintiffs extra-judicial demand made by the letter of July 20, 1967;

2. On the third cause of action, to pay to the plaintiff the amount of P18,200.00, representing the unrealized profit of 10% included in the contract price of P200,000.00 plus legal interest thereon from July 20,1967;

3. On the fourth cause of action, to pay to the plaintiff the amount of P20,000.00 as and for moral damages, with legal interest thereon from July 20, 1 967;

4. On the sixth cause of action, to pay to the plaintiff the amount of P5,000.00 damages as and for attorney's fee.

Plaintiffs second and fifth causes of action, and defendant's counterclaim, are dis-missed.

With costs against the defendant. (CA Rollo, p. 18)

On July 28, 1972, the petitioner filed its appeal with the Court of Appeals. The case was docketed as CA-G.R. No. 51079-R.

On February 3, 1977, the appellate court rendered its decision, the dispositive portion of which reads:

IN VIEW WHEREOF, with the modification that PAL is condemned to pay plaintiff the sum of P25,000.00 as damages and P5,000.00 as attorney's fee, judgment is affirmed, with costs. (CA Rollo, p. 29)

Notice of judgment was sent by the Court of Appeals to the trial court and on dates subsequent thereto, a motion for reconsideration was filed by respondent Amelia Tan, duly opposed by peti-tioner PAL.

On May 23,1977, the Court of Appeals rendered its resolution denying the respondent's motion for reconsideration for lack of merit.

No further appeal having been taken by the parties, the judgment became final and executory and on May 31, 1977, judgment was correspondingly entered in the case.

The case was remanded to the trial court for execution and on September 2,1977, respondent Amelia Tan filed a motion praying for the issuance of a writ of execution of the judgment rendered by the Court of Appeals. On October 11, 1977, the trial court, presided over by Judge Galano, is-sued its order of execution with the corresponding writ in favor of the respondent. The writ was duly referred to Deputy Sheriff Emilio Z. Reyes of Branch 13 of the Court of First Instance of Manila for enforcement.

Four months later, on February 11, 1978, respondent Amelia Tan moved for the issuance of an alias writ of execution stating that the judgment rendered by the lower court, and affirmed with modification by the Court of Appeals, remained unsatisfied.

On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of an alias writ of execution stating that it had already fully paid its obligation to plaintiff through the deputy sheriff of the respondent court, Emilio Z. Reyes, as evidenced by cash vouchers properly signed and re-ceipted by said Emilio Z. Reyes.

On March 3,1978, the Court of Appeals denied the issuance of the alias writ for being premature, ordering the executing sheriff Emilio Z. Reyes to appear with his return and explain the reason for his failure to surrender the amounts paid to him by petitioner PAL. However, the order could not be served upon Deputy Sheriff Reyes who had absconded or disappeared.

On March 28, 1978, motion for the issuance of a partial alias writ of execution was filed by respon-dent Amelia Tan.

On April 19, 1978, respondent Amelia Tan filed a motion to withdraw "Motion for Partial Alias Writ of Execution" with Substitute Motion for Alias Writ of Execution. On May 1, 1978, the respondent Judge issued an order which reads:

As prayed for by counsel for the plaintiff, the Motion to Withdraw 'Motion for Par-tial Alias Writ of Execution with Substitute Motion for Alias Writ of Execution is hereby granted, and the motion for partial alias writ of execution is considered withdrawn.

Let an Alias Writ of Execution issue against the defendant for the fall satisfaction of the judgment rendered. Deputy Sheriff Jaime K. del Rosario is hereby ap-pointed Special Sheriff for the enforcement thereof. (CA Rollo, p. 34)

On May 18, 1978, the petitioner received a copy of the first alias writ of execution issued on the same day directing Special Sheriff Jaime K. del Rosario to levy on execution in the sum of P25,000.00 with legal interest thereon from July 20,1967 when respondent Amelia Tan made an extra-judicial demand through a letter. Levy was also ordered for the further sum of P5,000.00 awarded as attorney's fees.

On May 23, 1978, the petitioner filed an urgent motion to quash the alias writ of execution stating that no return of the writ had as yet been made by Deputy Sheriff Emilio Z. Reyes and that the judgment debt had already been fully satisfied by the petitioner as evidenced by the cash vouch-ers signed and receipted by the server of the writ of execution, Deputy Sheriff Emilio Z. Reyes.

On May 26,1978, the respondent Jaime K. del Rosario served a notice of garnishment on the de-pository bank of petitioner, Far East Bank and Trust Company, Rosario Branch, Binondo, Manila, through its manager and garnished the petitioner's deposit in the said bank in the total amount of P64,408.00 as of May 16, 1978. Hence, this petition for certiorari filed by the Philippine Airlines, Inc., on the grounds that:

I

AN ALIAS WRIT OF EXECUTION CANNOT BE ISSUED WITHOUT PRIOR RE-TURN OF THE ORIGINAL WRIT BY THE IMPLEMENTING OFFICER.

II

PAYMENT OF JUDGMENT TO THE IMPLEMENTING OFFICER AS DIRECTED IN THE WRIT OF EXECUTION CONSTITUTES SATISFACTION OF JUDG-MENT.

III

INTEREST IS NOT PAYABLE WHEN THE DECISION IS SILENT AS TO THE PAYMENT THEREOF.

IV

SECTION 5, RULE 39, PARTICULARLY REFERS TO LEVY OF PROPERTY OF JUDGMENT DEBTOR AND DISPOSAL OR SALE THEREOF TO SATISFY JUDGMENT.

Can an alias writ of execution be issued without a prior return of the original writ by the implement-ing officer?

We rule in the affirmative and we quote the respondent court's decision with approval:

The issuance of the questioned alias writ of execution under the circumstances here obtaining is justified because even with the absence of a Sheriffs return on the original writ, the unalterable fact remains that such a return is incapable of be-ing obtained (sic) because the officer who is to make the said return has ab-sconded and cannot be brought to the Court despite the earlier order of the court for him to appear for this purpose. (Order of Feb. 21, 1978, Annex C, Petition). Obviously, taking cognizance of this circumstance, the order of May 11, 1978 di-recting the issuance of an alias writ was therefore issued. (Annex D. Petition). The need for such a return as a condition precedent for the issuance of an alias writ was justifiably dispensed with by the court below and its action in this regard meets with our concurrence. A contrary view will produce an abhorent situation whereby the mischief of an erring officer of the court could be utilized to impede indefinitely the undisputed and awarded rights which a prevailing party rightfully deserves to obtain and with dispatch. The final judgment in this case should not indeed be permitted to become illusory or incapable of execution for an indefinite and over extended period, as had already transpired. (Rollo, pp. 35-36)

Judicium non debet esse illusorium; suum effectum habere debet (A judgment ought not to be illu-sory it ought to have its proper effect).

Indeed, technicality cannot be countenanced to defeat the execution of a judgment for execution is the fruit and end of the suit and is very aptly called the life of the law (Ipekdjian Merchandising Co. v. Court of Tax Appeals, 8 SCRA 59 [1963]; Commissioner of Internal Revenue v. Visayan Electric Co., 19 SCRA 697, 698 [1967]). A judgment cannot be rendered nugatory by the unreasonable application of a strict rule of procedure. Vested rights were never intended to rest on the require-

ment of a return, the office of which is merely to inform the court and the parties, of any and all ac-tions taken under the writ of execution. Where such information can be established in some other manner, the absence of an executing officer's return will not preclude a judgment from being treated as discharged or being executed through an alias writ of execution as the case may be. More so, as in the case at bar. Where the return cannot be expected to be forthcoming, to require the same would be to compel the enforcement of rights under a judgment to rest on an impossibil-ity, thereby allowing the total avoidance of judgment debts. So long as a judgment is not satisfied, a plaintiff is entitled to other writs of execution (Government of the Philippines v. Echaus and Gon-zales, 71 Phil. 318). It is a well known legal maxim that he who cannot prosecute his judgment with effect, sues his case vainly.

More important in the determination of the propriety of the trial court's issuance of an alias writ of execution is the issue of satisfaction of judgment.

Under the peculiar circumstances surrounding this case, did the payment made to the absconding sheriff by check in his name operate to satisfy the judgment debt? The Court rules that the plaintiff who has won her case should not be adjudged as having sued in vain. To decide otherwise would not only give her an empty but a pyrrhic victory.

It should be emphasized that under the initial judgment, Amelia Tan was found to have been wronged by PAL.

She filed her complaint in 1967.

After ten (10) years of protracted litigation in the Court of First Instance and the Court of Appeals, Ms. Tan won her case.

It is now 1990.

Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the courts have solemnly declared as rightfully hers. Through absolutely no fault of her own, Ms. Tan has been de-prived of what, technically, she should have been paid from the start, before 1967, without need of her going to court to enforce her rights. And all because PAL did not issue the checks intended for her, in her name.

Under the peculiar circumstances of this case, the payment to the absconding sheriff by check in his name did not operate as a satisfaction of the judgment debt.

In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person. Article 1240 of the Civil Code provides:

Payment shall be made to the person in whose favor the obligation has been con-stituted, or his successor in interest, or any person authorized to receive it. (Em-phasis supplied)

Thus, payment must be made to the obligee himself or to an agent having authority, express or implied, to receive the particular payment (Ulen v. Knecttle 50 Wyo 94, 58 [2d] 446, 111 ALR 65). Payment made to one having apparent authority to receive the money will, as a rule, be treated as though actual authority had been given for its receipt. Likewise, if payment is made to one who by law is authorized to act for the creditor, it will work a discharge (Hendry v. Benlisa 37 Fla. 609, 20 SO 800,34 LRA 283). The receipt of money due on ajudgment by an officer authorized by law to accept it will, therefore, satisfy the debt (See 40 Am Jm 729, 25; Hendry v. Benlisa supra; Seattle v. Stirrat 55 Wash. 104 p. 834,24 LRA [NS] 1275).

The theory is where payment is made to a person authorized and recognized by the creditor, the payment to such a person so authorized is deemed payment to the creditor. Under ordinary cir-cumstances, payment by the judgment debtor in the case at bar, to the sheriff should be valid pay-ment to extinguish the judgment debt.

There are circumstances in this case, however, which compel a different conclusion.

The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The checks were not payable to Amelia Tan or Able Printing Press but to the abscond-ing sheriff.

Did such payments extinguish the judgment debt?

Article 1249 of the Civil Code provides:

The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance.

In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money (US v. Robertson, 5 Pet. [US] 641, 8 L. ed. 257) and unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of payment of his debt (Anderson v. Gill, 79 Md.. 312, 29 A 527, 25 LRA 200,47 Am. St. Rep. 402). Consequently, unless authorized to do so by law or by consent of the obligee a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. Strictly speaking, the acceptance by the sheriff of the petitioner's checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt.

Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment (See. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil.

44; 21 R.C.L. 60, 61). A check, whether a manager's check or ordinary cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by com-mercial document is actually realized (Art. 1249, Civil Code, par. 3).

If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's, there would have been no payment. After dishonor of the checks, Ms. Tan could have run after other proper-ties of PAL. The theory is that she has received no value for what had been awarded her. Be-cause the checks were drawn in the name of Emilio Z. Reyes, neither has she received anything. The same rule should apply.

It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been payment in full legal contemplation. The reasoning is logical but is it valid and proper? Logic has its limits in deci-sion making. We should not follow rulings to their logical extremes if in doing so we arrive at unjust or absurd results.

In the first place, PAL did not pay in cash. It paid in cheeks.

And second, payment in cash always carries with it certain cautions. Nobody hands over big amounts of cash in a careless and inane manner. Mature thought is given to the possibility of the cash being lost, of the bearer being waylaid or running off with what he is carrying for another. Payment in checks is precisely intended to avoid the possibility of the money going to the wrong party. The situation is entirely different where a Sheriff seizes a car, a tractor, or a piece of land. Logic often has to give way to experience and to reality. Having paid with checks, PAL should have done so properly.

Payment in money or cash to the implementing officer may be deemed absolute payment of the judgment debt but the Court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge amounts of cash or legal tender to sheriffs and other executing officers. Payment in cash would result in damage or interminable litigations each time a sheriff with huge amounts of cash in his hands decides to abscond.

As a protective measure, therefore, the courts encourage the practice of payments by cheek pro-vided adequate controls are instituted to prevent wrongful payment and illegal withdrawal or dis-bursement of funds. If particularly big amounts are involved, escrow arrangements with a bank and carefully supervised by the court would be the safer procedure. Actual transfer of funds takes place within the safety of bank premises. These practices are perfectly legal. The object is always the safe and incorrupt execution of the judgment.

It is, indeed, out of the ordinary that checks intended for a particular payee are made out in the name of another. Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue advantage by the sheriff, or any person into whose hands the checks may have fallen, whether wrongfully or in behalf of the creditor. The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn.

As explained and held by the respondent court:

... [K]nowing as it does that the intended payment was for the private party re-spondent Amelia Tan, the petitioner corporation, utilizing the services of its per-sonnel who are or should be knowledgeable about the accepted procedures and resulting consequences of the checks drawn, nevertheless, in this instance, with-out prudence, departed from what is generally observed and done, and placed as payee in the checks the name of the errant Sheriff and not the name of the rightful payee. Petitioner thereby created a situation which permitted the said Sheriff to personally encash said checks and misappropriate the proceeds thereof to his ex-clusive personal benefit. For the prejudice that resulted, the petitioner himself must bear the fault. The judicial guideline which we take note of states as follows:

As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act of confidence must bear the loss. (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61 Phil. 625)

Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made possible the loss had but itself to blame.

The attention of this Court has been called to the bad practice of a number of executing officers, of requiring checks in satisfaction of judgment debts to be made out in their own names. If a sheriff directs a judgment debtor to issue the checks in the sheriff's name, claiming he must get his com-mission or fees, the debtor must report the sheriff immediately to the court which ordered the exe-cution or to the Supreme Court for appropriate disciplinary action. Fees, commissions, and salaries are paid through regular channels. This improper procedure also allows such officers, who have sixty (60) days within which to make a return, to treat the moneys as their personal finds and to deposit the same in their private accounts to earn sixty (60) days interest, before said finds are turned over to the court or judgment creditor (See Balgos v. Velasco, 108 SCRA 525 [1981]). Quite as easily, such officers could put up the defense that said checks had been issued to them in their private or personal capacity. Without a receipt evidencing payment of the judgment debt, the misappropriation of finds by such officers becomes clean and complete. The practice is inge-nious but evil as it unjustly enriches court personnel at the expense of litigants and the proper ad-ministration of justice. The temptation could be far greater, as proved to be in this case of the ab-sconding sheriff. The correct and prudent thing for the petitioner was to have issued the checks in the intended payee's name.

The pernicious effects of issuing checks in the name of a person other than the intended payee, without the latter's agreement or consent, are as many as the ways that an artful mind could con-coct to get around the safeguards provided by the law on negotiable instruments. An angry litigant who loses a case, as a rule, would not want the winning party to get what he won in the judgment. He would think of ways to delay the winning party's getting what has been adjudged in his favor. We cannot condone that practice especially in cases where the courts and their officers are in-volved. We rule against the petitioner.

Anent the applicability of Section 15, Rule 39, as follows:

Section 15. Execution of money judgments. — The officer must enforce an execu-tion of a money judgment by levying on all the property, real and personal of ev-ery name and nature whatsoever, and which may be disposed of for value, of the judgment debtor not exempt from execution, or on a sufficient amount of such property, if they be sufficient, and selling the same, and paying to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. ...

the respondent court held:

We are obliged to rule that the judgment debt cannot be considered satisfied and therefore the orders of the respondent judge granting the alias writ of execution may not be pronounced as a nullity.

xxx xxx xxx

It is clear and manifest that after levy or garnishment, for a judgment to be exe-cuted there is the requisite of payment by the officer to the judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment and none such payment had been concededly made yet by the absconding Sheriff to the private respondent Amelia Tan. The ultimate and essential step to complete the execu-tion of the judgment not having been performed by the City Sheriff, the judgment debt legally and factually remains unsatisfied.

Strictly speaking execution cannot be equated with satisfaction of a judgment. Under unusual cir-cumstances as those obtaining in this petition, the distinction comes out clearly.

Execution is the process which carries into effect a decree or judgment (Painter v. Berglund, 31 Cal. App. 2d. 63, 87 P 2d 360, 363; Miller v. London, 294 Mass 300, 1 NE 2d 198, 200; Black's Law Dictionary), whereas the satisfaction of a judgment is the payment of the amount of the writ, or a lawful tender thereof, or the conversion by sale of the debtor's property into an amount equal to that due, and, it may be done otherwise than upon an execution (Section 47, Rule 39). Levy and delivery by an execution officer are not prerequisites to the satisfaction of a judgment when the same has already been realized in fact (Section 47, Rule 39). Execution is for the sheriff to ac-complish while satisfaction of the judgment is for the creditor to achieve. Section 15, Rule 39 merely provides the sheriff with his duties as executing officer including delivery of the proceeds of his levy on the debtor's property to satisfy the judgment debt. It is but to stress that the implement-ing officer's duty should not stop at his receipt of payments but must continue until payment is de-livered to the obligor or creditor.

Finally, we find no error in the respondent court's pronouncement on the inclusion of interests to be recovered under the alias writ of execution. This logically follows from our ruling that PAL is li -able for both the lost checks and interest. The respondent court's decision in CA-G.R. No. 51079-R does not totally supersede the trial court's judgment in Civil Case No. 71307. It merely modified the same as to the principal amount awarded as actual damages.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The judgment of the respondent Court of Appeals is AFFIRMED and the trial court's issuance of the alias writ of

execution against the petitioner is upheld without prejudice to any action it should take against the errant sheriff Emilio Z. Reyes. The Court Administrator is ordered to follow up the actions taken against Emilio Z. Reyes.

SO ORDERED.

Fernan, C.J., Cruz, Paras, Bidin, Griño-Aquino, Medialdea and Regalado, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION 

G.R. No. 88866 February 18, 1991

METROPOLITAN BANK & TRUST COMPANY, petitioner, vs.COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO, respondents.

CRUZ, J.:p

This case, for all its seeming complexity, turns on a simple question of negligence. The facts, pruned of all non-essentials, are easily told.

The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the Philip-pines and even abroad. Golden Savings and Loan Association was, at the time these events hap-pened, operating in Calapan, Mindoro, with the other private respondents as its principal officers.

In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and de-posited over a period of two months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its Gen-eral Manager and countersigned by its Auditor. Six of these were directly payable to Gomez while the others appeared to have been indorsed by their respective payees, followed by Gomez as second indorser. 1

On various dates between June 25 and July 16, 1979, all these warrants were subsequently in-dorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account No. 2498 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. 2

More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask whether the warrants had been cleared. She was told to wait. Accordingly, Gomez was meanwhile not allowed to withdraw from his account. Later, however, "exasperated" over Gloria's repeated inquiries and also as an accommodation for a "valued client," the petitioner says it finally decided to allow Golden Savings to withdraw from the proceeds of thewarrants. 3 The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the sec-ond on July 13, 1979, in the amount of P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The total withdrawal was P968.000.00. 4

In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared warrants. The last withdrawal was made on July 16, 1979.

On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishon-ored by the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account.

The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of Mindoro. 5 After trial, judgment was rendered in favor of Golden Savings, which, however, filed a motion for reconsideration even as Metrobank filed its notice of appeal. On November 4, 1986, the lower court modified its decision thus:

ACCORDINGLY, judgment is hereby rendered:

1. Dismissing the complaint with costs against the plaintiff;

2. Dissolving and lifting the writ of attachment of the properties of defendant Golden Savings and Loan Association, Inc. and defendant Spouses Magno Castillo and Lucia Castillo;

3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the sum of P1,754,089.00 and to reinstate and credit to such account such amount existing before the debit was made including the amount of P812,033.37 in favor of defendant Golden Savings and Loan Association, Inc. and thereafter, to allow defendant Golden Savings and Loan Association, Inc. to withdraw the amount outstanding thereon before the debit;

4. Ordering the plaintiff to pay the defendant Golden Savings and Loan Associa-tion, Inc. attorney's fees and expenses of litigation in the amount of P200,000.00.

5. Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia Castillo attorney's fees and expenses of litigation in the amount of P100,000.00.

SO ORDERED.

On appeal to the respondent court, 6 the decision was affirmed, prompting Metrobank to file this petition for review on the following grounds:

1. Respondent Court of Appeals erred in disregarding and failing to apply the clear contractual terms and conditions on the deposit slips allowing Metrobank to charge back any amount erroneously credited.

(a) Metrobank's right to charge back is not limited to instances where the checks or treasury warrants are forged or unauthorized.

(b) Until such time as Metrobank is actually paid, its obligation is that of a mere collecting agent which cannot be held liable for its failure to collect on the war-rants.

2. Under the lower court's decision, affirmed by respondent Court of Appeals, Metrobank is made to pay for warrants already dishonored, thereby perpetuating the fraud committed by Eduardo Gomez.

3. Respondent Court of Appeals erred in not finding that as between Metrobank and Golden Savings, the latter should bear the loss.

4. Respondent Court of Appeals erred in holding that the treasury warrants in-volved in this case are not negotiable instruments.

The petition has no merit.

From the above undisputed facts, it would appear to the Court that Metrobank was indeed negli-gent in giving Golden Savings the impression that the treasury warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his account with it. Without such assurance, Golden Savings would not have allowed the withdrawals; with such assurance, there was no reason not to allow the withdrawal. Indeed, Golden Savings might even have incurred liability for its refusal to return the money that to all appearances belonged to the depositor, who could therefore withdraw it any time and for any reason he saw fit.

It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to determine the validity of the warrants through its own services. The proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit. 7 It was only when Metrobank gave the go-signal that Gomez was fi-nally allowed by Golden Savings to withdraw them from his own account.

The argument of Metrobank that Golden Savings should have exercised more care in checking the personal circumstances of Gomez before accepting his deposit does not hold water. It was Gomez who was entrusting the warrants, not Golden Savings that was extending him a loan; and moreover, the treasury warrants were subject to clearing, pending which the depositor could not withdraw its proceeds. There was no question of Gomez's identity or of the genuineness of his sig-nature as checked by Golden Savings. In fact, the treasury warrants were dishonored allegedly because of the forgery of the signatures of the drawers, not of Gomez as payee or indorser. Under the circumstances, it is clear that Golden Savings acted with due care and diligence and cannot be faulted for the withdrawals it allowed Gomez to make.

By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling — more than one and a half million pesos (and this was 1979). There was no reason why it should not have waited until the treasury warrants had been cleared; it would not have lost a single cen-tavo by waiting. Yet, despite the lack of such clearance — and notwithstanding that it had not re-ceived a single centavo from the proceeds of the treasury warrants, as it now repeatedly stresses — it allowed Golden Savings to withdraw — not once, not twice, but thrice — from the un-cleared treasury warrants in the total amount of P968,000.00

Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and it also wanted to "accommodate" a valued client. It "presumed" that the warrants had been

cleared simply because of "the lapse of one week." 8 For a bank with its long experience, this ex-planation is unbelievably naive.

And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal side of the deposit slips through which the treasury warrants were deposited by Golden Savings with its Calapan branch. The conditions read as follows:

Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's collecting agent, assuming no responsibility beyond care in selecting correspondents, and until such time as actual payment shall have come into pos-session of this bank, the right is reserved to charge back to the depositor's ac-count any amount previously credited, whether or not such item is returned. This also applies to checks drawn on local banks and bankers and their branches as well as on this bank, which are unpaid due to insufficiency of funds, forgery, unau-thorized overdraft or any other reason. (Emphasis supplied.)

According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent for Golden Savings and give it the right to "charge back to the depositor's account any amount previously credited, whether or not such item is returned. This also applies to checks ". . . which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft of any other rea-son." It is claimed that the said conditions are in the nature of contractual stipulations and became binding on Golden Savings when Gloria Castillo, as its Cashier, signed the deposit slips.

Doubt may be expressed about the binding force of the conditions, considering that they have ap-parently been imposed by the bank unilaterally, without the consent of the depositor. Indeed, it could be argued that the depositor, in signing the deposit slip, does so only to identify himself and not to agree to the conditions set forth in the given permit at the back of the deposit slip. We do not have to rule on this matter at this time. At any rate, the Court feels that even if the deposit slip were considered a contract, the petitioner could still not validly disclaim responsibility thereunder in the light of the circumstances of this case.

In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to be suggesting that as a mere agent it cannot be liable to the principal. This is not exactly true. On the contrary, Article 1909 of the Civil Code clearly provides that —

Art. 1909. — The agent is responsible not only for fraud, but also for negligence, which shall be judged 'with more or less rigor by the courts, according to whether the agency was or was not for a compensation.

The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the clearance given by it that assured Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the treasury warrants he had deposited Metrobank misled Golden Savings. There may have been no express clearance, as Metrobank insists (although this is refuted by Golden Savings) but in any case that clearance could be implied from its allowing Golden Savings to with-draw from its account not only once or even twice but three times. The total withdrawal was in ex-cess of its original balance before the treasury warrants were deposited, which only added to its belief that the treasury warrants had indeed been cleared.

Metrobank's argument that it may recover the disputed amount if the warrants are not paid for any reason is not acceptable. Any reason does not mean no reason at all. Otherwise, there would have been no need at all for Golden Savings to deposit the treasury warrants with it for clearance. There would have been no need for it to wait until the warrants had been cleared before paying the proceeds thereof to Gomez. Such a condition, if interpreted in the way the petitioner suggests, is not binding for being arbitrary and unconscionable. And it becomes more so in the case at bar when it is considered that the supposed dishonor of the warrants was not communicated to Golden Savings before it made its own payment to Gomez.

The belated notification aggravated the petitioner's earlier negligence in giving express or at least implied clearance to the treasury warrants and allowing payments therefrom to Golden Savings. But that is not all. On top of this, the supposed reason for the dishonor, to wit, the forgery of the signatures of the general manager and the auditor of the drawer corporation, has not been estab-lished. 9 This was the finding of the lower courts which we see no reason to disturb. And as we said in MWSS v. Court of Appeals: 10

Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be established by clear, positive and convincing evidence. This was not done in the present case.

A no less important consideration is the circumstance that the treasury warrants in question are not negotiable instruments. Clearly stamped on their face is the word "non-negotiable." Moreover, and this is of equal significance, it is indicated that they are payable from a particular fund, to wit, Fund 501.

The following sections of the Negotiable Instruments Law, especially the underscored parts, are pertinent:

Sec. 1. — Form of negotiable instruments. — An instrument to be negotiable must conform to the following requirements:(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 other-wise indicated therein with reasonable certainty.xxx xxx xxxSec. 3. When promise is unconditional. — An unqualified order or promise to pay is unconditional within the meaning of this Act though coupled with —(a) An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount; or(b) A statement of the transaction which gives rise to the instrument judgment.But an order or promise to pay out of a particular fund is not unconditional.

The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or promise to pay "not unconditional" and the warrants themselves non-nego-tiable. There should be no question that the exception on Section 3 of the Negotiable Instruments

Law is applicable in the case at bar. This conclusion conforms to Abubakar vs. Auditor Gen-eral 11 where the Court held:

The petitioner argues that he is a holder in good faith and for value of a negotiable instrument and is entitled to the rights and privileges of a holder in due course, free from defenses. But this treasury warrant is not within the scope of the nego-tiable instrument law. For one thing, the document bearing on its face the words "payable from the appropriation for food administration, is actually an Order for payment out of "a particular fund," and is not unconditional and does not fulfill one of the essential requirements of a negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable Instruments Law).

Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were "genuine and in all respects what they purport to be," in accordance with Section 66 of the Negotiable Instruments Law. The simple reason is that this law is not applicable to the non-negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the warrants but merely to deposit them with Metrobank for clearing. It was in fact Metrobank that made the guarantee when it stamped on the back of the warrants: "All prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch."

The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine Islands, 12 but we feel this case is inapplicable to the present controversy. That case involved checks whereas this case involves treasury warrants. Golden Savings never represented that the warrants were nego-tiable but signed them only for the purpose of depositing them for clearance. Also, the fact of forgery was proved in that case but not in the case before us. Finally, the Court found the Jai Alai Corporation negligent in accepting the checks without question from one Antonio Ramirez notwith-standing that the payee was the Inter-Island Gas Services, Inc. and it did not appear that he was authorized to indorse it. No similar negligence can be imputed to Golden Savings.

We find the challenged decision to be basically correct. However, we will have to amend it insofar as it directs the petitioner to credit Golden Savings with the full amount of the treasury checks de-posited to its account.

The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez was allowed to withdraw P1,167,500.00 before Golden Savings was notified of the dishonor. The amount he has withdrawn must be charged not to Golden Savings but to Metrobank, which must bear the consequences of its own negligence. But the balance of P586,589.00 should be debited to Golden Savings, as obviously Gomez can no longer be permitted to withdraw this amount from his deposit because of the dishonor of the warrants. Gomez has in fact disappeared. To also credit the balance to Golden Savings would unduly enrich it at the expense of Metrobank, let alone the fact that it has already been informed of the dishonor of the treasury warrants.

WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the dispositive portion of the judgment of the lower court shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and there-after allowing defendant Golden Savings & Loan Association, Inc. to withdraw the amount outstanding thereon, if any, after the debit. SO ORDERED.

Republic of the PhilippinesSUPREME 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.

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 Su-cat 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 Is-sues, Original Records, p. 207; Defendant's Exhibits 1 to 280);

CTD CTDDates Serial Nos. Quantity Amount

22 Feb. 82 90101 to 90120 20 P80,00026 Feb. 82 74602 to 74691 90 360,0002 Mar. 82 74701 to 74740 40 160,0004 Mar. 82 90127 to 90146 20 80,0005 Mar. 82 74797 to 94800 4 16,0005 Mar. 82 89965 to 89986 22 88,0005 Mar. 82 70147 to 90150 4 16,0008 Mar. 82 90001 to 90020 20 80,0009 Mar. 82 90023 to 90050 28 112,0009 Mar. 82 89991 to 90000 10 40,0009 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 affi-davit of loss, 280 replacement CTDs were issued in favor of said depositor (De-fendant's Exhibits 282-561).

5. On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from de-fendant 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-ter-minate, 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 verifi-cation the CTDs declared lost by Angel dela Cruz alleging that the same were de-livered 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 pay-ment of the value of the CTDs in a letter dated February 7, 1983 (Defendant's Ex-hibit 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 defen-dant bank be ordered to pay it the aggregate value of the certificates of time de-posit 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 com-plaint, 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 pe-titioner did not become a holder in due course of the said certificates of deposit; and (3) in disre-garding 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 under-standing of the issues involved in this recourse.

SECURITY BANKAND TRUST COMPANY6778 Ayala Ave., Makati No. 90101Metro Manila, PhilippinesSUCAT OFFICEP 4,000.00CERTIFICATE OF DEPOSITRate 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 presenta-tion 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 An-gel 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 other-wise 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 de-positor 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 (sic) the amount.

Atty. Calida:

q And no other person or entity or company, Mr. Witness?

witness:

a None, your Honor. 7

xxx xxx xxx

Atty. Calida:

q Mr. Witness, who is the depositor identified in all of these certifi-cates of time deposit insofar as the bank is concerned?

witness:

a Angel dela Cruz is the depositor. 8

xxx xxx xxx

On this score, the accepted rule is that the negotiability or non-negotiability of an instrument is de-termined from the writing, that is, from the face of the instrument itself. 9 In the construction of a bill or note, the intention of the parties is to control, if it can be legally ascertained. 10 While the writing may be read in the light of surrounding circumstances in order to more perfectly understand the in-tent and meaning of the parties, yet as they have constituted the writing to be the only outward and visible expression of their meaning, no other words are to be added to it or substituted in its stead. The duty of the court in such case is to ascertain, not what the parties may have secretly in-tended as contradistinguished from what their words express, but what is the meaning of the words they have used. What the parties meant must be determined by what they said. 11

Contrary to what respondent court held, the CTDs are negotiable instruments. The documents provide that the amounts deposited shall be repayable to the depositor. And who, according to the document, is the depositor? It is the "bearer." The documents do not say that the depositor is An-gel de la Cruz and that the amounts deposited are repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the documents or, for that matter, whosoever may be the bearer at the time of presentment.

If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so expressed that fact in clear and categorical terms in the documents, in-stead of having the word "BEARER" stamped on the space provided for the name of the depositor in each CTD. On the wordings of the documents, therefore, the amounts deposited are repayable to whoever may be the bearer thereof. Thus, petitioner's aforesaid witness merely declared that Angel de la Cruz is the depositor "insofar as the bank is concerned," but obviously other parties not privy to the transaction between them would not be in a position to know that the depositor is not the bearer stated in the CTDs. Hence, the situation would require any party dealing with the

CTDs to go behind the plain import of what is written thereon to unravel the agreement of the par-ties thereto through facts aliunde. This need for resort to extrinsic evidence is what is sought to be avoided by the Negotiable Instruments Law and calls for the application of the elementary rule that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 12

The next query is whether petitioner can rightfully recover on the CTDs. This time, the answer is in the negative. The records reveal that Angel de la Cruz, whom petitioner chose not to implead in this suit for reasons of its own, delivered the CTDs amounting to P1,120,000.00 to petitioner with-out informing respondent bank thereof at any time. Unfortunately for petitioner, although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it and De la Cruz, as ultimately ascertained, requires both delivery and indorsement. For, although petitioner seeks to deflect this fact, the CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel products. Any doubt as to whether the CTDs were delivered as pay-ment for the fuel products or as a security has been dissipated and resolved in favor of the latter by petitioner's own authorized and responsible representative himself.

In a letter dated November 26, 1982 addressed to respondent Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . . These certificates of deposit were negotiated to us by Mr. An-gel dela Cruz to guarantee his purchases of fuel products" (Emphasis ours.) 13 This admission is conclusive upon petitioner, its protestations notwithstanding. Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be de-nied or disproved as against the person relying thereon. 14 A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them. 15 In the law of evidence, whenever a party has, by his own declaration, act, or omission, intentionally and deliber-ately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act, or omission, be permitted to falsify it. 16

If it were true that the CTDs were delivered as payment and not as security, petitioner's credit manager could have easily said so, instead of using the words "to guarantee" in the letter afore-quoted. Besides, when respondent bank, as defendant in the court below, moved for a bill of par-ticularity therein 17 praying, among others, that petitioner, as plaintiff, be required to aver with suffi-cient definiteness or particularity (a) the due date or dates ofpayment of the alleged indebtedness of Angel de la Cruz to plaintiff and (b) whether or not it issued a receipt showing that the CTDs were delivered to it by De la Cruz as payment of the latter's alleged indebtedness to it, plaintiff cor-poration opposed the motion. 18 Had it produced the receipt prayed for, it could have proved, if such truly was the fact, that the CTDs were delivered as payment and not as security. Having op-posed the motion, petitioner now labors under the presumption that evidence willfully suppressed would be adverse if produced. 19

Under the foregoing circumstances, this disquisition in Intergrated Realty Corporation, et al. vs. Philippine National Bank, et al. 20 is apropos:

. . . Adverting again to the Court's pronouncements in Lopez, supra, we quote therefrom:

The character of the transaction between the parties is to be de-termined by their intention, regardless of what language was

used or what the form of the transfer was. If it was intended to se-cure the payment of money, it must be construed as a pledge; but if there was some other intention, it is not a pledge. However, even though a transfer, if regarded by itself, appears to have been absolute, its object and character might still be qualified and explained by contemporaneous writing declaring it to have been a deposit of the property as collateral security. It has been said that a transfer of property by the debtor to a creditor, even if sufficient on its face to make an absolute conveyance, should be treated as a pledge if the debt continues in inexistence and is not dis-charged by the transfer, and that accordingly the use of the terms ordinarily importing conveyance of absolute ownership will not be given that 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 Nego-tiable Instruments Law, an instrument is negotiated when it is transferred from one person to an-other 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 nego-tiation 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 re-spondent court quoted at the start of this opinion show that petitioner failed to produce any docu-ment 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 ef-

fective against and binding upon respondent bank. The requirement under Article 2096 aforemen-tioned 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 prop-erty.

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 ex-tent of its lien nor the execution of any public instrument which could affect or bind private respon-dent. 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 pri-vate 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 be-fore 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 confer-ence 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 pri-vate 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 ac-tion, 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, peti-tioner still cannot have the odds in its favor. A close scrutiny of the provisions of the Code of Com-merce 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 is-suance 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 manda-tory. 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 Com-merce, on which petitioner seeks to anchor respondent bank's supposed negligence, merely es-tablished, 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 re-

placement 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 ap-pealed decision is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Padilla and Nocon, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-2516             September 25, 1950ANG TEK LIAN, petitioner, vs. THE COURT OF APPEALS, respondent.

BENGZON, J.:

For having issued a rubber check, Ang Tek Lian was convicted of estafa in the Court of First In-stance 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 assur-ance 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 deci-sion is whether under the facts found, estafa had been accomplished.Article 315, paragraph (d), subsection 2 of the Revised Penal Code, punishes swindling commit-ted "By post dating a check, or issuing such check in payment of an obligation the offender know-ing 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 circum-stances".We believe that under this provision of law Ang Tek Lian was properly held liable. In this connec-tion, it must be stated that, as explained in People vs. Fernandez (59 Phil., 615), estafa is commit-ted 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 en-dorsed by Ang Tek Lian, the defendant is not guilty of the offense charged. Based on the proposi-tion that "by uniform practice of all banks in the Philippines a check so drawn is invariably dishon-ored," 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 ap-pellant, 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 com-plainant, 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 circum-stances 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 present-ing 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 de-mand 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 in-strument 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 ordi-nary 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 fall-ing 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 negli-gence 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 uncon-nected 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 ofcertiorari is denied and the decision of the Court of Appeals is hereby affirmed, with costs.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 93073 December 21, 1992

REPUBLIC PLANTERS BANK, petitioner, vs.COURT OF APPEALS and FERMIN CANLAS, respondents. 

CAMPOS, JR., J.:

This is an appeal by way of a Petition for Review on Certiorari from the decision * of the Court of Appeals in CA G.R. CV No. 07302, entitled "Republic Planters Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and Fermin Canlas, Defendant-Appellant", which affirmed the decision ** in Civil Case No. 82-5448 except that it completely absolved Fermin Can-las from liability under the promissory notes and reduced the award for damages and attorney's fees. The RTC decision, rendered on June 20, 1985, is quoted hereunder:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Republic Planters Bank, ordering defendant Pinch Manufacturing Corpo-ration (formerly Worldwide Garment Manufacturing, Inc.) and defendants Shozo Yamaguchi and Fermin Canlas to pay, jointly and severally, the plaintiff bank the following sums with interest thereon at 16% per annum from the dates indicated, to wit:

Under the promissory note (Exhibit "A"), the sum of P300,000.00 with interest from January 29, 1981 until fully paid; under promissory note (Exhibit "B"), the sum of P40,000.00 with interest from November 27, 1980; under the promissory note (Exhibit "C"), the sum of P166,466.00 which interest from January 29, 1981; under the promissory note (Exhibit "E"), the sum of P86,130.31 with interest from January 29, 1981; under the promissory note (Exhibit "G"), the sum of P12,703.70 with interest from November 27, 1980; under the promissory note (Exhibit "H"), the sum of P281,875.91 with interest from January 29, 1981; and under the prom-issory note (Exhibit "I"), the sum of P200,000.00 with interest from January 29, 1981.

Under the promissory note (Exhibit "D") defendants Pinch Manufacturing Corpora-tion (formerly named Worldwide Garment Manufacturing, Inc.), and Shozo Yam-aguchi are ordered to pay jointly and severally, the plaintiff bank the sum of P367,000.00 with interest of 16% per annum from January 29, 1980 until fully paid

Under the promissory note (Exhibit "F") defendant corporation Pinch (formerly Worldwide) is ordered to pay the plaintiff bank the sum of P140,000.00 with inter-est at 16% per annum from November 27, 1980 until fully paid.

Defendant Pinch (formely Worldwide) is hereby ordered to pay the plaintiff the sum of P231,120.81 with interest at 12% per annum from July 1, 1981, until fully paid and the sum of P331,870.97 with interest from March 28, 1981, until fully paid.

All the defendants are also ordered to pay, jointly and severally, the plaintiff the sum of P100,000.00 as and for reasonable attorney's fee and the further sum equivalent to 3% per annum of the respective principal sums from the dates above stated as penalty charge until fully paid, plus one percent (1%) of the prin-cipal sums as service charge.

With costs against the defendants.

SO ORDERED. 1

From the above decision only defendant Fermin Canlas appealed to the then Intermediate Court (now the Court Appeals). His contention was that inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing, Inc, he should not be held personally liable for such authorized corporate acts that he performed. It is now the con-tention of the petitioner Republic Planters Bank that having unconditionally signed the nine (9) promissory notes with Shozo Yamaguchi, jointly and severally, defendant Fermin Canlas is soli-darity liable with Shozo Yamaguchi on each of the nine notes.

We find merit in this appeal.

From the records, these facts are established: Defendant Shozo Yamaguchi and private respon-dent Fermin Canlas were President/Chief Operating Officer and Treasurer respectively, of World-wide Garment Manufacturing, Inc.. By virtue of Board Resolution No.1 dated August 1, 1979, de-fendant Shozo Yamaguchi and private respondent Fermin Canlas were authorized to apply for credit facilities with the petitioner Republic Planters Bank in the forms of export advances and let-ters of credit/trust receipts accommodations. Petitioner bank issued nine promissory notes, marked as Exhibits A to I inclusive, each of which were uniformly worded in the following manner:

___________, after date, for value received, I/we, jointly and severaIly promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of ___________ PESOS(....) Philippine Currency...

On the right bottom margin of the promissory notes appeared the signatures of Shozo Yamaguchi and Fermin Canlas above their printed names with the phrase "and (in) his personal capacity" typewritten below. At the bottom of the promissory notes appeared: "Please credit proceeds of this note to:

________ Savings Account ______XX Current Account

No. 1372-00257-6

of WORLDWIDE GARMENT MFG. CORP.

These entries were separated from the text of the notes with a bold line which ran horizontally across the pages.

In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment Manufac-turing, Inc. was apparently rubber stamped above the signatures of defendant and private respon-dent.

On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its corporate name to Pinch Manufacturing Corporation.

On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money covered among others, by the nine promissory notes with interest thereon, plus attorney's fees and penalty charges. The complainant was originally brought against Worldwide Garment Manufacturing, Inc. inter alia, but it was later amended to drop Worldwide Manufacturing, Inc. as defendant and substitute Pinch Manufacturing Corporation it its place. Defendants Pinch Manufacturing Corpora-tion and Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only private respondent Fermin Canlas filed an Amended Answer wherein he, denied having issued the promissory notes in question since according to him, he was not an officer of Pinch Manufacturing Corporation, but instead of Worldwide Garment Manufacturing, Inc., and that when he issued said promissory notes in behalf of Worldwide Gar-ment Manufacturing, Inc., the same were in blank, the typewritten entries not appearing therein prior to the time he affixed his signature.

In the mind of this Court, the only issue material to the resolution of this appeal is whether private respondent Fermin Canlas is solidarily liable with the other defendants, namely Pinch Manufactur-ing Corporation and Shozo Yamaguchi, on the nine promissory notes.

We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes bearing his signature for the following reasons:

The promissory motes are negotiable instruments and must be governed by the Negotiable Instru-ments Law. 2

Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. 3 By signing the notes, the maker promises to pay to the order of the payee or any holder4 according to the tenor thereof. 5 Based on the above provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-makers of the promissory notes. As such, he cannot escape liability arising therefrom.

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. 6 An instrument which begins" with "I" ,We" , or "Either of us" promise to, pay, when signed by two or more persons, makes them soli-darily liable. 7 The fact that the singular pronoun is used indicates that the promise is individual as

to each other; meaning that each of the co-signers is deemed to have made an independent sin-gular promise to pay the notes in full.

In the case at bar, 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 describ-ing the unconditional promise to pay to the order of Republic Planters Bank. A joint and several note is one in which the makers bind themselves both jointly and individually to the payee so that all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit. 8 A joint and several obligation in common law corresponds to a civil law solidary obli-gation; that is, one of several debtors bound in such wise that each is liable for the entire amount, and not merely for his proportionate share. 9 By making a joint and several promise to pay to the order of Republic Planters Bank, private respondent Fermin Canlas assumed the solidary liability of a debtor and the payee may choose to enforce the notes against him alone or jointly with Yam-aguchi and Pinch Manufacturing Corporation as solidary debtors.

As to whether the interpolation of the phrase "and (in) his personal capacity" below the signatures of the makers in the notes will affect the liability of the makers, We do not find it necessary to re-solve and decide, because it is immaterial and will not affect to the liability of private respondent Fermin Canlas as a joint and several debtor of the notes. With or without the presence of said phrase, private respondent Fermin Canlas is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor.

Finally, the respondent Court made a grave error in holding that an amendment in a corporation's Articles of Incorporation effecting a change of corporate name, in this case from Worldwide Gar-ment manufacturing Inc to Pinch Manufacturing Corporation extinguished the personality of the original corporation.

The corporation, upon such change in its name, is in no sense a new corporation, nor the succes-sor of the original corporation. It is the same corporation with a different name, and its character is in no respect changed.10

A change in the corporate name does not make a new corporation, and whether effected by spe-cial act or under a general law, has no affect on the identity of the corporation, or on its property, rights, or liabilities. 11

The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or incurred. 12

As a general rule, officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old corporation and the change of name meant only the continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts of its agents if authorized by the Board. Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for as follows:

Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or a person adds to his signature words indicating that he signs for or on

behalf of a principal , or in a representative capacity, he is not liable on the instru-ment if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability.

Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a representative capacity or the name of the third party for whom he might have acted as agent, the agent is personally liable to take holder of the instrument and cannot be permitted to prove that he was merely acting as agent of another and parol or extrinsic evidence is not admis-sible to avoid the agent's personal liability. 13

On the private respondent's contention that the promissory notes were delivered to him in blank for his signature, we rule otherwise. A careful examination of the notes in question shows that they are the stereotype printed form of promissory notes generally used by commercial banking institu-tions to be signed by their clients in obtaining loans. Such printed notes are incomplete because there are blank spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest, date of issue and the maturity date. The terms and conditions of the loan are printed on the note for the borrower-debtor 's perusal. An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable Instru-ments Law which provides, in so far as relevant to this case, thus:

Sec. 14. Blanks: when may be filled. — Where the instrument is wanting in any material particular, the person in possesion thereof has a prima facie authority to complete it by filling up the blanks therein. ... In order, however, that any such in-strument 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...

Proof that the notes were signed in blank was only the self-serving testimony of private respon-dent Fermin Canlas, as determined by the trial court, so that the trial court ''doubts the defendant (Canlas) signed in blank the promissory notes". We chose to believe the bank's testimony that the notes were filled up before they were given to private respondent Fermin Canlas and defendant Shozo Yamaguchi for their signatures as joint and several promissors. For signing the notes above their typewritten names, they bound themselves as unconditional makers. We take judicial notice of the customary procedure of commercial banks of requiring their clientele to sign promis-sory notes prepared by the banks in printed form with blank spaces already filled up as per agreed terms of the loan, leaving the borrowers-debtors to do nothing but read the terms and conditions therein printed and to sign as makers or co-makers. When the notes were given to private respon-dent Fermin Canlas for his signature, the notes were complete in the sense that the spaces for the material particular had been filled up by the bank as per agreement. The notes were not incom-plete instruments; neither were they given to private respondent Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.

The ruling in case of Reformina vs. Tomol relied upon by the appellate court in reducing the inter-est rate on the promissory notes from 16% to 12% per annum does not squarely apply to the in-stant petition. In the abovecited case, the rate of 12% was applied to forebearances of money, goods or credit and court judgemets thereon, only in the absence of any stipulation between the parties.

In the case at bar however , it was found by the trial court that the rate of interest is 9% per an-num, which interest rate the plaintiff may at any time without notice, raise within the limits allowed law. And so, as of February 16, 1984 , the plaintiff had fixed the interest at 16% per annum.

This Court has held that the rates under the Usury Law, as amended by Presidential Decree No. 116, are applicable only to interests by way of compensation for the use or forebearance of money. Article 2209 of the Civil Code, on the other hand, governs interests by way of dam-ages. 15 This fine distinction was not taken into consideration by the appellate court, which instead made a general statement that the interest rate be at 12% per annum.

Inasmuch as this Court had declared that increases in interest rates are not subject to any ceiling prescribed by the Usury Law, the appellate court erred in limiting the interest rates at 12% per an-num. Central Bank Circular No. 905, Series of 1982 removed the Usury Law ceiling on interest rates. 16

In the 1ight of the foregoing analysis and under the plain language of the statute and jurispru-dence on the matter, the decision of the respondent: Court of Appeals absolving private respon-dent Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby rendered declaring pri-vate respondent Fermin Canlas jointly and severally liable on all the nine promissory notes with the following sums and at 16% interest per annum from the dates indicated, to wit:

Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest from Janu-ary 29, 1981 until fully paid; under promissory note marked as Exhibit B, the sum of P40,000.00 with interest from November 27, 1980: under the promissory note denominated as Exhibit C, the amount of P166,466.00 with interest from January 29, 1981; under the promissory note denomi-nated as Exhibit D, the amount of P367,000.00 with interest from January 29, 1981 until fully paid; under the promissory note marked as Exhibit E, the amount of P86,130.31 with interest from Janu-ary 29, 1981; under the promissory note marked as Exhibit F, the sum of P140,000.00 with inter-est from November 27, 1980 until fully paid; under the promissory note marked as Exhibit G, the amount of P12,703.70 with interest from November 27, 1980; the promissory note marked as Ex-hibit H, the sum of P281,875.91 with interest from January 29, 1981; and the promissory note marked as Exhibit I, the sum of P200,000.00 with interest on January 29, 1981.

The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide Garment Manu-facturing, Inc.) and Shozo Yamaguchi, for not having appealed from the decision of the trial court, shall be adjudged in accordance with the judgment rendered by the Court a quo.

With respect to attorney's fees, and penalty and service charges, the private respondent Fermin Canlas is hereby held jointly and solidarity liable with defendants for the amounts found, by the Court a quo. With costs against private respondent.

SO ORDERED.

Narvasa, C.J., (Chairman), Feliciano, Regalado and Nocon, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 148864               August 21, 2003

SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. EVANGELISTA, Petitioners, vs.MERCATOR FINANCE CORP., LYDIA P. SALAZAR, LAMEC'S** REALTY AND DEVELOP-MENT CORP. and the REGISTER OF DEEDS OF BULACAN, Respondents.

D E C I S I O N

PUNO, J.:

Petitioners, Spouses Evangelista ("Petitioners"), are before this Court on a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, assailing the decision of the Court of Appeals dismissing their petition.

Petitioners filed a complaint1 for annulment of titles against respondents, Mercator Finance Corpo-ration, Lydia P. Salazar, Lamecs Realty and Development Corporation, and the Register of Deeds of Bulacan. Petitioners claimed being the registered owners of five (5) parcels of land2 contained in the Real Estate Mortgage3 executed by them and Embassy Farms, Inc. ("Embassy Farms"). They alleged that they executed the Real Estate Mortgage in favor of Mercator Financing Corpo-ration ("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.4 With the void mortgage, they assailed the validity of the foreclosure proceedings conducted by 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 respondent Lydia P. Salazar ("Salazar"), and the transfer of the titles to her name, and lastly, the sale and transfer of the properties to respondent Lamecs Realty & Develop-ment Corporation ("Lamecs").

Mercator admitted that petitioners were the owners of the subject parcels of land. It, however, con-tended that "on February 16, 1982, plaintiffs executed a Mortgage in favor of defendant Mercator Finance Corporation ‘for and in consideration of certain loans, and/or other forms of credit accom-modations obtained from the Mortgagee (defendant Mercator Finance Corporation) amounting to EIGHT HUNDRED FORTY-FOUR THOUSAND SIX HUNDRED TWENTY-FIVE & 78/100 (P844,625.78) PESOS, Philippine Currency and to secure the payment of the same and those others that the MORTGAGEE may extend to the MORTGAGOR (plaintiffs) x x x.’"5 It contended that since petitioners and Embassy Farms signed the promissory note6 as co-makers, aside from the Continuing Suretyship Agreement7 subsequently executed to guarantee the indebtedness of Embassy Farms, and the succeeding promissory notes8 restructuring the loan, then petitioners are

jointly and severally liable with Embassy Farms. Due to their failure to pay the obligation, the fore-closure and subsequent sale of the mortgaged properties are valid.

Respondents 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 petitioners of the subject parcels of land, but alleged that they are the present registered owner. Both respondents likewise assailed the long silence and inaction by petitioners as it was only after a lapse of almost ten (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.9

During pre-trial, the parties agreed on the following issues:

a. Whether or not the Real Estate Mortgage executed by the plaintiffs in favor of defen-dant Mercator Finance Corp. is null and void;

b. Whether or not the extra-judicial foreclosure proceedings undertaken on subject parcels of land to satisfy the indebtedness of Embassy Farms, Inc. is (sic) null and void;

c. Whether or not the sale made by defendant Mercator Finance Corp. in favor of Lydia Salazar and that executed by the latter in favor of defendant Lamecs Realty and Develop-ment Corp. are null and void;

d. Whether or not the parties are entitled to damages.10

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 re-garding their liability. The mortgage, foreclosure proceedings and the subsequent sales are valid and the complaint must be dismissed.11

Petitioners opposed the motion for summary judgment claiming that because their personal liabil-ity to Mercator is at issue, there is a need for a full-blown trial.12

The RTC granted the motion for summary judgment and dismissed the complaint. It held:

A reading of the promissory notes show (sic) that the liability of the signatories thereto are solidary in view of the phrase "jointly and severally." On the promissory note appears (sic) the signatures of Eduardo B. Evangelista, Epifania C. Evangelista and another signature of Eduardo B. Evange-lista below the words Embassy Farms, Inc. It is crystal clear then that the plaintiffs-spouses signed the promissory note not only as officers of Embassy Farms, Inc. but in their personal capacity as well(.) Plaintiffs(,) by affixing their signatures thereon in a dual capacity have bound themselves as solidary debtor(s) with Embassy Farms, Inc. to pay defendant Mercator Finance Corporation the amount of indebtedness. That the principal contract of loan is void for lack of consideration, in the light of the foregoing is untenable.13

Petitioners’ motion for reconsideration was denied for lack of merit.14 Thus, petitioners went up to the Court of Appeals, but again were unsuccessful. The appellate court held:

The appellants’ insistence that the loans secured by the mortgage they executed were not person-ally theirs but those of Embassy Farms, Inc. is clearly self-serving and misplaced. The fact that they signed the subject promissory notes in the(ir) personal capacities and as officers of the said debtor corporation is manifest on the very face of the said documents of indebtedness (pp. 118, 128-131, Orig. Rec.). Even assuming arguendo that they did not, the appellants lose sight of the fact that third persons who are not parties to a loan may secure the latter by pledging or mortgag-ing their own property (Lustan vs. Court of Appeals, 266 SCRA 663, 675). x x x. In constituting a mortgage over their own property in order to secure the purported corporate debt of Embassy Farms, Inc., the appellants undeniably assumed the personality of persons interested in the fulfill-ment of the principal obligation who, to save the subject realities from foreclosure and with a view towards being subrogated to the rights of the creditor, were free to discharge the same by pay-ment (Articles 1302 [3] and 1303, Civil Code of the Philippines).15 (emphases in the original)

The appellate court also observed that "if the appellants really felt aggrieved by the foreclosure of the subject mortgage and the subsequent sales of the realties to other parties, why then did they commence the suit only on August 12, 1997 (when the certificate of sale was issued on January 12, 1987, and the certificates of title in the name of Mercator on September 27, 1988)?" Petition-ers’ "procrastination for about nine (9) years is difficult to understand. On so flimsy a ground as lack of consideration, (w)e may even venture to say that the complaint was not worth the time of the courts."16

A motion for reconsideration by petitioners was likewise denied for lack of merit.17 Thus, this peti-tion where they allege that:

The court a quo erred and acted with grave abuse of discretion amounting to lack or excess of ju-risdiction in affirming in toto the May 4, 1998 order of the trial court granting respondent’s motion for summary judgment despite the existence of genuine issues as to material facts and its non-en-titlement to a judgment as a matter of law, thereby deciding the case in a way probably not in ac-cord with applicable decisions of this Honorable Court.18

we affirm.

Summary judgment "is a procedural technique aimed at weeding out sham claims or defenses at an early stage of the litigation."19 The crucial question in a motion for summary judgment is whether the issues raised in the pleadings are genuine or fictitious, as shown by affidavits, deposi-tions or admissions accompanying the motion. A genuine issue means "an issue of fact which calls for the presentation of evidence, as distinguished from an issue which is fictitious or con-trived so as not to constitute a genuine issue for trial."20 To forestall summary judgment, it is es-sential for the non-moving party to confirm the existence of genuine issues where he has substan-tial, plausible and fairly arguable defense, i.e., issues of fact calling for the presentation of evi-dence upon which a reasonable finding of fact could return a verdict for the non-moving party. The proper inquiry would therefore be whether the affirmative defenses offered by petitioners consti-tute genuine issue of fact requiring a full-blown trial.21

In the case at bar, there are no genuine issues raised by petitioners. Petitioners do not deny that they obtained a loan from Mercator. They merely claim that they got the loan as officers of Em-bassy Farms without intending to personally bind themselves or their property. However, a simple perusal of the promissory note and the continuing suretyship agreement shows otherwise. These documentary evidence prove that petitioners are solidary obligors with Embassy Farms.

The promissory note22 states:

For value received, I/We jointly and severally promise to pay to the order of MERCATOR FI-NANCE CORPORATION at its office, the principal sum of EIGHT HUNDRED FORTY-FOUR THOUSAND SIX HUNDRED TWENTY-FIVE PESOS & 78/100 (P 844,625.78), Philippine cur-rency, x x x, in installments as follows:

September 16, 1982 - P154,267.87

October 16, 1982 - P154,267.87

November 16, 1982 - P154,267.87

December 16, 1982 - P154,267.87

January 16, 1983 - P154,267.87

February 16, 1983 - P154,267.87

x x x           x x x          x x x

The note was signed at the bottom by petitioners Eduardo B. Evangelista and Epifania C. Evange-lista, and Embassy Farms, Inc. with the signature of Eduardo B. Evangelista below it.

The Continuing Suretyship Agreement23 also proves the solidary obligation of petitioners, viz:

(Embassy Farms, Inc.)Principal

(Eduardo B. Evangelista)Surety

(Epifania C. Evangelista)Surety

(Mercator Finance Corporation)Creditor

To: MERCATOR FINANCE COPORATION

(1) For valuable and/or other consideration, EDUARDO B. EVANGELISTA and EPIFANIA C. EVANGELISTA (hereinafter called Surety), jointly and severally un-conditionally guarantees (sic) to MERCATOR FINANCE COPORATION (here-inafter called Creditor), the full, faithful and prompt payment and discharge of any and all indebtedness of EMBASSY FARMS, INC. (hereinafter called Principal) to the Creditor.

x x x           x x x          x x x

(3) The obligations hereunder are joint and several and independent of the obliga-tions of the Principal. A separate action or actions may be brought and prose-cuted against the Surety whether or not the action is also brought and prosecuted against the Principal and whether or not the Principal be joined in any such action or actions.

x x x           x x x          x x x

The agreement was signed by petitioners on February 16, 1982. The promissory notes24 subse-quently executed by petitioners and Embassy Farms, restructuring their loan, likewise prove that petitioners are solidarily liable with Embassy Farms.

Petitioners further 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.25 But, an examination of the prom-issory note shows no such ambiguity. Besides, assuming arguendo that there is an ambiguity, Section 17 of the Negotiable Instruments Law states, viz:

SECTION 17. Construction where instrument is ambiguous. – Where the language of the instru-ment is ambiguous or there are omissions therein, the following rules of construction apply:

x x x           x x x          x x x

(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.

Petitioners also insist that the promissory note does not convey their true intent in executing the document.1âwphi1 The defense is unavailing. Even if petitioners 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.26 Peti-tioners 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.27 Having executed the suretyship agreement, there can be no dispute on the personal lia-bility of petitioners.

Lastly, the parol evidence rule does not apply in this case.28 We held in Tarnate v. Court of Ap-peals,29 that where the parties admitted the existence of the loans and the mortgage deeds and the fact of default on the due repayments but raised the contention that they were misled by re-spondent bank to believe that the loans were long-term accommodations, then the parties could not be allowed to introduce evidence of conditions allegedly agreed upon by them other than those stipulated in the loan documents because when they reduced their agreement in writing, it is presumed that they have made the writing the only repository and memorial of truth, and whatever is not found in the writing must be understood to have been waived and abandoned.

IN VIEW WHEREOF, the petition is dismissed. Treble costs against the petitioners.

SO ORDERED.

Panganiban, and Sandoval-Gutierrez, JJ., concur.Corona, and Carpio-Morales, JJ., on official leave.

Republic of the PhilippinesSUPREME COURT

THIRD DIVISION

G.R. No. 161756 December 16, 2005

VICTORIA J. ILANO represented by her Attorney-in-fact, MILO ANTONIO C. ILANO, Petition-ers, vs.HON. DOLORES L. ESPAÑOL, in her capacity as Executive Judge, RTC of Imus, Cavite, Br. 90, and, AMELIA ALONZO, EDITH CALILAP, DANILO CAMACLANG, ESTELA CAMACLANG, ALLAN CAMACLANG, LENIZA REYES, EDWIN REYES, JANE BACAREL, CHERRY CA-MACLANG, FLORA CABRERA, ESTELITA LEGASPI, CARMENCITA GONZALES, NEMIA CASTRO, GLORIA DOMINGUEZ, ANNILYN C. SABALE and several JOHN DOES, Respon-dents.

D E C I S I O N

CARPIO MORALES, J.:

The Court of Appeals having affirmed the dismissal by Branch 20 of the Regional Trial Court (RTC) of Cavite at Imus, for lack of cause of action, Civil Case No. 2079-00, the complaint filed by herein petitioner Victoria J. Ilano for Revocation/Cancellation of Promissory Notes and Bills of Exchange (Checks) with Damages and Prayer for Preliminary Injunction or Temporary Restrain-ing Order (TRO),1 against herein respondents 15 named defendants (and several John Does), a recital of the pertinent allegations in the complaint, quoted verbatim as follows, is in order:

x x x

3. That defendant AMELIA O. ALONZO, is a trusted employee of [petitioner]. She has been with them for several years already, and through the years, defendant ALONZO was able to gain the trust and confidence of [petitioner] and her family;

4. That due to these trust and confidence reposed upon defendant ALONZO by [petitioner], there were occasions when defendant ALONZO was entrusted with [petitioner’s] METROBANK Check Book containing either signed or unsigned blank checks, especially in those times when [peti-tioner] left for the United States for medical check-up;

5. Sometime during the second week of December 1999, or thereabouts, defendant ALONZO by means of deceit and abuse of confidence succeeded in procuring Promissory Notes and signed blank checks from [petitioner] who was then recuperating from illness;

6. That as stated, aside from the said blank checks, defendant ALONZO likewise succeeded in inducing[petitioner] to sign the Promissory Notes antedated June 8, 1999   in the amount of PESOS: ONE MILLION FOUR HUNDRED TWENTY EIGHT THOUSAND TWO HUNDRED SEV-

ENTY TWO (Php 1,428,272.00) payable to defendants EDITH CALILAP and DANILO CALILAP, and another Promissory Noted dated March 1999   in the amount of PESOS: ONE MILLION (Php 1,000,000.00) payable to the same defendants EDITH CALILAP and DANILO CALILAP, copies of said Promissory Notes are hereto attached as Annexes "A" and "A-1" hereof;

7. That another Promissory Note antedated October 1, 1999   thru the machination of defen-dant ALONZO, was signed by [petitioner] in the amount of PESOS: THREE MILLION FORTY SIX THOUSAND FOUR HUNDRED ONE (Php 3,046,401.00) excluding interest, in favor of her co-defendants ESTELA CAMACLANG, ALLAN CAMACLANG, LENIZA REYES, EDWIN REYES, JANE BACAREL and CHERRY CAMACLANG, a copy of said Promissory Note is hereto attached as Annex "B" hereof;

8. That the Promissory Notes and blank checks were procured thru fraud and deceit. The consent of the [petitioner] in the issuance of the two (2) aforementioned Promissory Notes was vitiated. Furthermore, the same were issued for want of consideration, hence, the same should be cancelled, revoked or declared null and void;

9. That as clearly shown heretofore, defendant ALONZO in collusion with her co-defendants, ES-TELA CAMACLANG, ALLAN CAMACLANG and ESTELITA LEGASPI likewise was able to in-duce plaintiff to sign several undated blank checks, among which are:

· Metrobank Check No. 0111544

· Metrobank Check No. 0111545

· Metrobank Check No. 0111546

· Metrobank Check No. 0111547

· Metrobank Check No. 0111515

all in the total amount of Php 3,031,600.00, copies of said checks are hereto attached as Annexes "C", "C-1", "C-2", "C-3" and "C-4", respectively;

10. That aside from the checks mentioned heretofore, defendant ALONZO, confederated and conspired with the following co-defendants, FLORA CABRERA, NEMIA CASTRO, EDITH CALILAP, DANILO CALILAP, GLORIA DOMINGUEZ, CARMENCITA GONZALES and ANNILYN C. SABALE and took advantage of the signature of [petitioner] in said blank checks which were later on completed by them indicated opposite their respective names and the respective amount thereof, as follows:

NAME AMOUNT METROBANK Check No.

Flora Cabrera Php 337,584.58 0111460Flora Cabrera 98,000.00 0111514Nemia Castro 100,000.00 0111542

Nemia Castro 150,000.00 0084078Edith Calilap/Danilo Calilap 490,000.00 0111513Edith Calilap/Danilo Calilap 790,272.00 0111512Edith Calilap/Danilo Calilap 1,220,000.00 0111462Gloria Dominguez/Carmencita Gonzales

1,046,040.00 0111543

Annilyn C. Sable 150,000.00 0085134Annilyn C. Sable 250,000.00 0085149Annilyn C. Sable 186,000.00 0085112

Copy attached as Annexes "D", "D-1", "D-2", "D-3", "D-4", "D-5", "D-6", "D-7", "D-8", "D-9" and "D-10", respectively;

Furthermore, defendant ALONZO colluded and conspired with defendant NEMIA CASTO in procuring the signature of [petitioner] in documents denominated as "Malayang Salaysay" dated July 22, 1999   in the amount of PESOS: ONE HUNDRED FIFTY THOUSAND (Php 150,000.00) and another "Malayang Salaysay" dated November 22, 1999   in the amount of PE-SOS: ONE HUNDRED THOUSAND (Php 100,000.00) Annexes "D-11" and "D-12" hereof;

11. That said defendants took undue advantage of the signature of [petitioner] in the said blank checks and furthermore forged and or falsified the signature of [petitioner] in other unsigned checks   and as it was made to appear that said [petitioner] is under the obligation to pay them several amounts of money, when in truth and in fact, said [petitioner] does not owe any of said defendant any single amount;

12. That the issuance of the aforementioned checks or Promissory Notes or the aforemen-tioned "Malayang Salaysay" to herein defendants were tainted with fraud and deceit, and defendants conspired with one another to defraud herein [petitioner] as the aforemen-tioned documents were issued for want of consideration;

13. That the aforesaid defendants conspiring and confederating together and helping one an-other committed acts of falsification and defraudation which they should be held account-able under law;

14. The foregoing acts, and transactions, perpetrated by herein defendants in all bad faith and malice, with malevolence and selfish intent are causing anxiety, tension, sleepless nights, wounded feelings, and embarrassment to [petitioner]   entitling her to moral damages of at least in the amount of PESOS: FIVE HUNDRED THOUSAND (Php 500,000.00);

15. That to avoid repetition of similar acts and as a correction for the public good, the defendants should be held liable to [petitioner] for exemplary damages in the sum of not less than the amount of PESOS: TWO HUNDRED THOUSAND (Php 200,000.00);

16. That to protect the rights and interest of the [petitioner] in the illegal actuations of the defen-dants, she was forced to engage the services of counsel for which she was obliged to pay the sum

of PESOS: ONE HUNDRED THOUSAND (Php 100,000.00) by way of Attorney’s fees plus the amount of PESOS: THREE THOUSAND (Php 3,000.00) per appearance in court;

x x x (Emphasis and underscoring supplied)

The named defendants-herein respondents filed their respective Answers invoking, among other grounds for dismissal, lack of cause of action, for while the checks subject of the complaint had been issued on account and for value, some had been dishonored due to "ACCOUNT CLOSED;" and the allegations in the complaint are bare and general.

By Order2 dated October 12, 2000, the trial court dismissed petitioner’s complaint for failure "to al-lege the ultimate facts"-bases of petitioners claim that her right was violated and that she suffered damages thereby.

On appeal to the Court of Appeals, petitioner contended that the trial court:

A. . . . FAILED TO STATE CLEARLY AND DISTINCTLY THE FACTS AND LAW ON WHICH THE APPEALED ORDER WAS BASED, THEREBY RENDERING SAID ORDER NULL AND VOID.

B. . . . ERRED IN HOLDING THAT THE COMPLAINT FAILED TO ALLEGE ULTIMATE FACTS ON WHICH [PETITIONER] RELIES ON HER CLAIM THEREBY DISMISSING THE CASE FOR LACK OF CAUSE OF ACTION.

C. . . . ERRED IN GIVING DUE COURSE TO THE MOTION TO DISMISS THAT CONTAINED A FAULTY NOTICE OF HEARING AS THE SAME IS MERELY ADDRESSED TO THE BRANCH CLERK OF COURT.3

In its Decision4 of March 21, 2003 affirming the dismissal order of the trial court, the appellate court held that the elements of a cause of action are absent in the case:

x x x

Such allegations in the complaint are only general averments of fraud, deceit and bad faith. There were no allegations of facts showing that the acts complained of were done in the manner alleged. The complaint did not clearly ascribe the extent of the liability of each of [respondents]. Neither did it state any right or cause of action on the part of [petitioner] to show that she is indeed entitled to the relief prayed for. In the first place, the record shows that subject checks which she sought to cancel or revoke had already been dishonored and stamped "ACCOUNT CLOSED." In fact, there were already criminal charges for violation of Batas Pambansa Blg. 22 filed against [petitioner] previous to the filing of the civil case for revocation/cancellation. Such being the case, there was actually nothing more to cancel or revoke. The subject checks could no longer be negotiated. Thus, [petitioner’s] allegation that the [respondents] were secretly negotiating with third persons for their delivery and/or assignment, is untenable.

In the second place, we find nothing on the face of the complaint to show that [petitioner] denied the genuineness or authenticity of her signature on the subject promissory notes and the allegedly

signed blank checks. She merely alleged abuse of trust and confidence on the part of [Alonzo]. Even assuming arguendo that such allegations were true, then [petitioner] cannot be held totally blameless for her predicament as it was by her own negligence that subject instruments/signed blank checks fell into the hands of third persons. Contrary to [petitioner’s] allegations, the promis-sory notes show that some of the [respondents] were actually creditors of [petitioner] and who were issued the subject checks as securities for the loan/obligation incurred. Having taken the in-strument in good faith and for value, the [respondents] are therefore considered holders thereof in due course and entitled to payment.

x x x (Underscoring supplied)

Hence, the present petition for review on certiorari, petitioner faulting the appellate court:

1. . . . in sustaining the dismissal of the complaint upon the ground of failure to state a cause of ac-tion when there are other several causes of action which ventilate such causes of action in the complaint;

2. . . . in finding that a requirement that a Decision which should express therein clearly and dis-tinctly the facts and the law on which it is based does not include cases which had not reached pre-trial or trial stage;

3. . . . in not finding that a notice of hearing which was addressed to the Clerk of Court is totally defective and that subsequent action of the court did not cure the flaw.5

In issue then is whether petitioner’s complaint failed to state a cause of action.

A cause of action has three elements: (1) the legal right of the plaintiff, (2) the correlative obliga-tion of the defendant, and (3) the act or omission of the defendant in violation of said legal right. In determining the presence of these elements, inquiry is confined to the four corners of the com-plaint6 including its annexes, they being parts thereof.7 If these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.8

As reflected in the above-quoted allegations in petitioner’s complaint, petitioner is seeking twin re-liefs, one for revocation/cancellation of promissory notes and checks, and the other for damages.

Thus, petitioner alleged, among other things, that respondents, through "deceit," "abuse of confi-dence" "machination," "fraud," "falsification," "forgery," "defraudation," and "bad faith," and "with malice, malevolence and selfish intent," succeeded in inducing her to sign antedated promissory notes and some blank checks, and "[by taking] undue advantage" of her signature on some other blank checks, succeeded in procuring them, even if there was no consideration for all of these in-struments on account of which she suffered "anxiety, tension, sleepless nights, wounded feelings and embarrassment."

While some of the allegations may lack particulars, and are in the form of conclusions of law, the elements of a cause of action are present. For even if some are not stated with particularity, peti -tioner alleged 1) her legal right not to be bound by the instruments which were bereft of considera-tion and to which her consent was vitiated; 2) the correlative obligation on the part of the defen-

dants-respondents to respect said right; and 3) the act of the defendants-respondents in procuring her signature on the instruments through "deceit," "abuse of confidence" "machination," "fraud," "falsification," "forgery," "defraudation," and "bad faith," and "with malice, malevolence and selfish intent."

Where the allegations of a complaint are vague, indefinite, or in the form of conclusions, its dis-missal is not proper for the defendant may ask for more particulars.9

With respect to the checks subject of the complaint, it is gathered that, except for Check No. 0084078,10 they were drawn all against petitioner’s Metrobank Account No. 00703-955536-7.

Annex "D-8"11 of the complaint, a photocopy of Check No. 0085134, shows that it was dishonored on January 12, 2000 due to "ACCOUNT CLOSED." When petitioner then filed her complaint on March 28, 2000, all the checks subject hereof which were drawn against the same closed ac-count were already rendered valueless or non-negotiable, hence, petitioner had, with respect to them, no cause of action.

With respect to above-said Check No. 0084078, however, which was drawn against another ac-count of petitioner, albeit the date of issue bears only the year − 1999, its validity and negotiable character at the time the complaint was filed on March 28, 2000 was not affected. For Section 6 of the Negotiable Instruments Law provides:

Section 6. Omission; seal; particular money. – The validity and negotiable character of an in-strument are not affected by the fact that –

(a) It is not dated; or

(b) Does not specify the value given, or that any value had been given therefor; or

(c) Does not specify the place where it is drawn or the place where it is payable; or

(d) Bears a seal; or

(e) Designates a particular kind of current money in which payment is to be made.

x x x (Emphasis supplied)

However, even if the holder of Check No. 0084078 would have filled up the month and day of is-sue thereon to be "December" and "31," respectively, it would have, as it did, become stale six (6) months or 180 days thereafter, following current banking practice.12

It is, however, with respect to the questioned promissory notes that the present petition assumes merit. For, petitioner’s allegations in the complaint relative thereto, even if lacking particularity, does not as priorly stated call for the dismissal of the complaint.

WHEREFORE, the petition is PARTLY GRANTED.

The March 21, 2003 decision of the appellate court affirming the October 12, 2000 Order of the trial court, Branch 20 of the RTC of Imus, Cavite, is AFFIRMED with MODIFICATION in light of the foregoing discussions.

The trial court is DIRECTED to REINSTATE Civil Case No. 2079-00 to its docket and take further proceedings thereon only insofar as the complaint seeks the revocation/cancellation of the sub-ject promissory notes and damages.

Let the records of the case be then REMANDED to the trial court.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice