Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
97753 August 10, 1992 authorizes said bank to pre-terminate, set-off and "apply the said
CALTEX (PHILIPPINES), INC.,vs. COURT OF APPEALS and SECURITY time deposits to the payment of whatever amount or amounts may
BANK AND TRUST COMPANY be due" on the loan upon its maturity (TSN, February 9, 1987, pp.
60-62).
REGALADO, J.:
This petition for review on certiorari impugns and seeks the reversal 6. Sometime in November, 1982, Mr. Aranas, Credit Manager of
of the decision promulgated by respondent court on March 8, 1991 plaintiff Caltex (Phils.) Inc., went to the defendant bank's Sucat
in CA-G.R. CV No. 23615 1 affirming with modifications, the earlier branch and presented for verification the CTDs declared lost by
decision of the Regional Trial Court of Manila, Branch XLII, 2 which Angel dela Cruz alleging that the same were delivered to herein
dismissed the complaint filed therein by herein petitioner against plaintiff "as security for purchases made with Caltex Philippines,
respondent bank. Inc." by said depositor (TSN, February 9, 1987, pp. 54-68).
The undisputed background of this case, as found by the court a
quo and adopted by respondent court, appears of record: 7. On November 26, 1982, defendant received a letter (Defendant's
Exhibit 563) from herein plaintiff formally informing it of its
1. On various dates, defendant, a commercial banking institution, possession of the CTDs in question and of its decision to pre-
through its Sucat Branch issued 280 certificates of time deposit terminate the same.
(CTDs) in favor of one Angel dela Cruz who deposited with herein
defendant the aggregate amount of P1,120,000.00, as follows: (Joint 8. On December 8, 1982, plaintiff was requested by herein
Partial Stipulation of Facts and Statement of Issues, Original Records, defendant to furnish the former "a copy of the document evidencing
p. 207; Defendant's Exhibits 1 to 280); the guarantee agreement with Mr. Angel dela Cruz" as well as "the
details of Mr. Angel dela Cruz" obligation against which plaintiff
CTD CTD proposed to apply the time deposits (Defendant's Exhibit 564).
Dates Serial Nos. Quantity Amount
9. No copy of the requested documents was furnished herein
22 Feb. 82 90101 to 90120 20 P80,000 defendant.
26 Feb. 82 74602 to 74691 90 360,000
2 Mar. 82 74701 to 74740 40 160,000 10. Accordingly, defendant bank rejected the plaintiff's demand and
4 Mar. 82 90127 to 90146 20 80,000 claim for payment of the value of the CTDs in a letter dated February
5 Mar. 82 74797 to 94800 4 16,000 7, 1983 (Defendant's Exhibit 566).
5 Mar. 82 89965 to 89986 22 88,000
5 Mar. 82 70147 to 90150 4 16,000
11. In April 1983, the loan of Angel dela Cruz with the defendant
8 Mar. 82 90001 to 90020 20 80,000
bank matured and fell due and on August 5, 1983, the latter set-off
9 Mar. 82 90023 to 90050 28 112,000
and applied the time deposits in question to the payment of the
9 Mar. 82 89991 to 90000 10 40,000
matured loan (TSN, February 9, 1987, pp. 130-131).
9 Mar. 82 90251 to 90272 22 88,000
——— ————
Total 280 P1,120,000 12. In view of the foregoing, plaintiff filed the instant complaint,
===== ======== praying that defendant bank be ordered to pay it the aggregate
value of the certificates of time deposit of P1,120,000.00 plus
accrued interest and compounded interest therein at 16% per
2. Angel dela Cruz delivered the said certificates of time (CTDs) to
annum, moral and exemplary damages as well as attorney's fees.
herein plaintiff in connection with his purchased of fuel products
from the latter (Original Record, p. 208).
After trial, the court a quo rendered its decision dismissing the
instant complaint. 3
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 On appeal, as earlier stated, respondent court affirmed the lower
execute and submit a notarized Affidavit of Loss, as required by court's dismissal of the complaint, hence this petition wherein
defendant bank's procedure, if he desired replacement of said lost petitioner faults respondent court in ruling (1) that the subject
CTDs (TSN, February 9, 1987, pp. 48-50). certificates of deposit are non-negotiable despite being clearly
negotiable instruments; (2) that petitioner did not become a holder
in due course of the said certificates of deposit; and (3) in
4. On March 18, 1982, Angel dela Cruz executed and delivered to
disregarding the pertinent provisions of the Code of Commerce
defendant bank the required Affidavit of Loss (Defendant's Exhibit
relating to lost instruments payable to bearer. 4
281). On the basis of said affidavit of loss, 280 replacement CTDs
were issued in favor of said depositor (Defendant's Exhibits 282-
561). The instant petition is bereft of merit.
5. On March 25, 1982, Angel dela Cruz negotiated and obtained a A sample text of the certificates of time deposit is reproduced below
loan from defendant bank in the amount of Eight Hundred Seventy to provide a better understanding of the issues involved in this
Five Thousand Pesos (P875,000.00). On the same date, said recourse.
depositor executed a notarized Deed of Assignment of Time Deposit
(Exhibit 562) which stated, among others, that he (de la Cruz) SECURITY BANK
surrenders to defendant bank "full control of the indicated time AND TRUST COMPANY
deposits from and after date" of the assignment and further 6778 Ayala Ave., Makati No. 90101
—————————— ——————————— On this score, the accepted rule is that the negotiability or non-
negotiability of an instrument is determined from the writing, that
AUTHORIZED SIGNATURES 5 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
Respondent court ruled that the CTDs in question are non- surrounding circumstances in order to more perfectly understand
negotiable instruments, nationalizing as follows: the intent and meaning of the parties, yet as they have constituted
the writing to be the only outward and visible expression of their
. . . While it may be true that the word "bearer" appears rather meaning, no other words are to be added to it or substituted in its
boldly in the CTDs issued, it is important to note that after the word stead. The duty of the court in such case is to ascertain, not what the
"BEARER" stamped on the space provided supposedly for the name parties may have secretly intended as contradistinguished from
of the depositor, the words "has deposited" a certain amount what their words express, but what is the meaning of the words they
follows. The document further provides that the amount deposited have used. What the parties meant must be determined by what
shall be "repayable to said depositor" on the period indicated. they said. 11
Therefore, the text of the instrument(s) themselves manifest with
clarity that they are payable, not to whoever purports to be the Contrary to what respondent court held, the CTDs are negotiable
"bearer" but only to the specified person indicated therein, the instruments. The documents provide that the amounts deposited
depositor. In effect, the appellee bank acknowledges its depositor shall be repayable to the depositor. And who, according to the
Angel dela Cruz as the person who made the deposit and further document, is the depositor? It is the "bearer." The documents do
engages itself to pay said depositor the amount indicated thereon at not say that the depositor is Angel de la Cruz and that the amounts
the stipulated date. 6 deposited are repayable specifically to him. Rather, the amounts are
to be repayable to the bearer of the documents or, for that matter,
We disagree with these findings and conclusions, and hereby hold whosoever may be the bearer at the time of presentment.
that the CTDs in question are negotiable instruments. Section 1 Act
No. 2031, otherwise known as the Negotiable Instruments Law, If it was really the intention of respondent bank to pay the amount
enumerates the requisites for an instrument to become to Angel de la Cruz only, it could have with facility so expressed that
negotiable, viz: fact in clear and categorical terms in the documents, instead of
having the word "BEARER" stamped on the space provided for the
(a) It must be in writing and signed by the maker or drawer; name of the depositor in each CTD. On the wordings of the
(b) Must contain an unconditional promise or order to pay a sum documents, therefore, the amounts deposited are repayable to
certain in money; whoever may be the bearer thereof. Thus, petitioner's aforesaid
(c) Must be payable on demand, or at a fixed or determinable future witness merely declared that Angel de la Cruz is the depositor
time; "insofar as the bank is concerned," but obviously other parties not
(d) Must be payable to order or to bearer; and privy to the transaction between them would not be in a position to
(e) Where the instrument is addressed to a drawee, he must be know that the depositor is not the bearer stated in the CTDs. Hence,
named or otherwise indicated therein with reasonable certainty. the situation would require any party dealing with the CTDs to go
behind the plain import of what is written thereon to unravel the
The CTDs in question undoubtedly meet the requirements of the law agreement of the parties thereto through facts aliunde. This need
for negotiability. The parties' bone of contention is with regard to for resort to extrinsic evidence is what is sought to be avoided by
requisite (d) set forth above. It is noted that Mr. Timoteo P. Tiangco, the Negotiable Instruments Law and calls for the application of the
Security Bank's Branch Manager way back in 1982, testified in open elementary rule that the interpretation of obscure words or
court that the depositor reffered to in the CTDs is no other than Mr. stipulations in a contract shall not favor the party who caused the
Angel de la Cruz. obscurity. 12
Art. 1625. An assignment of credit, right or action shall To accept petitioner's suggestion that respondent bank's supposed
produce no effect as against third persons, unless it negligence may be considered encompassed by the issues on its
appears in a public instrument, or the instrument is right to preterminate and receive the proceeds of the CTDs would
recorded in the Registry of Property in case the be tantamount to saying that petitioner could raise on appeal any
assignment involves real property. issue. We agree with private respondent that the broad ultimate
issue of petitioner's entitlement to the proceeds of the questioned
Respondent bank duly complied with this statutory requirement. certificates can be premised on a multitude of other legal reasons
Contrarily, petitioner, whether as purchaser, assignee or lien holder and causes of action, of which respondent bank's supposed
of the CTDs, neither proved the amount of its credit or the extent of negligence is only one. Hence, petitioner's submission, if accepted,
its lien nor the execution of any public instrument which could affect would render a pre-trial delimitation of issues a useless exercise. 33
or bind private respondent. Necessarily, therefore, as between
petitioner and respondent bank, the latter has definitely the better Still, even assuming arguendo that said issue of negligence was
right over the CTDs in question. raised in the court below, petitioner still cannot have the odds in its
favor. A close scrutiny of the provisions of the Code of Commerce
Finally, petitioner faults respondent court for refusing to delve into laying down the rules to be followed in case of lost instruments
the question of whether or not private respondent observed the payable to bearer, which it invokes, will reveal that said provisions,
requirements of the law in the case of lost negotiable instruments even assuming their applicability to the CTDs in the case at bar, are
and the issuance of replacement certificates therefor, on the ground merely permissive and not mandatory. The very first article cited by
that petitioner failed to raised that issue in the lower court. 28 petitioner speaks for itself.
On this matter, we uphold respondent court's finding that the Art 548. The dispossessed owner, no matter for what cause it may
aspect of alleged negligence of private respondent was not included be, may apply to the judge or court of competent jurisdiction, asking
in the stipulation of the parties and in the statement of issues that the principal, interest or dividends due or about to become due,
submitted by them to the trial court. 29 The issues agreed upon by be not paid a third person, as well as in order to prevent the
them for resolution in this case are: ownership of the instrument that a duplicate be issued him.
(Emphasis ours.)
1. Whether or not the CTDs as worded are negotiable instruments.
xxx xxx xxx
2. Whether or not defendant could legally apply the amount covered
by the CTDs against the depositor's loan by virtue of the assignment The use of the word "may" in said provision shows that it is not
(Annex "C"). mandatory but discretionary on the part of the "dispossessed
owner" to apply to the judge or court of competent jurisdiction for
the issuance of a duplicate of the lost instrument. Where the
3. Whether or not there was legal compensation or set off involving
provision reads "may," this word shows that it is not mandatory but
the amount covered by the CTDs and the depositor's outstanding
discretional. 34 The word "may" is usually permissive, not
account with defendant, if any.
mandatory. 35 It is an auxiliary verb indicating liberty, opportunity,
permission and possibility. 36
4. Whether or not plaintiff could compel defendant to preterminate
the CTDs before the maturity date provided therein.
Moreover, as correctly analyzed by private respondent, 37 Articles
548 to 558 of the Code of Commerce, on which petitioner seeks to
5. Whether or not plaintiff is entitled to the proceeds of the CTDs. anchor respondent bank's supposed negligence, merely established,
on the one hand, a right of recourse in favor of a dispossessed
6. Whether or not the parties can recover damages, attorney's fees owner or holder of a bearer instrument so that he may obtain a
and litigation expenses from each other. 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
As respondent court correctly observed, with appropriate citation of to issue a replacement of the instrument. Significantly, none of the
some doctrinal authorities, the foregoing enumeration does not provisions cited by petitioner categorically restricts or prohibits the
include the issue of negligence on the part of respondent bank. An issuance a duplicate or replacement instrument sans compliance
issue raised for the first time on appeal and not raised timely in the with the procedure outlined therein, and none establishes a
proceedings in the lower court is barred by estoppel. 30 Questions mandatory precedent requirement therefor.
raised on appeal must be within the issues framed by the parties
and, consequently, issues not raised in the trial court cannot be WHEREFORE, on the modified premises above set forth, the petition
raised for the first time on appeal. 31 is DENIED and the appealed decision is hereby AFFIRMED.
Holding that breach of warranty if any, is not a defense available to IV. THE PETITIONERS ARE NOT LIABLE FOR THE PAYMENT OF THE
appellants either to withdraw from the contract and/or demand a PROMISSORY NOTE BECAUSE:
proportionate reduction of the price with damages in either case
(Art. 1567, New Civil Code). We now come to the issue as to
A) THE SELLER-ASSIGNOR IS GUILTY OF BREACH OF WARRANTY
whether the plaintiff-appellee is a holder in due course of the
UNDER THE LAW;
promissory note.
The petitioners prayed that judgment be rendered setting aside the xxx xxx xxx
decision dated July 17, 1985, as well as the resolution dated October
17, 1985 and dismissing the complaint but granting petitioners' ART. 1566. The vendor is responsible to the vendee for any hidden
counterclaims before the court of origin. faults or defects in the thing sold even though he was not aware
thereof.
On the other hand, the respondent corporation in its comment to
the petition filed on February 20, 1986, contended that the petition This provision shall not apply if the contrary has been stipulated, and
was filed out of time; that the promissory note is a negotiable the vendor was not aware of the hidden faults or defects in the thing
instrument and respondent a holder in due course; that respondent sold. (Emphasis supplied).
is not liable for any breach of warranty; and finally, that the
promissory note is admissible in evidence.
It is patent then, that the seller-assignor is liable for its breach of
warranty against the petitioner. This liability as a general rule,
The core issue herein is whether or not the promissory note in extends to the corporation to whom it assigned its rights and
question is a negotiable instrument so as to bar completely all the interests unless the assignee is a holder in due course of the
available defenses of the petitioner against the respondent- promissory note in question, assuming the note is negotiable, in
assignee. which case the latter's rights are based on the negotiable instrument
and assuming further that the petitioner's defenses may not prevail
Preliminarily, it must be established at the outset that we consider against it.
the instant petition to have been filed on time because the
petitioners' motion for reconsideration actually raised new issues. It Secondly, it likewise cannot be denied that as soon as the tractors
cannot, therefore, be considered pro- formal. broke down, the petitioner-corporation notified the seller-assignor's
sister company, AG & P, about the breakdown based on the seller-
The petition is impressed with merit. assignor's express 90-day warranty, with which the latter complied
by sending its mechanics. However, due to the seller-assignor's
First, there is no question that the seller-assignor breached its delay and its failure to comply with its warranty, the tractors
express 90-day warranty because the findings of the trial court, became totally unserviceable and useless for the purpose for which
adopted by the respondent appellate court, that "14 days after they were purchased.
delivery, the first tractor broke down and 9 days, thereafter, the
second tractor became inoperable" are sustained by the records. Thirdly, the petitioner-corporation, thereafter, unilaterally rescinded
The petitioner was clearly a victim of a warranty not honored by the its contract with the seller-assignor.
maker.
Articles 1191 and 1567 of the Civil Code provide that:
The Civil Code provides that:
ART. 1191. The power to rescind obligations is implied in reciprocal
ART. 1561. The vendor shall be responsible for warranty against the ones, in case one of the obligors should not comply with what is
hidden defects which the thing sold may have, should they render it incumbent upon him.
unfit for the use for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the vendee been The injured party may choose between the fulfillment and the
aware thereof, he would not have acquired it or would have given a rescission of the obligation with the payment of damages in either
lower price for it; but said vendor shall not be answerable for patent case. He may also seek rescission, even after he has chosen
defects or those which may be visible, or for those which are not fulfillment, if the latter should become impossible.
visible if the vendee is an expert who, by reason of his trade or
profession, should have known them.
xxx xxx xxx
xxx xxx xxx 18. Plaintiff knew full well that the assignment by Philfinance of CBCI
No. 891 by Filriters is not a regular transaction made in the usual of
14. Subsequently, Alberto Fabella, Senior Vice-President- ordinary course of business;
Comptroller are Pilar Jacobe, Vice-President-Treasury of Filriters
(both of whom were holding the same positions in Philfinance), a) The CBCI constitutes part of the reserve investments of Filriters
without any consideration or benefit redounding to Filriters and to against liabilities requires by the Insurance Code and its assignment
the grave prejudice of Filriters, its policy holders and all who have or transfer is expressly prohibited by law. There was no attempt to
present or future claims against its policies, executed similar get any clearance or authorization from the Insurance
detached assignment forms transferring the CBCI to plaintiff; Commissioner;
xxx xxx xxx b) The assignment by Filriters of the CBCI is clearly not a transaction
in the usual or regular course of its business;
15. The detached assignment is patently void and inoperative
because the assignment is without the knowledge and consent of c) The CBCI involved substantial amount and its assignment clearly
directors of Filriters, and not duly authorized in writing by the Board, constitutes disposition of "all or substantially all" of the assets of
as requiring by Article V, Section 3 of CB Circular No. 769; Filriters, which requires the affirmative action of the stockholders
(Section 40, Corporation [sic] Code.7
16. The assignment of the CBCI to Philfinance is a personal act of
Alfredo Banaria and not the corporate act of Filriters and such null In its Decision8 dated April 29, 1988, the Regional Trial Court of
and void; Manila, Branch XXXIII found the assignment of CBCI No. D891 in
favor of Philfinance, and the subsequent assignment of the same
a) The assignment was executed without consideration and for that CBCI by Philfinance in favor of Traders Royal Bank null and void and
reason, the assignment is void from the beginning (Article 1409, Civil of no force and effect. The dispositive portion of the decision reads:
Code);
ACCORDINGLY, judgment is hereby rendered in favor of the
b) The assignment was executed without any knowledge and respondent Filriters Guaranty Assurance Corporation and against the
consent of the board of directors of Filriters; plaintiff Traders Royal Bank:
c) The CBCI constitutes reserve investment of Filriters against (a) Declaring the assignment of CBCI No. 891 in favor of PhilFinance,
liabilities, which is a requirement under the Insurance Code for its and the subsequent assignment of CBCI by PhilFinance in favor of
existence as an insurance company and the pursuit of its business the plaintiff Traders Royal Bank as null and void and of no force and
operations. The assignment of the CBCI is illegal act in the sense effect;
of malum in se or malum prohibitum, for anyone to make, either as
corporate or personal act; (b) Ordering the respondent Central Bank of the Philippines to
disregard the said assignment and to pay the value of the proceeds
d) The transfer of dimunition of reserve investments of Filriters is of the CBCI No. D891 to the Filriters Guaranty Assurance
expressly prohibited by law, is immoral and against public policy; Corporation;
e) The assignment of the CBCI has resulted in the capital impairment (c) Ordering the plaintiff Traders Royal Bank to pay respondent
and in the solvency deficiency of Filriters (and has in fact helped in Filriters Guaranty Assurance Corp. The sum of P10,000 as attorney's
placing Filriters under conservatorship), an inevitable result known fees; and
to the officer who executed assignment.
(d) to pay the costs.
17. Plaintiff had acted in bad faith and with knowledge of the
illegality and invalidity of the assignment. SO ORDERED.9
a) The CBCI No. 891 is not a negotiable instrument and as a The petitioner assailed the decision of the trial court in the Court of
certificate of indebtedness is not payable to bearer but is a Appeals 10, but their appeals likewise failed. The findings of the fact
registered in the name of Filriters; of the said court are hereby reproduced:
b) The provision on transfer of the CBCIs provides that the Central The records reveal that defendant Filriters is the registered owner of
Bank shall treat the registered owner as the absolute owner and that CBCI No. D891. Under a deed of assignment dated November 27,
the value of the registered certificates shall be payable only to the 1971, Filriters transferred CBCI No. D891 to Philippine Underwriters
registered owner; a sufficient notice to plaintiff that the assignments Finance Corporation (Philfinance). Subsequently, Philfinance
do not give them the registered owner's right as absolute owner of transferred CBCI No. D891, which was still registered in the name of
the CBCI's; Filriters, to appellant Traders Royal Bank (TRB). The transfer was
made under a repurchase agreement dated February 4, 1981,
Obviously, the assignment of the certificate from Filriters to Properly understood, a certificate of indebtedness pertains to
Philfinance was fictitious, having made without consideration, and certificates for the creation and maintenance of a permanent
did not conform to Central Bank Circular No. 769, series of 1980, improvement revolving fund, is similar to a "bond," (82 Minn. 202).
better known as the "Rules and Regulations Governing Central Bank Being equivalent to a bond, it is properly understood as
Certificates of Indebtedness", which provided that any "assignment acknowledgment of an obligation to pay a fixed sum of money. It is
of registered certificates shall not be valid unless made . . . by the usually used for the purpose of long term loans.
registered owner thereof in person or by his representative duly
authorized in writing." The appellate court ruled that the subject CBCI is not a negotiable
instrument, stating that:
Petitioner's claimed interest has no basis, since it was derived from
Philfinance whose interest was inexistent, having acquired the As worded, the instrument provides a promise "to pay Filriters
certificate through simulation. What happened was Philfinance Guaranty Assurance Corporation, the registered owner hereof."
merely borrowed CBCI No. D891 from Filriters, a sister corporation, Very clearly, the instrument is payable only to Filriters, the
to guarantee its financing operations. registered owner, whose name is inscribed thereon. It lacks the
words of negotiability which should have served as an expression of
Said the Court: consent that the instrument may be transferred by negotiation. 15
In the case at bar, Alfredo O. Banaria, who signed the deed of A reading of the subject CBCI indicates that the same is payable to
assignment purportedly for and on behalf of Filriters, did not have FILRITERS GUARANTY ASSURANCE CORPORATION, and to no one
the necessary written authorization from the Board of Directors of else, thus, discounting the petitioner's submission that the same is a
Filriters to act for the latter. For lack of such authority, the negotiable instrument, and that it is a holder in due course of the
assignment did not therefore bind Filriters and violated as the same certificate.
time Central Bank Circular No. 769 which has the force and effect of
a law, resulting in the nullity of the transfer (People v. Que Po Lay, The language of negotiability which characterize a negotiable paper
94 Phil. 640; 3M Philippines, Inc. vs. Commissioner of Internal as a credit instrument is its freedom to circulate as a substitute for
Revenue, 165 SCRA 778). money. Hence, freedom of negotiability is the touchtone relating to
In the case at bar, there is sufficient showing that the petitioner was The transfer made by Filriters to Philfinance did not conform to the
not defrauded at all when it acquired the subject certificate of said. Central Bank Circular, which for all intents, is considered part of
indebtedness from Philfinance. the law. As found by the courts a quo, Alfredo O. Banaria, who had
signed the deed of assignment from Filriters to Philfinance,
On its face the subject certificates states that it is registered in the purportedly for and in favor of Filriters, did not have the necessary
name of Filriters. This should have put the petitioner on notice, and written authorization from the Board of Directors of Filriters to act
prompted it to inquire from Filriters as to Philfinance's title over the for the latter. As it is, the sale from Filriters to Philfinance was
same or its authority to assign the certificate. As it is, there is no fictitious, and therefore void and inexistent, as there was no
showing to the effect that petitioner had any dealings whatsoever consideration for the same. This is fatal to the petitioner's cause, for
with Filriters, nor did it make inquiries as to the ownership of the then, Philfinance had no title over the subject certificate to convey
certificate. the Traders Royal Bank. Nemo potest nisi quod de jure potest — no
man can do anything except what he can do lawfully.
The terms of the CBCI No. D891 contain a provision on its TRANSFER.
Thus: Concededly, the subject CBCI was acquired by Filriters to form part
of its legal and capital reserves, which are required by law 24 to be
TRANSFER. This Certificate shall pass by delivery unless it is maintained at a mandated level. This was pointed out by Elias
registered in the owner's name at any office of the Bank or any Garcia, Manager-in-Charge of respondent Filriters, in his testimony
agency duly authorized by the Bank, and such registration is noted given before the court on May 30, 1986.
hereon. After such registration no transfer thereof shall be valid
unless made at said office (where the Certificates has been Q Do you know this Central Bank Certificate of Indebtedness, in
registered) by the registered owner hereof, in person, or by his short, CBCI No. D891 in the face value of P5000,000.00 subject of
attorney, duly authorized in writing and similarly noted hereon and this case?
upon payment of a nominal transfer fee which may be required, a A Yes, sir.
new Certificate shall be issued to the transferee of the registered Q Why do you know this?
owner thereof. The bank or any agency duly authorized by the Bank A Well, this was CBCI of the company sought to be examined by the
may deem and treat the bearer of this Certificate, or if this Insurance Commission sometime in early 1981 and this CBCI No. 891
Certificate is registered as herein authorized, the person in whose was among the CBCI's that were found to be missing.
name the same is registered as the absolute owner of this Q Let me take you back further before 1981. Did you have the
Certificate, for the purpose of receiving payment hereof, or on knowledge of this CBCI No. 891 before 1981?
account hereof, and for all other purpose whether or not this A Yes, sir. This CBCI is an investment of Filriters required by the
Certificate shall be overdue. Insurance Commission as legal reserve of the company.
Q Legal reserve for the purpose of what?
This is notice to petitioner to secure from Filriters a written A Well, you see, the Insurance companies are required to put up
authorization for the transfer or to require Philfinance to submit legal reserves under Section 213 of the Insurance Code equivalent to
such an authorization from Filriters. 40 percent of the premiums receipt and further, the Insurance
Commission requires this reserve to be invested preferably in
government securities or government binds. This is how this CBCI
Petitioner knew that Philfinance is not registered owner of the CBCI
came to be purchased by the company.
No. D891. The fact that a non-owner was disposing of the registered
CBCI owned by another entity was a good reason for petitioner to
It cannot, therefore, be taken out of the said funds, without violating
verify of inquire as to the title Philfinance to dispose to the CBCI.
the requirements of the law. Thus, the anauthorized use or
distribution of the same by a corporate officer of Filriters cannot
Moreover, CBCI No. D891 is governed by CB Circular No. 769, series bind the said corporation, not without the approval of its Board of
of 1990 21, known as the Rules and Regulations Governing Central Directors, and the maintenance of the required reserve fund.
Bank Certificates of Indebtedness, Section 3, Article V of which
provides that:
Consequently, the title of Filriters over the subject certificate of
indebtedness must be upheld over the claimed interest of Traders
Sec. 3. Assignment of Registered Certificates. — Assignment of Royal Bank.
registered certificates shall not be valid unless made at the office ACCORDINGLY, the petition is DISMISSED and the decision appealed
where the same have been issued and registered or at the Securities from dated January 29, 1990 is hereby AFFIRMED.
Servicing Department, Central Bank of the Philippines, and by the
registered owner thereof, in person or by his representative, duly
These questions seek answers in this petition for review on certiorari RTC Disposition
of the Amended Decision1 of the Court of Appeals (CA) which Alarmed over the unexpected turn of events, the spouses Rodriguez
affirmed with modification that of the Regional Trial Court (RTC).2 filed a civil complaint for damages against PEMSLA, the Multi-
Purpose Cooperative of Philnabankers (MCP), and petitioner PNB.
The Facts They sought to recover the value of their checks that were deposited
The facts as borne by the records are as follows: to the PEMSLA savings account amounting to P2,345,804.00. The
Respondents-Spouses Erlando and Norma Rodriguez were clients of spouses contended that because PNB credited the checks to the
petitioner Philippine National Bank (PNB), Amelia Avenue Branch, PEMSLA account even without indorsements, PNB violated its
Cebu City. They maintained savings and demand/checking accounts, contractual obligation to them as depositors. PNB paid the wrong
namely, PNBig Demand Deposits (Checking/Current Account No. payees, hence, it should bear the loss.
810624-6 under the account name Erlando and/or Norma PNB moved to dismiss the complaint on the ground of lack of cause
Rodriguez), and PNBig Demand Deposit (Checking/Current Account of action. PNB argued that the claim for damages should come from
No. 810480-4 under the account name Erlando T. Rodriguez). the payees of the checks, and not from spouses Rodriguez. Since
there was no demand from the said payees, the obligation should be
considered as discharged.
The spouses were engaged in the informal lending business. In line
with their business, they had a discounting3 arrangement with the
Philnabank Employees Savings and Loan Association (PEMSLA), an In an Order dated January 12, 2000, the RTC denied PNB’s motion to
association of PNB employees. Naturally, PEMSLA was likewise a dismiss.
client of PNB Amelia Avenue Branch. The association maintained
current and savings accounts with petitioner bank. In its Answer,5 PNB claimed it is not liable for the checks which it
paid to the PEMSLA account without any indorsement from the
PEMSLA regularly granted loans to its members. Spouses Rodriguez payees. The bank contended that spouses Rodriguez, the makers,
would rediscount the postdated checks issued to members actually did not intend for the named payees to receive the
whenever the association was short of funds. As was customary, the proceeds of the checks. Consequently, the payees were considered
spouses would replace the postdated checks with their own checks as "fictitious payees" as defined under the Negotiable Instruments
issued in the name of the members. Law (NIL). Being checks made to fictitious payees which are bearer
instruments, the checks were negotiable by mere delivery. PNB’s
Answer included its cross-claim against its co-defendants PEMSLA
It was PEMSLA’s policy not to approve applications for loans of
and the MCP, praying that in the event that judgment is rendered
members with outstanding debts. To subvert this policy, some
against the bank, the cross-defendants should be ordered to
PEMSLA officers devised a scheme to obtain additional loans despite
reimburse PNB the amount it shall pay.
their outstanding loan accounts. They took out loans in the names of
unknowing members, without the knowledge or consent of the
latter. The PEMSLA checks issued for these loans were then given to After trial, the RTC rendered judgment in favor of spouses Rodriguez
the spouses for rediscounting. The officers carried this out by forging (plaintiffs). It ruled that PNB (defendant) is liable to return the value
the indorsement of the named payees in the checks. of the checks. All counterclaims and cross-claims were dismissed.
The dispositive portion of the RTC decision reads:
In return, the spouses issued their personal checks (Rodriguez
checks) in the name of the members and delivered the checks to an WHEREFORE, in view of the foregoing, the Court hereby renders
officer of PEMSLA. The PEMSLA checks, on the other hand, were judgment, as follows:
deposited by the spouses to their account.
1. Defendant is hereby ordered to pay the plaintiffs the total amount
Meanwhile, the Rodriguez checks were deposited directly by of P2,345,804.00 or reinstate or restore the amount of P775,337.00
PEMSLA to its savings account without any indorsement from the in the PNBig Demand Deposit Checking/Current Account No.
named payees. This was an irregular procedure made possible 810480-4 of Erlando T. Rodriguez, and the amount of P1,570,467.00
through the facilitation of Edmundo Palermo, Jr., treasurer of in the PNBig Demand Deposit, Checking/Current Account No.
PEMSLA and bank teller in the PNB Branch. It appears that this 810624-6 of Erlando T. Rodriguez and/or Norma Rodriguez, plus
became the usual practice for the parties. legal rate of interest thereon to be computed from the filing of this
complaint until fully paid;
For the period November 1998 to February 1999, the spouses issued
sixty nine (69) checks, in the total amount of P2,345,804.00. These 2. The defendant PNB is hereby ordered to pay the plaintiffs the
were payable to forty seven (47) individual payees who were all following reasonable amount of damages suffered by them taking
members of PEMSLA.4 into consideration the standing of the plaintiffs being sugarcane
SEC. 30. What constitutes negotiation. – An instrument is negotiated The US Supreme Court held in Mueller that when the person making
when it is transferred from one person to another in such manner as the check so payable did not intend for the specified payee to have
to constitute the transferee the holder thereof. If payable to bearer, any part in the transactions, the payee is considered as a fictitious
it is negotiated by delivery; if payable to order, it is negotiated by payee. The check is then considered as a bearer instrument to be
the indorsement of the holder completed by delivery. validly negotiated by mere delivery. Thus, the US Supreme Court
held that Liberty Insurance Bank, as drawee, was authorized to make
payment to the bearer of the check, regardless of whether prior
A check that is payable to a specified payee is an order instrument.
indorsements were genuine or not.17
However, under Section 9(c) of the NIL, a check payable to a
specified payee may nevertheless be considered as a bearer
instrument if it is payable to the order of a fictitious or non-existing The more recent Getty Petroleum Corp. v. American Express Travel
person, and such fact is known to the person making it so payable. Related Services Company, Inc.18 upheld the fictitious-payee rule.
Thus, checks issued to "Prinsipe Abante" or "Si Malakas at si The rule protects the depositary bank and assigns the loss to the
Maganda," who are well-known characters in Philippine mythology, drawer of the check who was in a better position to prevent the loss
in the first place. Due care is not even required from the drawee or
However, there is a commercial bad faith exception to the fictitious- A bank that regularly processes checks that are neither payable to
payee rule. A showing of commercial bad faith on the part of the the customer nor duly indorsed by the payee is apparently grossly
drawee bank, or any transferee of the check for that matter, will negligent in its operations.21 This Court has recognized the unique
work to strip it of this defense. The exception will cause it to bear public interest possessed by the banking industry and the need for
the loss. Commercial bad faith is present if the transferee of the the people to have full trust and confidence in their banks. 22 For this
check acts dishonestly, and is a party to the fraudulent scheme. Said reason, banks are minded to treat their customer’s accounts with
the US Supreme Court in Getty: utmost care, confidence, and honesty.23
Consequently, a transferee’s lapse of wary vigilance, disregard of In a checking transaction, the drawee bank has the duty to verify the
suspicious circumstances which might have well induced a prudent genuineness of the signature of the drawer and to pay the check
banker to investigate and other permutations of negligence are not strictly in accordance with the drawer’s instructions, i.e., to the
relevant considerations under Section 3-405 x x x. Rather, there is a named payee in the check. It should charge to the drawer’s accounts
"commercial bad faith" exception to UCC 3-405, applicable when the only the payables authorized by the latter. Otherwise, the drawee
transferee "acts dishonestly – where it has actual knowledge of facts will be violating the instructions of the drawer and it shall be liable
and circumstances that amount to bad faith, thus itself becoming a for the amount charged to the drawer’s account.24
participant in a fraudulent scheme. x x x Such a test finds support in
the text of the Code, which omits a standard of care requirement In the case at bar, respondents-spouses were the bank’s depositors.
from UCC 3-405 but imposes on all parties an obligation to act with The checks were drawn against respondents-spouses’ accounts.
"honesty in fact." x x x19 (Emphasis added) PNB, as the drawee bank, had the responsibility to ascertain the
regularity of the indorsements, and the genuineness of the
Getty also laid the principle that the fictitious-payee rule extends signatures on the checks before accepting them for deposit. Lastly,
protection even to non-bank transferees of the checks. PNB was obligated to pay the checks in strict accordance with the
instructions of the drawers. Petitioner miserably failed to discharge
In the case under review, the Rodriguez checks were payable to this burden.
specified payees. It is unrefuted that the 69 checks were payable to
specific persons. Likewise, it is uncontroverted that the payees were The checks were presented to PNB for deposit by a representative of
actual, existing, and living persons who were members of PEMSLA PEMSLA absent any type of indorsement, forged or otherwise. The
that had a rediscounting arrangement with spouses Rodriguez. facts clearly show that the bank did not pay the checks in strict
accordance with the instructions of the drawers, respondents-
What remains to be determined is if the payees, though existing spouses. Instead, it paid the values of the checks not to the named
persons, were "fictitious" in its broader context. payees or their order, but to PEMSLA, a third party to the
transaction between the drawers and the payees.alf-ITC
For the fictitious-payee rule to be available as a defense, PNB must
show that the makers did not intend for the named payees to be Moreover, PNB was negligent in the selection and supervision of its
part of the transaction involving the checks. At most, the bank’s employees. The trustworthiness of bank employees is indispensable
thesis shows that the payees did not have knowledge of the to maintain the stability of the banking industry. Thus, banks are
existence of the checks. This lack of knowledge on the part of the enjoined to be extra vigilant in the management and supervision of
payees, however, was not tantamount to a lack of intention on the their employees. In Bank of the Philippine Islands v. Court of
part of respondents-spouses that the payees would not receive the Appeals,25 this Court cautioned thus:
checks’ proceeds. Considering that respondents-spouses were
transacting with PEMSLA and not the individual payees, it is Banks handle daily transactions involving millions of pesos. By the
understandable that they relied on the information given by the very nature of their work the degree of responsibility, care and
officers of PEMSLA that the payees would be receiving the checks. trustworthiness expected of their employees and officials is far
greater than those of ordinary clerks and employees. For obvious
Verily, the subject checks are presumed order instruments. This is reasons, the banks are expected to exercise the highest degree of
because, as found by both lower courts, PNB failed to present diligence in the selection and supervision of their employees.26
sufficient evidence to defeat the claim of respondents-spouses that
the named payees were the intended recipients of the checks’ PNB’s tellers and officers, in violation of banking rules of procedure,
proceeds. The bank failed to satisfy a requisite condition of a permitted the invalid deposits of checks to the PEMSLA account.
fictitious-payee situation – that the maker of the check intended for Indeed, when it is the gross negligence of the bank employees that
the payee to have no interest in the transaction. caused the loss, the bank should be held liable.27
Because of a failure to show that the payees were "fictitious" in its PNB’s argument that there is no loss to compensate since no
broader sense, the fictitious-payee rule does not apply. Thus, the demand for payment has been made by the payees must also fail.
checks are to be deemed payable to order. Consequently, the Damage was caused to respondents-spouses when the PEMSLA
drawee bank bears the loss.20 checks they deposited were returned for the reason "Account
Closed." These PEMSLA checks were the corresponding payments to
PNB was remiss in its duty as the drawee bank. It does not dispute the Rodriguez checks. Since they could not encash the PEMSLA
the fact that its teller or tellers accepted the 69 checks for deposit to
We note that the RTC failed to thresh out the merits of PNB’s cross- Sometime in September 1996, when their financial situation turned
claim against its co-defendants PEMSLA and MPC. The records are better, respondents allegedly called and asked petitioner Pua for the
bereft of any pleading filed by these two defendants in answer to computation of their loan obligations.10 Hence, petitioner handed
the complaint of respondents-spouses and cross-claim of PNB. The them a computation dated October 2, 199611 which showed that, at
Rules expressly provide that failure to file an answer is a ground for the agreed 2% compounded interest rate per month, the amount of
a declaration that defendant is in default.28 Yet, the RTC failed to the loan payable to petitioner rose to thirteen million two hundred
sanction the failure of both PEMSLA and MPC to file responsive eighteen thousand five hundred forty-four pesos and 20/100 (PhP
pleadings. Verily, the RTC dismissal of PNB’s cross-claim has no basis. 13,218,544.20).12 On receiving the computation, the respondents
Thus, this judgment shall be without prejudice to whatever action asked petitioner to reduce their indebtedness to PhP
the bank might take against its co-defendants in the trial court. 8,500,000.13 Wanting to get paid the soonest possible time,
petitioner Pua agreed to the lowered amount.14
To PNB’s credit, it became involved in the controversial transaction
not of its own volition but due to the actions of some of its Respondents then delivered to petitioner Asiatrust Check No.
employees. Considering that moral damages must be understood to BND057750 bearing the reduced amount of PhP 8,500,000 dated
be in concept of grants, not punitive or corrective in nature, We March 30, 1997 with the assurance that the check was good.15 In
resolve to reduce the award of moral damages to P50,000.00.29 turn, respondents demanded the return of the 17 previously
dishonored checks. Petitioner, however, refused to return the bad
checks and advised respondents that she will do so only after the
WHEREFORE, the appealed Amended Decision is AFFIRMED with the
encashment of Asiatrust Check No. BND057750.16
MODIFICATION that the award for moral damages is reduced
to P50,000.00, and that this is without prejudice to whatever civil,
criminal, or administrative action PNB might take against PEMSLA, Like the 17 checks, however, Check No. BND057750 was also
MPC, and the employees involved. dishonored when it was presented by petitioner to the drawee bank.
Hence, as claimed by petitioner, she decided to file a complaint to
collect the money owed her by respondents.
G.R. No. 198660 October 23, 2013
TING TING PUA, Petitioner,
vs. For the defense, both respondents Caroline and Benito testified
SPOUSES BENITO LO BUN TIONG and CAROLINE SIOK CHING along with Rosa Dela Cruz Tuazon (Tuazon), who was the OIC-
TENG, Respondents. Manager of Asiatrust-Binondo Branch in 1997. Respondents
VELASCO, JR., J.: categorically denied obtaining a loan from petitioner.17 Respondent
Under consideration is the Motion for Reconsideration interposed Caroline, in particular, narrated that, in August 1995, she and
by petitioner Ting Ting Pua Pua) of our Resolution dated April 18, petitioner’s sister, Lilian, forged a partnership that operated a
2012 effectively affirming the Decision1 and Resolution2 dated mahjong business. Their agreement was for Lilian to serve as the
March 31, 2011 and September 26, 2011, respectively, of the Court capitalist while respondent Caroline was to act as the cashier.
of Appeals CA) In CA- G.R. CV No. 93755, which, in turn, reversed the Caroline also agreed to use her personal checks to pay for the
Decision of the Regional Trial Court RTC) of the City of Manila, operational expenses including the payment of the winners of the
Branch 29 in Civil Case No. 97-83027. games.18 As the partners anticipated that Caroline will not always be
As culled from the adverted R TC Decision, as adopted for the most in town to prepare these checks, she left with Lilian five (5) pre-
part by the CA, the antecedent facts may be summarized as follows: signed and consecutively numbered checks19 on the condition that
these checks will only be used to cover the costs of the business
operations and in no circumstance will the amount of the checks
The controversy arose from a Complaint for a Sum of Money3 filed
exceed PhP 5,000.20
by petitioner Pua against respondent-spouses Benito Lo Bun Tiong
Benito) and Caroline Siok Ching Teng Caroline). In the complaint, Pua
prayed that, among other things, respondents, or then defendants, In March 1996, however, respondent Caroline and Lilian had a
pay Pua the amount eight million five hundred thousand pesos (PhP serious disagreement that resulted in the dissolution of their
8,500,000), covered by a check. (Exhibit "A," for plaintiff) partnership and the cessation of their business. In the haste of the
dissolution and as a result of their bitter separation, respondent
Caroline alleged that she forgot about the five (5) pre-signed checks
During trial, petitioner Pua clarified that the PhP 8,500,000 check
she left with Lilian.21 It was only when Lilian’s husband, Vicente
was given by respondents to pay the loans they obtained from her
Balboa (Vicente), filed a complaint for sum of money in February
under a compounded interest agreement on various dates in
1997 against respondents to recover five million one hundred
1988.4 As Pua narrated, her sister, Lilian Balboa (Lilian), vouched for
respondents’ ability to pay so that when respondents approached
After trial, the RTC issued its Decision dated January 31, 2006 in Clearly, the issue in the present case is factual in nature as it involves
favor of petitioner. In holding thus, the RTC stated that the an inquiry into the very existence of the debt supposedly owed by
possession by petitioner of the checks signed by Caroline, under the respondents to petitioner.
Negotiable Instruments Law, raises the presumption that they were
issued and delivered for a valuable consideration. On the other The general rule is that this Court in petitions for review on
hand, the court a quo discounted the testimony for the defense certiorari only concerns itself with questions of law, not of fact,41 the
completely denying respondents’ loan obligation to Pua.35 resolution of factual issues being the primary function of lower
courts.42 However, several exceptions have been laid down by
The trial court, however, refused to order respondents to pay jurisprudence to allow the scrutiny of the factual arguments
petitioner the amount of PhP 8,500,000 considering that the advanced by the contending parties, viz: (1) the conclusion is
agreement to pay interest on the loan was not expressly stipulated grounded on speculations, surmises or conjectures; (2) the inference
in writing by the parties. The RTC, instead, ordered respondents to is manifestly mistaken, absurd or impossible ; (3) there is grave
pay the principal amount of the loan as represented by the 17 abuse of discretion; (4) the judgment is based on a misapprehension
checks plus legal interest from the date of demand. As of facts; (5) the findings of fact are conflicting ; (6) there is no
rectified,36 the dispositive portion of RTC’s Decision reads: citation of specific evidence on which the factual findings are based;
(7) the findings of absence of fact are contradicted by the presence
of evidence on record ; (8) the findings of the CA are contrary to
Defendant-spouses Benito Lo Bun Tiong and Caroline Siok Ching
those of the trial court ; (9) the CA manifestly overlooked certain
Teng, are hereby ordered jointly and solidarily:
relevant and undisputed facts that, if properly considered, would
justify a different conclusion ; (10) the findings of the CA are beyond
1. To pay plaintiff ₱1,975,000.00 plus 12% interest per annum from the issues of the case; and (11) such findings are contrary to the
September 30, 1998, until fully paid; admissions of both parties.43 At the very least, therefore, the
2. To pay plaintiff attorney’s fees of ₱200,000.00; and inconsonance of the findings of the RTC and the CA regarding the
3. To pay the costs of the suit. existence of the loan sanctions the recalibration of the evidence
presented by the parties before the trial court.
Aggrieved, respondents went to the CA arguing that the court a quo
erred in finding that they obtained and are liable for a loan from
Section 24. Presumption of consideration. – Every negotiable Clearly, respondents’ defense that Caroline left blank checks with
instrument is deemed prima facie to have been issued for a valuable petitioner’s sister who, it is said, is now determined to recoup her
Respondents’ other defenses are equally unconvincing. They assert Accordingly, respondents Benito Lo Bun Tiong and Caroline Siok
that petitioner could not have accepted a check worth PhP 8.5 Ching Teng are ordered jointly and solidarily to pay petitioner PhP
million considering that she should have known that respondent 1,975,000 plus 6% interest per annum from April 18, 1997, until fully
Caroline had issued several checks for PhP 25,000 each in favor of paid, and ₱200,000.00 as attorney’s fees.
Lilian and all of them had bounced.65 Needless to state, an act done
contrary to law cannot be sustained to defeat a legal obligation; G.R. No. 167567 September 22, 2010
repeated failure to honor obligations covered by several negotiable SAN MIGUEL CORPORATION, Petitioner,
instruments cannot serve to defeat yet another obligation covered vs.
by another instrument. BARTOLOME PUZON, JR., Respondent.
DEL CASTILLO, J.:
Indeed, it seems that respondent Caroline had displayed a cavalier This petition for review assails the December 21, 2004 Decision1 and
attitude towards the value, and the obligation concomitant with the March 28, 2005 Resolution2 of the Court of Appeals (CA) in CA-G.R.
issuance, of a check. As attested to by respondents’ very own SP No. 83905, which dismissed the petition before it and denied
witness, respondent Caroline has a documented history of issuing reconsideration, respectively.
insufficiently funded checks for 69 times, at the very least.66 This fact
alone bolsters petitioner’s allegation that the checks delivered to Factual Antecedents
her by respondent Caroline were similarly not funded. Respondent Bartolome V. Puzon, Jr., (Puzon) owner of Bartenmyk
Enterprises, was a dealer of beer products of petitioner San Miguel
In Magdiwang Realty Corp. v. Manila Banking Corp., We stressed Corporation (SMC) for Parañaque City. Puzon purchased SMC
that the quantum of evidence required in civil cases— products on credit. To ensure payment and as a business practice,
preponderance of evidence—"is a phrase which, in the last analysis, SMC required him to issue postdated checks equivalent to the value
means probability to truth. It is evidence which is more convincing of the products purchased on credit before the same were released
to the court as worthier of belief than that which is offered in to him. Said checks were returned to Puzon when the transactions
opposition thereto."67 Based on the evidence submitted by the covered by these checks were paid or settled in full.
parties and the legal presumptions arising therefrom, petitioner’s On December 31, 2000, Puzon purchased products on credit
evidence outweighs that of respondents. This preponderance of amounting to ₱11,820,327 for which he issued, and gave to SMC,
evidence in favor of Pua requires that a judgment ordering Bank of the Philippine Islands (BPI) Check Nos. 27904 (for
respondents to pay their obligation be entered. ₱309,500.00) and 27903 (for ₱11,510,827.00) to cover the said
transaction.
As aptly held by the court a quo, however, respondents cannot be
obliged to pay the interest of the loan on the ground that the On January 23, 2001, Puzon, together with his accountant, visited
supposed agreement to pay such interest was not reduced to the SMC Sales Office in Parañaque City to reconcile his account with
writing. Article 1956 of the Civil Code, which refers to monetary SMC. During that visit Puzon allegedly requested to see BPI Check
interest, specifically mandates that no interest shall be due unless it No. 17657. However, when he got hold of BPI Check No. 27903
has been expressly stipulated in writing.68 Thus, the collection of which was attached to a bond paper together with BPI Check No.
interest in loans or forbearance of money is allowed only when 17657 he allegedly immediately left the office with his accountant,
these two conditions concur: (1) there was an express stipulation for bringing the checks with them.
the payment of interest; (2) the agreement for the payment of the
interest was reduced in writing.69 Absent any of these two SMC sent a letter to Puzon on March 6, 2001 demanding the return
conditions, the money debtor cannot be made liable for interest. of the said checks. Puzon ignored the demand hence SMC filed a
Thus, petitioner is entitled only to the principal amount of the loan complaint against him for theft with the City Prosecutor’s Office of
plus the allowable legal interest from the time of the demand, 70 at Parañaque City.
the rate of 6% per annum.71
Rulings of the Prosecutor and the Secretary of Department of
Respondent Benito cannot escape the joint and solidary liability to Justice (DOJ)
pay the loan on the ground that the obligation arose from checks The investigating prosecutor, Elizabeth Yu Guray found that the
solely issued by his wife. Without any evidence to the contrary, it is "relationship between [SMC] and [Puzon] appears to be one of
presumed that the proceeds of the loan redounded to the benefit of credit or creditor-debtor relationship. The problem lies in the
their family. Hence, the conjugal partnership is liable therefor.72 The reconciliation of accounts and the non-payment of beer empties
unsupported allegation that respondents were separated in fact, which cannot give rise to a criminal prosecution for theft."3 Thus, in
standing alone, does not persuade this Court to solely bind her July 31, 2001 Resolution,4 she recommended the dismissal of
respondent Caroline and exempt Benito. As the head of the family, the case for lack of evidence. SMC appealed.
there is more reason that respondent Benito should answer for the
liability incurred by his wife presumably in support of their family.
On June 4, 2003, the DOJ issued its resolution5 affirming the
prosecutor’s Resolution dismissing the case. Its motion for
WHEREFORE, the Motion for Reconsideration is GRANTED. The reconsideration having been denied in the April 23, 2004 DOJ
Resolution of this Court dated April 18, 2012 is set aside and a new Resolution,6 SMC filed a petition for certiorari with the CA.
one entered REVERSING and SETTING ASIDE the Decision dated
Sec. 12. Antedated and postdated – The instrument is not invalid for
Consequently, the CA did not err in finding no grave abuse of
the reason only that it is antedated or postdated, provided this is
discretion committed by the DOJ in sustaining the dismissal of the
not done for an illegal or fraudulent purpose. The person to whom
case for theft for lack of probable cause.
an instrument so dated is delivered acquires the title thereto as of
the date of delivery. (Underscoring supplied.)
WHEREFORE, the petition is DENIED. The December 21, 2004
Decision and March 28, 2005 Resolution of the Court of Appeals in
Note however that delivery as the term is used in the
CA-G.R. SP. No. 83905 are AFFIRMED.
aforementioned provision means that the party delivering did so for
the purpose of giving effect thereto.12 Otherwise, it cannot be said
that there has been delivery of the negotiable instrument. Once G.R. No. 107382/G.R. No. 107612 January 31, 1996
there is delivery, the person to whom the instrument is delivered ASSOCIATED BANK, petitioner,
gets the title to the instrument completely and irrevocably. vs.
HON. COURT OF APPEALS, PROVINCE OF TARLAC and PHILIPPINE
NATIONAL BANK, respondents.
If the subject check was given by Puzon to SMC in payment of the
PHILIPPINE NATIONAL BANK, petitioner,
obligation, the purpose of giving effect to the instrument is evident
vs.
thus title to or ownership of the check was transferred upon
HONORABLE COURT OF APPEALS, PROVINCE OF TARLAC, and
delivery. However, if the check was not given as payment, there
ASSOCIATED BANK, respondents.
being no intent to give effect to the instrument, then ownership of
ROMERO, J.:
the check was not transferred to SMC.
Where thirty checks bearing forged endorsements are paid, who
bears the loss, the drawer, the drawee bank or the collecting bank?
The evidence of SMC failed to establish that the check was given in This is the main issue in these consolidated petitions for review
payment of the obligation of Puzon. There was no provisional assailing the decision of the Court of Appeals in "Province of Tarlac
receipt or official receipt issued for the amount of the check. What v. Philippine National Bank v. Associated Bank v. Fausto Pangilinan,
was issued was a receipt for the document, a "POSTDATED CHECK et. al." (CA-G.R. No. CV No. 17962). 1
SLIP."13
The facts of the case are as follows:
Furthermore, the petitioner's demand letter sent to respondent
states "As per company policies on receivables, all issuances are to
The Province of Tarlac maintains a current account with the
be covered by post-dated checks. However, you have deviated from
Philippine National Bank (PNB) Tarlac Branch where the provincial
this policy by forcibly taking away the check you have issued to us to
funds are deposited. Checks issued by the Province are signed by the
cover the December issuance."14 Notably, the term "payment" was
Provincial Treasurer and countersigned by the Provincial Auditor or
not used instead the terms "covered" and "cover" were used.
the Secretary of the Sangguniang Bayan.
The case at bench concerns checks payable to the order of A collecting bank where a check is deposited and which indorses the
Concepcion Emergency Hospital or its Chief. They were properly check upon presentment with the drawee bank, is such an indorser.
issued and bear the genuine signatures of the drawer, the Province So even if the indorsement on the check deposited by the banks's
of Tarlac. The infirmity in the questioned checks lies in the payee's client is forged, the collecting bank is bound by his warranties as an
(Concepcion Emergency Hospital) indorsements which are forgeries. indorser and cannot set up the defense of forgery as against the
At the time of their indorsement, the checks were order drawee bank.
instruments.
The bank on which a check is drawn, known as the drawee bank, is
Checks having forged indorsements should be differentiated from under strict liability to pay the check to the order of the payee. The
forged checks or checks bearing the forged signature of the drawer. drawer's instructions are reflected on the face and by the terms of
the check. Payment under a forged indorsement is not to the
drawer's order. When the drawee bank pays a person other than the
Section 23 of the Negotiable Instruments Law (NIL) provides:
payee, it does not comply with the terms of the check and violates
its duty to charge its customer's (the drawer) account only for
Sec. 23. FORGED SIGNATURE, EFFECT OF. — When a signature is properly payable items. Since the drawee bank did not pay a holder
forged or made without authority of the person whose signature it or other person entitled to receive payment, it has no right to
purports to be, it is wholly inoperative, and no right to retain the reimbursement from the drawer. 24 The general rule then is that the
instrument, or to give a discharge therefor, or to enforce payment drawee bank may not debit the drawer's account and is not entitled
thereof against any party thereto, can be acquired through or under to indemnification from the drawer. 25 The risk of loss must perforce
such signature unless the party against whom it is sought to enforce fall on the drawee bank.
such right is precluded from setting up the forgery or want of
authority.
However, if the drawee bank can prove a failure by the
customer/drawer to exercise ordinary care that substantially
A forged signature, whether it be that of the drawer or the payee, is contributed to the making of the forged signature, the drawer is
wholly inoperative and no one can gain title to the instrument precluded from asserting the forgery.
through it. A person whose signature to an instrument was forged
was never a party and never consented to the contract which
If at the same time the drawee bank was also negligent to the point
allegedly gave rise to such instrument. 18 Section 23 does not avoid
of substantially contributing to the loss, then such loss from the
the instrument but only the forged signature. 19 Thus, a forged
forgery can be apportioned between the negligent drawer and the
indorsement does not operate as the payee's indorsement.
negligent bank. 26
Since a forged indorsement is inoperative, the collecting bank had After careful examination of the records, the Court finds that the
no right to be paid by the drawee bank. The former must necessarily Province of Tarlac was equally negligent and should, therefore,
return the money paid by the latter because it was paid share the burden of loss from the checks bearing a forged
wrongfully. 30 indorsement.
More importantly, by reason of the statutory warranty of a general The Province of Tarlac permitted Fausto Pangilinan to collect the
indorser in section 66 of the Negotiable Instruments Law, a checks when the latter, having already retired from government
collecting bank which indorses a check bearing a forged indorsement service, was no longer connected with the hospital. With the
and presents it to the drawee bank guarantees all prior exception of the first check (dated January 17, 1978), all the checks
indorsements, including the forged indorsement. It warrants that were issued and released after Pangilinan's retirement on February
the instrument is genuine, and that it is valid and subsisting at the 28, 1978. After nearly three years, the Treasurer's office was still
time of his indorsement. Because the indorsement is a forgery, the releasing the checks to the retired cashier. In addition, some of the
collecting bank commits a breach of this warranty and will be aid allotment checks were released to Pangilinan and the others to
accountable to the drawee bank. This liability scheme operates Elizabeth Juco, the new cashier. The fact that there were now two
without regard to fault on the part of the collecting/presenting persons collecting the checks for the hospital is an unmistakable sign
bank. Even if the latter bank was not negligent, it would still be liable of an irregularity which should have alerted employees in the
to the drawee bank because of its indorsement. Treasurer's office of the fraud being committed. There is also
evidence indicating that the provincial employees were aware of
The Court has consistently ruled that "the collecting bank or last Pangilinan's retirement and consequent dissociation from the
endorser generally suffers the loss because it has the duty to hospital. Jose Meru, the Provincial Treasurer, testified:.
ascertain the genuineness of all prior endorsements considering that
the act of presenting the check for payment to the drawee is an ATTY. MORGA:
assertion that the party making the presentment has done its duty Q Now, is it true that for a given month there were two releases of
to ascertain the genuineness of the endorsements." 31 checks, one went to Mr. Pangilinan and one went to Miss Juco?
JOSE MERU:
The drawee bank is not similarly situated as the collecting bank A Yes, sir.
because the former makes no warranty as to the genuineness. of Q Will you please tell us how at the time (sic) when the authorized
any indorsement. 32 The drawee bank's duty is but to verify the representative of Concepcion Emergency Hospital is and was
genuineness of the drawer's signature and not of the indorsement supposed to be Miss Juco?
because the drawer is its client. A Well, as far as my investigation show (sic) the assistant cashier told
me that Pangilinan represented himself as also authorized to help in
the release of these checks and we were apparently misled because
Moreover, the collecting bank is made liable because it is privy to
they accepted the representation of Pangilinan that he was helping
the depositor who negotiated the check. The bank knows him, his
them in the release of the checks and besides according to them
address and history because he is a client. It has taken a risk on his
they were, Pangilinan, like the rest, was able to present an official
deposit. The bank is also in a better position to detect forgery, fraud
receipt to acknowledge these receipts and according to them since
or irregularity in the indorsement.
this is a government check and believed that it will eventually go to
the hospital following the standard procedure of negotiating
Hence, the drawee bank can recover the amount paid on the check government checks, they released the checks to Pangilinan aside
bearing a forged indorsement from the collecting bank. However, a from Miss Juco.34
drawee bank has the duty to promptly inform the presentor of the
forgery upon discovery. If the drawee bank delays in informing the The failure of the Province of Tarlac to exercise due care contributed
presentor of the forgery, thereby depriving said presentor of the to a significant degree to the loss tantamount to negligence. Hence,
right to recover from the forger, the former is deemed negligent and the Province of Tarlac should be liable for part of the total amount
can no longer recover from the presentor. 33 paid on the questioned checks.
Applying these rules to the case at bench, PNB, the drawee bank, The drawee bank PNB also breached its duty to pay only according
cannot debit the current account of the Province of Tarlac because it to the terms of the check. Hence, it cannot escape liability and
paid checks which bore forged indorsements. However, if the should also bear part of the loss.
Province of Tarlac as drawer was negligent to the point of
substantially contributing to the loss, then the drawee bank PNB can
As earlier stated, PNB can recover from the collecting bank.
charge its account. If both drawee bank-PNB and drawer-Province of
Tarlac were negligent, the loss should be properly apportioned
between them. In the case of Associated Bank v. CA, 35 six crossed checks with
forged indorsements were deposited in the forger's account with
the collecting bank and were later paid by four different drawee
The loss incurred by drawee bank-PNB can be passed on to the
banks. The Court found the collecting bank (Associated) to be
collecting bank-Associated Bank which presented and indorsed the
negligent and held:
checks to it. Associated Bank can, in turn, hold the forger, Fausto
Pangilinan, liable.
The collecting bank, Associated Bank, shall be liable to PNB for fifty Earlier, on September 21, 1983, FCC had deposited a money market
(50%) percent of P203,300.00. It is liable on its warranties as placement for PhP 2 million with respondent Producers Bank. Santos
indorser of the checks which were deposited by Fausto Pangilinan, was the money market trader assigned to handle FCC’s
having guaranteed the genuineness of all prior indorsements, account.12 Such deposit is evidenced by Official Receipt No.
including that of the chief of the payee hospital, Dr. Adena Canlas. 31756813 and a Letter dated September 21, 1983 of Santos
Associated Bank was also remiss in its duty to ascertain the addressed to Angie Lazo of FCC, acknowledging receipt of the
genuineness of the payee's indorsement. placement.14 The placement matured on October 25, 1983 and was
rolled-over until December 5, 1983 as evidenced by a Letter dated
IN VIEW OF THE FOREGOING, the petition for review filed by the October 25, 1983.15 When the placement matured, FCC demanded
Philippine National Bank (G.R. No. 107612) is hereby PARTIALLY the payment of the proceeds of the placement.16 On December 5,
GRANTED. The petition for review filed by the Associated Bank (G.R. 1983, the same date that So received the phone call instructing her
No. 107382) is hereby DENIED. The decision of the trial court is to pre-terminate Lim Sio Wan’s placement, the manager’s check in
MODIFIED. The Philippine National Bank shall pay fifty percent (50%) the name of Lim Sio Wan was deposited in the account of FCC,
of P203,300.00 to the Province of Tarlac, with legal interest from purportedly representing the proceeds of FCC’s money market
March 20, 1981 until the payment thereof. Associated Bank shall pay placement with Producers Bank.17 In other words, the Allied check
fifty percent (50%) of P203,300.00 to the Philippine National Bank, was deposited with Metrobank in the account of FCC as Producers
likewise, with legal interest from March 20, 1981 until payment is Bank’s payment of its obligation to FCC.
made.
G.R. No. 133179 March 27, 2008 To clear the check and in compliance with the requirements of the
ALLIED BANKING CORPORATION, Petitioner, Philippine Clearing House Corporation (PCHC) Rules and Regulations,
vs. Metrobank stamped a guaranty on the check, which reads: "All prior
LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and endorsements and/or lack of endorsement guaranteed."18
PRODUCERS BANK, Respondents.
VELASCO, JR., J.:
The check was sent to Allied through the PCHC. Upon the
To ingratiate themselves to their valued depositors, some banks at
presentment of the check, Allied funded the check even without
times bend over backwards that they unwittingly expose themselves
checking the authenticity of Lim Sio Wan’s purported indorsement.
to great risks.
Thus, the amount on the face of the check was credited to the
account of FCC.19
The Case
This Petition for Review on Certiorari under Rule 45 seeks to reverse
the Court of Appeals’ (CA’s) Decision promulgated on March 18, On December 9, 1983, Lim Sio Wan deposited with Allied a second
19981 in CA-G.R. CV No. 46290 entitled Lim Sio Wan v. Allied Banking money market placement to mature on January 9, 1984.20
Corporation, et al. The CA Decision modified the Decision dated
November 15, 19932 of the Regional Trial Court (RTC), Branch 63 in On December 14, 1983, upon the maturity date of the first money
Makati City rendered in Civil Case No. 6757. market placement, Lim Sio Wan went to Allied to withdraw it.21 She
was then informed that the placement had been pre-terminated
The Facts upon her instructions. She denied giving any instructions and
The facts as found by the RTC and affirmed by the CA are as follows: receiving the proceeds thereof. She desisted from further
On November 14, 1983, respondent Lim Sio Wan deposited with complaints when she was assured by the bank’s manager that her
petitioner Allied Banking Corporation (Allied) at its Quintin Paredes money would be recovered.22
Branch in Manila a money market placement of PhP 1,152,597.35
for a term of 31 days to mature on December 15, 1983,3 as When Lim Sio Wan’s second placement matured on January 9, 1984,
evidenced by Provisional Receipt No. 1356 dated November 14, So called Lim Sio Wan to ask for the latter’s instructions on the
1983.4 second placement. Lim Sio Wan instructed So to roll-over the
placement for another 30 days.23On January 24, 1984, Lim Sio Wan,
On December 5, 1983, a person claiming to be Lim Sio Wan called up realizing that the promise that her money would be recovered
Cristina So, an officer of Allied, and instructed the latter to pre- would not materialize, sent a demand letter to Allied asking for the
terminate Lim Sio Wan’s money market placement, to issue a payment of the first placement.24 Allied refused to pay Lim Sio Wan,
manager’s check representing the proceeds of the placement, and claiming that the latter had authorized the pre-termination of the
to give the check to one Deborah Dee Santos who would pick up the placement and its subsequent release to Santos.25
check.5 Lim Sio Wan described the appearance of Santos so that So
could easily identify her.6
On May 15, 1984, or more than six (6) months after funding the SO ORDERED.37
check, Allied informed Metrobank that the signature on the check
was forged.31 Thus, Metrobank withheld the amount represented by Hence, Allied filed the instant petition.
the check from FCC. Later on, Metrobank agreed to release the
amount to FCC after the latter executed an Undertaking, promising The Issues
to indemnify Metrobank in case it was made to reimburse the Allied raises the following issues for our consideration:
amount.32 The Honorable Court of Appeals erred in holding that Lim Sio Wan
did not authorize [Allied] to pre-terminate the initial placement and
Lim Sio Wan thereafter filed an amended complaint to include to deliver the check to Deborah Santos.
Metrobank as a party-defendant, along with Allied.33The RTC
admitted the amended complaint despite the opposition of The Honorable Court of Appeals erred in absolving Producers Bank
Metrobank.34 Consequently, Allied’s third party complaint against of any liability for the reimbursement of amount adjudged
Metrobank was converted into a cross-claim and the latter’s fourth demandable.
party complaint against FCC was converted into a third party
complaint.35
The Honorable Court of Appeals erred in holding [Allied] liable to the
extent of 60% of amount adjudged demandable in clear disregard to
After trial, the RTC issued its Decision, holding as follows: the ultimate liability of Metrobank as guarantor of all endorsement
on the check, it being the collecting bank.38
WHEREFORE, judgment is hereby rendered as follows:
The petition is partly meritorious.
1. Ordering defendant Allied Banking Corporation to pay plaintiff the
amount of P1,158,648.49 plus 12% interest per annum from March A Question of Fact
16, 1984 until fully paid;
Allied questions the finding of both the trial and appellate courts
2. Ordering defendant Allied Bank to pay plaintiff the amount of that Allied was not authorized to release the proceeds of Lim Sio
P100,000.00 by way of moral damages; Wan’s money market placement to Santos. Allied clearly raises a
question of fact. When the CA affirms the findings of fact of the RTC,
3. Ordering defendant Allied Bank to pay plaintiff the amount of the factual findings of both courts are binding on this Court.39
P173,792.20 by way of attorney’s fees; and,
We also agree with the CA when it said that it could not disturb the
4. Ordering defendant Allied Bank to pay the costs of suit. trial court’s findings on the credibility of witness So inasmuch as it
was the trial court that heard the witness and had the opportunity
Defendant Allied Bank’s cross-claim against defendant Metrobank is to observe closely her deportment and manner of testifying. Unless
DISMISSED. the trial court had plainly overlooked facts of substance or value,
which, if considered, might affect the result of the case,40 we find it
best to defer to the trial court on matters pertaining to credibility of
Likewise defendant Metrobank’s third-party complaint as against
witnesses.
Filipinas Cement Corporation is DISMISSED.
Additionally, this Court has held that the matter of negligence is also
Filipinas Cement Corporation’s fourth-party complaint against
a factual question.41 Thus, the finding of the RTC, affirmed by the CA,
Producer’s Bank is also DISMISSED.
that the respective parties were negligent in the exercise of their
obligations is also conclusive upon this Court.
SO ORDERED.36
The Liability of the Parties
The Decision of the Court of Appeals
As to the liability of the parties, we find that Allied is liable to Lim Sio
Allied appealed to the CA, which in turn issued the assailed Decision Wan. Fundamental and familiar is the doctrine that the relationship
on March 18, 1998, modifying the RTC Decision, as follows: between a bank and a client is one of debtor-creditor.
Thus, we have ruled in a line of cases that a bank deposit is in the We cannot, however, say outright that Allied is solely liable to Lim
nature of a simple loan or mutuum.42 More succinctly, in Citibank, Sio Wan.
N.A. (Formerly First National City Bank) v. Sabeniano, this Court
ruled that a money market placement is a simple loan or Allied claims that Metrobank is the proximate cause of the loss of
mutuum.43 Further, we defined a money market in Cebu Lim Sio Wan’s money. It points out that Metrobank guaranteed all
International Finance Corporation v. Court of Appeals, as follows: prior indorsements inscribed on the manager’s check, and without
Metrobank’s guarantee, the present controversy would never have
[A] money market is a market dealing in standardized short-term occurred. According to Allied:
credit instruments (involving large amounts) where lenders and
borrowers do not deal directly with each other but through a middle Failure on the part of the collecting bank to ensure that the
man or dealer in open market. In a money market transaction, the proceeds of the check is paid to the proper party is, aside from being
investor is a lender who loans his money to a borrower through a an efficient intervening cause, also the last negligent act, x x x
middleman or dealer. contributory to the injury caused in the present case, which thereby
leads to the conclusion that it is the collecting bank, Metrobank that
In the case at bar, the money market transaction between the is the proximate cause of the alleged loss of the plaintiff in the
petitioner and the private respondent is in the nature of a loan.44 instant case.46
Lim Sio Wan, as creditor of the bank for her money market We are not persuaded.
placement, is entitled to payment upon her request, or upon
maturity of the placement, or until the bank is released from its Proximate cause is "that cause, which, in natural and continuous
obligation as debtor. Until any such event, the obligation of Allied to sequence, unbroken by any efficient intervening cause, produces the
Lim Sio Wan remains unextinguished. injury and without which the result would not have
occurred."47 Thus, there is an efficient supervening event if the
Art. 1231 of the Civil Code enumerates the instances when event breaks the sequence leading from the cause to the ultimate
obligations are considered extinguished, thus: result. To determine the proximate cause of a controversy, the
question that needs to be asked is: If the event did not happen,
would the injury have resulted? If the answer is NO, then the event
Art. 1231. Obligations are extinguished:
is the proximate cause.
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt; In the instant case, Allied avers that even if it had not issued the
(4) By the confusion or merger of the rights of creditor and check payment, the money represented by the check would still be
debtor; lost because of Metrobank’s negligence in indorsing the check
(5) By compensation; without verifying the genuineness of the indorsement thereon.
(6) By novation.
Other causes of extinguishment of obligations, such as annulment, Section 66 in relation to Sec. 65 of the Negotiable Instruments Law
rescission, fulfillment of a resolutory condition, and prescription, are provides:
governed elsewhere in this Code. (Emphasis supplied.)
Section 66. Liability of general indorser.—Every indorser who
From the factual findings of the trial and appellate courts that Lim indorses without qualification, warrants to all subsequent holders in
Sio Wan did not authorize the release of her money market due course;
placement to Santos and the bank had been negligent in so doing,
there is no question that the obligation of Allied to pay Lim Sio Wan a) The matters and things mentioned in subdivisions (a), (b) and (c)
had not been extinguished. Art. 1240 of the Code states that of the next preceding section; and
"payment shall be made to the person in whose favor the obligation
has been constituted, or his successor in interest, or any person
b) That the instrument is at the time of his indorsement valid and
authorized to receive it." As commented by Arturo Tolentino:
subsisting;
a) That the instrument is genuine and in all respects what Considering the comparative negligence of the two (2) banks, we
it purports to be; rule that the demands of substantial justice are satisfied by
b) That he has a good title of it; allocating the loss of P2,413,215.16 and the costs of the arbitration
c) That all prior parties had capacity to contract; proceeding in the amount of P7,250.00 and the cost of litigation on a
d) That he has no knowledge of any fact which would 60-40 ratio.52
impair the validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty extends Similarly, we ruled in Associated Bank v. Court of Appeals that the
in favor of no holder other than the immediate transferee. issuing institution and the collecting bank should equally share the
liability for the loss of amount represented by the checks concerned
The provisions of subdivision (c) of this section do not apply to due to the negligence of both parties:
persons negotiating public or corporation securities, other than bills
and notes. (Emphasis supplied.) The Court finds as reasonable, the proportionate sharing of fifty
percent-fifty percent (50%-50%). Due to the negligence of the
The warranty "that the instrument is genuine and in all respects Province of Tarlac in releasing the checks to an unauthorized person
what it purports to be" covers all the defects in the instrument (Fausto Pangilinan), in allowing the retired hospital cashier to
affecting the validity thereof, including a forged indorsement. Thus, receive the checks for the payee hospital for a period close to three
the last indorser will be liable for the amount indicated in the years and in not properly ascertaining why the retired hospital
negotiable instrument even if a previous indorsement was forged. cashier was collecting checks for the payee hospital in addition to
We held in a line of cases that "a collecting bank which indorses a the hospital’s real cashier, respondent Province contributed to the
check bearing a forged indorsement and presents it to the drawee loss amounting to P203,300.00 and shall be liable to the PNB for fifty
bank guarantees all prior indorsements, including the forged (50%) percent thereof. In effect, the Province of Tarlac can only
indorsement itself, and ultimately should be held liable therefor."48 recover fifty percent (50%) of P203,300.00 from PNB.
However, this general rule is subject to exceptions. One such The collecting bank, Associated Bank, shall be liable to PNB for fifty
exception is when the issuance of the check itself was attended with (50%) percent of P203,300.00. It is liable on its warranties as
negligence. Thus, in the cases cited above where the collecting bank indorser of the checks which were deposited by Fausto Pangilinan,
is generally held liable, in two of the cases where the checks were having guaranteed the genuineness of all prior indorsements,
negligently issued, this Court held the institution issuing the check including that of the chief of the payee hospital, Dr. Adena Canlas.
just as liable as or more liable than the collecting bank. Associated Bank was also remiss in its duty to ascertain the
genuineness of the payee’s indorsement.53
In isolated cases where the checks were deposited in an account
other than that of the payees on the strength of forged A reading of the facts of the two immediately preceding cases would
indorsements, we held the collecting bank solely liable for the whole reveal that the reason why the bank or institution which issued the
amount of the checks involved for having indorsed the same. In check was held partially liable for the amount of the check was
Republic Bank v. Ebrada,49 the check was properly issued by the because of the negligence of these parties which resulted in the
Bureau of Treasury. While in Banco de Oro Savings and Mortgage issuance of the checks.
Bank (Banco de Oro) v. Equitable Banking Corporation,50 Banco de
Oro admittedly issued the checks in the name of the correct payees. In the instant case, the trial court correctly found Allied negligent in
And in Traders Royal Bank v. Radio Philippines Network, Inc., 51 the issuing the manager’s check and in transmitting it to Santos without
checks were issued at the request of Radio Philippines Network, Inc. even a written authorization.54 In fact, Allied did not even ask for the
from Traders Royal Bank.1avvphi1 certificate evidencing the money market placement or call up Lim
Sio Wan at her residence or office to confirm her instructions. Both
However, in Bank of the Philippine Islands v. Court of Appeals, we actions could have prevented the whole fraudulent transaction from
said that the drawee bank is liable for 60% of the amount on the unfolding. Allied’s negligence must be considered as the proximate
face of the negotiable instrument and the collecting bank is liable for cause of the resulting loss.
40%. We also noted the relative negligence exhibited by two banks,
to wit: To reiterate, had Allied exercised the diligence due from a financial
institution, the check would not have been issued and no loss of
Both banks were negligent in the selection and supervision of their funds would have resulted. In fact, there would have been no
employees resulting in the encashment of the forged checks by an issuance of indorsement had there been no check in the first place.
impostor. Both banks were not able to overcome the presumption
of negligence in the selection and supervision of their employees. It The liability of Allied, however, is concurrent with that of Metrobank
was the gross negligence of the employees of both banks which as the last indorser of the check. When Metrobank indorsed the
resulted in the fraud and the subsequent loss. While it is true that check in compliance with the PCHC Rules and Regulations55 without
petitioner BPI’s negligence may have been the proximate cause of verifying the authenticity of Lim Sio Wan’s indorsement and when it
the loss, respondent CBC’s negligence contributed equally to the accepted the check despite the fact that it was cross-checked
As to the claim that there was unjust enrichment on the part of WHEREFORE, premises considered, the decision appealed from is
Producers Bank, the same is correct. Allied correctly claims in its MODIFIED. Judgment is rendered ordering and sentencing
petition that Producers Bank should reimburse Allied for whatever defendant-appellant Allied Banking Corporation to pay sixty (60%)
judgment that may be rendered against it pursuant to Art. 22 of the percent and defendant-appellee Metropolitan Bank and Trust
Civil Code, which provides: "Every person who through an act of Company forty (40%) of the amount of P1,158,648.49 plus 12%
performance by another, or any other means, acquires or comes interest per annum from March 16, 1984 until fully paid. The moral
into possession of something at the expense of the latter without damages, attorney’s fees and costs of suit adjudged shall likewise be
just cause or legal ground, shall return the same to him."1avvphi1 paid by defendant-appellant Allied Banking Corporation and
defendant-appellee Metropolitan Bank and Trust Company in the
The above provision of law was clarified in Reyes v. Lim, where we same proportion of 60-40. Except as thus modified, the decision
ruled that "[t]here is unjust enrichment when a person unjustly appealed from is AFFIRMED.
retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of SO ORDERED.
justice, equity and good conscience."58
Additionally and by way of MODIFICATION, Producers Bank is hereby
In Tamio v. Ticson, we further clarified the principle of unjust ordered to pay Allied and Metrobank the aforementioned amounts.
enrichment, thus: "Under Article 22 of the Civil Code, there is unjust The liabilities of the parties are concurrent and independent of each
enrichment when (1) a person is unjustly benefited, and (2) such other.
benefit is derived at the expense of or with damages to another."59
G.R. No. 129015 August 13, 2004
In the instant case, Lim Sio Wan’s money market placement in Allied SAMSUNG CONSTRUCTION COMPANY PHILIPPINES,
Bank was pre-terminated and withdrawn without her consent. INC., petitioner,
Moreover, the proceeds of the placement were deposited in vs.
Producers Bank’s account in Metrobank without any justification. In FAR EAST BANK AND TRUST COMPANY AND COURT OF
other words, there is no reason that the proceeds of Lim Sio Wans’ APPEALS, respondents.
placement should be deposited in FCC’s account purportedly as TINGA, J.:
payment for FCC’s money market placement and interest in Called to fore in the present petition is a classic textbook question –
Producers Bank.lavvphil With such payment, Producers Bank’s if a bank pays out on a forged check, is it liable to reimburse the
indebtedness to FCC was extinguished, thereby benefitting the drawer from whose account the funds were paid out? The Court of
former. Clearly, Producers Bank was unjustly enriched at the Appeals, in reversing a trial court decision adverse to the bank,
expense of Lim Sio Wan. Based on the facts and circumstances of invoked tenuous reasoning to acquit the bank of liability. We
the case, Producers Bank should reimburse Allied and Metrobank for reverse, applying time-honored principles of law.
the amounts the two latter banks are ordered to pay Lim Sio Wan. The salient facts follow.
It cannot be validly claimed that FCC, and not Producers Bank, Plaintiff Samsung Construction Company Philippines, Inc. ("Samsung
should be considered as having been unjustly enriched. It must be Construction"), while based in Biñan, Laguna, maintained a current
remembered that FCC’s money market placement with Producers account with defendant Far East Bank and Trust Company1 ("FEBTC")
Bank was already due and demandable; thus, Producers Bank’s at the latter’s Bel-Air, Makati branch.2 The sole signatory to Samsung
payment thereof was justified. FCC was entitled to such payment. As Construction’s account was Jong Kyu Lee ("Jong"), its Project
At the same time, Justiani forwarded the check to the branch Senior FEBTC timely appealed to the Court of Appeals. On 28 November
Assistant Cashier Gemma Velez, as it was bank policy that two bank 1996, the Special Fourteenth Division of the Court of Appeals
branch officers approve checks exceeding One Hundred Thousand rendered a Decision,16 reversing the RTC Decision and absolving
Pesos, for payment or encashment. Velez likewise counterchecked FEBTC from any liability. The Court of Appeals held that the
the signature on the check as against that on the signature card. He contradictory findings of the NBI and the PNP created doubt as to
too concluded that the check was indeed signed by Jong. Velez then whether there was forgery.17 Moreover, the appellate court also
forwarded the check and signature card to Shirley Syfu, another held that assuming there was forgery, it occurred due to the
bank officer, for approval. Syfu then noticed that Jose Sempio III negligence of Samsung Construction, imputing blame on the
("Sempio"), the assistant accountant of Samsung Construction, was accountant Kyu for lack of care and prudence in keeping the checks,
also in the bank. Sempio was well-known to Syfu and the other bank which if observed would have prevented Sempio from gaining access
officers, he being the assistant accountant of Samsung Construction. thereto.18 The Court of Appeals invoked the ruling in PNB v. National
Syfu showed the check to Sempio, who vouched for the genuineness City Bank of New York19 that, if a loss, which must be borne by one
of Jong’s signature. Confirming the identity of Gonzaga, Sempio said or two innocent persons, can be traced to the neglect or fault of
that the check was for the purchase of equipment for Samsung either, such loss would be borne by the negligent party, even if
Construction. Satisfied with the genuineness of the signature of innocent of intentional fraud.20
Jong, Syfu authorized the bank’s encashment of the check to
Gonzaga. Samsung Construction now argues that the Court of Appeals had
seriously misapprehended the facts when it overturned the RTC’s
The following day, the accountant of Samsung Construction, Kyu, finding of forgery. It also contends that the appellate court erred in
examined the balance of the bank account and discovered that a finding that it had been negligent in safekeeping the check, and in
check in the amount of Nine Hundred Ninety Nine Thousand Five applying the equity principle enunciated in PNB v. National City Bank
Hundred Pesos (P999,500.00) had been encashed. Aware that he of New York.
had not prepared such a check for Jong’s signature, Kyu perused the
checkbook and found that the last blank check was missing. 7 He Since the trial court and the Court of Appeals arrived at contrary
reported the matter to Jong, who then proceeded to the bank. Jong findings on questions of fact, the Court is obliged to examine the
learned of the encashment of the check, and realized that his record to draw out the correct conclusions. Upon examination of the
signature had been forged. The Bank Manager reputedly told Jong record, and based on the applicable laws and jurisprudence, we
that he would be reimbursed for the amount of the check.8 Jong reverse the Court of Appeals.
proceeded to the police station and consulted with his
lawyers.9 Subsequently, a criminal case for qualified theft was filed
Section 23 of the Negotiable Instruments Law states:
against Sempio before the Laguna court.10
Brady, in his treatise The Law of Forged and Altered Checks, Under Section 23 of the Negotiable Instruments Law, forgery is a
elucidates: real or absolute defense by the party whose signature is forged.26 On
the premise that Jong’s signature was indeed forged, FEBTC is liable
When a person deposits money in a general account in a bank, for the loss since it authorized the discharge of the forged check.
against which he has the privilege of drawing checks in the ordinary Such liability attaches even if the bank exerts due diligence and care
course of business, the relationship between the bank and the in preventing such faulty discharge. Forgeries often deceive the eye
depositor is that of debtor and creditor. So far as the legal of the most cautious experts; and when a bank has been so
relationship between the two is concerned, the situation is the same deceived, it is a harsh rule which compels it to suffer although no
as though the bank had borrowed money from the depositor, one has suffered by its being deceived.27 The forgery may be so near
agreeing to repay it on demand, or had bought goods from the like the genuine as to defy detection by the depositor himself, and
depositor, agreeing to pay for them on demand. The bank owes the yet the bank is liable to the depositor if it pays the check.28
depositor money in the same sense that any debtor owes money to
his creditor. Added to this, in the case of bank and depositor, there Thus, the first matter of inquiry is into whether the check was
is, of course, the bank’s obligation to pay checks drawn by the indeed forged. A document formally presented is presumed to be
depositor in proper form and presented in due course. When the genuine until it is proved to be fraudulent. In a forgery trial, this
bank receives the deposit, it impliedly agrees to pay only upon the presumption must be overcome but this can only be done by
depositor’s order. When the bank pays a check, on which the convincing testimony and effective illustrations.29
depositor’s signature is a forgery, it has failed to comply with its
contract in this respect. Therefore, the bank is held liable. In ruling that forgery was not duly proven, the Court of Appeals
held:
The fact that the forgery is a clever one is immaterial. The forged
signature may so closely resemble the genuine as to defy detection [There] is ground to doubt the findings of the trial court sustaining
by the depositor himself. And yet, if a bank pays the check, it is the alleged forgery in view of the conflicting conclusions made by
paying out its own money and not the depositor’s. handwriting experts from the NBI and the PNP, both agencies of the
government.
The forgery may be committed by a trusted employee or
confidential agent. The bank still must bear the loss. Even in a case xxx
where the forged check was drawn by the depositor’s partner, the
loss was placed upon the bank. The case referred to is Robinson v.
These contradictory findings create doubt on whether there was
Security Bank, Ark., 216 S. W. Rep. 717. In this case, the plaintiff
indeed a forgery. In the case of Tenio-Obsequio v. Court of Appeals,
brought suit against the defendant bank for money which had been
230 SCRA 550, the Supreme Court held that forgery cannot be
deposited to the plaintiff’s credit and which the bank had paid out
presumed; it must be proved by clear, positive and convincing
on checks bearing forgeries of the plaintiff’s signature.
evidence.//
xxx
This reasoning is pure sophistry. Any litigator worth his or her salt
would never allow an opponent’s expert witness to stand
It was held that the bank was liable. It was further held that the fact uncontradicted, thus the spectacle of competing expert witnesses is
that the plaintiff waited eight or nine months after discovering the not unusual. The trier of fact will have to decide which version to
forgery, before notifying the bank, did not, as a matter of law, believe, and explain why or why not such version is more credible
constitute a ratification of the payment, so as to preclude the than the other. Reliance therefore cannot be placed merely on the
plaintiff from holding the bank liable. xxx fact that there are colliding opinions of two experts, both clothed
with the presumption of official duty, in order to draw a conclusion,
This rule of liability can be stated briefly in these words: "A bank is especially one which is extremely crucial. Doing so is tantamount to
bound to know its depositors’ signature." The rule is variously a jurisprudential cop-out.
expressed in the many decisions in which the question has been
considered. But they all sum up to the proposition that a bank must Much is expected from the Court of Appeals as it occupies the
know the signatures of those whose general deposits it carries.24 penultimate tier in the judicial hierarchy. This Court has long
deferred to the appellate court as to its findings of fact in the
By no means is the principle rendered obsolete with the advent of understanding that it has the appropriate skill and competence to
modern commercial transactions. Contemporary texts still affirm plough through the minutiae that scatters the factual field. In failing
this well-entrenched standard. Nickles, in his book Negotiable to thoroughly evaluate the evidence before it, and relying instead on
Instruments and Other Related Commercial Paper wrote, thus: presumptions haphazardly drawn, the Court of Appeals was sadly
remiss. Of course, courts, like humans, are fallible, and not every
The deposit contract between a payor bank and its customer error deserves a stern rebuke. Yet, the appellate court’s error in this
determines who can draw against the customer’s account by case warrants special attention, as it is absurd and even dangerous
On the other hand, the RTC did adjudge the testimony of the NBI There is no reason to doubt why the RTC gave credence to the
expert as more credible than that of the PNP, and explained its testimony of the NBI examiner, and not the PNP expert’s. The NBI
reason behind the conclusion: expert, Rhoda Flores, clearly qualifies as an expert witness. A
document examiner for fifteen years, she had been promoted to the
After subjecting the evidence of both parties to a crucible of rank of Senior Document Examiner with the NBI, and had held that
analysis, the court arrived at the conclusion that the testimony of rank for twelve years prior to her testimony. She had placed among
the NBI document examiner is more credible because the testimony the top five examinees in the Competitive Seminar in Question
of the PNP Crime Laboratory Services document examiner reveals Document Examination, conducted by the NBI Academy, which
that there are a lot of differences in the questioned signature as qualified her as a document examiner.40She had trained with the
compared to the standard specimen signature. Furthermore, as Royal Hongkong Police Laboratory and is a member of the
testified to by Ms. Rhoda Flores, NBI expert, the manner of International Association for Identification.41 As of the time she
execution of the standard signatures used reveals that it is a free testified, she had examined more than fifty to fifty-five thousand
rapid continuous execution or stroke as shown by the tampering questioned documents, on an average of fifteen to twenty
terminal stroke of the signatures whereas the questioned signature documents a day.42 In comparison, PNP document examiner Perez
is a hesitating slow drawn execution stroke. Clearly, the person who admitted to having examined only around five hundred documents
executed the questioned signature was hesitant when the signature as of her testimony.43
was made.30
In analyzing the signatures, NBI Examiner Flores utilized the
During the testimony of PNP expert Rosario Perez, the RTC bluntly scientific comparative examination method consisting of analysis,
noted that "apparently, there [are] differences on that questioned recognition, comparison and evaluation of the writing habits with
signature and the standard signatures."31 This Court, in examining the use of instruments such as a magnifying lense, a stereoscopic
the signatures, makes a similar finding. The PNP expert excused the microscope, and varied lighting substances. She also prepared
noted "differences" by asserting that they were mere "variations," enlarged photographs of the signatures in order to facilitate the
which are normal deviations found in writing.32 Yet the RTC, which necessary comparisons.44 She compared the questioned signature as
had the opportunity to examine the relevant documents and to against ten (10) other sample signatures of Jong. Five of these
personally observe the expert witness, clearly disbelieved the PNP signatures were executed on checks previously issued by Jong, while
expert. The Court similarly finds the testimony of the PNP expert as the other five contained in business letters Jong had signed.45 The
unconvincing. During the trial, she was confronted several times NBI found that there were significant differences in the handwriting
with apparent differences between strokes in the questioned characteristics existing between the questioned and the sample
signature and the genuine samples. Each time, she would just signatures, as to manner of execution, link/connecting strokes,
blandly assert that these differences were just "variations,"33 as if proportion characteristics, and other identifying details.46
the mere conjuration of the word would sufficiently disquiet
whatever doubts about the deviations. Such conclusion, standing The RTC was sufficiently convinced by the NBI examiner’s testimony,
alone, would be of little or no value unless supported by sufficiently and explained her reasons in its Decisions. While the Court of
cogent reasons which might amount almost to a demonstration.34 Appeals disagreed and upheld the findings of the PNP, it failed to
convincingly demonstrate why such findings were more credible
The most telling difference between the questioned and genuine than those of the NBI expert. As a throwaway, the
signatures examined by the PNP is in the final upward stroke in the assailed Decision noted that the PNP, not the NBI, had the
signature, or "the point to the short stroke of the terminal in the opportunity to examine the specimen signature card signed by Jong,
capital letter ‘L,’" as referred to by the PNP examiner who had which was relied upon by the employees of FEBTC in authenticating
marked it in her comparison chart as "point no. 6." To the plain eye, Jong’s signature. The distinction is irrelevant in establishing forgery.
such upward final stroke consists of a vertical line which forms a Forgery can be established comparing the contested signatures as
ninety degree (90º) angle with the previous stroke. Of the twenty against those of any sample signature duly established as that of the
one (21) other genuine samples examined by the PNP, at least nine persons whose signature was forged.
(9) ended with an upward stroke.35 However, unlike the questioned
signature, the upward strokes of eight (8) of these signatures are FEBTC lays undue emphasis on the fact that the PNP examiner did
looped, while the upward stroke of the seventh36 forms a severe compare the questioned signature against the bank signature
forty-five degree (45º) with the previous stroke. The difference is cards. The crucial fact in question is whether or not the check was
glaring, and indeed, the PNP examiner was confronted with the forged, not whether the bank could have detected the forgery. The
inconsistency in point no. 6. latter issue becomes relevant only if there is need to weigh the
comparative negligence between the bank and the party whose
Q: Now, in this questioned document point no. 6, the "s" stroke is signature was forged.
directly upwards.
A: Yes, sir. At the same time, the Court of Appeals failed to assess the effect of
Q: Now, can you look at all these standard signature (sic) were (sic) Jong’s testimony that the signature on the check was not his.47 The
point 6 is repeated or the last stroke "s" is pointing directly assertion may seem self-serving at first blush, yet it cannot be
upwards? ignored that Jong was in the best position to know whether or not
A: There is none in the standard signature, sir.37 the signature on the check was his. While his claim should not be
taken at face value, any averments he would have on the matter, if
The justification for the distinction between forgery of the signature FEBTC alleges that Sempio was well-known to the bank officers, as
of the drawer and forgery of an indorsement is that the drawee is in he had regularly transacted with the bank in behalf of Samsung
a position to verify the drawer’s signature by comparison with one in Construction. It was even claimed that everytime FEBTC would
his hands, but has ordinarily no opportunity to verify an contact Jong about problems with his account, Jong would hand the
indorsement.65 phone over to Sempio.72 However, the only proof of such allegations
is the testimony of Gemma Velez, who also testified that she did not
know Sempio personally,73 and had met Sempio for the first time
Thus, a drawee bank is generally liable to its depositor in paying a
only on the day the check was encashed.74 In fact, Velez had to
check which bears either a forgery of the drawer’s signature or a
inquire with the other officers of the bank as to whether Sempio was
forged indorsement. But the bank may, as a general rule, recover
actually known to the employees of the bank.75 Obviously, Velez had
back the money which it has paid on a check bearing a forged
no personal knowledge as to the past relationship between FEBTC
indorsement, whereas it has not this right to the same extent with
and Sempio, and any averments of her to that effect should be
reference to a check bearing a forgery of the drawer’s signature.66
deemed hearsay evidence. Interestingly, FEBTC did not present as a
witness any other employee of their Bel-Air branch, including those
The general rule imputing liability on the drawee who paid out on who supposedly had transacted with Sempio before.
the forgery holds in this case.
Even assuming that FEBTC had a standing habit of dealing with
Since FEBTC puts into issue the degree of care it exercised before Sempio, acting in behalf of Samsung Construction, the irregular
paying out on the forged check, we might as well comment on the circumstances attending the presentment of the forged check
bank’s performance of its duty. It might be so that the bank should have put the bank on the highest degree of alert. The Court
complied with its own internal rules prior to paying out on the recently emphasized that the highest degree of care and diligence is
questionable check. Yet, there are several troubling circumstances required of banks.
that lead us to believe that the bank itself was remiss in its duty.
Banks are engaged in a business impressed with public interest, and
The fact that the check was made out in the amount of nearly one it is their duty to protect in return their many clients and depositors
million pesos is unusual enough to require a higher degree of who transact business with them. They have the obligation to treat
caution on the part of the bank. Indeed, FEBTC confirms this through their client’s account meticulously and with the highest degree of
its own internal procedures. Checks below twenty-five thousand care, considering the fiduciary nature of their relationship. The
pesos require only the approval of the teller; those between twenty- diligence required of banks, therefore, is more than that of a good
five thousand to one hundred thousand pesos necessitate the father of a family.76
approval of one bank officer; and should the amount exceed one
hundred thousand pesos, the concurrence of two bank officers is
Given the circumstances, extraordinary diligence dictates that FEBTC
required.67
should have ascertained from Jong personally that the signature in
the questionable check was his.
In this case, not only did the amount in the check nearly total one
million pesos, it was also payable to cash. That latter circumstance
Still, even if the bank performed with utmost diligence, the drawer
should have aroused the suspicion of the bank, as it is not ordinary
whose signature was forged may still recover from the bank as long
business practice for a check for such large amount to be made
as he or she is not precluded from setting up the defense of forgery.
payable to cash or to bearer, instead of to the order of a specified
After all, Section 23 of the Negotiable Instruments Law plainly states
person.68Moreover, the check was presented for payment by one
that no right to enforce the payment of a check can arise out of a
Roberto Gonzaga, who was not designated as the payee of the
forged signature. Since the drawer, Samsung Construction, is not
check, and who did not carry with him any written proof that he was
precluded by negligence from setting up the forgery, the general
authorized by Samsung Construction to encash the check. Gonzaga,
rule should apply. Consequently, if a bank pays a forged check, it
a stranger to FEBTC, was not even an employee of Samsung
must be considered as paying out of its funds and cannot charge the
Construction.69 These circumstances are already suspicious if taken
amount so paid to the account of the depositor.77 A bank is liable,
independently, much more so if they are evaluated in concurrence.
irrespective of its good faith, in paying a forged check.78
Given the shadiness attending Gonzaga’s presentment of the check,
it was not sufficient for FEBTC to have merely complied with its
internal procedures, but mandatory that all earnest efforts be WHEREFORE, the Petition is GRANTED. The Decision of the Court of
undertaken to ensure the validity of the check, and of the authority Appeals dated 28 November 1996 is REVERSED, and the Decision of
of Gonzaga to collect payment therefor. the Regional Trial Court of Manila, Branch 9, dated 25 April 1994 is
REINSTATED. Costs against respondent.
Since Balmaceda did not file an Answer, he was declared in default. THE COURT OF APPEALS DECISION
On the other hand, Ramos filed an Answer denying any knowledge On appeal, the CA dismissed the complaint against Ramos, holding
of Balmaceda’s scheme. According to Ramos, he is a reputable that no sufficient evidence existed to prove that Ramos colluded
businessman engaged in the business of buying and selling fighting with Balmaceda in the latter’s fraudulent manipulations.8
cocks, and Balmaceda was one of his clients. Ramos admitted According to the CA, the mere fact that Balmaceda made Ramos the
receiving money from Balmaceda as payment for the fighting cocks payee in some of the Manager’s checks does not suffice to prove
that he sold to Balmaceda, but maintained that he had no that Ramos was complicit in Balmaceda’s fraudulent scheme. It
knowledge of the source of Balmaceda’s money. observed that other persons were also named as payees in the
checks that Balmaceda acquired and encashed, and PCIB only chose
THE RTC DECISION to go after Ramos. With PCIB’s failure to prove Ramos’ actual
On September 22, 2000, the RTC issued a decision in favor of PCIB, participation in Balmaceda’s fraud, no legal and factual basis exists
with the following dispositive portion: to hold him liable.
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff and against the defendants as follows: The CA also found that PCIB acted illegally in freezing and debiting
₱251,910.96 from Ramos’ bank account. The CA thus decreed:
1. Ordering defendant Antonio Balmaceda to pay the amount of
₱11,042,150.00 with interest thereon at the legal rate from [the] WHEREFORE, the appeal is granted. The Decision of the trial court
date of his misappropriation of the said amount until full restitution rendered on September 22, 2000[,] insofar as appellant Ramos is
shall have been made[.] concerned, is SET ASIDE, and the complaint below against him is
DISMISSED.
2. Ordering defendant Rolando Ramos to pay the amount of
₱895,000.00 with interest at the legal rate from the date of Appellee is hereby ordered to release the amount of ₱251,910.96 to
misappropriation of the said amount until full restitution shall have appellant Ramos plus interest at [the] legal rate computed from
been made[.] September 30, 1993 until appellee shall have fully complied
therewith.
3. Ordering the defendants to pay plaintiff moral damages in the
sum of ₱500,000.00 and attorney’s fees in the amount of ten (10%) Appellee is likewise ordered to pay appellant Ramos the following:
percent of the total misappropriated amounts sought to be
recovered. a) ₱50,000.00 as moral damages
b) ₱50,000.00 as exemplary damages, and
4. Plus costs of suit. c) ₱20,000.00 as attorney’s fees.
PCIB maintains that it had the right to freeze and debit the amount
Thus, PCIB, as plaintiff, had to prove, by preponderance of evidence,
of ₱251,910.96 from Ramos’ bank account, even without his
its positive assertion that Ramos conspired with Balmaceda in
consent, since legal compensation had taken place between them by
perpetrating the latter’s scheme to defraud the Bank. In PCIB’s
operation of law. PCIB debited Ramos’ bank account, believing in
estimation, it successfully accomplished this through the submission
good faith that Ramos was not entitled to the proceeds of the
of the following evidence:
Manager’s checks and was actually privy to the fraud perpetrated by
Balmaceda. PCIB cannot thus be held liable for moral and exemplary
damages. [1] Exhibits "A," "D," "PPPP," "QQQQ," and "RRRR" and their
submarkings, the application forms for MCs, show that [these MCs
were applied for in favor of Ramos;]
OUR RULING
[2] Exhibits "K," "N," "SSSS," "TTTT," and "UUUU" and their
We partly grant the petition.
submarkings prove that the MCs were issued in favor of x x x
At the outset, we observe that the petition raises mainly questions
Ramos[; and]
of fact whose resolution requires the re-examination of the evidence
[3] [T]estimonies of the witness for [PCIB].16
on record. As a general rule, petitions for review on certiorari only
We cannot accept these submitted pieces of evidence as sufficient
involve questions of law.11 By way of exception, however, we can
to satisfy the burden of proof that PCIB carries as plaintiff.
delve into evidence and the factual circumstance of the case when
the findings of fact in the tribunals below (in this case between
those of the CA and of the RTC) are conflicting. When the exception On its face, all that PCIB’s evidence proves is that Balmaceda used
applies, we are given latitude to review the evidence on record to Ramos’ name as a payee when he filled up the application forms for
decide the case with finality.12 the Manager’s checks. But, as the CA correctly observed, the mere
Ramos’ participation in Balmaceda’s scheme not proven fact that Balmaceda made Ramos the payee on some of the
Manager’s checks is not enough basis to conclude that Ramos was
complicit in Balmaceda’s fraud; a number of other people were
From the testimonial and documentary evidence presented, we find
made payees on the other Manager’s checks yet PCIB never alleged
it beyond question that Balmaceda, by taking advantage of his
them to be liable, nor did the Bank adduce any other evidence
position as branch manager of PCIB’s Sta. Cruz, Manila branch, was
pointing to Ramos’ participation that would justify his separate
able to apply for and obtain Manager’s checks drawn against the
treatment from the others. Also, while Ramos is Balmaceda’s
bank account of one of PCIB’s clients. The unsettled question is
brother-in-law, their relationship is not sufficient, by itself, to render
whether Ramos, who received a portion of the money that
Ramos liable, absent concrete proof of his actual participation in the
Balmaceda took from PCIB, should also be held liable for the return
fraudulent scheme.
of this money to the Bank.
Given that PCIB failed to establish Ramos’ participation in While we appreciate that Balmaceda took advantage of his authority
Balmaceda’s scheme, it was not even necessary for Ramos to and position as the branch manager to commit these acts, this
provide an explanation for the money he received from Balmaceda. circumstance cannot be used to excuse the manner the Bank –
Even if the evidence adduced by the plaintiff appears stronger than through its employees –handled its clients’ bank accounts and
that presented by the defendant, a judgment cannot be entered in thereby ignored established bank procedures at the branch
the plaintiff’s favor if his evidence still does not suffice to sustain his manager’s mere order. This lapse is made all the more glaring by
cause of action;25 to reiterate, a preponderance of evidence as Balmaceda’s repetition of his modus operandi 33 more times in a
defined must be established to achieve this result. period of over one year by the Bank’s own estimation. With this kind
of record, blame must be imputed on the Bank itself and its systems,
PCIB itself at fault as employer not solely on the weakness or lapses of individual employees.
In considering this case, one point that cannot be disregarded is the Principle of unjust enrichment not applicable
significant role that PCIB played which contributed to the PCIB maintains that even if Ramos did not collude with Balmaceda, it
perpetration of the fraud. We cannot ignore that Balmaceda still has the right to recover the amounts unjustly received by Ramos
managed to carry out his fraudulent scheme primarily because other pursuant to the principle of unjust enrichment. This principle is
PCIB employees failed to carry out their assigned tasks – flaws embodied in Article 22 of the Civil Code which provides:
imputable to PCIB itself as the employer. Article 22. Every person who through an act of performance by
another, or any other means, acquires or comes into possession of
something at the expense of the latter without just or legal ground,
Ms. Analiza Vega, an accounting clerk, teller and domestic
shall return the same to him.
remittance clerk working at the PCIB, Sta. Cruz, Manila branch at the
time of the incident, testified that Balmaceda broke the Bank’s
protocol when he ordered the Bank’s employees to fill up the To have a cause of action based on unjust enrichment, we explained
application forms for the Manager’s checks, to be debited from the in University of the Philippines v. Philab Industries, Inc.34 that:
bank account of one of the bank’s clients, without providing the
necessary Authority to Debit from the client. 26 PCIB also admitted Unjust enrichment claims do not lie simply because one party
that these Manager’s checks were subsequently released to benefits from the efforts or obligations of others, but instead it must
Balmaceda, and not to the client’s representative, based solely on be shown that a party was unjustly enriched in the sense that the
Balmaceda’s word that the client had tasked him to deliver these term unjustly could mean illegally or unlawfully.
checks.27
Moreover, to substantiate a claim for unjust enrichment,
Despite Balmaceda’s gross violations of bank procedures – mainly in the claimant must unequivocally prove that another party
the processing of the applications for Manager’s checks and in the knowingly received something of value to which he was not
releasing of the Manager’s checks – Balmaceda’s co-employees not entitled and that the state of affairs are such that it would be
only turned a blind eye to his actions, but actually complied with his unjust for the person to keep the benefit. Unjust enrichment is a
instructions. In this way, PCIB’s own employees were unwitting term used to depict result or effect of failure to make remuneration
accomplices in Balmaceda’s fraud. of or for property or benefits received under circumstances that give
Having arisen from a bank check which is indisputably a G.R. No. L-40824 February 23, 1989
negotiable instrument, the present case is, therefore, in so far as the GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
indorsee is concerned vis-a-vis the indorser, governed solely plaintiff vs.
the Negotiable Instruments Law (see secs. 1 and 185). Article 2071 COURT OF APPEALS and MR. & MRS. ISABELO R.
of the new Civil Code, invoked by the appellant, the pertinent RACHO, respondents.
portion of which states, "The guarantor, even before been paid, may REGALADO , J.:
proceed against the principal debtor; (1) when he is sued for the Private respondents, Mr. and Mrs. Isabelo R. Racho, together with
payment; . . . the action of the guarantor is to obtain release from the spouses Mr. and Mrs Flaviano Lagasca, executed a deed of
the guaranty, to demand a security that shall protect him from any mortgage, dated November 13, 1957, in favor of petitioner
proceedings by the creditor . . .," is here completely irrelevant and Government Service Insurance System (hereinafter referred to as
can have no application whatsoever. GSIS) and subsequently, another deed of mortgage, dated April 14,
1958, in connection with two loans granted by the latter in the sums
of P 11,500.00 and P 3,000.00, respectively. 1 A parcel of land
We are in agreement with the trial judge that nothing in the
covered by Transfer Certificate of Title No. 38989 of the Register of
check in question indicates that the appellant is not a general
Deed of Quezon City, co-owned by said mortgagor spouses, was
indorser within the purview of section 63 of the Negotiable
given as security under the aforesaid two deeds. 2 They also
Instruments Law which makes "a person placing his signature upon
executed a 'promissory note" which states in part:
an instrument otherwise than as maker, drawer or acceptor" a
... for value received, we the undersigned ... JOINTLY, SEVERALLY and
general indorser, — "unless he clearly indicates plaintiff appropriate
SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE
words his intention to be bound in some other capacity," which he
SYSTEM the sum of . . . (P 11,500.00) Philippine Currency, with
did not do. And section 66 ordains that "every indorser who indorses
interest at the rate of six (6%) per centum compounded monthly
without qualification, warrants to all subsequent holders in due
payable in . . . (120)equal monthly installments of . . . (P 127.65)
course" (a) that the instrument is genuine and in all respects what it
each. 3
purports to be; (b) that he has a good title to it; (c) that all prior
parties have capacity to contract; and (d) that the instrument is at
the time of his indorsement valid and subsisting. In addition, "he On July 11, 1961, the Lagasca spouses executed an instrument
engages that on due presentment, it shall be accepted or paid, or denominated "Assumption of Mortgage" under which they obligated
both, as the case may be, and that if it be dishonored, he will pay themselves to assume the aforesaid obligation to the GSIS and to
the amount thereof to the holder." 1 secure the release of the mortgage covering that portion of the land
belonging to herein private respondents and which was mortgaged
to the GSIS. 4 This undertaking was not fulfilled. 5
2. Even on the assumption that the appellant is a mere
accommodation party, as he professes to be, he is nevertheless, by
the clear mandate of section 29 of the Negotiable Instruments Law, Upon failure of the mortgagors to comply with the conditions of the
yet "liable on the instrument to a holder for value, notwithstanding mortgage, particularly the payment of the amortizations due, GSIS
that such holder at the time of taking the instrument knew him to be extrajudicially foreclosed the mortgage and caused the mortgaged
only an accommodation party." To paraphrase, the accommodation property to be sold at public auction on December 3, 1962. 6
party is liable to a holder for value as if the contract was not for
accommodation. It is not a valid defense that the accommodation More than two years thereafter, or on August 23, 1965, herein
party did not receive any valuable consideration when he executed private respondents filed a complaint against the petitioner and the
the instrument. Nor is it correct to say that the holder for value is Lagasca spouses in the former Court of
not a holder in due course merely because at the time he acquired
the instrument, he knew that the indorser was only an First Instance of Quezon City, 7 praying that the extrajudicial
accommodation party. 2 foreclosure "made on, their property and all other documents
executed in relation thereto in favor of the Government Service
3. That the appellant, again assuming him to be an Insurance System" be declared null and void. It was further prayed
accommodation indorser, may obtain security from the maker to that they be allowed to recover said property, and/or the GSIS be
protect himself against the danger of insolvency of the latter, cannot ordered to pay them the value thereof, and/or they be allowed to
in any manner affect his liability to the appellee, as the said remedy repurchase the land. Additionally, they asked for actual and moral
is a matter of concern exclusively between accommodation indorser damages and attorney's fees.
and accommodated party. So that the fact that the appellant stands
only as a surety in relation to the maker, granting this to be true for In their aforesaid complaint, private respondents alleged that they
the sake of argument, is immaterial to the claim of the appellee, and signed the mortgage contracts not as sureties or guarantors for the
does not a whit diminish nor defeat the rights of the latter who is a Lagasca spouses but they merely gave their common property to the