NEGOTIABLE INSTRUMENTS FULL TEXT

1. G.R. No. 128927. September 14, 1999 REME IOS NOTA SA!IERA, petitioner, vs. "OURT OF A!!EALS #$% RAMON SUA, respondents.

2. G.R. No. 1&7'82(G.R. No. 1&7)12

*#$+#r, '1, 199)

ASSO"IATE BAN-, pet.t.o$er, /0. 1ON. "OURT OF A!!EALS, !RO2IN"E OF TARLA" #$% !1ILI!!INE NATIONAL BAN-, re0po$%e$t0.

'. G.R. No. 11119& *+$e 27, 1993 LORETO . E LA 2I"TORIA, #0 ".t, F.04#5 o6 M#$%#+e ".t, #$% .$ 7.0 per0o$#5 4#p#4.t, #0 8#r$.07ee,pet.t.o$er, /0. 1ON. *OSE !. BURGOS, !re0.%.$8 *+%8e, RT", Br. X2II, "eb+ ".t,, #$% RAUL 1. SESBRE9O, re0po$%e$t0.

4. G.R. No. 1'&)'2. September 28, 1999

!EO!LE OF T1E !1ILI!!INES, plaintiff-appellee, vs. NAT: "1UA, accused;appellant.

3. G.R. No. 12141'

*#$+#r, 29, 2&&1

!1ILI!!INE "OMMER"IAL INTERNATIONAL BAN- <6ormer5, INSULAR BAN- OF ASIA AN AMERI"A=,pet.t.o$er, /0. "OURT OF A!!EALS #$% FOR !1ILI!!INES, IN". #$% "ITIBAN-, N.A., re0po$%e$t0.

6. G.R. No. 123297. *+$e ), 2&&'

EL2IRA :U O1, petitioner, vs. "OURT OF A!!EALS #$% !EO!LE OF T1E !1ILI!!INES, respondents.

SE"ON

I2ISION

>G.R. No. 128927. September 14, 1999? REME IOS NOTA SA!IERA, petitioner, vs. "OURT OF A!!EALS #$% RAMON SUA, respondents. E"ISION BELLOSILLO, J.@ REMEDIOS NOTA SAPIERA appeals to us through this petition for review the Decision of the Court of Appeals [ ! which ac"uitte# her of the cri$e of estafa %ut hel# her lia%le nonetheless for the value of the chec&s she in#orse# in favor of private respon#ent Ra$on Sua' On several occasions petitioner Re$e#ios Nota Sapiera( a sari)sari store owner( purchase# fro$ Monrico Mart certain grocer* ite$s( $ostl* cigarettes( an# pai# for the$ with chec&s issue# %* one Arturo #e +u,$an- .a/ PCI0 Chec& No' 12314 #ate# 56 7e%ruar* 482 for P 93(333'33: .%/ PCI0 Chec& No' 1232; #ate# 56 7e%ruar* 482 for P58(333'33: .c/ PCI0 Chec& No' 12312 #ate# 52 7e%ruar* 482 forP95( 13'33: an#( #/ Metro%an& Chec& No' DA+ ) 391 39218 PA #ate# 5 March 482 for P 51(333'33' These chec&s were signe# at the %ac& %* petitioner' <hen presente# for pa*$ent the chec&s were #ishonore# %ecause the #rawer=s account was alrea#* close#' Private respon#ent Ra$on Sua infor$e# Arturo #e +u,$an an# petitioner a%out the #ishonor %ut %oth faile# to pa* the value of the chec&s' >ence( four .9/ charges of estafa were file# against petitioner with the Regional Trial Court of Dagupan Cit*( #oc&ete# as Cri$' Cases Nos' D)8258( D)8254( D)82;3 an# D)82; ' Arturo #e +u,$an was charge# with two .5/ counts of violation of 0'P' 0lg' 55( #oc&ete# as Cri$' Cases Nos' D)82;; an# D)82;9' These cases against petitioner an# #e +u,$an were consoli#ate# an# trie# ?ointl*' On 52 Dece$%er 484 the court a quo[5! ac"uitte# petitioner of all the charges of estafa %ut #i# not rule on whether she coul# %e hel# civill* lia%le for the chec&s she in#orse# to private respon#ent' The trial court foun# Arturo #e +u,$an guilt* of @iolation of 0'P' 0lg' 55 on two .5/ counts an# sentence# hi$ to suffer i$prison$ent of siA .6/ $onths an# one . / #a* in each of the cases( an# to pa* private respon#ent P 62( 13'33 as civil in#e$nit*' Private respon#ent file# a notice of appeal with the trial court with regar# to the civil aspect %ut the court refuse# to give #ue course to the appeal on the groun# that the ac"uittal of petitioner was a%solute' Private respon#ent then file# a petition for mandamus with the Court of Appeals( #oc&ete# as CA)+R SP No' 59656( pra*ing that the court a quo %e or#ere# to give #ue course to the appeal on the civil aspect of the #ecision' The Court of Appeals grante# the petition an# rule# that private respon#ent coul# appeal with respect to the civil aspect the ?u#g$ent of ac"uittal %* the trial court' On 55 Banuar* 446( the Court of Appeals in CA)+R C@ No' ;6;26 ren#ere# the assaile# Decision insofar as it sustaine# the appeal of private respon#ent on the civil aspect an# or#ering petitioner to pa* private respon#ent P;;1(333'33 representing the aggregate face value of the four .9/ chec&s in#orse# %* petitioner plus legal interest fro$ the notice of #ishonor' Petitioner file# a $otion for reconsi#eration of the Decision' On 4 March 442 the Court of Appeals issue# a Resolution noting the a#$ission of %oth parties that private respon#ent ha# alrea#* collecte# the a$ount of P 51(333'33 fro$ Arturo #e +u,$an with regar# to his civil lia%ilit* in Cri$' Cases Nos' 82;; an# 82;9' The appellate court note# that

private respon#ent was the sa$e offen#e# part* in the cri$inal cases against petitioner an# against #e +u,$an' Cri$inal Cases Nos' 82;; an# 82;9 against De +u,$an( an# Cri$' Cases Nos' 82;3 an# 8254 against petitioner( involve# the sa$e chec&s( to wit- PCI0 Chec&s Nos' 12312 forP95( 13'33 an# Metro%an& Chec& No' DA+)391 39218 PA for P 51(333'33' Thus( the Court of Appeals rule# that private respon#ent coul# not recover twice on the sa$e chec&s' Since he ha# collecte# P 51(333'33 as civil in#e$nit* in Cri$' Cases Nos' 82;; an# 82;9( this a$ount shoul# %e #e#ucte# fro$ the su$ total of the civil in#e$nit* #ue hi$ arising fro$ the estafa cases against petitioner' The appellate court then correcte# its previous awar#( which was erroneousl* place# at P;;1(333'33( toP;;1( 13'33 as the su$ total of the a$ounts of the four .9/ chec&s involve#' De#ucting the a$ount of P 51(333'33 alrea#* collecte# %* private respon#ent( petitioner was a#?u#ge# to pa* P5 3( 13'33 as civil lia%ilit* to private respon#ent' >ence( this petition alleging that respon#ent Court of Appeals erre# in hol#ing petitioner civill* lia%le to private respon#ent %ecause her ac"uittal %* the trial court fro$ charges of estafa in Cri$' Cases Nos' D)8258( D)8254( D)82;3 an# D)82; was a%solute( the trial court having #eclare# in its #ecision that the fact fro$ which the civil lia%ilit* $ight have arisen #i# not eAist' <e cannot sustain petitioner' The issue is whether respon#ent Court of Appeals co$$itte# reversi%le error in re"uiring petitioner to pa* civil in#e$nit* to private respon#ent after the trial court ha# ac"uitte# her of the cri$inal charges' Section 5( par' .%/( of Rule of the Rules of Court( as a$en#e#( specificall* provi#es- CExtinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil might arise did not exist. The ?u#g$ent of ac"uittal eAtinguishes the lia%ilit* of the accuse# for #a$ages onl* when it inclu#es a #eclaration that the fact fro$ which the civil lia%ilit* $ight arise #i# not eAist' Thus( the civil lia%ilit* is not eAtinguishe# %* ac"uittal where- .a/ the ac"uittal is %ase# on reasona%le #ou%t: .%/ where the court eApressl* #eclares that the lia%ilit* of the accuse# is not cri$inal %ut onl* civil in nature: an#( .c/ where the civil lia%ilit* is not #erive# fro$ or %ase# on the cri$inal act of which the accuse# is ac"uitte#'[;! Thus( un#er Art' 54 of the Civil Co#e ) When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted. Such action requires only a preponderance of evidence. Upon motion of the defendant, the court may require the plaintiff to file a bond to answer for damages in case the complaint should be found to be malicious. n a criminal case where the judgment of acquittal is based upon reasonable doubt, the court shall so declare. n the absence of any declaration to that effect, it may be inferred from the text of the decision whether or not acquittal is due to that ground. An eAa$ination of the #ecision in the cri$inal cases reveals these fin#ings of the trial court ) Evidence for the prosecution tends to show that on various occasions, !emedios "ota Sapiera purchased from #onrico #art grocery items $mostly cigarettes% which purchases were paid with chec&s issued by 'rturo de (u)man* that those purchases and payments with chec&s were as follows+

$a% Sales nvoice "o. ,-.-/ dated 0ebruary ,1, .234 in the amount of 5,3,---.--* that said items purchased were paid with 56 7an& 6hec& "o. .84-49 dated 0ebruary ,1, .234* $b% Sales nvoice "o. ,-.-3 dated 0ebruary ,1, .234 in the amount of 5./-,---.--* that said items purchased were paid with 56 7an& "o. .84-82 dated 0ebruary ,1, .234* $c% Sales nvoice "o. ,-.,- dated 0ebruary ,4, .234 in the amount of 5/,,.8-.--* that said items were paid with 56 7an& 6hec& "o. .84-84 dated 0ebruary ,4, .234* $d% Sales nvoice "o. ,-./3 and ,-./2 both dated #arch ,, .234 in the amount of 5.,-,.-9.48* said items were paid with #etroban& 6hec& "o. -/8.-/483 dated #arch ,, .234 in the amount of5.,8,---.--. That all these checks were deposited with the Consolidated Bank and Trust Company, :agupan 7ranch, for collection from the drawee ban&* ;hat when presented for payment by the collecting ban& to the drawee ban&, said chec&s were dishonored due to account closed, as evidenced by chec& return slips* x x x x. 0rom the evidence, the 6ourt finds that accused !emedios "ota Sapiera is the owner of a sari<sari store inside the public mar&et* that she sells can$ned% goods, candies and assorted grocery items* that she &nows accused 'rturo :e (u)man, a customer since 0ebruary .234* that de (u)man purchases from her grocery items including cigarettes* that she &nows !amon Sua* that she has business dealings with him for 8 years* that her purchase orders were in clean sheets of paper* that she never pays in chec&* that Ramon Sua asked her to sign su !ect checks as identification of the signature of "rturo de #u$man* that she pays in cash* sometimes delayed by several days* that she signed the four $/% chec&s on the reverse side* that she did not &now the subject invoices* that de (u)man made the purchases and he issued the chec&s* that the goods were delivered to de (u)man* that she was not informed of dishonored chec&s* and that counsel for !amon Sua informed de (u)man and told him to pay x x x x n the case of accused !emedios "ota Sapiera, the prosecution failed to prove conspiracy. 0ase# on the a%ove fin#ings of the trial court( the eAoneration of petitioner of the charges of estafa was %ase# on the failure of the prosecution to present sufficient evi#ence showing conspirac* %etween her an# the other accuse# Arturo #e +u,$an in #efrau#ing private respon#ent' >owever( %* her own testi$on*( petitioner a#$itte# having signe# the four .9/ chec&s in "uestion on the reverse si#e' The evi#ence of the prosecution shows that petitioner purchase# goo#s fro$ the grocer* store of private respon#ent as shown %* the sales invoices issue# %* private respon#ent: that these purchases were pai# with the four .9/ su%?ect chec&s issue# %* #e +u,$an: that petitioner signe# the sa$e chec&s on the reverse si#e: an# when presente# for pa*$ent( the chec&s were #ishonore# %* the #rawee %an& #ue to the closure of the #rawer=s account: an#( petitioner was infor$e# of the #ishonor' <e affir$ the fin#ings of the Court of Appeals that #espite the conflicting versions of the parties( it is un#ispute# that the four .9/ chec&s issue# %* #e +u,$an were signe# %* petitioner at the %ac& without an* in#ication as to how she shoul# %e %oun# there%* an#( therefore( she is #ee$e# to %e an in#orser thereof' The Negotia%le Instru$ents Daw clearl* provi#es ) Sec' 2' Construction where instru$ent is a$%iguous' < Where the language of the instrument is ambiguous, or there are admissions therein, the following rules of construction

apply+ x x x x $f% Where a signature is so placed upon the instrument that it is not clear in what capacity the person ma&ing the same intended to sign, he is deemed an indorser. x xxx Sec' 6;' <hen person #ee$e# in#orser' < ' person placing his signature upon an instrument otherwise than as ma&er, drawer or acceptor, is deemed to be an indorser unless he clearly indicates by appropriate words his intention to be bound in some other capacity. Sec' 66' Dia%ilit* of general in#orser' < Every indorser who indorses without qualification, warrants to all subsequent holders in due course+ $a% ;he matters and things mentioned in subdivisions $a%, $b% and $c% of the next preceding section* and $b% ;hat the instrument is, at the time of the indorsement, valid and subsisting* 'nd, in addition, he engages that, on due presentment, it shall be accepted or paid or both, as the case may be, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly ta&en, he will pay the amount thereof to the holder or to any subsequent indorser who may be compelled to pay it. The #is$issal of the cri$inal cases against petitioner #i# not erase her civil lia%ilit* since the #is$issal was #ue to insufficienc* of evi#ence an# not fro$ a #eclaration fro$ the court that the fact fro$ which the civil action $ight arise #i# not eAist'[9! An accuse# ac"uitte# of estafa $a* nevertheless %e hel# civill* lia%le where the facts esta%lishe# %* the evi#ence so warrant' The accuse# shoul# %e a#?u#ge# lia%le for the unpai# value of the chec&s signe# %* her in favor of the co$plainant'[1! The rationale %ehin# the awar# of civil in#e$nit* #espite a ?u#g$ent of ac"uittal when evi#ence is sufficient to sustain the awar# was eAplaine# %* the Co#e Co$$ission in connection with Art' 54 of the Civil Co#e( to wit;he old rule that the acquittal of the accused in a criminal case also releases him from civil liability is one of the most serious flaws in the 5hilippine legal system. t has given rise to numberless instances of miscarriage of justice, where the acquittal was due to a reasonable doubt in the mind of the court as to the guilt of the accused. ;he reasoning followed is that inasmuch as the civil responsibility is derived from the criminal offense, when the latter is not proved, civil liability cannot be demanded. ;his is one of those cases where confused thin&ing leads to unfortunate and deplorable consequences. Such reasoning fails to draw a clear line of demarcation between criminal liability and civil responsibility, and to determine the logical result of the distinction. ;he two liabilities are separate and distinct from each other. =ne affects the social order and the other private rights. =ne is for punishment or correction of the offender while the other is for reparation of damages suffered by the aggrieved party x x x x t is just and proper that for the purposes of imprisonment of or fine upon the accused, the offense should be proved beyond reasonable doubt. 7ut for the purpose of indemnifying the complaining party, why should the offense also be proved beyond reasonable doubt> s not the invasion or violation of every private right to be proved only by preponderance of evidence> s the right of the aggrieved person any less private because the wrongful act is also punishable by the criminal law>[6! 7inall*( with regar# to the co$putation of the civil lia%ilit* of petitioner( the fin#ing of the Court of Appeals that petitioner is civill* lia%le for the aggregate value of the unpai# four .9/ chec&s su%?ect of the cri$inal cases in the su$ of P;;1( 13'33( less the a$ount of P 51(333'33 alrea#* collecte# %* private respon#ent pen#ing appeal( resulting in

the a$ount of P5 3( 13'33 still #ue private respon#ent( is a factual $atter which is %in#ing an# conclusive upon this Court' A1EREFORE( the petition is DENIED' The Decision of the Court of Appeals #ate# 55 Banuar* 446 as a$en#e# %* its Resolution #ate# 4 March 442 or#ering petitioner Re$e#ios Nota Sapiera to pa* private respon#ent Ra$on Sua the re$aining a$ount of P5 3( 13'33 as civil lia%ilit*( is A77IRMED' Costs against petitioners' SO OR ERE . #endo)a, ?uisumbing, an# 7uena, @@., concur.

On 7e%ruar* 4( 48 ( the Provincial Treasurer re"ueste# the $anager of the PN0 to return all of its cleare# chec&s which were issue# fro$ 422 to 483 in or#er to verif* the regularit* of their encash$ent' After the chec&s were eAa$ine#( the Provincial Treasurer learne# that ;3 chec&s a$ounting to P53;(;33'33 were encashe# %* one 7austo Pangilinan( with the Associate# 0an& acting as collecting %an&' It turne# out that 7austo Pangilinan( who was the a#$inistrative officer an# cashier of pa*ee hospital until his retire$ent on 7e%ruar* 58( 428( collecte# the "uestione# chec&s fro$ the office of the Provincial Treasurer' >e clai$e# to %e assisting or helping the hospital follow up the release of the chec&s an# ha# official receipts' ;Pangilinan sought to encash the first chec& 9 with Associate# 0an&' >owever( the $anager of Associate# 0an& refuse# an# suggeste# that Pangilinan #eposit the chec& in his personal savings account with the sa$e %an&' Pangilinan was a%le to with#raw the $one* when the chec& was cleare# an# pai# %* the #rawee %an&( PN0' After forging the signature of Dr' A#ena Canlas who was chief of the pa*ee hospital( Pangilinan followe# the sa$e proce#ure for the secon# chec&( in the a$ount of P1(333'33 an# #ate# April 53( 428( 1 as well as for twent*)eight other chec&s of various a$ounts an# on various #ates' The last chec& negotiate# %* Pangilinan was for f8(333'33 an# #ate# 7e%ruar* 3( 48 ' 6 All the chec&s %ore the sta$p of Associate# 0an& which rea#s CAll prior en#orse$ents guarantee# ASSOCIATED 0ANF'C Besus Davi#( the $anager of Associate# 0an& testifie# that Pangilinan $a#e it appear that the chec&s were pai# to hi$ for certain pro?ects with the hospital' 2 >e #i# not fin# as irregular the fact that the chec&s were not pa*a%le to Pangilinan %ut to the Concepcion E$ergenc* >ospital' <hile he a#$itte# that his wife an# PangilinanGs wife are first cousins( the $anager #enie# having given Pangilinan preferential treat$ent on this account' 8 On 7e%ruar* 56( 48 ( the Provincial Treasurer wrote the $anager of the PN0 see&ing the restoration of the various a$ounts #e%ite# fro$ the current account of the Province' 4 In turn( the PN0 $anager #e$an#e# rei$%urse$ent fro$ the Associate# 0an& on Ma* 1( 48 ' 3 As %oth %an&s resiste# pa*$ent( the Province of Tarlac %rought suit against PN0 which( in turn( i$plea#e# Associate# 0an& as thir#)part* #efen#ant' The latter then file# a fourth) part* co$plaint against A#ena Canlas an# 7austo Pangilinan' After trial on the $erits( the lower court ren#ere# its #ecision on March 5 ( 488( #isposing as follows<>ERE7ORE( in view of the foregoing( ?u#g$ent is here%* ren#ere#' On the %asic co$plaint( in favor of plaintiff Province of Tarlac an# against #efen#ant Philippine National 0an& .PN0/( or#ering the latter to pa* to the for$er( the su$ of Two >un#re# Three Thousan# Three >un#re# .P53;(;33'33/ Pesos with legal interest thereon fro$ March 53( 48 until full* pai#:

Repu%lic of the Philippines SU!REME "OURT Manila SE"ON I2ISION *#$+#r, '1, 199)

G.R. No. 1&7'82(G.R. No. 1&7)12

ASSO"IATE BAN-, petitioner( vs' 1ON. "OURT OF A!!EALS, !RO2IN"E OF TARLA" #$% !1ILI!!INE NATIONAL BAN-, respon#ents' AAAAAAAAAAAAAAAAAAAAA G.R. No. 1&7)12 *#$+#r, '1, 199)

!1ILI!!INE NATIONAL BAN-, pet.t.o$er, /0. 1ONORABLE "OURT OF A!!EALS, !RO2IN"E OF TARLA", #$% ASSO"IATE BAN-, respon#ents' E"ISION ROMERO, J.@ <here thirt* chec&s %earing forge# en#orse$ents are pai#( who %ears the loss( the #rawer( the #rawee %an& or the collecting %an&E This is the $ain issue in these consoli#ate# petitions for review assailing the #ecision of the Court of Appeals in CProvince of Tarlac v' Philippine National 0an& v' Associate# 0an& v' 7austo Pangilinan( et' al'C .CA)+'R' No' C@ No' 2465/' The facts of the case are as followsThe Province of Tarlac $aintains a current account with the Philippine National 0an& .PN0/ Tarlac 0ranch where the provincial fun#s are #eposite#' Chec&s issue# %* the Province are signe# %* the Provincial Treasurer an# countersigne# %* the Provincial Au#itor or the Secretar* of the Sangguniang 0a*an' A portion of the fun#s of the province is allocate# to the Concepcion E$ergenc* >ospital' 5 The allot$ent chec&s for sai# govern$ent hospital are #rawn to the or#er of CConcepcion E$ergenc* >ospital( Concepcion( TarlacC or CThe Chief( Concepcion E$ergenc* >ospital( Concepcion( Tarlac'C The chec&s are release# %* the Office of the Provincial Treasurer an# receive# for the hospital %* its a#$inistrative officer an# cashier' In Banuar* 48 ( the %oo&s of account of the Provincial Treasurer were post)au#ite# %* the Provincial Au#itor' It was then #iscovere# that the hospital #i# not receive several allot$ent chec&s #rawn %* the Province'

5' On the thir#)part* co$plaint( in favor of #efen#antHthir#)part* plaintiff Philippine National 0an& .PN0/ an# against thir#)part* #efen#antHfourth)part* plaintiff Associate# 0an& or#ering the latter to rei$%urse to the for$er the a$ount of Two >un#re# Three Thousan# Three >un#re# .P53;(;33'33/ Pesos with legal interests thereon fro$ March 53( 48 until full* pai#:' ;' On the fourth)part* co$plaint( the sa$e is here%* or#ere# #is$isse# for lac& of cause of action as against fourth)part* #efen#ant A#ena Canlas an# lac& of ?uris#iction over the person of fourth)part* #efen#ant 7austo Pangilinan as against the latter' 9' On the counterclai$s on the co$plaint( thir#)part* co$plaint an# fourth)part* co$plaint( the sa$e are here%* or#ere# #is$isse# for lac& of $erit' SO ORDERED'
5

<hile %oth %an&s are innocent of the forger*( Associate# 0an& clai$s that PN0 was at fault an# shoul# solel* %ear the loss %ecause it cleare# an# pai# the forge# chec&s' AAA AAA AAA

The case at %ench concerns chec&s pa*a%le to the or#er of Concepcion E$ergenc* >ospital or its Chief' The* were properl* issue# an# %ear the genuine signatures of the #rawer( the Province of Tarlac' The infir$it* in the "uestione# chec&s lies in the pa*eeGs .Concepcion E$ergenc* >ospital/ in#orse$ents which are forgeries' At the ti$e of their in#orse$ent( the chec&s were or#er instru$ents' Chec&s having forge# in#orse$ents shoul# %e #ifferentiate# fro$ forge# chec&s or chec&s %earing the forge# signature of the #rawer' Section 5; of the Negotia%le Instru$ents Daw .NID/ provi#esSec' 5;' 7OR+ED SI+NATIRE( E77ECT O7' J <hen a signature is forge# or $a#e without authorit* of the person whose signature it purports to %e( it is wholl* inoperative( an# no right to retain the instru$ent( or to give a #ischarge therefor( or to enforce pa*$ent thereof against an* part* thereto( can %e ac"uire# through or un#er such signature unless the part* against who$ it is sought to enforce such right is preclu#e# fro$ setting up the forger* or want of authorit*' A forge# signature( whether it %e that of the #rawer or the pa*ee( is wholl* inoperative an# no one can gain title to the instru$ent through it' A person whose signature to an instru$ent was forge# was never a part* an# never consente# to the contract which allege#l* gave rise to such instru$ent' 8 Section 5; #oes not avoi# the instru$ent %ut onl* the forge# signature' 4 Thus( a forge# in#orse$ent #oes not operate as the pa*eeGs in#orse$ent' The eAception to the general rule in Section 5; is where Ca part* against who$ it is sought to enforce a right is preclu#e# fro$ setting up the forger* or want of authorit*'C Parties who warrant or a#$it the genuineness of the signature in "uestion an# those who( %* their acts( silence or negligence are estoppe# fro$ setting up the #efense of forger*( are preclu#e# fro$ using this #efense' In#orsers( persons negotiating %* #eliver* an# acceptors are warrantors of the genuineness of the signatures on the instru$ent' 53 In %earer instru$ents( the signature of the pa*ee or hol#er is unnecessar* to pass title to the instru$ent' >ence( when the in#orse$ent is a forger*( onl* the person whose signature is forge# can raise the #efense of forger* against a hol#er in #ue course' 5 The chec&s involve# in this case are or#er instru$ents( hence( the following #iscussion is $a#e with reference to the effects of a forge# in#orse$ent on an instru$ent pa*a%le to or#er' <here the instru$ent is pa*a%le to or#er at the ti$e of the forger*( such as the chec&s in this case( the signature of its rightful hol#er .here( the pa*ee hospital/ is essential to transfer title to the sa$e instru$ent' <hen the hol#erGs in#orse$ent is forge#( all parties prior to the forger* $a* raise the real #efense of forger* against all parties su%se"uent thereto' 55

PN0 an# Associate# 0an& appeale# to the Court of Appeals' ; Respon#ent court affir$e# the trial courtGs #ecision in toto on Septe$%er ;3( 445' >ence these consoli#ate# petitions which see& a reversal of respon#ent appellate courtGs #ecision' PN0 assigne# two errors' 7irst( the %an& conten#s that respon#ent court erre# in eAe$pting the Province of Tarlac fro$ lia%ilit* when( in fact( the latter was negligent %ecause it #elivere# an# release# the "uestione# chec&s to 7austo Pangilinan who was then alrea#* retire# as the hospitalGs cashier an# a#$inistrative officer' PN0 also $aintains its innocence an# alleges that as %etween two innocent persons( the one whose act was the cause of the loss( in this case the Province of Tarlac( %ears the loss' NeAt( PN0 asserts that it was error for the court to or#er it to pa* the province an# then see& rei$%urse$ent fro$ Associate# 0an&' Accor#ing to petitioner %an&( respon#ent appellate Court shoul# have #irecte# Associate# 0an& to pa* the a#?u#ge# lia%ilit* #irectl* to the Province of Tarlac to avoi# circuit*' 9 Associate# 0an&( on the other han#( argues that the or#er of lia%ilit* shoul# %e totall* reverse#( with the #rawee %an& .PN0/ solel* an# ulti$atel* %earing the loss' Respon#ent court allege#l* erre# in appl*ing Section 5; of the Philippine Clearing >ouse Rules instea# of Central 0an& Circular No' 183( which( %eing an a#$inistrative regulation issue# pursuant to law( has the force an# effect of law' 1 The PC>C Rules are $erel* contractual stipulations a$ong an# %etween $e$%er)%an&s' As such( the* cannot prevail over the aforesai# C0 Circular' It li&ewise conten#s that PN0( the #rawee %an&( is estoppe# fro$ asserting the #efense of guarantee of prior in#orse$ents against Associate# 0an&( the collecting %an&' In sta$ping the guarantee .for all prior in#orse$ents/( it $erel* followe# a $an#ator* re"uire$ent for clearing an# ha# no choice %ut to place the sta$p of guarantee: otherwise( there woul# %e no clearing' The %an& will %e in a Cno)winC situation an# will alwa*s %ear the loss as against the #rawee %an&' 6 Associate# 0an& also clai$s that since PN0 alrea#* cleare# an# pai# the value of the forge# chec&s in "uestion( it is now estoppe# fro$ asserting the #efense that Associate# 0an& guarantee# prior in#orse$ents' The #rawee %an& allege#l* has the pri$ar* #ut* to verif* the genuineness of pa*eeGs in#orse$ent %efore pa*ing the chec&' 2

An in#orser of an or#er instru$ent warrants Cthat the instru$ent is genuine an# in all respects what it purports to %e: that he has a goo# title to it: that all prior parties ha# capacit* to contract: an# that the instru$ent is at the ti$e of his in#orse$ent vali# an# su%sisting'C 5; >e cannot interpose the #efense that signatures prior to hi$ are forge#' A collecting %an& where a chec& is #eposite# an# which in#orses the chec& upon present$ent with the #rawee %an&( is such an in#orser' So even if the in#orse$ent on the chec& #eposite# %* the %an&sGs client is forge#( the collecting %an& is %oun# %* his warranties as an in#orser an# cannot set up the #efense of forger* as against the #rawee %an&' The %an& on which a chec& is #rawn( &nown as the #rawee %an&( is un#er strict lia%ilit* to pa* the chec& to the or#er of the pa*ee' The #rawerGs instructions are reflecte# on the face an# %* the ter$s of the chec&' Pa*$ent un#er a forge# in#orse$ent is not to the #rawerGs or#er' <hen the #rawee %an& pa*s a person other than the pa*ee( it #oes not co$pl* with the ter$s of the chec& an# violates its #ut* to charge its custo$erGs .the #rawer/ account onl* for properl* pa*a%le ite$s' Since the #rawee %an& #i# not pa* a hol#er or other person entitle# to receive pa*$ent( it has no right to rei$%urse$ent fro$ the #rawer' 59 The general rule then is that the #rawee %an& $a* not #e%it the #rawerGs account an# is not entitle# to in#e$nification fro$ the #rawer' 51 The ris& of loss $ust perforce fall on the #rawee %an&' >owever( if the #rawee %an& can prove a failure %* the custo$erH#rawer to eAercise or#inar* care that su%stantiall* contri%ute# to the $a&ing of the forge# signature( the #rawer is preclu#e# fro$ asserting the forger*' If at the sa$e ti$e the #rawee %an& was also negligent to the point of su%stantiall* contri%uting to the loss( then such loss fro$ the forger* can %e apportione# %etween the negligent #rawer an# the negligent %an&' 56 In cases involving a forge# chec&( where the #rawerGs signature is forge#( the #rawer can recover fro$ the #rawee %an&' No #rawee %an& has a right to pa* a forge# chec&' If it #oes( it shall have to recre#it the a$ount of the chec& to the account of the #rawer' The lia%ilit* chain en#s with the #rawee %an& whose responsi%ilit* it is to &now the #rawerGs signature since the latter is its custo$er' 52 In cases involving chec&s with forge# in#orse$ents( such as the present petition( the chain of lia%ilit* #oes not en# with the #rawee %an&' The #rawee %an& $a* not #e%it the account of the #rawer %ut $a* generall* pass lia%ilit* %ac& through the collection chain to the part* who too& fro$ the forger an#( of course( to the forger hi$self( if availa%le' 58 In other wor#s( the #rawee %an& cansee& rei$%urse$ent or a return of the a$ount it pai# fro$ the presentor %an& or person' 54 Theoreticall*( the latter can #e$an# rei$%urse$ent fro$ the person who in#orse# the chec& to it an# so on' The loss falls on the part* who too& the chec& fro$ the forger( or on the forger hi$self' In this case( the chec&s were in#orse# %* the collecting %an& .Associate# 0an&/ to the #rawee %an& .PN0/' The for$er will necessaril* %e lia%le to the latter for the chec&s %earing forge# in#orse$ents' If the forger* is that of the pa*eeGs or hol#erGs in#orse$ent( the collecting %an& is hel# lia%le( without pre?u#ice to the latter procee#ing against the forger' Since a forge# in#orse$ent is inoperative( the collecting %an& ha# no right to %e pai# %* the #rawee %an&' The for$er $ust necessaril* return the $one* pai# %* the latter %ecause it was pai# wrongfull*' ;3 More i$portantl*( %* reason of the statutor* warrant* of a general in#orser in section 66 of the Negotia%le Instru$ents

Daw( a collecting %an& which in#orses a chec& %earing a forge# in#orse$ent an# presents it to the #rawee %an& guarantees all prior in#orse$ents( inclu#ing the forge# in#orse$ent' It warrants that the instru$ent is genuine( an# that it is vali# an# su%sisting at the ti$e of his in#orse$ent' 0ecause the in#orse$ent is a forger*( the collecting %an& co$$its a %reach of this warrant* an# will %e accounta%le to the #rawee %an&' This lia%ilit* sche$e operates without regar# to fault on the part of the collectingHpresenting %an&' Even if the latter %an& was not negligent( it woul# still %e lia%le to the #rawee %an& %ecause of its in#orse$ent' The Court has consistentl* rule# that Cthe collecting %an& or last en#orser generall* suffers the loss %ecause it has the #ut* to ascertain the genuineness of all prior en#orse$ents consi#ering that the act of presenting the chec& for pa*$ent to the #rawee is an assertion that the part* $a&ing the present$ent has #one its #ut* to ascertain the genuineness of the en#orse$ents'C ; The #rawee %an& is not si$ilarl* situate# as the collecting %an& %ecause the for$er $a&es no warrant* as to the genuineness' of an* in#orse$ent' ;5 The #rawee %an&Gs #ut* is %ut to verif* the genuineness of the #rawerGs signature an# not of the in#orse$ent %ecause the #rawer is its client' Moreover( the collecting %an& is $a#e lia%le %ecause it is priv* to the #epositor who negotiate# the chec&' The %an& &nows hi$( his a##ress an# histor* %ecause he is a client' It has ta&en a ris& on his #eposit' The %an& is also in a %etter position to #etect forger*( frau# or irregularit* in the in#orse$ent' >ence( the #rawee %an& can recover the a$ount pai# on the chec& %earing a forge# in#orse$ent fro$ the collecting %an&' >owever( a #rawee %an& has the #ut* to pro$ptl* infor$ the presentor of the forger* upon #iscover*' If the #rawee %an& #ela*s in infor$ing the presentor of the forger*( there%* #epriving sai# presentor of the right to recover fro$ the forger( the for$er is #ee$e# negligent an# can no longer recover fro$ the presentor';; Appl*ing these rules to the case at %ench( PN0( the #rawee %an&( cannot #e%it the current account of the Province of Tarlac %ecause it pai# chec&s which %ore forge# in#orse$ents' >owever( if the Province of Tarlac as #rawer was negligent to the point of su%stantiall* contri%uting to the loss( then the #rawee %an& PN0 can charge its account' If %oth #rawee %an&)PN0 an# #rawer)Province of Tarlac were negligent( the loss shoul# %e properl* apportione# %etween the$' The loss incurre# %* #rawee %an&)PN0 can %e passe# on to the collecting %an&)Associate# 0an& which presente# an# in#orse# the chec&s to it' Associate# 0an& can( in turn( hol# the forger( 7austo Pangilinan( lia%le' If PN0 negligentl* #ela*e# in infor$ing Associate# 0an& of the forger*( thus #epriving the latter of the opportunit* to recover fro$ the forger( it forfeits its right to rei$%urse$ent an# will %e $a#e to %ear the loss' After careful eAa$ination of the recor#s( the Court fin#s that the Province of Tarlac was e"uall* negligent an# shoul#( therefore( share the %ur#en of loss fro$ the chec&s %earing a forge# in#orse$ent' The Province of Tarlac per$itte# 7austo Pangilinan to collect the chec&s when the latter( having alrea#* retire# fro$ govern$ent service( was no longer connecte# with the hospital' <ith the eAception of the first chec& .#ate# Banuar* 2( 428/( all the chec&s were issue# an# release# after PangilinanGs retire$ent on 7e%ruar* 58( 428' After nearl* three *ears( the TreasurerGs office was still releasing the chec&s to the retire# cashier' In a##ition( so$e of the ai#

allot$ent chec&s were release# to Pangilinan an# the others to Eli,a%eth Buco( the new cashier' The fact that there were now two persons collecting the chec&s for the hospital is an un$ista&a%le sign of an irregularit* which shoul# have alerte# e$plo*ees in the TreasurerGs office of the frau# %eing co$$itte#' There is also evi#ence in#icating that the provincial e$plo*ees were aware of PangilinanGs retire$ent an# conse"uent #issociation fro$ the hospital' Bose Meru( the Provincial Treasurer( testifie#-' ATTK' MOR+AL Now( is it true that for a given $onth there were two releases of chec&s( one went to Mr' Pangilinan an# one went to Miss BucoE BOSE MERIA Kes( sir' L <ill *ou please tell us how at the ti$e .sic/ when the authori,e# representative of Concepcion E$ergenc* >ospital is an# was suppose# to %e Miss BucoE A <ell( as far as $* investigation show .sic/ the assistant cashier tol# $e that Pangilinan represente# hi$self as also authori,e# to help in the release of these chec&s an# we were apparentl* $isle# %ecause the* accepte# the representation of Pangilinan that he was helping the$ in the release of the chec&s an# %esi#es accor#ing to the$ the* were( Pangilinan( li&e the rest( was a%le to present an official receipt to ac&nowle#ge these receipts an# accor#ing to the$ since this is a govern$ent chec& an# %elieve# that it will eventuall* go to the hospital following the stan#ar# proce#ure of negotiating govern$ent chec&s( the* release# the chec&s to Pangilinan asi#e fro$ Miss Buco';9 The failure of the Province of Tarlac to eAercise #ue care contri%ute# to a significant #egree to the loss tanta$ount to negligence' >ence( the Province of Tarlac shoul# %e lia%le for part of the total a$ount pai# on the "uestione# chec&s' The #rawee %an& PN0 also %reache# its #ut* to pa* onl* accor#ing to the ter$s of the chec&' >ence( it cannot escape lia%ilit* an# shoul# also %ear part of the loss' As earlier state#( PN0 can recover fro$ the collecting %an&' In the case of 'ssociated 7an& v' 6'( ;1 siA crosse# chec&s with forge# in#orse$ents were #eposite# in the forgerGs account with the collecting %an& an# were later pai# %* four #ifferent #rawee %an&s' The Court foun# the collecting %an& .Associate#/ to %e negligent an# hel#The 0an& shoul# have first verifie# his right to en#orse the crosse# chec&s( of which he was not the pa*ee( an# to #eposit the procee#s of the chec&s to his own account' The 0an& was %* reason of the nature of the chec&s put upon notice that the* were issue# for #eposit onl* to the private respon#entGs account' ' ' ' The situation in the case at %ench is analogous to the a%ove case( for it was not the pa*ee who #eposite# the chec&s with the collecting %an&' >ere( the chec&s were all pa*a%le to Concepcion E$ergenc* >ospital %ut it was 7austo Pangilinan who #eposite# the chec&s in his personal savings account'

Although Associate# 0an& clai$s that the guarantee sta$pe# on the chec&s .All prior an#Hor lac& of en#orse$ents guarantee#/ is $erel* a re"uire$ent force# upon it %* clearing house rules( it cannot %ut re$ain lia%le' The sta$p guaranteeing prior in#orse$ents is not an e$pt* ru%ric which a %an& $ust fulfill for the sa&e of convenience' A %an& is not re"uire# to accept all the chec&s negotiate# to it' It is within the %an&Gs #iscretion to receive a chec& for no %an&ing institution woul# consciousl* or #eli%eratel* accept a chec& %earing a forge# in#orse$ent' <hen a chec& is #eposite# with the collecting %an&( it ta&es a ris& on its #epositor' It is onl* logical that this %an& %e hel# accounta%le for chec&s #eposite# %* its custo$ers' A #ela* in infor$ing the collecting %an& .Associate# 0an&/ of the forger*( which #eprives it of the opportunit* to go after the forger( signifies negligence on the part of the #rawee %an& .PN0/ an# will preclu#e it fro$ clai$ing rei$%urse$ent' It is here that Associate# 0an&Gs assign$ent of error concerning C'0' Circular No' 183 an# Section 5; of the Philippine Clearing >ouse Corporation Rules co$es to fore' In#er Section 9.c/ of C0 Circular No' 183( ite$s %earing a forge# en#orse$ent shall %e returne# within twent*)Sour .59/ hours after #iscover* of the forger* %ut in no event %e*on# the perio# fiAe# or provi#e# %* law for filing of a legal action %* the returning %an&' Section 5; of the PC>C Rules #elete# the re"uire$ent that ite$s %earing a forge# en#orse$ent shoul# %e returne# within twent*)four hours' Associate# 0an& now argues that the afore$entione# Central 0an& Circular is applica%le' Since PN0 #i# not return the "uestione# chec&s within twent*)four hours( %ut several #a*s later( Associate# 0an& alleges that PN0 shoul# %e consi#ere# negligent an# not entitle# to rei$%urse$ent of the a$ount it pai# on the chec&s' The Court #ee$s it unnecessar* to #iscuss Associate# 0an&Gs assertions that C0 Circular No' 183 is an a#$inistrative regulation issue# pursuant to law an# as such( $ust prevail over the PC>C rule' The Central 0an& circular was in force for all %an&s until Bune 483 when the Philippine Clearing >ouse Corporation .PC>C/ was set up an# co$$ence# operations' 0an&s in Metro Manila were covere# %* the PC>C while %an&s locate# elsewhere still ha# to go through Central 0an& Clearing' In an* event( the twent*)four)hour return rule was a#opte# %* the PC>C until it was change# in 485' The conten#ing %an&s herein( which are %oth %ranches in Tarlac province( are therefore not covere# %* PC>C Rules %ut %* C0 Circular No' 183' Clearl* then( the C0 circular was applica%le when the forger* of the chec&s was #iscovere# in 48 ' The rule $an#ates that the chec&s %e returne# within twent*) four hours after #iscover* of the forger* %ut in no event %e*on# the perio# fiAe# %* law for filing a legal action' The rationale of the rule is to give the collecting %an& .which in#orse# the chec&/ a#e"uate opportunit* to procee# against the forger' If pro$pt notice is not given( the collecting %an& $a*%e pre?u#ice# an# lose the opportunit* to go after its #epositor' The Court fin#s that even if PN0 #i# not return the "uestione# chec&s to Associate# 0an& within twent*)four hours( as $an#ate# %* the rule( PN0 #i# not co$$it negligent #ela*' In#er the circu$stances( PN0 gave pro$pt notice to Associate# 0an& an# the latter %an& was not pre?u#ice# in going after 7austo Pangilinan' After the Province of Tarlac infor$e# PN0 of the forgeries( PN0 necessaril* ha# to inspect the chec&s an# con#uct its own investigation' Thereafter( it re"ueste# the Provincial TreasurerGs office on March ; ( 48 to return the chec&s for verification' The Province of Tarlac returne# the chec&s onl* on April 55( 48 ' Two #a*s later( Associate# 0an& receive# the chec&s fro$ PN0' ;6 Associate# 0an& was also furnishe# a cop* of the ProvinceGs letter of #e$an# to PN0 #ate# March 53( 48 ( thus giving it notice of the forgeries' At this ti$e( however( PangilinanGs

account with Associate# ha# onl* P59'6; in it';2 >a# Associate# 0an& #eci#e# to #e%it PangilinanGs account( it coul# not have recovere# the a$ounts pai# on the "uestione# chec&s' In a##ition( while Associate# 0an& file# a fourth)part* co$plaint against 7austo Pangilinan( it #i# not present evi#ence against Pangilinan an# even presente# hi$ as its re%uttal witness' ;8 >ence( Associate# 0an& was not pre?u#ice# %* PN0Gs failure to co$pl* with the twent*)four)hour return rule' NeAt( Associate# 0an& conten#s that PN0 is estoppe# fro$ re"uiring rei$%urse$ent %ecause the latter pai# an# cleare# the chec&s' The Court fin#s this contention un$eritorious' Even if PN0 cleare# an# pai# the chec&s( it can still recover fro$ Associate# 0an&' This is true even if the pa*eeGs Chief Officer who was suppose# to have in#orse# the chec&s is also a custo$er of the #rawee %an&' ;4 PN0Gs #ut* was to verif* the genuineness of the #rawerGs signature an# not the genuineness of pa*eeGs in#orse$ent' Associate# 0an&( as the collecting %an&( is the entit* with the #ut* to verif* the genuineness of the pa*eeGs in#orse$ent' PN0 also avers that respon#ent court erre# in a#?u#ging circuitous lia%ilit* %* #irecting PN0 to return to the Province of Tarlac the a$ount of the chec&s an# then #irecting Associate# 0an& to rei$%urse PN0' The Court fin#s nothing wrong with the $o#e of the awar#' The #rawer( Province of Tarlac( is a clientor custo$er of the PN0( not of Associate# 0an&' There is no privit* of contract %etween the #rawer an# the collecting %an&' The trial court $a#e PN0 an# Associate# 0an& lia%le with legal interest fro$ March 53( 48 ( the #ate of eAtra?u#icial #e$an# $a#e %* the Province of Tarlac on PN0' The pa*$ents to %e $a#e in this case ste$ fro$ the #eposits of the Province of Tarlac in its current account with the PN0' 0an& #eposits are consi#ere# un#er the law as loans' 93 Central 0an& Circular No' 9 6 prescri%es a twelve percent . 5M/ interest per annu$ for loans( fore%earance of $one*( goo#s or cre#its in the a%sence of eApress stipulation' Nor$all*( current accounts are li&ewise interest)%earing( %* eApress contract( thus eAclu#ing the$ fro$ the coverage of C0 Circular No' 9 6' In this case( however( the actual interest rate( if an*( for the current account opene# %* the Province of Tarlac with PN0 was not given in evi#ence' >ence( the Court #ee$s it wise to affir$ the trial courtGs use of the legal interest rate( or siA percent .6M/ per annu$' The interest rate shall %e co$pute# fro$ the #ate of #efault( or the #ate of ?u#icial or eAtra?u#icial #e$an#' 9 The trial court #i# not err in granting legal interest fro$ March 53( 48 ( the #ate of eAtra?u#icial #e$an#' The Court fin#s as reasona%le( the proportionate sharing of fift* percent ) fift* percent .13M)13M/' Due to the negligence of the Province of Tarlac in releasing the chec&s to an unauthori,e# person .7austo Pangilinan/( in allowing the retire# hospital cashier to receive the chec&s for the pa*ee hospital for a perio# close to three *ears an# in not properl* ascertaining wh* the retire# hospital cashier was collecting chec&s for the pa*ee hospital in a##ition to the hospitalGs real cashier( respon#ent Province contri%ute# to the loss a$ounting to P53;(;33'33 an# shall %e lia%le to the PN0 for fift* .13M/ percent thereof' In effect( the Province of Tarlac can onl* recover fift* percent .13M/ of P53;(;33'33 fro$ PN0' The collecting %an&( Associate# 0an&( shall %e lia%le to PN0 for fift* .13M/ percent of P53;(;33'33' It is lia%le on its warranties as in#orser of the chec&s which were #eposite# %* 7austo Pangilinan( having guarantee# the genuineness of all prior in#orse$ents( inclu#ing that of the chief of the pa*ee hospital( Dr' A#ena Canlas' Associate# 0an& was also re$iss in its #ut* to ascertain the genuineness of the pa*eeGs in#orse$ent'

IN @IE< O7 T>E 7ORE+OIN+( the petition for review file# %* the Philippine National 0an& .+'R' No' 326 5/ is here%* PARTIADDK +RANTED' The petition for review file# %* the Associate# 0an& .+'R' No' 32;85/ is here%* DENIED' The #ecision of the trial court is MODI7IED' The Philippine National 0an& shall pa* fift* percent .13M/ of P53;(;33'33 to the Province of Tarlac( with legal interest fro$ March 53( 48 until the pa*$ent thereof' Associate# 0an& shall pa* fift* percent .13M/ of P53;(;33'33 to the Philippine National 0an&( li&ewise( with legal interest fro$ March 53( 48 until pa*$ent is $a#e' SO ORDERED' !egalado, 5uno and #endo)a, @@., concur'

Repu%lic of the Philippines SU!REME "OURT Manila 7IRST DI@ISION

G.R. No. 11119& *+$e 27, 1993 LORETO . E LA 2I"TORIA, #0 ".t, F.04#5 o6 M#$%#+e ".t, #$% .$ 7.0 per0o$#5 4#p#4.t, #0 8#r$.07ee,petitioner( vs' 1ON. *OSE !. BURGOS, !re0.%.$8 *+%8e, RT", Br. X2II, "eb+ ".t,, #$% RAUL 1. SESBRE9O, respon#ents'

BELLOSILLO, J.% RAID >' SES0RENO file# a co$plaint for #a$ages against Assistant Cit* 7iscals 0ienveni#o N' Ma%anto( Br'( an# Dario D' Ra$a( Br'( %efore the Regional Trial Court of Ce%u Cit*' After trial ?u#g$ent was ren#ere# or#ering the #efen#ants to pa* P (333'33 to the plaintiff( private respon#ent herein' The #ecision having %eco$e final an# eAecutor*( on $otion of the latter( the trial court or#ere# its eAecution' This or#er was "uestione# %* the #efen#ants %efore the Court of Appeals' >owever( on 1 Banuar* 445 a writ of eAecution was issue#' On 9 7e%ruar* 445 a notice of garnish$ent was serve# on petitioner Doreto D' #e la @ictoria as Cit* 7iscal of Man#aue Cit* where #efen#ant Ma%anto( Br'( was then #etaile#' The notice #irecte# petitioner not to #is%urse( transfer( release or conve* to an* other person eAcept to the #eput* sheriff concerne# the salar* chec&s or other chec&s( $onies( or cash #ue or %elonging to Ma%anto( Br'( un#er penalt* of law' 1 On 3 March 445 private respon#ent file# a $otion %efore the trial court for eAa$ination of the garnishees' On 51 Ma* 445 the petition pen#ing %efore the Court of Appeals was #is$isse#' Thus the trial court( fin#ing no $ore legal o%stacle to act on the $otion for eAa$ination of the garnishees( #irecte# petitioner on 9 Nove$%er 445 to su%$it his report showing the a$ount of the garnishe# salaries of Ma%anto( Br'( within fifteen . 1/ #a*s fro$ receipt 2 ta&ing into consi#eration the provisions of Sec' 5( pars' .f/ an# .i/( Rule ;4 of the Rules of Court' On 59 Nove$%er 445 private respon#ent file# a $otion to re"uire petitioner to eAplain wh* he shoul# not %e cite# in conte$pt of court for failing to co$pl* with the or#er of 9 Nove$%er 445'

On the other han#( on 4 Banuar* 44; petitioner $ove# to "uash the notice of garnish$ent clai$ing that he was not in possession of an* $one*( fun#s( cre#it( propert* or an*thing of value %elonging to Ma%anto( Br'( eAcept his salar* an# RATA chec&s( %ut that sai# chec&s were not *et properties of Ma%anto( Br'( until #elivere# to hi$' >e further clai$e# that( as such( the* were still pu%lic fun#s which coul# not %e su%?ect to garnish$ent' On 4 March 44; the trial court #enie# %oth $otions an# or#ere# petitioner to i$$e#iatel* co$pl* with its or#er of 9 Nove$%er 445' ' It opine# that the chec&s of Ma%anto( Br'( ha# alrea#* %een release# through petitioner %* the Depart$ent of Bustice #ul* signe# %* the officer concerne#' Ipon service of the writ of garnish$ent( petitioner as custo#ian of the chec&s was un#er o%ligation to hol# the$ for the ?u#g$ent cre#itor' Petitioner %eca$e a virtual part* to( or a force# intervenor in( the case an# the trial court there%* ac"uire# ?uris#iction to %in# hi$ to its or#ers an# processes with a view to the co$plete satisfaction of the ?u#g$ent' A##itionall*( there was no sufficient reason for petitioner to hol# the chec&s %ecause the* were no longer govern$ent fun#s an# presu$a%l* #elivere# to the pa*ee( confor$a%l* with the last sentence of Sec' 6 of the Negotia%le Instru$ents Daw' <ith regar# to the conte$pt charge( the trial court was not $orall* convince# of petitionerGs guilt' 7or( while his eAplanation suffere# fro$ proce#ural infir$ities nevertheless he too& pains in enlightening the court %* sen#ing a written eAplanation #ate# 55 Bul* 445 re"uesting for the lifting of the notice of garnish$ent on the groun# that the notice shoul# have %een sent to the 7inance Officer of the Depart$ent of Bustice' Petitioner insists that he ha# no authorit* to segregate a portion of the salar* of Ma%anto( Br' The eAplanation however was not su%$itte# to the trial court for action since the stenographic reporter faile# to attach it to the recor#' 4 On 53 April 44; the $otion for reconsi#eration was #enie#' The trial court eAplaine# that it was not the #ut* of the garnishee to in"uire or ?u#ge for hi$self whether the issuance of the or#er of eAecution( writ of eAecution an# notice of garnish$ent was ?ustifie#' >is onl* #ut* was to turn over the garnishe# chec&s to the trial court which issue# the or#er of eAecution' 3 Petitioner raises the following relevant issues- . / whether a chec& still in the han#s of the $a&er or its #ul* authori,e# representative is owne# %* the pa*ee %efore ph*sical #eliver* to the latter- an#( .5/ whether the salar* chec& of a govern$ent official or e$plo*ee fun#e# with pu%lic fun#s can %e su%?ect to garnish$ent' Petitioner reiterates his position that the salar* chec&s were not owne# %* Ma%anto( Br'( %ecause the* were not *et #elivere# to hi$( an# that petitioner as garnishee has no legal o%ligation to hol# an# #eliver the$ to the trial court to %e applie# to Ma%anto( Br'Gs ?u#g$ent #e%t' The thesis of petitioner is that the salar* chec&s still for$e# part of pu%lic fun#s an# therefore %e*on# the reach of garnish$ent procee#ings' Petitioner has well argue# his case' +arnish$ent is consi#ere# as a species of attach$ent for reaching cre#its %elonging to the ?u#g$ent #e%tor owing to hi$ fro$ a stranger to the litigation' ) E$phasis is lai# on the phrase C%elonging to the ?u#g$ent #e%torC since it is the focal point in resolving the issues raise#' As Assistant Cit* 7iscal( the source of the salar* of Ma%anto( Br'( is pu%lic fun#s' >e receives his co$pensation in the for$ of chec&s fro$ the Depart$ent of Bustice through petitioner as

Cit* 7iscal of Man#aue Cit* an# hea# of office' In#er Sec' 6 of the Negotia%le Instru$ents Daw( ever* contract on a negotia%le instru$ent is inco$plete an# revoca%le until delivery of the instru$ent for the purpose of giving effect thereto' As or#inaril* un#erstoo#( #eliver* $eans the transfer of the possession of the instru$ent %* the $a&er or #rawer with intent to transfer title to the payee and recogni)e him as the holder thereof. 7 Accor#ing to the trial court( the chec&s of Ma%anto( Br'( were alrea#* release# %* the Depart$ent of Bustice #ul* signe# %* the officer concerne# through petitioner an# upon service of the writ of garnish$ent %* the sheriff petitioner was un#er o%ligation to hol# the$ for the ?u#g$ent cre#itor' It recogni,e# the role of petitioner ascustodian of the chec&s' At the sa$e ti$e however it consi#ere# the chec&s as no longer govern$ent fun#s an# presu$e# #elivere# to the pa*ee %ase# on the last sentence of Sec' 6 of the Negotia%le Instru$ents Daw which states- CAn# where the instru$ent is no longer in the possession of a part* whose signature appears thereon( a vali# an# intentional #eliver* %* hi$ is presu$e#'C Ket( the presu$ption is not conclusive %ecause the last portion of the provision sa*s Cuntil the contrar* is prove#'C >owever this phrase was deleted %* the trial court for no apparent reason' Proof to the contrar* is its own fin#ing that the chec&s were in the custo#* of petitioner' Inas$uch as sai# chec&s ha# not *et %een #elivere# to Ma%anto( Br'( the* did not belong to him an# still ha# the character of pu%lic fun#s' In ;iro v' Aontanosas 8 we rule# that J The salar* chec& of a govern$ent officer or e$plo*ee such as a teacher #oes not %elong to hi$ %efore it is ph*sicall* #elivere# to hi$' Intil that ti$e the chec& %elongs to the govern$ent' Accor#ingl*( %efore there is actual #eliver* of the chec&( the pa*ee has no power over it: he cannot assign it without the consent of the +overn$ent' As a necessar* conse"uence of %eing pu%lic fun#( the chec&s $a* not %e garnishe# to satisf* the ?u#g$ent' 9 The rationale %ehin# this #octrine is o%vious consi#eration of pu%lic polic*' The Court succinctl* state# in 6ommissioner of 5ublic Aighways v. San :iego 1& that J The functions an# pu%lic services ren#ere# %* the State cannot %e allowe# to %e paral*,e# or #isrupte# %* the #iversion of pu%lic fun#s fro$ their legiti$ate an# specific o%?ects( as appropriate# %* law'

In #en*ing petitionerGs $otion for reconsi#eration( the trial court eApresse# the a##itional ratiocination that it was not the #ut* of the garnishee to in"uire or ?u#ge for hi$self whether the issuance of the or#er of eAecution( the writ of eAecution( an# the notice of garnish$ent was ?ustifie#( citing our ruling in 5hilippine 6ommercial ndustrial 7an& v. 6ourt of 'ppeals' 11 Our precise ruling in that case was that C[I!t is not incu$%ent upon the garnishee to in"uire or to ?u#ge for itself whether or not the or#er for the a#vance eAecution of a ?u#g$ent is vali#'C 0ut that is invo&ing onl* the general rule' <e have also esta%lishe# therein the co$pelling reasons( as eAceptions thereto( which were not ta&en into account %* the trial court( e'g'( a #efect on the face of the writ or actual &nowle#ge %* the garnishee of lac& of entitle$ent on the part of the garnisher' It is worth to note that the ruling referre# to the vali#it* of a#vance eAecution of ?u#g$ents( %ut a careful scrutin* of that case an# si$ilar cases reveals that it was applica%le to a notice of garnish$ent as well' In the case at %ench( it was incu$%ent upon petitioner to in"uire into the vali#it* of the notice of garnish$ent as he ha# actual &nowle#ge of the non)entitle$ent of private respon#ent to the chec&s in "uestion' Conse"uentl*( we fin# no #ifficult* conclu#ing that the trial court eAcee#e# its ?uris#iction in issuing the notice of garnish$ent concerning the salar* chec&s of Ma%anto( Br'( in the possession of petitioner' <>ERE7ORE( the petition is +RANTED' The or#ers of 4 March 44; an# 53 April 44; of the Regional Trial Court of Ce%u Cit*( 0r' 2( su%?ect of the petition are SET ASIDE' The notice of garnish$ent serve# on petitioner #ate# ; 7e%ruar* 445 is or#ere# DISC>AR+ED' SO ORDERED' ?uiason and Bapunan, @@., concur.

E"uita%le 0an& Ir%an 0an& E"uita%le 0an& E"uita%le 0an& E"uita%le 0an&

5526;11

9H53H84

1( 13'33

388844

9H31H84

53(333'33

5526;16

1H5;H84

33(333'33

5526;12

6H36H84

13(333'33

5526;18

6H5;H84

13(333'33

when sai# accuse# &new full* well at the ti$e that she ha[#! no sufficient fun#s in the %an& an# woul# not have such fun#s even on the #ate state# on the face thereof an# upon present$ent of such chec&s to the #rawee %an& for pa*$ent( the sa$e were all #ishonore# for the reasons PDrawn Against Insufficient 7un#sQ an# PAccount Close#Q: that #espite #ue notice as re"uire# %* Repu%lic Act No' 9881 an# notwithstan#ing repeate# #e$an#s( the herein accuse#( #i# then an# there wilfull*( unlawfull* an# feloniousl* refuse an# fail to $a&e goo# her chec&s in the total a$ount of P5;5(613'33 an# still refuses an# fails to #o so( to the #a$age an# pre?u#ice of the sai# co$plainant in the afore$entione# a$ount' Contrar* to Daw'[9! The accusator* portion of the infor$ation in Cri$inal Case No' C);99 8 rea#s as followsThat on or a%out an# so$eti$e #uring the $onth of Octo%er 488 in Caloocan Cit*( Metro Manila( an# within the ?uris#iction of this >onora%le Court( the a%ove)na$e# accuse#( #i# then an# there willfull*( unlawfull* an# feloniousl* $a&e an# issue Chec& No 5526;11 #rawn against the E"uita%le 0an&ing Corp'( in the a$ount of P1( 13'33 #ate# April 53( 484 to appl* for value in favor of RO0ERT DOO TIAN well &nowing at the ti$e of issue that she ha# no sufficient fun#s in or cre#it with the #rawee %an& for the pa*$ent of such chec& in full upon its present$ent( which chec& was su%se"uentl* #ishonore# for the reason PDrawn Against Insufficient 7un#sQ an# with the intent to #efrau#( faile# an# still fails to pa* the sai# co$plainant the a$ount of P1( 13'33 #espite receipt of notice fro$ the #rawee %an& that sai# chec& ha# %een #ishonore# an# ha# not %een pai#' Contrar* to law'[1! The Infor$ations in Cri$inal Cases Nos' C);99 4 to C) ;995 [6! are si$ilarl* wor#e# as in Cri$inal Case No' C);99 8 eAcept as to the #ates of issue( an# the nu$%ers an# a$ounts of the chec&s' Involve# therein are Chec& No' 5526;16 #ate# 5; Ma* 484 in the a$ount of P 33(333: Chec& No' 5526;12 #ate# 6 Bune 484 in the a$ount of P13(333: an# Chec& No' 5526;18 #ate# 5; Bune 484 in the a$ount of P13(333' The groun# for the #ishonor of the chec&s was PDrawn Against Insufficient 7un#s'Q The cases were consoli#ate# an# ?ointl* trie#' Ipon arraign$ent( NATK plea#e# not guilt* in each case'[2! The evi#ence for the prosecution is su$$ari,e# in the challenge# #ecision of the trial court as followsCo$plainant Ro%ert Doo Tian testifie# that so$eti$e in Octo%er 488( his sister)in)law Teresita Di$ %rought to his house in Faloo&an Cit* the herein accuse# Nat* Chua an# intro#uce# her to hi$' The accuse# wante# to %orrow $one* in the a$ount of P533(333'33' >e was at first reluctant an#

FIRST I2ISION >G.R. No. 1'&)'2. September 28, 1999? !EO!LE OF T1E !1ILI!!INES, plaintiff-appellee, vs. NAT: "1UA, accused;appellant. E"ISION A2I E, *R., J.@ In a #ecision[ ! ren#ere# in Cri$inal Case No' C);99 2 for estafa un#er Article ; 1.5/ .#/ of the Revise# Penal Co#e[5! an# Cri$inal Cases Nos' C);99 8 to C);995 for violations of 0atas Pa$%ansa 0lg' 55([;!the Regional Trial Court of Faloo&an( 0ranch ;3( foun# accuse#)appellant Nat* Chua .hereafter NATK/ guilt* %e*on# reasona%le #ou%t in all cases' The Infor$ation in Cri$inal Case No' C);99 2 charge# NATK with estafa allege#l* co$$itte# as followsThat on( a%out an# so$eti$e #uring the $onth of Octo%er 488 in Faloo&an Cit*( Metro Manila( an# within the ?uris#iction of this >onora%le Court( the a%ove)na$e# accuse# #efrau#e# an# #eceive# one Ro%ert Doo Tian in the following $anner to wit- the sai# accuse# receive# fro$ sai# co$plainant cash $one* a$ounting to P5;5(613'33 an# in eAchange thereof issue# in favor of sai# co$plainant the following chec&s to witNa$e of 0an& No' Date Chec& A$ount

7ar East 0an& O Trust Co' 434535 ;H59H84

P 2(133'33

10

tol# the$ to co$e %ac& after two or three #a*s' <hen the accuse# Nat* Chua an# Teresita Di$ returne# to his house two or three #a*s later( he agree# to Nat* Chua=s re"uest an# gave her the a$ount of P5;5(613'33 in cash in consi#eration of which the accuse# issue# an# #elivere# hi$ siA .6/ personal post#ate# chec&s( #rawn against the E"uita%le 0an&ing Corporation' <hen the siA .6/ chec&s %eca$e #ue in March 484( he wante# to #eposit the$ %ut the accuse# tol# hi$ not to #eposit the$ %ecause the* were not fun#e# an# pro$ise# to replace the$' So$eti$e within that $onth of March 484( the accuse# replace# the siA .6/ personal chec&s with another siA .6/ post#ate# chec&s( four of which were her personal chec&s .EAhi%its 0( D( E( 7/ #rawn against the E"uita%le 0an&ing Corporation( while the other two .EAhi%its A( C/ were chec&s en#orse# to her %* +racita #el Rosario an# Susana #e +u,$an .TSN( Bune ( 443( pp' 6) 2/' <hen the two en#orse# chec&s .EAhi%its A( C/ %eca$e #ue( he $a#e an arrange$ent with Teresita Di$ to #eposit the$ in her personal account %ecause Teresita Di$ ha# $one* an# i$$e#iatel* pai# hi$ in cash( whereas if he ha# to #eposit the$ in his personal account( he woul# have to wait for another three #a*s %efore the chec&s coul# %e cleare#' >owever( the two chec&s when presente# for pa*$ent were #ishonore# for the reason that the* were #rawn against insufficient fun#s .EAhi%its A)5( C)9( on EAhi%its A an# C/( as a result of which he ha# to return to Teresita Di$ the a$ount he ha# receive# fro$ her' >e loo&e# for the accuse# in or#er to re"uest her to $a&e goo# the chec&s %ut she was nowhere to %e foun#' The four personal chec&s $a#e an# issue# %* the accuse# Nat* Chua .EAhi%its 0( D( E( 7/ were #eposite# %* hi$ in his personal account( %ut the* were all #ishonore# upon present$ent an# returne# unpai# for reasons of insufficient fun# .I7/ in the case of the Chec& EAhi%it 0( an# Account Close# with regar# to the Chec&s EAhi%its D( E an# 7' Since he coul# not fin# the accuse# personall*( he sent her %* registere# $ail two letters of #e$an#( %oth #ate# Bul* 2( 484( one a##resse# to her resi#ence at No' 554)7 Fanlaon Street( Lue,on Cit*( an# other to her place of %usiness at No' 92 Carlos Palanca Street( Luiapo( Manila .EAhi%its +( >/' 0oth letters were returne# %* the Post Office for the reason that the* were unclai$e# %* the accuse#' >e notice#( however( that the envelope of one of the letters .EAhi%it +/ was alrea#* opene# when returne# to hi$' Co$plainant file# with the Faloo&an Cit* Police Station a case against the accuse# .EAhi%it I/ which case was su%se"uentl* forwar#e# to the Office of the 7iscal .EAhi%it B/' During the confrontation( at the 7iscal=s Office( the accuse# appeare# personall* an# offere# to settle the case %* pa*ing to hi$ the a$ount of P (333'33 a $onth( an offer which he re?ecte# for it woul# ta&e her 2 R *ears to co$plete the pa*$ent' Teresita Di$ corro%orate# his testi$on* in all $aterial points' Alfre#o #e la Cru,( signature verifier of the E"uita%le 0an&ing Corporation( who appeare# pursuant to a subpoena duces tecum( pro#uce# %efore the Court the state$ent of account of accuse# Nat* Chua with the 0an& .EAhi%it D/' >e testifie# that Chec& No' 5526;11 .EAhi%it 0/ was #eposite# on April 53( 484 %ut was returne# the following #a* for the reason PInsufficient 7un#Q .TSN( Bune 51( 443( p' 2' See also EAhi%it D)5 on EAhi%it D/: that the account of Nat* Chua was close# on Bune 5 ( 484: that the three other chec&s .EAhi%its D( E( 7/ were no longer reflecte# in the state$ent of account since her account ha# %een close#( so that sai# chec&s were #ishonore# an# returne# for the reason PAccount Close#Q' .TSN( Bune 51( 443( pp' 8( 4/'[8! On the other han#( NATK interpose# the #efense of #enial' She #enie# &nowing Ro%ert Doo Tian .hereafter RO0ERT/ an# issuing chec&s to hi$' She testifie# that she

receive# a subpoena fro$ the Cit* Prosecutor=s Office of Faloo&an Cit* so$eti$e in Bul* 484' Since she #i# not &now the co$plainant( she P#ee$e# it proper not to atten# the hearing'Q She sent her $other to the prosecutor=s office to fin# out who file# the case against her' >er $other reporte# that the co$plainant was one Ro%ert Doo Tian an# that the latter was intereste# in ?ust settling the case' >er $other an# RO0ERT agree# at the prosecutor=s office to $eet at Al#*=s Restaurant at 5-33 p'$'( an# her $other a#vise# her to $eet with RO0ERT' Acco$panie# %* her $other( her uncle 0en?a$in Manalo( an# her frien# Prec*( NATK went to Al#*=s Restaurant at the appointe# hour' Mrs' Doo Tian was there waiting outsi#e the restaurant' Since the restaurant was still close#( her uncle suggeste# that the* go instea# to Silver Cit* Restaurant across the street an# ?ust wait for RO0ERT there' <hen the* were alrea#* insi#e the restaurant Mrs' Doo Tian $a#e a phone call to RO0ERT' NATK=s co$panions all sat on one ta%le' NATK sat on the ta%le neAt to the$( as their ta%le was alrea#* full* occupie#: %esi#es( she wante# to show then that she an# RO0ERT #i# not &now each other' After waiting for one)an#Sa half hours( RO0ERT arrive# an# approache# the ta%le where his wife an# NATK=s co$panions were sitting' >e face# Prec* an# as&e# her( PNat*( wh* [#i#n=t! *ou want to appear at the fiscal=s officeEQ NATK=S $other answere#( PThat is not Nat*Q an# pointe# at her an# sai#( PThat is Nat*'Q <hen 0en Manalo as&e# her whether she &new RO0ERT( she shoo& her hea# to in#icate that she #i# not &now hi$' RO0ERT ?ust stare# at her an# sat #own at the ta%le of her co$panions' RO0ERT then sai# that the* shoul# ?ust settle the case an# that she shoul# help hi$ %* letting Susan appear %efore the prosecutor=s office in or#er for Susan to pa* the P53(333 chec& issue# to Teresita Di$' RO0ERT also tol# her that she coul# pa* to hi$ in install$ent the a$ounts of the chec&s' She refuse# an# tol# RO0ERT that she #i# not &now hi$( nor #i# she have an o%ligation to hi$' As for Susan=s wherea%outs( she ha# no &nowle#ge thereof' NATK further #eclare# that the four chec&s issue# %* her were for Teresita Di$ as collateral for her loan an# that she alrea#* pai# these chec&s in cash an# in &in# out of the goo#s ta&en %* Teresita fro$ her store' The goo#s ta&en %* Teresita worth P61(333 an# charge# against her loan were covere# %* #eliver* receipts' She further clai$e# that the cash pa*$ents she $a#e were liste# on a piece of paper an# signe# %* Teresita after each pa*$ent' >owever( she was una%le to ta&e %ac& the chec&s fro$ Teresita' <hen she re"ueste# an accounting Teresita wante# her to pro#uce the list of pa*$ents $a#e( %ut she #i# not give her list to Teresita' Infortunatel*( the list is now $issing: although at the ti$e Teresita #e$an#e# its pro#uction( it was still eAisting' 7inall*( NATK asserte# that she $erel* stoo# as guarantor to the chec&s she in#orse#( which represente# the loans o%taine# fro$ teresita Di$ %* Susana #e +u,$an in the a$ount of P53(333 an# %* +racita #el Rosario in the a$ount of P2(133'[4! 0en?a$in Manalo corro%orate# NATK=s testi$on* as to what transpire# #uring the $eeting at Silver Cit* Restaurant' >e testifie# that NATK #i# not sit at their ta%le %ut sat on the thir# ta%le awa* fro$ the$ an# the* all preten#e# that the* #i# not &now each other' RO0ERT ca$e in after a while an# procee#e# to their ta%le' RO0ERT $istoo& Prec* for Nat*( an# he was correcte# %* NATK=s $other'[ 3! The trial court #i# not %elieve NATK' It foun# unworth* her clai$ that her four personal post#ate# chec&s an# the two in#orse# chec&s were issue# an# in#orse# not to RO0ERT %ut to Teresita( since RO0ERT was in possession thereof' It #i# not give cre#ence to her clai$ that she ha# alrea#* pai# the a$ounts evi#ence# %* the chec&s' It hel#-

11

There is no #ou%t in the $in# of the Court that the siA .6/ chec&s .EAhi%its A( 0( C( D( E( 7/ are replace$ent chec&s .TSN( Ma* 5( 443( pp' 99( 96' See also Affi#avit of Ro%ert Doo Tian( EAhi%it I/ $a#e( issue# an# #elivere# %* the accuse# to the co$plainant to replace the siA .6/ personal chec&s all post#ate# previousl* issue# %* her which she a#$itte# were unfun#e# on their #ue #ate' Not onl* #i# the accuse# fail to #eposit the a$ount necessar* to cover the pa*$ent of the original siA post#ate# chec&s %ut she also faile# to #eposit the a$ount to cover the pa*$ent of the four of the siA replace$ent chec&s' Thus( there was frau# or #eceit( constituting false pretense an# frau#ulent acts' The Court is convince# that the prosecution has proven %e*on# reasona%le #ou%t the guilt of the accuse#'[ ! The trial court li&ewise foun# NATK guilt* of violation of 0atas Pa$%ansa 0lg' 55 for having issue# four worthless chec&s' The law punishes the $ere issuance( regar#less of the intent of the parties( of an* &in# of chec& which is su%se"uentl* #ishonore#' Accor#ingl*( the trial court ren#ere# ?u#g$ent against NATK' In the estafa case it sentence# her to suffer the penalt* of thirt* .;3/ *ears of reclusion perpetua an# to in#e$nif* the offen#e# part* RO0ERT in the a$ount of P5;5(613( plus 5M interest per annu$ fro$ #ate of #e$an#: an# in each of the four cases for violations of 0atas Pa$%ansa 0lg' 55( it i$pose# upon her the penalt* of i$prison$ent of one . / *ear' NATK interpose# an appeal fro$ the #ecision to the Court of Appeals( which was( however( referre# to us in view of the penalt* of reclusion perpetua i$pose# in the estafa case' <e accepte# the appeal' In her Appellant=s 0rief( NATK conten#s that the trial court erre# in .A/ T CON@ICTIN+ [>ER! DESPITE T>E E@IDENCE 0K T>E PROSECITION ITSED7 T>AT T>E C>ECFS IN LIESTION [<ERE! NOT T>E E77ICIENT CAISE 7OR T>E SI0BECT DOAN TRANSACTION: .0/ T CON@ICTIN+ [>ER! O7 ESTA7A DESPITE 7AIDIRE O7 T>E PROSECITION TO PRO@E SIMIDTANEITK IN T>E ISSIANCE O7 T>E C>ECFS AND RECEIPT O7 0ENE7ITS: .C/ T 7AIDIN+ TO APPRECIATE T>E INLIESTIONA0DE 7ACT T>AT T>E C>ECFS IN T>ESE CASES <ERE ISSIED <>EN T>E O0DI+ATIONS <ERE ADREADK EUISTIN+: .D/ T MISINTERPRETIN+ T>E DA< ON ESTA7A 0K ITS SCATTERED ATTRI0ITION O7 ITS EDEMENTS TO DI77ERENT SETS O7 C>ECFS: .E/ T CON@ICTIN+ [>ER! DESPITE CDEAR E@IDENCE T>AT PRIOR SETTDEMENT OR RECONCIDIATION O7 T>E ACCOINT IS RELIIRED TO DETERMINE T>E 0ADANCE O7 T>E DOAN TRANSACTION IN@OD@ED IN T>ESE CASES: .7/ T CON@ICTIN+ [>ER! IN T>IS CASE DESPITE T>E CDEAR AND INDI0ITA0DE A0SENCE O7 DECEIT ON >ER PART IN ENTERIN+ INTO T>E SI0BECT DOAN TRANSACTION: .+/ T CON@ICTIN+ [>ER! O7 0ATAS PAM0ANSA 0D+' 55 DESPITE T>E O@ER<>EDMIN+ E@IDENCE T>AT T>E PRI@ATE COMPDAINANT >IMSED7( IN CONSPIRACK <IT> >IS SISTER)IN)DA<( ARE T>E <RON+DOERS IN T>IS CASE:

.>/ T @IODAT[IN+! [>ER! CONSTITITIONAD RI+>T TO PRESIMPTION O7 INNOCENCE IN CON@ICTIN+ >ER ON E@IDENCE <AK 0EDO< T>E REASONA0DE)DOI0T STANDARD IN CRIMINAD CASES AND T>ROI+> ITS TOTAD AND CON@ENIENT DISRE+ARD O7 T>E DE7ENSE E@IDENCE IN T>IS CASE' NATK argues that one of the ele$ents of estafa un#er Article ; 1 .5/ .#/ of the Revise# Penal Co#e is a fin#ing %e*on# reasona%le #ou%t that the issuance of the chec& was the Pefficient causeQ an# the P$eans use# to o%tain a valua%le consi#eration'Q This ele$ent was a%sent in her case %ecause the issuance of the chec&s was not the in#uce$ent for the loan to her' The in#uce$ents were the intercession $a#e %* Teresita Di$( RO0ERT=s sister)in)law( an# the interest to %e earne# on the $one* lent' NATK further stresses that the chec&s for which she was convicte# were not the sa$e chec&s originall* issue#( %ut replace$ent chec&s issue# so$eti$e in March 484 when her loan o%ligation was alrea#* four $onths ol#' >ence( there was alrea#* a pre)eAisting o%ligation for which the replace$ent chec&s were $a#e to answer' She #i# not( therefore( co$$it the cri$e of estafa' In a##ition( NATK faults the trial court for refusing to consi#er her clai$ that she ha# alrea#* pai# her loan as shown %* the fifteen receipts totalling P61(333' In the Appellee=s 0rief( the Office of the Solicitor +eneral .OS+/ su%$its that NATK cannot %e convicte# of estafa un#er Article ; 1 .5/ .#/ of the Revise# Penal Co#e( since the su%?ect chec&s were replace$ent chec&s issue# an# #elivere# in pa*$ent of a pre)eAisting o%ligation' >ence( the chec&s coul# no longer %e consi#ere# as the $eans e$plo*e# %* NATK to o%tain a loan fro$ co$plainant' The ele$ent of #eceit was thus lac&ing' >owever( the OS+ agrees with the trial court that NATK violate# 0'P' 0lg' 55 in the issuance of the four replace$ent chec&s' She issue# the chec&s as pa*$ent for the $one* she %orrowe# fro$ co$plainant( %ut all the chec&s %ounce#' Despite #e$an#( she faile# to $a&e goo# the chec&s' The OS+ then reco$$en#s that NATK=s conviction for estafa %e reverse# an# she %e ac"uitte# thereof( while her conviction for violation of 0'P' 0lg' 55 %e affir$e# with the $o#ification that she %e re"uire# to in#e$nif* the offen#e# part* of the a$ount e"uivalent to the value of the chec&s she personall* issue#' After #eli%erating on the assigne# errors an# the %riefs su%$itte# %* the parties( we fin# NATK=s appeal partiall* i$presse# with $erit' NATK shoul# %e ac"uitte# in the case for estafa' She is charge# un#er Article ; 1.5/ .#/ of the Revise# Penal Co#e( as a$en#e# %* R'A' No' 9881( which penali,es an* person who shall #efrau# another P%* post#ating a chec& or issuing a chec& in pa*$ent of an o%ligation when the offen#er ha# no fun#s in the %an& or his fun#s #eposite# therein were not sufficient to cover the a$ount of the chec&'Q The ele$ents therefor are . / post#ating or issuance of a chec& in pa*$ent of an o%ligation contracte# at the ti$e the chec& was issue#: .5/ lac& or insufficienc* of fun#s to cover the chec&: an# .;/ #a$age to the pa*ee thereof'[ 5! Da$age an# #eceit are essential ele$ents of the offense an# $ust %e esta%lishe# with satisfactor* proof to warrant conviction([ ;! while the false pretense or frau#ulent act $ust %e co$$itte# prior to( or si$ultaneousl* with( the issuance of the %a# chec&'[ 9! <hat is o%vious to us is that NATK %orrowe# $one* fro$ RO0ERT through the intercession of the latter=s sister)in)law( Teresita Di$' In pa*$ent therefor she issue# post#ate# chec&s' <hen such chec&s %eca$e #ue she notifie# RO0ERT not to #eposit the$( since these were not *et fun#e#' RO0ERT agree# that NATK replace the chec&s with

12

another set of siA post#ate# chec&s( four of which were her personal chec&s an# the other two were issue# %* another which NATK in#orse# to RO0ERT' Inelucta%l*( the replace$ent chec&s were issue# in pa*$ent of an o%ligation long contracte# an# incurre#' It cannot therefore %e sai# that NATK co$$itte# frau#ulent acts in the issuance an# the in#orse$ent of the replace$ent chec&s' In short( the replace$ent chec&s were %* no $eans the #evice use# %* NATK to in#uce RO0ERT to len# her $one* without which the transaction woul# not have %een consu$$ate#' Even assu$ing arguendo that the chec&s su%?ect of this case were the original post#ate# chec&s issue# %* NATK at the ti$e of the transaction( still no estafa was co$$itte#' The trial court ha# overloo&e# portions of the testi$on* of RO0ERT o%viousl* in#icating that what transpire# %etween RO0ERT an# NATK was a si$ple loan transaction( the principal of which was pa*a%le at a future #ate with interest'[ 1! This was a$pl* corro%orate# %* prosecution witness Teresita Di$( who #eclare# that it was she who intro#uce# NATK to RO0ERT an# as&e# the latter whether he coul# lend $one* to NATK' [ 6! RO0ERT hi$self a#$itte# that what $otivate# hi$ to len# the a$ount to NATK was not her issuing the original post#ate# chec&s[ 2! %ut the eApectation that he woul# receive an interest e"uivalent to M a $onth of the total a$ount %orrowe# fro$ hi$' >owever( NATK is lia%le un#er 0atas Pa$%ansa 0lg' 55 for issuing four replace$ent chec&s' The law $a&es the $ere act of issuing a worthless chec& punisha%le as a special offense'[ 8! The grava$en of the offense un#er this law is the act of issuing a worthless chec& or a chec& that is #ishonore# upon its present$ent for pa*$ent'[ 4! The law has $a#e the $ere act of issuing a %u$ chec& a malum prohibitum( an act proscri%e# %* legislature for %eing #ee$e# pernicious an# ini$ical to pu%lic welfare'[53! It is un#ispute# that the four replace$ent chec&s in "uestion were issue# %* NATK an# that these were all #ishonore# #ue to insufficienc* of fun#s' A1EREFORE( in view of the foregoing( ?u#g$ent is here%* ren#ere# RE@ERSIN+ the challenge# #ecision of the Regional Trial Court of Faloo&an Cit*( 0ranch ;3( insofar as Cri$inal Case No' C);99 2 is concerne# an# ACLIITTIN+ accuse#)appellant NATK C>IA of the cri$e of estafa charge# therein: an# A77IRMIN+ it insofar as the conviction of NATK C>IA in Cri$inal Cases Nos' C);99 8 to C);995 for violations of 0atas Pa$%ansa 0lg' 55 an# the i$position of the penalt* of i$prison$ent of one . / *ear in each case are concerne#( with the $o#ification that she is further or#ere# to pa* the offen#e# part* Ro%ert Doo Tian the face value of the chec&s involve# therein( to wit- P1( 13: P 33(333: P13(333: an# P13(333( or a total of P531( 13( with legal interest fro$ the filing of the infor$ations until the finalit* of this #ecision an# at the rate of 5M per annu$ thereafter until the a$ounts are full* pai#' No pronounce$ent as to costs' SO OR ERE . 5uno, @@., concur. Bapunan, 5ardo, an# Cnares<Santiago,

AMERI"A=,petitioner( vs' "OURT OF A!!EALS #$% FOR !1ILI!!INES, IN". #$% "ITIBAN-, N.A., respon#ents'

G.R. No. 121479

*#$+#r, 29, 2&&1

FOR !1ILI!!INES, IN"., petitioner)plaintiff( vs' "OURT OF A!!EALS #$% "ITIBAN-, N.A. #$% !1ILI!!INE "OMMER"IAL INTERNATIONAL BAN-,respon#ents'

G.R. No. 128)&4

*#$+#r, 29, 2&&1

FOR !1ILI!!INES, IN"., petitioner( vs' "ITIBAN-, N.A., !1ILI!!INE "OMMER"IAL INTERNATIONAL BAN- #$% "OURT OF A!!EALS, respon#ents' BUISUMBING, J.@ These consoli#ate# petitions involve several frau#ulentl* negotiate# chec&s' The original actions a quo were institute# %* 7or# Philippines to recover fro$ the #rawee %an&( CITI0ANF( N'A' .Citi%an&/ an# collecting %an&( Philippine Co$$ercial International 0an& .PCI0an&/ [for$erl* Insular 0an& of Asia an# A$erica!( the value of several chec&s pa*a%le to the Co$$issioner of Internal Revenue( which were e$%e,,le# allege#l* %* an organi,e# s*n#icate'.Dwphi..nEt +'R' Nos' 5 9 ; an# 5 924 are twin petitions for review of the March 52( 441 Decision of the Court of Appeals in CA) +'R' C@ No' 513 2( entitle# C7or# Philippines( Inc' vs' Citi%an&( N'A' an# Insular 0an& of Asia an# A$erica .now Philipppine Co$$ercial International 0an&/( an# the August 8( 441 Resolution(5 or#ering the collecting %an&( Philippine Co$$ercial International 0an&( to pa* the a$ount of Citi%an& Chec& No' SN)39862' In +'R' No' 58639( petitioner 7or# Philippines assails the Octo%er 1( 446 Decision; of the Court of Appeals an# its March 1( 442 Resolution9 in CA)+'R' No' 589;3 entitle# C7or# Philippines( Inc' vs' Citi%an&( N'A' an# Philippine Co$$ercial International 0an&(C affir$ing in toto the ?u#g$ent of the trial court hol#ing the #efen#ant #rawee %an&( Citi%an&( N'A'( solel* lia%le to pa* the a$ount of P 5( 6;(548' 3 as #a$ages for the $isapplie# procee#s of the plaintiffGs Citi%anl Chec& Nu$%ers SN) 3142 an# 6138' I. G.R. No0. 12141' #$% 121479 The stipulate# facts su%$itte# %* the parties as accepte# %* the Court of Appeals are as follows-

Repu%lic of the Philippines SU!REME "OURT Manila SECOND DI@ISION G.R. No. 12141' *#$+#r, 29, 2&&1

COn Octo%er 4( 422( the plaintiff 7or# #rew an# issue# its Citi%an& Chec& No' SN)39862 in the a$ount of P9(296( 9'9 ( in favor of the Co$$issioner of Internal Revenue as pa*$ent of plaintiff:s percentage or $anufacturerGs sales taAes for the thir# "uarter of 422'

!1ILI!!INE "OMMER"IAL INTERNATIONAL BAN<6ormer5, INSULAR BAN- OF ASIA AN

13

The aforesai# chec& was #eposite# with the #egen#ant I0AA .now PCI0an&/ an# was su%se"uentl* cleare# at the Central 0an&' Ipon present$ent with the #efen#ant Citi%an&( the procee#s of the chec& was pai# to I0AA as collecting or #epositor* %an&' The procee#s of the sa$e Citi%an& chec& of the plaintiff was never pai# to or receive# %* the pa*ee thereof( the Co$$issioner of Internal Revenue' As a conse"uence( upon #e$an# of the 0ureau an#Hor Co$$issioner of Internal Revenue( the plaintiff was co$pelle# to $a&e a secon# pa*$ent to the 0ureau of Internal Revenue of its percentageH$anufacturersG sales taAes for the thir# "uarter of 422 an# that sai# secon# pa*$ent of plaintiff in the a$ount of P9(296( 9'9 was #ul* receive# %* the 0ureau of Internal Revenue' It is further a#$itte# %* #efen#ant Citi%an& that #uring the ti$e of the transactions in "uestion( plaintiff ha# %een $aintaining a chec&ing account with #efen#ant Citi%an&: that Citi%an& Chec& No' SN)39862 which was #rawn an# issue# %* the plaintiff in favor of the Co$$issioner of Internal Revenue was a crosse# chec& in that( on its face were two parallel lines an# written in %etween sai# lines was the phrase CPa*eeGs Account Onl*C: an# that #efen#ant Citi%an& pai# the full face value of the chec& in the a$ount of P9(296( 9'9 to the #efen#ant I0AA' It has %een #ul* esta%lishe# that for the pa*$ent of plaintiffGs percentage taA for the last "uarter of 422( the 0ureau of Internal Revenue issue# Revenue TaA Receipt No' 8292335( #ate# Octo%er 53( 422( #esignating therein in Muntinlupa( Metro Manila( as the authori,e# agent %an& of Metro%anl( Ala%ang %ranch to receive the taA pa*$ent of the plaintiff' On Dece$%er 4( 422( plaintiffGs Citi%an& Chec& No' SN)39862( together with the Revenue TaA Receipt No' 8292335( was #eposite# with #efen#ant I0AA( through its Er$ita 0ranch' The latter accepte# the chec& an# sent it to the Central Clearing >ouse for clearing on the sa$# #a*( with the in#orse$ent at the %ac& Call prior in#orse$ents an#Hor lac& of in#orse$ents guarantee#'C Thereafter( #efen#ant I0AA presente# the chec& for pa*$ent to #efen#ant Citi%an& on sa$e #ate( Dece$%er 4( 422( an# the latter pai# the face value of the chec& in the a$ount of P9(296( 9'9 ' Conse"uentl*( the a$ount of P9(296( 9'9 was #e%ite# in plaintiffGs account with the #efen#ant Citi%an& an# the chec& was returne# to the plaintiff' Ipon verification( plaintiff #iscovere# that its Citi%an& Chec& No' SN)39862 in the a$ount of P9(296( 9'9 was not pai# to the Co$$issioner of Internal Revenue' >ence( in separate letters #ate# Octo%er 56( 424( a##resse# to the #efen#ants( the plaintiff notifie# the latter that in case it will %e re)assesse# %* the 0IR for the pa*$ent of the taAes covere# %* the sai# chec&s( then plaintiff shall hol# the #efen#ants lia%le for rei$%urse$ent of the face value of the sa$e' 0oth #efen#ants #enie# lia%ilit* an# refuse# to pa*' In a letter #ate# 7e%ruar* 58( 483 %* the Acting Co$$issioner of Internal Revenue a##resse# to the plaintiff ) suppose# to %e EAhi%it CDC( the latter was officiall* infor$e#( a$ong others( that its chec& in the a$ount of P9( 296( 9'9 was not pai# to the govern$ent or its authori,e# agent an# instea#

encashe# %* unauthori,e# persons( hence( plaintiff has to pa* the sai# a$ount within fifteen #a*s fro$ receipt of the letter' Ipon a#vice of the plaintiffGs law*ers( plaintiff on March ( 485( pai# to the 0ureau of Internal Revenue( the a$ount of P9(296( 9'9 ( representing pa*$ent of plaintiffGs percentage taA for the thir# "uarter of 422' As a conse"uence of #efen#antGs refusal to rei$%urse plaintiff of the pa*$ent it ha# $a#e for the secon# ti$e to the 0IR of its percentage taAes( plaintiff file# on Banuar* 53( 48; its original co$plaint %efore this Court' On Dece$%er 59( 481( #efen#ant I0AA was $erge# with the Philippine Co$$ercial International 0an& .PCI 0an&/ with the latter as the surviving entit*' Defen#ant Citi%an& $aintains that: the pa*$ent it $a#e of plaintiffGs Citi%an& Chec& No' SN)39862 in the a$ount of P9(296( 9'9 Cwas in #ue courseC: it $erel* relie# on the clearing sta$p of the #epositor*Hcollecting %an&( the #efen#ant I0AA that Call prior in#orse$ents an#Hor lac& of in#orse$ents guarantee#C: an# the proAi$ate cause of plaintiffGs in?ur* is the gross negligence of #efen#ant I0AA in in#orsing the plaintiffGs Citi%an& chec& in "uestion' It is a#$itte# that on Dece$%er 4( 422 when the procee#s of plaintiffGs Citi%an& Chec& No' SN)398862 was pai# to #efen#ant I0AA as collecting %an&( plaintiff was $aintaining a chec&ing account with #efen#ant Citi%an&'C1 Although it was not a$ong the stipulate# facts( an investigation %* the National 0ureau of Investigation .N0I/ reveale# that Citi%an& Chec& No' SN)39862 was recalle# %* +o#ofre#o Rivera( the +eneral De#ger Accountant of 7or#' >e purporte#l* nee#e# to hol# %ac& the chec& %ecause there was an error in the co$putation of the taA #ue to the 0ureau of Internal Revenue .0IR/' <ith RiveraGs instruction( PCI0an& replace# the chec& with two of its own ManagerGs Chec&s .MCs/' Allege# $e$%ers of a s*n#icate later #eposite# the two MCs with the Pacific 0an&ing Corporation' 7or#( with leave of court( file# a thir#)part* co$plaint %efore the trial court i$plea#ing Pacific 0an&ing Corporation .P0C/ an# +o#ofre#o Rivera( as thir# part* #efen#ants' 0ut the court #is$isse# the co$plaint against P0C for lac& of cause of action' The course li&ewise #is$isse# the thir#)part* co$plaint against +o#ofre#o Rivera %ecause he coul# not %e serve# with su$$ons as the N0I #eclare# hi$ as a Cfugitive fro$ ?usticeC' On Bune 1( 484( the trial court ren#ere# its #ecision( as followsCPre$ises consi#ere#( ?u#g$ent is here%* ren#ere# as followsC ' Or#ering the #efen#ants Citi%an& an# I0AA .now PCI 0an&/( ?ointl* an# severall*( to pa* the plaintiff the a$ount of P9(296( 9'9 representing the face value of plaintiffGs Citi%an& Chec& No' SN)39862( with interest thereon at the legal rate starting Banuar* 53( 48;( the #ate when the original co$plaint was file# until the a$ount is full* pai#( plus costs: C5' On #efen#ant Citi%an&Gs cross)clai$or#ering the cross)#efen#ant I0AA .now PCI 0an&/ to rei$%urse #efen#ant Citi%an& for

14

whatever a$ount the latter has pai# or $a* pa* to the plaintiff in accor#ance with neAt prece#ing paragraph: C;' The counterclai$s asserte# %* the #efen#ants against the plaintiff( as well as that asserte# %* the cross)#efen#ant against the cross)clai$ant are #is$isse#( for lac& of $erits: an# C9' <ith costs against the #efen#ants' SO ORDERED'C6 Not satisfie# with the sai# #ecision( %oth #efen#ants( Citi%an& an# PCI0an&( elevate# their respective petitions for review on certiorari to the Courts of Appeals' On March 52( 441( the appellate court issue# its ?u#g$ent as followsC<>ERE7ORE( in view of the foregoing( the court A77IRMS the appeale# #ecision with $o#ifications' The court here%* ren#eres ?u#g$ent' .0m.00.$8 the co$plaint in Civil Case No' 94582 insofar as #efen#ant Citi%an& N'A' is concerne#: 5' Or%er.$8 the #efen#ant I0AA now PCI 0an& to pa* the plaintiff the a$ount of P9(296( 9'9 representing the face value of plaintiffGs Citi%an& Chec& No' SN)39862( with interest thereon at the legal rate starting Banuar* 53( 48;( the #ate when the original co$plaint was file# until the a$ount is full* pai#: ;' Dis$issing the counterclai$s asserte# %* the #efen#ants against the plaintiff as well as that asserte# %* the cross)#efen#ant against the cross)clai$ant( for lac& of $erits' Costs against the #efen#ant I0AA .now PCI 0an&/' IT IS SO ORDERED'C2 PCI 0an& $ove# to reconsi#er the a%ove)"uote# #ecision of the Court of Appeals( while 7or# file# a CMotion for Partial Reconsi#eration'C 0oth $otions were #enie# for lac& of $erit' Separatel*( PCI0an& an# 7or# file# %efore this Court( petitions for review %* certiorari un#er Rule 91' In +'R' No' 5 9 ;( PCI0an& see&s the reversal of the #ecision an# resolution of the Twelfth Division of the Court of Appeals conten#ing that it $erel* acte# on the instruction of 7or# an# such casue of action ha# alrea#* prescri%e#' PCI0an& sets forth the following issues for consi#erationI' Di# the respon#ent court err when( after fin#ing that the petitioner acte# on the chec& #rawn %* respon#ent 7or# on the sai# respon#entGs instructions( it nevertheless foun# the petitioner lia%le to the sai# respon#ent for the full a$ount of the sai# chec&' II' Di# the respon#ent court err when it #i# not fin# prescription in favor of the petitioner'8

In a counter $ove( 7or# file# its petition #oc&ete# as +'R' No' 5 924( "uestioning the sa$e #ecision an# resolution of the Court of Appeals( an# pra*ing for the reinstate$ent in toto of the #ecision of the trial court which foun# %oth PCI0an& an# Citi%an& ?ointl* an# severall* lia%le for the loss' In +'R' No' 5 924( appellant 7or# presents the following propositions for consi#erationI' Respon#ent Citi%an& is lia%le to petitioner 7or# consi#ering that' As #rawee %an&( respon#ent Citi%an& owes to petitioner 7or#( as the #rawer of the su%?ect chec& an# a #epositor of respon#ent Citi%an&( an a%solute an# contractual #ut* to pa* the procee#s of the su%?ect chec& onl* to the pa*ee thereof( the Co$$issioner of Internal Revenue' 5' Respon#ent Citi%an& faile# to o%serve its #ut* as %an&er with respect to the su%?ect chec&( which was crosse# an# pa*a%le to CPa*eeGs Account Onl*'C ;' Respon#ent Citi%an& raises an issue for the first ti$e on appeal: thus the sa$e shoul# not %e consi#ere# %* the >onora%le Court' 9' As correctl* hel# %* the trial court( there is no evi#ence of gross negligence on the part of petitioner 7or#'4 II' PCI 0an& is lia%le to petitioner 7or# consi#ering that' There were no instructions fro$ petitioner 7or# to #eliver the procee#s of the su%?ect chec& to a person other than the pa*ee na$e# therein( the Co$$issioner of the 0ureau of Internal Revenue: thus( PCI0an&Gs onl* o%ligation is to #eliver the procee#s to the Co$$issioner of the 0ureau of Internal Revenue' 3 5' PCI0an& which affiAe# its in#orse$ent on the su%?ect chec& .CAll prior in#orse$ent an#Hor lac& of in#orse$ent guarantee#C/( is lia%le as collecting %an&' ;' PCI0an& is %arre# fro$ raising issues of fact in the instant procee#ings' 5 9' Petitioner 7or#Gs cause of action ha# not prescri%e#' ; II. G.R. No. 128)&4 The sa$e s*sn#icate apparentl* e$%e,,le# the procee#s of chec&s inten#e#( this ti$e( to settle 7or#Gs percentage taAes appertaining to the secon# "uarter of 428 an# the first "uarter of 424' The facts as narrate# %* the Court of Appeals are as follows7or# #rew Citi%an& Chec& No' SN) 3142 on Bul* 4( 428 in the a$ount of P1(81 (236';2 representing the percentage taA #ue for the secon# "uarter of 428 pa*a%le to the Co$$issioner of Internal Revenue' A 0IR Revenue TaA Receipt No' 58691;81 was issue# for the sai# purpose'

15

On April 53( 424( 7or# #rew another Citi%an& Chec& No' SN) 6138 in the a$ount of P6(; (14 '2;( representing the pa*$ent of percentage taA for the first "uarter of 424 an# pa*a%le to the Co$$issioner of Internal Revenue' Again a 0IR Revenue TaA Receipt No' A) 642 63 was issue# for the sai# purpose' 0oth chec&s were Ccrosse# chec&sC an# contain two #iagonal lines on its upper corner %etween( which were written the wor#s Cpa*a%le to the pa*eeGs account onl*'C The chec&s never reache# the pa*ee( CIR' Thus( in a letter #ate# 7e%ruar* 58( 483( the 0IR( Region 9)0( #e$an#e# for the sai# taA pa*$ents the correspon#ing perio#s a%ove) $entione#' As far as the 0IR is concernce#( the sai# two 0IR Revenue TaA Receipts were consi#ere# Cfa&e an# spuriousC' This ano$al* was confir$e# %* the N0I upon the initiative of the 0IR' The fin#ings force# 7or# to pa* the 0IR a new( while an action was file# against Citi%an& an# PCI0an& for the recover* of the a$ount of Citi%an& Chec& Nu$%ers SN) 3142 an# 6138' The Regional Trial Court of Ma&ati( 0ranch 12( which trie# the case( $a#e its fin#ings on the modus operandi of the s*n#icate( as followsCA certain Mr' +o#ofre#o Rivera was e$plo*e# %* the plaintiff 7ORD as its +eneral De#ger Accountant' As such( he prepare# the plaintiffGs chec& $ar&e# EA' GAG [Citi%an& Chec& No' Sn) 3142! for pa*$ent to the 0IR' Instea#( however( fo #elivering the sa$e of the pa*ee( he passe# on the chec& to a co)conspirator na$e# Re$%erto Castro who was a pro)$anager of the San An#res 0ranch of PCI0'V In connivance with one <inston Dula*( Castro hi$self su%se"uentl* opene# a Chec&ing Account in the na$e of a fictitious person #eno$inate# as GRe*nal#o re*esG in the Meralco 0ranch of PCI0an& where Dula* wor&s as Assistant Manager' After an initial #eposit of P 33'33 to vali#ate the account( Castro #eposite# a worthless 0an& of A$erica Chec& in eAactl* the sa$e a$ount as the first 7ORD chec& .EAh' CAC( P1(81 (236';2/ while this worthless chec& was course# through PCI0Gs $ain office enroute to the Central 0an& for clearing( replace# this worthless chec& with 7ORDGs EAhi%it GAG an# accor#ingl* ta$pere# the acco$pan*ing #ocu$ents to cover the replace$ent' As a result( EAhi%it GAG was cleare# %* #efen#ant CITI0ANF( an# the fictitious #eposit account of GRe*nal#o Re*esG was cre#ite# at the PCI0 Meralco 0ranch with the total a$ount of the 7ORD chec& EAhi%it GAG' The sa$e $etho# was again utili,e# %* the s*n#icate in profiting fro$ EAh' G0G [Citi%an& Chec& No' SN) 6138! which was su%se"uentl* pilfere# %* AleAis Marin#o( RiveraGs Assistant at 7ORD' 7ro$ this GRe*nal#o Re*esG account( Castro #rew various chec&s #istri%uting the sahres of the other participating conspirators na$el* . / CRISANTO 0ERNA0E( the $aster$in# who for$ulate# the $etho# for the e$%e,,le$ent: .5/ RODOD7O R' DE DEON a custo$s %ro&er who negotiate# the initial contact %etween 0erna%e( 7ORDGs +o#ofre#o Rivera an# PCI0Gs Re$%erto Castro: .;/ BIAN @ASTIDDO who assiste# #e Deon in the initial arrange$ents: .9/ +ODO7REDO RI@ERA( 7ORDGs accountant who passe# on the first chec& .EAhi%it CAC/ to Castro: .1/ REMERTO CASTRO( PCI0Gs pro)$anager at San An#res who perfor$e# the switching of chec&s in the clearing process an# opene# the fictitious Re*nal#o

Re*es account at the PCI0 Meralco 0ranch: .6/ <INSTON DIDAK( PCI0Gs Assistant Manager at its Meralco 0ranch( who assiste# Castro in switching the chec&s in the clearing process an# facilitate# the opening of the fictitious Re*nal#o Re*esG %an& account: .2/ ADEUIS MARINDO( RiveraGs Assistant at 7ORD( who gave the secon# chec& .EAh' C0C/ to Castro: .8/ EDEITERIO BIMENEW( 0IR Collection Agent who provi#e# the fa&e an# spurious revenue taA receipts to $a&e it appear that the 0IR ha# receive# 7ORDGs taA pa*$ents' Several other persons an# entities were utili,e# %* the s*n#icate as con#uits in the #is%urse$ents of the procee#s of the two chec&s( %ut li&e the afore$entione# participants in the conspirac*( have not %een i$plea#e# in the present case' The $anner %* which the sai# fun#s were #istri%ute# a$ong the$ are tracea%le fro$ the recor# of chec&s #rawn against the original CRe*nal#o Re*esC account an# in#u%ita%l* i#entif* the parties who illegall* %enefite# therefro$ an# rea#il* in#icate in what a$ounts the* #i# so'C 9 On Dece$%er 4( 488( Regional Trial Court of Ma&ati( 0ranch 12( hel# #rawee)%an&( Citi%an&( lia%le for the value of the two chec&s while a#solving PCI0an& fro$ an* lia%ilit*( #isposing as followsC<>ERE7ORE( ?u#g$ent is here%* ren#ere# sentencing #efen#ant CITI0ANF to rei$%urse plaintiff 7ORD the total a$ount of P 5( 6;(548' 3 pra*e# for in its co$plaint( with 6M interest thereon fro$ #ate of first written #e$an# until full pa*$ent( plus P;33(333'33 attorne*Gs fees an# eApenses litigation( an# to pa* the #efen#ant( PCI0 .on its counterclai$ to crossclai$/ the su$ of P;33(333'33 as attorne*Gs fees an# costs of litigation( an# pa* the costs' SO ORDERED'C
1

0oth 7or# an# Citi%an& appeale# to the Court of Appeals which affir$e#( in toto( the #ecision of the trial court' >ence( this petition' Petitioner 7or# pra*s that ?u#g$ent %e ren#ere# setting asi#e the portion of the Court of Appeals #ecision an# its resolution #ate# March 1( 442( with respect to the #is$issal of the co$plaint against PCI0an& an# hol#ing Citi%an& solel* responsi%le for the procee#s of Citi%an& Chec& Nu$%ers SN) 3142 an# 6138 for P1(81 (236'2; an# P6(; (14 '2; respectivel*' 7or# avers that the Court of Appeals erre# in #is$issing the co$plaint against #efen#ant PCI0an& consi#ering thatI' Defen#ant PCI0an& was clearl* negligent when it faile# to eAercise the #iligence re"uire# to %e eAercise# %* it as a %an&ing insitution' II' Defen#ant PCI0an& clearl* faile# to o%serve the #iligence re"uire# in the selection an# supervision of its officers an# e$plo*ees' III' Defen#ant PCI0an& was( #ue to its negligence( clearl* lia%le for the loss or #a$age resulting to the plaintiff 7or# as a conse"uence of the su%stitution of the chec& consistent with Section 1 of Central 0an& Circular No' 183 series of 422' I@' Assu$ing arguedo that #efe#ant PCI0an& #i# not accept( en#orse or negotiate in #ue course the

16

su%?ect chec&s( it is lia%le( un#er Article 5 19 of the Civil Co#e( to return the $one* which it a#$its having receive#( an# which was cre#ite# to it its Central %an& account' 6 The $ain issue presente# for our consi#eration %* these petitions coul# %e si$plifie# as follows- >as petitioner 7or# the right to recover fro$ the collecting %an& .PCI0an&/ an# the #rawee %an& .Citi%an&/ the value of the chec&s inten#e# as pa*$ent to the Co$$issioner of Internal RevenueE Or has 7or#Gs cause of action alrea#* prescri%e#E Note that in these cases( the chec&s were #rawn against the #rawee %an&( %ut the title of the person negotiating the sa$e was allege#l* #efective %ecause the instru$ent was o%taine# %* frau# an# unlawful $eans( an# the procee#s of the chec&s were not re$itte# to the pa*ee' It was esta%lishe# that instea# of pa*ing the chec&s to the CIR( for the settle$ent of the approprite "uarterl* percentage taAes of 7or#( the chec&s were #iverte# an# encashe# for the eventual #istri%ution a$ong the $$%ers of the s*n#icate' As to the unlawful negotiation of the chec& the applica%le law is Section 11 of the Negotia%le Instru$ents Daw .NID/( which provi#esC<hen title #efective )) The title of a person who negotiates an instru$ent is #efective within the $eaning of this Act when he o%taine# the instru$ent( or an* signature thereto( %* frau#( #uress( or fore an# fear( or other unlawful $eans( or for an illegal consi#eration( or when he negotiates it in %reach of faith or un#er such circu$stances as a$ount to a frau#'C Pursuant to this provision( it is vital to show that the negotiation is $a#e %* the perpetator in %reach of faith a$ounting to frau#' The person negotiating the chec&s $ust have gone %e*on# the authorit* given %* his principal' If the principal coul# prove that there was no negligence in the perfor$ance of his #uties( he $a* set up the personal #efense to escape lia%ilit* an# recover fro$ other parties who' Though their own negligence( alowe# the co$$ission of the cri$e' In this case( we note that the #irect perpetrators of the offense( na$el* the e$%e,,lers %elonging to a s*n#icate( are now fugitives fro$ ?ustice' The* have( even if te$poraril*( escape# lia%ilit* for the e$%e,,le$ent of $illions of pesos' <e are thus left onl* with the tas& of #eter$ining who of the present parties %efore us $ust %ear the %ur#en of loss of these $illions' It all %oils #own to the"uestion of lia%ilit* %ase# on the #egree of negligence a$ong the parties concerne#' 7ore$ost( we $ust resolve whether the in?ure# part*( 7or#( is guilt* of the Ci$pute# contri%utor* negligenceC that woul# #efeat its clai$ for rei$%urse$ent( %earing ing $in# that its e$plo*ees( +o#ofre#o Rivera an# AleAis Marin#o( were a$ong the $e$%ers of the s*n#icate' Citi%an& points out that 7or# allowe# its ver* own e$plo*ee( +o#ofre#o Rivera( to negotiate the chec&s to his co) conspirators( instea# of #elivering the$ to the #esignate# authori,e# collecting %an& .Metro%an&)Ala%ang/ of the pa*ee( CIR' Citi%an& %ewails the fact that 7or# was re$iss in the supervision an# control of its own e$plo*ees( inas$uch as it onl* #iscovere# the s*n#icateGs activities through the infor$ation given %* the pa*ee of the chec&s after an unreasona%le perio# of ti$e' PCI0an& also %la$es 7or# of negligence when it allege#l* authori,e# +o#ofre#o Rivera to #ivert the procee#s of Citi%an& Chec& No' SN)39862( instea# of using it to pa* the 0IR' As to the su%se"uent run)aroun# of un#s of Citi%an& Chec& Nos' SN) 3142 an# 6138( PCI0an& clai$s that the proAi$ate cause of the #a$ge to 7or# lies in its own officers an#

e$plo*ees who carrie# out the fra#ulent sche$es an# the transactions' These circu$stances were not chec&e# %* other officers of the co$pan* inclu#ing its co$ptroller or internal au#itor' PCI0an& conten#s that the inaction of 7or# #espite the enor$it* of the a$ount involve# was a sheer negligence an# state# that( as %etween two innocent persons( one of who$ $ust suffer the conse"uences of a %reach of trust( the one who $a#e it possi%le( %* his act of negligence( $ust %ear the loss' 7or its part( 7or# #enies an* negligence in the perfor$ance of its #uties' It avers that there was no evi#ence presente# %efore the trial court showing lac& of #iligence on the part of 7or#' An#( citing the case of (empesaw vs. 6ourt of 'ppeals, 2 7or# argues that even if there was a fin#ing therein that the #rawer was negligent( the #rawee %an& was still or#ere# to pa* #a$ages' 7urther$ore( 7or# conten#s the +o#ofre#o rivera was not authori,e# to $a&e an* representation in its %ehalf( specificall*( to #ivert the procee#s of the chec&s' It a##s that Citi%an& raise# the issue of i$pute# negligence against 7or# for the first ti$e on appeal' Thus( it shoul# not %e consi#ere# %* this Court' On this point( ?urispru#ence regar#ing the i$pute# negligence of e$plo*er in a $aster)servant relationship is instructive' Since a $aster $a* %e hel# for his servantGs wrongful act( the law i$putes to the $aster the act of the servant( an# if that act is negligent or wrongful an# proAi$atel* results in in?ur* to a thir# person( the negligence or wrongful con#uct is the negligence or wrongful con#uct of the $aster( for which he is lia%le' 8 The general rule is that if the $aster is in?ure# %* the negligence of a thir# person an# %* the concuring contri%utor* negligence of his own servant or agent( the latterGs negligence is i$pute# to his superior an# will #efeat the superiorGs action against the thir# person( asu$ing( of course that the contri%utor* negligence was the proC.m#te 4#+0e of the in?ur* of which co$plaint is $a#e' 4 Accor#ingl*( we nee# to #eter$ine whether or not the action of +o#ofre#o Rivera( 7or#Gs +eneral De#ger Accountant( an#Hor AleAis Marin#o( his assistant( was the proAi$ate cause of the loss or #a$age' AS #efine#( proAi$ate cause is that which( in the natural an# continuous se"uence( un%ro&en %* an* efficient( intervening cause pro#uces the in?ur* an# without the result woul# not have occurre#'53 It appears that although the e$plo*ees of 7or# initiate# the transactions attri%uta%le to an organi,e# s*n#icate( in our view( their actions were not the proAi$ate cause of encashing the chec&s pa*a%le to the CIR' The #egree of 7or#Gs negligence( if an*( coul# not %e characteri,e# as the proAi$ate cause of the in?ur* to the parties' The 0oar# of Directors of 7or#( we note( #i# not confir$ the re"uest of +o#ofre#o Rivera to recall Citi%an& Chec& No' SN) 39862' RiveraGs instruction to replace the sai# chec& with PCI0an&Gs ManagerGs Chec& was not in theor#inar* course of %usiness which coul# have pro$pte# PCI0an& to vali#ate the sa$e' As to the preparation of Citi%an& Chec&s Nos' SN) 3142 an# 6138( it was esta%lishe# that these chec&s were $a#e pa*a%le to the CIR' 0oth were crosse# chec&s' These chec&s were apparentl* turne# aroun# %* 7or#Gs e$ploees( who were acting on their own personal capacit*' +iven these circu$stances( the $ere fact that the forger* was co$$itte# %* a #rawer)pa*orGs confi#ential e$plo*ee or agent( who %* virtue of his position ha# unusual facilities for perpertrating the frau# an# i$posing the forge# paper upon the %an&( #oes notentitle the %an& toshift the loss to the #rawer) pa*or( in the a%sence of so$e circu$stance raising estoppel

17

against the #rawer'5 This rule li&ewise applies to the chec&s frau#ulentl* negotiate# or #iverte# %* the confi#ential e$plo*ees who hol# the$ in their possession' <ith respect to the negligence of PCI0an& in the pa*$ent of the three chec&s involve#( separatel*( the trial courts foun# variations %etween the negotiation of Citi%an& Chec& No' SN) 39862 an# the $isapplication of total procee#s of Chec&s SN) 3142 an# 6138' Therefore( we have to scrutini,e( separatel*( PCI0an&Gs share of negligence when the s*n#icate achieve# its ulti$ate agen#a of stealing the procee#s of these chec&s' G.R. No0. 12141' #$% 121479 Citi%an& Chec& No' SN)39862 was #eposite# at PCI0an& through its Er$ita 0ranch' It was course# through the or#inar* %an&ing transaction( sent to Central Clearing with the in#orse$ent at the %ac& Call prior in#orse$ents an#Hor lac& of in#orse$ents guarantee#(C an# was presente# to Citi%an& for pa*$ent' Thereafter PCI0an&( instea# of re$itting the procee#s to the CIR( prepare# two of its ManagerGs chec&s an# ena%le# the s*n#icate to encash the sa$e' On recor#( PCI0an& faile# to verif* the authorit* of Mr' Rivera to negotiate the chec&s' The neglect of PCI0an& e$plo*ees to verif* whether his letter re"uesting for the replace$ent of the Citi%an& Chec& No' SN)39862 was #ul* authori,e#( showe# lac& of care an# pru#ence re"uire# in the circu$stances' 7urther$ore( it was a#$itte# that PCI0an& is authori,e# to collect the pa*$ent of taApa*ers in %ehalf of the 0IR' As an agent of 0IR( PCI0an& is #ut* %oun# to consult its principal regar#ing the unwarrante# instructions given %* the pa*or or its agent' As aptl* state# %* the trial court( to witCAAA' Since the "uestione# crosse# chec& was #eposite# with I0AA [now PCI0an&!( which clai$e# to %e a #epositor*Hcollecting %an& of 0IR( it has the responsi%ilit* to $a&e sure that the chec& in "uestion is #eposite# in Pa*eeGs account onl*' AAA AAA AAA

%ecause it $a#e it pass through the clearing house an# therefore Citi%an& ha# no other option %ut to pa* it' Thus( Citi%an& ha# no other option %ut to pa* it' Thus( Citi%an& assets that the proAi$ate cause of 7or#Gs in?ur* is the gross negligence of PCI0an&' Since the "uestione #crosse# chec& was #eposite# with PCI0an&( which clai$e# to %e a #epositor*Hcollecting %an& of the 0IR( it ha# the responsi%ilit* to $a&e sure that the chec& in "uestions is #eposite# in Pa*eeGs account onl*' In#ee#( the crossing of the chec& with the phrase CPa*eeGs Account Onl*(C is a warning that the chec& shoul# %e #eposite# onl* in the account of the CIR' Thus( it is the #ut* of the collecting %an& PCI0an& to ascertain that the chec& %e #eposite# in pa*eeGs account onl*' Therefore( it is the collecting %an& .PCI0an&/ which is %oun# to scrunini,e the chec& an# to &now its #epositors %efore it coul# $a&e the clearing in#orse$ent Call prior in#orse$ents an#Hor lac& of in#orse$ent guarantee#C' In 7anco de =ro Savings and #ortgage 7an& vs. Equitable 7an&ing 6orporation,,/ we rule#CAnent petitionerGs lia%ilit* on sai# instru$ents( this court is in full accor# with the ruling of the PC>CGs 0oar# of Directors thatGIn presenting the chec&s for clearing an# for pa*$ent( the #efen#ant $a#e an eApress guarantee on the vali#it* of Call prior en#orse$ents'C Thus( sta$pe# at the %ac& of the chec&s are the #efe#antGs clear warrant*- ADD PRIOR ENDORSEMENTS ANDHOR DACF O7 ENDORSEMENTS +IARANTEED' <ithout such warrant*( plaintiff woul# not have pai# on the chec&s'G No a$ount of legal ?argon can reverse the clear $eaning of #efen#antGs warrant*' As the warrant* has proven to %e false an# inaccurate( the #efen#ant is lia%le for an* #a$age arising out of the falsit* of its representation'C51 Dastl*( %an&ing %usiness re"uires that the one who first cashes an# negotiates the chec& $ust ta&e so$e percautions to learn whether or not it is genuine' An# if the one cashing the chec& through in#ifference or othe circu$stance assists the forger in co$$itting the frau#( he shoul# not %e per$itte# to retain the procee#s of the chec& fro$ the #rawee whose sole fault was that it #i# not #iscover the forger* or the #efect in the title of the person negotiating the instru$ent %efore pa*ing the chec&' 7or this reason( a %an& which cashes a chec& #rawn upon another %an&( without re"uiring proof as to the i#entit* of persons presenting it( or $a&ing in"uiries with regar# to the$( cannot hol# the procee#s against the #rawee when the procee#s of the chec&s were afterwar#s #iverte# to the han#s of a thir# part*' In such cases the #rawee %an& has a right to %elieve that the cashing %an& .or the collecting %an&/ ha#( %* the usual proper investigation( satisfie# itself of the authenticit* of the negotiation of the chec&s' Thus( one who encashe# a chec& which ha# %een forge# or #iverte# an# in turn receive# pa*$ent thereon fro$ the #rawee( is guilt* of negligence which proAi$atel* contri%ute# to the success of the frau# practice# on the #rawee %an&' The latter $a* recover fro$ the hol#er the $one* pai# on the chec&'56 >aving esta%lishe# that the collecting %an&Gs negligence is the proAi$ate cause of the loss( we conclu#e that PCI0an& is lia%le in the a$ount correspon#ing to the procee#s of Citi%an& Chec& No' SN)39862' G.R. No. 128)&4

As agent of the 0IR .the pa*ee of the chec&/( #efen#ant I0AA shoul# receive instructions onl* fro$ its principal 0IR an# not fro$ an* other person especiall* so when that person is not &nown to the #efen#ant' It is ver* i$pru#ent on the part of the #efen#ant I0AA to ?ust rel* on the allege# telephone call of the one +o#ofre#o Rivera an# in his signature consi#ering that the plaintiff is not a client of the #efen#ant I0AA'C It is a well)settle# rule that the relationship %etween the pa*ee or hol#er of co$$ercial paper an# the %an& to which it is sent for collection is( in the a%sence of an argree$ent to the contrar*( that of principal an# agent'55 A %an& which receives such paper for collection is the agent of the pa*ee or hol#er'5; Even consi#ering arguendo, that the #iversion of the a$ount of a chec& pa*a%le to the collecting %an& in %ehalf of the #esignate# pa*ee $a* %e allowe#( still such #iversion $ust %e properl* authori,e# %* the pa*or' Otherwise state#( the #iversion can %e ?ustifie# onl* %* proof of authorit* fro$ the #rawer( or that the #rawer has clothe# his agent with apparent authorit* to receive the procee#s of such chec&' Citi%an& further argues that PCI 0an&Gs clearing sta$p appearing at the %ac& of the "uestione# chec&s stating that ADD PRIOR INDORSEMENTS ANDHOR DACF O7 INDORSEMENTS +IRANTEED shoul# ren#er PCI0an& lia%le

18

The trial court an# the Court of Appeals foun# that PCI0an& ha# no official act in the or#inar* course of %usiness that woul# attri%ute to it the case of the e$%e,,le$ent of Citi%an& Chec& Nu$%ers SN) 3142 an# 6138( %ecause PCI0an& #i# not actuall* receive nor hol# the two 7or# chec&s at all' The trial court hel#( thusCNeither is there an* proof that #efen#ant PCI0an& contri%ute# an* official or conscious participation in the process of the e$%e,,le$ent' This Court is convince# that the switching operation .involving the chec&s while in transit for CclearingC/ were the clan#estine or hi##en actuations perfor$e# %* the $e$%ers of the s*n#icate in their own personl( covert an# private capacit* an# #one without the &nowle#ge of the #efen#ant PCI0an&TC52 In this case( there was no evi#ence presente# confir$ing the conscious particiapation of PCI0an& in the e$%e,,le$ent' As a general rule( however( a %an&ing corporation is lia%le for the wrongful or tortuous acts an# #eclarations of its officers or agents within the course an# scope of their e$plo*$ent'58 A %an& will %e hel# lia%le for the negligence of its officers or agents when acting within the course an# scope of their e$plo*$ent' It $a* %e lia%le for the tortuous acts of its officers even as regar#s that species of tort of which $alice is an essential ele$ent' In this case( we fin# a situation where the PCI0an& appears also to %e the victi$ of the sche$e hatche# %* a s*n#icate in which its own $anage$ent e$plo*ees ha# particiapte#' The pro)$anager of San An#res 0ranch of PCI0an&( Re$%erto Castro( receive# Citi%an& Chec& Nu$%ers SN) 3142 an# 6138' >e passe# the chec&s to a co)conspirator( an Assistant Manager of PCI0an&Gs Meralco 0ranch( who helpe# Castro open a Chec&ing account of a fictitious person na$e# CRe*nal#o Re*es'C Castro #eposite# a worthless 0an& of A$erica Chec& in eAactl* the sa$e a$ount of 7or# chec&s' The s*n#icate ta$pere# with the chec&s an# succee#e# in replacing the worthless chec&s an# the eventual encash$ent of Citi%an& Chec& Nos' SN 3142 an# 6138' The PCI0an& Ptro)$anager( Castro( an# his co)conspirator Assistant Manager apparentl* perfor$e# their activities using facilities in their official capacit* or authorit* %ut for their personal an# private gain or %enefit' A %an& hol#ing out its officers an# agents as worth* of confi#ence will not %e per$itte# to profit %* the frau#s these officers or agents were ena%le# to perpetrate in the apparent course of their e$plo*$ent: nor will t %e per$itte# to shir& its responsi%ilit* for such frau#s( even though no %enefit $a* accrue to the %an& therefro$' 7or the general rule is that a %an& is lia%le for the frau#ulent acts or representations of an officer or agent acting within the course an# apparent scope of his e$plo*$ent or authorit*'54 An# if an officer or e$plo*ee of a %an&( in his official capacit*( receives $one* to satisf* an evi#ence of in#e%ete#ness lo#ge# with his %an& for collection( the %an& is lia%le for his $isappropriation of such su$';3 Moreover( as correctl* pointe# out %* 7or#( Section 1; of Central 0an& Circular No' 183( Series of 422 provi#es that an* theft affecting ite$s in transit for clearing( shall %e for the account of sen#ing %an&( which in this case is PCI0an&' 0ut in this case( responsi%ilit* for negligence #oes not lie on PCI0an&Gs shoul#ers alone' The evi#ence on recor# shows that Citi%an& as #rawee %an& was li&ewise negligent in the perfor$ance of its #uties' Citi%an& faile# to esta%lish that its pa*$ent of 7or#Gs chec?s were $a#e in #ue course an# legall* in or#er' In its #efense( Citi%an& clai$s the genuineness an# #ue eAecution of sai# chec&s( consi#ering that Citi%an& . / has no &nowle#ge of an* infor$it* in the issuance of the chec&s in "uestion .5/ couple#

%* the fact that sai# chec&s were sufficientl* fun#e# an# .;/ the en#orse$ent of the Pa*ee or lac& thereof was guarantee# %* PCI 0an& .for$erl* I0AA/( thus( it has the o%ligation to honor an# pa* the sa$e' 7or its part( 7or# conten#s that Citi%an& as the #rawee %an& owes to 7or# an a%solute an# contractual #ut* to pa* the procee#s of the su%?ect chec& onl* to the pa*ee thereof( the CIR' Citing Section 65;5 of the Negotia%le Instru$ents Daw( 7or# argues that %* accepting the instru$ent( the acceptro which is Citi%an& engages that it will pa* accor#ing to the tenor of its acceptance( an# that it will pa* onl* to the pa*ee( .the CIR/( consi#ering the fact that here the chec& was crosse# with annotation CPa*ees Account Onl*'C As rule# %* the Court of Appeals( Citi%an& $ust li&ewise answer for the #a$ages incurre# %* 7or# on Citi%an& Chec&s Nu$%ers SN 3142 an# 6138( %ecause of the contractual relationship eAisting %etween the two' Citi%an&( as the #rawee %an& %reache# its contractual o%ligation with 7or# an# such #egree of culpa%ilit* contri%ute# to the #a$age cause# to the latter' On this score( we agree with the respon#ent courtGs ruling' Citi%an& shoul# have scrutini,e# Citi%an& Chec& Nu$%ers SN 3142 an# 6138 %efore pa*ing the a$ount of the procee#s thereof to the collecting %an& of the 0IR' One thing is clear fro$ the recor#- the clearing sta$ps at the %ac& of Citi%an& Chec& Nos' SN 3142 an# 6138 #o not %ear an* initials' Citi%an& faile# to notice an# verif* the a%sence of the clearing sta$ps' >a# this %een #ul* eAa$ine#( the switching of the worthless chec&s to Citi%an& Chec& Nos' 3142 an# 6138 woul# have %een #iscovere# in ti$e' 7or this reason( Citi%an& ha# in#ee# faile# to perfor$ what was incu$%ent upon it( which is to ensure that the a$ount of the chec&s shoul# %e pai# onl* to its #esignate# pa*ee' The fact that the #rawee %an& #i# not #iscover the irregularit* seasona%l*( in our view( consitutes negligence in carr*ing out the %an&Gs #ut* to its #epositors' The point is that as a %usiness affecte# with pu%lic interest an# %ecause of the nature of its functions( the %an& is un#er o%ligation to treat the accounts of its #epositors with $eticulous care( alwa*s having in $in# the fi#uciar* nature of their relationship';; Thus( invo&ing the #octrine of co$parative negligence( we are of the view that %oth PCI0an& an# Citi%an& faile# in their respective o%ligations an# %oth were negligent in the selection an# supervision of their e$plo*ees resulting in the encash$ent of Citi%an& Chec& Nos' SN 3142 AND 6138' Thus( we are constraine# to hol# the$ e"uall* lia%le for the loss of the procee#s of sai# chec&s issue# %* 7or# in favor of the CIR' Ti$e an# again( we have stresse# that %an&ing %usiness is so i$presse# with pu%lic interest where the trust an# confi#ence of the pu%lic in general is of para$ount u$portance such that the appropriate stan#ar# of #iligence $ust %e ver* high( if not the highest( #egree of #iligence';9 A %an&Gs lia%ilit* as o%ligor is not $erel* vicarious %ut pri$ar*( wherein the #efense of eAercise of #ue #iligence in the selection an# supervision of its e$plo*ees is of no $o$ent';1 0an&s han#le #ail* transactions involving $illions of pesos';6 0* the ver* nature of their wor& the #egree of responsi%ilit*( care an# trustworthiness eApecte# of their e$plo*ees an# officials is far greater than those of or#inar* cler&s an# e$plo*ees';2 0an&s are eApecte# to eAercise the highest #egree of #iligence in the selection an# supervision of their e$plo*ees';8 On the issue of prescription( PCI0an& clai$s that the action of 7or# ha# prescri%e# %ecause of its ina%ilit* to see& ?u#icial relief seasona%l*( consi#ering that the allege# negligent act too& place prior to Dece$%er 4( 422 %ut the relief was sought onl* in 48;( or seven *ears thereafter'

19

The statute of li$itations %egins to run when the %an& gives the #epositor notice of the pa*$ent( which is or#inaril* when the chec& is returne# to the allege# #rawer as a voucher with a state$ent of his account(;4 an# an action upon a chec& is or#inaril* governe# %* the statutor* perio# applica%le to instru$ents in writing'93 Our laws on the $atter provi#e that the action upon a written contract $ust %e %rought within ten *ear fro$ the ti$e the right of action accrues'9 hence( the rec&oning ti$e for the prescriptive perio# %egins when the instru$ent was issue# an# the correspon#ing chec& was returne# %* the %an& to its #epositor .nor$all* a $onth thereafter/' Appl*ing the sa$e rule( the cause of action for the recover* of the procee#s of Citi%an& Chec& No' SN 39862 woul# nor$all* %e a $onth after Dece$%er 4( 422( when Citi%an& pai# the face value of the chec& in the a$ount of P9(296( 9'9 ' Since the original co$plaint for the cause of action was file# on Banuar* 53( 489( %arel* siA *ears ha# lapse#' Thus( we conclu#e that 7or#Gs cause of action to recover the a$ount of Citi%an& Chec& No' SN 39862 was seasona%l* file# within the perio# provi#e# %* law' 7inall*( we also fin# thet 7or# is not co$pletel* %la$eless in its failure to #etect the frau#' 7ailure on the part of the #epositor to eAa$ine its pass%oo&( state$ents of account( an# cancelle# chec&s an# to give notice within a reasona%le ti$e .or as re"uire# %* statute/ of an* #iscrepanc* which it $a* in the eAercise of #ue care an# #iligence fin# therein( serves to $itigate the %an&sG lia%ilit* %* re#ucing the awar# of interest fro$ twelve percent . 5M/ to siA percent .6M/ per annu$' As provi#e# in Article 25 of the Civil Co#e of the Philippines( respon#i%ilit* arising fro$ negligence in the perfor$ance of ever* &in# of o%ligation is also #e$an#a%le( %ut such lia%ilit* $a* %e regulate# %* the courts( accor#ing to the circu$stances' In "uasi)#elicts( the contri%utor* negligence of the plaintiff shall re#uce the #a$ages that he $a* recover'95 A1EREFORE, the assaile# Decision an# Resolution of the Court of Appeals in CA)+'R' C@ No' 513 2 areAFFIRME . PCI0an&( &now for$erl* as Insular 0an& of Asia an# A$erica( i# #eclare# solel* responsi%le for the loss of the procee#s of Citi%an& Chec& No SN 39862 in the a$ount P9(296( 9'9 ( which shall %e pai# together with siA percent .6M/ interest thereon to 7or# Philippines Inc' fro$ the #ate when the original co$plaint was file# until sai# a$ount is full* pai#' >owever( the Decision an# Resolution of the Court of Appeals in CA)+'R' No' 589;3 are MO IFIE as follows- PCI0an& an# Citi%an& are a#?u#ge# lia%le for an# $ust share the loss( .concerning the procee#s of Citi%an& Chec& Nu$%ers SN 3142 an# 6138 totalling P 5( 6;(548' 3/ on a fift*)fift* ratio( an# each %an& is OR ERE to pa* 7or# Philippines Inc' P6(38 (694'31( with siA percent .6M/ interest thereon( fro$ the #ate the co$plaint was file# until full pa*$ent of sai# a$ount'.Dwphi..nEt Costs against Philippine Co$$ercial International 0an& an# Citi%an& N'A' SO OR ERE . 7ellosillo, #endo)a, 7uena, :e Feon, @r., @@, concur'

AUSTRIA;MARTINED, J.@ 0efore this Court is a petition for review on certiorari of the #ecision[ ! of the Court of Appeals in CA)+'R' No' CR No' 6;43( pro$ulgate# on Banuar* ;3( 446( affir$ing the conviction of petitioner Elvira Ku Oh %* the Regional Trial Court .RTC/( 0ranch 44( Lue,on Cit* an# the resolution #ate# Ma* ;3( 446 which #enie# her $otion for reconsi#eration' The facts as %orne %* the recor#s are as followsPetitioner purchase# pieces of ?ewelr* fro$ Soli# +ol# International Tra#ers( Inc'( a co$pan* engage# in ?ewelr* tra#ing' Due to her failure to pa* the purchase price( Soli# +ol# file# civil cases[5! against her for specific perfor$ance %efore the Regional Trial Court of Pasig' On Septe$%er 2( 443( petitioner an# Soli# +ol#( through its general $anager Boa"uin Novales III( entere# into a co$pro$ise agree$ent to settle sai# civil cases'[;! The co$pro$ise agree$ent( as approve# %* the trial court( provi#e# that petitioner shall issue a total of ninet*)nine post)#ate# chec&s in the a$ount of P13(333'33 each( #ate# ever* 1th an# ;3th of the $onth starting Octo%er ( 443 an# the %alance of over P $illion to %e pai# in lu$p su$ on Nove$%er 6( 449 which is also the #ue #ate of the 44th an# last post#ate# chec&' Petitioner issue# ten chec&s at P13(333'33 each( for a total of P133(333'33( #rawn against her account at the E"uita%le 0an&ing Corporation .E0C/( +race Par&( Caloocan Cit* 0ranch' Novales then #eposite# each of the ten chec&s on their respective #ue #ates with the 7ar East 0an& an# Trust Co$pan* .7E0TC/' >owever( sai# chec&s were #ishonore# %* E0C for the reason PAccount Close#'Q Dishonor slips were issue# for each chec& that was returne# to Novales'[9! On Octo%er 1( 445( Novales file# ten separate Infor$ations( #oc&ete# as Cri$inal Cases Nos' 45)5659; to 45);6515 %efore the RTC of Lue,on Cit* charging petitioner with violation of 0atas Pa$%ansa 0ilang 55( otherwise &nown as the 0ouncing Chec&s Daw'[1! EAcept for the #ates an# the chec& nu$%ers( the Infor$ations unifor$l* allegeThat on or a%out the T in Lue,on Cit*( Philippines( the sai# accuse# #i# then an# there willfull*( unlawfull* an# feloniousl* $a&e or #raw an# issue to BOALIIN P' DO@ADES III to appl* on account or for value E"uita%le 0an&ing Corp' +race Par& Caloocan 0ranch Chec& No' T #ate# T pa*a%le to SODID +ODD INTERNATIONAD TRADERS( INC' in the a$ount of P13(333'33( Philippine Currenc*( sai# accuse# well &nowing that at the ti$e of issue sheHheHthe* #i# not have sufficient fun#s in or cre#it with the #rawee %an& for pa*$ent of such chec& in full upon its present$ent( which chec& when presente# for pa*$ent was su%se"uentl* #ishonore# %* the #rawee %an& for insufficienc* of fun#sHAccount Close# an# #espite receipt of notice of such #ishonor( sai# accuse# faile# to pa* sai# SODID +ODD INTERNATIONAD TRADERS( INC' the a$ount of sai# chec& or to $a&e arrange$ent for full pa*$ent of the sa$e within five .1/ %an&ing #a*s after receiving sai# notice' CONTRARK TO DA<'[6! The cases were consoli#ate# an# su%se"uentl* raffle# to 0ranch 44 of the sai# RTC' Ipon arraign$ent( accuse# plea#e# not guilt*'[2! Trial then ensue#' On Dece$%er 55( 44;( the RTC ren#ere# its #ecision( the #ispositive portion of which rea#s<>ERE7ORE( this Court fin#s the accuse# +IIDTK of ten counts of violation of 0P 55 an# here%* sentences her to a penalt* of one *ear i$prison$ent for each count( or a total of ten *ears( to %e serve# in accor#ance with the li$itation prescri%e# in par' 9( Article 23 of the Revise# Penal Co#e an# to in#e$nif* co$plainant the a$ount of the chec&s in their totalit*( or in the a$ount of P133(333'33'

SE"ON

I2ISION

>G.R. No. 123297. *+$e ), 2&&'? EL2IRA :U O1, petitioner, vs. "OURT OF A!!EALS #$% !EO!LE OF T1E !1ILI!!INES, respondents. E"ISION

20

SO ORDERED'[8! Petitioner appeale# to the Court of Appeals alleging that- the RTC has no ?uris#iction over the offense charge# in the ten infor$ations: it overloo&e# the fact that no notice of #ishonor ha# %een given to the appellant as #rawer of the #ishonore# chec&s: it faile# to consi#er that the reason of Pclose# accountQ for the #ishonor of the ten chec&s in these cases is not the statutor* cause to warrant prosecution( $uch $ore a conviction( un#er 0'P' 0lg' 55: it faile# to consi#er that there is onl* one act which cause# the offense( if an*( an# not ten separate cases: an# it #isregar#e# the #efinition of what a Xchec&= is un#er Sec' 81 of the Negotia%le Instru$ents Daw'[4! 7in#ing the appeal to %e without $erit( the Court of Appeals affir$e# the #ecision of the trial court with costs against appellant' >ence( herein petition raising the following errorsI T>AT T>E COIRT O7 APPEADS ERRED IN NOT RESOD@IN+ T>E BIRISDICTIONAD ISSIE IN 7A@OR O7 T>E ACCISED)APPEDDANT 0K INBISTDK DEPRI@IN+ >ER O7 T>E DE+AD 0ENE7ITS O7 +I@IN+ RETROACTI@E E77ECT TO T>E PRO@ISIONS O7 R'A' NO' 264 EUPANDIN+ T>E BIRISDICTION O7 T>E IN7ERIOR COIRTS TO CO@ER T>E O77ENSES IN@OD@ED IN T>ESE CASES PIRSIANT TO ART' 55 O7 T>E RE@ISED PENAD CODE( T>IS IN E77ECT RENDERIN+ T>E BID+MENT O7 CON@ICTION PROMID+ATED 0K T>E TRIAD COIRT 0EDO< AND A77IRMED 0K T>E COIRT O7 APPEADS PATENTDK NIDD AND @OID 7OR >A@IN+ 0EEN RENDERED <IT>OIT OR IN EUCESS O7 BIRISDICTION' II T>AT T>E COIRT O7 APPEADS ERRED IN NOT RESOD@IN+ IN 7A@OR O7 ACCISED) APPEDDANT T>E 7ACT T>AT NO NOTICE O7 DIS>ONOR >AD 0EEN +I@EN >ER AS DRA<ER O7 T>E DIS>ONORED PC>ECFSQ PIRSIANT TO T>E RELIIREMENT EUPRESSDK PRO@IDED INDER 0ATAS PAM0ANSA 0IDAN+ 55' III T>AT T>E COIRT O7 APPEADS ERRED IN CONSTRIIN+ T>E PRO@ISIONS O7 0ATAS PAM0ANSA 0IDAN+ 55 CONTRARK TO T>E <EDD)ESTA0DIS>ED RIDE O7 STATITORK CONSTRICTION T>AT PPENAD STATITES( SI0STANTI@E AND REMEDIAD OR PROCEDIRAD( ARE( 0K T>E CONSECRATED RIDE( CONSTRIED STRICTDK A+AINST T>E STATE( OR DI0ERADDK IN 7A@OR O7 T>E ACCISEDQ AND T>AT PIT IS AD<AKS T>E DITK O7 T>E COIRT TO RESOD@E T>E CIRCIMSTANCES O7 E@IDENCE IPON A T>EORK O7 INNOCENCE RAT>ER T>AN IPON A T>EORK O7 +IIDT <>ERE IT IS POSSI0DE TO DO SOQ( AND IN SO DOIN+ T>E DECISION APPEADED 7ROM INDID+ED ITSED7 IN PBIDICIAD DE+ISDATIONQ TO 7A@OR T>E PROSECITION AND TO <ORF +RA@E INBISTICE TO T>E ACCISED' Si$pl* wor#e#( the issues of this case $a* %e state# as follows- . / whether or not the appellate court erre# in not

granting retroactive effect to Repu%lic Act No' 264 [ 3! in view of Art' 55 of the Revise# Penal Co#e .RPC/: .5/ whether or not notice of #ishonor is #ispensa%le in this case: an# .;/ whether or not the appellate court erre# in construing 0'P' 0lg' 55' <e will resolve the first an# thir# issues %efore consi#ering the secon# issue' 0irst issue S <hether or not the Court of Appeals erre# in not giving retroactive effect to R'A' 2643 in view of Article 55 of the RPC' Petitioner argues that- the failure of the appellate court to give retroactive application to R'A' 264 is a violation of Art' 55 of the Revise# Penal Co#e which provi#es that penal laws shall have retroactive effect insofar as the* favor the person guilt* of the felon*: R'A' 264 is a penal law in the sense that it affects the ?uris#iction of the court to ta&e cogni,ance of cri$inal cases: ta&en separatel*( the offense covere# %* each of the ten Infor$ations in this case falls within the eAclusive original ?uris#iction of the Municipal Trial Court un#er Sec' 5 of R'A' 264 : an# the Court of Appeals is guilt* of ?u#icial legislation in stating that after the arraign$ent of petitioner( sai# cases coul# no longer %e transferre# to the MTC without violating the rules on #ou%le ?eopar#*( %ecause that is not so provi#e# in R'A' 264 '[ ! The Solicitor +eneral( in its Co$$ent( counters that the argu$ents of petitioner are %aseless conten#ing that- penal laws are those which #efine cri$es an# provi#es for their punish$ent: laws #efining the ?uris#iction of courts are su%stantive in nature an# not proce#ural for the* #o not refer to the $anner of tr*ing cases %ut to the authorit* of the courts to hear an# #eci#e certain an# #efinite cases in the various instances of which the* are suscepti%le: R'A' No' 264 is a su%stantive law an# not a penal law as nowhere in its provisions #oes it #efine a cri$e neither #oes it provi#e a penalt* of an* &in#: the purpose of enacting R'A' No' 264 is lai# #own in the opening sentence thereof as PAn Act EApan#ing the Buris#iction of the Municipal Trial Courts( Municipal Circuit Trial Courts an# the Metropolitan Trial CourtQ where%* it reapportions the ?uris#iction of sai# courts to cover certain civil an# cri$inal case( erstwhile trie# eAclusivel* %* the Regional Trial Courts: conse"uentl*( Art' 55 of the RPC fin#s no application to the case at %ar: ?uris#iction is #eter$ine# %* the law in force at the ti$e of the filing of the co$plaint( an# once ac"uire#( ?uris#iction is not affecte# %* su%se"uent legislative enact$ents placing ?uris#iction in another tri%unal: in this case( the RTC was veste# with ?uris#iction to tr* petitioner=s cases when the sa$e were file# in Octo%er 445: at that ti$e( R'A' No' 264 was not *et effective:[ 5! in so far as the retroactive effect of R'A' No' 264 is concerne#( that sa$e is li$ite# onl* to pen#ing civil cases that have not reache# pre) trial stage as provi#e# for in Section 2 thereof an# as clarifie# %* this Court in 5eople vs. Colanda Gelasco[ ;!( where it was hel#- P[a! perusal of R'A' No' 264 will show that its retroactive provisions appl* onl* to civil cases that have not *et reache# the pre)trial stage' Neither fro$ an eApress proviso nor %* i$plication can it %e un#erstoo# as having retroactive application to cri$inal cases pen#ing or #eci#e# %* the RTC prior to its effectivit*'Q[ 9! On this point( the Court full* agrees with the Solicitor +eneral an# hol#s that Article 55 of the Revise# Penal Co#e fin#s no application to the case at %ar' Sai# provision rea#sART' 55' !etroactive effect of penal laws' S Penal laws shall have a retroactive effect insofar as the* favor the person guilt* of a felon*( who is not a ha%itual cri$inal( as this ter$ is #efine# in Rule 1 of Article 65 of this Co#e( although at the ti$e of the pu%lication of such laws a final sentence has %een pronounce# an# the convict is serving sentence' A penal law( as #efine# %* this Court( is an act of the legislature that prohi%its certain acts an# esta%lishes penalties

21

for its violations' It also #efines cri$e( treats of its nature an# provi#es for its punish$ent'[ 1! R'A' No' 264 #oes not prohi%it certain acts or provi#es penalties for its violation: neither #oes it treat of the nature of cri$es an# its punish$ent' Conse"uentl*( R'A' No' 264 is not a penal law( an# therefore( Art' 55 of the RPC #oes not appl* in the present case' 0' P' 0lg' 55( which too& effect on April 59( 424( provi#es the penalt* of i$prison$ent of not less than thirt* #a*s %ut not $ore than one *ear or %* a fine of not less than %ut not $ore then #ou%le the a$ount of the chec& which fine shall in no case eAcee# P533(333'33( or %oth such fine an# i$prison$ent at the #iscretion of the court' R'A' No' 264 which too& effect on Bune 1( 449( a$en#e# 0'P' 0lg' 54( an# veste# on the Metropolitan( Municipal an# Municipal Circuit Trial Courts ?uris#iction to tr* cases punisha%le %* i$prison$ent of not $ore than siA .6/ *ears'[ 6! Since R'A' No' 264 vests ?uris#iction on courts( it is apparent that sai# law is substantive'[ 2! In the case of 6ang vs. 6ourt of 'ppeals([ 8! this Court hel# that P?uris#iction %eing a $atter of su%stantive law( the esta%lishe# rule is that the statute in force at the ti$e of the co$$ence$ent of the action #eter$ines the ?uris#iction of the court'Q[ 4! R'A' No' 264 was not *et in force at the ti$e of the co$$ence$ent of the cases in the trial court' It too& effect onl* #uring the pen#enc* of the appeal %efore the Court of Appeals'[53! There is therefore no $erit in the clai$ of petitioner that R'A' No' 264 shoul# %e retroactivel* applie# to this case an# the sa$e %e re$an#e# to the MTC' The Court has hel# that a Plaw vesting a##itional ?uris#iction in the court cannot %e given retroactive effect'Q[5 ! ;hird issue S <hether or not the Court of Appeals erroneousl* construe# 0'P' 0lg' 55' Petitioner insists that- penal statutes $ust %e strictl* construe# an# where there is an* reasona%le #ou%t( it $ust alwa*s %e resolve# in favor of the accuse#:[55! the Court of Appeals( in construing that 0'P' 0lg' 55 e$%races cases of Pno fun#sQ or Pclose# accountsQ when the eApress language of 0'P' 0lg' 55 penali,es onl* the issuance of chec&s that are su%se"uentl* #ishonore# %* the #rawee %an& for Pinsufficienc*Q of fun#s or cre#it( has enlarge# %* i$plication the $eaning of the statute which a$ounts to ?u#icial legislation:[5;! a post#ate# chec&( not %eing #rawn pa*a%le on #e$an#( is technicall* not a special &in# of a %ill of eAchange( calle# chec&( %ut an or#inar* %ill of eAchange pa*a%le at a fiAe# #ate( which is the #ate in#icate# on the face of the post#ate# chec&( hence( the instru$ent is still vali# an# the o%ligation covere# there%*( %ut onl* civill* an# not cri$inall*: [59! the trial court also erroneousl* cite# a portion in the case of Fo)ano vs. #artine)[51! that the Planguage of 0'P' 0lg' 55 is %roa# enough to cover all &in#s of chec&s( whether present #ate# or post#ate#( or whether issue# in pa*$ent of pre)eAisting o%ligations or given in $utual or si$ultaneous eAchange for so$ething of value(Q since the sa$e is $ere obiter dictum:[56! in the interpretation of the $eaning of a Pchec&Q( where the law is clear an# una$%iguous( the law $ust %e ta&en as it is( #evoi# of ?u#icial a##ition or su%traction'[52! The Solicitor +eneral counters that a post#ate# chec& is still a chec& an# its %eing a post#ate# instru$ent #oes not necessaril* $a&e it a %ill of eAchange Ppa*a%le at a fiAe# or #eter$ina%le future ti$eQ since it is still pai# on #e$an# on the #ate in#icate# therein or thereafter ?ust li&e an or#inar* chec&' [58! It also points out that the #octrine lai# #own in Fo)ano vs. #artine) was reiterate# in 5eople vs. "itafan,[54! hence( it can no longer %e argue# that the state$ent in the case of Fo)ano regar#ing the scope of Pchec&sQ is $ere obiter dictum' Again( we agree with the Solicitor +eneral an# fin# petitioner=s clai$ to %e without $erit'

The rationale %ehin# 0'P' 0lg' 55 was initiall* eAplaine# %* the Court in the lan#$ar& case of Fo)ano vs. #artine)[;3! where we hel# thatThe grava$en of the offense punishe# %* 0'P' 0lg' 55 is the act of $a&ing an# issuing a worthless chec& or a chec& that is #ishonore# upon its presentation for pa*$ent T The thrust of the law is to prohi%it( un#er pain of penal sanctions( the $a&ing or worthless chec&s an# putting the$ in circulation' 0ecause of its #eleterious effects on the pu%lic interest( the practice is proscri%e# %* law' The law punishe# the act not as an offense against propert*( %ut an offense against pu%lic or#er'[; ! ''' The effects of the issuance of a worthless chec& transcen# the private interests of the parties #irectl* involve# in the transaction an# touches the interests of the co$$unit* at large' The $ischief it creates is not onl* a wrong to the pa*ee or hol#er %ut also an in?ur* to the pu%lic' The har$ful practice of putting valueless co$$ercial papers in circulation( $ultiplie# a thousan#fol#( can ver* well pollute the channels of tra#e an# co$$erce( in?ure the %an&ing s*ste$ an# eventuall* hurt the welfare of societ* an# the pu%lic interest'[;5! The sa$e is reiterate# in 6ueme vs. 5eople[;;! where we pronounce# that' ' ' 0'P' 0lg' 55 was purposel* enacte# to prevent the proliferation of worthless chec&s in the $ainstrea$ of #ail* %usiness an# to avert not onl* the un#er$ining of the %an&ing s*ste$ of the countr* %ut also the infliction of #a$age an# in?ur* upon tra#e an# co$$erce occasione# %* the in#iscri$inate issuances of such chec&s' 0* its ver* nature( the offenses #efine# un#er 0'P' 0lg' 55 are against pu%lic interest'[;9! In !ecuerdo vs. 5eople( this Court also hel# that the ter$s an# con#itions surroun#ing the issuance of the chec&s are irrelevant since its pri$or#ial intention is to ensure the sta%ilit* an# co$$ercial value of chec&s as %eing virtual su%stitutes for currenc*'[;1! Petitioner=s clai$ that cases of Pclose# accountsQ are not inclu#e# in the coverage of 0'P' 0lg' 55 has no $erit consi#ering the clear intent of the law( which is to #iscourage the issuance of worthless chec&s #ue to its har$ful effect to the pu%lic' This Court( in Fo)ano vs. #artine)( was eAplicit in ruling that the language of 0'P' 0lg' 55 is %roa# enough to cover all &in#s of chec&s( whether present #ate# or post#ate#( or whether issue# in pa*$ent of pre)eAisting o%ligations or given in $utual or si$ultaneous eAchange for so$ething of value'[;6! In 5eople vs. "itafan([;2! the Supre$e Court reiterate# this point an# hel# that0'P' 0lg' 55 T #oes not #istinguish %ut $erel* provi#es that P[a!n* person who $a&es or #raws an# issues an* chec& &nowing at the ti$e of issue that he #oes not have sufficient fun#s in or cre#it with the #rawee %an& T which chec& is su%se"uentl* #ishonore# T shall %e punishe# %* i$prison$ent T Ubi lex non distinguit nec nos distinguere debemus. 0ut even if <e retrace the enact$ent of the P0ouncing Chec& DawQ to #eter$ine the para$eters of the concept of Pchec&Q( we can easil* glean that the $e$%ers of the then 0atasang Pa$%ansa inten#e# it to %e co$prehensive as to inclu#e all chec&s #rawn against %an&s'[;8! In this light( it is eas* to see that the clai$ of petitioner that 0'P' 0lg' 55 #oes not inclu#e Xpost#ate# chec&s= an#

22

cases of Xclose# accounts= has no leg to stan# on' The ter$ Pclose# accountsQ is within the $eaning of the phrase P#oes not have sufficient fun#s in or cre#it with the #rawee %an&Q' Anent the secon# issue- whether or not notice of #ishonor is #ispensa%le in the case at %ar' Petitioner faile# to show an* cogent reason for us to #istur% the fin#ings of the RTC an# the Court of Appeals' 0'P' 0lg' 55 or the 0ouncing Chec&=s Daw see&s to prevent the act of $a&ing an# issuing chec&s with the &nowle#ge that at the ti$e of issue( the #rawer #oes not have sufficient fun#s in or cre#it with the %an& for pa*$ent an# the chec&s were su%se"uentl* #ishonore# upon present$ent' [;4! To %e convicte# thereun#er( the following ele$ents $ust %e prove#' The accuse# $a&es( #raws or issues an* chec& to appl* to account or for value: The accuse# &nows at the ti$e of the issuance that he or she #oes not have sufficient fun#s in( or cre#it with( the #rawee %an& for the pa*$ent of the chec& in full upon its present$ent: an# The chec& is su%se"uentl* #ishonore# %* the #rawee %an& for insufficienc* of fun#s or cre#it or it woul# have %een #ishonore# for the sa$e reason ha# not the #rawer( without an* vali# reason( or#ere# the %an& to stop pa*$ent'[93!

The trial court rule# that the secon# ele$ent is present %ecauseT the accuse# &new at the ti$e of issuance of the chec&s that she #i# not have sufficient fun#s in or cre#it with her #rawee %an& for the pa*$ent of the chec&s in full upon their present$ent HasI admitted by her in the 6ounter<'ffidavit she executed during the preliminary investigation of these criminal cases .itals' ours/( to wit9' That the ti$e of the issuance of the sai# chec&s( #ue notice an# infor$ation ha# %een so given to Soli# +ol# anent the actual status of the chec&s that the sa$e $ight not %e a%le to cover the a$ount of the sai# chec&s so state# therein T .EAhi%it PNQ( P Q( un#erscoring supplie#/' This fact %eca$e evi#ent again #uring the cross)eAa$ination %* the accuse#=s counsel of the prosecution=s witness( Boa"uin Novales IIIATTK' TA+ANASL- An# the reason *ou agree# to the ter$s an# con#itions for the issuance of post)#ate# chec&s %ecause *ou are also aware the particular ti$e the accuse# Mrs' Elvira Ku Oh #i# not also have enough fun#s or $one* in the %an& within which to cover the a$ount of the chec&sE A''' I a$ not aware( sir'

5'

;'

7or lia%ilit* to attach un#er 0'P' 0lg' 55( it is not enough that the prosecution esta%lishes that chec&s were issue# an# that the sa$e were su%se"uentl* #ishonore#' The prosecution $ust also prove that the issuer( at the ti$e of the chec&=s issuance( ha# &nowle#ge that he #i# not have enough fun#s or cre#it in the %an& of pa*$ent thereof upon its present$ent'[9 ! Since the secon# ele$ent involves a state of $in# which is #ifficult to esta%lish( Section 5 of 0'P' 0lg' 55 create# a prima facie presu$ption of such &nowle#ge( as followsSEC' 5' Evidence of &nowledge of insufficient funds' S The $a&ing( #rawing an# issuance of a chec& pa*$ent of which is refuse# %* the #rawee %ecause of insufficient fun#s in or cre#it with such %an&( when presente# within ninet* .43/ #a*s fro$ the #ate of the chec&( shall %e prima facie evi#ence of &nowle#ge of such insufficienc* of fun#s or cre#it unless such $a&er or #rawer pa*s the hol#er thereof the a$ount #ue thereon( or $a&es arrange$ents for pa*$ent in full %* the #rawee of such chec& within five .1/ %an&ing #a*s after receiving notice that such chec& has not %een pai# %* the #rawee' 0ase# on this section( the presu$ption that the issuer ha# &nowle#ge of the insufficienc* of fun#s is %rought into eAistence only after it is proved that the issuer had received a notice of dishonor an# that within five #a*s fro$ receipt thereof( he faile# to pa* the a$ount of the chec& or to $a&e arrange$ent for its pa*$ent'[95! The presu$ption or prima facie evi#ence as provi#e# in this section cannot arise( if such notice of non)pa*$ent %* the #rawee %an& is not sent to the $a&er or #rawer( or if there is no proof as to when such notice was receive# %* the #rawer( since there woul# si$pl* %e no wa* of rec&oning the crucial 1)#a* perio#'[9;! In this case( it is not #ispute# that chec&s were issue# %* petitioner an# sai# chec&s were su%se"uentl* #ishonore#' The "uestion however is( was petitioner furnishe# a notice of #ishonorE If not( is it sufficient ?ustification to eAonerate petitioner fro$ her cri$inal an# civil lia%ilities for issuing the %ouncing chec&sE

L- To *our &nowle#ge when the accuse# ha# alrea#* a#$itte# to *ou that she ha# not enough $one* to pa* *ouE AThat is the ter$s an# pro$ise an# agree# upon( sir'

L- 0ut inspite of the fact that she alrea#* tol# *ou a%out that( that *ou never suspecte# that she #i# not have enough $one* to cover the chec&s agree# upon an# issue# to *ouE AKes( sir'

L- An# inspite of the fact she tol# *ou *ou never suspecte# that she #i# not have enough $one* to cover *ou ' ' ' L- Kou still %elieve that although she #oes not have enough $one* she still issue# chec&s to *ouE AKes( sir' .TSN( April 6( 44;( pp' 59)56/

At an* rate( there is alrea#* prima facie evi#ence of &nowle#ge of insufficienc* of fun#s on the part of the accuse# fro$ her failure to pa* the a$ount #ue on the chec&s or to $a&e arrange$ents for pa*$ent in full %* the #rawee %an& within five %an&ing #a*s after she receive# notice of their #ishonor( each of the chec&s having %een presente# within ninet* #a*s fro$ their respective #ate# .0'P' 0lg' 55( Sec' 5/' The #efense #i# not controvert this evi#ence' .itals' ours/[99! Although the trial court in its #ecision( $entione# that herein petitioner receive# notices of #ishonor( nowhere in the recor#s is there proof that the prosecution ever presente# evi#ence that petitioner receive# or was furnishe# a notice of #ishonor' The notices of #ishonor that were presente# in court an# $ar&e# as EAhi%its PD)5Q( PE)5Q( P7)5Q( P+)5Q( P>)5Q( PI)5Q( PB)5Q( PF)5Q( PD)5Q( PC)5Q[91! were all sent to the private co$plainant( Soli# +ol#( an# not to petitioner' In convicting petitioner( the trial court( gave pro%ative weight on the a#$ission of petitioner in her Counter)Affi#avit which she

23

su%$itte# #uring the preli$inar* investigation that at the ti$e of issuance of the su%?ect chec&s( she was aware an# even tol# private co$plainant that the chec&s $ight not %e a%le to cover the a$ount state# therein' The Court of Appeals sustaine# the RTC( to wit' ' ' Neither can <e agree that accuse#)appellant was still entitle# to notice of #ishonor of the %ouncing chec&s as she ha# no $ore chec&ing account with the #rawee %an& at the ti$e of the #ishonor of the ten chec&s in "uestion' Accuse#) appellant $ust have reali,e# that %* closing her chec&ing account after issuing the ten post#ate# chec&s( all of sai# chec&s woul# %ounce' Fnowing that she ha# alrea#* close# her chec&ing account with the #rawee %an&( certainl* accuse#) appellant woul# not have eApecte#( even in her wil#est i$agination( that her post#ate# chec&s woul# %e honore# %* the #rawee %an&' Thus( accuse#)appellant nee# not %e notifie# an*$ore of the o%vious #ishonor of her ru%%er chec&s' .itals' ours/[96! 0ase# on the law an# eAisting ?urispru#ence( we fin# that the appellate court erre# in convicting petitioner' In cases for violation of 0'P' 0lg' 55( it is necessar* that the prosecution prove that the issuer ha# receive# a notice of #ishonor' Since service of notice is an issue( the person alleging that the notice was serve# $ust prove the fact of service' 0asic also is the #octrine that in cri$inal cases( the "uantu$ of proof re"uire# is proof %e*on# reasona%le #ou%t' >ence( for cases of 0'P' 0lg' 55 there shoul# %e clear proof of notice'[92! In#ee#( this re"uire$ent cannot %e ta&en lightl* %ecause Section 5 provi#es for an opportunit* for the #rawer to effect full pa*$ent of the a$ount appearing on the chec&( within five %an&ing #a*s from notice of dishonor' The a%sence of sai# notice therefore #eprives an accuse# of an opportunit* to preclu#e cri$inal prosecution' In other wor#s( proce#ural #ue process #e$an#s that a notice of #ishonor %e actuall* serve# on petitioner' In the case at %ar( appellant has a right to #e$an# S an# the %asic postulate of fairness re"uires S that the notice of #ishonor %e actuall* sent to an# receive# %* her to affor# her to opportunit* to aver prosecution un#er 0'P' 0lg' 55'[98! The Solicitor +eneral conten#s that notice of #ishonor is #ispensa%le in this case consi#ering that the cause of the #ishonor of the chec&s was PAccount Close#Q an# therefore( petitioner alrea#* &new that the chec&s will %ounce an*wa*' This argu$ent has no $erit' The Court has #eci#e# nu$erous cases where chec&s were #ishonore# for the reason( PAccount Close#Q[94! an# we have eAplicitl* hel# in sai# cases that Pit is essential for the $a&er or #rawer to %e notifie# of the #ishonor of her chec&( so she coul# pa* the value thereof or $a&e arrange$ents for its pa*$ent within the perio# prescri%e# %* lawQ[13! an# o$ission or neglect on the part of the prosecution to prove that the accuse# receive# such notice of #ishonor is fatal to its cause'[1 ! A perusal of the testi$on* of the prosecution witness Boa"uin Novales III( +eneral Manager of co$plainant Soli# +ol#( #iscloses that no personal #e$an#s were $a#e on appellant %efore the filing of the co$plaints against her' [15! Thus( a%sent a clear showing that petitioner actuall* &new of the #ishonor of her chec&s an# was given the opportunit* to $a&e arrange$ents for pa*$ent as provi#e# for un#er the law( we cannot with $oral certaint* convict her of violation of 0'P' 0lg' 55' The failure of the prosecution to prove that petitioner

was given the re"uisite notice of #ishonor is a clear groun# for her ac"uittal'[1;! Moreover( as un#erstoo# %* the trial court itself in the herein afore"uote# portion of its #ecision( +eneral Manager Novales &new of the non)availa%ilit* of sufficient fun#s when appellant issue# the su%?ect chec&s to hi$' This Court has hel# that there is no violation of 0'P' 55 if co$plainant was tol# %* the #rawer that he has no sufficient fun#s in the %an&'[19! 7or these reasons( we reverse the ruling of the Court of Appeals affir$ing the trial court=s conviction of petitioner for violation of 0'P' 0lg' 55' This is without pre?u#ice( however( to her civil lia%ilit* towar#s private co$plainant Soli# +ol# in the a$ount of P133(333'33 plus interest thereon at the rate of 5M per annu$ fro$ #ate of finalit* of herein ?u#g$ent'[11! A1EREFORE( the assaile# Decision an# Resolution of the Court of Appeals are here%* RE@ERSED an# SET ASIDE' Petitioner Elvira Ku Oh is ACLIITTED of the offense of violation of 0'P' 0lg' 55 on ten counts for insufficienc* of evi#ence' >owever( she is or#ere# to pa* co$plainant Soli# +ol# International Tra#ers( Inc' the total a$ount of 7ive >un#re# Thousan# Pesos .P133(333'33/ with 5M interest per annu$ fro$ #ate of finalit* of herein ?u#g$ent' SO OR ERE . 7ellosillo, @@., concur. $6hairman%, ?uisumbing, an# 6allejo, Sr.,

24