Professional Documents
Culture Documents
The trial court ordered the deposit of the escheated balances with the Treasurer and
credited in favor of the Republic. Respondents claim that they were not able to
participate in the trial, as they were not informed of the ongoing escheat
proceedings. Later motion for reconsideration was denied.
CA reversed the RTC ruling. CA pronounced that RTC Clerk of Court failed to issue
individual notices directed to all persons claiming interest in the unclaimed
balances. CA held that the Decision and Order of the RTC were void for want of
jurisdiction.
Issue:
Whether or not the allocated funds may be escheated in favor of the Republic
Held:
There are sufficient grounds to affirm the CA on the exclusion of the funds allocated
for the payment of the Managers Check in the escheat proceedings.
An ordinary check refers to a bill of exchange drawn by a depositor (drawer) on a
bank (drawee), requesting the latter to pay a person named therein (payee) or to
the order of the payee or to the bearer, a named sum of money. The issuance of the
check does not of itself operate as an assignment of any part of the funds in the
bank to the credit of the drawer. Here, the bank becomes liable only after it accepts
or certifies the check. After the check is accepted for payment, the bank would then
debit the amount to be paid to the holder of the check from the account of the
depositor-drawer.
There are checks of a special type called managers or cashiers checks. These are
bills of exchange drawn by the banks manager or cashier, in the name of the bank,
against the bank itself. Typically, a managers or a cashiers check is procured from
the bank by allocating a particular amount of funds to be debited from the
depositors account or by directly paying or depositing to the bank the value of the
check to be drawn. Since the bank issues the check in its name, with itself as the
drawee, the check is deemed accepted in advance. Ordinarily, the check becomes
the primary obligation of the issuing bank and constitutes its written promise to pay
upon demand.
Nevertheless, the mere issuance of a managers check does not ipso facto work as
an automatic transfer of funds to the account of the payee. In case the procurer of
the managers or cashiers check retains custody of the instrument, does not tender
it to the intended payee, or fails to make an effective delivery, we find the following
provision on undelivered instruments under the Negotiable Instruments Law
applicable:
Sec. 16. Delivery; when effectual; when presumed. Every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. As between immediate parties and as regards a
remote party other than a holder in due course, the delivery, in order to be
effectual, must be made either by or under the authority of the party making,
drawing, accepting, or indorsing, as the case may be; and, in such case, the
delivery may be shown to have been conditional, or for a special purpose only, and
not for the purpose of transferring the property in the instrument. But where the
instrument is in the hands of a holder in due course, a valid delivery thereof by all
parties prior to him so as to make them liable to him is conclusively presumed. And
where the instrument is no longer in the possession of a party whose signature
appears thereon, a valid and intentional delivery by him is presumed until the
contrary is proved.
Petitioner acknowledges that the Managers Check was procured by respondents,
and that the amount to be paid for the check would be sourced from the deposit
account of Hi-Tri. When Rosmil did not accept the Managers Check offered by
respondents, the latter retained custody of the instrument instead of cancelling it.
As the Managers Check neither went to the hands of Rosmil nor was it further
negotiated to other persons, the instrument remained undelivered. Petitioner does
not dispute the fact that respondents retained custody of the instrument.
Since there was no delivery, presentment of the check to the bank for payment did
not occur. An order to debit the account of respondents was never made. In fact,
petitioner confirms that the Managers Check was never negotiated or presented for
payment to its Ermita Branch, and that the allocated fund is still held by the
bank. As a result, the assigned fund is deemed to remain part of the account of HiTri, which procured the Managers Check. The doctrine that the deposit represented
by a managers check automatically passes to the payee is inapplicable, because
the instrument although accepted in advance remains undelivered. Hence,
respondents should have been informed that the deposit had been left inactive for
more than 10 years, and that it may be subjected to escheat proceedings if left
unclaimed.
trial court, in denying appellant's claim, was proper because of the failure to
establish that the note was delivered during the lifetime of the deceased.
At the trial, appellant testified that she is the daughter of the deceased. She
identified Exhibit A as a note in the handwriting of her mother, dated March 1, 1930,
promising to pay appellant $1,500 on December 1, 1930, signed by the decedent.
On the back of the note was the endorsement: "This money is coming to her for
teaching $1,000, and $500. is what the rest got also. Mother."
The decedent died January 2, 1936. The administrator qualified on March 1, 1936.
Appellant testified that, about March 11, 1936, in examining the contents of her
mother's safe, she discovered an envelope on which, in her mother's handwriting,
was the notation: "Please give this to S. Fisher in case of death. Mabel Martens from
Mother"; she delivered the envelope to said Simon Fisher at his law office shortly
after she discovered it; Fisher opened the envelope, which was sealed, in her
presence and in the presence of the administrator; the note, Exhibit A, was found in
the envelope; her mother had *164164 told her that, in case of death, there was a
letter for her, but she knew nothing of any note; she found the envelope after the
administrator had made an examination of the contents of the safe and had not
discovered it; she had loaned her parents $1,000 from time to time out of money
earned teaching school; her brothers and sisters each had received $500 when they
were married; she married subsequent to March 1, 1930, and did not receive her
$500.
Simon Fisher testified that he first saw the envelope and the note after the death of
the decedent; he opened the envelope in the presence of the appellant and the
administrator; in 1930 appellant agreed to accept a note from her mother in
satisfaction of $1,500 owed by her father's estate, which was not paid because of
insufficient funds; the decedent told him she had executed a note in favor of
appellant for $1,500, and she would bring it to the office and leave it with him; later
she told him she had placed it in a box or safe at home and for him to get it and
give it to appellant any time he heard of her death; he told her to deliver it to him or
leave it with him, and if she wanted to, to turn it over to appellant.
Apparently the trial court held that the claim should be denied because the record
failed to establish legal delivery of the note, which formed the basis of appellant's
claim. We hold that there was no error in this decision.
[1] Section 9476 of the Code provides that every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. This was the common law rule. In the case of Bell v.
Mahin, 69 Iowa 408,29 N.W. 331, this court commences its opinion with the
following statement:
"The first defense set up by Petty to the note is that it was executed upon Sunday. It
seems to be undisputed that the note was signed on Sunday, but it was not
intended to be delivered on that day, and was not in fact delivered until Monday. A
promissory note becomes a contract at the time of its delivery. This contract, then,
was made on Monday, and is not subject to the objection urged that it is a Sunday
contract."
[2] Obviously, the note here sued upon could not be made the basis of a valid claim
against the estate unless there was a legal delivery of the same, during the lifetime
RULING:
As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He
receives his compensation in the form of checks from the DOJ through V as City
Fiscal of Mandaue City and head of office. Under Sec. 16 of the Negotiable
Instruments Law, every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving effect thereto. As
ordinarily understood, delivery means the transfer of the possession of the
instrument by the maker or drawer with intent to transfer title to the payee and
recognize him as the holder thereof.
Inasmuch as said checks had not yet been delivered to Mabanto, Jr., they did not
belong to him and still had the character of public funds. The salary check of a
government officer or employee does not belong to him before it is physically
delivered to him. Until that time the check belongs to the government. Accordingly,
before there is actual delivery of the check, the payee has no power over it; he
cannot assign it without the consent of the Government. Being public fund, the
checks may not be garnished to satisfy the judgment in consideration of public
policy.
Manuel Lim v CA
Facts:
Manuel Lim and Rosita Lim are the officers of the Rigi Bilt Industries, Inc. (RIGI). RIGI
had been transacting business with Linton Commercial Company, Inc. The Lims
ordered 100 pieces of mild steel plates from Linton and were delivered to the Lims
place of business which was in Caloocan. To pay Linton, the Lims issued a postdated
check for P51,800.00. On a different date, the Lims also ordered another 65 pcs of
mild steel plates and were delivered in the place of business. They again issued
another postdated check. On that same day, they also ordered purlins worth
P241,800 which were delivered to them on various dates. The Lims issued 7 checks
for this.
When the 7 checks were presented to the drawee bank (Solidbank), it was
dishonored because payment for the checks had been stopped and/or insufficiency
of funds. So the Lims were charged with 7 counts of violation of Bouncing Checks
Law.
The Malabon trial court held that the Lims were guilty of estafa and violation of BP
22. They went to CA on appeal.
The CA acquitted the Lims of estafa, on the ground that the checks were not made
in payment of an obligation contracted at the time of their issuance. However, the
CA affirmed the finding that they were guilty
of violation for BP 22. Motion for Reconsideration to SC.
Issue:
Whether or not the issue was within the jurisdiction of the Malabon Trial Court
Held:
Yes. The venue of jurisdiction lies either in the RTC Caloocan or Malabon Trial Court.
BP 22 is a continuing crime. A person charged with a transitory crime may be validly
tried in any municipality or territory where the offense was partly committed. In
determining the proper venue, the ff. must be considered. 1) 7 checks were issued
to Linton in its place of business in Navotas. 2) The checks were delivered Linton in
the same place. 3) The checks were dishonored in Caloocan 4) The Lims had
knowledge
of their insufficiency of funds.
The place where the bills were written, signed or dated does not necessarily fix or
determine the place where they were executed. It is the delivery that is important. It
is the final act essential to its consummation of an obligation. An undelivered bill is
unoperative. The issuance and delivery of the check must be to a person who takes
it as a holder.
Although Linton sent a collector who received the checks fr. The Lims at their place
of business, the checks were actually issued and delivered to Linton in Navotas. The
collector is not a holder or an agent, he was just an employee.
*SC affirms conviction of the Lims for violation of BP 22 and the decision of CA
B. Negotiation; Holder
SECTION 30.What Constitutes Negotiation. An instrument is negotiated when it is
transferred from one person to another in such manner as to constitute the
transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if
payable to order, it is negotiated by the indorsement of the holder completed by
delivery.||| (Negotiable Instruments Law, ACT NO. 2031, [1911])
"Holder" means the payee or indorsee of a bill or note, who is in possession of it, or
the bearer thereof;| (Negotiable Instruments Law, ACT NO. 2031, [1911])
State Investment House Inc. V. CA (1993)
G.R. No. 101163 January 11, 1993
MOULIC failed to sell the pieces of jewelry, so she returned them to the payee
before maturity of the checks.
The checks, however, could no longer be retrieved as they had already been
negotiated
before their maturity dates, MOULIC withdrew her funds from the drawee
bank
Upon presentment for payment, the checks were dishonored for insufficiency
of funds
October 6, 1983: State sued to recover the value of the checks plus
attorney's fees and expenses of litigation
ISSUE: W/N State has a right to recourse as holder in due course regardless if the
sale did not push through against MOULIC
Sec. 52. What constitutes a holder in due course. A holder in due course is a
holder who has taken the instrument under the following conditions: (a) That it is
complete and regular upon its face; (b) That he became the holder of it before it
was overdue, and without notice that it was previously dishonored, if such was the
fact; (c) That he took it in good faith and for value; (d) That at the time it was
negotiated to him he had no notice of any infirmity in the instrument or defect in
the title of the person negotiating it.
burden of proving that STATE is not a holder in due course lies in MOULIC failed
As holder in due course, it holds the instruments free from any defect of title of prior
parties, and from defenses available to prior parties among themselves
State may, therefore, enforce full payment of the checks
MOULIC cannot set up against STATE the defense that there was failure or absence
of consideration
That the post-dated checks were merely issued as security is not a ground for the
discharge of the instrument as against a holder in due course.
For the only grounds are those outlined in Sec. 119 of the Negotiable Instruments
Law:
Sec. 119. Instrument; how discharged. A negotiable instrument is discharged: (a)
By payment in due course by or on behalf of the principal debtor; (b) By payment in
due course by the party accommodated, where the instrument is made or accepted
for his accommodation; (c) By the intentional cancellation thereof by the holder; (d)
By any other act which will discharge a simple contract for the payment of money;
(e) When the principal debtor becomes the holder of the instrument at or after
maturity in his own right.
Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for
the discharge of the instrument.
But, the intentional cancellation contemplated under paragraph (c) is that
cancellation effected by destroying the instrument either by tearing it up, burning it,
or writing the word "cancelled" on the instrument.
The act of destroying the instrument must also be made by the holder of the
instrument intentionally.
Since MOULIC failed to get back possession of the post-dated checks, the intentional
cancellation of the said checks is altogether impossible.
acts which will discharge a simple contract for the payment of money under
paragraph (d) are determined by other existing legislations since Sec. 119 does not
specify what these acts are, e.g., Art. 1231 of the Civil Code which enumerates the
modes of extinguishing obligations.
Again, none of the modes outlined therein is applicable in the instant case as Sec.
119 contemplates of a situation where the holder of the instrument is the creditor
while its drawer is the debtor. In the present action, the payee, Corazon Victoriano,
was no longer MOULIC's creditor at the time the jewelry was returned.
State failed to give Notice of Dishonor to MOULIC is of no moment. The need for
such notice is not absolute; there are exceptions under Sec. 114 of the Negotiable
Instruments Law:
Sec. 114. When notice need not be given to drawer. Notice of dishonor is not
required to be given to the drawer in the following cases:
(a) Where the drawer and the drawee are the same person;
(b) When the drawee is a fictitious person or a person not having capacity to
contract;
(c) When the drawer is the person to whom the instrument is presented for
payment:
(d) Where the drawer has no right to expect or require that the drawee or acceptor
will honor the instrument;
(e) Where the drawer had countermanded payment.
she was responsible for the dishonor of her checks, hence, there was no need to
serve her Notice of Dishonor, which is simply bringing to the knowledge of the
drawer or indorser of the instrument, either verbally or by writing, the fact that a
specified instrument, upon proper proceedings taken, has not been accepted or has
not been paid, and that the party notified is expected to pay it
deposited with the petitioner bank to private respondent Salazar's account (Account
No. 0203-1187-67) without his knowledge and corresponding endorsement. ITAaCc
Accepting that Templonuevo's claim was a valid one, petitioner BPI froze Account
No. 0201-0588-48 of A.A. Salazar and Construction and Engineering Services,
instead of Account No. 0203-1187-67 where the checks were deposited, since this
account was already closed by private respondent Salazar or had an insufficient
balance.
Private respondent Salazar was advised to settle the matter with Templonuevo but
they did not arrive at any settlement. As it appeared that private respondent
Salazar was not entitled to the funds represented by the checks which were
deposited and accepted for deposit, petitioner BPI decided to debit the amount of
P267,707.70 from her Account No. 0201-0588-48 and the sum of P267,692.50 was
paid to Templonuevo by means of a cashier's check. The difference between the
value of the checks (P267,692.50) and the amount actually debited from her
account (P267,707.70) represented bank charges in connection with the issuance of
a cashier's check to Templonuevo.
In the answer to the third-party complaint, private respondent Templonuevo
admitted the payment to him of P267,692.50 and argued that said payment was to
correct the malicious deposit made by private respondent Salazar to her private
account, and that petitioner bank's negligence and tolerance regarding the matter
was violative of the primary and ordinary rules of banking. He likewise contended
that the debiting or taking of the reimbursed amount from the account of private
respondent Salazar by petitioner BPI was a matter exclusively between said parties
and may be pursuant to banking rules and regulations, but did not in any way affect
him. The debiting from another account of private respondent Salazar, considering
that her other account was effectively closed, was not his concern.
After trial, the RTC rendered a decision, the dispositive portion of which reads thus:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff [private respondent Salazar] and against the
defendant [petitioner BPI] and ordering the latter to pay as follows:
1. The amount of P267,707.70 with 12% interest thereon from
September 16, 1991 until the said amount is fully paid;
2. The amount of P30,000.00 as and for actual damages;
3. The amount of P50,000.00 as and for moral damages;
4. The amount of P50,000.00 as and for exemplary damages;
5. The amount of P30,000.00 as and for attorney's fees; and
6. Costs of suit. ACIESH
The counterclaim is hereby ordered DISMISSED for lack of factual
basis.
The third-party complaint [filed by petitioner] is hereby likewise
ordered DISMISSED for lack of merit.
The Honorable Court erred in affirming the decision of the lower court
dismissing the third-party complaint of BPI. 7
The issues center on the propriety of the deductions made by petitioner from
private respondent Salazar's account. Stated otherwise, does a collecting bank, over
the objections of its depositor, have the authority to withdraw unilaterally from such
depositor's account the amount it had previously paid upon certain unendorsed
order instruments deposited by the depositor to another account that she later
closed?
Petitioner argues thus:
1. There is no presumption in law that a check payable to order,
when found in the possession of a person who is neither a
payee nor the indorsee thereof, has been lawfully transferred
for value. Hence, the CA should not have presumed that
Salazar was a transferee for value within the contemplation of
Section 49 of the Negotiable Instruments Law, 8 as the latter
applies only to a holder defined under Section 191of the
same. 9
2. Salazar failed to adduce sufficient evidence to prove that her
possession of the three checks was lawful despite her
allegations that these checks were deposited pursuant to a
prior internal arrangement with Templonuevo and that
petitioner was privy to the arrangement.
3. The CA should have applied the Civil Code provisions on legal
compensation because in deducting the subject amount from
Salazar's account, petitioner was merely rectifying the undue
payment it made upon the checks and exercising its
prerogative to alter or modify an erroneous credit entry in the
regular course of its business.
4. The debit of the amount from the account of A.A. Salazar
Construction and Engineering Services was proper even
though the value of the checks had been originally credited to
the personal account of Salazar because A.A. Salazar
Construction and Engineering Services, an unincorporated
single proprietorship, had no separate and distinct personality
from Salazar.
5. Assuming the deduction from Salazar's account was improper, the
CA should not have dismissed petitioner's third-party
complaint against Templonuevo because the latter would have
the legal duty to return to petitioner the proceeds of the
checks which he previously received from it.
6. There was no factual basis for the award of damages to Salazar.
The petition is partly meritorious. EcICSA
First, the issue raised by petitioner requires an inquiry into the factual findings made
by the CA. The CA's conclusion that the deductions from the bank account of A.A.
Salazar Construction and Engineering Services were improper stemmed from its
finding that there was no ineffective payment to Salazar which would call for the
exercise of petitioner's right to set off against the former's bank deposits. This
finding, in turn, was drawn from the pleadings of the parties, the evidence adduced
during trial and upon the admissions and stipulations of fact made during the pretrial, most significantly the following:
(a) That Salazar previously had in her possession the following checks:
(1) Solid Bank Check No. CB766556 dated January 30, 1990 in the
amount of P57,712.50;
(2) Solid Bank Check No. CB898978 dated July 31, 1990 in the
amount of P55,180.00; and,
(3) Equitable Banking Corporation Check No. 32380638 dated August
28, 1990 for the amount of P154,800.00;
(b) That these checks which had an aggregate amount of P267,692.50 were payable
to the order of JRT Construction and Trading, the name and style under which
Templonuevo does business;
(c) That despite the lack of endorsement of the designated payee upon such
checks, Salazar was able to deposit the checks in her personal savings account with
petitioner and encash the same;
(d) That petitioner accepted and paid the checks on three (3) separate occasions
over a span of eight months in 1990; and
(e) That Templonuevo only protested the purportedly unauthorized encashment of
the checks after the lapse of one year from the date of the last check. 10
Petitioner concedes that when it credited the value of the checks to the account of
private respondent Salazar, it made a mistake because it failed to notice the lack of
endorsement thereon by the designated payee. The CA, however, did not lend
credence to this claim and concluded that petitioner's actions were deliberate, in
view of its admission that the "mistake" was committed three times on three
separate occasions, indicating acquiescence to the internal arrangement between
Salazar and Templonuevo. The CA explained thus:
It was quite apparent that the three checks which appellee Salazar
deposited were not indorsed. Three times she deposited them to her
account and three times the amounts borne by these checks were
credited to the same. And in those separate occasions, the bank did
not return the checks to her so that she could have them indorsed.
Neither did the bank question her as to why she was depositing the
checks to her account considering that she was not the payee
thereof, thus allowing us to come to the conclusion that defendantappellant BPI was fully aware that the proceeds of the three checks
belong to appellee. TSIaAc
For if the bank was not privy to the agreement between Salazar and
Templonuevo, it is most unlikely that appellant BPI (or any bank for
that matter) would have accepted the checks for deposit on three
separate times nary any question. Banks are most finicky over
accepting checks for deposit without the corresponding indorsement
by their payee. In fact, they hesitate to accept indorsed checks for
deposit if the depositor is not one they know very well. 11
The CA likewise sustained Salazar's position that she received the checks from
Templonuevo pursuant to an internal arrangement between them, ratiocinating as
follows:
If there was indeed no arrangement between Templonuevo and the
plaintiff over the three questioned checks, it baffles us why it was
only on August 31, 1991 or more than a year after the third and last
check was deposited that he demanded for the refund of the total
amount of P267,692.50.
A prudent man knowing that payment is due him would have
demanded payment by his debtor from the moment the same
became due and demandable. More so if the sum involved runs in
hundreds of thousand of pesos. By and large, every person, at the
very moment he learns that he was deprived of a thing which
rightfully belongs to him, would have created a big fuss. He would not
have waited for a year within which to do so. It is most inconceivable
that Templonuevo did not do this. 12
Generally, only questions of law may be raised in an appeal by certiorari under Rule
45 of the Rules of Court. 13 Factual findings of the CA are entitled to great weight
and respect, especially when the CA affirms the factual findings of the trial
court. 14 Such questions on whether certain items of evidence should be accorded
probative value or weight, or rejected as feeble or spurious, or whether or not the
proofs on one side or the other are clear and convincing and adequate to establish a
proposition in issue, are questions of fact. The same holds true for questions on
whether or not the body of proofs presented by a party, weighed and analyzed in
relation to contrary evidence submitted by the adverse party may be said to be
strong, clear and convincing, or whether or not inconsistencies in the body of proofs
of a party are of such gravity as to justify refusing to give said proofs weight all
these are issues of fact which are not reviewable by the Court. 15
This rule, however, is not absolute and admits of certain exceptions, namely: a)
when the conclusion is a finding grounded entirely on speculations, surmises, or
conjectures; b) when the inference made is manifestly mistaken, absurd, or
impossible; c) when there is a grave abuse of discretion; d) when the judgment is
based on a misapprehension of facts; e) when the findings of fact are conflicting; f)
when the CA, in making its findings, went beyond the issues of the case and the
same are contrary to the admissions of both appellant and appellee; g) when the
findings of the CA are contrary to those of the trial court; h) when the findings of
fact are conclusions without citation of specific evidence on which they are based; i)
when the finding of fact of the CA is premised on the supposed absence of evidence
but is contradicted by the evidence on record; and j) when the CA manifestly
overlooked certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion. 16
In the present case, the records do not support the finding made by the CA and the
trial court that a prior arrangement existed between Salazar and Templonuevo
regarding the transfer of ownership of the checks. This fact is crucial as Salazar's
entitlement to the value of the instruments is based on the assumption that she is a
transferee within the contemplation of Section 49 of the Negotiable Instruments
Law.
Section 49 of the Negotiable Instruments Law contemplates a situation whereby the
payee or indorsee delivers a negotiable instrument for value without indorsing it,
thus:
Transfer without indorsement; effect of Where the holder of an
instrument payable to his order transfers it for value without
indorsing it, the transfer vests in the transferee such title as the
transferor had therein, and the transferee acquires in addition, the
right to have the indorsement of the transferor. But for the purpose of
determining whether the transferee is a holder in due course, the
negotiation takes effect as of the time when the indorsement is
actually made. 17
It bears stressing that the above transaction is an equitable assignment and the
transferee acquires the instrument subject to defenses and equities available
among prior parties. Thus, if the transferor had legal title, the transferee acquires
such title and, in addition, the right to have the indorsement of the transferor and
also the right, as holder of the legal title, to maintain legal action against the maker
or acceptor or other party liable to the transferor. The underlying premise of this
provision, however, is that a valid transfer of ownership of the negotiable
instrument in question has taken place. ISTDAH
Transferees in this situation do not enjoy the presumption of ownership in favor of
holders since they are neither payees nor indorsees of such instruments. The weight
of authority is that the mere possession of a negotiable instrument does not in itself
conclusively establish either the right of the possessor to receive payment, or of the
right of one who has made payment to be discharged from liability. Thus, something
more than mere possession by persons who are not payees or indorsers of the
instrument is necessary to authorize payment to them in the absence of any other
facts from which the authority to receive payment may be inferred. 18
The CA and the trial court surmised that the subject checks belonged to private
respondent Salazar based on the pre-trial stipulation that Templonuevo incurred a
one-year delay in demanding reimbursement for the proceeds of the same. To the
Court's mind, however, such period of delay is not of such unreasonable length as to
estop Templonuevo from asserting ownership over the checks especially considering
that it was readily apparent on the face of the instruments 19 that these were
crossed checks.
In State Investment House v. IAC, 20 the Court enumerated the effects of crossing a
check, thus: (1) that the check may not be encashed but only deposited in the bank;
(2) that the check may be negotiated only once to one who has an account with a
bank; and (3) that the act of crossing the check serves as a warning to the holder
that the check has been issued for a definite purpose so that such holder must
inquire if the check has been received pursuant to that purpose.
Thus, even if the delay in the demand for reimbursement is taken in conjunction
with Salazar's possession of the checks, it cannot be said that the presumption of
ownership in Templonuevo's favor as the designated payee therein was sufficiently
overcome. This is consistent with the principle that if instruments payable to named
payees or to their order have not been indorsed in blank, only such payees or their
indorsees can be holders and entitled to receive payment in their own right. 21
The presumption under Section 131 (s) of the Rules of Court stating that a
negotiable instrument was given for a sufficient consideration will not inure to the
benefit of Salazar because the term "given" does not pertain merely to a transfer of
physical possession of the instrument. The phrase "given or indorsed" in the context
of a negotiable instrument refers to the manner in which such instrument may be
negotiated. Negotiable instruments are negotiated by "transfer to one person or
another in such a manner as to constitute the transferee the holder thereof. If
payable to bearer it is negotiated by delivery. If payable to order it is negotiated by
the indorsement completed by delivery." 22 The present case involves checks
payable to order. Not being a payee or indorsee of the checks, private respondent
Salazar could not be a holder thereof. aDHScI
It is an exception to the general rule for a payee of an order instrument to transfer
the instrument without indorsement. Precisely because the situation is abnormal, it
is but fair to the maker and to prior holders to require possessors to prove without
the aid of an initial presumption in their favor, that they came into possession by
virtue of a legitimate transaction with the last holder. 23 Salazar failed to discharge
this burden, and the return of the check proceeds to Templonuevo was therefore
warranted under the circumstances despite the fact that Templonuevo may not
have clearly demonstrated that he never authorized Salazar to deposit the checks
or to encash the same. Noteworthy also is the fact that petitioner stamped on the
back of the checks the words: "All prior endorsements and/or lack of endorsements
guaranteed," thereby making the assurance that it had ascertained the genuineness
of all prior endorsements. Having assumed the liability of a general indorser,
petitioner's liability to the designated payee cannot be denied.
Consequently, petitioner, as the collecting bank, had the right to debit Salazar's
account for the value of the checks it previously credited in her favor. It is of no
moment that the account debited by petitioner was different from the original
account to which the proceeds of the check were credited because both admittedly
belonged to Salazar, the former being the account of the sole proprietorship which
had no separate and distinct personality from her, and the latter being her personal
account.
The right of set-off was explained in Associated Bank v. Tan: 24
A bank generally has a right of set-off over the deposits therein for
the payment of any withdrawals on the part of a depositor. The right
of a collecting bank to debit a client's account for the value of a
dishonored check that has previously been credited has fairly been
established by jurisprudence. To begin with, Article 1980 of the Civil
Code provides that "[f]ixed, savings, and current deposits of money in
banks and similar institutions shall be governed by the provisions
concerning simple loan."
Hence, the relationship between banks and depositors has been held
to be that of creditor and debtor. Thus, legal compensation under
Article 1278 of the Civil Code may take place "when all the requisites
mentioned in Article 1279 are present," as follows:
(1) That each one of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things
due are consumable, they be of the same kind, and also
of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor. DcaCSE
While, however, it is conceded that petitioner had the right of set-off over the
amount it paid to Templonuevo against the deposit of Salazar, the issue of whether
it acted judiciously is an entirely different matter. 25 As businesses affected with
public interest, and because of the nature of their functions, banks are under
obligation to treat the accounts of their depositors with meticulous care, always
having in mind the fiduciary nature of their relationship. 26 In this regard, petitioner
was clearly remiss in its duty to private respondent Salazar as its depositor.
To begin with, the irregularity appeared plainly on the face of the checks. Despite
the obvious lack of indorsement thereon, petitioner permitted the encashment of
these checks three times on three separate occasions. This negates petitioner's
claim that it merely made a mistake in crediting the value of the checks to Salazar's
account and instead bolsters the conclusion of the CA that petitioner recognized
Salazar's claim of ownership of checks and acted deliberately in paying the same,
contrary to ordinary banking policy and practice. It must be emphasized that the
law imposes a duty of diligence on the collecting bank to scrutinize checks
deposited with it, for the purpose of determining their genuineness and regularity.
The collecting bank, being primarily engaged in banking, holds itself out to the
public as the expert on this field, and the law thus holds it to a high standard of
conduct. 27 The taking and collection of a check without the proper indorsement
amount to a conversion of the check by the bank. 28
More importantly, however, solely upon the prompting of Templonuevo, and with full
knowledge of the brewing dispute between Salazar and Templonuevo, petitioner
debited the account held in the name of the sole proprietorship of Salazar without
even serving due notice upon her. This ran contrary to petitioner's assurances to
private respondent Salazar that the account would remain untouched, pending the
resolution of the controversy between her and Templonuevo. 29 In this connection,
the CA cited the letter dated September 5, 1991 of Mr. Manuel Ablan, Senior
Manager of petitioner bank's Pasig/Ortigas branch, to private respondent Salazar
informing her that her account had been frozen, thus:
From the tenor of the letter of Manuel Ablan, it is safe to conclude
that Account No. 0201-0588-48 will remain frozen or untouched until
No costs.
SO ORDERED.
Puno, C.J., Sandoval-Gutierrez, Corona and Garcia, JJ., concur.
C. Methods of Negotiation
Allied Banking Corp. v. Court of Appeals, G.R. No. 125851, [July 11, 2006],
527 PHIL 46-57)
DECISION
QUISUMBING, J p:
This petition for review on certiorari assails (a) the July 31, 1996 Decision 1 of the
Court of Appeals, ordering respondent G.G. Sportswear Manufacturing Corp. to
reimburse petitioner US $20,085; and exonerating the guarantors from liability; and
(b) the January 17, 1997 Resolution 2 denying the motion for reconsideration.
The facts are undisputed.
On January 6, 1981, petitioner Allied Bank, Manila (ALLIED) purchased Export Bill No.
BDO-81-002 in the amount of US $20,085.00 from respondent G.G. Sportswear Mfg.
Corporation (GGS). The bill, drawn under a letter of credit No. BB640549 covered
Men's Valvoline Training Suit that was in transit to West Germany (Uniger via
Rotterdam) under Cont. #73/S0299. The export bill was issued by Chekiang First
Bank Ltd., Hongkong. With the purchase of the bill, ALLIED credited GGS the peso
equivalent of the aforementioned bill amounting to P151,474.52 and the receipt of
which was acknowledged by the latter in its letter dated June 22, 1981.
On the same date, respondents Nari Gidwani and Alcron International Ltd. (Alcron)
executed their respective Letters of Guaranty, holding themselves liable on the
export bill if it should be dishonored or retired by the drawee for any reason.
Subsequently, the spouses Leon and Leticia de Villa and Nari Gidwani also executed
a Continuing Guaranty/Comprehensive Surety (surety, for brevity), guaranteeing
payment of any and all such credit accommodations which ALLIED may extend to
GGS. When ALLIED negotiated the export bill to Chekiang, payment was refused due
to some material discrepancies in the documents submitted by GGS relative to the
exportation covered by the letter of credit. Consequently, ALLIED demanded
payment from all the respondents based on the Letters of Guaranty and Surety
executed in favor of ALLIED. However, respondents refused to pay, prompting
ALLIED to file an action for a sum of money.
In their joint answer, respondents GGS and Nari Gidwani admitted the due execution
of the export bill and the Letters of Guaranty in favor of ALLIED, but claimed that
they signed blank forms of the Letters of Guaranty and the Surety, and the blanks
were only filled up by ALLIED after they had affixed their signatures. They also
added that the documents did not cover the transaction involving the subject export
bill. ACTISD
On the other hand, the respondents, spouses de Villa, claimed that they were not
aware of the existence of the export bill; they signed blank forms of the surety; and
averred that the guaranty was not meant to secure the export bill.
Respondent Alcron, for its part, alleged that as a foreign corporation doing business
in the Philippines, its branch in the Philippines is merely a liaison office confined to
the following duties and responsibilities, to wit: acting as a message center between
its office in Hongkong and its clients in the Philippines; conducting credit
investigations on Filipino clients; and providing its office in Hongkong with shipping
arrangements and other details in connection with its office in Hongkong.
Respondent Alcron further alleged that neither its liaison office in the Philippines nor
its then representative, Hans-Joachim Schloer, had the authority to issue Letters of
Guaranty for and in behalf of local entities and persons. It also invoked laches
against petitioner ALLIED.
GGS and Nari Gidwani filed a Motion for Summary Judgment on the ground that
since the plaintiff admitted not having protested the dishonor of the export bill, it
thereby discharged GGS from liability. But the trial court denied the motion. After
the presentation of evidence by the petitioner, only the spouses de Villa presented
their evidence. The other respondents did not. The trial court dismissed the
complaint.
On appeal, the Court of Appeals modified the ruling of the trial court holding
respondent GGS liable to reimburse petitioner ALLIED the peso equivalent of the
export bill, but it exonerated the guarantors from their liabilities under the Letters of
Guaranty. The CA decision reads as follows:
For the foregoing considerations, appellee GGS is obliged to
reimburse appellant Allied Bank the amount of P151,474.52 which
was the equivalent of GGS's contracted obligation of US$20,085.00.
The lower court however correctly exonerated the guarantors from
their liability under their Letters of Guaranty. A guaranty is an
accessory contract. What the guarantors guaranteed in the instant
case was the bill which had been discharged. Consequently, the
guarantors should be correspondingly released.
WHEREFORE, judgment is hereby rendered ordering defendantappellee G.G. Sportswear Mfg. Corporation to pay appellant the sum
of P151,474.52 with interest thereon at the legal rate from the filing
of the complaint, and the costs.
SO ORDERED. 3
The petitioner filed a Motion for Reconsideration, but to no avail. Hence, this appeal,
raising a single issue:
WHETHER OR NOT RESPONDENTS NARI, DE VILLA AND ALCRON ARE
LIABLE UNDER THE LETTERS OF GUARANTY AND THE CONTINUING
GUARANTY/ COMPREHENSIVE SURETY NOTWITHSTANDING THE FACT
THAT NO PROTEST WAS MADE AFTER THE BILL, A FOREIGN BILL OF
EXCHANGE, WAS DISHONORED. 4
The main issue raised before us is: Can respondents, in their capacity as guarantors
and surety, be held jointly and severally liable under the Letters of Guaranty and
Continuing Guaranty/Comprehensive Surety, in the absence of protest on the bill in
accordance with Section 152 of the Negotiable Instruments Law? 5
The petitioner contends that part of the Court of Appeals' decision exonerating
respondents Nari Gidwani, Alcron International Ltd., and spouses Leon and Leticia
de Villa as guarantors and/or sureties. Respondents rely on Section 152 of the
Negotiable Instruments Law to support their contention. SECHIA
Our review of the records shows that what transpired in this case is a discounting
arrangement of the subject export bill, between petitioner ALLIED and respondent
GGS. Previously, we ruled that in a letter of credit transaction, once the credit is
established, the seller ships the goods to the buyer and in the process secures the
required shipping documents of title. To get paid, the seller executes a draft and
presents it together with the required documents to the issuing bank. The issuing
bank redeems the draft and pays cash to the seller if it finds that the documents
submitted by the seller conform with what the letter of credit requires. The bank
then obtains possession of the documents upon paying the seller. The transaction is
completed when the buyer reimburses the issuing bank and acquires the
documents entitling him to the goods. 6 However, in most cases, instead of going to
the issuing bank to claim payment, the buyer (or the beneficiary of the draft) may
approach another bank, termed the negotiating bank, to have the draft
discounted. 7 While the negotiating bank owes no contractual duty toward the
beneficiary of the draft to discount or purchase it, it may still do so. Nothing can
prevent the negotiating bank from requiring additional requirements, like contracts
of guaranty and surety, in consideration of the discounting arrangement.
In this case, respondent GGS, as the beneficiary of the export bill, instead of going
to Chekiang First Bank Ltd. (issuing bank), went to petitioner ALLIED, to have the
export bill purchased or discounted. Before ALLIED agreed to purchase the subject
export bill, it required respondents Nari Gidwani and Alcron to execute Letters of
Guaranty, holding them liable on demand, in case the subject export bill was
dishonored or retired for any reason. 8
Likewise, respondents Nari Gidwani and spouses Leon and Leticia de Villa executed
Continuing Guaranty/Comprehensive Surety, holding themselves jointly and
severally liable on any and all credit accommodations, instruments, loans,
advances, credits and/or other obligation that may be granted by the petitioner
ALLIED to respondent GGS. 9 The surety also contained a clause whereby said
sureties waive protest and notice of dishonor of any and all such instruments, loans,
advances, credits and/or obligations. 10 These letters of guaranty and surety are
now the basis of the petitioner's action.
At this juncture, we must stress that obligations arising from contracts have the
force of law between the parties and should be complied with in good
faith. 11 Nothing can stop the parties from establishing stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy. 12
Here, Art. 2047 of the New Civil Code is pertinent. Art. 2047 states,
Art. 2047. By guaranty a person, called the guarantor, binds himself
to the creditor to fulfill the obligation of the principal debtor in case
the latter should fail to do so.
in the case at bar where not only one document but several documents were
executed at different times and at different places by the herein respondent
guarantors and sureties. 20
In this case, having affixed their consenting signatures in several documents
executed at different times, it is safe to presume that they had full knowledge of its
terms and conditions, hence, they are precluded from asserting ignorance of the
legal effects of the undertaking they assumed thereunder. It is also presumed that
private transactions have been fair and regular 21 and that he who alleges has the
burden of proving his allegation with the requisite quantum of evidence. 22 But
here the records of this case do not support their claims.
Last, we find the defense of laches unavailing. The question of laches is addressed
to the sound discretion of the court and since laches is an equitable doctrine, its
application is controlled by equitable considerations. 23 Respondents, however,
failed to show that the collection suit against them as sureties was inequitable.
Remedies in equity address only situations tainted with inequity, not those
expressly governed by statutes. 24
After considering the facts of this case vis--vis the pertinent laws, we are
constrained to rule for the petitioner.
WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of
Appeals is hereby MODIFIED, and we hold that respondent Alcron International Ltd.
is subsidiarily liable, while respondents Nari Gidwani, and Spouses Leon and Leticia
de Villa are jointly and severally liable together with G.G. Sportswear, to pay
petitioner Bank the sum of P151,474.52 with interest at the legal rate from the filing
of the complaint, and the costs. aAHTDS
SO ORDERED.
Carpio, Carpio Morales, Tinga and Velasco, Jr., JJ., concur.
D. Indorsement
SECTION 31.Indorsement; How Made. The indorsement must be written on the
instrument itself or upon a paper attached thereto. The signature of the indorser,
without additional words, is a sufficient indorsement.||| (Negotiable Instruments
Law, ACT NO. 2031, [1911])
E. Indorsement must be entire instrument
SECTION 32.Indorsement Must Be of Entire Instrument. The indorsement must be
an indorsement of the entire instrument. An indorsement which purports to transfer
to the indorsee a part only of the amount payable, or which purports to transfer the
instrument to two or more indorsees severally, does not operate as a negotiation of
the instrument. But where the instrument has been paid in part, it may be indorsed
as to the residue.||| (Negotiable Instruments Law, ACT NO. 2031, [1911])
ENRIQUE P MONTINOLA VS THE PHILIPPINE NATIONAL BANK
G.R. NO L-2861 || SECTION 124 & 125
FACTS:
On April 30, 1942, M. V.Ramos, as a disbursing officer of an army division of the
USAFE, went to the neighboring Province Lanao to procure a cash advance in the
amount of P800,000 for the use of the USAFFE in Cagayan de Misamis. Pedro
Encarnacion, Provincial Treasurer of Lanao did not have that amount in cash. So, he
gave Ramos P300,000 in emergency notes and a check for P500,000. On May 2,
1942 Ramos went to the office of Provincial Treasurer Laya at Misamis Oriental to
encash the check for P500,000 which he had received from the Provincial Treasurer
of Lanao. Laya did not have enough cash to cover the check so he gave Ramos
P400,000.00 in emergency notes and a check No. 1382 for P100,000.00 drawn on
the Philippine National Bank. According to Laya he had previously deposited
P500,000.00 emergency notes in the Philippine National Bank branch in Cebu and
he expected to have the check issued by him cashed in Cebu against said deposit.
Ramos was unable to encash the said check for he was captured by the Japanese.
But after his release, he sold P30,000.00 of the check to Enrique P. Montinola for
P850,000.00 Japanese Military notes, of which only P45000 was paid by the latter.
The writing made by Ramos at the back of the check was to the effect that he was
assigning only P30,000.00 of the value of the document with an instruction to the
bank to pay P30,000.00 to Montinola and to deposit the balance to Ramos's credit.
This writing was, however, mysteriously obliterated and in its place, a supposed
endorsement appearing on the back of the check was made for the whole amount
of the check. At the time of the transfer of this check to Montinola, the check was
long overdue by about 2-1/2 years. Montinola instituted an action against the PNB
and the Provincial Treasurer of Misamis Oriental to collect the sum of P100,000, the
amount of the aforesaid check. There now appears on the face of said check the
words in parenthesis "Agent, Phil. National Bank" under the signature of Laya
purportedly showing that Laya issued the check as agent of the Philippine National
Bank.
ISSUE:
Whether or not the subject check is a negotiable instrument.
HELD:
No. It was not negotiated according to the Negotiable Instruments Law (NIL) hence
it is not a negotiable instrument. There was only a partial indorsement and not a
negotiation contemplated under the NIL. Only P30k of the P100k amount of the
check was indorsed. This merely makeMontinola a mere assignee and this is the
clear intent of Ramos. Ramos was merely assigning P30k to Montinola. Montinola
may therefore not be regarded as an indorsee and PNB has all the right to dishonor
the check. As mere assignee, he is subject to all defenses available to the drawer
Provincial Treasurer of Misamis Oriental and against Ramos.
Anent the issue of alteration, the apparent purpose of which is to make the drawee
(PNB) the drawer against which Montinola can recover from directly. Such material
alteration which was done by Montinola without the consent of the parties liable
thereon discharges the instrument, pursuant to Sec. 124 of the NIL.
Montinola cannot be said to be a holder. He is an assignee. And even if he is a
holder, he is not in good faith because he did not pay the full amount of the
consideration for which the P30k was issued to him he only paid 45k Japanese
notes out of the 90k Japanese notes consideration.
At any rate, even assuming that there is proper negotiation, Montinola can no
longer encash said check because when he sought to have it encashed in January
1945, it is already stale there being two and half years pass since its time of
issuance.
F. Kinds of Indorsement
SECTION 34.Special Indorsement; Indorsement in Blank. A special indorsement
specifies the person to whom, or to whose order, the instrument is to be payable;
and the indorsement of such indorsee is necessary to the further negotiation of the
instrument. An indorsement in blank specifies no indorsee, and an instrument so
indorsed is payable to bearer, and may be negotiated by delivery.||| (Negotiable
Instruments Law, ACT NO. 2031, [1911])
SECTION 35.Blank Indorsement; How Changed to Special Indorsement. The
holder may convert a blank indorsement into a special indorsement by writing over
the signature of the indorser in blank any contract consistent with the character of
the indorsement.||| (Negotiable Instruments Law, ACT NO. 2031, [1911])
SECTION 40.Indorsement of Instrument Payable to Bearer. Where an instrument,
payable to bearer, is indorsed specially, it may nevertheless be further negotiated
by delivery; but the person indorsing specially is liable as indorser to only such
holders as make title through his indorsement.||| (Negotiable Instruments Law, ACT
NO. 2031, [1911])
G. Qualified Indorsement
Metropol vs. Sambok
L-39641
February 28, 1983
De Castro, J.:
Facts:
Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons
Motors Co., Ltd. Payable in 12 equal monthly installments with interest. It is further
provided that in case on non-payment of any of the installments, the total principal
sum then remaining unpaid shall become due and payable with an additional
interest. Sambok Motors co., a sister company of Ng Sambok Sons negotiated and
indorsed the note in favor of Metropol Financing & investment Corporation. Villaruel
defaulted in the payment, upon presentment of the promissory note he failed to pay
the promissory note as demanded, hence Ng Sambok Sons Motors Co., Ltd. notified
Sambok as indorsee that the promissory note has been dishonored and demanded
payment. Sambok failed to pay. Ng Sambok Sons filed a complaint for the collection
of sum of money. During the pendency of the case Villaruel died. Sambok argues
that by adding the words with recourse in the indorsement of the note, it becomes
a qualified indorser, thus, it does not warrant that in case that the maker failed to
pay upon presentment it will pay the amount to the holder.
Issue:
Whether or not Sambok Motors Co is a qualified indorser, thus it is not liable
upon the failure of payment of the maker.
Held:
No. A qualified indorserment constitutes the indorser a mere assignor of the
title to the instrument. It may be made by adding to the indorsers signature the
words without recourse or any words of similar import. Such indorsement relieves
the indorser of the general obligation to pay if the instrument is dishonored but not
of the liability arising from warranties on the instrument as provided by section 65
of NIL. However, Sambok indorsed the note with recourse and even waived the
notice of demand, dishonor, protest and presentment.
Recourse means resort to a person who is secondarily liable after the default
of the person who is primarily liable. Sambok by indorsing the note with recourse
does not make itself a qualified indorser but a general indorser who is secondarily
liable, because by such indorsement, it agreed that if Villaruel fails to pay the not
the holder can go after it. The effect of such indorsement is that the note was
indorsed witout qualification. A person who indorses without qualification engages
that on due presentment, the note shall be accepted or paid, or both as the case
maybe, and that if it be dishonored, he will pay the amount thereof to the holder.
The words added by Sambok do not limit his liability, but rather confirm his
obligation as general indorser.
Great Asian Sales Center Corp. V. CA (2002)
G.R. No. 105774
March 17, 1981: Great Asian BOD approved a resolution authorizing its
Treasurer and General Manager, Arsenio Lim Piat, Jr. (Arsenio) to secure a loan,
not exceeding 1M, from Bancasia
February 10, 1982: Great Asian BOD approved a resolution authorizing Great
Asian to secure a discounting line with Bancasia in an amount not exceeding
P2M
also designated Arsenio as the authorized signatory to sign all
instruments, documents and checks necessary to secure the discounting line
Tan Chong Lin signed 2 surety agreements in favor of Bancasia
Great Asian, through its Treasurer and General Manager Arsenio, signed 4
Deeds of Assignment of Receivables (Deeds of Assignment), assigning to
Bancasia 15 postdated checks:
9 checks were payable to Great Asian
3 were payable to "New Asian Emp."
3 were payable to cash
various customers of Great Asian issued these postdated checks in
payment for appliances and other merchandise.
Deed of Assignments of assignment:
January 12, 1982: 4 post-dated checks of P244,225.82 maturing March
17, 1982, 2 were dishonored
January 12, 1982: 4 post-dated checks of P312,819 maturing April 1,
1982, all 4 were dishonored
ISSUE: W/N Bancasia and Tang Chon Lin should be held liable under the Civil Code
because it was a separate and distinct deed of assignment
HELD: YES. Affirmed with Modification
As plain as daylight, the two board resolutions clearly authorize Great Asian
to secure a loan or discounting line from Bancasia
Clearly, the discounting arrangements entered into by Arsenio under the
Deeds of Assignment were the very transactions envisioned in the two board
resolutions of Great Asian to raise funds for its business.
There is nothing in the Negotiable Instruments Law or in the Financing
Company Act (old or new), that prohibits Great Asian and Bancasia parties from
adopting the with recourse stipulation uniformly found in the Deeds of
Assignment. Instead of being negotiated, a negotiable instrument may be
assigned.
the endorsement does not operate to make the finance company a holder in
due course. For its own protection, therefore, the finance company usually
requires the assignor, in a separate and distinct contract, to pay the finance
company in the event of dishonor of the notes or checks. (only security)
or not. But any person to whom an instrument so indorsed is negotiated will hold
the same, or the proceeds thereof, subject to the rights of the person indorsing
conditionally.||| (Negotiable Instruments Law, ACT NO. 2031, [1911])
I. Indorsement to or by Collecting Bank
Metrobank v. PBCom, G.R. No. 141408, 141429, [October 18, 2007]
DECISION
SANDOVAL-GUTIERREZ, J p:
Sometime in 1978, Pipe Master Corporation (Pipe Master) represented by Yu Kio, its
president, applied for check discounting with Filipinas Orient Finance Corporation
(Filipinas Orient). The latter approved and granted the same.
On July 1, 1978, the Board of Directors of Pipe Master issued a Board Resolution
authorizing Yu Kio, in his capacity as president, and/or Tan Juan Lian, in his capacity
as vice-president, to execute, indorse, make, sign, deliver or negotiate instruments,
documents and such other papers necessary in connection with any transaction
coursed through Filipinas Orient for and in behalf of the corporation.
Tan Juan Lian then executed in favor of Filipinas Orient a continuing guaranty that
he shall pay at maturity any and all promissory notes, drafts, checks, or other
instruments or evidence of indebtedness for which Pipe Master may become liable;
that the extent of his liability shall not at any one time exceed the sum of
P1,000,000.00; and that in the event of default by Pipe Master, Filipinas Orient may
proceed directly against him.
On April 9, 1980, under the check discounting agreement between Pipe Master and
Filipinas Orient, Yu Kio sold to Filipinas Orient four Metropolitan Bank and Trust
Company (Metro Bank) checks amounting to P1,000,000.00. In exchange for the
four Metro Bank checks, Filipinas Orient issued to Yu Kio four Philippine Bank of
Communications (PBCom) crossed checks totaling P964,303.62, payable to Pipe
Master with the statement "for payee's account only."
Upon his receipt of the four PBCom checks, Yu Kio indorsed and deposited in the
Metro Bank, in his personal account, three of the checks valued at P721,596.95. As
to the remaining check amounting to P242,706.67, he deposited it in the Solid Bank
Corporation (Solid Bank), also in his personal account. Eventually, PBCom paid
Metro Bank and Solid Bank the amounts of the checks. In turn, Metro Bank and Solid
Bank credited the value of the checks to the personal accounts of Yu Kio. STCDaI
Subsequently, when Filipinas Orient presented the four Metro Bank checks
equivalent to P1,000,000.00 it received from Yu Kio, they were dishonored by the
drawee bank. Pipe Master, the drawer, refused to pay the amounts of the checks,
claiming that it never received the proceeds of the PBCom checks as they were
delivered and paid to the wrong party, Yu Kio, who was not the named payee.
Filipinas Orient then demanded that PBCom restore to its (Filipinas Orient's) account
the value of the PBCom checks. In turn, PBCom sought reimbursement from Metro
Bank and Solid Bank, being the collecting banks, but they refused. Thus, Filipinas
Orient filed with the Regional Trial Court (RTC), Branch 39, Manila a complaint for a
sum of money against Pipe Master, Tan Juan Lian and/or PBCom.
In their answer to the complaint, Pipe Master and Tan Juan Lian averred that they
did not authorize Yu Kio to negotiate and enter into discounting transaction with
Filipinas Orient, and even if Yu Kio was so authorized, Pipe Master never received
the proceeds of the checks. Consequently, they filed a cross-claim against PBCom
for gross negligence for having paid the wrong party. In turn, PBCom, Pipe Master
and Tan Juan Lian filed third-party complaints against Metro Bank and Solid Bank.
On July 12, 1990, the RTC rendered a Decision against Metro Bank and Solid Bank,
the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Ordering third-party defendant Metro Bank to pay plaintiff the
amount of Seven Hundred Twenty One Thousand Five Hundred
Ninety Six Pesos and Ninety-Five Centavos (P721,596.95) plus
legal interest;
2. Ordering third-party defendant Solid Bank to pay plaintiff the
amount of Two Hundred Forty-Two Thousand Seven Hundred
Six Pesos and Sixty-Seven Centavos (P242,706.67) plus legal
interest;
3. Ordering third-party defendants to pay the costs of suit.
SO ORDERED.
On appeal, the appellate court affirmed in toto the Decision of the trial court. Metro
Bank and Solid Bank filed their respective motions for reconsideration but the same
were denied.
Hence, the instant consolidated petitions for review on certiorari filed by Metro Bank
and Solid Bank.
The issue for our resolution is whether Metro Bank and Solid Bank, petitioners, are
liable to respondent Filipinas Orient for accepting the PBCom crossed checks
payable to Pipe Master.
Petitioner banks contend that respondents Pipe Master, Tan Juan Lian and/or PBCom
should be made liable to respondent Filipinas Orient for the value of the checks.
Respondents Pipe Master and Tan Juan Lian counter that although Yu Kio was
expressly authorized to indorse Pipe Master's checks, such authority extended only
to acts done in the ordinary course of business, not in his personal capacity. For its
part, respondent Filipinas Orient contends that petitioner banks were negligent in
allowing Yu Kio to deposit the PBCom checks in his account. Respondent PBCom, as
the drawee bank, maintains that it has no liability because in clearing the checks, it
relied on the express guarantee made by petitioner banks that the checks were
validly indorsed. TICAcD
We find in favor of respondents.
J. Unindorsed Instruments
SECTION 49.Transfer Without Indorsement; Effect of . Where the holder of an
instrument payable to his order transfers it for value without indorsing it, the
transfer vests in the transferee such title as the transferor had therein, and the
transferee acquires, in addition, the right to have the indorsement of the transferor.
But for the purpose of determining whether the transferee is a holder in due course,
the negotiation takes effect as of the time when the indorsement is actually
made.|||(Negotiable Instruments Law, ACT NO. 2031, [1911]).
Metropolitan Bank and Trust Co. v. Chiok, G.R. Nos. 172652, 175302 &
175394, [November 6, 2014]
DECISION
LEONARDO-DE CASTRO, J p:
The three consolidated petitions herein all assail the Decision 1 of the Court of
Appeals in CA-G.R. CV No. 77508 dated May 5, 2006, and the Resolution 2 in the
same case dated November 6, 2006.
Respondent Wilfred N. Chiok (Chiok) had been engaged in dollar trading for several
years. He usually buys dollars from Gonzalo B. Nuguid (Nuguid) at the exchange
rate prevailing on the date of the sale. Chiok pays Nuguid either in cash or
manager's check, to be picked up by the latter or deposited in the latter's bank
account. Nuguid delivers the dollars either on the same day or on a later date as
may be agreed upon between them, up to a week later. Chiok and Nuguid had been
dealing in this manner for about six to eight years, with their transactions running
into millions of pesos. For this purpose, Chiok maintained accounts with
petitioners Metropolitan Bank and Trust Company (Metrobank) and Global
Business Bank, Inc. (Global Bank), the latter being then referred to as the Asian
Banking Corporation (Asian Bank). Chiok likewise entered into a Bills Purchase Line
Agreement (BPLA) with Asian Bank. Under the BPLA, checks drawn in favor of, or
negotiated to, Chiok may be purchased by Asian Bank. Upon such purchase, Chiok
receives a discounted cash equivalent of the amount of the check earlier than the
normal clearing period.
On July 5, 1995, pursuant to the BPLA, Asian Bank "bills purchased" Security Bank &
Trust Company (SBTC) Manager's Check (MC) No. 037364 in the amount of
P25,500,000.00 issued in the name of Chiok, and credited the same amount to the
latter's Savings Account No. 2-007-03-00201-3.
On the same day, July 5, 1995, Asian Bank issued MC No. 025935 in the amount of
P7,550,000.00 and MC No. 025939 in the amount of P10,905,350.00 to Gonzalo
Bernardo, who is the same person as Gonzalo B. Nuguid. The two Asian Bank
manager's checks, with a total value of P18,455,350.00 were issued pursuant to
Chiok's instruction and was debited from his account. Likewise upon Chiok's
application, Metrobank issued Cashier's Check (CC) No. 003380 in the amount of
P7,613,000.00 in the name of Gonzalo Bernardo. The same was debited from
Chiok's Savings Account No. 154-42504955. The checks bought by Chiok for payee
Gonzalo Bernardo are therefore summarized as follows:
Amount (P)
7,550,000.00
10,905,350.00
(aggregate value
of
Asian Bank MCs:
Metrobank CC No. 003380
TOTAL
18,455,350.00)
7,613,000.00
Source of fund
Chiok's Asian Bank Savings
Account No. 2-007-0300201-3,
which had been credited with
the
value of SBTC MC No.
037364
(P25,500,000.00) when the
latter
was purchased by Asian Bank
from
Chiok pursuant to their BPLA.
Chiok's Metrobank Savings
Account No. 15442504955 3
26,068,350.00
=========
Chiok then deposited the three checks (Asian Bank MC Nos. 025935 and 025939,
and Metrobank CC No. 003380), with an aggregate value of P26,068,350.00 in
Nuguid's account with Far East Bank & Trust Company (FEBTC), the predecessor-ininterest of petitioner Bank of the Philippine Islands (BPI). Nuguid was supposed to
deliver US$1,022,288.50, 4 the dollar equivalent of the three checks as agreed
upon, in the afternoon of the same day. Nuguid, however, failed to do so, prompting
Chiok to request that payment on the three checks be stopped. Chiok was allegedly
advised to secure a court order within the 24-hour clearing period. IHcSCA
On the following day, July 6, 1995, Chiok filed a Complaint for damages with
application for ex parte restraining order and/or preliminary injunction with the
Regional Trial Court (RTC) of Quezon City against the spouses Gonzalo and Marinella
Nuguid, and the depositary banks, Asian Bank and Metrobank, represented by their
respective managers, Julius de la Fuente and Alice Rivera. The complaint was
docketed as Civil Case No. Q-95-24299 and was raffled to Branch 96. The complaint
was later amended 5 to include the prayer of Chiok to be declared the legal owner
of the proceeds of the subject checks and to be allowed to withdraw the entire
proceeds thereof.
On the same day, July 6, 1995, the RTC issued a temporary restraining order
(TRO) directing the spouses Nuguid to refrain from presenting the said
checks for payment and the depositary banks from honoring the same until
further orders from the court. 6
Asian Bank refused to honor MC Nos. 025935 and 025939 in deference to the TRO.
Metrobank claimed that when it received the TRO on July 6, 1995, it refused to
honor CC No. 003380 and stopped payment thereon. However, in a letter also dated
July 6, 1995, Ms. Jocelyn T. Paz of FEBTC, Cubao-Araneta Branch informed Metrobank
that the TRO was issued a day after the check was presented for payment. Thus,
according to Paz, the transaction was already consummated and FEBTC had already
validly accepted the same. In another letter, FEBTC informed Metrobank that "the
restraining order indicates the name of the payee of the check as GONZALO
NUGUID, but the check is in fact payable to GONZALO BERNARDO. We believe there
is a defect in the restraining order and as such should not bind your bank." 7 Alice
Rivera of Metrobank replied to said letters, reiterating Metrobank's position to
comply with the TRO lest it be cited for contempt by the trial court. However, as
would later be alleged in Metrobank's Answer before the trial court, Metrobank
eventually acknowledged the check when it became clear that nothing more can be
done to retrieve the proceeds of the check. Metrobank furthermore claimed that
since it is the issuer of CC No. 003380, the check is its primary obligation and
should not be affected by any prior transaction between the purchaser (Chiok) and
the payee (Nuguid).
In the meantime, FEBTC, as the collecting bank, filed a complaint against Asian
Bank before the Philippine Clearing House Corporation (PCHC) Arbitration
Committee for the collection of the value of Asian Bank MC Nos. 025935 and
025939, which FEBTC had allegedly allowed Nuguid to withdraw on July 5, 1995, the
same day the checks were deposited. The case was docketed as Arbicom Case No.
95-082. The PCHC Arbitration Committee later relayed, in a letter dated August 4,
1995, its refusal to assume jurisdiction over the case on the ground that any step it
may take might be misinterpreted as undermining the jurisdiction of the RTC over
the case or a violation of the July 6, 1995 TRO.
On July 25, 1995, the RTC issued an Order directing the issuance of a writ of
preliminary prohibitory injunction:
WHEREFORE, upon filing by the plaintiff of a sufficient bond in the
amount of P26,068,350.00, to be executed in favor of the defendants
under the condition that the same shall answer for whatever
damages they may sustain by reason of this injunction should the
Court ultimately determine that he was not entitled thereto, let awrit
In their own Answer, the spouses Nuguid claimed that Gonzalo Nuguid had delivered
much more dollars than what was required for the three checks at the time of
payment. By way of special affirmative defense, the spouses Nuguid also claims
that since the subject checks had already been paid to him, Chiok is no longer
entitled to an injunction (to hold the payment of the subject checks), and Civil Case
No. Q-95-24299 has already become moot.
On August 29, 2002, the RTC rendered its Decision, the dispositive portion of which
states:
WHEREFORE, judgment is rendered:
1. Declaring as permanent the writ of preliminary injunction issued
under the Order of July 25, 1995;
2. Ordering Global Business Bank, Inc. to pay the plaintiff [Chiok]:
a.) The amount of P34,691,876.71 (less the attorney's fees of
P255,000.00 which shall remain with Global Business Bank,
Inc.), plus interest at the legal rate of 12%/p.a. from
September 30, 1999 until fully paid;
b.) The amount of P215,000.00, representing the excess
amount debited from the plaintiff's deposit in his account with
Global Business Bank, Inc. on July 7, 1995, plus interest of
12%/p.a. from July 7, 1995, until fully paid;
c.) Attorney's fees equivalent of 5% of the total amount due;
and
3. Ordering Metropolitan Bank & Trust Company to pay the
plaintiff:
a. The amount of his deposit of P7,613,000.00, plus interest of
12%/p.a. from July 5, 1995 until said amount is fully paid; and
b. Attorney's fees of 5% of the total amount due;
4. Ordering Spouses Gonzalo B. Nuguid and Marinella O.
Nuguid liable jointly and severally with Global Business Bank,
Inc. and Metropolitan Bank & Trust Company, Inc. for the
respective attorney's fees;
5. Dismissing the complaint-in-intervention of BPI for lack of merit;
6. Ordering the defendants and the intervenor to pay, jointly and
severally, the costs of suit. 9 (Emphases supplied.)
The RTC held that Nuguid failed to prove the delivery of dollars to Chiok. According
to the RTC, Nuguid's claim that Chiok was still liable for seven dishonored China
Banking Corporation (CBC) checks with a total worth of P72,984,020.00 is highly
doubtful since such claim was not presented as a counterclaim in the case.
Furthermore, the court ruled that the certification of CBC stating the reasons 10 for
the stop payment order "are indicative of Chiok's non-liability to Nuguid." The RTC
further noted that there was a criminal case filed by Chiok against Nuguid on March
29, 1996 for estafa and other deceit on account of Nuguid's alleged failure to return
the originals of the seven CBC checks. 11 TADcCS
The RTC went on to rule that manager's checks and cashier's checks may be the
subject of a Stop Payment Order from the purchaser on the basis of the payee's
contractual breach. As explanation for this ruling, the RTC adopted its
pronouncements when it issued the July 25, 1995 Order:
Defendant
Nuguid's
argument
that
the
injunction
could
render manager's and cashier's checks unworthy of the faith they
should have and could impair their nature as independent
undertakings of the issuing banks is probably an undistinguished
simplification. While the argument may be applicable to such
checks in general, it does not adequately address the situation, as
here, when specific manager's and cashier's checks are already
covered
by reciprocal undertakings between their purchaserand
their payee, in which the latter allegedly failed to perform. The
agreement herein was supposedly one in which Nuguid would deliver
the equivalent amount in US dollars ($1,022,288.23) "on the same
date" that
the
plaintiff
purchased
and
delivered
the manager's and cashier's checks (P26,068,350.00). Assuming that
such a reciprocity was true, the purchaser should have the legal
protection of the injunctive writ (which, after all, the legal
departments of the issuing banks themselves allegedly advised the
plaintiff to obtain), since the usual order or instruction to stop
payment available in case of ordinary checks did not avail. This was
probably the reason that Asian Bank has expressly announced in its
own comment/opposition of July 14, 1995 that it was not
opposing the application for the prohibitory injunction.
The dedication of
such
checks pursuant to
specific reciprocal undertakings between their
purchasers
and
payees authorizes rescission by the former to prevent substantial and
material damage to themselves, which authority includes stopping
the payment of the checks. 12
According to the RTC, both manager's and cashier's checks are still subject to
regular clearing under the regulations of the Bangko Sentral ng Pilipinas. Since
manager's and cashier's checks are the subject of regular clearing, they may
consequently be refused for cause by the drawee, which refusal is in fact provided
for in the PCHC Rule Book.
The RTC found the argument by BPI that the manager's and cashier's checks are
pre-cleared untenable under Section 60 of the New Central Bank Act and Article
1249 of the Civil Code, which respectively provides:
Section 60. Legal Character. Checks representing demand deposits
do not have legal tender power and their acceptance in the payment
of debts, both public and private, is at the option of the
creditor; Provided, however, that a check which has been cleared and
credited to the account of the creditor shall be equivalent to a
delivery to the creditor of cash in an amount equal to the amount
credited to his account.
compliance with the TRO which was received about 12:10 noon of
July 6, 1999. Hence, Metro Bank should not have paid because the
TRO was served within the 24-hour period to clear checks.
Moreover, the payment, being made on third clearing, was unjustified
for violating existing regulations, particularly paragraph 1 of the
Clearing House Operating Memo (CHOM), effective September 1,
1984, which prohibited the reclearing of a check after its first
presentation if it was returned for the reason of "step payment" or
"closed account."
It also seems that Metro Bank paid the CC without first checking
whether, in fact, any actual payment of the 3 checks had been made
on July 5, 1995 to the payee when the checks were deposited in
payee's account with FEBTC on July 5, 1995. The records show no
such payment was ever made to render the TRO of July 6, 1995 or
the writ of preliminary injunction applied for moot and academic.
Jessy A. Degaos adopted by Metro Bank as its own witness in
injunction hearing of July 24, 1995 stated that the payment of the
3 checks consisted of the accounting entry made at the PCHC during
the presenting process by debiting the respective accounts of the
drawees and crediting the account of collecting bank FEBTC. Yet, as
already found hereinabove, such process was reversed due to the
return by the drawees of the checks which they dishonored on
account of the TRO.
Also, Degaos, testifying on January 17, 2002 for intervenor BPI, was
asked in what form was the withdrawal of the amounts of the checks
made by Nuguid on July 5, 1995, that is, whether: 1) cash
withdrawal; or 2) credit to Nuguid's account; or 3) draft issued to
Nuguid. His reply was that only the bank's branch which serviced the
payee's account could provide the answer. Yet, BPI did not present
any competent personnel from the branch concerned to enlighten the
Court on this material point.
This amount of P7,613,000.00, having remained with Metro Bank
since the service of the TRO of July 6, 1995 and the writ of
preliminary injunction issued under the Order of July 25, 1998, should
be returned to Chiok with interest of 12%/p.a. from July 7, 1995 until
full payment. 16 (Citations omitted.)
The RTC likewise denied BPI's complaint-in-intervention to recover the value of the
three checks from drawees Global Bank and Metrobank for lack of merit. The RTC,
after reprimanding Global Bank and Metrobank for siding with BPI on this issue, held
that BPI, as a mere collecting bank of the payee with a void title to the checks, had
no valid claim as to the amounts of such checks. The RTC explained:
Firstly: BPI, being a collecting bank in relation to the 3 checks, was
merely performing collection services as an agent of Nuguid, the
payee. If, as found hereinbefore, Nuguid could not have legal title to
the 3 checks, it follows that BPI could not stake any claim for title
better than Nuguid's own void title. Consequently, BPI has no right to
claim the amounts of the 3 checks from the drawee-banks.
Secondly: The purpose of the delivery of the 3 checks to BPI which
was not even accompanied by Nuguid's endorsement
was solely for deposit in the account of payee Nuguid. Assuming, for
the sake of argument, that BPI as the collecting bank paid the value
of the checks of which fact there has been no proof whatsoever
BPI was nonetheless, at best, a mere transferee whose title was no
better than the void title of the transferor, payee Nuguid. Under such
circumstance, BPI has no legal basis to demand payment of the
amounts of the 3 checks from the drawee-banks.
Thirdly: Under Sec. 49, Negotiable Instruments Law, BPI,
as transferee without indorsement, was not considered a holder of
the instrument since it was neither a payee nor an indorsee. It would
become so only when and if the indorsement is actually made, and
only as of then, but not before, is the issue whether BPI was a holder
in due course or not is determined.
Consequently, any alleged payment by BPI as the collecting bank,
through the supposed though unproved withdrawal of the amounts of
the 3 checks by Nuguid upon the deposit of the checks on July 5,
1995, is not the payment which discharges liability under the 3
checks because BPI is neither the party primarily liable nor the
drawee.
Such a payment, if true, is akin to, if it is not, drawing against
uncollected deposits (DAUD). In such a case, BPI was in duty bound
to send the 3 checks to the PCHC for clearing pursuant to Section
1603.c.1 of the BSP Manual of Regulations and Sec. 60, R.A. No.
7653. It serves well to note herein that Global Bank and Metro
Bankreturned the checks through the PCHC on July 6, 1995, well
within the 24-hour clearing period, in compliance with the TRO of July
6, 1995. cADTSH
Finally: As earlier noted and discussed, there is no evidence of any
prior valid payment by the collecting bank to support its claim of the
amounts of the 3 checks against the defendant banks. 17 (Citation
omitted.)
The RTC held Global Bank and Metrobank liable for attorney's fees equivalent to 5%
of the total amount due them, while the spouses Nuguid were held solidarily liable
for said fees.
Defendants Global Bank, Metrobank, and the spouses Nuguid, and intervenor BPI
filed separate notices of appeal, which were approved in the Order 18 dated April 3,
2003. Chiok filed a Motion to Dismiss against the appeal of Global Bank, on the
ground that the latter had ceased to operate as a banking institution.
On May 26, 2004, the Court of Appeals dismissed the appeal of the spouses Nuguid
pursuant to Section 1 (e), Rule 50 of the Rules of Court, on account of their failure to
file their appellant's brief. In the same Resolution, the Court of Appeals denied
Chiok's Motion to Dismiss.
On May 5, 2006, the Court of Appeals rendered the assailed Decision affirming the
RTC Decision with modifications. The fallo of the Decision reads:
WHEREFORE, premises considered, the Decision dated August 29,
2000 of the RTC, Branch 96, Quezon City is AFFIRMED with the
following MODIFICATIONS:
1.) The contract to buy foreign currency in the amount of
$1,022,288.50 between plaintiff-appellee Wilfred N.
Chiok and defendant Gonzalo B. Nuguid is hereby
rescinded. Corollarily, Manager's Check Nos. 025935 and
025939 and Cashier's Check No. 003380 are ordered
cancelled.
2.) Global Business Holdings, Inc. is ordered to credit Savings
Account No. 2-007-03-00201-3 with:
a) The amount of P25,500,000.00, plus interest at 4%
from September 29, 1999 until withdrawn by
plaintiff-appellee;
b) The amount of P215,390.00, plus interest at 4% from
July 7, 1995 until withdrawn by plaintiff-appellee.
3.) Metropolitan Bank & Trust Company is ordered to credit
Savings Account No. 154-42504955 the amount of
P7,613,000.00, with interest at 6% [per annum] from
July 12, 1995 until the same is withdrawn;
4.) The Spouses Gonzalo B. Nuguid and Marinella O. Nuguid are
ordered to pay attorney's fees equivalent to 5% of the
total amount due to plaintiff-appellee from both
depository banks, as well as the costs of suit. 19
According to the Court of Appeals, Article 1191 of the Civil Code provides a legal
basis of the right of purchasers of MCs and CCs to make a stop payment order on
the ground of the failure of the payee to perform his obligation to the purchaser. The
appellate court ruled that such claim was impliedly incorporated in Chiok's
complaint. The Court of Appeals held:
By depositing the subject checks to the account of Nuguid, Chiok had
already performed his obligation under the contract, and the
subsequent failure of Nuguid to comply with what was incumbent
upon him gave rise to an action for rescission pursuant to Article
1191 of the Civil Code, which states:
Art. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in
Resolutions dated February 21, 2007 24 and March 12, 2007, 25 this Court resolved
to consolidate the three petitions. DTIaHE
Metrobank submitted the following issues for the consideration of this Court:
(A) WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED
IN RULING THAT "IT IS LEGALLY POSSIBLE FOR A PURCHASER
OF A MANAGER'S CHECK OR CASHIER'S CHECK TO STOP
PAYMENT THEREON THROUGH A COURT ORDER ON THE
GROUND OF THE PAYEE'S ALLEGED BREACH OF CONTRACTUAL
OBLIGATION AMOUNTING TO AN ABSENCE OF CONSIDERATION
THEREFOR."
(B) GRANTING ARGUENDO THAT A MANAGER' S CHECK OR CASHIER'S
CHECK, "IN VIEW OF THE PECULIAR CIRCUMSTANCES OF THIS
CASE" MAY BE SUBJECT TO A STOP PAYMENT ORDER BY THE
PURCHASER THEREOF THROUGH A COURT ORDER, WHETHER
OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
CONCLUDING THAT PETITIONER HEREIN "HAD KNOWLEDGE OF
CIRCUMSTANCES THAT WOULD DEFEAT THE TITLE OF THE
PAYEE TO THE CHECKS" WITHOUT, HOWEVER, CITING ANY
SPECIFIC EVIDENCE WHICH WOULD PROVE THE EXISTENCE OF
SUCH KNOWLEDGE.
(C) WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED
IN SUSTAINING THE TRIAL COURT'S ORDER FOR PETITIONER
HEREIN "TO PAY (TO CHIOK) THE VALUE OF CASHIER'S CHECK
NO. 003380 IN THE AMOUNT OF P7,613,000.00, WHICH WAS
DEBITED AGAINST CHIOK'S SAVINGS ACCOUNT # 15442504955 ON THE OBSERVATION THAT THE PAYMENT TO
FEBTC BY METROBANK OF CC NO. 003380 ON JULY 12, 1995
WAS AN OPEN DEFIANCE OF THE TRO OF JULY 6, 1995."26
BPI, on the other hand, presented the following issues:
I.
Whether or not the Court of Appeals detracted from well-settled
concepts and principles in commercial law regarding the nature,
causes, and effects of a manager's check and cashier's check in
ruling that [the] power of the court can be invoked by the purchaser
[Chiok] in a proper action, which the Court su[b]stantially construed
as a rescissory action or the power to rescind obligations under
Article 1191 of the Civil Code.
II.
Whether or not the Honorable Court of Appeals erred in ruling that
where a purchaser invokes rescission due to an alleged breach of the
payee's contractual obligation, it is deemed as "peculiar
circumstance" which justifies a stop payment order issued by the
purchaser or a temporary restraining order/injunction from a Court to
prevent payment of a Manager's Check or a Cashier's Check.
III.
Whether or not the Honorable Court of Appeals erred in ruling that
judicial admissions in the pleadings of Nuguid, BPI, Asian Bank,
Metrobank and even Chiok himself that Nuguid had withdrawn the
proceeds of the checks will not defeat Chiok's "substantial right" to
restrain the drawee bank from paying BPI, the collecting bank or
presenting bank in this case who paid the value of the
Cashier's/Manager's Checks to the payee. 27
Finally, Global Bank rely upon the following grounds in its petition with this Court:
A.
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT
PETITIONER GLOBAL BANK HAD NO JUSTIFICATION FOR ITS RIGHT OF
RECOURSE AGAINST RESPONDENT CHIOK NOTWITHSTANDING THE
CLEAR AND UNMISTAKABLE PROVISIONS OF THE BILLS PURCHASE
AGREEMENT.
B.
THE COURT OF APPEALS GRAVELY ERRED IN MAKING PETITIONER
GLOBAL BANK LIABLE FOR INTEREST OF 4% PER ANNUM DESPITE THE
FACT THAT:
1. RESPONDENT DID NOT ASK FOR SUCH RELIEF IN HIS
COMPLAINT;
2. RESPONDENT HAD WAIVED HIS RIGHT TO ANY INTEREST;
AND
3. THERE IS NO EVIDENCE ON RECORD AS THE BASIS FOR ANY
INTEREST. 28
Before delving into the merits of these cases, we shall first dispose of a procedural
development during their pendency with the Court. DAcaIE
Joint Manifestation and Motion allegedly
filed by Metrobank, Global Bank and
respondent Chiok
On May 28, 2013, this Court received a Joint Manifestation and Motion allegedly filed
by petitioners Metrobank, Global Bank, and respondent Chiok, which reads:
PETITIONERS METROPOLITAN BANK & TRUST COMPANY & GLOBAL
BUSINESS BANK, INC., and RESPONDENT WILFRED N. CHIOK, by their
respective counsels, unto this Honorable Court, respectfully state that
after a thorough consideration, the parties herein have decided to
forego their respective claims against each other, including, past,
present and/or contingent, in relation to the above-referenced cases.
PRAYER
WHEREFORE, it is respectfully prayed that no further action be taken
by this Honorable Court on the foregoing petitions, that the instant
proceedings be declared CLOSED and TERMINATED, and that an
As far as this Court is concerned, the counsel of record of respondent Chiok is still
Cruz Durian Alday & Cruz-Matters. The requisites of a proper substitution of counsel
of record are stated and settled in jurisprudence:
No substitution of counsel of record is allowed unless the following
essential requisites of a valid substitution of counsel concur: (1) there
must be a written request for substitution; (2) it must be filed with
the written consent of the client; (3) it must be with the written
consent of the attorney to be substituted; and (4) in case the consent
of the attorney to be substituted cannot be obtained, there must be
at least a proof of notice that the motion for substitution was served
on him in the manner prescribed by the Rules of Court. 29 (Citation
omitted.) CDcHSa
Therefore, while we should indeed require Atty. Cruz to indicate the number and
date of issue of his MCLE Certificate of Compliance or Certificate of Exemption
for the immediately preceding compliance period, he is justified in pointing out
the violation of Canon 8 30 of the Code of Professional Responsibility, Rule 8.02
of which provides:
Rule 8.02. A lawyer shall not, directly or indirectly, encroach upon
the professional employment of another lawyer; however, it is the
right of any lawyer, without fear or favor, to give proper advice and
assistance to those seeking relief against unfaithful or neglectful
counsel.
We should also give weight to the opposition of BPI to the supposed compromise
agreement. As stated above, the consolidated petitions filed by Metrobank, BPI, and
Global Bank all assail the Decision of the Court of Appeals in CA-G.R. CV No. 77508
dated May 5, 2006, and the Resolution on the same case dated November 6, 2006.
BPI itself has a claim against Global Bank, which appear to be intimately related to
issues brought forth in the other consolidated petitions.
Furthermore, the failure of the parties to the Joint Manifestation and Motion to
declare with particularity the terms of their agreement prevents us from approving
the same so as to allow it to attain the effect of res judicata. A judicial compromise
is not a mere contract between the parties. Thus, we have held that:
A compromise agreement intended to resolve a matter already under
litigation is a judicial compromise. Having judicial mandate and
entered as its determination of the controversy, such judicial
compromise has the force and effect of a judgment. It transcends its
identity as a mere contract between the parties, as it becomes a
judgment that is subject to execution in accordance with the Rules of
Court. Thus, a compromise agreement that has been made and duly
approved by the court attains the effect and authority of res judicata,
although no execution may be issued unless the agreement receives
the approval of the court where the litigation is pending and
compliance with the terms of the agreement is decreed. 31 (Citation
omitted.)
We are therefore constrained to deny the Joint Manifestation and Motion filed with
this Court on May 28, 2013 and to hereby decide the consolidated petitions on their
merits.
The Court's ruling on the merits of these
consolidated petitions
Whether or not payment of manager's
and cashier's checks are subject to the
condition that the payee thereof should
comply with his obligations to the
purchaser of the checks
The legal effects of a manager's check and a cashier's check are the same. A
manager's check, like a cashier's check, is an order of the bank to pay, drawn upon
itself, committing in effect its total resources, integrity, and honor behind its
issuance. By its peculiar character and general use in commerce, a manager's
check or a cashier's check is regarded substantially to be as good as the money it
represents. 32 Thus, the succeeding discussions and jurisprudence on manager's
checks, unless stated otherwise, are applicable to cashier's checks, and vice versa.
The RTC effectively ruled that payment of manager's and cashier's checks are
subject to the condition that the payee thereof complies with his obligations to the
purchaser of the checks:
The dedication of
such
checks pursuant to specific reciprocal undertakings between th
eir purchasers and payees authorizes rescission by the former to
prevent substantial and material damage to themselves, which
authority includes stopping the payment of the checks.
Moreover, it seems to be fallacious to hold that the
unconditional payment of manager's and cashier's checks is
the rule. To begin with, both manager's andcashier's checks are still
subject to regular clearing under the regulations of the Bangko
Sentral ng Pilipinas, a fact borne out by the BSP manual for banks
and intermediaries, which provides, among others, in its Section
1603.1, c, as follows:
xxx xxx xxx
c. Items for clearing. All checks and documents payable on
demand and drawn against a bank/branch, institution or entity
allowed to clear may be exchanged through the Clearing Office
in Manila and the Regional Clearing Units in regional clearing
centers designated by the Central Bank . . . . 33
The RTC added that since manager's and cashier's checks are the
subject of regular clearing, they may consequently be refused for
cause by the drawee, which refusal is in fact provided for in Section
20 of the Rule Book of the PCHC: cDCaTS
Sec. 20. REGULAR RETURN ITEM PROCEDURE.
sufficient funds in the hands of the drawee, that they have been set
apart for its satisfaction, and that they shall be so applied whenever
the check is presented for payment. It is an understanding that
the check is good then, and shall continue good, and this
agreement is as binding on the bank as its notes in
circulation, a certificate of deposit payable to the order of the
depositor, or any other obligation it can assume. The object
of certifying a check, as regards both parties, is to enable the
holder to use it as money."When the holder procures the check to
be certified, "the check operates as an assignment of a part of the
funds to the creditors." Hence, the exception to the rule enunciated
under Section 63 of the Central Bank Act to the effect "that a check
which has been cleared and credited to the account of the creditor
shall be equivalent to a delivery to the creditor in cash in an amount
equal to the amount credited to his account" shall apply in this case. .
. . . (Emphases supplied, citations omitted.)
Even more telling is the Court's pronouncement in Tan v. Court of Appeals, 36 which
unequivocally settled the unconditional nature of the credit created by the issuance
of manager's or cashier's checks:
A cashier's check is a primary obligation of the issuing bank
and accepted in advance by its mere issuance. By its very nature, a
cashier's check is the bank's order to pay drawn upon itself,
committing in effect its total resources, integrity and honor behind
the check. A cashier's check by its peculiar character and general use
in the commercial world is regarded substantially to be as good as
the money which it represents. In this case, therefore, PCIB by issuing
the check created an unconditional credit in favor of any collecting
bank. (Emphases supplied, citations omitted.)
Furthermore, under the principle of ejusdem generis, where a statute describes
things of a particular class or kind accompanied by words of a generic character,
the generic word will usually be limited to things of a similar nature with those
particularly enumerated, unless there be something in the context of the statute
which would repel such inference. 37 Thus, any long standing and accepted
banking practice which can be considered as a valid cause to return manager's or
cashier's checks should be of a similar nature to the enumerated cause applicable
to manager's or cashier's checks: material alteration. As stated above, an example
of a similar cause is the presentation of a counterfeit check. cSIADa
Whether or not the purchaser of
manager's and cashier's checks has the
right to have the checks cancelled by
filing an action for rescission of its
contract with the payee
The Court of Appeals affirmed the order of the RTC for Global Bank and Metrobank
to pay Chiok for the amounts of the subject manager's and cashier's checks.
However, since it is clear to the appellate court that the payment of manager's and
cashier's checks cannot be considered to be subject to the condition the payee
thereof complies with his obligations to the purchaser of the checks, the Court of
Appeals provided another legal basis for such liability rescission under Article
1191 of the Civil Code:
WHEREFORE, premises considered, the Decision dated August 29,
2000 of the RTC, Branch 96, Quezon City is AFFIRMED with the
following MODIFICATIONS:
1.) The contract to buy foreign currency in the amount of
$1,022,288.50 between plaintiff-appellee Wilfred N.
Chiok and defendant Gonzalo B. Nuguid is hereby
rescinded. Corollarily, Manager's Check Nos. 025935 and
025939 and Cashier's Check No. 003380 are ordered
cancelled. 38
According to the Court of Appeals, while such rescission was not mentioned in
Chiok's Amended Complaint, the same was evident from his prayer to be declared
the legal owner of the proceeds of the subject checks and to be allowed to withdraw
the same. Since rescission creates the obligation to return the things which are the
object of the contract, together with the fruits, the price and the
interest, 39 injunctive relief was necessary to restrain the payment of the subject
checks with the end in view of the return of the proceeds to Chiok. 40
Thus, as it was construed by the Court of Appeals, the Amended Complaint of Chiok
was in reality an action for rescission of the contract to buy foreign currency
between Chiok and Nuguid. The Court of Appeals then proceeded to cancel the
manager's and cashier's checks as a consequence of the granting of the action for
rescission, explaining that "the subject checks would not have been issued were it
not for the contract between Chiok and Nuguid. Therefore, they cannot be
disassociated from the contract and given a distinct and exclusive signification, as
the purchase thereof is part and parcel of the series of transactions necessary to
consummate the contract." 41
We disagree with the above ruling.
The right to rescind invoked by the Court of Appeals is provided by Article 1191 of
the Civil Code, which reads:
Art. 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles
1385 and 1388 and the Mortgage Law.
The cause of action supplied by the above article, however, is clearly predicated
upon the reciprocity of the obligations of the injured party and the guilty party.
Reciprocal obligations are those which arise from the same cause, and in which
each party is a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. They are to be performed
simultaneously such that the performance of one is conditioned upon the
simultaneous fulfillment of the other. 42 When Nuguid failed to deliver the agreed
amount to Chiok, the latter had a cause of action against Nuguid to ask for the
rescission of their contract. On the other hand, Chiok did not have a cause of action
against Metrobank and Global Bank that would allow him to rescind the contracts of
sale of the manager's or cashier's checks, which would have resulted in the
crediting of the amounts thereof back to his accounts.
Otherwise stated, the right of rescission 43 under Article 1191 of the Civil Code can
only be exercised in accordance with the principle of relativity of contracts under
Article 1131 of the same code, which provides:
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. . . . . SEACTH
In several cases, this Court has ruled that under the civil law principle of relativity of
contracts under Article 1131, contracts can only bind the parties who entered into
it, and it cannot favor or prejudice a third person, even if he is aware of such
contract and has acted with knowledge thereof. 44 Metrobank and Global Bank are
not parties to the contract to buy foreign currency between Chiok and Nuguid.
Therefore, they are not bound by such contract and cannot be prejudiced by the
failure of Nuguid to comply with the terms thereof.
Neither could Chiok be validly granted a writ of injunction against Metrobank and
Global Bank to enjoin said banks from honoring the subject manager's and cashier's
checks. It is elementary that "(a)n injunction should never issue when an action for
damages would adequately compensate the injuries caused. The very foundation of
the jurisdiction to issue the writ of injunction rests in the fact that the damages
caused
are
irreparable
and
that
damages
would
not
adequately
compensate." 45 Chiok could have and should have proceeded directly against
Nuguid to claim damages for breach of contract and to have the very account where
he deposited the subject checks garnished under Section 7 (d) 46 and Section
8, 47 Rule 57 of the Rules of Court. Instead, Chiok filed an action to enjoin
Metrobank and Global Bank from complying with their primary obligation under
checks in which they are liable as both drawer and drawee.
It is undisputed that Chiok personally deposited the subject manager's and cashier's
checks to Nuguid's account. If the intention of Chiok was for Nuguid to be allowed to
withdraw the proceeds of the checks after clearing, he could have easily deposited
personal checks, instead of going through the trouble of purchasing manager's and
cashier's checks. Chiok therefore knew, and actually intended, that Nuguid will be
allowed to immediately withdraw the proceeds of the subject checks. The deposit of
the checks which were practically as good as cash was willingly and voluntarily
made by Chiok, without any assurance that Nuguid will comply with his end of the
bargain on the same day. The explanation for such apparently reckless action was
admitted by Chiok in the Amended Complaint itself:
That plaintiff [Chiok] due to the number of years (five to seven years)
of business transactions with defendant [Nuguid] has reposed
utmost trust and confidence on the latter that their transactions
as of June 1995 reaches millions of pesos. . . . . 48 (Emphases
supplied.)
As between two innocent persons, one of whom must suffer the consequences of
a breach of trust, the one who made it possible by his act of confidence must
bear the loss. 49 Evidently, it was the utmost trust and confidence reposed by
Chiok to Nuguid that caused this entire debacle, dragging three banks into the
controversy, and having their resources threatened because of an alleged
default in a contract they were not privy to.
Whether or not the peculiar
circumstances of this case justify the
deviation from the general principles on
causes and effects of manager's and
cashier's checks
The Court of Appeals, while admitting that the general principles on the causes and
effects of manager's and cashier's checks do not allow the countermanding of such
checks on the basis of an alleged failure of consideration of the payee to the
purchaser, nevertheless held that the peculiar circumstances of this case justify a
deviation from said general principles, applying the aforementioned case
of Mesina. The Court of Appeals held:
At the core of the appeal interposed by the intervenor BPI, as well as
the depository banks, Global Bank and Metrobank, is the issue of
whether or not it is legally possible for a purchaser of a Manager's
Check or Cashier's Check to stop payment thereon through a court
order on the ground of the payee's alleged breach of contractual
obligation amounting to an absence of consideration therefor.
In view of the peculiar circumstances of this case, and in the
interest of substantial justice, We are constrained to rule in the
affirmative.
xxx xxx xxx
In the case of Mesina v. Intermediate Appellate Court, cited by BPI in
its appeal brief, the Supreme Court had the occasion to rule that
general principles on causes and effects of a cashier's check, i.e.,
that it cannot be countermanded in the hands of a holder in due
course and that it is a bill of exchange drawn by the bank against
itself, cannot be applied without considering that the bank was aware
of facts (in this case, the cashier's check was stolen) that would not
entitle the payee thereof to collect on the check and, consequently,
the bank has the right to refuse payment when the check is
presented by the payee.
While the factual milieu of the Mesina case is different from the case
at bench, the inference drawn therein by the High Court is
There is, however, no comparable peculiar circumstance in the case at bar that
would justify applying the Mesina disposition. In Mesina, the cashier's check was
stolen while it was in the possession of the drawee bank. In the case at bar, the
manager's and cashier's checks were personally deposited by Chiok in the account
of Nuguid. The only knowledge that can be attributed to the drawee banks is
whatever was relayed by Chiok himself when he asked for a Stop Payment Order.
Chiok testified on this matter, to wit:
Q: Now, Mr. witness, since according to you the defendant failed to
deliver [this] amount of P1,023,288.23 what action have you
undertaken to protect your interest Mr. witness?
A: I immediately call my lawyer, Atty. Espiritu to seek his legal advise
in this matter.
Q: Prior to that matter that you sought the advise of your lawyer,
Atty. Espiritu insofar as the issuing bank is concerned,
namely, Asian Bank, what did you do in order to protect your
interest?
A: I immediately call the bank asking them if what is the procedure
for stop payment and the bank told me that you have to
secure a court order as soon as possible before the clearing of
these checks. 52 (Emphasis supplied.)
Asian Bank, which is now Global Bank, obeyed the TRO and denied the clearing of
the manager's checks. As such, Global Bank may not be held liable on account of
the knowledge of whatever else Chiok told them when he asked for the procedure to
secure a Stop Payment Order. On the other hand, there was no mention that
Metrobank was ever notified of the alleged failure of consideration. Only Asian Bank
was notified of such fact. Furthermore, the mere allegation of breach on the part of
the payee of his personal contract with the purchaser should not be considered a
sufficient cause to immediately nullify such checks, thereby eroding their integrity
and honor as being as good as cash.
In view of all the foregoing, we resolve that Chiok's complaint should be denied
insofar as it prayed for the withdrawal of the proceeds of the subject manager's and
cashier's checks. Accordingly, the writ of preliminary prohibitory injunction enjoining
Metrobank and Global Bank from honoring the subject manager's and cashier's
checks should be lifted.
Since we have ruled that Chiok cannot claim the amounts of the checks from
Metrobank and Global Bank, the issue concerning the setting off of Global Bank's
judgment debt to Chiok with the outstanding obligations of Chiok is hereby mooted.
We furthermore note that Global Bank had not presented 53 such issue as a
counterclaim in the case at bar, preventing us from ruling on the same. ICAcaH
BPI's right to the proceeds of the
manager's checks from Global Bank
While our ruling in Mesina is inapplicable to the case at bar, a much more relevant
case as regards the effect of a Stop Payment Order upon a manager's check would
beSecurity
Bank
and
Trust
Company
v.
Rizal
Commercial
Banking
Corporation, 54 which was decided by this Court in 2009. In said case, SBTC issued
Another reason given by the Court of Appeals for sustaining the dismissal of BPI's
complaint-in-intervention was that BPI failed to prove that it was a holder in due
course with respect to the manager's checks. 59
We agree with the finding of the Court of Appeals that BPI is not a holder in due
course with respect to manager's checks. Said checks were never indorsed by
Nuguid to FEBTC, the predecessor-in-interest of BPI, for the reason that they were
deposited by Chiok directly to Nuguid's account with FEBTC. However, in view of our
ruling that Nuguid has withdrawn the value of the checks from his account, BPI has
the rights of an equitable assignee for value under Section 49 of the Negotiable
Instruments Law, which provides:
Section 49. Transfer without indorsement; effect of. Where the
holder of an instrument payable to his order transfers it for value
without indorsing it, the transfer vests in the transferee such title as
the transferor had therein, and the transferee acquires in addition,
the right to have the indorsement of the transferor. But for the
purpose of determining whether the transferee is a holder in due
course, the negotiation takes effect as of the time when the
indorsement is actually made.
As an equitable assignee, BPI acquires the instrument subject to defenses and
equities available among prior parties 60 and, in addition, the right to have the
indorsement of Nuguid. Since the checks in question are manager's checks, the
drawer and the drawee thereof are both Global Bank. Respondent Chiok cannot be
considered a prior party as he is not the check's drawer, drawee, indorser, payee or
indorsee. Global Bank is consequently primarily liable upon the instrument, and
cannot hide behind respondent Chiok's defenses. As discussed above, manager's
checks are pre-accepted. By issuing the manager's check, therefore, Global Bank
committed in effect its total resources, integrity and honor towards its payment. 61
Resultantly, Global Bank should pay BPI the amount of P18,455,350.00,
representing the aggregate face value of MC No. 025935 and MC No. 025939. Since
Global Bank was merely following the TRO and preliminary injunction issued by the
RTC, it cannot be held liable for legal interest during the time said amounts are in its
possession. Instead, we are adopting the formulation of the Court of Appeals that
the amounts be treated as savings deposits in Global Bank. The interest rate,
however, should not be fixed at 4% as determined by the Court of Appeals, since
said rates have fluctuated since July 7, 1995, the date Global Bank refused to honor
the subject manager's checks. Thus, Global Bank should pay BPI interest based on
the rates it actually paid its depositors from July 7, 1995 until the finality of this
Decision, in accordance with the same compounding rules it applies to its
depositors. The legal rate of 6% per annum shall apply after the finality of this
Decision. 62
We have to stress that respondent Chiok is not left without recourse. Respondent
Chiok's cause of action to recover the value of the checks is against Nuguid.
Unfortunately, Nuguid allowed his appeal with the Court of Appeals to lapse, without
taking steps to have it reinstated. As stated above, parties who did not appeal will
not be affected by the decision of the appellate court rendered to appealing
parties. 63 Moreover, since Nuguid was not impleaded as a party to the present
consolidated cases, he cannot be bound by our judgment herein. Respondent Chiok
should therefore pursue his remedy against Nuguid in a separate action to recover
the amounts of the checks.
Despite the reversal of the Court of Appeals Decision, the liability of Nuguid therein
to respondent Chiok for attorney's fees equivalent to 5% of the total amount due
remains valid, computed from the amounts stated in said Decision. This is a
consequence of the finality of the Decision of the Court of Appeals with respect to
him.
WHEREFORE, the Court resolves to DENY the Joint Manifestation and Motion filed
with this Court on May 28, 2013.
The petitions in G.R. No. 172652 and G.R. No. 175302 are GRANTED. The Decision
of the Court of Appeals in CA-G.R. CV No. 77508 dated May 5, 2006, and the
Resolution on the same case dated November 6, 2006 are hereby REVERSED AND
SET ASIDE, and a new one is issued ordering the DENIAL of the Amended
Complaint in Civil Case No. Q-95-24299 in Branch 96 of the Regional Trial Court of
Quezon City for lack of merit. The Writ of Preliminary Prohibitory Injunction enjoining
Asian Banking Corporation (now Global Business Bank, Inc.) from honoring MC No.
025935 and MC No. 025939, and Metropolitan Bank & Trust Company from honoring
CC No. 003380, is hereby LIFTED and SET ASIDE.
Global Business Bank, Inc. is ORDERED TO PAY the Bank of the Philippine Islands,
as successor-in-interest of Far East Bank & Trust Company, the amount of
P18,455,350.00, representing the aggregate face value of MC No. 025935 and MC
No. 025939, with interest based on the rates it actually paid its depositors from July
7, 1995 until the finality of this Decision, in accordance with the same compounding
rules it applies to its depositors.
The petition in G.R. No. 175394 is hereby rendered MOOT.
The liabilities of spouses Gonzalo B. Nuguid and Marinella O. Nuguid under the
Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 77508
remain VALIDand SUBSISTING, computed from the amounts adjudged by the
Court of Appeals, without prejudice to any further action that may be filed by
Wilfred N. Chiok. aCASEH
SO ORDERED.
K. Cancellation of Indorsements
SECTION 48.Striking Out Indorsement. The holder may at any time strike out any
indorsement which is not necessary to his title. The indorser whose indorsement is
struck out, and all indorsers subsequent to him, are thereby relieved from liability
on the instrument.||| (Negotiable Instruments Law, ACT NO. 2031, [1911])
L. Indorsement by Agent
SECTION 44.Indorsement in Representative Capacity. Where any person is under
obligation to indorse in a representative capacity, he may indorse in such terms as
to negative personal liability.||| (Negotiable Instruments Law, ACT NO. 2031, [1911])
SECTION 20.Liability of Person Signing as Agent, and So Forth. Where the
instrument contains or a person adds to his signature words indicating that he signs
for or on behalf of a principal, or in a representative capacity, he is not liable on the
instrument if he was duly authorized; but the mere addition of words describing him
as an agent, or as filling a representative character, without disclosing his principal,
does not exempt him from personal liability.||| (Negotiable Instruments Law, ACT
NO. 2031, [1911])
ADALIA FRANCISCO vs. COURT OF APPEALS, ET AL.
G.R. No. 116320 November 29, 1999
--agents
FACTS:
A. Francisco Realty & Development Corporation (AFRDC), of which petitioner
Francisco is the president, entered into a Land Development and Construction
Contract with private respondent Herby Commercial & Construction Corporation
(HCCC), represented by its President and General Manager private respondent
Ong. Under the contract, HCCC was to be paid on the basis of the completed
houses and developed lands delivered to and accepted by AFRDC and the
GSIS. Sometime in 1979, Ong discovered that Diaz and Francisco, the VicePresident of GSIS, had executed and signed seven checks of various dates and
amounts payable to HCCC for completed and delivered work under the contract.
Ong, however, claims that these checks were never delivered to HCCC. It turned
out that Francisco forged the indorsement of Ong on the checks and indorsed the
checks for a second time by signing her name at the back of the checks, petitioner
then deposited said checks in her savings account. A case was brought by private
respondents against petitioner to recover the value of said checks. Petitioner
however claims that she was authorized to sign Ong's name on the checks by virtue
of the Certification executed by Ong in her favor giving her the authority to collect
all the receivables of HCCC from the GSIS, including the questioned checks.
ISSUE:
Whether petitioner cannot be held liable on the questioned checks by virtue of the
Certification executed by Ong giving her the authority to collect such checks from
the GSIS.
RULING:
Petitioner is liable. The Negotiable Instruments Law provides that where any person
is under obligation to indorse in a representative capacity, he may indorse in such
terms as to negative personal liability. An agent, when so signing, should indicate
that he is merely signing in behalf of the principal and must disclose the name of his
principal; otherwise he shall be held personally liable. Even assuming that
Francisco was authorized by HCCC to sign Ong's name, still, Francisco did not
indorse the instrument in accordance with law. Instead of signing Ong's name,
Francisco should have signed her own name and expressly indicated that she was
signing as an agent of HCCC. Thus, the Certification cannot be used by Francisco to
validate her act of forgery.
M. Presumptions as to Indorsements
SECTION 45.Time of Indorsement; Presumption. Except where an indorsement
bears date after the maturity of the instrument, every negotiation is deemed prima
facie to have been effected before the instrument was overdue.||| (Negotiable
Instruments Law, ACT NO. 2031, [1911])
SECTION 46.Place of Indorsement; Presumption. Except where the contrary
appears, every indorsement is presumed prima facie to have been made at the
place where the instrument is dated.||| (Negotiable Instruments Law, ACT NO. 2031,
[1911])
SECTION 42.Effect of Instrument Drawn or Indorsed to a Person as Cashier.
Where an instrument is drawn or indorsed to a person as "cashier" or other fiscal
officer of a bank or corporation, it is deemed prima facie to be payable to the bank
or corporation of which he is such officer; and may be negotiated by either the
indorsement of the bank or corporation, or the indorsement of the
officer.||| (Negotiable Instruments Law, ACT NO. 2031, [1911])