G.R. No. L-22405 June 30, 1971 On September 27, 1961, appellee Mauricio A.

Soriano, Chief of the

Money Order Division of the Manila Post Office, acting for and in
PHILIPPINE EDUCATION CO., INC., plaintiff-appellant, behalf of his co-appellee, Postmaster Enrico Palomar, notified the
vs. Bank of America that money order No. 124688 attached to his letter
MAURICIO A. SORIANO, ET AL., defendant-appellees. had been found to have been irregularly issued and that, in view
thereof, the amount it represented had been deducted from the
Marcial Esposo for plaintiff-appellant. bank's clearing account. For its part, on August 2 of the same year,
the Bank of America debited appellant's account with the same
amount and gave it advice thereof by means of a debit memo.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor
General Antonio G. Ibarra and Attorney Concepcion Torrijos-Agapinan
for defendants-appellees. On October 12, 1961 appellant requested the Postmaster General to
reconsider the action taken by his office deducting the sum of
P200.00 from the clearing account of the Bank of America, but his
request was denied. So was appellant's subsequent request that the
matter be referred to the Secretary of Justice for advice. Thereafter,
DIZON, J.: appellant elevated the matter to the Secretary of Public Works and
Communications, but the latter sustained the actions taken by the
An appeal from a decision of the Court of First Instance of Manila postal officers.
dismissing the complaint filed by the Philippine Education Co., Inc.
against Mauricio A. Soriano, Enrico Palomar and Rafael Contreras. In connection with the events set forth above, Montinola was charged
with theft in the Court of First Instance of Manila (Criminal Case No.
On April 18, 1958 Enrique Montinola sought to purchase from the 43866) but after trial he was acquitted on the ground of reasonable
Manila Post Office ten (10) money orders of P200.00 each payable to doubt.
E.P. Montinola withaddress at Lucena, Quezon. After the postal teller
had made out money ordersnumbered 124685, 124687-124695, On January 8, 1962 appellant filed an action against appellees in the
Montinola offered to pay for them with a private checks were not Municipal Court of Manila praying for judgment as follows:
generally accepted in payment of money orders, the teller advised him
to see the Chief of the Money Order Division, but instead of doing so, WHEREFORE, plaintiff prays that after hearing
Montinola managed to leave building with his own check and the defendants be ordered:
ten(10) money orders without the knowledge of the teller.
(a) To countermand the notice given to the Bank of
On the same date, April 18, 1958, upon discovery of the America on September 27, 1961, deducting from the
disappearance of the unpaid money orders, an urgent message was said Bank's clearing account the sum of P200.00
sent to all postmasters, and the following day notice was likewise represented by postal money order No. 124688, or in
served upon all banks, instructing them not to pay anyone of the the alternative indemnify the plaintiff in the same
money orders aforesaid if presented for payment. The Bank of amount with interest at 8-½% per annum from
America received a copy of said notice three days later. September 27, 1961, which is the rate of interest being
paid by plaintiff on its overdraft account;
On April 23, 1958 one of the above-mentioned money orders
numbered 124688 was received by appellant as part of its sales (b) To pay to the plaintiff out of their own personal
receipts. The following day it deposited the same with the Bank of funds, jointly and severally, actual and moral damages
America, and one day thereafter the latter cleared it with the Bureau in the amount of P1,000.00 or in such amount as will
of Posts and received from the latter its face value of P200.00. be proved and/or determined by this Honorable Court:
 exemplary damages in the amount of P1,000.00, vs. Stock Drawers National Bank, 30 Fed. 912), the reason behind
attorney's fees of P1,000.00, and the costs of action. this rule being that, in establishing and operating a postal money
order system, the government is not engaging in commercial
Plaintiff also prays for such other and further relief as transactions but merely exercises a governmental power for the
may be deemed just and equitable. public benefit.

On November 17, 1962, after the parties had submitted the It is to be noted in this connection that some of the restrictions
stipulation of facts reproduced at pages 12 to 15 of the Record on imposed upon money orders by postal laws and regulations are
Appeal, the above-named court rendered judgment as follows: inconsistent with the character of negotiable instruments. For
instance, such laws and regulations usually provide for not more
WHEREFORE, judgment is hereby rendered, ordering than one endorsement; payment of money orders may be withheld
the defendants to countermand the notice given to the under a variety of circumstances (49 C.J. 1153).
Bank of America on September 27, 1961, deducting
from said Bank's clearing account the sum of P200.00 Of particular application to the postal money order in question are
representing the amount of postal money order No. the conditions laid down in the letter of the Director of Posts of
124688, or in the alternative, to indemnify the plaintiff October 26, 1948 (Exhibit 3) to the Bank of America for the
in the said sum of P200.00 with interest thereon at the redemption of postal money orders received by it from its depositors.
rate of 8-½% per annum from September 27, 1961 Among others, the condition is imposed that "in cases of adverse
until fully paid; without any pronouncement as to cost claim, the money order or money orders involved will be returned to
and attorney's fees. you (the bank) and the, corresponding amount will have to be
refunded to the Postmaster, Manila, who reserves the right to deduct
The case was appealed to the Court of First Instance of Manila where, the value thereof from any amount due you if such step is deemed
after the parties had resubmitted the same stipulation of facts, the necessary." The conditions thus imposed in order to enable the bank
appealed decision dismissing the complaint, with costs, was to continue enjoying the facilities theretofore enjoyed by its
rendered. depositors, were accepted by the Bank of America. The latter is
therefore bound by them. That it is so is clearly referred from the fact
that, upon receiving advice that the amount represented by the
The first, second and fifth assignments of error discussed in money order in question had been deducted from its clearing account
appellant's brief are related to the other and will therefore be with the Manila Post Office, it did not file any protest against such
discussed jointly. They raise this main issue: that the postal money action.
order in question is a negotiable instrument; that its nature as such
is not in anyway affected by the letter dated October 26, 1948 signed
by the Director of Posts and addressed to all banks with a clearing Moreover, not being a party to the understanding existing between
account with the Post Office, and that money orders, once issued, the postal officers, on the one hand, and the Bank of America, on the
create a contractual relationship of debtor and creditor, respectively, other, appellant has no right to assail the terms and conditions
between the government, on the one hand, and the remitters payees thereof on the ground that the letter setting forth the terms and
or endorses, on the other. conditions aforesaid is void because it was not issued by a
Department Head in accordance with Sec. 79 (B) of the Revised
Administrative Code. In reality, however, said legal provision does not
It is not disputed that our postal statutes were patterned after apply to the letter in question because it does not provide for a
statutes in force in the United States. For this reason, ours are department regulation but merely sets down certain conditions upon
generally construed in accordance with the construction given in the the privilege granted to the Bank of Amrica to accept and pay postal
United States to their own postal statutes, in the absence of any money orders presented for payment at the Manila Post Office. Such
special reason justifying a departure from this policy or practice. The being the case, it is clear that the Director of Posts had ample
weight of authority in the United States is that postal money orders authority to issue it pursuant to Sec. 1190 of the Revised
are not negotiable instruments (Bolognesi vs. U.S. 189 Fed. 395; U.S. Administrative Code.
In view of the foregoing, We do not find it necessary to resolve the On 14 December 1990, the Tibajia spouses delivered to Deputy
issues raised in the third and fourth assignments of error. Sheriff Eduardo Bolima the total money judgment in the following
form:
WHEREFORE, the appealed decision being in accordance with law,
the same is hereby affirmed with costs. Cashier's Check P262,750.00
Cash 135,733.70
G.R. No. 100290 June 4, 1993 ————
Total P398,483.70
NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA, petitioners,
vs. Private respondent, Eden Tan, refused to accept the payment made
THE HONORABLE COURT OF APPEALS and EDEN by the Tibajia spouses and instead insisted that the garnished funds
TAN, respondents. deposited with the cashier of the Regional Trial Court of Pasig, Metro
Manila be withdrawn to satisfy the judgment obligation. On 15
January 1991, defendant spouses (petitioners) filed a motion to lift
the writ of execution on the ground that the judgment debt had
already been paid. On 29 January 1991, the motion was denied by
PADILLA, J.: the trial court on the ground that payment in cashier's check is not
payment in legal tender and that payment was made by a third party
Petitioners, spouses Norberto Tibajia, Jr. and Carmen Tibajia, are other than the defendant. A motion for reconsideration was denied on
before this Court assailing the decision * of respondent appellate 8 February 1991. Thereafter, the spouses Tibajia filed a petition
court dated 24 April 1991 in CA-G.R. SP No. 24164 denying their for certiorari, prohibition and injunction in the Court of Appeals. The
petition for certiorari prohibition, and injunction which sought to appellate court dismissed the petition on 24 April 1991 holding that
annul the order of Judge Eutropio Migriño of the Regional Trial payment by cashier's check is not payment in legal tender as
Court, Branch 151, Pasig, Metro Manila in Civil Case No. 54863 required by Republic Act No. 529. The motion for reconsideration was
entitled "Eden Tan vs. Sps. Norberto and Carmen Tibajia." denied on 27 May 1991.

Stated briefly, the relevant facts are as follows: In this petition for review, the Tibajia spouses raise the following
issues:
Case No. 54863 was a suit for collection of a sum of money filed by
Eden Tan against the Tibajia spouses. A writ of attachment was I WHETHER OR NOT THE BPI CASHIER'S CHECK NO.
issued by the trial court on 17 August 1987 and on 17 September 014021 IN THE AMOUNT OF P262,750.00 TENDERED
1987, the Deputy Sheriff filed a return stating that a deposit made by BY PETITIONERS FOR PAYMENT OF THE JUDGMENT
the Tibajia spouses in the Regional Trial Court of Kalookan City in DEBT, IS "LEGAL TENDER".
the amount of Four Hundred Forty Two Thousand Seven Hundred
and Fifty Pesos (P442,750.00) in another case, had been garnished by II WHETHER OR NOT THE PRIVATE RESPONDENT
him. On 10 March 1988, the Regional Trial Court, Branch 151 of MAY VALIDLY REFUSE THE TENDER OF PAYMENT
Pasig, Metro Manila rendered its decision in Civil Case No. 54863 in PARTLY IN CHECK AND PARTLY IN CASH MADE BY
favor of the plaintiff Eden Tan, ordering the Tibajia spouses to pay PETITIONERS, THRU AURORA VITO AND COUNSEL,
her an amount in excess of Three Hundred Thousand Pesos FOR THE SATISFACTION OF THE MONETARY
(P300,000.00). On appeal, the Court of Appeals modified the decision OBLIGATION OF PETITIONERS-SPOUSES.1
by reducing the award of moral and exemplary damages. The decision
having become final, Eden Tan filed the corresponding motion for
execution and thereafter, the garnished funds which by then were on The only issue to be resolved in this case is whether or not payment
deposit with the cashier of the Regional Trial Court of Pasig, Metro by means of check (even by cashier's check) is considered payment in
Manila, were levied upon.
legal tender as required by the Civil Code, Republic Act No. 529, and incurred. Every obligation heretofore and hereafter
the Central Bank Act. incurred, whether or not any such provision as to
payment is contained therein or made with respect
It is contended by the petitioners that the check, which was a thereto, shall be discharged upon payment in any coin
cashier's check of the Bank of the Philippine Islands, undoubtedly a or currency which at the time of payment is legal
bank of good standing and reputation, and which was a crossed tender for public and private debts.
check marked "For Payee's Account Only" and payable to private
respondent Eden Tan, is considered legal tender, payment with which c. Section 63 of Republic Act No. 265, as amended (Central Bank Act)
operates to discharge their monetary obligation.2 Petitioners, to which provides:
support their contention, cite the case of New Pacific Timber and
Supply Co., Inc. v. Señeris3 where this Court held through Mr. Justice Sec. 63. Legal character — Checks representing
Hermogenes Concepcion, Jr. that "It is a well-known and accepted deposit money do not have legal tender power and
practice in the business sector that a cashier's check is deemed as their acceptance in the payment of debts, both public
cash". and private, is at the option of the creditor: Provided,
however, that a check which has been cleared and
The provisions of law applicable to the case at bar are the following: credited to the account of the creditor shall be
equivalent to a delivery to the creditor of cash in an
a. Article 1249 of the Civil Code which provides: amount equal to the amount credited to his account.

Art. 1249. The payment of debts in money shall be From the aforequoted provisions of law, it is clear that this petition
made in the currency stipulated, and if it is not must fail.
possible to deliver such currency, then in the currency
which is legal tender in the Philippines. In the recent cases of Philippine Airlines, Inc. vs. Court of
Appeals4 and Roman Catholic Bishop of Malolos, Inc. vs. Intermediate
The delivery of promissory notes payable to order, or Appellate Court,5 this Court held that —
bills of exchange or other mercantile documents shall
produce the effect of payment only when they have A check, whether a manager's check or ordinary
been cashed, or when through the fault of the creditor check, is not legal tender, and an offer of a check in
they have been impaired. payment of a debt is not a valid tender of payment and
may be refused receipt by the obligee or creditor.
In the meantime, the action derived from the original
obligation shall be held in abeyance.; The ruling in these two (2) cases merely applies the statutory
provisions which lay down the rule that a check is not legal tender
b. Section 1 of Republic Act No. 529, as amended, which provides: and that a creditor may validly refuse payment by check, whether it
be a manager's, cashier's or personal check.
Sec. 1. Every provision contained in, or made with
respect to, any obligation which purports to give the Petitioners erroneously rely on one of the dissenting opinions in
obligee the right to require payment in gold or in any the Philippine Airlines case6 to support their cause. The dissenting
particular kind of coin or currency other than opinion however does not in any way support the contention that a
Philippine currency or in an amount of money of the check is legal tender but, on the contrary, states that "If the PAL
Philippines measured thereby, shall be as it is hereby checks in question had not been encashed by Sheriff Reyes, there
declared against public policy null and void, and of no would be no payment by PAL and, consequently, no discharge or
effect, and no such provision shall be contained in, or satisfaction of its judgment obligation."7 Moreover, the circumstances
made with respect to, any obligation thereafter in the Philippine Airlines case are quite different from those in the
case at bar for in that case the checks issued by the judgment debtor The petition involving the alias writ of execution had its beginnings
were made payable to the sheriff, Emilio Z. Reyes, who encashed the on November 8, 1967, when respondent Amelia Tan, under the name
checks but failed to deliver the proceeds of said encashment to the and style of Able Printing Press commenced a complaint for damages
judgment creditor. before the Court of First Instance of Manila. The case was docketed
as Civil Case No. 71307, entitled Amelia Tan, et al. v. Philippine
In the more recent case of Fortunado vs. Court of Appeals,8 this Court Airlines, Inc.
stressed that, "We are not, by this decision, sanctioning the use of a
check for the payment of obligations over the objection of the After trial, the Court of First Instance of Manila, Branch 13, then
creditor." presided over by the late Judge Jesus P. Morfe rendered judgment on
June 29, 1972, in favor of private respondent Amelia Tan and against
WHEREFORE, the petition is DENIED. The appealed decision is petitioner Philippine Airlines, Inc. (PAL) as follows:
hereby AFFIRMED, with costs against the petitioners.
WHEREFORE, judgment is hereby rendered, ordering the
SO ORDERED. defendant Philippine Air Lines:

G.R. No. L-49188 January 30, 1990 1. On the first cause of action, to pay to the plaintiff
the amount of P75,000.00 as actual damages, with
PHILIPPINE AIRLINES, INC., petitioner, legal interest thereon from plaintiffs extra-judicial
vs. demand made by the letter of July 20, 1967;
HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO,
Court of First Instance of Manila, Branch XIII, JAIME K. DEL 2. On the third cause of action, to pay to the plaintiff
ROSARIO, Deputy Sheriff, Court of First Instance, Manila, and the amount of P18,200.00, representing the unrealized
AMELIA TAN, respondents. profit of 10% included in the contract price of
P200,000.00 plus legal interest thereon from July
20,1967;

3. On the fourth cause of action, to pay to the plaintiff

the amount of P20,000.00 as and for moral damages,
GUTIERREZ, JR., J.:
with legal interest thereon from July 20, 1 967;

Behind the simple issue of validity of an alias writ of execution in this

4. On the sixth cause of action, to pay to the plaintiff
case is a more fundamental question. Should the Court allow a too
the amount of P5,000.00 damages as and for
literal interpretation of the Rules with an open invitation to knavery
attorney's fee.
to prevail over a more discerning and just approach? Should we not
apply the ancient rule of statutory construction that laws are to be
interpreted by the spirit which vivifies and not by the letter which Plaintiffs second and fifth causes of action, and defendant's
killeth? counterclaim, are dismissed.

This is a petition to review on certiorari the decision of the Court of With costs against the defendant. (CA Rollo, p. 18)
Appeals in CA-G.R. No. 07695 entitled "Philippine Airlines, Inc. v.
Hon. Judge Ricardo D. Galano, et al.", dismissing the petition for On July 28, 1972, the petitioner filed its appeal with the Court of
certiorari against the order of the Court of First Instance of Manila Appeals. The case was docketed as CA-G.R. No. 51079-R.
which issued an alias writ of execution against the petitioner.
On February 3, 1977, the appellate court rendered its decision, the
dispositive portion of which reads:
 IN VIEW WHEREOF, with the modification that PAL is On March 28, 1978, motion for the issuance of a partial alias writ of
condemned to pay plaintiff the sum of P25,000.00 as damages execution was filed by respondent Amelia Tan.
and P5,000.00 as attorney's fee, judgment is affirmed, with
costs. (CA Rollo, p. 29) On April 19, 1978, respondent Amelia Tan filed a motion to withdraw
"Motion for Partial Alias Writ of Execution" with Substitute Motion for
Notice of judgment was sent by the Court of Appeals to the trial court Alias Writ of Execution. On May 1, 1978, the respondent Judge
and on dates subsequent thereto, a motion for reconsideration was issued an order which reads:
filed by respondent Amelia Tan, duly opposed by petitioner PAL.
As prayed for by counsel for the plaintiff, the Motion to
On May 23,1977, the Court of Appeals rendered its resolution Withdraw 'Motion for Partial Alias Writ of Execution with
denying the respondent's motion for reconsideration for lack of merit. Substitute Motion for Alias Writ of Execution is hereby
granted, and the motion for partial alias writ of execution is
No further appeal having been taken by the parties, the judgment considered withdrawn.
became final and executory and on May 31, 1977, judgment was
correspondingly entered in the case. Let an Alias Writ of Execution issue against the defendant for
the fall satisfaction of the judgment rendered. Deputy Sheriff
The case was remanded to the trial court for execution and on Jaime K. del Rosario is hereby appointed Special Sheriff for
September 2,1977, respondent Amelia Tan filed a motion praying for the enforcement thereof. (CA Rollo, p. 34)
the issuance of a writ of execution of the judgment rendered by the
Court of Appeals. On October 11, 1977, the trial court, presided over On May 18, 1978, the petitioner received a copy of the first alias writ
by Judge Galano, issued its order of execution with the of execution issued on the same day directing Special Sheriff Jaime
corresponding writ in favor of the respondent. The writ was duly K. del Rosario to levy on execution in the sum of P25,000.00 with
referred to Deputy Sheriff Emilio Z. Reyes of Branch 13 of the Court legal interest thereon from July 20,1967 when respondent Amelia
of First Instance of Manila for enforcement. Tan made an extra-judicial demand through a letter. Levy was also
ordered for the further sum of P5,000.00 awarded as attorney's fees.
Four months later, on February 11, 1978, respondent Amelia Tan
moved for the issuance of an alias writ of execution stating that the On May 23, 1978, the petitioner filed an urgent motion to quash the
judgment rendered by the lower court, and affirmed with modification alias writ of execution stating that no return of the writ had as yet
by the Court of Appeals, remained unsatisfied. been made by Deputy Sheriff Emilio Z. Reyes and that the judgment
debt had already been fully satisfied by the petitioner as evidenced by
On March 1, 1978, the petitioner filed an opposition to the motion for the cash vouchers signed and receipted by the server of the writ of
the issuance of an alias writ of execution stating that it had already execution, Deputy Sheriff Emilio Z. Reyes.
fully paid its obligation to plaintiff through the deputy sheriff of the
respondent court, Emilio Z. Reyes, as evidenced by cash vouchers On May 26,1978, the respondent Jaime K. del Rosario served a notice
properly signed and receipted by said Emilio Z. Reyes. of garnishment on the depository bank of petitioner, Far East Bank
and Trust Company, Rosario Branch, Binondo, Manila, through its
On March 3,1978, the Court of Appeals denied the issuance of the manager and garnished the petitioner's deposit in the said bank in
alias writ for being premature, ordering the executing sheriff Emilio the total amount of P64,408.00 as of May 16, 1978. Hence, this
Z. Reyes to appear with his return and explain the reason for his petition for certiorari filed by the Philippine Airlines, Inc., on the
failure to surrender the amounts paid to him by petitioner PAL. grounds that:
However, the order could not be served upon Deputy Sheriff Reyes
who had absconded or disappeared. I
 AN ALIAS WRIT OF EXECUTION CANNOT BE ISSUED prevailing party rightfully deserves to obtain and with
WITHOUT PRIOR RETURN OF THE ORIGINAL WRIT BY THE dispatch. The final judgment in this case should not indeed be
IMPLEMENTING OFFICER. permitted to become illusory or incapable of execution for an
indefinite and over extended period, as had already
II transpired. (Rollo, pp. 35-36)

PAYMENT OF JUDGMENT TO THE IMPLEMENTING OFFICER Judicium non debet esse illusorium; suum effectum habere debet (A
AS DIRECTED IN THE WRIT OF EXECUTION CONSTITUTES judgment ought not to be illusory it ought to have its proper effect).
SATISFACTION OF JUDGMENT.
Indeed, technicality cannot be countenanced to defeat the execution
III of a judgment for execution is the fruit and end of the suit and is very
aptly called the life of the law (Ipekdjian Merchandising Co. v. Court
INTEREST IS NOT PAYABLE WHEN THE DECISION IS of Tax Appeals, 8 SCRA 59 [1963]; Commissioner of Internal Revenue
SILENT AS TO THE PAYMENT THEREOF. v. Visayan Electric Co., 19 SCRA 697, 698 [1967]). A judgment
cannot be rendered nugatory by the unreasonable application of a
strict rule of procedure. Vested rights were never intended to rest on
IV the requirement of a return, the office of which is merely to inform
the court and the parties, of any and all actions taken under the writ
SECTION 5, RULE 39, PARTICULARLY REFERS TO LEVY OF of execution. Where such information can be established in some
PROPERTY OF JUDGMENT DEBTOR AND DISPOSAL OR other manner, the absence of an executing officer's return will not
SALE THEREOF TO SATISFY JUDGMENT. preclude a judgment from being treated as discharged or being
executed through an alias writ of execution as the case may be. More
Can an alias writ of execution be issued without a prior return of the so, as in the case at bar. Where the return cannot be expected to be
original writ by the implementing officer? forthcoming, to require the same would be to compel the enforcement
of rights under a judgment to rest on an impossibility, thereby
We rule in the affirmative and we quote the respondent court's allowing the total avoidance of judgment debts. So long as a
decision with approval: judgment is not satisfied, a plaintiff is entitled to other writs of
execution (Government of the Philippines v. Echaus and Gonzales, 71
The issuance of the questioned alias writ of execution under Phil. 318). It is a well known legal maxim that he who cannot
the circumstances here obtaining is justified because even prosecute his judgment with effect, sues his case vainly.
with the absence of a Sheriffs return on the original writ, the
unalterable fact remains that such a return is incapable of More important in the determination of the propriety of the trial
being obtained (sic) because the officer who is to make the court's issuance of an alias writ of execution is the issue of
said return has absconded and cannot be brought to the satisfaction of judgment.
Court despite the earlier order of the court for him to appear
for this purpose. (Order of Feb. 21, 1978, Annex C, Petition). Under the peculiar circumstances surrounding this case, did the
Obviously, taking cognizance of this circumstance, the order payment made to the absconding sheriff by check in his name
of May 11, 1978 directing the issuance of an alias writ was operate to satisfy the judgment debt? The Court rules that the
therefore issued. (Annex D. Petition). The need for such a plaintiff who has won her case should not be adjudged as having
return as a condition precedent for the issuance of an alias sued in vain. To decide otherwise would not only give her an empty
writ was justifiably dispensed with by the court below and its but a pyrrhic victory.
action in this regard meets with our concurrence. A contrary
view will produce an abhorent situation whereby the mischief It should be emphasized that under the initial judgment, Amelia Tan
of an erring officer of the court could be utilized to impede was found to have been wronged by PAL.
indefinitely the undisputed and awarded rights which a
She filed her complaint in 1967. There are circumstances in this case, however, which compel a
different conclusion.
After ten (10) years of protracted litigation in the Court of First
Instance and the Court of Appeals, Ms. Tan won her case. The payment made by the petitioner to the absconding sheriff was
not in cash or legal tender but in checks. The checks were not
It is now 1990. payable to Amelia Tan or Able Printing Press but to the absconding
sheriff.
Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of
what the courts have solemnly declared as rightfully hers. Through Did such payments extinguish the judgment debt?
absolutely no fault of her own, Ms. Tan has been deprived of what,
technically, she should have been paid from the start, before 1967, Article 1249 of the Civil Code provides:
without need of her going to court to enforce her rights. And all
because PAL did not issue the checks intended for her, in her name. The payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency,
Under the peculiar circumstances of this case, the payment to the then in the currency which is legal tender in the Philippines.
absconding sheriff by check in his name did not operate as a
satisfaction of the judgment debt. The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the
In general, a payment, in order to be effective to discharge an effect of payment only when they have been cashed, or when
obligation, must be made to the proper person. Article 1240 of the through the fault of the creditor they have been impaired.
Civil Code provides:
In the meantime, the action derived from the original
Payment shall be made to the person in whose favor the obligation shall be held in abeyance.
obligation has been constituted, or his successor in interest,
or any person authorized to receive it. (Emphasis supplied) In the absence of an agreement, either express or implied, payment
means the discharge of a debt or obligation in money (US v.
Thus, payment must be made to the obligee himself or to an agent Robertson, 5 Pet. [US] 641, 8 L. ed. 257) and unless the parties so
having authority, express or implied, to receive the particular agree, a debtor has no rights, except at his own peril, to substitute
payment (Ulen v. Knecttle 50 Wyo 94, 58 [2d] 446, 111 ALR 65). something in lieu of cash as medium of payment of his debt
Payment made to one having apparent authority to receive the money (Anderson v. Gill, 79 Md.. 312, 29 A 527, 25 LRA 200,47 Am. St. Rep.
will, as a rule, be treated as though actual authority had been given 402). Consequently, unless authorized to do so by law or by consent
for its receipt. Likewise, if payment is made to one who by law is of the obligee a public officer has no authority to accept anything
authorized to act for the creditor, it will work a discharge (Hendry v. other than money in payment of an obligation under a judgment
Benlisa 37 Fla. 609, 20 SO 800,34 LRA 283). The receipt of money being executed. Strictly speaking, the acceptance by the sheriff of the
due on ajudgment by an officer authorized by law to accept it will, petitioner's checks, in the case at bar, does not, per se, operate as a
therefore, satisfy the debt (See 40 Am Jm 729, 25; Hendry v. Benlisa discharge of the judgment debt.
supra; Seattle v. Stirrat 55 Wash. 104 p. 834,24 LRA [NS] 1275).
Since a negotiable instrument is only a substitute for money and not
The theory is where payment is made to a person authorized and money, the delivery of such an instrument does not, by itself, operate
recognized by the creditor, the payment to such a person so as payment (See. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code;
authorized is deemed payment to the creditor. Under ordinary Bryan Landon Co. v. American Bank, 7 Phil. 255; Tan Sunco v.
circumstances, payment by the judgment debtor in the case at bar, to Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager's
the sheriff should be valid payment to extinguish the judgment debt. check or ordinary cheek, is not legal tender, and an offer of a check
in payment of a debt is not a valid tender of payment and may be
refused receipt by the obligee or creditor. Mere delivery of checks with a bank and carefully supervised by the court would be the safer
does not discharge the obligation under a judgment. The obligation is procedure. Actual transfer of funds takes place within the safety of
not extinguished and remains suspended until the payment by bank premises. These practices are perfectly legal. The object is
commercial document is actually realized (Art. 1249, Civil Code, par. always the safe and incorrupt execution of the judgment.
3).
It is, indeed, out of the ordinary that checks intended for a particular
If bouncing checks had been issued in the name of Amelia Tan and payee are made out in the name of another. Making the checks
not the Sheriff's, there would have been no payment. After dishonor payable to the judgment creditor would have prevented the
of the checks, Ms. Tan could have run after other properties of PAL. encashment or the taking of undue advantage by the sheriff, or any
The theory is that she has received no value for what had been person into whose hands the checks may have fallen, whether
awarded her. Because the checks were drawn in the name of Emilio wrongfully or in behalf of the creditor. The issuance of the checks in
Z. Reyes, neither has she received anything. The same rule should the name of the sheriff clearly made possible the misappropriation of
apply. the funds that were withdrawn.

It is argued that if PAL had paid in cash to Sheriff Reyes, there would As explained and held by the respondent court:
have been payment in full legal contemplation. The reasoning is
logical but is it valid and proper? Logic has its limits in decision ... [K]nowing as it does that the intended payment was for the
making. We should not follow rulings to their logical extremes if in private party respondent Amelia Tan, the petitioner
doing so we arrive at unjust or absurd results. corporation, utilizing the services of its personnel who are or
should be knowledgeable about the accepted procedures and
In the first place, PAL did not pay in cash. It paid in cheeks. resulting consequences of the checks drawn, nevertheless, in
this instance, without prudence, departed from what is
And second, payment in cash always carries with it certain cautions. generally observed and done, and placed as payee in the
Nobody hands over big amounts of cash in a careless and inane checks the name of the errant Sheriff and not the name of the
manner. Mature thought is given to the possibility of the cash being rightful payee. Petitioner thereby created a situation which
lost, of the bearer being waylaid or running off with what he is permitted the said Sheriff to personally encash said checks
carrying for another. Payment in checks is precisely intended to avoid and misappropriate the proceeds thereof to his exclusive
the possibility of the money going to the wrong party. The situation is personal benefit. For the prejudice that resulted, the
entirely different where a Sheriff seizes a car, a tractor, or a piece of petitioner himself must bear the fault. The judicial guideline
land. Logic often has to give way to experience and to reality. Having which we take note of states as follows:
paid with checks, PAL should have done so properly.
As between two innocent persons, one of whom must suffer
Payment in money or cash to the implementing officer may be the consequence of a breach of trust, the one who made it
deemed absolute payment of the judgment debt but the Court has possible by his act of confidence must bear the loss.
never, in the least bit, suggested that judgment debtors should settle (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61
their obligations by turning over huge amounts of cash or legal Phil. 625)
tender to sheriffs and other executing officers. Payment in cash
would result in damage or interminable litigations each time a sheriff Having failed to employ the proper safeguards to protect itself, the
with huge amounts of cash in his hands decides to abscond. judgment debtor whose act made possible the loss had but itself to
blame.
As a protective measure, therefore, the courts encourage the practice
of payments by cheek provided adequate controls are instituted to The attention of this Court has been called to the bad practice of a
prevent wrongful payment and illegal withdrawal or disbursement of number of executing officers, of requiring checks in satisfaction of
funds. If particularly big amounts are involved, escrow arrangements judgment debts to be made out in their own names. If a sheriff
directs a judgment debtor to issue the checks in the sheriff's name, We are obliged to rule that the judgment debt cannot be
claiming he must get his commission or fees, the debtor must report considered satisfied and therefore the orders of the
the sheriff immediately to the court which ordered the execution or to respondent judge granting the alias writ of execution may not
the Supreme Court for appropriate disciplinary action. Fees, be pronounced as a nullity.
commissions, and salaries are paid through regular channels. This
improper procedure also allows such officers, who have sixty (60) xxx xxx xxx
days within which to make a return, to treat the moneys as their
personal finds and to deposit the same in their private accounts to It is clear and manifest that after levy or garnishment, for a
earn sixty (60) days interest, before said finds are turned over to the judgment to be executed there is the requisite of payment by
court or judgment creditor (See Balgos v. Velasco, 108 SCRA 525 the officer to the judgment creditor, or his attorney, so much
[1981]). Quite as easily, such officers could put up the defense that of the proceeds as will satisfy the judgment and none such
said checks had been issued to them in their private or personal payment had been concededly made yet by the absconding
capacity. Without a receipt evidencing payment of the judgment debt, Sheriff to the private respondent Amelia Tan. The ultimate
the misappropriation of finds by such officers becomes clean and and essential step to complete the execution of the judgment
complete. The practice is ingenious but evil as it unjustly enriches not having been performed by the City Sheriff, the judgment
court personnel at the expense of litigants and the proper debt legally and factually remains unsatisfied.
administration of justice. The temptation could be far greater, as
proved to be in this case of the absconding sheriff. The correct and
Strictly speaking execution cannot be equated with satisfaction of a
prudent thing for the petitioner was to have issued the checks in the
judgment. Under unusual circumstances as those obtaining in this
intended payee's name.
petition, the distinction comes out clearly.
The pernicious effects of issuing checks in the name of a person other
Execution is the process which carries into effect a decree or
than the intended payee, without the latter's agreement or consent,
judgment (Painter v. Berglund, 31 Cal. App. 2d. 63, 87 P 2d 360,
are as many as the ways that an artful mind could concoct to get
363; Miller v. London, 294 Mass 300, 1 NE 2d 198, 200; Black's Law
around the safeguards provided by the law on negotiable
Dictionary), whereas the satisfaction of a judgment is the payment of
instruments. An angry litigant who loses a case, as a rule, would not
the amount of the writ, or a lawful tender thereof, or the conversion
want the winning party to get what he won in the judgment. He
by sale of the debtor's property into an amount equal to that due,
would think of ways to delay the winning party's getting what has
and, it may be done otherwise than upon an execution (Section 47,
been adjudged in his favor. We cannot condone that practice
Rule 39). Levy and delivery by an execution officer are not
especially in cases where the courts and their officers are
prerequisites to the satisfaction of a judgment when the same has
involved.1âwphi1 We rule against the petitioner.
already been realized in fact (Section 47, Rule 39). Execution is for
the sheriff to accomplish while satisfaction of the judgment is for the
Anent the applicability of Section 15, Rule 39, as follows: creditor to achieve. Section 15, Rule 39 merely provides the sheriff
with his duties as executing officer including delivery of the proceeds
Section 15. Execution of money judgments. — The officer must of his levy on the debtor's property to satisfy the judgment debt. It is
enforce an execution of a money judgment by levying on all but to stress that the implementing officer's duty should not stop at
the property, real and personal of every name and nature his receipt of payments but must continue until payment is delivered
whatsoever, and which may be disposed of for value, of the to the obligor or creditor.
judgment debtor not exempt from execution, or on a sufficient
amount of such property, if they be sufficient, and selling the Finally, we find no error in the respondent court's pronouncement on
same, and paying to the judgment creditor, or his attorney, so the inclusion of interests to be recovered under the alias writ of
much of the proceeds as will satisfy the judgment. ... execution. This logically follows from our ruling that PAL is liable for
both the lost checks and interest. The respondent court's decision in
the respondent court held: CA-G.R. No. 51079-R does not totally supersede the trial court's
judgment in Civil Case No. 71307. It merely modified the same as to It is a matter of history that the judiciary .. is an inherit or of
the principal amount awarded as actual damages. the Anglo-American tradition. While the common law as
such .. "is not in force" in this jurisdiction, "to breathe the
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby breath of life into many of the institutions, introduced [here]
DISMISSED. The judgment of the respondent Court of Appeals is under American sovereignty, recourse must be had to the
AFFIRMED and the trial court's issuance of the alias writ of rules, principles and doctrines of the common law under
execution against the petitioner is upheld without prejudice to any whose protecting aegis the prototypes of these institutions
action it should take against the errant sheriff Emilio Z. Reyes. The had their birth" A sheriff is "an officer of great antiquity," and
Court Administrator is ordered to follow up the actions taken against was also called the shire reeve. A shire in English law is a
Emilio Z. Reyes. Saxon word signifying a division later called a county. A reeve
is an ancient English officer of justice inferior in rank to an
SO ORDERED. alderman .. appointed to process, keep the King's peace, and
put the laws in execution. From a very remote period in
English constitutional history .. the shire had another officer,
Fernan, C.J., Cruz, Paras, Bidin, Griño-Aquino, Medialdea and namely the shire reeve or as we say, the sheriff. .. The Sheriff
Regalado, JJ., concur. was the special representative of the legal or central authority,
and as such usually nominated by the King. .. Since the
earliest times, both in England and the United States, a
sheriff has continued his status as an adjunct of the court .. .
As it was there, so it has been in the Philippines from the time
Separate Opinions of the organization of the judiciary .. . (J. Fernando's
concurring opinion in Bagatsing v. Herrera, 65 SCRA 434)

One of a sheriff s principal functions is to execute final judgments

and orders. The Rules of Court require the writs of execution to issue
to him, directing him to enforce such judgments and orders in the
NARVASA, J., dissenting:
manner therein provided (Rule 39). The mode of enforcement varies
according to the nature of the judgment to be carried out: whether it
The execution of final judgments and orders is a function of the be against property of the judgment debtor in his hands or in the
sheriff, an officer of the court whose authority is by and large hands of a third person i e. money judgment), or for the sale of
statutorily determined to meet the particular exigencies arising from property, real or personal (i.e. foreclosure of mortgage) or the delivery
or connected with the performance of the multifarious duties of the thereof, etc. (sec. 8, Rule 39).
office. It is the acknowledgment of the many dimensions of this
authority, defined by statute and chiselled by practice, which
Under sec. 15 of the same Rule, the sheriff is empowered to levy on
compels me to disagree with the decision reached by the majority.
so much of the judgment debtor's property as may be sufficient to
enforce the money judgment and sell these properties at public
A consideration of the wide latitude of discretion allowed the sheriff auction after due notice to satisfy the adjudged amount. It is the
as the officer of the court most directly involved with the sheriff who, after the auction sale, conveys to the purchaser the
implementation and execution of final judgments and orders property thus sold (secs. 25, 26, 27, Rule 39), and pays the judgment
persuades me that PAL's payment to the sheriff of its judgment debt creditor so much of the proceeds as will satisfy the judgment. When
to Amelia Tan, though made by check issued in said officer's name, the property sold by him on execution is an immovable which
lawfully satisfied said obligation and foreclosed further recourse consequently gives rise to a light of redemption on the part of the
therefor against PAL, notwithstanding the sheriffs failure to deliver to judgment debtor and others (secs. 29, 30, Rule 39), it is to him (or to
Tan the proceeds of the check. the purchaser or redemptioner that the payments may be made by
those declared by law as entitled to redeem (sec. 31, Rule 39); and in
this situation, it becomes his duty to accept payment and execute the In the instances where the Rules allow or direct payments to be made
certificate of redemption (Enage v. Vda. y Hijos de Escano, 38 Phil. to the sheriff, the payments may be made by check, but it goes
657, cited in Moran, Comments on the Rules of Court, 1979 ed., vol. without saying that if the sheriff so desires, he may require payment
2, pp. 326-327). It is also to the sheriff that "written notice of any to be made in lawful money. If he accepts the check, he places
redemption must be given and a duplicate filed with the registrar of himself in a position where he would be liable to the judgment
deeds of the province, and if any assessments or taxes are paid by creditor if any damages are suffered by the latter as a result of the
the redemptioner or if he has or acquires any lien other than that medium in which payment was made (Javellana v. Mirasol, et al., 40
upon which the redemption was made, notice thereof must in like Phil. 761). The validity of the payment made by the judgment debtor,
manner be given to the officer and filed with the registrar of deeds," however, is in no wise affected and the latter is discharged from his
the effect of failure to file such notice being that redemption may be obligation to the judgment creditor as of the moment the check
made without paying such assessments, taxes, or liens (sec. 30, Rule issued to the sheriff is encashed and the proceeds are received by Id.
39). office. The issuance of the check to a person authorized to receive it
(Art. 1240, Civil Code; See. 46 of the Code of Civil Procedure; Enage
The sheriff may likewise be appointed a receiver of the property of the v. Vda y Hijos de Escano, 38 Phil. 657, cited in Javellana v. Mirasol,
judgment debtor where the appointment of the receiver is deemed 40 Phil. 761) operates to release the judgment debtor from any
necessary for the execution of the judgment (sec. 32, Rule 39). further obligations on the judgment.

At any time before the sale of property on execution, the judgment The sheriff is an adjunct of the court; a court functionary whose
debtor may prevent the sale by paying the sheriff the amount competence involves both discretion and personal liability
required by the execution and the costs that have been incurred (concurring opinion of J. Fernando, citing Uy Piaoco v. Osmena, 9
therein (sec. 20, Rule 39). Phil. 299, in Bagatsing v. Herrera, 65 SCRA 434). Being an officer of
the court and acting within the scope of his authorized functions, the
The sheriff is also authorized to receive payments on account of the sheriff s receipt of the checks in payment of the judgment execution,
judgment debt tendered by "a person indebted to the judgment may be deemed, in legal contemplation, as received by the court itself
debtor," and his "receipt shall be a sufficient discharge for the (Lara v. Bayona, 10 May 1955, No. L- 10919).
amount so paid or directed to be credited by the judgment creditor on
the execution" (sec. 41, Rule 39). That the sheriff functions as a conduit of the court is further
underscored by the fact that one of the requisites for appointment to
Now, obviously, the sheriff s sale extinguishes the liability of the the office is the execution of a bond, "conditioned (upon) the faithful
judgment debtor either in fun, if the price paid by the highest bidder performance of his (the appointee's) duties .. for the delivery or
is equal to, or more than the amount of the judgment or pro tanto if payment to Government, or the person entitled thereto, of all
the price fetched at the sale be less. Such extinction is not in any way properties or sums of money that shall officially come into his hands"
dependent upon the judgment creditor's receiving the amount (sec. 330, Revised Administrative Code).
realized, so that the conversion or embezzlement of the proceeds of
the sale by the sheriff does not revive the judgment debt or render the There is no question that the checks came into the sheriffs
judgment creditor liable anew therefor. possession in his official capacity. The court may require of the
judgment debtor, in complying with the judgment, no further burden
So, also, the taking by the sheriff of, say, personal property from the than his vigilance in ensuring that the person he is paying money or
judgment debtor for delivery to the judgment creditor, in fulfillment of delivering property to is a person authorized by the court to receive it.
the verdict against him, extinguishes the debtor's liability; and the Beyond this, further expectations become unreasonable. To my mind,
conversion of said property by the sheriff, does not make said debtor a proposal that would make the judgment debtor unqualifiedly the
responsible for replacing the property or paying the value thereof. insurer of the judgment creditor's entitlement to the judgment
amount which is really what this case is all about begs the question.
That the checks were made out in the sheriffs name (a practice, by satisfaction of the judgment debt. In addition, Padilla, J. has
the way, of long and common acceptance) is of little consequence if underscored the obligation of the sheriff, imposed upon him
juxtaposed with the extent of the authority explicitly granted him by by the nature of his office and the law, to turn over such legal
law as the officer entrusted with the power to execute and implement tender, checks and proceeds of execution sales to the
court judgments. The sheriffs requirement that the checks in judgment creditor. The failure of a sheriff to effect such
payment of the judgment debt be issued in his name was simply an turnover and his conversion of the funds (or goods) held by
assertion of that authority; and PAL's compliance cannot in the him to his own uses, do not have the effect of frustrating
premises be faulted merely because of the sheriffs subsequent payment by and consequent discharge of the judgment
malfeasance in absconding with the payment instead of turning it debtor.
over to the judgment creditor.
To hold otherwise would be to throw the risk of the sheriff
If payment had been in cash, no question about its validity or of the faithfully performing his duty as a public officer upon those
authority and duty of the sheriff to accept it in settlement of PAL's members of the general public who are compelled to deal with
judgment obligation would even have arisen. Simply because it was him. It seems to me that a judgment debtor who turns over
made by checks issued in the sheriff s name does not warrant funds or property to the sheriff can not reasonably be made
reaching any different conclusion. an insurer of the honesty and integrity of the sheriff and that
the risk of the sheriff carrying out his duties honestly and
As payment to the court discharges the judgment debtor from his faithfully is properly lodged in the State itself The sheriff, like
responsibility on the judgment, so too must payment to the person all other officers of the court, is appointed and paid and
designated by such court and authorized to act in its behalf, operate controlled and disciplined by the Government, more
to produce the same effect. specifically by this Court. The public surely has a duty to
report possible wrongdoing by a sheriff or similar officer to the
It is unfortunate and deserving of commiseration that Amelia Tan proper authorities and, if necessary, to testify in the
was deprived of what was adjudged to her when the sheriff appropriate judicial and administrative disciplinary
misappropriated the payment made to him by PAL in dereliction of proceedings. But to make the individual members of the
his sworn duties. But I submit that her remedy lies, not here and in general community insurers of the honest performance of
reviving liability under a judgment already lawfully satisfied, but duty of a sheriff, or other officer of the court, over whom they
elsewhere. have no control, is not only deeply unfair to the former. It is
also a confession of comprehensive failure and comes too
close to an abdication of duty on the part of the Court itself.
ACCORDINGLY, I vote to grant the petition. This Court should have no part in that.

Melencio-Herrera, Gancayco, J., concurs. 2. I also feel compelled to comment on the majority opinion
written by Gutierrez, J. with all his customary and special
way with words. My learned and eloquent brother in the Court
apparently accepts the proposition that payment by a
judgment debtor of cash to a sheriff produces the legal effects
FELICIANO, J., dissenting: of payment, the sheriff being authorized to accept such
payment. Thus, in page 10 of his ponencia, Gutierrez, J.
I concur in the able dissenting opinions of Narvasa and Padilla, JJ. writes:
and would merely wish to add a few footnotes to their lucid opinions.
The receipt of money due on a judgment by an officer
1. Narvasa, J. has demonstrated in detail that a sheriff authorized by law to accept it will satisfy the debt. (Citations
is authorized by the Rules of Court and our case law to receive omitted)
either legal tender or checks from the judgment debtor in
 The theory is where payment is made to a person authorized cash, i.e., Philippine currency. If the sheriff had done so, and if PAL
and recognized by the creditor, the payment to such a person had complied with such a requirement, as it would have had to, one
so authorized is deemed payment to the creditor. Under would have to agree that legal payment must be deemed to have been
ordinary circumstances, payment by the judgment debtor in effected. It requires no particularly acute mind to note that a
the case at bar, to the sheriff would be valid payment to dishonest sheriff could easily convert the money and abscond. The
extinguish the judgment debt. fact that the sheriff in the instant case required, not cash to be
delivered to him, but rather a check made out in his name,
Shortly thereafter, however, Gutierrez, J. backs off from the does not change the legal situation. PAL did not thereby become
above position and strongly implies that payment in cash to negligent; it did not make the loss anymore possible or probable than
the sheriff is sheer imprudence on the part of the judgment if it had instead delivered plain cash to the sheriffs.
debtor and that therefore, should the sheriff abscond with the
cash, the judgment debtor has not validly discharged the It seems to me that the majority opinion's real premise is the
judgment debt: unspoken one that the judgment debtor should bear the risk of the
fragility of the sheriff s virtue until the money or property parted with
It is argued that if PAL had paid in cash to Sheriff Reyes, by the judgment debtor actually reaches the hands of the judgment
there would have been payment in full legal contemplation. creditor. This brings me back to my earlier point that risk is most
The reasoning is logical but is it valid and proper? appropriately borne not by the judgment debtor, nor indeed by the
judgment creditor, but by the State itself. The Court requires all
In the first place, PAL did not pay in cash. It paid in checks. sheriffs to post good and adequate fidelity bonds before entering upon
the performance of their duties and, presumably, to maintain such
bonds in force and effect throughout their stay in office.2 The
And second, payment in cash always carries with it certain judgment creditor, in circumstances like those of the instant case,
cautions. Nobody hands over big amounts of cash in a could be allowed to execute upon the absconding sheriff s bond.3
careless and inane manner. Mature thought is given to the
possibility of the cash being lost, of the bearer being waylaid
or running off with what he is carrying for another. Payment I believe the Petition should be granted and I vote accordingly.
in checks is precisely intended to avoid the possibility of the
money going to the wrong party....

Payment in money or cash to the implementing officer may be

deemed absolute payment of the judgment debt but the court PADILLA, J., Dissenting Opinion
has never, in the least bit, suggested that judgment debtors
should settle their obligations by turning over huge amounts From the facts that appear to be undisputed, I reach a conclusion
of cash or legal tender to sheriffs and other executing different from that of the majority. Sheriff Emilio Z. Reyes, the trial
officers. ... (Emphasis in the original) (Majority opinion, pp. court's authorized sheriff, armed with a writ of execution to enforce a
12-13) final money judgment against the petitioner Philippine Airlines (PAL)
in favor of private respondent Amelia Tan, proceeded to petitioner
There is no dispute with the suggestion apparently made that PAL's office to implement the writ.
maximum safety is secured where the judgment debtor delivers to the
sheriff not cash but a check made out, not in the name of the sheriff, There is no question that Sheriff Reyes, in enforcing the writ of
but in the judgment creditor's name. The fundamental point that must execution, was acting with full authority as an officer of the law and
be made, however, is that under our law only cash is legal tender and not in his personal capacity. Stated differently, PAL had every right to
that the sheriff can be compelled to accept only cash and not assume that, as an officer of the law, Sheriff Reyes would perform his
checks, even if made out to the name of the judgment creditor. 1 The duties as enjoined by law. It would be grossly unfair to now charge
sheriff could have quite lawfully required PAL to deliver to him only PAL with advanced or constructive notice that Mr. Reyes would
abscond and not deliver to the judgment creditor the proceeds of the If the PAL cheeks in question had not been encashed by Sheriff
writ of execution. If a judgment debtor cannot rely on and trust an Reyes, there would be no payment by PAL and, consequently no
officer of the law, as the Sheriff, whom else can he trust? discharge or satisfaction of its judgment obligation. But the checks
had been encashed by Sheriff Reyes giving rise to a situation as if
Pursued to its logical extreme, if PAL had delivered to Sheriff Reyes PAL had paid Sheriff Reyes in cash, i.e., Philippine currency. This, we
the amount of the judgment in CASH, i.e. Philippine currency, with repeat, is payment, in legal contemplation, on the part of PAL and
the corresponding receipt signed by Sheriff Reyes, this would have this payment legally discharged PAL from its judgment obligation to
been payment by PAL in full legal contemplation, because under the judgment creditor. To be sure, the same encashment by Sheriff
Article 1240 of the Civil Code, "payment shall be made to the person Reyes of PAL's checks delivered to him in his official capacity as
in whose favor the obligation has been constituted or his successor in Sheriff, imposed an obligation on Sheriff Reyes to pay and deliver the
interest or any person authorized to receive it." And said payment if proceeds of the encashment to Amelia Tan who is deemed to have
made by PAL in cash, i.e., Philippine currency, to Sheriff Reyes would acquired a cause of action against Sheriff Reyes for his failure to
have satisfied PAL's judgment obligation, as payment is a legally deliver to her the proceeds of the encashment. As held:
recognized mode for extinguishing one's obligation. (Article 1231,
Civil Code). Payment of a judgment, to operate as a release or satisfaction,
even pro tanto must be made to the plaintiff or to some person
Under Sec. 15, Rule 39, Rules of Court which provides that- authorized by him, or by law, to receive it. The payment of
money to the sheriff having an execution satisfies it, and, if
Sec. 15. Execution of money judgments. — The officer must the plaintiff fails to receive it, his only remedy is against the
enforce an execution of a money judgment by levying on all officer (Henderson v. Planters' and Merchants Bank, 59 SO
the property, real and personal of every name and nature 493, 178 Ala. 420).
whatsoever, and which may be disposed of for value, of the
judgment debtor not exempt from execution, or on a sufficient Payment of an execution satisfies it without regard to whether
amount of such property, if there be sufficient, and selling the the officer pays it over to the creditor or misapplies it (340, 33
same, and paying to the judgment creditor, or his attorney, so C.J.S. 644, citing Elliot v. Higgins, 83 N.C. 459). If defendant
much of the proceeds as will satisfy the judgment. ... . consents to the Sheriff s misapplication of the money,
(emphasis supplied) however, defendant is estopped to claim that the debt is
satisfied (340, 33 C.J.S. 644, citing Heptinstall v. Medlin 83
it would be the duty of Sheriff Reyes to pay to the judgment creditor N.C. 16).
the proceeds of the execution i.e., the cash received from PAL (under
the above assumption). But, the duty of the sheriff to pay the cash to The above rulings find even more cogent application in the case at
the judgment creditor would be a matter separate the distinct from bar because, as contended by petitioner PAL (not denied by private
the fact that PAL would have satisfied its judgment obligation to respondent), when Sheriff Reyes served the writ of execution on PAL,
Amelia Tan, the judgment creditor, by delivering the cash amount he (Reyes) was accompanied by private respondent's counsel.
due under the judgment to Sheriff Reyes. Prudence dictated that when PAL delivered to Sheriff Reyes the two
(2) questioned checks (payable to Sheriff Reyes), private respondent's
Did the situation change by PAL's delivery of its two (2) checks counsel should have insisted on their immediate encashment by the
totalling P30,000.00 drawn against its bank account, payable to Sheriff with the drawee bank in order to promptly get hold of the
Sheriff Reyes, for account of the judgment rendered against PAL? I do amount belonging to his client, the judgment creditor.
not think so, because when Sheriff Reyes encashed the checks, the
encashment was in fact a payment by PAL to Amelia Tan through ACCORDINGLY, I vote to grant the petition and to quash the court a
Sheriff Reyes, an officer of the law authorized to receive payment, and quo's alias writ of execution.
such payment discharged PAL'S obligation under the executed
judgment. G.R. No. 88866 February 18, 1991
METROPOLITAN BANK & TRUST COMPANY, petitioner, cleared. She was told to wait. Accordingly, Gomez was meanwhile not
vs. allowed to withdraw from his account. Later, however, "exasperated"
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, over Gloria's repeated inquiries and also as an accommodation for a
INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA "valued client," the petitioner says it finally decided to allow Golden
CASTILLO, respondents. Savings to withdraw from the proceeds of the
warrants.3
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Magno and The first withdrawal was made on July 9, 1979, in the amount of
Lucia Castillo. P508,000.00, the second on July 13, 1979, in the amount of
Agapito S. Fajardo and Jaime M. Cabiles for respondent Golden P310,000.00, and the third on July 16, 1979, in the amount of
Savings & Loan Association, Inc. P150,000.00. The total withdrawal was P968.000.00.4

In turn, Golden Savings subsequently allowed Gomez to make

withdrawals from his own account, eventually collecting the total
amount of P1,167,500.00 from the proceeds of the apparently cleared
CRUZ, J.: warrants. The last withdrawal was made on July 16, 1979.

This case, for all its seeming complexity, turns on a simple question On July 21, 1979, Metrobank informed Golden Savings that 32 of the
of negligence. The facts, pruned of all non-essentials, are easily told. warrants had been dishonored by the Bureau of Treasury on July 19,
1979, and demanded the refund by Golden Savings of the amount it
had previously withdrawn, to make up the deficit in its account.
The Metropolitan Bank and Trust Co. is a commercial bank with
branches throughout the Philippines and even abroad. Golden
Savings and Loan Association was, at the time these events The demand was rejected. Metrobank then sued Golden Savings in
happened, operating in Calapan, Mindoro, with the other private the Regional Trial Court of Mindoro.5 After trial, judgment was
respondents as its principal officers. rendered in favor of Golden Savings, which, however, filed a motion
for reconsideration even as Metrobank filed its notice of appeal. On
November 4, 1986, the lower court modified its decision thus:
In January 1979, a certain Eduardo Gomez opened an account with
Golden Savings and deposited over a period of two months 38
treasury warrants with a total value of P1,755,228.37. They were all ACCORDINGLY, judgment is hereby rendered:
drawn by the Philippine Fish Marketing Authority and purportedly
signed by its General Manager and countersigned by its Auditor. Six 1. Dismissing the complaint with costs against the plaintiff;
of these were directly payable to Gomez while the others appeared to
have been indorsed by their respective payees, followed by Gomez as 2. Dissolving and lifting the writ of attachment of the
second indorser.1 properties of defendant Golden Savings and Loan Association,
Inc. and defendant Spouses Magno Castillo and Lucia
On various dates between June 25 and July 16, 1979, all these Castillo;
warrants were subsequently indorsed by Gloria Castillo as Cashier of
Golden Savings and deposited to its Savings Account No. 2498 in the 3. Directing the plaintiff to reverse its action of debiting
Metrobank branch in Calapan, Mindoro. They were then sent for Savings Account No. 2498 of the sum of P1,754,089.00 and to
clearing by the branch office to the principal office of Metrobank, reinstate and credit to such account such amount existing
which forwarded them to the Bureau of Treasury for special clearing. 2 before the debit was made including the amount of
P812,033.37 in favor of defendant Golden Savings and Loan
More than two weeks after the deposits, Gloria Castillo went to the Association, Inc. and thereafter, to allow defendant Golden
Calapan branch several times to ask whether the warrants had been
 Savings and Loan Association, Inc. to withdraw the amount The petition has no merit.
outstanding thereon before the debit;
From the above undisputed facts, it would appear to the Court that
4. Ordering the plaintiff to pay the defendant Golden Savings Metrobank was indeed negligent in giving Golden Savings the
and Loan Association, Inc. attorney's fees and expenses of impression that the treasury warrants had been cleared and that,
litigation in the amount of P200,000.00. consequently, it was safe to allow Gomez to withdraw the proceeds
thereof from his account with it. Without such assurance, Golden
5. Ordering the plaintiff to pay the defendant Spouses Magno Savings would not have allowed the withdrawals; with such
Castillo and Lucia Castillo attorney's fees and expenses of assurance, there was no reason not to allow the withdrawal. Indeed,
litigation in the amount of P100,000.00. Golden Savings might even have incurred liability for its refusal to
return the money that to all appearances belonged to the depositor,
SO ORDERED. who could therefore withdraw it any time and for any reason he saw
fit.
On appeal to the respondent court,6 the decision was affirmed,
prompting Metrobank to file this petition for review on the following It was, in fact, to secure the clearance of the treasury warrants that
grounds: Golden Savings deposited them to its account with Metrobank.
Golden Savings had no clearing facilities of its own. It relied on
Metrobank to determine the validity of the warrants through its own
1. Respondent Court of Appeals erred in disregarding and services. The proceeds of the warrants were withheld from Gomez
failing to apply the clear contractual terms and conditions on until Metrobank allowed Golden Savings itself to withdraw them from
the deposit slips allowing Metrobank to charge back any its own deposit.7 It was only when Metrobank gave the go-signal that
amount erroneously credited. Gomez was finally allowed by Golden Savings to withdraw them from
his own account.
(a) Metrobank's right to charge back is not limited to
instances where the checks or treasury warrants are The argument of Metrobank that Golden Savings should have
forged or unauthorized. exercised more care in checking the personal circumstances of
Gomez before accepting his deposit does not hold water. It was
(b) Until such time as Metrobank is actually paid, its Gomez who was entrusting the warrants, not Golden Savings that
obligation is that of a mere collecting agent which was extending him a loan; and moreover, the treasury warrants were
cannot be held liable for its failure to collect on the subject to clearing, pending which the depositor could not withdraw
warrants. its proceeds. There was no question of Gomez's identity or of the
genuineness of his signature as checked by Golden Savings. In fact,
2. Under the lower court's decision, affirmed by respondent the treasury warrants were dishonored allegedly because of the
Court of Appeals, Metrobank is made to pay for warrants forgery of the signatures of the drawers, not of Gomez as payee or
already dishonored, thereby perpetuating the fraud committed indorser. Under the circumstances, it is clear that Golden Savings
by Eduardo Gomez. acted with due care and diligence and cannot be faulted for the
withdrawals it allowed Gomez to make.
3. Respondent Court of Appeals erred in not finding that as
between Metrobank and Golden Savings, the latter should By contrast, Metrobank exhibited extraordinary carelessness. The
bear the loss. amount involved was not trifling — more than one and a half million
pesos (and this was 1979). There was no reason why it should not
4. Respondent Court of Appeals erred in holding that the have waited until the treasury warrants had been cleared; it would
treasury warrants involved in this case are not negotiable not have lost a single centavo by waiting. Yet, despite the lack of such
instruments. clearance — and notwithstanding that it had not received a single
centavo from the proceeds of the treasury warrants, as it now
repeatedly stresses — it allowed Golden Savings to withdraw — not validly disclaim responsibility thereunder in the light of the
once, not twice, but thrice — from the uncleared treasury warrants in circumstances of this case.
the total amount of P968,000.00
In stressing that it was acting only as a collecting agent for Golden
Its reason? It was "exasperated" over the persistent inquiries of Gloria Savings, Metrobank seems to be suggesting that as a mere agent it
Castillo about the clearance and it also wanted to "accommodate" a cannot be liable to the principal. This is not exactly true. On the
valued client. It "presumed" that the warrants had been cleared contrary, Article 1909 of the Civil Code clearly provides that —
simply because of "the lapse of one week."8 For a bank with its long
experience, this explanation is unbelievably naive. Art. 1909. — The agent is responsible not only for fraud, but
also for negligence, which shall be judged 'with more or less
And now, to gloss over its carelessness, Metrobank would invoke the rigor by the courts, according to whether the agency was or
conditions printed on the dorsal side of the deposit slips through was not for a compensation.
which the treasury warrants were deposited by Golden Savings with
its Calapan branch. The conditions read as follows: The negligence of Metrobank has been sufficiently established. To
repeat for emphasis, it was the clearance given by it that assured
Kindly note that in receiving items on deposit, the bank Golden Savings it was already safe to allow Gomez to withdraw the
obligates itself only as the depositor's collecting agent, proceeds of the treasury warrants he had deposited
assuming no responsibility beyond care in selecting Metrobank misled Golden Savings. There may have been no express
correspondents, and until such time as actual payment shall clearance, as Metrobank insists (although this is refuted by Golden
have come into possession of this bank, the right is reserved Savings) but in any case that clearance could be implied from its
to charge back to the depositor's account any amount allowing Golden Savings to withdraw from its account not only once
previously credited, whether or not such item is returned. This or even twice but three times. The total withdrawal was in excess of
also applies to checks drawn on local banks and bankers and its original balance before the treasury warrants were deposited,
their branches as well as on this bank, which are unpaid due which only added to its belief that the treasury warrants had indeed
to insufficiency of funds, forgery, unauthorized overdraft been cleared.
or any other reason. (Emphasis supplied.)
Metrobank's argument that it may recover the disputed amount if the
According to Metrobank, the said conditions clearly show that it was warrants are not paid for any reason is not acceptable. Any reason
acting only as a collecting agent for Golden Savings and give it the does not mean no reason at all. Otherwise, there would have been no
right to "charge back to the depositor's account any amount need at all for Golden Savings to deposit the treasury warrants with it
previously credited, whether or not such item is returned. This also for clearance. There would have been no need for it to wait until the
applies to checks ". . . which are unpaid due to insufficiency of funds, warrants had been cleared before paying the proceeds thereof to
forgery, unauthorized overdraft of any other reason." It is claimed Gomez. Such a condition, if interpreted in the way the petitioner
that the said conditions are in the nature of contractual stipulations suggests, is not binding for being arbitrary and unconscionable. And
and became binding on Golden Savings when Gloria Castillo, as its it becomes more so in the case at bar when it is considered that the
Cashier, signed the deposit slips. supposed dishonor of the warrants was not communicated to Golden
Savings before it made its own payment to Gomez.
Doubt may be expressed about the binding force of the conditions,
considering that they have apparently been imposed by the bank The belated notification aggravated the petitioner's earlier negligence
unilaterally, without the consent of the depositor. Indeed, it could be in giving express or at least implied clearance to the treasury
argued that the depositor, in signing the deposit slip, does so only to warrants and allowing payments therefrom to Golden Savings. But
identify himself and not to agree to the conditions set forth in the that is not all. On top of this, the supposed reason for the dishonor,
given permit at the back of the deposit slip. We do not have to rule on to wit, the forgery of the signatures of the general manager and the
this matter at this time. At any rate, the Court feels that even if the auditor of the drawer corporation, has not been established.9 This
deposit slip were considered a contract, the petitioner could still not
was the finding of the lower courts which we see no reason to (b) A statement of the transaction which gives rise to the
disturb. And as we said in MWSS v. Court of Appeals:10 instrument judgment.

Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 But an order or promise to pay out of a particular fund is not
SCRA 238). It must be established by clear, positive and unconditional.
convincing evidence. This was not done in the present case.
The indication of Fund 501 as the source of the payment to be made
A no less important consideration is the circumstance that the on the treasury warrants makes the order or promise to pay "not
treasury warrants in question are not negotiable instruments. Clearly unconditional" and the warrants themselves non-negotiable. There
stamped on their face is the word "non-negotiable." Moreover, and should be no question that the exception on Section 3 of the
this is of equal significance, it is indicated that they are payable from Negotiable Instruments Law is applicable in the case at bar. This
a particular fund, to wit, Fund 501. conclusion conforms to Abubakar vs. Auditor General11 where the
Court held:
The following sections of the Negotiable Instruments Law, especially
the underscored parts, are pertinent: The petitioner argues that he is a holder in good faith and for
value of a negotiable instrument and is entitled to the rights
Sec. 1. — Form of negotiable instruments. — An instrument to and privileges of a holder in due course, free from defenses.
be negotiable must conform to the following requirements: But this treasury warrant is not within the scope of the
negotiable instrument law. For one thing, the document
(a) It must be in writing and signed by the maker or drawer; bearing on its face the words "payable from the appropriation
for food administration, is actually an Order for payment out
of "a particular fund," and is not unconditional and does not
(b) Must contain an unconditional promise or order to pay a fulfill one of the essential requirements of a negotiable
sum certain in money; instrument (Sec. 3 last sentence and section [1(b)] of the
Negotiable Instruments Law).
(c) Must be payable on demand, or at a fixed or determinable
future time; Metrobank cannot contend that by indorsing the warrants in general,
Golden Savings assumed that they were "genuine and in all respects
(d) Must be payable to order or to bearer; and what they purport to be," in accordance with Section 66 of the
Negotiable Instruments Law. The simple reason is that this law is not
(e) Where the instrument is addressed to a drawee, he must applicable to the non-negotiable treasury warrants. The indorsement
be named or otherwise indicated therein with reasonable was made by Gloria Castillo not for the purpose of guaranteeing the
certainty. genuineness of the warrants but merely to deposit them with
Metrobank for clearing. It was in fact Metrobank that made the
xxx xxx xxx guarantee when it stamped on the back of the warrants: "All prior
indorsement and/or lack of endorsements guaranteed, Metropolitan
Sec. 3. When promise is unconditional. — An unqualified order Bank & Trust Co., Calapan Branch."
or promise to pay is unconditional within the meaning of this
Act though coupled with — The petitioner lays heavy stress on Jai Alai Corporation v. Bank of
the Philippine Islands,12 but we feel this case is inapplicable to the
(a) An indication of a particular fund out of which present controversy.1âwphi1 That case involved checks whereas this
reimbursement is to be made or a particular account to be case involves treasury warrants. Golden Savings never represented
debited with the amount; or that the warrants were negotiable but signed them only for the
purpose of depositing them for clearance. Also, the fact of forgery was
proved in that case but not in the case before us. Finally, the Court
found the Jai Alai Corporation negligent in accepting the checks Nepomuceno, Hofileña & Guingona for private.
without question from one Antonio Ramirez notwithstanding that the
payee was the Inter-Island Gas Services, Inc. and it did not appear
that he was authorized to indorse it. No similar negligence can be
imputed to Golden Savings. REGALADO, J.:

We find the challenged decision to be basically correct. However, we This petition for review on certiorari impugns and seeks the reversal
will have to amend it insofar as it directs the petitioner to credit of the decision promulgated by respondent court on March 8, 1991 in
Golden Savings with the full amount of the treasury checks deposited CA-G.R. CV No. 23615 1 affirming with modifications, the earlier
to its account. decision of the Regional Trial Court of Manila, Branch XLII, 2 which
dismissed the complaint filed therein by herein petitioner against
The total value of the 32 treasury warrants dishonored was respondent bank.
P1,754,089.00, from which Gomez was allowed to withdraw
P1,167,500.00 before Golden Savings was notified of the dishonor. The undisputed background of this case, as found by the court a
The amount he has withdrawn must be charged not to Golden quo and adopted by respondent court, appears of record:
Savings but to Metrobank, which must bear the consequences of its
own negligence. But the balance of P586,589.00 should be debited to
1. On various dates, defendant, a commercial banking
Golden Savings, as obviously Gomez can no longer be permitted to
institution, through its Sucat Branch issued 280
withdraw this amount from his deposit because of the dishonor of the
certificates of time deposit (CTDs) in favor of one Angel
warrants. Gomez has in fact disappeared. To also credit the balance
dela Cruz who deposited with herein defendant the
to Golden Savings would unduly enrich it at the expense of
aggregate amount of P1,120,000.00, as follows: (Joint
Metrobank, let alone the fact that it has already been informed of the
Partial Stipulation of Facts and Statement of Issues,
dishonor of the treasury warrants.
Original Records, p. 207; Defendant's Exhibits 1 to
280);
WHEREFORE, the challenged decision is AFFIRMED, with the
modification that Paragraph 3 of the dispositive portion of the
CTD CTD
judgment of the lower court shall be reworded as follows:
Dates Serial Nos. Quantity Amount
3. Debiting Savings Account No. 2498 in the sum of
22 Feb. 82 90101 to 90120 20 P80,000
P586,589.00 only and thereafter allowing defendant Golden
26 Feb. 82 74602 to 74691 90 360,000
Savings & Loan Association, Inc. to withdraw the amount
2 Mar. 82 74701 to 74740 40 160,000
outstanding thereon, if any, after the debit.
4 Mar. 82 90127 to 90146 20 80,000
5 Mar. 82 74797 to 94800 4 16,000
SO ORDERED. 5 Mar. 82 89965 to 89986 22 88,000
5 Mar. 82 70147 to 90150 4 16,000
G.R. No. 97753 August 10, 1992 8 Mar. 82 90001 to 90020 20 80,000
9 Mar. 82 90023 to 90050 28 112,000
CALTEX (PHILIPPINES), INC., petitioner, 9 Mar. 82 89991 to 90000 10 40,000
vs. 9 Mar. 82 90251 to 90272 22 88,000
COURT OF APPEALS and SECURITY BANK AND TRUST ——— ————
COMPANY, respondents. Total 280 P1,120,000
===== ========
Bito, Lozada, Ortega & Castillo for petitioners.
2. Angel dela Cruz delivered the said certificates of informing it of its possession of the CTDs in question
time (CTDs) to herein plaintiff in connection with his and of its decision to pre-terminate the same.
purchased of fuel products from the latter (Original
Record, p. 208). 8. On December 8, 1982, plaintiff was requested by
herein defendant to furnish the former "a copy of the
3. Sometime in March 1982, Angel dela Cruz informed document evidencing the guarantee agreement with
Mr. Timoteo Tiangco, the Sucat Branch Manger, that Mr. Angel dela Cruz" as well as "the details of Mr.
he lost all the certificates of time deposit in dispute. Angel dela Cruz" obligation against which plaintiff
Mr. Tiangco advised said depositor to execute and proposed to apply the time deposits (Defendant's
submit a notarized Affidavit of Loss, as required by Exhibit 564).
defendant bank's procedure, if he desired replacement
of said lost CTDs (TSN, February 9, 1987, pp. 48-50). 9. No copy of the requested documents was furnished
herein defendant.
4. On March 18, 1982, Angel dela Cruz executed and
delivered to defendant bank the required Affidavit of 10. Accordingly, defendant bank rejected the plaintiff's
Loss (Defendant's Exhibit 281). On the basis of said demand and claim for payment of the value of the
affidavit of loss, 280 replacement CTDs were issued in CTDs in a letter dated February 7, 1983 (Defendant's
favor of said depositor (Defendant's Exhibits 282-561). Exhibit 566).

5. On March 25, 1982, Angel dela Cruz negotiated and 11. In April 1983, the loan of Angel dela Cruz with the
obtained a loan from defendant bank in the amount of defendant bank matured and fell due and on August
Eight Hundred Seventy Five Thousand Pesos 5, 1983, the latter set-off and applied the time deposits
(P875,000.00). On the same date, said depositor in question to the payment of the matured loan (TSN,
executed a notarized Deed of Assignment of Time February 9, 1987, pp. 130-131).
Deposit (Exhibit 562) which stated, among others, that
he (de la Cruz) surrenders to defendant bank "full 12. In view of the foregoing, plaintiff filed the instant
control of the indicated time deposits from and after complaint, praying that defendant bank be ordered to
date" of the assignment and further authorizes said pay it the aggregate value of the certificates of time
bank to pre-terminate, set-off and "apply the said time deposit of P1,120,000.00 plus accrued interest and
deposits to the payment of whatever amount or compounded interest therein at 16% per annum, moral
amounts may be due" on the loan upon its maturity and exemplary damages as well as attorney's fees.
(TSN, February 9, 1987, pp. 60-62).
After trial, the court a quo rendered its decision
6. Sometime in November, 1982, Mr. Aranas, Credit dismissing the instant complaint. 3
Manager of plaintiff Caltex (Phils.) Inc., went to the
defendant bank's Sucat branch and presented for
On appeal, as earlier stated, respondent court affirmed the lower
verification the CTDs declared lost by Angel dela Cruz
court's dismissal of the complaint, hence this petition wherein
alleging that the same were delivered to herein plaintiff
petitioner faults respondent court in ruling (1) that the subject
"as security for purchases made with Caltex
certificates of deposit are non-negotiable despite being clearly
Philippines, Inc." by said depositor (TSN, February 9,
negotiable instruments; (2) that petitioner did not become a holder in
1987, pp. 54-68).
due course of the said certificates of deposit; and (3) in disregarding
the pertinent provisions of the Code of Commerce relating to lost
7. On November 26, 1982, defendant received a letter instruments payable to bearer. 4
(Defendant's Exhibit 563) from herein plaintiff formally
The instant petition is bereft of merit. depositor" on the period indicated. Therefore, the text
of the instrument(s) themselves manifest with clarity
A sample text of the certificates of time deposit is reproduced below to that they are payable, not to whoever purports to be
provide a better understanding of the issues involved in this the "bearer" but only to the specified person indicated
recourse. therein, the depositor. In effect, the appellee bank
acknowledges its depositor Angel dela Cruz as the
SECURITY BANK person who made the deposit and further engages
AND TRUST COMPANY itself to pay said depositor the amount indicated
6778 Ayala Ave., Makati No. 90101 thereon at the stipulated date. 6
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00 We disagree with these findings and conclusions, and hereby hold
CERTIFICATE OF DEPOSIT that the CTDs in question are negotiable instruments. Section 1 Act
Rate 16% No. 2031, otherwise known as the Negotiable Instruments Law,
enumerates the requisites for an instrument to become
Date of Maturity FEB. 23, 1984 FEB 22, 1982, negotiable, viz:
19____
(a) It must be in writing and signed by the maker or
This is to Certify that B E A R E R has drawer;
deposited in this Bank the sum
of PESOS: FOUR THOUSAND ONLY, (b) Must contain an unconditional promise or order to
SECURITY BANK SUCAT OFFICE pay a sum certain in money;
P4,000 & 00 CTS Pesos, Philippine
Currency, repayable to said (c) Must be payable on demand, or at a fixed or
depositor 731 days. after date, upon determinable future time;
presentation and surrender of this
certificate, with interest at the rate (d) Must be payable to order or to bearer; and
of 16% per cent per annum.
(e) Where the instrument is addressed to a drawee, he
(Sgd. Illegible) (Sgd. Illegible) must be named or otherwise indicated therein with
reasonable certainty.
—————————— ———————————
The CTDs in question undoubtedly meet the requirements of the law
5
AUTHORIZED SIGNATURES for negotiability. The parties' bone of contention is with regard to
requisite (d) set forth above. It is noted that Mr. Timoteo P. Tiangco,
Respondent court ruled that the CTDs in question are non-negotiable Security Bank's Branch Manager way back in 1982, testified in open
instruments, nationalizing as follows: court that the depositor reffered to in the CTDs is no other than Mr.
Angel de la Cruz.
. . . While it may be true that the word "bearer"
appears rather boldly in the CTDs issued, it is xxx xxx xxx
important to note that after the word "BEARER"
stamped on the space provided supposedly for the Atty. Calida:
name of the depositor, the words "has deposited" a
certain amount follows. The document further provides q In other words Mr. Witness, you are
that the amount deposited shall be "repayable to said saying that per books of the bank, the
 depositor referred (sic) in these stead. The duty of the court in such case is to ascertain, not what the
certificates states that it was Angel dela parties may have secretly intended as contradistinguished from what
Cruz? their words express, but what is the meaning of the words they have
used. What the parties meant must be determined by what they
witness: said. 11

a Yes, your Honor, and we have the Contrary to what respondent court held, the CTDs are negotiable
record to show that Angel dela Cruz was instruments. The documents provide that the amounts deposited
the one who cause (sic) the amount. shall be repayable to the depositor. And who, according to the
document, is the depositor? It is the "bearer." The documents do not
Atty. Calida: say that the depositor is Angel de la Cruz and that the amounts
deposited are repayable specifically to him. Rather, the amounts are
to be repayable to the bearer of the documents or, for that matter,
q And no other person or entity or whosoever may be the bearer at the time of presentment.
company, Mr. Witness?
If it was really the intention of respondent bank to pay the amount to
witness: Angel de la Cruz only, it could have with facility so expressed that
fact in clear and categorical terms in the documents, instead of
7
a None, your Honor. having the word "BEARER" stamped on the space provided for the
name of the depositor in each CTD. On the wordings of the
xxx xxx xxx documents, therefore, the amounts deposited are repayable to
whoever may be the bearer thereof. Thus, petitioner's aforesaid
Atty. Calida: witness merely declared that Angel de la Cruz is the depositor
"insofar as the bank is concerned," but obviously other parties not
q Mr. Witness, who is the depositor privy to the transaction between them would not be in a position to
identified in all of these certificates of know that the depositor is not the bearer stated in the CTDs. Hence,
time deposit insofar as the bank is the situation would require any party dealing with the CTDs to go
concerned? behind the plain import of what is written thereon to unravel the
agreement of the parties thereto through facts aliunde. This need for
resort to extrinsic evidence is what is sought to be avoided by the
witness:
Negotiable Instruments Law and calls for the application of the
elementary rule that the interpretation of obscure words or
a Angel dela Cruz is the depositor. 8 stipulations in a contract shall not favor the party who caused the
obscurity. 12
xxx xxx xxx
The next query is whether petitioner can rightfully recover on the
On this score, the accepted rule is that the negotiability or non- CTDs. This time, the answer is in the negative. The records reveal
negotiability of an instrument is determined from the writing, that is, that Angel de la Cruz, whom petitioner chose not to implead in this
from the face of the instrument itself.9 In the construction of a bill or suit for reasons of its own, delivered the CTDs amounting to
note, the intention of the parties is to control, if it can be legally P1,120,000.00 to petitioner without informing respondent bank
ascertained. 10 While the writing may be read in the light of thereof at any time. Unfortunately for petitioner, although the CTDs
surrounding circumstances in order to more perfectly understand the are bearer instruments, a valid negotiation thereof for the true
intent and meaning of the parties, yet as they have constituted the purpose and agreement between it and De la Cruz, as ultimately
writing to be the only outward and visible expression of their ascertained, requires both delivery and indorsement. For, although
meaning, no other words are to be added to it or substituted in its petitioner seeks to deflect this fact, the CTDs were in reality delivered
to it as a security for De la Cruz' purchases of its fuel products. Any The character of the transaction
doubt as to whether the CTDs were delivered as payment for the fuel between the parties is to be determined
products or as a security has been dissipated and resolved in favor of by their intention, regardless of what
the latter by petitioner's own authorized and responsible language was used or what the form of
representative himself. the transfer was. If it was intended to
secure the payment of money, it must
In a letter dated November 26, 1982 addressed to respondent be construed as a pledge; but if there
Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . . was some other intention, it is not a
These certificates of deposit were negotiated to us by Mr. Angel dela pledge. However, even though a
Cruz to guarantee his purchases of fuel products" (Emphasis transfer, if regarded by itself, appears to
ours.) 13 This admission is conclusive upon petitioner, its have been absolute, its object and
protestations notwithstanding. Under the doctrine of estoppel, an character might still be qualified and
admission or representation is rendered conclusive upon the person explained by contemporaneous writing
making it, and cannot be denied or disproved as against the person declaring it to have been a deposit of the
relying thereon. 14 A party may not go back on his own acts and property as collateral security. It has
representations to the prejudice of the other party who relied upon been said that a transfer of property by
them. 15 In the law of evidence, whenever a party has, by his own the debtor to a creditor, even if
declaration, act, or omission, intentionally and deliberately led sufficient on its face to make an
another to believe a particular thing true, and to act upon such absolute conveyance, should be treated
belief, he cannot, in any litigation arising out of such declaration, act, as a pledge if the debt continues in
or omission, be permitted to falsify it. 16 inexistence and is not discharged by the
transfer, and that accordingly the use of
If it were true that the CTDs were delivered as payment and not as the terms ordinarily importing
security, petitioner's credit manager could have easily said so, conveyance of absolute ownership will
instead of using the words "to guarantee" in the letter aforequoted. not be given that effect in such a
Besides, when respondent bank, as defendant in the court below, transaction if they are also commonly
moved for a bill of particularity therein 17 praying, among others, that used in pledges and mortgages and
petitioner, as plaintiff, be required to aver with sufficient definiteness therefore do not unqualifiedly indicate a
or particularity (a) the due date or dates of payment of the alleged transfer of absolute ownership, in the
indebtedness of Angel de la Cruz to plaintiff and (b) whether or not it absence of clear and unambiguous
issued a receipt showing that the CTDs were delivered to it by De la language or other circumstances
Cruz as payment of the latter's alleged indebtedness to it, plaintiff excluding an intent to pledge.
corporation opposed the motion. 18 Had it produced the receipt
prayed for, it could have proved, if such truly was the fact, that the Petitioner's insistence that the CTDs were negotiated to it begs the
CTDs were delivered as payment and not as security. Having opposed question. Under the Negotiable Instruments Law, an instrument is
the motion, petitioner now labors under the presumption that negotiated when it is transferred from one person to another in such
evidence willfully suppressed would be adverse if produced. 19 a manner as to constitute the transferee the holder thereof, 21 and a
holder may be the payee or indorsee of a bill or note, who is in
Under the foregoing circumstances, this disquisition in Intergrated possession of it, or the bearer thereof. 22 In the present case, however,
Realty Corporation, et al. vs. Philippine National Bank, et al. 20 is there was no negotiation in the sense of a transfer of the legal title to
apropos: the CTDs in favor of petitioner in which situation, for obvious
reasons, mere delivery of the bearer CTDs would have sufficed. Here,
the delivery thereof only as security for the purchases of Angel de la
. . . Adverting again to the Court's pronouncements Cruz (and we even disregard the fact that the amount involved was
in Lopez, supra, we quote therefrom: not disclosed) could at the most constitute petitioner only as a holder
for value by reason of his lien. Accordingly, a negotiation for such unless it appears in a public instrument, or the
purpose cannot be effected by mere delivery of the instrument since, instrument is recorded in the Registry of Property in
necessarily, the terms thereof and the subsequent disposition of such case the assignment involves real property.
security, in the event of non-payment of the principal obligation,
must be contractually provided for. Respondent bank duly complied with this statutory requirement.
Contrarily, petitioner, whether as purchaser, assignee or lien holder
The pertinent law on this point is that where the holder has a lien on of the CTDs, neither proved the amount of its credit or the extent of
the instrument arising from contract, he is deemed a holder for value its lien nor the execution of any public instrument which could affect
to the extent of his lien. 23 As such holder of collateral security, he or bind private respondent. Necessarily, therefore, as between
would be a pledgee but the requirements therefor and the effects petitioner and respondent bank, the latter has definitely the better
thereof, not being provided for by the Negotiable Instruments Law, right over the CTDs in question.
shall be governed by the Civil Code provisions on pledge of
incorporeal rights, 24 which inceptively provide: Finally, petitioner faults respondent court for refusing to delve into
the question of whether or not private respondent observed the
Art. 2095. Incorporeal rights, evidenced by negotiable requirements of the law in the case of lost negotiable instruments
instruments, . . . may also be pledged. The instrument and the issuance of replacement certificates therefor, on the ground
proving the right pledged shall be delivered to the that petitioner failed to raised that issue in the lower court. 28
creditor, and if negotiable, must be indorsed.
On this matter, we uphold respondent court's finding that the aspect
Art. 2096. A pledge shall not take effect against third of alleged negligence of private respondent was not included in the
persons if a description of the thing pledged and the stipulation of the parties and in the statement of issues submitted by
date of the pledge do not appear in a public them to the trial court. 29 The issues agreed upon by them for
instrument. resolution in this case are:

Aside from the fact that the CTDs were only delivered but not 1. Whether or not the CTDs as worded are negotiable
indorsed, the factual findings of respondent court quoted at the start instruments.
of this opinion show that petitioner failed to produce any document
evidencing any contract of pledge or guarantee agreement between it 2. Whether or not defendant could legally apply the
and Angel de la Cruz. 25 Consequently, the mere delivery of the CTDs amount covered by the CTDs against the depositor's
did not legally vest in petitioner any right effective against and loan by virtue of the assignment (Annex "C").
binding upon respondent bank. The requirement under Article 2096
aforementioned is not a mere rule of adjective law prescribing the 3. Whether or not there was legal compensation or set
mode whereby proof may be made of the date of a pledge contract, off involving the amount covered by the CTDs and the
but a rule of substantive law prescribing a condition without which depositor's outstanding account with defendant, if any.
the execution of a pledge contract cannot affect third persons
adversely. 26
4. Whether or not plaintiff could compel defendant to
preterminate the CTDs before the maturity date
On the other hand, the assignment of the CTDs made by Angel de la provided therein.
Cruz in favor of respondent bank was embodied in a public
instrument. 27 With regard to this other mode of transfer, the Civil
5. Whether or not plaintiff is entitled to the proceeds of
Code specifically declares:
the CTDs.
Art. 1625. An assignment of credit, right or action
6. Whether or not the parties can recover damages,
shall produce no effect as against third persons,
attorney's fees and litigation expenses from each other.
As respondent court correctly observed, with appropriate citation of xxx xxx xxx
some doctrinal authorities, the foregoing enumeration does not
include the issue of negligence on the part of respondent bank. An The use of the word "may" in said provision shows that it is not
issue raised for the first time on appeal and not raised timely in the mandatory but discretionary on the part of the "dispossessed owner"
proceedings in the lower court is barred by estoppel. 30 Questions to apply to the judge or court of competent jurisdiction for the
raised on appeal must be within the issues framed by the parties issuance of a duplicate of the lost instrument. Where the provision
and, consequently, issues not raised in the trial court cannot be reads "may," this word shows that it is not mandatory but
raised for the first time on appeal. 31 discretional. 34 The word "may" is usually permissive, not
mandatory. 35 It is an auxiliary verb indicating liberty, opportunity,
Pre-trial is primarily intended to make certain that all issues permission and possibility. 36
necessary to the disposition of a case are properly raised. Thus, to
obviate the element of surprise, parties are expected to disclose at a Moreover, as correctly analyzed by private respondent, 37 Articles 548
pre-trial conference all issues of law and fact which they intend to to 558 of the Code of Commerce, on which petitioner seeks to anchor
raise at the trial, except such as may involve privileged or impeaching respondent bank's supposed negligence, merely established, on the
matters. The determination of issues at a pre-trial conference bars one hand, a right of recourse in favor of a dispossessed owner or
the consideration of other questions on appeal. 32 holder of a bearer instrument so that he may obtain a duplicate of
the same, and, on the other, an option in favor of the party liable
To accept petitioner's suggestion that respondent bank's supposed thereon who, for some valid ground, may elect to refuse to issue a
negligence may be considered encompassed by the issues on its right replacement of the instrument. Significantly, none of the provisions
to preterminate and receive the proceeds of the CTDs would be cited by petitioner categorically restricts or prohibits the issuance a
tantamount to saying that petitioner could raise on appeal any issue. duplicate or replacement instrument sans compliance with the
We agree with private respondent that the broad ultimate issue of procedure outlined therein, and none establishes a mandatory
petitioner's entitlement to the proceeds of the questioned certificates precedent requirement therefor.
can be premised on a multitude of other legal reasons and causes of
action, of which respondent bank's supposed negligence is only one. WHEREFORE, on the modified premises above set forth, the petition
Hence, petitioner's submission, if accepted, would render a pre-trial is DENIED and the appealed decision is hereby AFFIRMED.
delimitation of issues a useless exercise. 33
SO ORDERED.
Still, even assuming arguendo that said issue of negligence was
raised in the court below, petitioner still cannot have the odds in its G.R. No. L-2516 September 25, 1950
favor. A close scrutiny of the provisions of the Code of Commerce
laying down the rules to be followed in case of lost instruments
ANG TEK LIAN, petitioner,
payable to bearer, which it invokes, will reveal that said provisions,
vs.
even assuming their applicability to the CTDs in the case at bar, are
THE COURT OF APPEALS, respondent.
merely permissive and not mandatory. The very first article cited by
petitioner speaks for itself.
Laurel, Sabido, Almario and Laurel for petitioner.
Office of the Solicitor General Felix Bautista Angelo and Solicitor
Art 548. The dispossessed owner, no matter for what
Manuel Tomacruz for respondent.
cause it may be, may apply to the judge or court of
competent jurisdiction, asking that the principal,
interest or dividends due or about to become due, be BENGZON, J.:
not paid a third person, as well as in order to prevent
the ownership of the instrument that a duplicate be For having issued a rubber check, Ang Tek Lian was convicted
issued him. (Emphasis ours.) of estafa in the Court of First Instance of Manila. The Court of
Appeals affirmed the verdict.
It appears that, knowing he had no funds therefor, Ang Tek Lian It is argued, however, that as the check had been made payable to
drew on Saturday, November 16, 1946, the check Exhibits A upon "cash" and had not been endorsed by Ang Tek Lian, the defendant is
the China Banking Corporation for the sum of P4,000, payable to the not guilty of the offense charged. Based on the proposition that "by
order of "cash". He delivered it to Lee Hua Hong in exchange for uniform practice of all banks in the Philippines a check so drawn is
money which the latter handed in act. On November 18, 1946, the invariably dishonored," the following line of reasoning is advanced in
next business day, the check was presented by Lee Hua Hong to the support of the argument:
drawee bank for payment, but it was dishonored for insufficiency of
funds, the balance of the deposit of Ang Tek Lian on both dates being . . . When, therefore, he (the offended party ) accepted the
P335 only. check (Exhibit A) from the appellant, he did so with full
knowledge that it would be dishonored upon presentment. In
The Court of Appeals believed the version of Lee Huan Hong who that sense, the appellant could not be said to have acted
testified that "on November 16, 1946, appellant went to his fraudulently because the complainant, in so accepting the
(complainant's) office, at 1217 Herran, Paco, Manila, and asked him check as it was drawn, must be considered, by every rational
to exchange Exhibit A — which he (appellant) then brought with him consideration, to have done so fully aware of the risk he was
— with cash alleging that he needed badly the sum of P4,000 running thereby." (Brief for the appellant, p. 11.)
represented by the check, but could not withdraw it from the bank, it
being then already closed; that in view of this request and relying We are not aware of the uniformity of such practice. Instances have
upon appellant's assurance that he had sufficient funds in the blank undoubtedly occurred wherein the Bank required the indorsement of
to meet Exhibit A, and because they used to borrow money from each the drawer before honoring a check payable to "cash." But cases
other, even before the war, and appellant owns a hotel and there are too, where no such requirement had been made . It depends
restaurant known as the North Bay Hotel, said complainant delivered upon the circumstances of each transaction.
to him, on the same date, the sum of P4,000 in cash; that despite
repeated efforts to notify him that the check had been dishonored by Under the Negotiable Instruments Law (sec. 9 [d], a check drawn
the bank, appellant could not be located any-where, until he was payable to the order of "cash" is a check payable to bearer, and the
summoned in the City Fiscal's Office in view of the complaint bank may pay it to the person presenting it for payment without the
for estafa filed in connection therewith; and that appellant has not drawer's indorsement.
paid as yet the amount of the check, or any part thereof."
A check payable to the order of cash is a bearer instrument.
Inasmuch as the findings of fact of the Court of Appeals are final, the Bacal vs. National City Bank of New York (1933), 146 Misc.,
only question of law for decision is whether under the facts 732; 262 N. Y. S., 839; Cleary vs. De Beck Plate Glass Co.
found, estafa had been accomplished. (1907), 54 Misc., 537; 104 N. Y. S., 831; Massachusetts
Bonding & Insurance Co. vs. Pittsburgh Pipe & Supply Co.
Article 315, paragraph (d), subsection 2 of the Revised Penal Code, (Tex. Civ. App., 1939), 135 S. W. (2d), 818. See also H. Cook &
punishes swindling committed "By post dating a check, or issuing Son vs. Moody (1916), 17 Ga. App., 465; 87 S. E., 713.
such check in payment of an obligation the offender knowing that at
the time he had no funds in the bank, or the funds deposited by him Where a check is made payable to the order of "cash", the
in the bank were not sufficient to cover the amount of the check, and word cash "does not purport to be the name of any person",
without informing the payee of such circumstances". and hence the instrument is payable to bearer. The drawee
bank need not obtain any indorsement of the check, but may
We believe that under this provision of law Ang Tek Lian was properly pay it to the person presenting it without any
held liable. In this connection, it must be stated that, as explained indorsement. . . . (Zollmann, Banks and Banking, Permanent
in People vs. Fernandez (59 Phil., 615), estafa is committed by Edition, Vol. 6, p. 494.)
issuing either a postdated check or an ordinary check to accomplish
the deceit.
Of course, if the bank is not sure of the bearer's identity or financial PHILIPPINE NATIONAL BANK, Petitioner,
solvency, it has the right to demand identification and /or assurance vs.
against possible complications, — for instance, (a) forgery of drawer's ERLANDO T. RODRIGUEZ and NORMA RODRIGUEZ, Respondents.
signature, (b) loss of the check by the rightful owner, (c) raising of the
amount payable, etc. The bank may therefore require, for its DECISION
protection, that the indorsement of the drawer — or of some other
person known to it — be obtained. But where the Bank is satisfied of REYES, R.T., J.:
the identity and /or the economic standing of the bearer who tenders
the check for collection, it will pay the instrument without further
WHEN the payee of the check is not intended to be the true recipient
question; and it would incur no liability to the drawer in thus acting.
of its proceeds, is it payable to order or bearer? What is the fictitious-
payee rule and who is liable under it? Is there any exception?
A check payable to bearer is authority for payment to holder.
Where a check is in the ordinary form, and is payable to
These questions seek answers in this petition for review on certiorari
bearer, so that no indorsement is required, a bank, to which it
of the Amended Decision1 of the Court of Appeals (CA) which affirmed
is presented for payment, need not have the holder identified,
with modification that of the Regional Trial Court (RTC). 2
and is not negligent in falling to do so. . . . (Michie on Banks
and Banking, Permanent Edition, Vol. 5, p. 343.)
The Facts
. . . Consequently, a drawee bank to which a bearer check is
presented for payment need not necessarily have the holder The facts as borne by the records are as follows:
identified and ordinarily may not be charged with negligence
in failing to do so. See Opinions 6C:2 and 6C:3 If the bank Respondents-Spouses Erlando and Norma Rodriguez were clients of
has no reasonable cause for suspecting any irregularity, it will petitioner Philippine National Bank (PNB), Amelia Avenue Branch,
be protected in paying a bearer check, "no matter what facts Cebu City. They maintained savings and demand/checking accounts,
unknown to it may have occurred prior to the presentment." 1 namely, PNBig Demand Deposits (Checking/Current Account No.
Morse, Banks and Banking, sec. 393. 810624-6 under the account name Erlando and/or Norma
Rodriguez), and PNBig Demand Deposit (Checking/Current Account
Although a bank is entitled to pay the amount of a bearer No. 810480-4 under the account name Erlando T. Rodriguez).
check without further inquiry, it is entirely reasonable for the
bank to insist that holder give satisfactory proof of his The spouses were engaged in the informal lending business. In line
identity. . . . (Paton's Digest, Vol. I, p. 1089.) with their business, they had a discounting3 arrangement with the
Philnabank Employees Savings and Loan Association (PEMSLA), an
Anyway, it is significant, and conclusive, that the form of the check association of PNB employees. Naturally, PEMSLA was likewise a
Exhibit A was totally unconnected with its dishonor. The Court of client of PNB Amelia Avenue Branch. The association maintained
Appeals declared that it was returned unsatisfied because the drawer current and savings accounts with petitioner bank.
had insufficient funds— not because the drawer's indorsement was
lacking. PEMSLA regularly granted loans to its members. Spouses Rodriguez
would rediscount the postdated checks issued to members whenever
Wherefore, there being no question as to the correctness of the the association was short of funds. As was customary, the spouses
penalty imposed on the appellant, the writ of certiorari is denied and would replace the postdated checks with their own checks issued in
the decision of the Court of Appeals is hereby affirmed, with costs. the name of the members.

G.R. No. 170325 September 26, 2008 It was PEMSLA’s policy not to approve applications for loans of
members with outstanding debts. To subvert this policy, some
PEMSLA officers devised a scheme to obtain additional loans despite
their outstanding loan accounts. They took out loans in the names of PNB moved to dismiss the complaint on the ground of lack of cause
unknowing members, without the knowledge or consent of the latter. of action. PNB argued that the claim for damages should come from
The PEMSLA checks issued for these loans were then given to the the payees of the checks, and not from spouses Rodriguez. Since
spouses for rediscounting. The officers carried this out by forging the there was no demand from the said payees, the obligation should be
indorsement of the named payees in the checks. considered as discharged.

In return, the spouses issued their personal checks (Rodriguez In an Order dated January 12, 2000, the RTC denied PNB’s motion to
checks) in the name of the members and delivered the checks to an dismiss.
officer of PEMSLA. The PEMSLA checks, on the other hand, were
deposited by the spouses to their account. In its Answer,5 PNB claimed it is not liable for the checks which it
paid to the PEMSLA account without any indorsement from the
Meanwhile, the Rodriguez checks were deposited directly by PEMSLA payees. The bank contended that spouses Rodriguez, the makers,
to its savings account without any indorsement from the named actually did not intend for the named payees to receive the proceeds
payees. This was an irregular procedure made possible through the of the checks. Consequently, the payees were considered as "fictitious
facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and bank payees" as defined under the Negotiable Instruments Law (NIL). Being
teller in the PNB Branch. It appears that this became the usual checks made to fictitious payees which are bearer instruments, the
practice for the parties. checks were negotiable by mere delivery. PNB’s Answer included its
cross-claim against its co-defendants PEMSLA and the MCP, praying
For the period November 1998 to February 1999, the spouses issued that in the event that judgment is rendered against the bank, the
sixty nine (69) checks, in the total amount of P2,345,804.00. These cross-defendants should be ordered to reimburse PNB the amount it
were payable to forty seven (47) individual payees who were all shall pay.
members of PEMSLA.4
After trial, the RTC rendered judgment in favor of spouses Rodriguez
Petitioner PNB eventually found out about these fraudulent acts. To (plaintiffs). It ruled that PNB (defendant) is liable to return the value
put a stop to this scheme, PNB closed the current account of of the checks. All counterclaims and cross-claims were dismissed.
PEMSLA. As a result, the PEMSLA checks deposited by the spouses The dispositive portion of the RTC decision reads:
were returned or dishonored for the reason "Account Closed." The
corresponding Rodriguez checks, however, were deposited as usual to WHEREFORE, in view of the foregoing, the Court hereby renders
the PEMSLA savings account. The amounts were duly debited from judgment, as follows:
the Rodriguez account. Thus, because the PEMSLA checks given as
payment were returned, spouses Rodriguez incurred losses from the 1. Defendant is hereby ordered to pay the plaintiffs the total
rediscounting transactions. amount of P2,345,804.00 or reinstate or restore the amount
of P775,337.00 in the PNBig Demand Deposit
RTC Disposition Checking/Current Account No. 810480-4 of Erlando T.
Rodriguez, and the amount of P1,570,467.00 in the PNBig
Alarmed over the unexpected turn of events, the spouses Rodriguez Demand Deposit, Checking/Current Account No. 810624-6 of
filed a civil complaint for damages against PEMSLA, the Multi- Erlando T. Rodriguez and/or Norma Rodriguez, plus legal rate
Purpose Cooperative of Philnabankers (MCP), and petitioner PNB. of interest thereon to be computed from the filing of this
They sought to recover the value of their checks that were deposited complaint until fully paid;
to the PEMSLA savings account amounting to P2,345,804.00. The
spouses contended that because PNB credited the checks to the 2. The defendant PNB is hereby ordered to pay the plaintiffs
PEMSLA account even without indorsements, PNB violated its the following reasonable amount of damages suffered by them
contractual obligation to them as depositors. PNB paid the wrong taking into consideration the standing of the plaintiffs being
payees, hence, it should bear the loss.
 sugarcane planters, realtors, residential subdivision owners, nine (69) checks were in the possession of PEMSLA’s errand boy for
and other businesses: presentment to the defendant-appellant that led to this present
controversy. It also appears that the teller who accepted the said
(a) Consequential damages, unearned income in the checks was PEMSLA’s officer, and that such was a regular practice
amount of P4,000,000.00, as a result of their having by the parties until the defendant-appellant discovered the scam. The
incurred great dificulty (sic) especially in the logical conclusion, therefore, is that the checks were never meant to
residential subdivision business, which was not be paid to order, but instead, to PEMSLA. We thus find no breach of
pushed through and the contractor even threatened to contract on the part of the defendant-appellant.
file a case against the plaintiffs;
According to plaintiff-appellee Erlando Rodriguez’ testimony, PEMSLA
(b) Moral damages in the amount of P1,000,000.00; allegedly issued post-dated checks to its qualified members who had
applied for loans. However, because of PEMSLA’s insufficiency of
(c) Exemplary damages in the amount of P500,000.00; funds, PEMSLA approached the plaintiffs-appellees for the latter to
issue rediscounted checks in favor of said applicant members. Based
on the investigation of the defendant-appellant, meanwhile, this
(d) Attorney’s fees in the amount of P150,000.00 arrangement allowed the plaintiffs-appellees to make a profit by
considering that this case does not involve very issuing rediscounted checks, while the officers of PEMSLA and other
complicated issues; and for the members would be able to claim their loans, despite the fact that they
were disqualified for one reason or another. They were able to achieve
(e) Costs of suit. this conspiracy by using other members who had loaned lesser
amounts of money or had not applied at all. x x x.8 (Emphasis added)
3. Other claims and counterclaims are hereby dismissed.6
The CA found that the checks were bearer instruments, thus they do
CA Disposition not require indorsement for negotiation; and that spouses Rodriguez
and PEMSLA conspired with each other to accomplish this money-
PNB appealed the decision of the trial court to the CA on the making scheme. The payees in the checks were "fictitious payees"
principal ground that the disputed checks should be considered as because they were not the intended payees at all.
payable to bearer and not to order.
The spouses Rodriguez moved for reconsideration. They argued, inter
In a Decision7 dated July 22, 2004, the CA reversed and set aside the alia, that the checks on their faces were unquestionably payable to
RTC disposition. The CA concluded that the checks were obviously order; and that PNB committed a breach of contract when it paid the
meant by the spouses to be really paid to PEMSLA. The court a quo value of the checks to PEMSLA without indorsement from the payees.
declared: They also argued that their cause of action is not only against
PEMSLA but also against PNB to recover the value of the checks.
We are not swayed by the contention of the plaintiffs-appellees
(Spouses Rodriguez) that their cause of action arose from the alleged On October 11, 2005, the CA reversed itself via an Amended
breach of contract by the defendant-appellant (PNB) when it paid the Decision, the last paragraph and fallo of which read:
value of the checks to PEMSLA despite the checks being payable to
order. Rather, we are more convinced by the strong and credible In sum, we rule that the defendant-appellant PNB is liable to the
evidence for the defendant-appellant with regard to the plaintiffs- plaintiffs-appellees Sps. Rodriguez for the following:
appellees’ and PEMSLA’s business arrangement – that the value of
the rediscounted checks of the plaintiffs-appellees would be deposited 1. Actual damages in the amount of P2,345,804 with interest
in PEMSLA’s account for payment of the loans it has approved in at 6% per annum from 14 May 1999 until fully paid;
exchange for PEMSLA’s checks with the full value of the said loans.
This is the only obvious explanation as to why all the disputed sixty-
 2. Moral damages in the amount of P200,000; Prefatorily, amendment of decisions is more acceptable than an
erroneous judgment attaining finality to the prejudice of innocent
3. Attorney’s fees in the amount of P100,000; and parties. A court discovering an erroneous judgment before it becomes
final may, motu proprio or upon motion of the parties, correct its
4. Costs of suit. judgment with the singular objective of achieving justice for the
litigants.10
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered by Us AFFIRMING WITH MODIFICATION the assailed However, a word of caution to lower courts, the CA in Cebu in this
decision rendered in Civil Case No. 99-10892, as set forth in the particular case, is in order. The Court does not sanction careless
immediately next preceding paragraph hereof, and SETTING ASIDE disposition of cases by courts of justice. The highest degree of
Our original decision promulgated in this case on 22 July 2004. diligence must go into the study of every controversy submitted for
decision by litigants. Every issue and factual detail must be closely
scrutinized and analyzed, and all the applicable laws judiciously
SO ORDERED.9 studied, before the promulgation of every judgment by the court.
Only in this manner will errors in judgments be avoided.
The CA ruled that the checks were payable to order. According to the
appellate court, PNB failed to present sufficient proof to defeat the Now to the core of the petition.
claim of the spouses Rodriguez that they really intended the checks
to be received by the specified payees. Thus, PNB is liable for the
value of the checks which it paid to PEMSLA without indorsements As a rule, when the payee is fictitious or not intended to be the true
from the named payees. The award for damages was deemed recipient of the proceeds, the check is considered as a bearer
appropriate in view of the failure of PNB to treat the Rodriguez instrument. A check is "a bill of exchange drawn on a bank payable
account with the highest degree of care considering the fiduciary on demand."11 It is either an order or a bearer instrument. Sections 8
nature of their relationship, which constrained respondents to seek and 9 of the NIL states:
legal action.
SEC. 8. When payable to order. – The instrument is payable to order
Hence, the present recourse under Rule 45. where it is drawn payable to the order of a specified person or to him
or his order. It may be drawn payable to the order of –
Issues
(a) A payee who is not maker, drawer, or drawee; or
The issues may be compressed to whether the subject checks are
payable to order or to bearer and who bears the loss? (b) The drawer or maker; or

PNB argues anew that when the spouses Rodriguez issued the (c) The drawee; or
disputed checks, they did not intend for the named payees to receive
the proceeds. Thus, they are bearer instruments that could be validly (d) Two or more payees jointly; or
negotiated by mere delivery. Further, testimonial and documentary
evidence presented during trial amply proved that spouses Rodriguez (e) One or some of several payees; or
and the officers of PEMSLA conspired with each other to defraud the
bank. (f) The holder of an office for the time being.

Our Ruling Where the instrument is payable to order, the payee must be named
or otherwise indicated therein with reasonable certainty.
SEC. 9. When payable to bearer. – The instrument is payable to point since our law on negotiable instruments was directly lifted from
bearer – the Uniform Negotiable Instruments Law of the United States. 13

(a) When it is expressed to be so payable; or A review of US jurisprudence yields that an actual, existing, and
living payee may also be "fictitious" if the maker of the check did not
(b) When it is payable to a person named therein or bearer; or intend for the payee to in fact receive the proceeds of the check. This
usually occurs when the maker places a name of an existing payee on
(c) When it is payable to the order of a fictitious or non- the check for convenience or to cover up an illegal activity.14 Thus, a
existing person, and such fact is known to the person making check made expressly payable to a non-fictitious and existing person
it so payable; or is not necessarily an order instrument. If the payee is not the
intended recipient of the proceeds of the check, the payee is
considered a "fictitious" payee and the check is a bearer instrument.
(d) When the name of the payee does not purport to be the
name of any person; or
In a fictitious-payee situation, the drawee bank is absolved from
liability and the drawer bears the loss. When faced with a check
(e) Where the only or last indorsement is an indorsement in payable to a fictitious payee, it is treated as a bearer instrument that
blank.12 (Underscoring supplied) can be negotiated by delivery. The underlying theory is that one
cannot expect a fictitious payee to negotiate the check by placing his
The distinction between bearer and order instruments lies in their indorsement thereon. And since the maker knew this limitation, he
manner of negotiation. Under Section 30 of the NIL, an order must have intended for the instrument to be negotiated by mere
instrument requires an indorsement from the payee or holder before delivery. Thus, in case of controversy, the drawer of the check will
it may be validly negotiated. A bearer instrument, on the other hand, bear the loss. This rule is justified for otherwise, it will be most
does not require an indorsement to be validly negotiated. It is convenient for the maker who desires to escape payment of the check
negotiable by mere delivery. The provision reads: to always deny the validity of the indorsement. This despite the fact
that the fictitious payee was purposely named without any intention
SEC. 30. What constitutes negotiation. – An instrument is negotiated that the payee should receive the proceeds of the check.15
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 The fictitious-payee rule is best illustrated in Mueller & Martin v.
is negotiated by delivery; if payable to order, it is negotiated by the Liberty Insurance Bank.16 In the said case, the corporation Mueller &
indorsement of the holder completed by delivery. Martin was defrauded by George L. Martin, one of its authorized
signatories. Martin drew seven checks payable to the German
A check that is payable to a specified payee is an order instrument. Savings Fund Company Building Association (GSFCBA) amounting to
However, under Section 9(c) of the NIL, a check payable to a specified $2,972.50 against the account of the corporation without authority
payee may nevertheless be considered as a bearer instrument if it is from the latter. Martin was also an officer of the GSFCBA but did not
payable to the order of a fictitious or non-existing person, and such have signing authority. At the back of the checks, Martin placed the
fact is known to the person making it so payable. Thus, checks rubber stamp of the GSFCBA and signed his own name as
issued to "Prinsipe Abante" or "Si Malakas at si Maganda," who are indorsement. He then successfully drew the funds from Liberty
well-known characters in Philippine mythology, are bearer Insurance Bank for his own personal profit. When the corporation
instruments because the named payees are fictitious and non- filed an action against the bank to recover the amount of the checks,
existent. the claim was denied.

We have yet to discuss a broader meaning of the term "fictitious" as The US Supreme Court held in Mueller that when the person making
used in the NIL. It is for this reason that We look elsewhere for the check so payable did not intend for the specified payee to have
guidance. Court rulings in the United States are a logical starting any part in the transactions, the payee is considered as a fictitious
payee. The check is then considered as a bearer instrument to be
validly negotiated by mere delivery. Thus, the US Supreme Court held What remains to be determined is if the payees, though existing
that Liberty Insurance Bank, as drawee, was authorized to make persons, were "fictitious" in its broader context.
payment to the bearer of the check, regardless of whether prior
indorsements were genuine or not.17 For the fictitious-payee rule to be available as a defense, PNB must
show that the makers did not intend for the named payees to be part
The more recent Getty Petroleum Corp. v. American Express Travel of the transaction involving the checks. At most, the bank’s thesis
Related Services Company, Inc.18 upheld the fictitious-payee rule. The shows that the payees did not have knowledge of the existence of the
rule protects the depositary bank and assigns the loss to the drawer checks. This lack of knowledge on the part of the payees, however,
of the check who was in a better position to prevent the loss in the was not tantamount to a lack of intention on the part of respondents-
first place. Due care is not even required from the drawee or spouses that the payees would not receive the checks’ proceeds.
depositary bank in accepting and paying the checks. The effect is Considering that respondents-spouses were transacting with
that a showing of negligence on the part of the depositary bank will PEMSLA and not the individual payees, it is understandable that
not defeat the protection that is derived from this rule. they relied on the information given by the officers of PEMSLA that
the payees would be receiving the checks.
However, there is a commercial bad faith exception to the fictitious-
payee rule. A showing of commercial bad faith on the part of the Verily, the subject checks are presumed order instruments. This is
drawee bank, or any transferee of the check for that matter, will work because, as found by both lower courts, PNB failed to present
to strip it of this defense. The exception will cause it to bear the loss. sufficient evidence to defeat the claim of respondents-spouses that
Commercial bad faith is present if the transferee of the check acts the named payees were the intended recipients of the checks’
dishonestly, and is a party to the fraudulent scheme. Said the US proceeds. The bank failed to satisfy a requisite condition of a
Supreme Court in Getty: fictitious-payee situation – that the maker of the check intended for
the payee to have no interest in the transaction.
Consequently, a transferee’s lapse of wary vigilance, disregard of
suspicious circumstances which might have well induced a prudent Because of a failure to show that the payees were "fictitious" in its
banker to investigate and other permutations of negligence are not broader sense, the fictitious-payee rule does not apply. Thus, the
relevant considerations under Section 3-405 x x x. Rather, there is a checks are to be deemed payable to order. Consequently, the drawee
"commercial bad faith" exception to UCC 3-405, applicable when the bank bears the loss.20
transferee "acts dishonestly – where it has actual knowledge of facts
and circumstances that amount to bad faith, thus itself becoming a PNB was remiss in its duty as the drawee bank. It does not dispute
participant in a fraudulent scheme. x x x Such a test finds support in the fact that its teller or tellers accepted the 69 checks for deposit to
the text of the Code, which omits a standard of care requirement the PEMSLA account even without any indorsement from the named
from UCC 3-405 but imposes on all parties an obligation to act with payees. It bears stressing that order instruments can only be
"honesty in fact." x x x19 (Emphasis added) negotiated with a valid indorsement.

Getty also laid the principle that the fictitious-payee rule extends A bank that regularly processes checks that are neither payable to
protection even to non-bank transferees of the checks. the customer nor duly indorsed by the payee is apparently grossly
negligent in its operations.21 This Court has recognized the unique
In the case under review, the Rodriguez checks were payable to public interest possessed by the banking industry and the need for
specified payees. It is unrefuted that the 69 checks were payable to the people to have full trust and confidence in their banks.22 For this
specific persons. Likewise, it is uncontroverted that the payees were reason, banks are minded to treat their customer’s accounts with
actual, existing, and living persons who were members of PEMSLA utmost care, confidence, and honesty.23
that had a rediscounting arrangement with spouses Rodriguez.
In a checking transaction, the drawee bank has the duty to verify the
genuineness of the signature of the drawer and to pay the check
strictly in accordance with the drawer’s instructions, i.e., to the deposited were returned for the reason "Account Closed." These
named payee in the check. It should charge to the drawer’s accounts PEMSLA checks were the corresponding payments to the Rodriguez
only the payables authorized by the latter. Otherwise, the drawee will checks. Since they could not encash the PEMSLA checks,
be violating the instructions of the drawer and it shall be liable for respondents-spouses were unable to collect payments for the
the amount charged to the drawer’s account.24 amounts they had advanced.

In the case at bar, respondents-spouses were the bank’s depositors. A bank that has been remiss in its duty must suffer the
The checks were drawn against respondents-spouses’ accounts. PNB, consequences of its negligence. Being issued to named payees, PNB
as the drawee bank, had the responsibility to ascertain the regularity was duty-bound by law and by banking rules and procedure to
of the indorsements, and the genuineness of the signatures on the require that the checks be properly indorsed before accepting them
checks before accepting them for deposit. Lastly, PNB was obligated for deposit and payment. In fine, PNB should be held liable for the
to pay the checks in strict accordance with the instructions of the amounts of the checks.
drawers. Petitioner miserably failed to discharge this burden.
One Last Note
The checks were presented to PNB for deposit by a representative of
PEMSLA absent any type of indorsement, forged or otherwise. The We note that the RTC failed to thresh out the merits of PNB’s cross-
facts clearly show that the bank did not pay the checks in strict claim against its co-defendants PEMSLA and MPC. The records are
accordance with the instructions of the drawers, respondents- bereft of any pleading filed by these two defendants in answer to the
spouses. Instead, it paid the values of the checks not to the named complaint of respondents-spouses and cross-claim of PNB. The Rules
payees or their order, but to PEMSLA, a third party to the transaction expressly provide that failure to file an answer is a ground for a
between the drawers and the payees.alf-ITC declaration that defendant is in default.28 Yet, the RTC failed to
sanction the failure of both PEMSLA and MPC to file responsive
Moreover, PNB was negligent in the selection and supervision of its pleadings. Verily, the RTC dismissal of PNB’s cross-claim has no
employees. The trustworthiness of bank employees is indispensable basis. Thus, this judgment shall be without prejudice to whatever
to maintain the stability of the banking industry. Thus, banks are action the bank might take against its co-defendants in the trial
enjoined to be extra vigilant in the management and supervision of court.
their employees. In Bank of the Philippine Islands v. Court of
Appeals,25 this Court cautioned thus: To PNB’s credit, it became involved in the controversial transaction
not of its own volition but due to the actions of some of its employees.
Banks handle daily transactions involving millions of pesos. By the Considering that moral damages must be understood to be in
very nature of their work the degree of responsibility, care and concept of grants, not punitive or corrective in nature, We resolve to
trustworthiness expected of their employees and officials is far reduce the award of moral damages to P50,000.00.29
greater than those of ordinary clerks and employees. For obvious
reasons, the banks are expected to exercise the highest degree of WHEREFORE, the appealed Amended Decision is AFFIRMED with
diligence in the selection and supervision of their employees.26 the MODIFICATION that the award for moral damages is reduced
to P50,000.00, and that this is without prejudice to whatever civil,
PNB’s tellers and officers, in violation of banking rules of procedure, criminal, or administrative action PNB might take against PEMSLA,
permitted the invalid deposits of checks to the PEMSLA account. MPC, and the employees involved.
Indeed, when it is the gross negligence of the bank employees that
caused the loss, the bank should be held liable.27 SO ORDERED.

PNB’s argument that there is no loss to compensate since no demand G.R. No. L-18103 June 8, 1922
for payment has been made by the payees must also fail. Damage
was caused to respondents-spouses when the PEMSLA checks they
PHILIPPINE NATIONAL BANK, plaintiff-appellee, (Sgd.) VICENTE SOTELO,
vs. Manager.
MANILA OIL REFINING & BY-PRODUCTS COMPANY,
INC., defendant-appellant. MANILA OIL REFINING & BY-PRODUCTS CO., INC.,

Antonio Gonzalez for appellant. (Sgd.) RAFAEL LOPEZ,

Roman J. Lacson for appellee. Treasurer
Hartigan and Welch; Fisher and De Witt; Perkins and Kincaid; Gibbs,
Mc Donough and Johnson; Julian Wolfson; Ross and Lawrence; The Manila Oil Refining and By-Products Company, Inc. failed to pay
Francis B. Mahoney, and Jose A. Espiritu, amici curiae. the promissory note on demand. The Philippine National Bank
brought action in the Court of First Instance of Manila, to recover
MALCOLM, J.: P61,000, the amount of the note, together with interest and costs.
Mr. Elias N. Rector, an attorney associated with the Philippine
The question of first impression raised in this case concerns the National Bank, entered his appearance in representation of the
validity in this jurisdiction of a provision in a promissory note defendant, and filed a motion confessing judgment. The defendant,
whereby in case the same is not paid at maturity, the maker however, in a sworn declaration, objected strongly to the unsolicited
authorizes any attorney to appear and confess judgment thereon for representation of attorney Recto. Later, attorney Antonio Gonzalez
the principal amount, with interest, costs, and attorney's fees, and appeared for the defendant and filed a demurrer, and when this was
waives all errors, rights to inquisition, and appeal, and all property overruled, presented an answer. The trial judge rendered judgment
exceptions. on the motion of attorney Recto in the terms of the complaint.

On May 8, 1920, the manager and the treasurer of the Manila Oil The foregoing facts, and appellant's three assignments of error, raise
Refining & By-Products Company, Inc., executed and delivered to the squarely the question which was suggested in the beginning of this
Philippine National Bank, a written instrument reading as follows: opinion. In view of the importance of the subject to the business
community, the advice of prominent attorneys-at-law with banking
RENEWAL. connections, was solicited. These members of the bar responded
P61,000.00 promptly to the request of the court, and their memoranda have
proved highly useful in the solution of the question. It is to the credit
MANILA, P.I., May 8, 1920. of the bar that although the sanction of judgement notes in the
Philippines might prove of immediate value to clients, every one of the
attorneys has looked upon the matter in a big way, with the result
On demand after date we promise to pay to the order of the that out of their independent investigations has come a practically
Philippine National Bank sixty-one thousand only pesos at unanimous protest against the recognition in this jurisdiction of
Philippine National Bank, Manila, P.I. judgment notes.1

Without defalcation, value received; and to hereby authorize Neither the Code of Civil Procedure nor any other remedial statute
any attorney in the Philippine Islands, in case this note be not expressly or tacitly recognizes a confession of judgment commonly
paid at maturity, to appear in my name and confess judgment called a judgment note. On the contrary, the provisions of the Code of
for the above sum with interest, cost of suit and attorney's Civil Procedure, in relation to constitutional safeguards relating to
fees of ten (10) per cent for collection, a release of all errors the right to take a man's property only after a day in court and after
and waiver of all rights to inquisition and appeal, and to the due process of law, contemplate that all defendants shall have an
benefit of all laws exempting property, real or personal, from opportunity to be heard. Further, the provisions of the Code of Civil
levy or sale. Value received. No. ____ Due ____ Procedure pertaining to counter claims argue against judgment
notes, especially as the Code provides that in case the defendant or
MANILA OIL REFINING & BY-PRODUCTS CO., INC., his assignee omits to set up a counterclaim, he cannot afterwards
maintain an action against the plaintiff therefor. (Secs. 95, 96, 97.) At Possibly the leading case on the subject is First National Bank of
least one provision of the substantive law, namely, that the validity Kansas City vs. White ([1909], 220 Mo., 717; 16 Ann. Cas., 889; 120
and fulfillment of contracts cannot be left to the will of one of the S. W., 36; 132 Am. St. Rep., 612). The record in this case discloses
contracting parties (Civil Code, art. 1356), constitutes another that on October 4, 1990, the defendant executed and delivered to the
indication of fundamental legal purposes. plaintiff an obligation in which the defendant authorized any
attorney-at-law to appear for him in an action on the note at any time
The attorney for the appellee contends that the Negotiable after the note became due in any court of record in the State of
Instruments Law (Act No. 2031) expressly recognizes judgment notes, Missouri, or elsewhere, to waive the issuing and service of process,
and that they are enforcible under the regular procedure. The and to confess judgement in favor of the First National Bank of
Negotiable Instruments Law, in section 5, provides that "The Kansas City for the amount that might then be due thereon, with
negotiable character of an instrument otherwise negotiable is not interest at the rate therein mentioned and the costs of suit, together
affected by a provision which ". . . (b) Authorizes a confession of with an attorney's fee of 10 per cent and also to waive and release all
judgment if the instrument be not paid at maturity." We do not errors in said proceedings and judgment, and all proceedings,
believe, however, that this provision of law can be taken to sanction appeals, or writs of error thereon. Plaintiff filed a petition in the
judgments by confession, because it is a portion of a uniform law Circuit Court to which was attached the above-mentioned
which merely provides that, in jurisdiction where judgment notes are instrument. An attorney named Denham appeared pursuant to the
recognized, such clauses shall not affect the negotiable character of authority given by the note sued on, entered the appearance of the
the instrument. Moreover, the same section of the Negotiable defendant, and consented that judgement be rendered in favor of the
Instruments. Law concludes with these words: "But nothing in this plaintiff as prayed in the petition. After the Circuit Court had entered
section shall validate any provision or stipulation otherwise illegal." a judgement, the defendants, through counsel, appeared specially
and filed a motion to set it aside. The Supreme Court of Missouri,
The court is thus put in the position of having to determine the speaking through Mr. Justice Graves, in part said:
validity in the absence of statute of a provision in a note authorizing
an attorney to appear and confess judgment against the maker. This But going beyond the mere technical question in our
situation, in reality, has its advantages for it permits us to reach that preceding paragraph discussed, we come to a question urged
solution which is best grounded in the solid principles of the law, and which goes to the very root of this case, and whilst new and
which will best advance the public interest. novel in this state, we do not feel that the case should be
disposed of without discussing and passing upon that
The practice of entering judgments in debt on warrants of attorney is question.
of ancient origin. In the course of time a warrant of attorney to
confess judgement became a familiar common law security. At xxx xxx xxx
common law, there were two kinds of judgments by confession; the
one a judgment by cognovit actionem, and the other by And if this instrument be considered as security for a debt, as
confession relicta verificatione. A number of jurisdictions in the it was by the common law, it has never so found recognition
United States have accepted the common law view of judgments by in this state. The policy of our law has been against such
confession, while still other jurisdictions have refused to sanction hidden securities for debt. Our Recorder's Act is such that
them. In some States, statutes have been passed which have either instruments intended as security for debt should find a place
expressly authorized confession of judgment on warrant of attorney, in the public records, and if not, they have often been viewed
without antecedent process, or have forbidden judgments of this with suspicion, and their bona fides often questioned.
character. In the absence of statute, there is a conflict of authority as
to the validity of a warrant of attorney for the confession of Nor do we thing that the policy of our law is such as to thus
judgement. The weight of opinion is that, unless authorized by place a debtor in the absolute power of his creditor. The field
statute, warrants of attorney to confess judgment are void, as against for fraud is too far enlarged by such an instrument.
public policy. Oppression and tyranny would follow the footsteps of such a
diversion in the way of security for debt. Such instruments
procured by duress could shortly be placed in judgment in a condemned by the courts, until such time as they may receive
foreign court and much distress result therefrom. express statutory recognition, as they have in some states.

Again, under the law the right to appeal to this court or some xxx xxx xxx
other appellate court is granted to all persons against whom
an adverse judgment is rendered, and this statutory right is From what has been said, it follows that the Circuit Court
by the instrument stricken down. True it is that such right is never had jurisdiction of the defendant, and the judgement is
not claimed in this case, but it is a part of the bond and we reversed.
hardly know why this pound of flesh has not been demanded.
Courts guard with jealous eye any contract innovations upon The case of Farquhar and Co. vs. Dehaven ([1912], 70 W. Va., 738;
their jurisdiction. The instrument before us, considered in the 40 L.R.A. [N. S.], 956; 75 S.E., 65; Ann. Cas. [1914-A], 640), is
light of a contract, actually reduces the courts to mere clerks another well-considered authority. The notes referred to in the record
to enter and record the judgment called for therein. By our contained waiver of presentment and protest, homestead and
statute (Rev. St. 1899, sec. 645) a party to a written exemption rights real and personal, and other rights, and also the
instrument of this character has the right to show a failure of following material provision: "And we do hereby empower and
consideration, but this right is brushed to the wind by this authorize the said A. B. Farquhar Co. Limited, or agent, or any
instrument and the jurisdiction of the court to hear that prothonotary or attorney of any Court of Record to appear for us and
controversy is by the whose object is to oust the jurisdiction of in our name to confess judgement against us and in favor of said A.
the courts are contrary to public policy and will not be B. Farquhar Co., Limited, for the above named sum with costs of suit
enforced. Thus it is held that any stipulation between parties and release of all errors and without stay of execution after the
to a contract distinguishing between the different courts of the maturity of this note." The Supreme Court of West Virginia, on
country is contrary to public policy. The principle has also consideration of the validity of the judgment note above described,
been applied to a stipulation in a contract that a party who speaking through Mr. Justice Miller, in part said:
breaks it may not be sued, to an agreement designating a
person to be sued for its breach who is nowise liable and
As both sides agree the question presented is one of first
prohibiting action against any but him, to a provision in a
impression in this State. We have no statutes, as has
lease that the landlord shall have the right to take immediate
Pennsylvania and many other states, regulating the subject.
judgment against the tenant in case of a default on his part,
In the decision we are called upon to render, we must have
without giving the notice and demand for possession and
recourse to the rules and principles of the common law, in
filing the complaint required by statute, to a by-law of a
force here, and to our statute law, applicable, and to such
benefit association that the decisions of its officers on claim
judicial decisions and practices in Virginia, in force at the
shall be final and conclusive, and to many other agreements
time of the separation, as are properly binding on us. It is
of a similar tendency. In some courts, any agreement as to the
pertinent to remark in this connection, that after nearly fifty
time for suing different from time allowed by the statute of
years of judicial history this question, strong evidence, we
limitations within which suit shall be brought or the right to
think, that such notes, if at all, have never been in very
sue be barred is held void.
general use in this commonwealth. And in most states where
they are current the use of them has grown up under statutes
xxx xxx xxx authorizing them, and regulating the practice of employing
them in commercial transactions.
We shall not pursue this question further. This contract, in so
far as it goes beyond the usual provisions of a note, is void as xxx xxx xxx
against the public policy of the state, as such public policy is
found expressed in our laws and decisions. Such agreements
It is contended, however, that the old legal maxim, qui facit
are iniquitous to the uttermost and should be promptly
per alium, facit per se, is as applicable here as in other cases.
 We do not think so. Strong reasons exist, as we have shown, of the poor debtor and cut him off from his ordinary day in
for denying its application, when holders of contracts of this court. On the other hand, it may be said in their favor that it
character seek the aid of the courts and of their execution frequently enables a debtor to obtain money which he could
process to enforce them, defendant having had no day in by no possibility otherwise obtain. It strengthens his credit,
court or opportunity to be heard. We need not say in this case and may be most highly beneficial to him at times. In some of
that a debtor may not, by proper power of attorney duly the states there judgments have been condemned by statute
executed, authorize another to appear in court, and by proper and of course in that case are not allowed.
endorsement upon the writ waive service of process, and
confess judgement. But we do not wish to be understood as Our conclusion in this case is that a warrant of attorney given
approving or intending to countenance the practice employing as security to a creditor accompanying a promissory note
in this state commercial paper of the character here involved. confers a valid power, and authorizes a confession of
Such paper has heretofore had little if any currency here. If judgment in any court of competent jurisdiction in an action
the practice is adopted into this state it ought to be, we think, to be brought upon said note; that our cognovit statute does
by act of the Legislature, with all proper safeguards thrown not cover the same field as that occupied by the common-law
around it, to prevent fraud and imposition. The policy of our practice of taking judgments upon warrant of attorney, and
law is, that no man shall suffer judgment at the hands of our does not impliedly or otherwise abrogate such practice; and
courts without proper process and a day to be heard. To give that the practice of taking judgments upon warrants of
currency to such paper by judicial pronouncement would be attorney as it was pursued in this case is not against any
to open the door to fraud and imposition, and to subject the public policy of the state, as declared by its laws.
people to wrongs and injuries not heretofore contemplated.
This we are unwilling to do. With reference to the conclusiveness of the decisions here mentioned,
it may be said that they are based on the practice of the English-
A case typical of those authorities which lend support to judgment American common law, and that the doctrines of the common law are
notes is First National Bank of Las Cruces vs. Baker ([1919], 180 binding upon Philippine courts only in so far as they are founded on
Pac., 291). The Supreme Court of New Mexico, in a per sound principles applicable to local conditions.
curiam decision, in part, said:
Judgments by confession as appeared at common law were
In some of the states the judgments upon warrants of considered an amicable, easy, and cheap way to settle and secure
attorney are condemned as being against public policy. debts. They are a quick remedy and serve to save the court's time.
(Farquhar and Co. vs. Dahaven, 70 W. Va., 738; 75 S.E., 65; They also save the time and money of the litigants and the
40 L.R.A. [N. S.], 956; Ann. Cas. [1914 A]. 640, and First government the expenses that a long litigation entails. In one sense,
National Bank of Kansas City vs. White, 220 Mo., 717; 120 S. instruments of this character may be considered as special
W., 36; 132 Am. St. Rep., 612; 16 Ann. Cas., 889, are agreements, with power to enter up judgments on them, binding the
examples of such holding.) By just what course of reasoning it parties to the result as they themselves viewed it.
can be said by the courts that such judgments are against
public policy we are unable to understand. It was a practice On the other hand, are disadvantages to the commercial world which
from time immemorial at common law, and the common law outweigh the considerations just mentioned. Such warrants of
comes down to us sanctioned as justified by the reason and attorney are void as against public policy, because they enlarge the
experience of English-speaking peoples. If conditions have field for fraud, because under these instruments the promissor
arisen in this country which make the application of the bargains away his right to a day in court, and because the effect of
common law undesirable, it is for the Legislature to so the instrument is to strike down the right of appeal accorded by
announce, and to prohibit the taking of judgments can be statute. The recognition of such a form of obligation would bring
declared as against the public policy of the state. We are about a complete reorganization of commercial customs and
aware that the argument against them is that they enable the practices, with reference to short-term obligations. It can readily be
unconscionable creditor to take advantage of the necessities seen that judgement notes, instead of resulting to the advantage of
commercial life in the Philippines might be the source of abuse and interest thereon at 16% per annum from the dates
oppression, and make the courts involuntary parties thereto. If the indicated, to wit:
bank has a meritorious case, the judgement is ultimately certain in
the courts. Under the promissory note (Exhibit "A"), the sum of
P300,000.00 with interest from January 29, 1981 until
We are of the opinion that warrants of attorney to confess judgment fully paid; under promissory note (Exhibit "B"), the
are not authorized nor contemplated by our law. We are further of the sum of P40,000.00 with interest from November 27,
opinion that provisions in notes authorizing attorneys to appear and 1980; under the promissory note (Exhibit "C"), the
confess judgments against makers should not be recognized in this sum of P166,466.00 which interest from January 29,
jurisdiction by implication and should only be considered as valid 1981; under the promissory note (Exhibit "E"), the
when given express legislative sanction. sum of P86,130.31 with interest from January 29,
1981; under the promissory note (Exhibit "G"), the
The judgment appealed from is set aside, and the case is remanded sum of P12,703.70 with interest from November 27,
to the lower court for further proceedings in accordance with this 1980; under the promissory note (Exhibit "H"), the
decision. Without special finding as to costs in this instance, it is so sum of P281,875.91 with interest from January 29,
ordered. 1981; and under the promissory note (Exhibit "I"), the
sum of P200,000.00 with interest from January 29,
G.R. No. 93073 December 21, 1992 1981.

REPUBLIC PLANTERS BANK, petitioner, Under the promissory note (Exhibit "D") defendants
vs. Pinch Manufacturing Corporation (formerly named
COURT OF APPEALS and FERMIN CANLAS, respondents. Worldwide Garment Manufacturing, Inc.), and Shozo
Yamaguchi are ordered to pay jointly and severally, the
plaintiff bank the sum of P367,000.00 with interest of
16% per annum from January 29, 1980 until fully
paid
CAMPOS, JR., J.:
Under the promissory note (Exhibit "F") defendant
This is an appeal by way of a Petition for Review on Certiorari from corporation Pinch (formerly Worldwide) is ordered to
the decision * of the Court of Appeals in CA G.R. CV No. 07302, pay the plaintiff bank the sum of P140,000.00 with
entitled "Republic Planters Bank.Plaintiff-Appellee vs. Pinch interest at 16% per annum from November 27, 1980
Manufacturing Corporation, et al., Defendants, and Fermin Canlas, until fully paid.
Defendant-Appellant", which affirmed the decision ** in Civil Case
No. 82-5448 except that it completely absolved Fermin Canlas from Defendant Pinch (formely Worldwide) is hereby ordered
liability under the promissory notes and reduced the award for to pay the plaintiff the sum of P231,120.81 with
damages and attorney's fees. The RTC decision, rendered on June 20, interest at 12% per annum from July 1, 1981, until
1985, is quoted hereunder: fully paid and the sum of P331,870.97 with interest
from March 28, 1981, until fully paid.
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiff Republic All the defendants are also ordered to pay, jointly and
Planters Bank, ordering defendant Pinch severally, the plaintiff the sum of P100,000.00 as and
Manufacturing Corporation (formerly Worldwide for reasonable attorney's fee and the further sum
Garment Manufacturing, Inc.) and defendants Shozo equivalent to 3% per annum of the respective principal
Yamaguchi and Fermin Canlas to pay, jointly and sums from the dates above stated as penalty charge
severally, the plaintiff bank the following sums with
 until fully paid, plus one percent (1%) of the principal ________ Savings Account ______XX Current Account
sums as service charge.
No. 1372-00257-6
With costs against the defendants.
of WORLDWIDE GARMENT MFG.
1
SO ORDERED. CORP.

From the above decision only defendant Fermin Canlas appealed to These entries were separated from the text of the notes with a bold
the then Intermediate Court (now the Court Appeals). His contention line which ran horizontally across the pages.
was that inasmuch as he signed the promissory notes in his capacity
as officer of the defunct Worldwide Garment Manufacturing, Inc, he In the promissory notes marked as Exhibits C, D and F, the name
should not be held personally liable for such authorized corporate Worldwide Garment Manufacturing, Inc. was apparently rubber
acts that he performed. It is now the contention of the petitioner stamped above the signatures of defendant and private respondent.
Republic Planters Bank that having unconditionally signed the nine
(9) promissory notes with Shozo Yamaguchi, jointly and severally, On December 20, 1982, Worldwide Garment Manufacturing, Inc.
defendant Fermin Canlas is solidarity liable with Shozo Yamaguchi noted to change its corporate name to Pinch Manufacturing
on each of the nine notes. Corporation.

We find merit in this appeal. On February 5, 1982, petitioner bank filed a complaint for the
recovery of sums of money covered among others, by the nine
From the records, these facts are established: Defendant Shozo promissory notes with interest thereon, plus attorney's fees and
Yamaguchi and private respondent Fermin Canlas were penalty charges. The complainant was originally brought against
President/Chief Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc. inter alia, but it was later
Worldwide Garment Manufacturing, Inc.. By virtue of Board amended to drop Worldwide Manufacturing, Inc. as defendant and
Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi substitute Pinch Manufacturing Corporation it its place. Defendants
and private respondent Fermin Canlas were authorized to apply for Pinch Manufacturing Corporation and Shozo Yamaguchi did not file
credit facilities with the petitioner Republic Planters Bank in the an Amended Answer and failed to appear at the scheduled pre-trial
forms of export advances and letters of credit/trust receipts conference despite due notice. Only private respondent Fermin
accommodations. Petitioner bank issued nine promissory notes, Canlas filed an Amended Answer wherein he, denied having issued
marked as Exhibits A to I inclusive, each of which were uniformly the promissory notes in question since according to him, he was not
worded in the following manner: an officer of Pinch Manufacturing Corporation, but instead of
Worldwide Garment Manufacturing, Inc., and that when he issued
___________, after date, for value received, I/we, jointly said promissory notes in behalf of Worldwide Garment
and severaIly promise to pay to the ORDER of the Manufacturing, Inc., the same were in blank, the typewritten entries
REPUBLIC PLANTERS BANK, at its office in Manila, not appearing therein prior to the time he affixed his signature.
Philippines, the sum of ___________ PESOS(....)
Philippine Currency... In the mind of this Court, the only issue material to the resolution of
this appeal is whether private respondent Fermin Canlas is solidarily
On the right bottom margin of the promissory notes appeared the liable with the other defendants, namely Pinch Manufacturing
signatures of Shozo Yamaguchi and Fermin Canlas above their Corporation and Shozo Yamaguchi, on the nine promissory notes.
printed names with the phrase "and (in) his personal capacity"
typewritten below. At the bottom of the promissory notes appeared: We hold that private respondent Fermin Canlas is solidarily liable on
"Please credit proceeds of this note to: each of the promissory notes bearing his signature for the following
reasons:
The promissory motes are negotiable instruments and must be Finally, the respondent Court made a grave error in holding that an
governed by the Negotiable Instruments Law. 2 amendment in a corporation's Articles of Incorporation effecting a
change of corporate name, in this case from Worldwide Garment
Under the Negotiable lnstruments Law, persons who write their manufacturing Inc to Pinch Manufacturing Corporation extinguished
names on the face of promissory notes are makers and are liable as the personality of the original corporation.
such.3 By signing the notes, the maker promises to pay to the order
of the payee or any holder 4according to the tenor thereof.5 Based on The corporation, upon such change in its name, is in no sense a new
the above provisions of law, there is no denying that private corporation, nor the successor of the original corporation. It is the
respondent Fermin Canlas is one of the co-makers of the promissory same corporation with a different name, and its character is in no
notes. As such, he cannot escape liability arising therefrom. respect changed.10

Where an instrument containing the words "I promise to pay" is A change in the corporate name does not make a new corporation,
signed by two or more persons, they are deemed to be jointly and and whether effected by special act or under a general law, has no
severally liable thereon.6 An instrument which begins" with "I" ,We" , affect on the identity of the corporation, or on its property, rights,
or "Either of us" promise to, pay, when signed by two or more or liabilities. 11
persons, makes them solidarily liable. 7 The fact that the singular
pronoun is used indicates that the promise is individual as to each The corporation continues, as before, responsible in its new name for
other; meaning that each of the co-signers is deemed to have made all debts or other liabilities which it had previously contracted or
an independent singular promise to pay the notes in full. incurred.12

In the case at bar, the solidary liability of private respondent Fermin As a general rule, officers or directors under the old corporate name
Canlas is made clearer and certain, without reason for ambiguity, by bear no personal liability for acts done or contracts entered into by
the presence of the phrase "joint and several" as describing the officers of the corporation, if duly authorized. Inasmuch as such
unconditional promise to pay to the order of Republic Planters Bank. officers acted in their capacity as agent of the old corporation and the
A joint and several note is one in which the makers bind themselves change of name meant only the continuation of the old juridical
both jointly and individually to the payee so that all may be sued entity, the corporation bearing the same name is still bound by the
together for its enforcement, or the creditor may select one or more as acts of its agents if authorized by the Board. Under the Negotiable
the object of the suit. 8 A joint and several obligation in common law Instruments Law, the liability of a person signing as an agent is
corresponds to a civil law solidary obligation; that is, one of several specifically provided for as follows:
debtors bound in such wise that each is liable for the entire amount,
and not merely for his proportionate share. 9 By making a joint and Sec. 20. Liability of a person signing as agent and so
several promise to pay to the order of Republic Planters Bank, private forth. Where the instrument contains or a person adds
respondent Fermin Canlas assumed the solidary liability of a debtor to his signature words indicating that he signs for or
and the payee may choose to enforce the notes against him alone or on behalf of a principal , or in a representative
jointly with Yamaguchi and Pinch Manufacturing Corporation as capacity, he is not liable on the instrument if he was
solidary debtors. duly authorized; but the mere addition of words
describing him as an agent, or as filling a
As to whether the interpolation of the phrase "and (in) his personal representative character, without disclosing his
capacity" below the signatures of the makers in the notes will affect principal, does not exempt him from personal liability.
the liability of the makers, We do not find it necessary to resolve and
decide, because it is immaterial and will not affect to the liability of Where the agent signs his name but nowhere in the instrument has
private respondent Fermin Canlas as a joint and several debtor of the he disclosed the fact that he is acting in a representative capacity or
notes. With or without the presence of said phrase, private the name of the third party for whom he might have acted as agent,
respondent Fermin Canlas is primarily liable as a co-maker of each of the agent is personally liable to take holder of the instrument and
the notes and his liability is that of a solidary debtor.
cannot be permitted to prove that he was merely acting as agent of notes were not incomplete instruments; neither were they given to
another and parol or extrinsic evidence is not admissible to avoid the private respondent Fermin Canlas in blank as he claims. Thus,
agent's personal liability. 13 Section 14 of the NegotiabIe Instruments Law is not applicable.

On the private respondent's contention that the promissory notes The ruling in case of Reformina vs. Tomol relied upon by the appellate
were delivered to him in blank for his signature, we rule otherwise. A court in reducing the interest rate on the promissory notes from 16%
careful examination of the notes in question shows that they are the to 12% per annum does not squarely apply to the instant petition. In
stereotype printed form of promissory notes generally used by the abovecited case, the rate of 12% was applied to forebearances of
commercial banking institutions to be signed by their clients in money, goods or credit and court judgemets thereon, only in the
obtaining loans. Such printed notes are incomplete because there are absence of any stipulation between the parties.
blank spaces to be filled up on material particulars such as payee's
name, amount of the loan, rate of interest, date of issue and the In the case at bar however , it was found by the trial court that the
maturity date. The terms and conditions of the loan are printed on rate of interest is 9% per annum, which interest rate the plaintiff may
the note for the borrower-debtor 's perusal. An incomplete instrument at any time without notice, raise within the limits allowed law. And
which has been delivered to the borrower for his signature is so, as of February 16, 1984 , the plaintiff had fixed the interest at
governed by Section 14 of the Negotiable Instruments Law which 16% per annum.
provides, in so far as relevant to this case, thus:
This Court has held that the rates under the Usury Law, as amended
Sec. 14. Blanks: when may be filled. — Where the by Presidential Decree No. 116, are applicable only to interests by
instrument is wanting in any material particular, the way of compensation for the use or forebearance of money. Article
person in possesion thereof has a prima facie authority 2209 of the Civil Code, on the other hand, governs interests by way of
to complete it by filling up the blanks therein. ... In damages.15 This fine distinction was not taken into consideration by
order, however, that any such instrument when the appellate court, which instead made a general statement that the
completed may be enforced against any person who interest rate be at 12% per annum.
became a party thereto prior to its completion, it must
be filled up strictly in accordance with the authority Inasmuch as this Court had declared that increases in interest rates
given and within a reasonable time... are not subject to any ceiling prescribed by the Usury Law, the
appellate court erred in limiting the interest rates at 12% per annum.
Proof that the notes were signed in blank was only the self-serving Central Bank Circular No. 905, Series of 1982 removed the Usury
testimony of private respondent Fermin Canlas, as determined by the Law ceiling on interest rates. 16
trial court, so that the trial court ''doubts the defendant (Canlas)
signed in blank the promissory notes". We chose to believe the bank's In the 1ight of the foregoing analysis and under the plain language of
testimony that the notes were filled up before they were given to the statute and jurisprudence on the matter, the decision of the
private respondent Fermin Canlas and defendant Shozo Yamaguchi respondent: Court of Appeals absolving private respondent Fermin
for their signatures as joint and several promissors. For signing the Canlas is REVERSED and SET ASIDE. Judgement is hereby rendered
notes above their typewritten names, they bound themselves as declaring private respondent Fermin Canlas jointly and severally
unconditional makers. We take judicial notice of the customary liable on all the nine promissory notes with the following sums and at
procedure of commercial banks of requiring their clientele to sign 16% interest per annum from the dates indicated, to wit:
promissory notes prepared by the banks in printed form with blank
spaces already filled up as per agreed terms of the loan, leaving the
Under the promissory note marked as exhibit A, the sum of
borrowers-debtors to do nothing but read the terms and conditions
P300,000.00 with interest from January 29, 1981 until fully paid;
therein printed and to sign as makers or co-makers. When the notes
under promissory note marked as Exhibit B, the sum of P40,000.00
were given to private respondent Fermin Canlas for his signature, the
with interest from November 27, 1980: under the promissory note
notes were complete in the sense that the spaces for the material
denominated as Exhibit C, the amount of P166,466.00 with interest
particular had been filled up by the bank as per agreement. The
from January 29, 1981; under the promissory note denominated as Petitioners filed a complaint1 for annulment of titles against
Exhibit D, the amount of P367,000.00 with interest from January 29, respondents, Mercator Finance Corporation, Lydia P. Salazar, Lamecs
1981 until fully paid; under the promissory note marked as Exhibit Realty and Development Corporation, and the Register of Deeds of
E, the amount of P86,130.31 with interest from January 29, 1981; Bulacan. Petitioners claimed being the registered owners of five (5)
under the promissory note marked as Exhibit F, the sum of parcels of land2 contained in the Real Estate Mortgage3 executed by
P140,000.00 with interest from November 27, 1980 until fully paid; them and Embassy Farms, Inc. ("Embassy Farms"). They alleged that
under the promissory note marked as Exhibit G, the amount of they executed the Real Estate Mortgage in favor of Mercator
P12,703.70 with interest from November 27, 1980; the promissory Financing Corporation ("Mercator") only as officers of Embassy
note marked as Exhibit H, the sum of P281,875.91 with interest from Farms. They did not receive the proceeds of the loan evidenced by a
January 29, 1981; and the promissory note marked as Exhibit I, the promissory note, as all of it went to Embassy Farms. Thus, they
sum of P200,000.00 with interest on January 29, 1981. contended that the mortgage was without any consideration as to
them since they did not personally obtain any loan or credit
The liabilities of defendants Pinch Manufacturing Corporation accommodations. There being no principal obligation on which the
(formerly Worldwide Garment Manufacturing, Inc.) and Shozo mortgage rests, the real estate mortgage is void.4With the void
Yamaguchi, for not having appealed from the decision of the trial mortgage, they assailed the validity of the foreclosure proceedings
court, shall be adjudged in accordance with the judgment rendered conducted by Mercator, the sale to it as the highest bidder in the
by the Court a quo. public auction, the issuance of the transfer certificates of title to it,
the subsequent sale of the same parcels of land to respondent Lydia
With respect to attorney's fees, and penalty and service charges, the P. Salazar ("Salazar"), and the transfer of the titles to her name, and
private respondent Fermin Canlas is hereby held jointly and lastly, the sale and transfer of the properties to respondent Lamecs
solidarity liable with defendants for the amounts found, by the Realty & Development Corporation ("Lamecs").
Court a quo. With costs against private respondent.
Mercator admitted that petitioners were the owners of the subject
SO ORDERED. parcels of land. It, however, contended that "on February 16, 1982,
plaintiffs executed a Mortgage in favor of defendant Mercator Finance
Corporation ‘for and in consideration of certain loans, and/or other
G.R. No. 148864 August 21, 2003 forms of credit accommodations obtained from the Mortgagee
(defendant Mercator Finance Corporation) amounting to EIGHT
SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. HUNDRED FORTY-FOUR THOUSAND SIX HUNDRED TWENTY-FIVE
EVANGELISTA, Petitioners, & 78/100 (P844,625.78) PESOS, Philippine Currency and to secure
vs. the payment of the same and those others that the MORTGAGEE
MERCATOR FINANCE CORP., LYDIA P. SALAZAR, may extend to the MORTGAGOR (plaintiffs) x x x.’"5 It contended that
LAMEC'S** REALTY AND DEVELOPMENT CORP. and the since petitioners and Embassy Farms signed the promissory note6 as
REGISTER OF DEEDS OF BULACAN, Respondents. co-makers, aside from the Continuing Suretyship
Agreement7 subsequently executed to guarantee the indebtedness of
DECISION Embassy Farms, and the succeeding promissory notes8 restructuring
the loan, then petitioners are jointly and severally liable with
PUNO, J.: Embassy Farms. Due to their failure to pay the obligation, the
foreclosure and subsequent sale of the mortgaged properties are
Petitioners, Spouses Evangelista ("Petitioners"), are before this Court valid.
on a Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court, assailing the decision of the Court of Appeals Respondents Salazar and Lamecs asserted that they are innocent
dismissing their petition. purchasers for value and in good faith, relying on the validity of the
title of Mercator. Lamecs admitted the prior ownership of petitioners
of the subject parcels of land, but alleged that they are the present
registered owner. Both respondents likewise assailed the long silence Farms, Inc. It is crystal clear then that the plaintiffs-spouses signed
and inaction by petitioners as it was only after a lapse of almost ten the promissory note not only as officers of Embassy Farms, Inc. but
(10) years from the foreclosure of the property and the subsequent in their personal capacity as well(.) Plaintiffs(,) by affixing their
sales that they made their claim. Thus, Salazar and Lamecs averred signatures thereon in a dual capacity have bound themselves as
that petitioners are in estoppel and guilty of laches.9 solidary debtor(s) with Embassy Farms, Inc. to pay defendant
Mercator Finance Corporation the amount of indebtedness. That the
During pre-trial, the parties agreed on the following issues: principal contract of loan is void for lack of consideration, in the light
of the foregoing is untenable.13
a. Whether or not the Real Estate Mortgage executed by the
plaintiffs in favor of defendant Mercator Finance Corp. is null Petitioners’ motion for reconsideration was denied for lack of
and void; merit.14 Thus, petitioners went up to the Court of Appeals, but again
were unsuccessful. The appellate court held:
b. Whether or not the extra-judicial foreclosure proceedings
undertaken on subject parcels of land to satisfy the The appellants’ insistence that the loans secured by the mortgage
indebtedness of Embassy Farms, Inc. is (sic) null and void; they executed were not personally theirs but those of Embassy
Farms, Inc. is clearly self-serving and misplaced. The fact that they
c. Whether or not the sale made by defendant Mercator signed the subject promissory notes in the(ir) personal capacities and
Finance Corp. in favor of Lydia Salazar and that executed by as officers of the said debtor corporation is manifest on the very face
the latter in favor of defendant Lamecs Realty and of the said documents of indebtedness (pp. 118, 128-131, Orig. Rec.).
Development Corp. are null and void; Even assuming arguendo that they did not, the appellants lose sight
of the fact that third persons who are not parties to a loan may
secure the latter by pledging or mortgaging their own property
d. Whether or not the parties are entitled to damages.10 (Lustan vs. Court of Appeals, 266 SCRA 663, 675). x x x. In
constituting a mortgage over their own property in order to secure the
After pre-trial, Mercator moved for summary judgment on the ground purported corporate debt of Embassy Farms, Inc., the appellants
that except as to the amount of damages, there is no factual issue to undeniably assumed the personality of persons interested in the
be litigated. Mercator argued that petitioners had admitted in their fulfillment of the principal obligation who, to save the subject realities
pre-trial brief the existence of the promissory note, the continuing from foreclosure and with a view towards being subrogated to the
suretyship agreement and the subsequent promissory notes rights of the creditor, were free to discharge the same by payment
restructuring the loan, hence, there is no genuine issue regarding (Articles 1302 [3] and 1303, Civil Code of the
their liability. The mortgage, foreclosure proceedings and the Philippines).15 (emphases in the original)
subsequent sales are valid and the complaint must be dismissed.11
The appellate court also observed that "if the appellants really felt
Petitioners opposed the motion for summary judgment claiming that aggrieved by the foreclosure of the subject mortgage and the
because their personal liability to Mercator is at issue, there is a need subsequent sales of the realties to other parties, why then did they
for a full-blown trial.12 commence the suit only on August 12, 1997 (when the certificate of
sale was issued on January 12, 1987, and the certificates of title in
The RTC granted the motion for summary judgment and dismissed the name of Mercator on September 27, 1988)?" Petitioners’
the complaint. It held: "procrastination for about nine (9) years is difficult to understand. On
so flimsy a ground as lack of consideration, (w)e may even venture to
A reading of the promissory notes show (sic) that the liability of the say that the complaint was not worth the time of the courts." 16
signatories thereto are solidary in view of the phrase "jointly and
severally." On the promissory note appears (sic) the signatures of A motion for reconsideration by petitioners was likewise denied for
Eduardo B. Evangelista, Epifania C. Evangelista and another lack of merit.17 Thus, this petition where they allege that:
signature of Eduardo B. Evangelista below the words Embassy
The court a quo erred and acted with grave abuse of discretion October 16, 1982 - P154,267.87
amounting to lack or excess of jurisdiction in affirming in toto the
May 4, 1998 order of the trial court granting respondent’s motion for November 16, 1982 - P154,267.87
summary judgment despite the existence of genuine issues as to
material facts and its non-entitlement to a judgment as a matter of December 16, 1982 - P154,267.87
law, thereby deciding the case in a way probably not in accord with January 16, 1983 - P154,267.87
applicable decisions of this Honorable Court.18
February 16, 1983 - P154,267.87
we affirm.
xxx xxx xxx
Summary judgment "is a procedural technique aimed at weeding out
sham claims or defenses at an early stage of the litigation."19 The The note was signed at the bottom by petitioners Eduardo B.
crucial question in a motion for summary judgment is whether the Evangelista and Epifania C. Evangelista, and Embassy Farms, Inc.
issues raised in the pleadings are genuine or fictitious, as shown by with the signature of Eduardo B. Evangelista below it.
affidavits, depositions or admissions accompanying the motion. A
genuine issue means "an issue of fact which calls for the presentation The Continuing Suretyship Agreement23 also proves the solidary
of evidence, as distinguished from an issue which is fictitious or obligation of petitioners, viz:
contrived so as not to constitute a genuine issue for trial."20 To
forestall summary judgment, it is essential for the non-moving party
(Embassy Farms, Inc.)
to confirm the existence of genuine issues where he has substantial,
Principal
plausible and fairly arguable defense, i.e., issues of fact calling for the
presentation of evidence upon which a reasonable finding of fact
could return a verdict for the non-moving party. The proper inquiry (Eduardo B. Evangelista)
would therefore be whether the affirmative defenses offered by Surety
petitioners constitute genuine issue of fact requiring a full-blown
trial.21 (Epifania C. Evangelista)
Surety
In the case at bar, there are no genuine issues raised by petitioners.
Petitioners do not deny that they obtained a loan from Mercator. They (Mercator Finance Corporation)
merely claim that they got the loan as officers of Embassy Farms Creditor
without intending to personally bind themselves or their property.
However, a simple perusal of the promissory note and the continuing To: MERCATOR FINANCE COPORATION
suretyship agreement shows otherwise. These documentary evidence
prove that petitioners are solidary obligors with Embassy Farms. (1) For valuable and/or other consideration,
EDUARDO B. EVANGELISTA and EPIFANIA C.
The promissory note22 states: EVANGELISTA (hereinafter called Surety), jointly and
severally unconditionally guarantees (sic) to
For value received, I/We jointly and severally promise to pay to the MERCATOR FINANCE COPORATION (hereinafter
order of MERCATOR FINANCE CORPORATION at its office, the called Creditor), the full, faithful and prompt payment
principal sum of EIGHT HUNDRED FORTY-FOUR THOUSAND SIX and discharge of any and all indebtedness of
HUNDRED TWENTY-FIVE PESOS & 78/100 (P 844,625.78), EMBASSY FARMS, INC. (hereinafter called Principal)
Philippine currency, x x x, in installments as follows: to the Creditor.

September 16, 1982 - P154,267.87 xxx xxx xxx

 (3) The obligations hereunder are joint and several and A surety is bound by the same consideration that makes the contract
independent of the obligations of the Principal. A effective between the principal parties thereto.27 Having executed the
separate action or actions may be brought and suretyship agreement, there can be no dispute on the personal
prosecuted against the Surety whether or not the liability of petitioners.
action is also brought and prosecuted against the
Principal and whether or not the Principal be joined in Lastly, the parol evidence rule does not apply in this case.28 We held
any such action or actions. in Tarnate v. Court of Appeals,29 that where the parties admitted the
existence of the loans and the mortgage deeds and the fact of default
xxx xxx xxx on the due repayments but raised the contention that they were
misled by respondent bank to believe that the loans were long-term
The agreement was signed by petitioners on February 16, 1982. The accommodations, then the parties could not be allowed to introduce
promissory notes24 subsequently executed by petitioners and evidence of conditions allegedly agreed upon by them other than
Embassy Farms, restructuring their loan, likewise prove that those stipulated in the loan documents because when they reduced
petitioners are solidarily liable with Embassy Farms. their agreement in writing, it is presumed that they have made the
writing the only repository and memorial of truth, and whatever is
Petitioners further allege that there is an ambiguity in the wording of not found in the writing must be understood to have been waived and
the promissory note and claim that since it was Mercator who abandoned.
provided the form, then the ambiguity should be resolved against it.
IN VIEW WHEREOF, the petition is dismissed. Treble costs against
Courts can interpret a contract only if there is doubt in its the petitioners.
letter.25 But, an examination of the promissory note shows no such
ambiguity. Besides, assuming arguendo that there is an ambiguity, SO ORDERED.
Section 17 of the Negotiable Instruments Law states, viz:
G.R. No. 161756 December 16, 2005
SECTION 17. Construction where instrument is ambiguous. – Where
the language of the instrument is ambiguous or there are omissions VICTORIA J. ILANO represented by her Attorney-in-fact, MILO
therein, the following rules of construction apply: ANTONIO C. ILANO, Petitioners,
vs.
xxx xxx xxx HON. DOLORES L. ESPAÑOL, in her capacity as Executive Judge,
RTC of Imus, Cavite, Br. 90, and, AMELIA ALONZO, EDITH
(g) Where an instrument containing the word "I promise to pay" is CALILAP, DANILO CAMACLANG, ESTELA CAMACLANG, ALLAN
signed by two or more persons, they are deemed to be jointly and CAMACLANG, LENIZA REYES, EDWIN REYES, JANE BACAREL,
severally liable thereon. CHERRY CAMACLANG, FLORA CABRERA, ESTELITA LEGASPI,
CARMENCITA GONZALES, NEMIA CASTRO, GLORIA DOMINGUEZ,
ANNILYN C. SABALE and several JOHN DOES, Respondents.
Petitioners also insist that the promissory note does not convey their
true intent in executing the document.1âwphi1 The defense is
unavailing. Even if petitioners intended to sign the note merely as DECISION
officers of Embassy Farms, still this does not erase the fact that they
subsequently executed a continuing suretyship agreement. A surety CARPIO MORALES, J.:
is one who is solidarily liable with the principal.26 Petitioners cannot
claim that they did not personally receive any consideration for the The Court of Appeals having affirmed the dismissal by Branch 20 of
contract for well-entrenched is the rule that the consideration the Regional Trial Court (RTC) of Cavite at Imus, for lack of cause of
necessary to support a surety obligation need not pass directly to the action, Civil Case No. 2079-00, the complaint filed by herein
surety, a consideration moving to the principal alone being sufficient. petitioner Victoria J. Ilano for Revocation/Cancellation of Promissory
Notes and Bills of Exchange (Checks) with Damages and Prayer for CHERRY CAMACLANG, a copy of said Promissory Note is hereto
Preliminary Injunction or Temporary Restraining Order attached as Annex "B" hereof;
(TRO),1 against herein respondents 15 named defendants (and several
John Does), a recital of the pertinent allegations in the complaint, 8. That the Promissory Notes and blank checks were procured
quoted verbatim as follows, is in order: thru fraud and deceit. The consent of the [petitioner] in the
issuance of the two (2) aforementioned Promissory Notes was
xxx vitiated. Furthermore, the same were issued for want of
consideration, hence, the same should be cancelled, revoked or
3. That defendant AMELIA O. ALONZO, is a trusted employee of declared null and void;
[petitioner]. She has been with them for several years already, and
through the years, defendant ALONZO was able to gain the trust and 9. That as clearly shown heretofore, defendant ALONZO in collusion
confidence of [petitioner] and her family; with her co-defendants, ESTELA CAMACLANG, ALLAN CAMACLANG
and ESTELITA LEGASPI likewise was able to induce plaintiff to
4. That due to these trust and confidence reposed upon defendant sign several undated blank checks, among which are:
ALONZO by [petitioner], there were occasions when defendant
ALONZO was entrusted with [petitioner’s] METROBANK Check Book · Metrobank Check No. 0111544
containing either signed or unsigned blank checks, especially in
those times when [petitioner] left for the United States for medical · Metrobank Check No. 0111545
check-up;
· Metrobank Check No. 0111546
5. Sometime during the second week of December 1999, or
thereabouts, defendant ALONZO by means of deceit and abuse of · Metrobank Check No. 0111547
confidence succeeded in procuring Promissory Notes and signed
blank checks from [petitioner] who was then recuperating from
· Metrobank Check No. 0111515
illness;

all in the total amount of Php 3,031,600.00, copies of said checks are
6. That as stated, aside from the said blank checks, defendant
hereto attached as Annexes "C", "C-1", "C-2", "C-3" and "C-4",
ALONZO likewise succeeded in inducing[petitioner] to sign the
respectively;
Promissory Notes antedated June 8, 1999 in the amount of
PESOS: ONE MILLION FOUR HUNDRED TWENTY EIGHT
THOUSAND TWO HUNDRED SEVENTY TWO (Php 1,428,272.00) 10. That aside from the checks mentioned heretofore, defendant
payable to defendants EDITH CALILAP and DANILO ALONZO, confederated and conspired with the following co-
CALILAP, and another Promissory Noted dated March 1999 in the defendants, FLORA CABRERA, NEMIA CASTRO, EDITH CALILAP,
amount of PESOS: ONE MILLION (Php 1,000,000.00) payable to DANILO CALILAP, GLORIA DOMINGUEZ, CARMENCITA GONZALES
the same defendants EDITH CALILAP and DANILO CALILAP, copies and ANNILYN C. SABALE and took advantage of the signature of
of said Promissory Notes are hereto attached as Annexes "A" and "A- [petitioner] in said blank checks which were later on completed by
1" hereof; them indicated opposite their respective names and the respective
amount thereof, as follows:
7. That another Promissory Note antedated October 1, 1999 thru
the machination of defendant ALONZO, was signed by
[petitioner] in the amount of PESOS: THREE MILLION FORTY SIX NAME AMOUNT METROBANK
THOUSAND FOUR HUNDRED ONE (Php 3,046,401.00) excluding Check No.
interest, in favor of her co-defendants ESTELA CAMACLANG, ALLAN
CAMACLANG, LENIZA REYES, EDWIN REYES, JANE BACAREL and
 Furthermore, defendant ALONZO colluded and conspired with
Flora Cabrera Php 337,584.58 0111460 defendant NEMIA CASTO in procuring the signature of
[petitioner] in documents denominated as "Malayang Salaysay"
dated July 22, 1999 in the amount of PESOS: ONE HUNDRED
FIFTY THOUSAND (Php 150,000.00) and another "Malayang
Flora Cabrera 98,000.00 0111514 Salaysay" dated November 22, 1999 in the amount of PESOS: ONE
HUNDRED THOUSAND (Php 100,000.00) Annexes "D-11" and "D-12"
hereof;
Nemia Castro 100,000.00 0111542
11. That said defendants took undue advantage of the signature of
[petitioner] in the said blank checks and furthermore forged and
or falsified the signature of [petitioner] in other unsigned
Nemia Castro 150,000.00 0084078 checks and as it was made to appear that said [petitioner] is
under the obligation to pay them several amounts of money,
when in truth and in fact, said [petitioner] does not owe any of
Edith Calilap/Danilo Calilap 490,000.00 0111513 said defendant any single amount;

12. That the issuance of the aforementioned checks or

Promissory Notes or the aforementioned "Malayang Salaysay" to
Edith Calilap/Danilo Calilap 790,272.00 0111512
herein defendants were tainted with fraud and deceit, and
defendants conspired with one another to defraud herein
[petitioner] as the aforementioned documents were issued for
Edith Calilap/Danilo Calilap 1,220,000.00 0111462 want of consideration;

13. That the aforesaid defendants conspiring and confederating

Gloria Dominguez/ 1,046,040.00 0111543 together and helping one another committed acts of falsification
and defraudation which they should be held accountable under
law;
Carmencita Gonzales

14. The foregoing acts, and transactions, perpetrated by herein

defendants in all bad faith and malice, with malevolence and
Annilyn C. Sable 150,000.00 0085134 selfish intent are causing anxiety, tension, sleepless nights,
wounded feelings, and embarrassment to [petitioner] entitling her
to moral damages of at least in the amount of PESOS: FIVE
Annilyn C. Sable 250,000.00 0085149 HUNDRED THOUSAND (Php 500,000.00);

15. That to avoid repetition of similar acts and as a correction for the
public good, the defendants should be held liable to [petitioner] for
Annilyn C. Sable 186,000.00 0085112 exemplary damages in the sum of not less than the amount of
PESOS: TWO HUNDRED THOUSAND (Php 200,000.00);

Copy attached as Annexes "D", "D-1", "D-2", "D-3", "D-4", "D-5", "D- 16. That to protect the rights and interest of the [petitioner] in the
6", "D-7", "D-8", "D-9" and "D-10", respectively; illegal actuations of the defendants, she was forced to engage the
services of counsel for which she was obliged to pay the sum of
PESOS: ONE HUNDRED THOUSAND (Php 100,000.00) by way of C. . . . ERRED IN GIVING DUE COURSE TO THE MOTION TO
Attorney’s fees plus the amount of PESOS: THREE THOUSAND (Php DISMISS THAT CONTAINED A FAULTY NOTICE OF HEARING AS
3,000.00) per appearance in court; THE SAME IS MERELY ADDRESSED TO THE BRANCH CLERK OF
COURT.3
x x x (Emphasis and underscoring supplied)
In its Decision4 of March 21, 2003 affirming the dismissal order of the
The named defendants-herein respondents filed their respective trial court, the appellate court held that the elements of a cause of
Answers invoking, among other grounds for dismissal, lack of cause action are absent in the case:
of action, for while the checks subject of the complaint had been
issued on account and for value, some had been dishonored due to xxx
"ACCOUNT CLOSED;" and the allegations in the complaint are bare
and general. Such allegations in the complaint are only general averments of
fraud, deceit and bad faith. There were no allegations of
By Order2 dated October 12, 2000, the trial court dismissed facts showing that the acts complained of were done in the manner
petitioner’s complaint for failure "to allege the ultimate facts"-bases of alleged. The complaint did not clearly ascribe the extent of the
petitioners claim that her right was violated and that she suffered liability of each of [respondents]. Neither did it state any right or
damages thereby. cause of action on the part of [petitioner] to show that she is indeed
entitled to the relief prayed for. In the first place, the record shows
On appeal to the Court of Appeals, petitioner contended that the trial that subject checks which she sought to cancel or revoke had already
court: been dishonored and stamped "ACCOUNT CLOSED." In fact, there
were already criminal charges for violation of Batas Pambansa Blg.
A. . . . FAILED TO STATE CLEARLY AND DISTINCTLY THE FACTS 22 filed against [petitioner] previous to the filing of the civil case for
AND LAW ON WHICH THE APPEALED ORDER WAS BASED, revocation/cancellation. Such being the case, there was actually
THEREBY RENDERING SAID ORDER NULL AND VOID. nothing more to cancel or revoke. The subject checks could no longer
be negotiated. Thus, [petitioner’s] allegation that the [respondents]
were secretly negotiating with third persons for their delivery and/or
B. . . . ERRED IN HOLDING THAT THE COMPLAINT FAILED TO assignment, is untenable.
ALLEGE ULTIMATE FACTS ON WHICH [PETITIONER] RELIES ON
HER CLAIM THEREBY DISMISSING THE CASE FOR LACK OF
CAUSE OF ACTION.

In the second place, we find nothing on the face of the complaint to

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

x x x (Underscoring supplied)

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

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

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

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

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

A cause of action has three elements: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of
the defendant in violation of said legal right. In determining the presence of these elements, inquiry is confined to the four corners of the
complaint6 including its annexes, they being parts thereof.7 If these elements are absent, the complaint becomes vulnerable to a motion to dismiss
on the ground of failure to state a cause of action.8

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

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

While some of the allegations may lack particulars, and are in the form of conclusions of law, the elements of a cause of action are present. For
even if some are not stated with particularity, petitioner alleged 1) her legal right not to be bound by the instruments which were bereft of
consideration and to which her consent was vitiated; 2) the correlative obligation on the part of the defendants-respondents to respect said right;
and 3) the act of the defendants-respondents in procuring her signature on the instruments through "deceit," "abuse of confidence" "machination,"
"fraud," "falsification," "forgery," "defraudation," and "bad faith," and "with malice, malevolence and selfish intent."
Where the allegations of a complaint are vague, indefinite, or in the form of conclusions, its dismissal is not proper for the defendant may ask for
more particulars.9

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

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

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

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

(a) It is not dated; or

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

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

(d) Bears a seal; or

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

x x x (Emphasis supplied)

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

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

WHEREFORE, the petition is PARTLY GRANTED.

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

The trial court is DIRECTED to REINSTATE Civil Case No. 2079-00 to its docket and take further proceedings thereon only insofar as the
complaint seeks the revocation/cancellation of the subject promissory notes and damages.
Let the records of the case be then REMANDED to the trial court.

SO ORDERED.