Nego Cases 1
Nego Cases 1
Nego Cases 1
MICHAEL A. OSMEA, petitioner, vs. CITI AN!, N.A., ASSOCIATE" a#$ %RAN! TAN, respondents. "ECISION CALLE&O, SR., J.'
AN!
This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of the Decision[1] of the Court of Appeals in CA- !R! C" #o! 4$5%$ which affirmed in toto the Decision[%] of the Re&ional Trial Court of 'a(ati Cit), *ranch +,, in Civil Case #o! $1-5+,! As culled from the records, the appeal at -ench stemmed from the followin& factual -ac(drop. /n 0e-ruar) %%, 1$$1, the petitioner filed with the Re&ional Trial Court of 'a(ati an action for dama&es a&ainst the respondents Citi-an(, #!A! and Associated *an(! [+] The case was doc(eted as Civil Case #o! $1-5+,! The complaint materiall) alle&ed that, on or a-out Au&ust %5, 1$,$, the petitioner purchased from the Citi-an( 'ana&er1s Chec( #o! %2-215+21 3the chec( for -revit)4 in the amount of 51,545,222 pa)a-le to respondent 0ran( Tan6 the petitioner later received information that the aforesaid mana&er1s chec( was deposited with the respondent Associated *an(, Rosario *ranch, to the account of a certain 7ulius Di8on under 9avin&s Account #o! 1$,::6 the clearin& and;or pa)ment -) the respondents of the chec( to an improper part) and the a-sence of an) indorsement -) the pa)ee thereof, respondent 0ran( Tan, is a clear violation of the respondents1 o-li&ations under the #e&otia-le <nstruments =aw and standard -an(in& practice6 considerin& that the petitioner1s intended pa)ee for the chec(, the respondent 0ran( Tan, did not receive the value thereof, the petitioner demanded from the respondents Citi-an( and the Associated *an( the pa)ment or reim-ursement of the value of the chec(6 the respondents, however, o-stinatel) refused to heed his repeated demands for pa)ment and;or reim-ursement of the amount of the chec(6 hence, the petitioner was compelled to file this complaint pra)in& for the restitution of the amount of the chec(, and for moral dama&es and attorne)1s fees! /n 7une 1:, 1$$1, the petitioner, with leave of court, filed an Amended Complaint [4] impleadin& 0ran( Tan as an additional defendant! The petitioner averred therein that the chec( was purchased -) him as a demand loan to respondent 0ran( Tan! 9ince apparentl) respondent 0ran( Tan did not receive the proceeds of the chec(, the petitioner mi&ht have no ri&ht to collect from respondent 0ran( Tan and is conse>uentl) left with no recourse -ut to see( pa)ment or reim-ursement from either or -oth respondents Citi-an( and;or Associated *an(!
<n its answer to the amended complaint,[5] the respondent Associated *an( alle&ed that the petitioner was not the real part)-in-interest -ut respondent 0ran( Tan who was the pa)ee of the chec(! The respondent also maintained that the chec( was deposited to the account of respondent 0ran( Tan, a!(!a! 7ulius Di8on, throu&h its A)ala ?ead /ffice and was credited to the savin&s account of 7ulius Di8on6 the A)ala office confirmed with the Rosario *ranch that the account of 7ulius Di8on is also in realit) that of respondent 0ran( Tan6 it never committed an) violation of its duties and responsi-ilities as the proceeds of the chec( went and was credited to respondent 0ran( Tan, a!(!a! 7ulius Di8on6 the petitioner1s affirmative alle&ation of non-pa)ment to the pa)ee is self-servin&6 as such, the petitioner1s claim for dama&es is -aseless, unfounded and without le&al -asis! /n the other hand, the respondent Citi-an(, in answer to the amended complaint, [@] alle&ed that the pa)ment of the chec( was made -) it in due course and in the eAercise of its re&ular -an(in& function! 9ince a mana&er1s chec( is normall) purchased in favor of a third part), the identit) of whom in most cases is un(nown to the issuin& -an(, its onl) responsi-ilit) when pa)in& the chec( was to eAamine the &enuineness of the chec(! <t had no wa) of ascertainin& the &enuineness of the si&nature of the pa)ee respondent 0ran( Tan who was a total stran&er to it! <f at all, the petitioner had a cause of action onl) a&ainst the respondent Associated *an( which, as depositor) or collectin& -an(, was o-li&ed to ma(e sure that the chec( in >uestion was properl) endorsed -) the pa)ee! <t is not eApected of the respondent Citi-an( to ascertain the &enuineness of the indorsement of the pa)ee or even the lac( of indorsement -) him, most especiall) when the chec( was presented for pa)ment with the respondent Associated *an(1s &uaranteein& all prior indorsements or lac( thereof! /n 'arch 1@, 1$$%, the trial court declared 0ran( Tan in default for failure to file his answer![:] /n 7une 12, 1$$%, the pre-trial conference was concluded without the parties reachin& an amica-le settlement![,] ?ence, trial on the merits ensued! After evaluatin& the evidence adduced -) the parties, the trial court resolved that the preponderance of evidence supports the claim of the petitioner as a&ainst respondent 0ran( Tan onl) -ut not a&ainst respondents *an(s! ?ence, on 0e-ruar) %1, 1$$5, the trial court rendered Bud&ment in favor of the petitioner and a&ainst respondent 0ran( Tan! The complaints a&ainst the respondents *an(s were dismissed! The dispositive portion of the decision reads. C?DRD0/RD, Bud&ment is here-) rendered as follows . 1! /rderin& defendant 0ran( Tan to pa) plaintiff 'ichael /smeEa the amount of /ne 'illion 0ive ?undred 0ort)-0ive Thousand 351,545,222!224 5esos, 5hilippine Currenc), with interest thereon at 1%F per annum from 7anuar) 1$$2, date of eAtra-Budicial demand until the full amount is paid6 %! Dismissin& the complaint a&ainst defendants Citi-an( and Associated *an(6 +! Dismissin& the counter-claims and the cross-claim of Citi-an( a&ainst Associated *an( for lac( of merit!
Cith costs a&ainst defendant 0ran( Tan![$] The petitioner appealed the decision,[12] while respondent 0ran( Tan did not! /n #ovem-er %@, 1$$$, the appellate court rendered Bud&ment affirmin& in toto the decision of the trial court! A&&rieved, the petitioner assailed the decision in his petition at -ar! The petitioner contends that. <! RD95/#DD#T C/GRT DRRDD <# #/T ?/=D<# C<T<*A#H A#D A99/C<ATDD *A#H =<A*=D T/ 5DT<T</#DR 0/R T?D D#CA9?'D#T /0 C<T<*A#H 'A#A DR19 C?DCH #/! %2215+21 *I 7G=<G9 D<J/#!
<<! RD95/#DD#T C/GRT DRRDD <# ?/=D<# T?AT 0RA#H TA# A#D 7G=<G9 D<J/# ARD /#D A#D T?D 9A'D 5DR9/#! <<<! T?D <DD#T<TI /0 0RA#H TA# A9 7G=<G9 D<J/# CA9 H#/C# /#=I T/ A99/C<ATDD *A#H A#D CA9 #/T *<#D<# /# [11] 5DT<T</#DR! The petition is denied! The petitioner asserts that the chec( was pa)a-le to the order of respondent Tan! ?owever, the respondent Associated *an( ordered the chec( to -e deposited to the account of one 7ulius Di8on, althou&h the chec( was not endorsed -) respondent Tan! As 7ulius Di8on was not a holder of the chec( in due course, he could not validl) ne&otiate the chec(! The latter was not even a transferee in due course -ecause respondent Tan, the pa)ee, did not endorse the said chec(! The position of the respondent *an( is a(in to that of a -an( acceptin& a chec( for deposit wherein the si&nature of the pa)ee or endorsee has -een for&ed! The contention of the petitioner does not hold water! The fact of the matter is that the chec( was endorsed -) K7ulius Di8onL and was deposited and credited to 9avin&s Account #o! 1$,:: with the respondent Associated *an(! *ut the evidence on record shows that the said account was in the name of 0ran( Tan uan =en&, which is the Chinese name of the respondent 0ran( Tan, who also uses the alias K7ulius Di8on!L As correctl) ruled -) the Court of Appeals. /n the other hand, Associated satisfactoril) proved that Tan is usin& and is also (nown -) his alias of 7ulius Di8on! ?e si&ned the Agreement On Bills Purchased 3DAh! K1L4 and Continuing Suretyship Agreement 3DAh! K%4 -oth ac(nowled&ed on 7anuar) 1@, 1$,$, where his full name is stated to -e K0RA#H Tan uan =en& 3a(a 7G=<G9 D<J/#4!L DAh! K1L also refers to his KAccount #o! 9AM1$,::,L the ver) same account to which the 51,545,222!22 from the mana&er1s chec( was deposited! /smeEa countered that such use of an alias is ille&al! That is -ut an irrelevant casuistr) that does not detract from the fact that the pa)ee Tan as 7ulius Di8on has encashed and deposited the 51,545,222!22![1%] The respondent Associated *an( presented preponderant evidence to support its assertion that respondent Tan, the pa)ee of the chec(, did receive the proceeds of the
chec(! <t adduced evidence that K7ulius Di8onL and K0ran( TanL are one and the same person! Respondent Tan was a re&ular and trusted client or depositor of the respondent Associated *an( in its -ranch at Rosario, *inondo, 'anila! As such, respondent Tan was allowed to maintain two 3%4 savin&s accounts therein![1+] The first is 9avin&s Account #o! %21@1-+ under his name K0ran( Tan!L[14] The other is 9avin&s Account #o! 1$,:: under his assumed 0ilipino name K7ulius Di8on,L[15] to which account the chec( was deposited in the instant case! *oth witnesses for the respondent Associated *an(, /scar =una 3si&nature verifier4 and =u8 =a&rimas 3new accounts cler(4, testified that respondent Tan was usin& the alias K7ulius Di8on,L and that -oth names referred to one and the same person, as 0ran( Tan himself re&ularl) transacted -usiness at the -an( under -oth names! [1@] This is also evidenced -) the KA&reement on *ills 5urchasedL[1:] and the KContinuin& 9uret)ship A&reementL[1,] eAecuted -etween 0ran( Tan and the respondent Associated *an( on 7anuar) 1@, 1$,$! 0ran( Tan1s name appears in said document as K0RA#H TA# GA# =D# 3a!(!a! 7G=<G9 D<J/#4![1$] The same documentar) evidence also made reference to 9avin&s Account #o! 1$,::,[%2] the ver) same account to which the chec( was deposited and the entire 51,545,222 was credited! Additionall), Citi-an( Chec( #o! 2:5:1+[%1] which was presented -) the petitioner to prove one of the loans previousl) eAtended to respondent Tan showed that the endorsement of respondent Tan at the dorsal side thereof[%%] is stri(in&l) similar to the si&natures of K0ran( TanL appearin& in said a&reements! *) see(in& to recover the loan from respondent Tan, the petitioner admitted that respondent Tan received the amount of the chec(! This apprehension was not without an) -asis at all, for after the petitioner attempted to communicate with respondent Tan on 7anuar) or 0e-ruar) 1$$2, demandin& pa)ment for the loan, respondent Tan -ecame elusive of the petitioner![%+] As a matter of fact, respondent Tan did not file his answer to the amended complaint and was never seen or heard of -) the petitioner! [%4] *esides, if it were reall) a fact that respondent Tan did not receive the proceeds of the chec(, he could himself have initiated the instant complaint a&ainst respondents *an(s, or in the remotest possi-ilit), Boined the petitioner in pursuin& the instant claim! The petitioner initiall) sou&ht to recover from the respondents *an(s the amount of 51,545,222 correspondin& to the loan o-tained -) respondent Tan from him, o-viousl) -ecause respondent Tan had no intent to pa) the amount! The petitioner alle&es that the respondents *an(s were ne&li&ent in pa)in& the amount to a certain 7ulius Di8on, in relation to the pertinent provisions of the #e&otia-le <nstruments =aw, without the proper indorsement of the pa)ee, 0ran( Tan! The petitioner cites the rulin& of the Court in Associated Bank v. Court of Appeals ,[%5] in which we outlined the respective responsi-ilities and lia-ilities of a drawee -an(, such as the respondent Citi-an(, and a collectin& -an(, such as the defendant Associated *an(, in the event that pa)ment of a chec( to a person not desi&nated as the pa)ee, or who is not a holder in due course, had -een made! ?owever, the rulin& of the Court therein does not appl) to the present case for, as has -een ampl) demonstrated, the petitioner failed to esta-lish that the proceeds of the chec( was indeed wron&full) paid -) the respondents *an(s to a person other than the intended pa)ee! <n addition, the #e&otia-le <nstruments =aw was enacted for the purpose of facilitatin&, not hinderin& or hamperin& transactions in commercial paper! Thus, the said statute should not -e tampered with hapha8ardl) or li&htl)! #or should it
-e -rushed aside in order to meet the necessities in a sin&le case![%@] 'oreover, the chain of events followin& the purported deliver) of the chec( to respondent Tan renders even more du-ious the petitioner1s claim that respondent Tan had not received the proceeds of the chec(! Thus, the petitioner never -othered to find out from the said respondent whether the latter received the chec( from his messen&er! And if it were to -e supposed that respondent Tan did not receive the chec(, &iven that his need for the mone) was ur&ent, it strains credulit) that respondent Tan never even made an effort to &et in touch with the petitioner to inform the latter that he did not receive the chec( as a&reed upon, and to in>uire wh) the chec( had not -een delivered to him! The petitioner and respondent Tan saw each other durin& social &atherin&s -ut the) never too( the chance to discuss details on the loan or the chec(! [%:] Their actuations are not those to -e usuall) eApected of friends of 15 )ears who, as the petitioner would want to impress upon this Court, were transactin& -usiness on the -asis of confidence! [%,] <n fact, the first time that the petitioner attempted to communicate with respondent Tan was on 7anuar) or 0e-ruar) 1$$2, almost five or siA months after the eApected deliver) of the chec(, for the purpose of demandin& pa)ment for the loan! And it was onl) on that occasion that respondent Tan, as the petitioner insinuates, informed him that he 30ran( Tan4 had not received the proceeds of the chec( and refused to pa) his loan! [%$] All told, the petitioner1s alle&ation that respondent Tan did not receive the proceeds of the chec([+2] is -elied -) the evidence on record and attendant circumstances! Conversel), the records would disclose that even the petitioner himself had mis&ivin&s a-out the truthfulness of his alle&ation that respondent Tan did not receive the amount of the chec(! This is made implicit -) respondent Tan1s -ein& made a part)defendant to the case when the petitioner filed his amended complaint! <n his memorandum in the case -elow, the petitioner averred inter alia that. The amount of 51,545,222!22 is sou&ht to -e recovered from. 1! 0ran( Tan for his failure to pa) the loan eAtended -) plaintiff6 and %! Associated *an( and Citi-an( for havin& accepted for deposit and;or paid the Citi-an( mana&er1s chec( despite the a-sence of an) si&nature;endorsement -) the named pa)ee, 0ran( Tan! The claim of the petitioner that respondent Tan1s use of an alias is ille&al does not detract a whit from the fact that respondent Tan had -een credited -) the respondent Associated *an( for the amount of the chec(! Respondent Tan did not appeal the decision of the RTC! IN LIGHT O% ALL THE %OREGOING, the petition is DD#<DD! The Decision dated #ovem-er %@, 1$$$ of the Court of Appeals in CA- !R! C" #o! 4$5%$ is here-) A00<R'DD! Costs a&ainst the petitioner! SO OR"ERE". Quisumbing, Acting Chairman!, Austria"#artine$, and %inga, &&., concur. Puno, Chairman!, &., on leave!
5
0I E10RESS CAR" COR0ORATION, petitioner, vs. CO2RT O% A00EALS a#$ RICAR"O &. MARASIGAN, respondents. "ECISION !A02NAN, J.' The >uestion -efore this Court is whether private respondent can recover moral dama&es arisin& from the cancellation of his credit card -) petitioner credit card corporation! The facts of the case are as stated in the decision of the respondent court,[1] to wit. The case arose from the dishonor of the credit card of the plaintiff Att)! Ricardo 7! 'arasi&an -) Cafe Adriatico, a -usiness esta-lishment accredited with the defendant-appellant *5< DApress Card Corporation 3*DCC for -revit)4 on Decem-er ,, 1$,$ when the plaintiff entertained some &uests thereat! The records of this case show that plaintiff, who is a law)er -) profession was a complimentar) mem-er of *DCC from 0e-ruar) 1$,, to 0e-ruar) 1$,$ and was issued Credit Card #o! 122-21%-55+4 with a credit limit of 5+,222!22 and with a monthl) -illin& ever) %:th of the month 3DAh! #4, su-Bect to the terms and conditions stipulated in the contract 3DAh! 1--4! ?is mem-ership was renewed for another )ear or until 0e-ruar) 1$$2 and the credit limit was increased to 55,222!22 3DAh! A4! The plaintiff oftentimes eAceeded his credit limits 3DAhs! <, <-1 to <-1%4 -ut this was never ta(en a&ainst him -) the defendant and even his mode of pa)in& his monthl) -ills in chec( was tolerated! Their contractual relations went on smoothl) until his statement of account for /cto-er, 1$,$ amountin& to 5,,$,:!,4 was not paid in due time! The plaintiff admitted havin& inadvertentl) failed to pa) his account for the said month -ecause he was in Nue8on province attendin& to some professional and personal commitments! ?e was informed -) his secretar) that defendant was demandin& immediate pa)ment of his outstandin& account, was re>uirin& him to issue a chec( for515,222!22 which would include his future -ills, and was threatenin& to suspend his credit card! 5laintiff issued 0ar Dast *an( and Trust Co! Chec( #o! 4$4@:5 in the amount of 515,222!22, postdated Decem-er 15, 1$,$ which was received on #ovem-er %+, 1$,$ -) Tess =oren8o, an emplo)ee of the defendant 3DAhs! 7 and 7-14, who in turn &ave the said chec( to 7en& An&eles, a co-emplo)ee who handles the account of the plaintiff! The chec( remained in the custod) of 7en& An&eles! 'r! Ro-erto 'ani>ui8, head of the collection department of defendant was formall) informed of the postdated chec( a-out a wee( later! /n #ovem-er %,, 1$,$, defendant served plaintiff a letter -) ordinar) mail informin& him of
the temporar) suspension of the privile&es of his credit card and the inclusion of his account num-er in their Caution =ist! ?e was also told to refrain from further use of his credit card to avoid an) inconvenience;em-arrassment and that unless he settles his outstandin& account with the defendant within 5 da)s from receipt of the letter, his mem-ership will -e permanentl) cancelled 3DAh! +4! There is no showin& that the plaintiff received this letter -efore Decem-er ,, 1$,$! Confident that he had settled his account with the issuance of the postdated chec(, plaintiff invited some &uests on Decem-er ,, 1$,$ and entertained them at CafO Adriatico! Chen he presented his credit card to CafO Adriatico for the -ill amountin& to 5:+5!+%, said card was dishonored! /ne of his &uests, 'ar) Dllen Rin&ler, paid the -ill -) usin& her own credit card, a Gni-an(ard 3DAhs! ', '-1 and '-%4! <n a letter addressed to the defendant dated Decem-er 1%, 1$,$, plaintiff re>uested that he -e sent the eAact -illin& due him as of Decem-er 15, 1$,$, to withhold the deposit of his postdated chec( and that said chec( -e returned to him -ecause he had alread) instructed his -an( to stop the pa)ment thereof as the defendant violated their a&reement that the plaintiff issue the chec( to the defendant to cover his account amountin& to onl) 5,,$,:!,4 on the condition that the defendant will not suspend the effectivit) of the card 3DAh! D4! A letter dated Decem-er 1@, 1$,$ was sent -) the plaintiff to the mana&er of 0D*TC, Ramada *ranch, 'anila re>uestin& the -an( to stop the pa)ment of the chec( 3DAhs! D, D-14! #o repl) was received -) plaintiff from the defendant to his letter dated Decem-er 1%, 1$,$! 5laintiff sent defendant another letter dated 'arch 1%, 1$$2 remindin& the latter that he had lon& rescinded and cancelled whatever arran&ement he entered into with defendant and re>uestin& for his correct -illin&, less the improper char&es and penalties, and for an eAplanation within five 354 da)s from receipt thereof wh) his card was dishonored on Decem-er ,, 1$,$ despite assurance to the contrar) -) defendantPs personnel-in-char&e, otherwise the necessar) court action shall -e filed to hold defendant responsi-le for the humiliation and em-arrassment suffered -) him 3DAh! 04! 5laintiff alle&ed further that after a few da)s, a certain Att)! Al-ano, representin& himself to -e wor(in& with office of Att)! =ope8, called him in>uirin& as to how the matter can -e threshed out eAtraBudiciall) -ut the latter said that such is a serious matter which cannot -e discussed over the phone! The defendant served its final demand to the plaintiff dated 'arch %1, 1$$2 re>uirin& him to pa) in full his overdue account, includin& stipulated fees and char&es, within 5 da)s from receipt thereof or face court action also to replace the postdated chec( with cash within the same period or face criminal suit for violation of the *ouncin& Chec( =aw 3DAh! ;DAh! 1+4! The plaintiff, in a repl) letter dated April 5, 1$$2 3DAh! ?4, demanded defendantPs compliance with his re>uest in his first letter dated 'arch 1%, 1$$2 within three 3+4 da)s from receipt, otherwise the plaintiff will file a case a&ainst them, A A A![%] Thus, on 'a) :, 1$$2 private respondent filed a complaint for dama&es a&ainst petitioner -efore the Re&ional Trial Court of 'a(ati, *ranch 152, doc(eted as Civil Case #o! $2-11:4!
After trial, the trial court ruled for private respondent, findin& that herein petitioner a-used its ri&ht in contravention of Article 1$ of the Civil Code! [+] The dispositive portion of the decision reads. Cherefore, Bud&ment is here-) rendered orderin& the defendant to pa) plaintiff the followin&. 1! 5122,222!22 as moral dama&es6 %! 552,222!22 as eAemplar) dama&es6 and +! 5%2,222!22 -) wa) of attorne)Ps fees! /n the other hand, plaintiff is ordered to pa) defendant its outstandin& o-li&ation in the amount of 514,4+$!41, amount due as of Decem-er 15, 1$,$![4] The trial courtPs rulin& was -ased on its findin&s and conclusions, to wit. There is no >uestion that plaintiff had -een in default in the pa)ment of his -illin&s for more than two months, promptin& defendant to call him and reminded him of his o-li&ation! Gna-le to personall) tal( with him, this Court is convinced that somehow one or another emplo)ee of defendant called him up more than once! ?owever, while it is true that, as indicated in the terms and conditions of the application for *5< credit card, upon failure of the cardholder to pa) his outstandin& o-li&ation for more than thirt) 3+24 da)s, the defendant can automaticall) suspend or cancel the credit card, that reserved ri&ht should not have -een a-used, as it was in fact a-used, in plaintiffPs case! Chat is more peculiar here is that there have -een admitted communications -etween plaintiff and defendant prior to the suspension or cancellation of plaintiffPs credit card and his inclusion in the caution list! ?owever, nowhere in an) of these communications was there ever a hint &iven to plaintiff that his card had alread) -een suspended or cancelled! <n fact, the Court o-served that while defendant was tr)in& its -est to persuade plaintiff to update its account and pa) its o-li&ation, it had alread) ta(en steps to suspend;cancel plaintiffPs card and include him in the caution list! Chile the Court admires defendantPs diplomac) in dealin& with its clients, it cannot help -ut frown upon the -ac(handed wa) defendant dealt with plaintiffPs case! 0or despite Tess =oren8oPs denial, there is reason to -elieve that plaintiff was indeed assured -) defendant of the continued honorin& of his credit card so lon& as he pa)s his o-li&ation of 515,222!22! Corst, upon receipt of the postdated chec(, defendant (ept the same until a few da)s -efore it -ecame due and said chec( was presented to the head of the collection department, 'r! 'ani>ui8, to ta(e steps thereon, resultin& to the em-arrassin& situation plaintiff found himself in on Decem-er ,, 1$,$! 'oreover, 'r! 'ani>ui8 himself admitted that his re>uest for plaintiff to replace the chec( with cash was not -ecause it was a postdated chec( -ut merel) to tall) the pa)ment with the account due! =i(ewise, the Court is not persuaded -) the sweepin& denials made -) Tess =oren8o and her claim that her onl) participation was to receive the su-Bect
$
chec(! ?er immediate superior, 'r! 'ani>ui8 testified that he had instructed =oren8o to communicate with plaintiff once or twice to re>uest the latter to replace the >uestioned chec( with cash, thus &ivin& support to the testimon) of plaintiffPs witness, Dolores Nui8on, that it was one Tess =oren8o who she had tal(ed over the phone re&ardin& plaintiffPs account and plaintiffPs own statement that it was this woman who assured him that his card has not )et -een and will not -e cancelled;suspended if he would pa) defendant the sum of 515,222!22! #ow, on the issue of whether or not upon receipt of the su-Bect chec(, defendant had a&reed that the card shall remain effective, the Court ta(es note of the followin&. 1! An emplo)ee of defendant corporation unconditionall) accepted the su-Bect chec( upon its deliver), despite its -ein& a postdated one6 and the amount did not tall) with plaintiffPs o-li&ation6 %! Defendant did not den) nor controvert plaintiffPs claim that all his pa)ments were made in chec(s6 +! DefendantPs main witness, 'r! 'ani>ui8, cate&oricall) stated that the re>uest for plaintiff to replace his postdated chec( with cash was merel) for the purpose of tall)in& plaintiffPs outstandin& o-li&ation with his pa)ment and not to >uestion the postdated chec(6 4! That the card was suspended almost a wee( after receipt of the postdated chec(6 5! That despite the man) instances that defendant could have informed plaintiff over the phone of the cancellation or suspension of his credit card, it did not do so, which could have prevented the incident of Decem-er ,, 1$,$, the notice alle&edl) sent thru ordinar) mail is not onl) unrelia-le -ut ta(es a lon& time! 9uch action as suspension of credit card must -e immediatel) rela)ed to the person affected so as to avoid em-arrassin& situations! @! And that the postdated chec( was deposited on Decem-er %2, 1$,$! <n view of the fore&oin& o-servations, it is needless to sa) that there was indeed an arran&ement -etween plaintiff and the defendant, as can -e inferred from the acts of the defendantPs emplo)ees, that the su-Bect credit card is still &ood and could still -e used -) the plaintiff as it would -e honored -) the dul) accredited esta-lishment of defendant![5] #ot satisfied with the Re&ional Trial CourtPs decision, petitioner appealed to the Court of Appeals, which, in a decision promul&ated on 'arch $, 1$$5 ruled in its dispositive portion. C?DRD0/RD, premises considered, the decision appealed from is here-) A00<R'DD with the '/D<0<CAT</# that the defendant-appellant shall pa) the plaintiff-appellee the followin&. 552,222!22 as moral dama&es6 5%5,222!22 as
12
eAemplar) dama&es6 and 512,222!22 -) wa) of attorne)Ps fees! 9/ /RDDRDD![@] ?ence, the present petition on the followin& assi&nment of errors. I T?D =/CDR C/GRT DRRDD <# DDC=AR<# T?AT T?DRD CA9 <#DDDD A# A RDD'D#T /R ARRA# D'D#T D#TDRDD <#T/ *DTCDD# T?D 5ART<D9 C?DRD<# T?D DD0D#DA#T RDNG<RDD T?D 5=A<#T<00 T/ <99GD A 5/9TDATDD C?DCH <# <T9 0A"/R <# T?D A'/G#T /0 515,222!22 A9 5AI'D#T 0/R ?<9 /"DRDGD ACC/G#T9, C<T? T?D C/#D<T</# T?AT T?D 5=A<#T<00P9 CRDD<T CARD C<== #/T *D 9G95D#DDD /R CA#CD==DD! II T?D =/CDR C/GRT DRRDD <# ?/=D<# DD0D#DA#T =<A*=D 0/R DA'A D9 A#D ATT/R#DIP9 0DD9 AR<9<# /GT 0R/' T?D D<9?/#/R /0 T?D 5=A<#T<00P9 CRDD<T CARD![:] Ce find the petition meritorious! The first issue to -e resolved is whether petitioner had the ri&ht to suspend the credit card of the private respondent! Gnder the terms and conditions of the credit card, si&ned -) the private respondent, an) card with outstandin& -alances after thirt) 3+24 da)s from ori&inal -illin&;statement shall automaticall) -e suspended, thus. 5AI'D#T /0 C?AR D9 - *DCC shall furnish the Cardholder a monthl) statement of account made throu&h the use of the CARD and the Cardholder a&rees that all char&es made throu&h the use of the CARD shall -e paid -) the Cardholder on or -efore the last da) for pa)ments, which is twent) 3%24 da)s from the date of the said statement of account, and such pa)ment due date ma) -e chan&ed to an earlier date if the CardholderPs account is considered overdue and;or with -alances in eAcess of the approved credit limit6 or to such other date as ma) -e deemed proper -) the CARD issuer with notice to the Cardholder on the same monthl) statement of account! <f the last da) for pa)ment falls on a 9aturda), 9unda) or ?olida), the last da) for pa)ment automaticall) -ecomes the last wor(in& da) prior to said pa)ment date! ?owever, notwithstandin& the a-sence or lac( of proof of service of the statement of char&es to the Cardholder, the latter shall pa) an) or all char&es made throu&h the use of the CARD within thirt) 3+24 da)s from the date or dates thereof! 0ailure of Cardholder to pa) an) and all char&es made throu&h the CARD within the pa)ment period as stated in the statement of char&es or within thirt) 3+24 da)s from actual date or dates whichever occur earlier, shall render him in default without the necessit) of demand from *DCC, which the Cardholder eApressl) waives! These char&es or -alance thereof remainin& unpaid after the pa)ment due date indicated on the monthl) statement of account shall -ear interest at the rate of +F per month and
11
an additional penalt) fee e>uivalent to another +F of the amount due for ever) month or a fraction of a monthPs dela)! 5R/"<DDD, that if there occurs an) chan&e on the prevailin& mar(et rates! *DCC shall have the option to adBust the rate of interest and;or penalt) fee due on the outstandin& o-li&ation with prior notice to the Cardholder! AAA AAA AAA An) CARD with outstandin& -alances unpaid after thirt) 3+24 da)s from ori&inal -illin&;statement date shall automaticall) -e suspended, and those with accounts unpaid after siAt) 3@24 da)s from said ori&inal -illin&;statement date shall automaticall) -e cancelled, without preBudice to *DCCPs ri&ht to suspend or cancel an) CARD an) time and for whatever reason! <n case of default in his o-li&ation as provided for in the precedin& para&raph, Cardholder shall surrender his CARD to *DCC and shall in addition to the interest and penalt) char&es aforementioned, pa) the followin& li>uidated dama&es and;or fees 3a4 a collection fee of %5F of the amount due if the account is referred to a collection a&enc) or attorne)6 3-4 a service fee of 5122 for ever) dishonored chec( issued -) the Cardholder in pa)ment of his account, with preBudice, however, to *DCCPs ri&ht of considerin& CardholderPs o-li&ation unpaid, ca-le cost for demandin& pa)ment or advisin& cancellation of mem-ership shall also -e for CardholderPs account6 and 3c4 a final fee e>uivalent to %5F of the unpaid -alance, eAclusive of liti&ation eApenses and Budicial costs, if the pa)ment of the account is enforced throu&h court action![,] The afore>uoted provision of the credit card cannot -e an) clearer! *) his own admission, private respondent made no pa)ment within thirt) da)s for his ori&inal -illin&;statement dated %: 9eptem-er 1$,$! #either did he ma(e pa)ment for his ori&inal -illin&;statement dated %: /cto-er 1$,$! Conse>uentl), as earl) as %, /cto-er 1$,$, thirt) da)s from the non-pa)ment of his -illin& dated %: 9eptem-er 1$,$, petitioner corporation could automaticall) suspend his credit card! The neAt issue is whether prior to the suspension of private respondentPs credit card on %, #ovem-er 1$,$, the parties entered into an a&reement where-) the card could still -e used and would -e dul) honored -) dul) accredited esta-lisments! Ce a&ree with the findin&s of the respondent court, that there was an arran&ement -etween the parties, wherein the petitioner re>uired the private respondent to issue a chec( worth 515,222 as pa)ment for the latterPs -illin&s! ?owever, we find that the private respondent was not a-le to compl) with his o-li&ation! As the testimon) of private respondent himself -ears out, the a&reement was for the immediate pa)ment of the outstandin& account. N <n said statement of account that )ou are supposed to pa) the 5,,$:4!,4 the char&e of interest and penalties, did )ou note thatQ A Ies, sir! < noted the date! N ChenQ
1%
A Chen < returned from the Nue8on province, sir! N ChenQ A < thin( #ovem-er %%, sir! N 9o that -efore )ou used a&ain the credit card )ou were not a-le to pa) immediatel) this 5,,$,:!,4 in cashQ A < paid 515,222!22, sir! N ') >uestion 'r! Citness is, did )ou pa) this 5,,$,:!,4 in char&e of interest and penalties immediatel) in cashQ A <n cash no, -ut in chec(, sir! N Iou said that )ou noted the word Rimmediatel)R in -old letters in )our statement of account, wh) did )ou not pa) immediatel)Q A *ecause < received that late, sir! N Ies, on #ovem-er %% when )ou received from the secretar) of the defendant tellin& )ou to pa) the principal amount of 5,,$,:!,4, wh) did )ou not pa)Q A There was a communication -etween me and the defendant, < was re>uired to pa) 5,,222!22 -ut < paid in chec( for 515,222!22, sir! N Do )ou have an) evidence to show that the defendant re>uired )ou to pa) in chec( for 515,222!22Q A Ies, sir! N Chere is itQ A <t was -) telecommunication, sir! N 9o there is no written communication -etween )ou and the defendantQ A There was none, sir! N There is no written a&reement which sa)s that 5,,$,:!,4 should -e paid for 515,222!22 in chec(, there is noneQ A Ies, no written a&reement, sir! N And )ou as a law)er )ou (now that a chec( is not considered as cash speciall) when it is postdated sent to the defendantQ A That is correct, sir! Clearl), the purpose of the arran&ement -etween the parties on #ovem-er %%, 1$,$, was for the immediate pa)ment of the private respondentPs outstandin& account, in order that his credit card would not -e suspended! As a&reed upon -) the parties, on the followin& da), private respondent did issue a chec( for 515,222! ?owever, the chec( was postdated 15 Decem-er 1$,$! 9ettled is the doctrine that a chec( is onl) a su-stitute for mone) and not mone), the deliver) of such
1+
an instrument does not, -) itself operate as pa)ment! [$] This is especiall) true in the case of a postdated chec(! Thus, the issuance -) the private respondent of the postdated chec( was not effective pa)ment! <t did not compl) with his o-li&ation under the arran&ement with 'iss =oren8o! 5etitioner corporation was therefore Bustified in suspendin& his credit card! 0inall), we find no le&al and factual -asis for private respondentPs assertion that in cancelin& the credit card of the private respondent, petitioner a-used its ri&ht under the terms and conditions of the contract! To find the eAistence of an a-use of ri&ht under Article 1$ the followin& elements must -e present. 314 There is a le&al ri&ht or dut)6 3%4 which is eAercised in -ad faith6 3+4 for the sole intent of preBudicin& or inBurin& another![12] Time and a&ain this Court has held that &ood faith is presumed and the -urden of provin& -ad faith is on the part) alle&in& it! [11] This private respondent failed to do! <n fact, the action of the petitioner -elies the eAistence of -ad faith! As earl) as %, /cto-er 1$,$, petitioner could have suspended private respondentPs card outri&ht! <nstead, petitioner allowed private respondent to use his card for several wee(s! 5etitioner had even notified private respondent of the impendin& suspension of his credit card and made special accommodations for him for settlin& his outstandin& account! As such, petitioner cannot -e said to have capriciousl) and ar-itraril) canceled the private respondentPs credit card! Ce do not dispute the findin&s of the lower court that private respondent suffered dama&es as a result of the cancellation of his credit card! ?owever, there is a material distinction -etween dama&es and inBur)! <nBur) is the ille&al invasion of a le&al ri&ht6 dama&e is the loss, hurt, or harm which results from the inBur)6 and dama&es are the recompense or compensation awarded for the dama&e suffered! Thus, there can -e dama&e without inBur) in those instances in which the loss or harm was not the result of a violation of a le&al dut)! <n such cases, the conse>uences must -e -orne -) the inBured person alone, the law affords no remed) for dama&es resultin& from an act which does not amount to a le&al inBur) or wron&! These situations are often called damnum abs'ue in(uria.[1%] <n other words, in order that a plaintiff ma) maintain an action for the inBuries of which he complains, he must esta-lish that such inBuries resulted from a -reach of dut) which the defendant owed to the plaintiff - a concurrence of inBur) to the plaintiff and le&al responsi-ilit) -) the person causin& it! The underl)in& -asis for the award of tort dama&es is the premise that an individual was inBured in contemplation of law! Thus, there must first -e a -reach of some dut) and the imposition of lia-ilit) for that -reach -efore dama&es ma) -e awarded6[1+] and the -reach of such dut) should -e the proAimate cause of the inBur)! Ce therefore disa&ree with the rulin& of the respondent court that the dishonor of the credit card of the private respondent -) CafO Adriatico is attri-uta-le to petitioner for its willful or &ross ne&lect to inform the private respondent of the suspension of his credit card, the unfortunate conse>uence of which -rou&ht social humiliation and em-arrassment to the private respondent![14]
14
<t was petitionerPs failure to settle his o-li&ation which caused the suspension of his credit card and su-se>uent dishonor at CafO Adriatico! ?e can not now pass the -lame to the petitioner for not notif)in& him of the suspension of his card! As >uoted earlier, the application contained the stipulation that the petitioner could automaticall) suspend a card whose -illin& has not -een paid for more than thirt) da)s! #owhere is it stated in the terms and conditions of the application that there is a need of notice -efore suspension ma) -e effected as private respondent claims![15] This notwithstandin&, on #ovem-er %,, 1$,$, the da) of the suspension of private respondentPs card, petitioner sent a letter -) ordinar) mail notif)in& private respondent that his card had -een temporaril) suspended! Gnder the Rules on Dvidence, there is a disputa-le presumption that letters dul) directed and mailed were received on the re&ular course of mail![1@] Aside from the private respondentPs -are denial, he failed to present evidence to re-ut the presumption that he received said notice! <n fact upon cross eAamination, private respondent admitted that he did received the letter notif)in& him of the cancellation. N #ow )ou were sa)in& that there was a first letter sent to )ou -) the defendantQ A Iour letter, sir! N Cas that the first letter that )ou receivedQ A Ies, sir! N <s it that there was a communication first -etween )ou and the defendantQ A There was none, sir! < received a cancellation notice -ut that was after #ovem-er %:![1:] As it was private respondentPs own ne&li&ence which was the proAimate cause of his em-arrassin& and humiliatin& eAperience, we find the award of dama&es -) the respondent court clearl) unBustified! Ce ta(e note of the fact that private respondent has not )et paid his outstandin& account with petitioner! IN 3IE4 O% THE %OREGOING, the decision of the Court of Appeals orderin& petitioner to pa) private respondent 5122,222!22 as moral dama&es, 552,222!22 as eAemplar) dama&es and5%2,222!22 as attorne)Ps fees, is 9DT A9<DD! 5rivate respondent is D<RDCTDD to pa) his outstandin& o-li&ation with the petitioner in the amount of 514,4+$!41! SO OR"ERE". )arvasa, C.&., Chairman!, and *omero, &., concur. Purisima, &., no part, -ein& si&nator) to CA decision.
15
Ro-a# Ca,ho56c 67ho+ o8 Ma5o5o7, I#c. 97. I#,*r-*$6a,* A++*55a,* Co:r,, G.R. No. 72110, 1)1 SCRA 411 , No9*-.*r 1(, 1))0 G.R. No. 72110. No9*-.*r 1(, 1))0.; ROMAN CATHOLIC ISHO0 O% MALOLOS, INC., +*,6,6o#*r, 97. INTERME"IATE A00ELLATE CO2RT, a#$ RO ES<%RANCISCO REALT= AN" "E3ELO0MENT COR0ORATION, r*7+o#$*#,7. 5DT<T</# for certiorari to review the decision of the Court of Appeals! The facts are stated in the opinion of the Court! Rodri&o =aw /ffice for petitioner! Antonio 5! *arredo and #apoleon '! 'alinas for private respondent! 9AR'<D#T/, 7!. This is a petition for review on certiorari which see(s the reversal and settin& aside of the decision1 of the Court of Appeals,% the dispositive portion of which reads. C?DRD0/RD, the decision appealed from is here-) reversed % AC- !R! C" #o! @$@%@, Ro-es-0rancisco Realt) S Development Corporation vs! Roman Catholic *ishop of 'alolos, <nc! and set aside and another one entered for the plaintiff orderin& the defendant-appellee Roman Catholic *ishop of 'alolos, <nc! to accept the -alance of 51%4,222!22 -ein& paid -) plaintiff-appellant and thereafter to eAecute in favor of Ro-es-0rancisco Realt) Corporation a re&istera-le Deed of A-solute 9ale over %2,@55 s>uare meters portion of that parcel of land situated in 9an 7ose del 'onte, *ulacan descri-ed in /CT #o! 5:5 3now Transfer Certificates of Title #os! T1@$4$+, 1@$4$4, 1@$4$5 and 1@$4$@4 of the Re&ister of Deeds of *ulacan! <n case of refusal of the defendant to eAecute the Deed of 0inal 9ale, the cler( of court is directed to eAecute the said document! Cithout pronouncement as to dama&es and attorne)1s fees! Costs a&ainst the defendant-appellee!+ The case at -ar arose from a complaint filed -) the private respondent, then plaintiff, a&ainst the petitioner, then defendant, in the Court of 0irst <nstance 3now Re&ional Trial Court4 of *ulacan, at 9ta! 'aria, *ulacan,4 for specific performance with dama&es, -ased on a contract5 eAecuted on 7ul) :, 1$:1! The propert) su-Bect matter of the contract consists of a %2,@55 s>!m!-portion, out of the +2,@55 s>!m! total area, of a parcel of land covered -) /ri&inal Certificate of Title #o! 5:5 of the 5rovince of *ulacan, issued and re&istered in the name of the petitioner which it sold to the private respondent for and in consideration of 51%+,$+2!22! The cruA of the instant controvers) lies in the compliance or non-compliance -) the private respondent with the provision for pa)ment to the petitioner of the principal
1@
-alance of 5122,222!22 and the accrued interest of 5%4,222!22 within the &race period! A chronolo&ical narration of the antecedent facts is as follows. /n 7ul) :, 1$:1, the su-Bect contract over the land in >uestion was eAecuted -etween the petitioner as vendor and the private respondent throu&h its then president, 'r! Carlos 0! Ro-es, as vendee, stipulatin& for a downpa)ment of 5%+,$+2!22 and the -alance of 5122,222!22 plus 1%F interest per annum to -e paid within four 344 )ears from eAecution of the contract, that is, on or -efore 7ul) :, 1$:5! The contract li(ewise provides for cancellation, forfeiture of previous pa)ments, and reconve)ance of the land in >uestion in case the private respondent would fail to complete pa)ment within the said period! /n 'arch 1%, 1$:+, the private respondent, throu&h its new president, Att)! Adalia 0rancisco, addressed a letter@ to 0ather "as>ue8, parish priest of 9an 7ose Del 'onte, *ulacan, re>uestin& to -e furnished with a cop) of the su-Bect contract and the supportin& documents! /n 7ul) 1:, 1$:5, admittedl) after the eApiration of the stipulated period for pa)ment, the same Att)! 0rancisco wrote the petitioner a formal re>uest: that her compan) -e allowed to pa) the principal amount of 5122,222!22 in three 3+4 e>ual installments of siA 3@4 months each with the first installment and the accrued interest of 5%4,222!22 to -e paid immediatel) upon approval of the said re>uest! /n 7ul) %$, 1$:5, the petitioner, throu&h its counsel, Att)! Carmelo 0ernande8, formall) denied the said re>uest of the private respondent, -ut &ranted the latter a &race period of five 354 da)s from the receipt of the denial, to pa) the total -alance of 51%4,222!22, otherwise, the provisions of the contract re&ardin& cancellation, forfeiture, and reconve)ance would -e implemented! /n Au&ust 4, 1$:5, the private respondent, throu&h its president, Att)! 0rancisco, wrote$ the counsel of the petitioner re>uestin& an eAtension of +2 da)s from said date to full) settle its account! The counsel for the petitioner, Att)! 0ernande8, received the said letter on the same da)! Gpon consultation with the petitioner in 'alolos, *ulacan, Att)! 0ernande8, as instructed, wrote the private respondent a letter12 dated Au&ust! Conse>uentl), Att)! 0rancisco, the private respondent1s president, wrote a letter11 dated Au&ust %%, 1$:5, directl) addressed to the petitioner, protestin& the alle&ed refusal of the latter to accept tender of pa)ment purportedl) made -) the former on Au&ust 5, 1$:5, the last da) of the &race period! <n the same letter of Au&ust %%, 1$:5, received on the followin& da) -) the petitioner, the private respondent demanded the eAecution of a deed of a-solute sale over the land in >uestion and after which it would pa) its account in full, otherwise, Budicial action would -e resorted to! /n Au&ust %:, 1$:5, the petitioner1s counsel, Att)! 0ernande8, wrote a repl)1% to the private respondent statin& the refusal of his client to eAecute the deed of a-solute sale due to its 3private respondent1s4 failure to pa) its full o-li&ation! 'oreover, the petitioner denied that the private respondent had made an) tender of pa)ment whatsoever within the
1:
&race period! <n view of this alle&ed -reach of contract, the petitioner cancelled the contract and considered all previous pa)ments forfeited and the land as ipso facto reconve)ed! 0rom a perusal of the fore&oin& facts, we find that -oth the contendin& parties have conflictin& versions on the main >uestion of tender of pa)ment! The trial court, in its ratiocination, preferred not to &ive credence to the evidence presented -) the private respondent! Accordin& to the trial court. A A A Chat made Att)! 0rancisco suddenl) decide to pa) plaintiff1s o-li&ation on Au&ust 5, 1$:5, &o to defendant1s office at 'alolos, and there tender her pa)ment, when her re>uest of Au&ust 4, 1$:5 had not )et -een acted upon until Au&ust :, 1$:5Q <f Att)! 0rancisco had decided to pa) the o-li&ation and had availa-le funds for the purpose on Au&ust 5, 1$:5, then there would have -een no need for her to write defendant on Au&ust 4, 1$:5 to re>uest an eAtension of time! <ndeed, Att)! 0rancisco1s claim that she made a tender of pa)ment on Au&ust 5, 1$:5Tsuch alle&ed act, considered in relation to the circumstances -oth antecedent and su-se>uent thereto, -ein& not in accord with the normal pattern of human conductTis not worth) of credence!1+ The trial court li(ewise noted the inconsistenc) in the testimon) of Att)! 0rancisco, president of the private respondent, who earlier testified that a certain 'ila 5olicarpio accompanied her on Au&ust 5, 1$:5 to the office of the petitioner! Another person, however, named Aurora /racion, was presented to testif) as the secretar)-companion of Att)! 0rancisco on that same occasion! 0urthermore, the trial court considered as fatal the failure of Att)! 0rancisco to present in court the certified personal chec( alle&edl) tendered as pa)ment or, at least, its AeroA cop), or even -an( records thereof! 0inall), the trial court found that the private respondent had insufficient funds availa-le to fulfill the entire o-li&ation considerin& that the latter, throu&h its president, Att)! 0rancisco, onl) had a savin&s account deposit of 5@4,,42!22, and althou&h the latter had a mone)-mar(et placement of 5+22,222!22! the same was to mature onl) after the eApiration of the 5-da) &race period! *ased on the a-ove considerations, the trial court rendered a decision in favor of the petitioner, the dispositive portion of which reads.
C?DRD0/RD, findin& plaintiff to have failed to ma(e out its case, the court here-) declares the su-Bect contract cancelled and plaintiff1s down pa)ment of 5%+,$+2!22 forfeited in favor of defendant, and here-) dismisses the complaint6 and on the counterclaim, the Court orders plaintiff to pa) defendant! 314 Attorne)1s fees of 512,222!226 3%4 =iti&ation eApenses of 5%,222!226 and
1,
3+4 7udicial costs! 9/ /RDDRDD!14 #ot satisfied with the said decision, the private respondent appealed to the respondent <ntermediate Appellate Court 3now Court of Appeals4 assi&nin& as reversi-le errors, amon& others, the findin&s of the trial court that the availa-le funds of the private respondent were insufficient and that the latter did not effect a valid tender of pa)ment and consi&nation! The respondent court, in reversin& the decision of the trial court, essentiall) relies on the followin& findin&s. A A A Ce are convinced from the testimon) of Att)! Adalia 0rancisco and her witnesses that in -ehalf of the plaintiff-appellant the) have a total availa-le sum of 5+@4,,42!22 at her and at the plaintiff1s disposal on or -efore Au&ust 4, 1$:5 to answer for the o-li&ation of the plaintiff-appellant! <t was not correct for the trial court to conclude that the plaintiff-appellant had onl) a-out 5@4,,42!22 in savin&s deposit on or -efore Au&ust 5, 1$:5, a sum not enou&h to pa) the outstandin& account of 51%4,222!22! The plaintiffappellant, throu&h Att)! 0rancisco proved and the trial court even ac(nowled&ed that Att)! Adalia 0rancisco had a-out 5+22,222!22 in mone) mar(et placement! The error of the trial court lies in concludin& that the mone) mar(et placement of 5+22,222!22 was out of reach of Att)! 0rancisco! *ut as testified to -) 'r! Catalino Dstrella, a representative of the <nsular *an( of Asia and America, Att)! 0rancisco could withdraw an)time her mone) mar(et placement and place it at her disposal, thus provin& her financial capa-ilit) of meetin& more than the whole of 51%4,222!22 then due per contract! This situation, Ce -elieve, proves the truth that Att)! 0rancisco apprehensive that her re>uest for a +2-da) &race period would -e denied, she tendered pa)ment on Au&ust 4, 1$:5 which offer defendant throu&h its representative and counsel refused to receive! A A A15 3<talics supplied4 <n other words, the respondent court, findin& that the private respondent had sufficient availa-le funds, ipso facto concluded that the latter had tendered pa)ment! <s such conclusion warranted -) the facts provenQ The petitioner su-mits that it is not! ?ence, this petition!1@ The petitioner presents the followin& issues for resolution. A! <s a findin& that private respondent had sufficient availa-le funds on or -efore the &race period for the pa)ment of its o-li&ation proof that it 3private respondent4 did tender of 3sic4 pa)ment for its said o-li&ation within said periodQ AAA AAA AAA
*! <s it the le&al o-li&ation of the petitioner 3as vendor4 to eAecute a deed of a-solute sale in favor of the private respondent 3as vendee4 -efore the latter has actuall) paid the complete consideration of the saleTwhere the contract -etween and eAecuted -) the
1$
parties stipulatesT KThat upon complete pa)ment of the a&reed consideration -) the herein "D#DDD, the "D#D/R shall cause the eAecution of a Deed of A-solute 9ale in favor of the "D#DDD!L AAA AAA AAA
C! <s an offer of a chec( a valid tender of pa)ment of an o-li&ation under a contract which stipulates that the consideration of the sale is in 5hilippine Currenc)Q1: Ce find the petition impressed with merit! Cith respect to the first issue, we a&ree with the petitioner that a findin& that the private respondent had sufficient availa-le funds on or -efore the &race period for the pa)ment of its o-li&ation does not constitute proof of tender of pa)ment -) the latter for its o-li&ation within the said period! Tender of pa)ment involves a positive and unconditional act -) the o-li&or of offerin& le&al tender currenc) as pa)ment to the o-li&ee for the former1s o-li&ation and demandin& that the latter accept the same! Thus, tender of pa)ment cannot -e presumed -) a mere inference from surroundin& circumstances! At most, sufficienc) of availa-le funds is onl) affirmative of the capacit) or a-ilit) of the o-li&or to fulfill his part of the -ar&ain! *ut whether or not the o-li&or avails himself of such funds to settle his outstandin& account remains to -e proven -) independent and credi-le evidence! Tender of pa)ment presupposes not onl) that the o-li&or is a-le, read), and willin&, -ut more so, in the act of performin& his o-li&ation! A- posse ad actu non vale illatio! KA proof that an act could have -een done is no proof that it was actuall) done!L The respondent court was therefore in error to have concluded from the sheer proof of sufficient availa-le funds on the part of the private respondent to meet more than the total o-li&ation within the &race period, the alle&ed truth of tender of pa)ment! The same is a classic case of non-se>uitur! /n the contrar), the respondent court finds itself remiss in overloo(in& or ta(in& li&htl) the more important findin&s of fact made -) the trial court which we have earlier mentioned and which as a rule, are entitled to &reat wei&ht on appeal and should -e accorded full consideration and respect and should not -e distur-ed unless for stron& and co&ent reasons!1, Chile the Court is not a trier of facts, )et, when the findin&s of fact of the Court of Appeals are at variance with those of the trial court,1$ or when the inference of the Court of Appeals from its findin&s of fact is manifestl) mista(en,%2 the Court has to review the evidence in order to arrive at the correct findin&s -ased on the record! Apropos the second issue raised, althou&h admittedl) the documents for the deed of a-solute sale had not -een prepared, the su-Bect contract clearl) provides that the full pa)ment -) the private respondent is an a priori condition for the eAecution of the said documents -) the petitioner!
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That upon complete pa)ment of the a&reed consideration -) the herein "D#DDD, the "D#D/R shall cause the eAecution of a Deed of A-solute 9ale in favor of the "D#DDD!%1 The private respondent is therefore in estoppel to claim otherwise as the latter did in the testimon) in cross-eAamination of its president, Att)! 0rancisco, which reads. N #ow, )ou mentioned, Att)! 0rancisco, that )ou wanted the defendant to eAecute the final deed of sale -efore )ou would &iven 3sic4 the personal certified chec( in pa)ment of )our -alance, is that correctQ A Ies, sir!%% AAA AAA AAA
Art! 115$ of the Civil Code of the 5hilippines provides that Ko-li&ations arisin& from contracts have the force of law -etween the contractin& parties and should -e complied with in &ood faith!L And unless the stipulations in said contract are contrar) to law, morals, &ood customs, pu-lic order, or pu-lic polic), the same are -indin& as -etween the parties!%+ Chat the private respondent should have done if it was indeed desirous of compl)in& with its o-li&ations would have -een to pa) the petitioner within the &race period and o-tain a receipt of such pa)ment dul) issued -) the latter! Thereafter, or, allowin& a reasona-le time, the private respondent could have demanded from the petitioner the eAecution of the necessar) documents! <n case the petitioner refused, the private respondent could have had alwa)s resorted to Budicial action for the le&itimate enforcement of its ri&ht! 0or the failure of the private respondent to underta(e this more Budicious course of action, it alone shall suffer the conse>uences! Cith re&ard to the third issue, &rantin& ar&uendo that we would rule affirmativel) on the two precedin& issues, the case of the private respondent still can not succeed in view of the fact that the latter used a certified personal chec( which is not le&al tender nor the currenc) stipulated, and therefore, can not constitute valid tender of pa)ment! The first para&raph of Art! 1%4$ of the Civil Code provides that Kthe pa)ment of de-ts in mone) shall -e made in the currenc) stipulated, and if it is not possi-le to deliver such currenc), then in the currenc) which is le&al tender in the 5hilippines! The Court en -anc in the recent case of 5hilippine Airlines v! Court of Appeals,%4 !R! #o! =-4$1,,, stated thus. 9ince a ne&otia-le instrument is onl) a su-stitute for mone) and not mone), the deliver) of such an instrument does not, -) itself, operate as pa)ment 3citin& 9ec! 1,$, Act %2+1 on #e&s! <nsts!6 Art! 1%4$, Civil Code6 *r)an =ondon Co! v! American *an(, : 5hil! %556 Tan 9unco v! 9antos, $ 5hil! 446 %1 R!C!=! @2, @14! A chec(, whether a mana&er1s chec( or ordinar) chec(, is not le&al tender, and an offer of a chec( in pa)ment of a de-t is not a valid tender of pa)ment and ma) -e refused receipt -) the o-li&ee or creditor!
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?ence, where the tender of pa)ment -) the private respondent was not valid for failure to compl) with the re>uisite pa)ment in le&al tender or currenc) stipulated within the &race period and as such, was validl) refused receipt -) the petitioner, the su-se>uent consi&nation did not operate to dischar&e the former from its o-li&ation to the latter! <n view of the fore&oin&, the petitioner in the le&itimate eAercise of its ri&hts pursuant to the su-Bect contract, did validl) order therefore the cancellation of the said contract, the forfeiture of the previous pa)ment, and the reconve)ance ipso facto of the land in >uestion! C?DRD0/RD, the petition for review on certiorari is RA#TDD and the DDC<9</# of the respondent court promul&ated on April %5, 1$,5 is here-) 9DT A9<DD and A##G==DD and the DDC<9</# of the trial court dated 'a) %5, 1$,1 is here-) RD<#9TATDD! Costs a&ainst the private respondent! 9/ /RDDRDD!
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"*c*-.*r 8, 2003
ROMEO C. GARCIA, petitioner, vs! "IONISIO 3. LLAMAS, respondent! DDC<9</# 0ANGANI AN, J.: #ovation cannot -e presumed! <t must -e clearl) shown either -) the eApress assent of the parties or -) the complete incompati-ilit) -etween the old and the new a&reements! 5etitioner herein fails to show either re>uirement convincin&l)6 hence, the summar) Bud&ment holdin& him lia-le as a Boint and solidar) de-tor stands! The Case *efore us is a 5etition for Review1 under Rule 45 of the Rules of Court, see(in& to nullif) the #ovem-er %@, %221 Decision% and the 7une %@, %22% Resolution+ of the Court of Appeals 3CA4 in CA- R C" #o! @25%1! The appellate court disposed as follows. RG5/# T?D "<DC CD TAHD /0 T?<9 CA9D, T?G9, the Bud&ment appealed from, insofar as it pertains to [5etitioner] Romeo arcia, must -e, as it here-) is, A00<R'DD, su-Bect to the modification that the award for attorne)1s fees and cost of suit is DD=DTDD! The portion of the Bud&ment that pertains to A A A Dduardo de 7esus is 9DT A9<DD and "ACATDD! Accordin&l), the case a&ainst A A A Dduardo de 7esus is RD'A#DDD to the court of ori&in for purposes of receivin& eA parte [Respondent] Dionisio =lamas1 evidence a&ainst A A A Dduardo de 7esus!R4 The challen&ed Resolution, on the other hand, denied petitioner1s 'otion for Reconsideration! The Antecedents The antecedents of the case are narrated -) the CA as follows. RThis case started out as a complaint for sum of mone) and dama&es -) A A A [Respondent] Dionisio =lamas a&ainst A A A [5etitioner] Romeo arcia and Dduardo de 7esus! Doc(eted as Civil Case #o! N$:-+%-,:+, the complaint alle&ed that on %+ Decem-er 1$$@[,] [petitioner and de 7esus] -orrowed 5422,222!22 from [respondent]6 that, on the same da), [the)] eAecuted a promissor) note wherein the) -ound themselves Bointl) and severall) to pa) the loan on or -efore %+ 7anuar) 1$$: with a 5F interest per month6 that the loan has lon& -een overdue and, despite repeated demands, [petitioner and de 7esus] have failed and refused to pa) it6 and that, -) reason of the[ir] unBustified refusal, [respondent] was compelled to en&a&e the services of counsel to whom he a&reed
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to pa) %5F of the sum to -e recovered from [petitioner and de 7esus], plus 5%,222!22 for ever) appearance in court! AnneAed to the complaint were the promissor) note a-ovementioned and a demand letter, dated 2% 'a) 1$$:, -) [respondent] addressed to [petitioner and de 7esus]! RResistin& the complaint, [5etitioner arcia,] in his [Answer,] averred that he assumed no lia-ilit) under the promissor) note -ecause he si&ned it merel) as an accommodation part) for A A A de 7esus6 and, alternativel), that he is relieved from an) lia-ilit) arisin& from the note inasmuch as the loan had -een paid -) A A A de 7esus -) means of a chec( dated 1: April 1$$:6 and that, in an) event, the issuance of the chec( and [respondent1s] acceptance thereof novated or superseded the note! R[Respondent] tendered a repl) to [5etitioner] arcia1s answer, thereunder assertin& that the loan remained unpaid for the reason that the chec( issued -) A A A de 7esus -ounced, and that [5etitioner] arcia1s answer was not even accompanied -) a certificate of nonforum shoppin&! AnneAed to the repl) were the face of the chec( and the reverse side thereof! R0or his part, A A A de 7esus asserted in his [A]nswer with [C]ounterclaim that out of the supposed 5422,222!22 loan, he received onl) 5+@2,222!22, the 542,222!22 havin& -een advance interest thereon for two months, that is, for 7anuar) and 0e-ruar) 1$$:6 that[,] in fact[,] he paid the sum of 51%2,222!22 -) wa) of interests6 that this was made when [respondent1s] dau&hter, one #its =lamas-NuiBencio, received from the Central 5olice District Command at *icutan, Ta&ui&, 'etro 'anila 3where A A A de 7esus wor(ed4, the sum of 542,222!22, representin& the peso e>uivalent of his accumulated leave credits, another 542,222!22 as advance interest, and still another542,222!22 as interest for the months of 'arch and April 1$$:6 that he had difficult) in pa)in& the loan and had as(ed [respondent] for an eAtension of time6 that [respondent] acted in -ad faith in institutin& the case, [respondent] havin& a&reed to accept the -enefits he 3de 7esus4 would receive for his retirement, -ut [respondent] nonetheless filed the instant case while his retirement was -ein& processed6 and that, in defense of his ri&hts, he a&reed to pa) his counsel 5%2,222!22 [as] attorne)1s fees, plus 51,222!22 for ever) court appearance! RDurin& the pre-trial conference, A A A de 7esus and his law)er did not appear, nor did the) file an) pre-trial -rief! #either did [5etitioner] arcia file a pre-trial -rief, and his counsel even manifested that he would no [lon&er] present evidence! iven this development, the trial court &ave [respondent] permission to present his evidence eA parte a&ainst A A A de 7esus6 and, as re&ards [5etitioner] arcia, the trial court directed [respondent] to file a motion for Bud&ment on the pleadin&s, and for [5etitioner] arcia to file his comment or opposition thereto! R<nstead, [respondent] filed a [']otion to declare [5etitioner] arcia in default and to allow him to present his evidence eA parte! 'eanwhile, [5etitioner] arcia filed a [']anifestation su-mittin& his defense to a Bud&ment on the pleadin&s! 9u-se>uentl), [respondent] filed a [']anifestation;[']otion to su-mit the case for Bud&ement on the pleadin&s, withdrawin& in the process his previous motion! Thereunder, he asserted that
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[petitioner1s and de 7esus1] solidar) lia-ilit) under the promissor) note cannot -e an) clearer, and that the chec( issued -) de 7esus did not dischar&e the loan since the chec( -ounced!R5 /n 7ul) :, 1$$,, the Re&ional Trial Court 3RTC4 of Nue8on Cit) 3*ranch %%%4 disposed of the case as follows. RC?DRD0/RD, premises considered, Bud&ment on the pleadin&s is here-) rendered in favor of [respondent] and a&ainst [petitioner and De 7esus], who are here-) ordered to pa), Bointl) and severall), the [respondent] the followin& sums, to wit. U14 5422,222!22 representin& the principal amount plus 5F interest thereon per month from 7anuar) %+, 1$$: until the same shall have -een full) paid, less the amount of 51%2,222!22 representin& interests alread) paid -) A A A de 7esus6 U%4 5122,222!22 as attorne)1s fees plus appearance fee of 5%,222!22 for each da) of [c]ourt appearance, and6 U+4 Cost of this suit!1R@ Rulin& of the Court of Appeals The CA ruled that the trial court had erred when it rendered a Bud&ment on the pleadin&s a&ainst De 7esus! Accordin& to the appellate court, his Answer raised &enuinel) contentious issues! 'oreover, he was still re>uired to present his evidence eA parte! Thus, respondent was not ipso facto entitled to the RTC Bud&ment, even thou&h De 7esus had -een declared in default! The case a&ainst the latter was therefore remanded -) the CA to the trial court for the eA parte reception of the former1s evidence! As to petitioner, the CA treated his case as a summar) Bud&ment, -ecause his Answer had failed to raise even a sin&le &enuine issue re&ardin& an) material fact! The appellate court ruled that no novation -- eApress or implied -- had ta(en place when respondent accepted the chec( from De 7esus! Accordin& to the CA, the chec( was issued precisel) to pa) for the loan that was covered -) the promissor) note Bointl) and severall) underta(en -) petitioner and De 7esus! Respondent1s acceptance of the chec( did not serve to ma(e De 7esus the sole de-tor -ecause, first, the o-li&ation incurred -) him and petitioner was Boint and several6 and, second, the chec( -- which had -een intended to eAtin&uish the o-li&ation -- -ounced upon its presentment! ?ence, this 5etition!: <ssues 5etitioner su-mits the followin& issues for our consideration.
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R< Chether or not the ?onora-le Court of Appeals &ravel) erred in not holdin& that novation applies in the instant case as A A A Dduardo de 7esus had eApressl) assumed sole and eAclusive lia-ilit) for the loan o-li&ation he o-tained from A A A Respondent Dionisio =lamas, as clearl) evidenced -). a4 <ssuance -) A A A de 7esus of a chec( in pa)ment of the full amount of the loan of 5422,222!22 in favor of Respondent =lamas, althou&h the chec( su-se>uentl) -ounced[6] -4 Acceptance of the chec( -) the A A A respondent A A A which resulted in [the] su-stitution -) A A A de 7esus or [the supersedin& of] the promissor) note6 c4 A A A de 7esus havin& paid interests on the loan in the total amount of 51%2,222!226 d4 The fact that Respondent =lamas a&reed to the proposal of A A A de 7esus that due to financial difficulties, he -e &iven an eAtension of time to pa) his loan o-li&ation and that his retirement -enefits from the 5hilippine #ational 5olice will answer for said o-li&ation! R<< Chether or not the ?onora-le Court of Appeals seriousl) erred in not holdin& that the defense of petitioner that he was merel) an accommodation part), despite the fact that the promissor) note provided for a Boint and solidar) lia-ilit), should have -een &iven wei&ht and credence considerin& that su-se>uent events showed that the principal o-li&or was in truth and in fact A A A de 7esus, as evidenced -) the fore&oin& circumstances showin& his assumption of sole lia-ilit) over the loan o-li&ation! R<<< Chether or not Bud&ment on the pleadin&s or summar) Bud&ment was properl) availed of -) Respondent =lamas, despite the fact that there are &enuine issues of fact, which the ?onora-le Court of Appeals itself admitted in its Decision, which call for the presentation of evidence in a full--lown trial!R, 9impl) put, the issues are the followin&. 14 whether there was novation of the o-li&ation6 %4 whether the defense that petitioner was onl) an accommodation part) had an) -asis6 and +4 whether the Bud&ment a&ainst him -- -e it a Bud&ment on the pleadin&s or a summar) Bud&ment -- was proper! The Court1s Rulin& The 5etition has no merit!
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0irst <ssue. #ovation 5etitioner see(s to eAtricate himself from his o-li&ation as Boint and solidar) de-tor -) insistin& that novation too( place, either throu&h the su-stitution of De 7esus as sole de-tor or the replacement of the promissor) note -) the chec(! Alternativel), the former ar&ues that the ori&inal o-li&ation was eAtin&uished when the latter, who was his coo-li&or, RpaidR the loan with the chec(! The fallac) of the second 3alternative4 ar&ument is all too apparent! The chec( could not have eAtin&uished the o-li&ation, -ecause it -ounced upon presentment! *) law,$ the deliver) of a chec( produces the effect of pa)ment onl) when it is encashed! Ce now come to the main issue of whether novation too( place! #ovation is a mode of eAtin&uishin& an o-li&ation -) chan&in& its o-Bects or principal o-li&ations, -) su-stitutin& a new de-tor in place of the old one, or -) su-ro&atin& a third person to the ri&hts of the creditor!12 Article 1%$+ of the Civil Code defines novation as follows. RArt! 1%$+! #ovation which consists in su-stitutin& a new de-tor in the place of the ori&inal one, ma) -e made even without the (nowled&e or a&ainst the will of the latter, -ut not without the consent of the creditor! 5a)ment -) the new de-tor &ives him ri&hts mentioned in articles 1%+@ and 1%+:!R <n &eneral, there are two modes of su-stitutin& the person of the de-tor. 314 eApromision and 3%4 dele&acion! <n eApromision, the initiative for the chan&e does not come from -and ma) even -e made without the (nowled&e of -- the de-tor, since it consists of a third person1s assumption of the o-li&ation! As such, it lo&icall) re>uires the consent of the third person and the creditor! <n dele&acion, the de-tor offers, and the creditor accepts, a third person who consents to the su-stitution and assumes the o-li&ation6 thus, the consent of these three persons are necessar)!11 *oth modes of su-stitution -) the de-tor re>uire the consent of the creditor!1% #ovation ma) also -e eAtinctive or modificator)! <t is eAtinctive when an old o-li&ation is terminated -) the creation of a new one that ta(es the place of the former! <t is merel) modificator) when the old o-li&ation su-sists to the eAtent that it remains compati-le with the amendator) a&reement!1+ Chether eAtinctive or modificator), novation is made either -) chan&in& the o-Bect or the principal conditions, referred to as o-Bective or real novation6 or -) su-stitutin& the person of the de-tor or su-ro&atin& a third person to the ri&hts of the creditor, an act (nown as su-Bective or personal novation! 14 0or novation to ta(e place, the followin& re>uisites must concur. 14 There must -e a previous valid o-li&ation!
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%4 The parties concerned must a&ree to a new contract! +4 The old contract must -e eAtin&uished! 44 There must -e a valid new contract!15 #ovation ma) also -e eApress or implied! <t is eApress when the new o-li&ation declares in une>uivocal terms that the old o-li&ation is eAtin&uished! <t is implied when the new o-li&ation is incompati-le with the old one on ever) point! 1@ The test of incompati-ilit) is whether the two o-li&ations can stand toðer, each one with its own independent eAistence!1: Appl)in& the fore&oin& to the instant case, we hold that no novation too( place! The parties did not une>uivocall) declare that the old o-li&ation had -een eAtin&uished -) the issuance and the acceptance of the chec(, or that the chec( would ta(e the place of the note! There is no incompati-ilit) -etween the promissor) note and the chec(! As the CA correctl) o-served, the chec( had -een issued precisel) to answer for the o-li&ation! /n the one hand, the note evidences the loan o-li&ation6 and on the other, the chec( answers for it! "eril), the two can stand toðer! #either could the pa)ment of interests -- which, in petitioner1s view, also constitutes novation1, -- chan&e the terms and conditions of the o-li&ation! 9uch pa)ment was alread) provided for in the promissor) note and, li(e the chec(, was totall) in accord with the terms thereof! Also unmeritorious is petitioner1s ar&ument that the o-li&ation was novated -) the su-stitution of de-tors! <n order to chan&e the person of the de-tor, the old one must -e eApressl) released from the o-li&ation, and the third person or new de-tor must assume the former1s place in the relation!1$ Cell-settled is the rule that novation is never presumed!%2 Conse>uentl), that which arises from a purported chan&e in the person of the de-tor must -e clear and eApress!%1 <t is thus incum-ent on petitioner to show clearl) and une>uivocall) that novation has indeed ta(en place! <n the present case, petitioner has not shown that he was eApressl) released from the o-li&ation, that a third person was su-stituted in his place, or that the Boint and solidar) o-li&ation was cancelled and su-stituted -) the solitar) underta(in& of De 7esus! The CA aptl) held. RA A A! 5laintiff1s acceptance of the -um chec( did not result in su-stitution -) de 7esus either, the nature of the o-li&ation -ein& solidar) due to the fact that the promissor) note eApressl) declared that the lia-ilit) of appellants thereunder is Boint and [solidar)!] Reason. under the law, a creditor ma) demand pa)ment or performance from one of the solidar) de-tors or some or all of them simultaneousl), and pa)ment made -) one of them eAtin&uishes the o-li&ation! <t therefore follows that in case the creditor fails to collect from one of the solidar) de-tors, he ma) still proceed a&ainst the other or others! A
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A A R%% 'oreover, it must -e noted that for novation to -e valid and le&al, the law re>uires that the creditor eApressl) consent to the su-stitution of a new de-tor!%+ 9ince novation implies a waiver of the ri&ht the creditor had -efore the novation, such waiver must -e eApress! %4 <t cannot -e supposed, without clear proof, that the present respondent has done awa) with his ri&ht to eAact fulfillment from either of the solidar) de-tors!%5 'ore important, De 7esus was not a third person to the o-li&ation! 0rom the -e&innin&, he was a Boint and solidar) o-li&or of the 5422,222 loan6 thus, he can -e released from it onl) upon its eAtin&uishment! Respondent1s acceptance of his chec( did not chan&e the person of the de-tor, -ecause a Boint and solidar) o-li&or is re>uired to pa) the entiret) of the o-li&ation! <t must -e noted that in a solidar) o-li&ation, the creditor is entitled to demand the satisfaction of the whole o-li&ation from an) or all of the de-tors! %@ <t is up to the former to determine a&ainst whom to enforce collection!%:?avin& made himself Bointl) and severall) lia-le with De 7esus, petitioner is therefore lia-le%, for the entire o-li&ation!%$ 9econd <ssue. Accommodation 5art) 5etitioner avers that he si&ned the promissor) note merel) as an accommodation part)6 and that, as such, he was released as o-li&or when respondent a&reed to eAtend the term of the o-li&ation! This reasonin& is misplaced, -ecause the note herein is not a ne&otia-le instrument! The note reads. R5R/'<99/RI #/TD R5422,222!22 RRDCD<"DD 0R/' ATTI! D</#<9</ "! ==A'A9, the sum of 0/GR ?G#DRDD T?/G9A#D 5D9/9, 5hilippine Currenc) pa)a-le on or -efore 7anuar) %+, 1$$: at #o! 144 H-12 9t! Hamias, Nue8on Cit), with interest at the rate of 5F per month or fraction thereof! R<t is understood that our lia-ilit) under this loan is Bointl) and severall) [sic]! RDone at Nue8on Cit), 'etro 'anila this %+rd da) of Decem-er, 1$$@!R+2
*) its terms, the note was made pa)a-le to a specific person rather than to -earer or to
%$
order+1 -- a re>uisite for ne&otia-ilit) under Act %2+1, the #e&otia-le <nstruments =aw 3#<=4! ?ence, petitioner cannot avail himself of the #<=1s provisions on the lia-ilities and defenses of an accommodation part)! *esides, a non-ne&otia-le note is merel) a simple contract in writin& and is evidence of such intan&i-le ri&hts as ma) have -een created -) the assent of the parties!+% The promissor) note is thus covered -) the &eneral provisions of the Civil Code, not -) the #<=! Dven &rantin& ar&uendo that the #<= was applica-le, still, petitioner would -e lia-le for the promissor) note! Gnder Article %$ of Act %2+1, an accommodation part) is lia-le for the instrument to a holder for value even if, at the time of its ta(in&, the latter (new the former to -e onl) an accommodation part)! The relation -etween an accommodation part) and the part) accommodated is, in effect, one of principal and suret) -- the accommodation part) -ein& the suret)!++ <t is a settled rule that a suret) is -ound e>uall) and a-solutel) with the principal and is deemed an ori&inal promissor and de-tor from the -e&innin&! The lia-ilit) is immediate and direct!+4 Third <ssue. 5ropriet) of 9ummar) 7ud&ment or 7ud&ment on the 5leadin&s The neAt issue illustrates the usual confusion -etween a Bud&ment on the pleadin&s and a summar) Bud&ment! Gnder 9ection + of Rule +5 of the Rules of Court, a summar) Bud&ment ma) -e rendered after a summar) hearin& if the pleadin&s, supportin& affidavits, depositions and admissions on file show that 314 eAcept as to the amount of dama&es, there is no &enuine issue re&ardin& an) material fact6 and 3%4 the movin& part) is entitled to a Bud&ment as a matter of law! A summar) Bud&ment is a procedural device desi&ned for the prompt disposition of actions in which the pleadin&s raise onl) a le&al, not a &enuine, issue re&ardin& an) material fact!+5 Conse>uentl), facts are asserted in the complaint re&ardin& which there is )et no admission, disavowal or >ualification6 or specific denials or affirmative defenses are set forth in the answer, -ut the issues are fictitious as shown -) the pleadin&s, depositions or admissions!+@ A summar) Bud&ment ma) -e applied for -) either a claimant or a defendin& part)!+: /n the other hand, under 9ection 1 of Rule +4 of the Rules of Court, a Bud&ment on the pleadin&s is proper when an answer fails to render an issue or otherwise admits the material alle&ations of the adverse part)1s pleadin&! The essential >uestion is whether there are issues &enerated -) the pleadin&s! +, A Bud&ment on the pleadin&s ma) -e sou&ht onl) -) a claimant, who is the part) see(in& to recover upon a claim, counterclaim or cross-claim6 or to o-tain a declarator) relief! +$ Apropos thereto, it must -e stressed that the trial court1s Bud&ment a&ainst petitioner was correctl) treated -) the appellate court as a summar) Bud&ment, rather than as a Bud&ment on the pleadin&s! ?is Answer42 apparentl) raised several issues -- that he si&ned the
+2
promissor) note alle&edl) as a mere accommodation part), and that the o-li&ation was eAtin&uished -) either pa)ment or novation! ?owever, these are not factual issues re>uirin& trial! Ce >uote with approval the CA1s o-servations. RAlthou&h arcia1s [A]nswer tendered some issues, -) wa) of affirmative defenses, the documents su-mitted -) [respondent] nevertheless clearl) showed that the issues so tendered were not valid issues! 0irstl), arcia1s claim that he was merel) an accommodation part) is -elied -) the promissor) note that he si&ned! #othin& in the note indicates that he was onl) an accommodation part) as he claimed to -e! Nuite the contrar), the promissor) note -ears the statement. U<t is understood that our lia-ilit) under this loan is Bointl) and severall) [sic]!1 9econdl), his claim that his co-defendant de 7esus alread) paid the loan -) means of a chec( collapses in view of the dishonor thereof as shown at the dorsal side of said chec(!R41 0rom the records, it also appears that petitioner himself moved to su-mit the case for Bud&ment on the -asis of the pleadin&s and documents! +,-phi+ <n a written 'anifestation,4% he stated that RBud&ment on the pleadin&s ma) now -e rendered without further evidence, considerin& the alle&ations and admissions of the parties!R4+ <n view of the fore&oin&, the CA correctl) considered as a summar) Bud&ment that which the trial court had issued a&ainst petitioner! C?DRD0/RD, this 5etition is here-) DD#<DD and the assailed Decision A00<R'DD! Costs a&ainst petitioner! 9/ /RDDRDD!
+1
GEORGE A. !A2%%MAN, plaintiff-appellee, vs! THE 0HILI00INE NATIONAL AN!, defendant-appellant! *oman &. .acson for appellant. *oss and .a-rence for appellee. STREET, J.: At the time of the transaction which &ave rise to this liti&ation the plaintiff, eor&e A! Hauffman, was the president of a domestic corporation en&a&ed chiefl) in the eAportation of hemp from the 5hilippine <slands and (nown as the 5hilippine 0i-er and 5roduce Compan), of which compan) the plaintiff apparentl) held in his own ri&ht nearl) the entire issue of capital stoc(! /n 0e-ruar) 5, 1$1,, the -oard of directors of said compan), declared a dividend of 5122,222 from its surplus earnin&s for the )ear 1$1:, of which the plaintiff was entitled to the sum of 5$,,222! This amount was accordin&l) placed to his credit on the -oo(s of the compan), and so remained until in /cto-er of the same )ear when an unsuccessful effort was made to transmit the whole, or a &reater part thereof, to the plaintiff in #ew Ior( Cit)! <n this connection it appears that on /cto-er $, 1$1,, eor&e *! Cic(s, treasurer of the 5hilippine 0i-er and 5roduce Compan), presented himself in the eAchan&e department of the 5hilippine #ational *an( in 'anila and re>uested that a tele&raphic transfer of V45,222 should -e made to the plaintiff in #ew Ior( Cit), upon account of the 5hilippine 0i-er and 5roduce Compan)! ?e was informed that the total cost of said transfer, includin& eAchan&e and cost of messa&e, would -e 5$2,+55!52! Accordin&l), Cic(s, as treasurer of the 5hilippine 0i-er and 5roduce Compan), thereupon drew and delivered a chec( for that amount on the 5hilippine #ational *an(6 and the same was accepted -) the officer sellin& the eAchan&e in pa)ment of the transfer in >uestion! As evidence of this transaction a document was made out and delivered to Cic(s, which is referred to -) the -an(Ps assistant cashier as its official receipt! This memorandum receipt is in the followin& lan&ua&e. /cto-er $th, 1$1,!
CA*=D TRA#90DR */G ?T 0R/' 5?<=<55<#D #AT</#A= *A#H, #anila, P./. 9tamp 51, 0orei&n V45,222! Amount +;, F Rate 5$2,++:!52
+%
5a)a-le throu&h 5hilippine #ational *an(, #ew Ior(! To ! A! Hauffman, #ew Ior(! Total 5$2,+55!52! Account of 5hilippine 0i-er and 5roduce Compan)! 9old to 'essrs! 5hilippine 0i-er and 5roduce Compan), 'anila! 39&d!4 I =DR'A, #anager, 0oreign 1epartment.
/n the same da) the 5hilippine #ational *an( dispatched to its #ew Ior( a&enc) a ca-le&ram to the followin& effect. 5a) eor&e A! Hauffman, #ew Ior(, account 5hilippine 0i-er 5roduce Co!, V45,222! 39&d!4 5?<=<55<#D #AT</#A= *A#H, #anila! Gpon receivin& this tele&raphic messa&e, the -an(Ps representative in #ew Ior( sent a ca-le messa&e in repl) su&&estin& the advisa-ilit) of withholdin& this mone) from Hauffman, in view of his reluctance to accept certain -ills of the 5hilippine 0i-er and 5roduce Compan)! The 5hilippine #ational *an( ac>uiesced in this and on /cto-er 11 dispatched to its #ew Ior( a&enc) another messa&e to withhold the Hauffman pa)ment as su&&ested! 'eanwhile Cic(s, the treasurer of the 5hilippine 0i-er and 5roduce Compan), ca-led to Hauffman in #ew Ior(, advisin& him that V45,222 had -een placed to his credit in the #ew Ior( a&enc) of the 5hilippine #ational *an(6 and in response to this advice Hauffman presented himself at the office of the 5hilippine #ational *an( in #ew Ior( Cit) on /cto-er 15, 1$1,, and demanded the mone)! *) this time, however, the messa&e from the 5hilippine #ational *an( of /cto-er 11, directin& the withholdin& of pa)ment had -een received in #ew Ior(, and pa)ment was therefore refused! <n view of these facts, the plaintiff Hauffman instituted the present action in the Court of 0irst <nstance of the cit) of 'anila to recover said sum, with interest and costs6 and Bud&ment havin& -een there entered favora-l) to the plaintiff, the defendant appealed! Amon& additional facts pertinent to the case we note the circumstance that at the time of the transaction a-ove-mentioned, the 5hilippines 0i-er and 5roduce Compan) did not have on deposit in the 5hilippine #ational *an( mone) ade>uate to pa) the chec( for 5$2,+55!52, which was delivered in pa)ment of the tele&raphic order6 -ut the compan) did have credit to that eAtent, or more, for overdraft in current account, and the chec( in >uestion was char&ed as an overdraft a&ainst the 5hilippine 0i-er and 5roduce Compan) and has remained on the -oo(s of the -an( as an interest--earin& item in the account of said compan)! <t is furthermore noteworth) that no evidence has -een introduced tendin& to show failure of consideration with respect to the amount paid for said tele&raphic order! <t is true that
++
in the defendantPs answer it is su&&ested that the failure of the -an( to pa) over the amount of this remittance to the plaintiff in #ew Ior( Cit), pursuant to its a&reement, was due to a desire to protect the -an( in its relations with the 5hilippine 0i-er and 5roduce Compan), whose credit was secured at the -an( -) warehouse receipts on 5hilippine products6 and it is alle&ed that after the eAchan&e in >uestion was sold the -an( found that it did not have sufficient to warrant pa)ment of the remittance! <n view, however, of the failure of the -an( to su-stantiate these alle&ations, or to offer an) other proof showin& failure of consideration, it must -e assumed that the o-li&ation of the -an( was supported -) ade>uate consideration! <n this court the defense is mainl), if not eAclusivel), -ased upon the proposition that, inasmuch as the plaintiff Hauffman was not a part) to the contract with the -an( for the transmission of this credit, no ri&ht of action can -e vested in him for the -reach thereof! R<n this situation,R T we here >uote the words of the appellantPs -rief, T Rif there eAists a cause of action a&ainst the defendant, it would not -e in favor of the plaintiff who had ta(en no part at all in the transaction nor had entered into an) contract with the plaintiff, -ut in favor of the 5hilippine 0i-er and 5roduce Compan), the part) which contracted in its own name with the defendant!R The >uestion thus placed -efore us is one purel) of law6 and at the ver) threshold of the discussion it can -e stated that the provisions of the #e&otia-le <nstruments =aw can come into operation there must -e a document in eAistence of the character descri-ed in section 1 of the =aw6 and no ri&hts properl) spea(in& arise in respect to said instrument until it is delivered! <n the case -efore us there was an order, it is true, transmitted -) the defendant -an( to its #ew Ior( -ranch, for the pa)ment of a specified sum of mone) to eor&e A! Hauffman! *ut this order was not made pa)a-le Rto order or Rto -earer,R as re>uired in su-section 3d4 of that Act6 and inasmuch as it never left the possession of the -an(, or its representative in #ew Ior( Cit), there was no deliver) in the sense intended in section 1@ of the same =aw! <n this connection it is unnecessar) to point out that the official receipt delivered -) the -an( to the purchaser of the tele&raphic order, and alread) set out a-ove, cannot itself -e viewed in the li&ht of a ne&otia-le instrument, althou&h it affords complete proof of the o-li&ation actuall) assumed -) the -an(! 9tated in -are simplicit) the admitted facts show that the defendant -an( for a valua-le consideration paid -) the 5hilippine 0i-er and 5roduce Compan) a&reed on /cto-er $, 1$1,, to cause a sum of mone) to -e paid to the plaintiff in #ew Ior( Cit)6 and the >uestion is whether the plaintiff can maintain an action a&ainst the -an( for the nonperformance of said underta(in&! <n other words, is the lac( of privit) with the contract on the part of the plaintiff fatal to the maintenance of an action -) himQ The onl) eApress provision of law that has -een cited as -earin& directl) on this >uestion is the second para&raph of article 1%5: of the Civil Code6 and unless the present action can -e maintained under the provision, the plaintiff admittedl) has no case! This provision states an eAception to the more &eneral rule eApressed in the first para&raph of the same article to the effect that contracts are productive of effects onl) -etween the parties who eAecute them6 and in harmon) with this &eneral rule are numerous decisions
+4
of this court 3Colfson vs. Dstate of 'artine8, %2 5hil!, +426 <-aEe8 de Aldecoa vs. ?on&(on& and 9han&hai *an(in& Corporation, %% 5hil!, 5:%, 5,46 'anila Railroad Co! vs. CompaEia Trasatlantica and Atlantic, ulf and 5acific Co!, +, 5hil!, ,:+, ,$4!4 The para&raph introducin& the eAception which we are now to consider is in these words. 9hould the contract contain an) stipulation in favor of a third person, he ma) demand its fulfillment, provided he has &iven notice of his acceptance to the person -ound -efore the stipulation has -een revo(ed! 3Art! 1%5:, par! %, Civ! Code!4 <n the case of G) Tam and G) Iet vs. =eonard 3+2 5hil!, 4:14, is found an ela-orate dissertation upon the histor) and interpretation of the para&raph a-ove >uoted and so complete is the discussion contained in that opinion that it would -e idle for us here to &o over the same matter! 9uffice it to sa) that 7ustice Trent, spea(in& for the court in that case, sums up its conclusions upon the conditions &overnin& the ri&ht of the person for whose -enefit a contract is made to maintain an action for the -reach thereof in the followin& words. 9o, we -elieve the fairest test, in this Burisdiction at least, where-) to determine whether the interest of a third person in a contract is a stipulation pour autrui, or merel) an incidental interest, is to rel) upon the intention of the parties as disclosed -) their contract! <f a third person claims an enforci-le interest in the contract, the >uestion must -e settled -) determinin& whether the contractin& parties desired to tender him such an interest! Did the) deli-eratel) insert terms in their a&reement with the avowed purpose of conferrin& a favor upon such third personQ <n resolvin& this >uestion, of course, the ordinar) rules of construction and interpretation of writin&s must -e o-served! 3G) Tam and G) Iet vs. =eonard, supra!4 0urther on in the same opinion he adds. R<n appl)in& this test to a stipulation pour autrui, it matters not whether the stipulation is in the nature of a &ift or whether there is an o-li&ation owin& from the promise to the third person! That no such o-li&ation eAists ma) in some de&ree assist in determinin& whether the parties intended to -enefit a third person, whether the) stipulated for him!R 3G) Tam and G) Iet vs. =eonard, supra!4 <n the li&ht of the conclusion thus stated, the ri&ht of the plaintiff to maintain the present action is clear enou&h6 for it is undenia-le that the -an(Ps promise to cause a definite sum of mone) to -e paid to the plaintiff in #ew Ior( Cit) is a stipulation in his favor within the meanin& of the para&raph a-ove >uoted6 and the circumstances under which that promise was &iven disclose an evident intention on the part of the contractin& parties that the plaintiff should have the mone) upon demand in #ew Ior( Cit)! The reco&nition of this un>ualified ri&ht in the plaintiff to receive the mone) implies in our opinion the ri&ht in him to maintain an action to recover it6 and indeed if the provision in >uestion were not applica-le to the facts now -efore us, it would -e difficult to conceive of a case arisin& under it!
+5
<t will -e noted that under the para&raph cited a third person see(in& to enforce compliance with a stipulation in his favor must si&nif) his acceptance -efore it has -een revo(ed! <n this case the plaintiff clearl) si&nified his acceptance to the -an( -) demandin& pa)ment6 and althou&h the 5hilippine #ational *an( had alread) directed its #ew Ior( a&enc) to withhold pa)ment when this demand was made, the ri&hts of the plaintiff cannot -e considered to as there used, must -e understood to impl) revocation -) the mutual consent of the contractin& parties, or at least -) direction of the part) purchasin& he eAchan&e! <n the course of the ar&ument attention was directed to the case of =e&niti vs. 'echanics, etc! *an( 31+2 #!D! Rep!, 5$:4, decided -) the Court of Appeals of the 9tate of #ew Ior( on 'arch 1, 1$%1, wherein it is held that, -) sellin& a ca-le transfer of funds on a forei&n countr) in ordinar) course, a -an( incurs a simple contractual o-li&ation, and cannot -e considered as holdin& the mone) which was paid for the transfer in the character of a specific trust! Thus, it was said, RCa-le transfers, therefore, mean a method of transmittin& mone) -) ca-le wherein the seller en&a&es that he has the -alance at the point on which the pa)ment is ordered and that on receipt of the ca-le directin& the transfer his correspondent at such point will ma(e pa)ment to the -eneficiar) descri-ed in the ca-le! All these transaction are matters of purchase and sale create no trust relationship!R As we view it there is nothin& in the decision referred to decisive of the >uestion now -efore us, wish is merel) that of the ri&ht of the -eneficiar) to maintain an action a&ainst the -an( sellin& the transfer! Gpon the considerations alread) stated, we are of the opinion that the ri&ht of action eAists, and the Bud&ment must -e affirmed! <t is so ordered, with costs a&ainst the appellant! <nterest will -e computed as prescri-ed in section 512 of the Code of Civil 5rocedure! &ohnson, Araullo, Avance2a and 3illamor, &&., concur!
+@
G.R. No. L<2237/ &:5> 18, 1)7/ THE CA0ITAL INS2RANCE ? S2RET= CO., INC., petitioner, vs! 0LASTIC ERA CO., INC., AN" CO2RT O% A00EALS, respondents! Salcedo, 1el *osario, Bito, #isa and .o$ada for petitioner. H!"! 0a)lona for 5rivate respondent!
MARTIN, J.: 5etition for review of a decision of the Court of Appeals affirmin& the decision of the Court of 0irst <nstance of 'anila in Civil Case #o! 4:$+4 entitled R5lastic Dra 'anufacturin& Co!, <nc! versus The Capital <nsurance and 9uret) Co!, <nc!R /n Decem-er 1:, 1$@2, petitioner Capital <nsurance S 9uret) Co!, <nc! 3hereinafter referred to as Capital <nsurance4 delivered to the respondent 5lastic Dra 'anufacturin& Co!, <nc!, 3hereinafter referred to as 5lastic Dra4 its open 0ire 5olic) #o! %%:@2 1 wherein the former undertoo( to insure the latterPs -uildin&, e>uipments, raw materials, products and accessories located at 9heridan 9treet, 'andalu)on&, Ri8al! The polic) eApressl) provides that if the propert) insured would -e destro)ed or dama&ed -) fire after the pa)ment of the premiums, at an)time -etween the 15th da) of Decem-er 1$@2 and one oPcloc( in the afternoon of the 15th da) of Decem-er 1$@1, the insurance compan) shall ma(e &ood all such loss or dama&e in an amount not eAceedin& 5122,222!22! Chen the polic) was delivered, 5lastic Dra failed to pa) the correspondin& insurance premium! ?owever, throu&h its dul) authori8ed representative, it eAecuted the followin& ac(nowled&ment receipt. This ac(nowled&ed receipt of 0ire 5olic)4 #/! %%:@2 5remium A A A A A4 3< promise to pa)4 35%,%%2!224 3has -een paid4 T?<RTI DAI9 A0TDR on effective date --------------------3Date4
/n 7anuar) ,, 1$@1, in partial pa)ment of the insurance premium, 5lastic Dra delivered to Capital <nsurance, a chec( 2 for the amount of 51,222!22 postdated 7anuar) 1@, 1$@1 pa)a-le to the order of the latter and drawn a&ainst the *an( of America! ?owever, Capital <nsurance tried to deposit the chec( onl) on 0e-ruar) %2, 1$@1 and the same was dishonored -) the -an( for lac( of funds! The records show that as of 7anuar) 1$, 1$@1 5lastic Dra had a -alance of 51,1$+!41 with the *an( of America!
+:
/n 7anuar) 1,, 1$@1 or two da)s after the insurance premium -ecame due, at a-out 4.22 to 5.22 oPcloc( in the mornin&, the propert) insured -) 5lastic Dra was destro)ed -) fire! <n due time, the latter notified Capital <nsurance of the loss of the insured propert) -) fire 3 and accordin&l) filed its claim for indemnit) thru the 'anila AdBustment Compan)! 4 The loss and;or dama&e suffered -) 5lastic Dra was estimated -) the 'anila AdBustment Compan) to -e 5%,+,,:5! ?owever, accordin& to the records the same propert) has -een insured -) 5lastic Dra with the 5hilam&en <nsurance Compan) for 5%22,222!22! <n less than a month 5lastic Dra demanded from Capital <nsurance the pa)ment of the sum of 5122,222!22 as indemnit) for the loss of the insured propert) under 5olic) #o! %%:@2 -ut the latter refused for the reason that, amon& others, 5lastic Dra failed to pa) the insurance premium! /n Au&ust %5, 1$@1, 5lastic Dra filed its complaint a&ainst Capital <nsurance for the recover) of the sum of 5122,222!22 plus 5%5,222!22 for attorne)Ps fees and 5%2,222!22 for additional eApenses! Capital <nsurance filed a counterclaim of 5%5,222!22 as and for attorne)Ps fees! /n #ovem-er 15, 1$@1, the trial court rendered Bud&ment, the dispositive portion of which reads as follows. C?DRD0/RD, Bud&ment is rendered in favor of the plaintiff and a&ainst the defendant for the sum of 5,,,+%5!@+ with interest at the le&al rate from the filin& of the complaint and to pa) the costs!
0rom said decision, Capital <nsurance appealed to the Court of Appeals! /n Decem-er 5, 1$@+, the Court of Appeals rendered its decision affirmin& that of the trial court! ?ence, this petition for review -) certiorari to this Court! Assailin& the decision of the Court of Appeals petitioner assi&ns the followin& errors, to wit. 1! T?D C/GRT /0 A55DA=9 DRRDD <# 9D#TD#C<# 5DT<T</#DR T/ 5AI 5=A9T<C DRA T?D 9G' /0 5,,,+%5!@+ 5=G9 <#TDRD9T, A#D C/9T /0 9G<T, A=T?/G ? 5=A9T<C DRA #D"DR 5A<D 5DT<T</#DR T?D <#9GRA#CD 5RD'<G' /0 5%,%%2!,,! %! T?D C/GRT /0 A55DA=9 DRRDD <# ?/=D<# T?AT 5DT<T</#DR 9?/G=D ?A"D <#9T<TGTDD A# ACT</# 0/R RD9C<99</# /0 T?D <#9GRA#CD C/#TRACT D#TDRDD <#T/ *DTCDD# <T A#D 5=A9T<C DRA *D0/RD 5DT<T</#DR C/G=D *D RD=<D"DD /0 RD95/#9<*<=<TI G#DDR <T9 0<RD <#9GRA#CD 5/=<CI!
+,
+! CD ?A"D 9?/C# A*/"D T?AT 5=A9T<C DRAP9 ACT</# CA9 G#CARRA#TDD A#D T?AT T?D 5DT<T</#DR 9?/G=D ?A"D *DD# A*9/="DD 0R/' T?D C/'5=A<#T, A#D C/#9DNGD#T=I, T?D =/CDR C/GRT 9?/G=D ?A"D ACARDDD 5DT<T</#DR A RDA9/#A*=D 9G' A#D A9 ATT/R#DIP9 0DD9 5%5,222!22!
The pivotal issue in this petition is whether or not a contract of insurance has -een dul) perfected -etween the petitioner, Capital <nsurance, and respondent 5lastic Dra! #ecessaril), the issue calls for a correct interpretation of the insurance polic) which states. This 5olic) of <nsurance Citnesseth That in consideration of P.AS%/C 4*A #A)50AC%5*/)6 CO#PA)7, /)C! hereinafter called the <nsured, pa)in& to the Capital <nsurance S 9uret) Co!, <nc!, hereinafter called the Compan), the sum of 5D9/9 TC/ T?/G9A#D /#D ?G#DRDD D< ?TI D< ?T the premium for the first period hereinafter mentioned, for insurin& a&ainst =oss or Dama&e -) onl) 0ire or =i&htnin&, as hereinafter appears, the 5ropert) hereinafter descri-ed and contained, or descri-ed herein and not elsewhere, in the several sums followin& namel). 5D9/9 /#D ?G#DRDD T?/G9A#D /#=I, 5?<=<55<#D CGRRD#CI6 !!! T?D C/'5A#I ?DRD*I A RDD9 with the <nsured -ut su-Bect to the terms and conditions endorsed or otherwise eApressed hereon, which are to -e ta(en as part of this 5olic)4, that if the 5ropert) descri-ed, or an) part thereof, shall -e destro)ed or dama&ed -) 0ire or =i&htnin& after payment of the Premiums, at an)time -etween the 15th da) of Decem-er /ne Thousand #ine ?undred and 9iAt) and 1 Pcloc( in the afternoon of the 15th da) of Decem-er /ne Thousand #ine ?undred and 9iAt)-/ne of the last da) of an) su-se>uent period in respect of which the insured, or a successor in interest to whom the insurance is -) an endorsement hereon declared to -e or is otherwise continued, shall pa) to the Compan) and the Compan) shall accept the sum re>uired for the renewal of this 5olic), the Compan) will pa) or ma(e &ood all such loss or Dama&e, to an amount not eAceedin& durin& an) one period of the insurance in respect of the several matters specified, the sum6 set opposite thereto respectivel), and not eAceedin& the whole sum of 5D9/9, /#D ?G#DRDD T?/G9A#D /#=I, 5?<=! CGR!!!!
<n clear and une>uivocal terms the insurance polic) provides that it is onl) upon pa)ment of the premiums -) 5lastic Dra that Capital <nsurance a&rees to insure the properties of the former a&ainst loss or dama&e in an amount not eAceedin& 5122,222!22! The cruA of the pro-lem then is whether at the time the insurance polic) was delivered to 5lastic Dra on Decem-er 1:, 1$@2, the latter was a-le to pa) the stipulated premium! <t appears on record that on the da) the insurance polic) was delivered, 5lastic Dra did not
+$
pa) the Capital <nsurance, -ut instead eAecuted an ac(nowled&ment receipt of 5olic) #o! %%:@2! <n said receipt 5lastic Dra promised to pa) the premium within thirt) 3+24 da)s from the effectivit) date of the polic) on Decem-er 1:, 1$@2 and Capital <nsurance accepted it! Chat then is the effect of acceptin& such ac(nowled&ment receipt from the 5lastic DraQ Did the Capital <nsurance mean to a&ree to ma(e &ood its underta(in& under the polic) if the premium could -e paid on or -efore 7anuar) 1@, 1$@1Q And what would -e the effect of the deliver) to Capital <nsurance on 7anuar) ,, 1$@1 of a postdated chec( 37anuar) 1@, 1$@14 in the amount of 51,222!22, pa)a-le to the order of the latterQ Could not this have -een considered a valid pa)ment of the insurance premiumQ 5ursuant to Article 1%4$ of the #ew Civil Code. AAA AAA AAA The deliver) of promissor) notes pa)a-le to order, or -ills of eAchan&e or other mercantile documents shall produce the effect of pa)ment onl) when the) have -een cashed, or when throu&h the fault of the creditor the) have -een impaired! AAA AAA AAA <n the meantime, the action derived from the ori&inal o-li&ation shall -e held in a-e)ance!
Gnder this provision the mere deliver) of a -ill of eAchan&e in pa)ment of a de-t does not immediatel) effect pa)ment! <t simpl) suspends the action arisin& from the ori&inal o-li&ation in satisfaction of which it was delivered, until pa)ment is accomplished either actuall) or presumptivel)! / Tender of draft or chec( in order to effect pa)ment that would eAtin&uish the de-torPs lia-ilit) should -e actuall) cashed! ( <f the deliver) of the chec( of 5lastic Dra to Capital <nsurance were to -e viewed in the li&ht of the fore&oin&, no pa)ment of the premium had -een effected, for it is onl) when the chec( is cashed that it is said to effect pa)ment! 9i&nificantl), in the case -efore Gs the Capital <nsurance accepted the promise of 5lastic Dra to pa) the insurance premium within thirt) 3+24 da)s from the effective date of polic)! *) so doin&, it has implicitl) a&reed to modif) the tenor of the insurance polic) and in effect, waived the provision therein that it would onl) pa) for the loss or dama&e in case the same occurs after the pa)ment of the premium! Considerin& that the insurance polic) is silent as to the mode of pa)ment, Capital <nsurance is deemed to have accepted the promissor) note in pa)ment of the premium! This rendered the polic) immediatel) operative on the date it was delivered! The view ta(en in most cases in the Gnited 9tates. !!! is that althou&h one of conditions of an insurance polic) is that Rit shall not -e valid or -indin& until the first premium is paidR, if it is silent as to the mode of pa)ment, promissor) notes received -) the compan) must -e deemed to have -een accepted in pa)ment of the premium! <n other words, a re>uirement for the
42
pa)ment of the first or initial premium in advance or actual cash ma) -e waived -) acceptance of a promissor) note !!! 7
5recisel), this was what actuall) happened when the Capital <nsurance accepted the ac(nowled&ment receipt of the 5lastic Dra promisin& to pa) the insurance premium within thirt) 3+24 da)s from Decem-er 1:, 1$@2! ?ence, when the dama&e or loss of the insured propert) occurred, the insurance polic) was in full force and effect! The fact that the chec( issued -) 5lastic Dra in partial pa)ment of the promissor) note was later on dishonored did not in an) wa) operate as a forfeiture of its ri&hts under the polic), there -ein& no eApress stipulation therein to that effect! <n the a-sence of eApress a&reement or stipulation to that effect in the polic), the non-pa)ment at maturit) of a note &iven for and accepted as premium on a polic) does not operate to forfeit the ri&hts of the insured even thou&h the note is &iven for an initial premium, nor does the fact that the collection of the note had -een enBoined -) the insured in an) wa) affect the polic)! 8 !!! <f the chec( is accepted as pa)ment of the premium even thou&h it turns out to -e worthless, there is pa)ment which will prevent forfeiture! )
*) acceptin& its promise to pa) the insurance premium within thirt) 3+24 da)s from the effectivit) date of the polic) T Decem-er 1:, 1$@2 Capital <nsurance had in effect eAtended credit to 5lastic Dra! The pa)ment of the premium on the insurance polic) therefore -ecame an independent o-li&ation the non-fulfillment of which would entitle Capital <nsurance to recover! <t could Bust deduct the premium due and unpaid upon the satisfaction of the loss under the polic)! 10 <t did not have the ri&ht to cancel the polic) for nonpa)ment of the premium eAcept -) puttin& 5lastic Dra in default and &ivin& it personal notice to that effect! This Capital <nsurance failed to do! !!! Chere credit is &iven -) an insurance compan) for the pa)ment of the premium it has no ri&ht to cancel the polic) for nonpa)ment eAcept -) puttin& the insured in default and &ivin& him personal notice!!!! 11
/n the contrar) Capital <nsurance had accepted a chec( for 51,222!22 from 5lastic Dra in partial pa)ment of the premium on the insurance polic)! Althou&h the chec( was due for pa)ment on 7anuar) 1@, 1$@1 and 5lastic Dra had sufficient funds to cover it as of
41
7anuar) 1$, 1$@1, Capital <nsurance decided to hold the same for thirt)-five 3+54 da)s -efore presentin& it for pa)ment! ?avin& held the chec( for such an unreasona-le period of time, Capital <nsurance was estopped from claimin& a forfeiture of its polic) for nonpa)ment even if the chec( had -een dishonored later!+8-ph9+.2:t Chere the chec( is held for an unreasona-le time -efore presentin& it for pa)ment, the insurer ma) -e held estopped from claimin& a forfeiture if the chec( is dishonored! 12
0inall), it is su-mitted -) petitioner that. Ce are here concerned with a case of reciprocal o-li&ations, and respondent havin& failed to compl) with its o-li&ation to pa) the insurance premium due on the polic) within thirt) da)s from Decem-er 1:, 1$@2, petitioner was relieved of its o-li&ation to pa) an)thin& under the polic), without the necessit) of first institutin& an action for rescission of the contract of insurance entered into -) the parties!
*ut precisel) in this case, 5lastic Dra has complied with its o-li&ation to pa) the insurance premium and therefore Capital <nsurance is o-li&ed to ma(e &ood its underta(in& to 5lastic Dra! C?DRD0/RD, findin& no reversi-le error in the decision appealed from, Ce here-) affirm the same in toto! Costs a&ainst the petitioner! 9/ /RDDRDD! Castro, #akasiar, 4sguerra and #u2o$ Palma, &&., concur. Teehan(ee, 7!, is on leave!
4%
G.R. No7. L</040/<0( A:@:7, /, 1)81 3ICENTA 0. TOLENTINO a#$ &OSE TOLENTINO, petitioners, vs! CO2RT O% A00EALS, AN! O% THE 0HILI00INE ISLAN"S, CONS2ELO . "E LA CR2A, *, a5., respondents!
"E CASTRO, J.: A petition for review -) certiorari of the consolidated decision 1 of the respondent Court of Appeals in CA- !R! #os! 5+$2:-R 2 and 54224-R 3 promul&ated on 0e-ruar) %%, 1$:,, as well as the Resolution 4 of said Court of Appeals, promul&ated on 'arch +2, 1$:$, den)in& the 'otion for Reconsideration of the aforesaid consolidated decision! Ceferino de la Cru8 died in Davao Cit) on April 1$, 1$@2 leavin& as his onl) heirs his widow, Consuelo de la Cru8, and their children ?ilario, Tarcelo, and odofredo, all surnamed de la Cru8 3hereinafter referred to as the De la Cru8es4! At the time of his demise, Ceferino left a parcel of land 3homestead land4 containin& 1+1,:25 s>uare meters covered -) /ri&inal Certificate of Title #o! 5-1@ in his name, issued -) virtue of ?omestead 5atent #o! "-1:%,! <n a deed of sale eAecuted -) the De la Cru8es on April +2, 1$@%, the homestead land was sold to the spouses 7ose Tolentino and "icenta Tolentino 3hereinafter referred to as the Tolentinos4! The Tolentinos too( immediate possession of the homestead land and caused the cancellation of /!C!T! #o! 5-1@ and the issuance of T!C!T! #o! T-111+5 in their names! <n 1$@+, the Tolentinos constituted a first mort&a&e over the homestead land, toðer with two other parcels of land covered -) T!C!T! #os! 112,5 and 11@%@ in their names, in favor of the *an( of the 5hilippine <slands, 3*5<4 Davao *ranch, for a loan of 542,222! Another mort&a&e was constituted over the said properties in 1$@4 in favor of 5hilippine *an(in& Corporation! The Tolentinos failed to pa) their mort&a&e inde-tedness to the *5< upon maturit) in the Budicial foreclosure sale that followed, conducted -) the Cit) 9heriff of Davao on 7ul) 15, 1$@:, *5< was the sole and hi&hest -idder! The 9heriffPs Certificate of 9ale in favor of *5< was re&istered onl) on April %, 1$@$ in the Re&istr) of Deeds of Davao! 'eanwhile, on 0e-ruar) 4, 1$@:, the De la Cru8es filed an action / with the Court of 0irst <nstance of Davao a&ainst the Tolentinos for the repurchase of the homestead land under 9ection 11$ of the 5u-lic =and Act 3CA 1414, with a pra)er for dama&es and accountin& of fruits on the &round that the) had tried to repurchase said land eAtraBudiciall) for several tunes alread) -ut that the Tolentinos would not heed their re>uest, thus constrainin& the De la Cru8es to file a court action for the repurchase thereof! *5< and
4+
5hilippine *an(in& Corporation were included in the action as formal part) defendants, -ein& the first and second mort&a&ees, respectivel), of the homestead land! /n 7une 1, 1$@:, the Tolentinos filed a motion for eAtension of ten 3124 da)s Rfrom and after 7une lstR to file their answer! This motion was &ranted -) the lower court! /n 7une 14, 1$@:, the De la Cru8es filed a petition to declare the Tolentinos in default for failure to file an answer! /n that same da), the Tolentinos filed a 'otion to Dismiss the repurchase case on the &round that the complaint states no cause of action, -ut said motion was denied -) the lower court on the &round that the same was filed out of time! 9u-se>uentl), the Tolentinos were declared in default and the De la Cru8es were allowed to present their evidence e; parte. /n #ovem-er %4, 1$@:, the Tolentinos filed their answer interposin& the defense that the complaint states no cause of action -ecause from the face of T!C!T! #o! T-111+5 alone, onl) the ori&inal patentee, Ceferino, is &iven the ri&ht to repurchase the homestead land and not the De la Cru8es and -ecause the complaint does not alle&e that there was a bona fide offer to repurchase or a valid tender of pa)ment, as well as an alle&ation that the De la Cru8es intended to pa) not onl) the purchase price -ut all the other eApenses of the sale which includes the necessar) and useful eApenses made on the thin& sold, as re>uired under Article 1@1@ of the new Civil Code! Gpon a manifestation filed -) the De la Cru8es, the lower court issued an /rder dated Decem-er ,, 1$@: declarin& the Tolentinos as Rhavin& no standin&R in the proceedin&s therein, to which the latter filed a motion for its reconsideration! This motion, as well as their second 'otion for Reconsideration, was denied -) the lower court! /n 'arch %:, 1$@$, the lower court rendered a decision allowin& the De la Cru8es to repurchase the homestead land! Gpon pa)ment -) the De la Cru8es of the amount of 51@,222 representin& the repurchase price to the *5<, the latter eAecuted a deed of conve)ance over the homestead land on Au&ust %5, 1$@$! /n motion, the lower court issued a writ of possession in favor of the De la Cru8es on 9eptem-er 4, 1$@$, which was served -) the Cit) 9heriff upon the Tolentinos on 9eptem-er ,, 1$@$! Accordin&l), the possession of the homestead land was delivered to the De la Cru8es on 9eptem-er 1+,1$@$! /n 9eptem-er 1$, 1$@$, the Tolentinos filed a petition for relief from the Decision dated 'arch %:, 1$@$ on the &round of eAcusa-le mista(e in the countin& of the re&lementar) period for the filin& of an answer, with a pra)er that the /rder declarin& them in default -e lifted and that the) -e allowed to present their defense! /n /cto-er 1, 1$@$, the Tolentinos filed a 'otion to Nuash the writ of possession alle&in& as principal &rounds therefor the a-sence of service on their counsel of a cop) of the writ of possession, as well as the decision of the lower court declarin& the De la Cru8es entitled to repurchase the homestead land! The De la Cru8es filed an opposition to this 'otion and pra)ed for the investi&ation of an alle&ed tamperin& of records of the case particularl) the pa&e containin& the proofs of the service of a cop) of the writ of
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possession as well as of the decision of the lower court to the Tolentinos! /n /cto-er 4, 1$@$, the lower court denied the 'otion to Nuash! A motion for reconsideration was li(ewise denied -) the lower court on Decem-er @,1$@$! /n /cto-er @, 1$:2, the Tolentinos filed -efore the respondent Court of Appeals a petition for certiorari 3CA- !R! #o! 95-4@+%14 a&ainst the De la Cru8es, wherein the Tolentinos raise the propriet) of the issuance of the Crit of 5ossession alle&in& that it was issued improvidentl) -ecause the decision of the lower court declarin& them in default was not served upon them and, therefore, the Bud&ment has not -ecome final and eAecutor)! This petition was denied -) the respondent court in a decision rendered on #ovem-er 15, 1$:1 on the &round that the Tolentino were actuall) and dul) served with a cop) of the >uestioned decision! /n 'arch 5, 1$:+, the trial court issued an /rder den)in& for lac( of merit the petition for relief from Bud&ment filed therein -) the Tolentinos! <t li(ewise denied a motion for reconsideration filed su-se>uentl) -) the Tolentinos in its /rder of 7ul) 5, 1$:+! Conse>uentl), the Tolentinos appealed to the respondent Court of Appeals the a-ove % /rders of the lower court, doc(eted therein as CA !R! #o! 54224-R, claimin& that the lower court erred and a-used its discretion in not liftin& its /rder of default and in not orderin& resumption of trial for the reception of their evidence6 and, in finall) orderin& eAecution of the default Bud&ment! <n the meantime, on 'arch %, 1$:2, petitioner "icente Tolentino went to see 'r! Ramon =ope8, *ranch 'ana&er of *5< Davao *ranch, carr)in& a letter of even date, offerin& to redeem the homestead propert) for 51@,222 covered -) a chec(! Gpon -ein& informed that she can no lon&er redeem the same for the reason that it was alread) conve)ed to the De la Cru8es pursuant to the decision dated 'arch %:, 1$@$, "icenta left the office of the mana&er, -rin&in& with her the letter which she later on sent to 'r! =ope8 -) re&istered mail, inclosed <n another letter dated 'arch +, 1$:2, reteiratin& her desire to redeem the homestead land! 'r! =ope8 sent said letters to the *5<Ps le&al counsel with specific re>uest to inform the Tolentinos that the) can still redeem the two other properties covered -) T!C!T! #os! 112,5 and 11@%@ -efore the eApiration of the redemption period upon pa)ment of the amount of 5:5,$$5!2: T the -alance remainin& after deductin& the amount of 51@,222 paid -) the De la Cru8es for the homestead propert)! ?owever, instead of compl)in& with *5<Ps advice, "icente consi&ned with the /ffice of the Cit) 9heriff of Davao a crossed 5#* chec( for 5$1,$$5!2: drawn a&ainst the 5#* Hidapawan *ranch, Cota-ato, on 'arch +1, 1$:2, alle&edl) for the redemption of the + lots, includin& the homestead land! The followin& da), however, upon advice of their counsel, "icente issued a stop-pa)ment order a&ainst the said crossed chec( purportedl) to protect her ri&hts and to prevent *5< cashin& said chec( without returnin& all the properties which *5< had foreclosed and purchased! 9imultaneousl) with the consi&nation of the crossed chec( with the Cit) 9heriff of Davao on 'arch +1, 1$:2, the Tolentinos filed a complaint 3redemption case4 ( a&ainst *5<, amended on April 15, 1$:2, with the Davao Court of 0irst <nstance for the redemption of their properties covered -) T!C!T! #os! 111+5, 112,5 and 11@%@, which were foreclosed
45
-) and sold to *5<, with a pra)er for dama&es, imputin& -ad faith on *5< in alle&edl) refusin& to allow them to redeem all three lots and pra)in& that *5< -e ordered to allow the Tolentinos to redeem their properties, to accept the pa)ment consi&ned -) them with the Cit) 9heriffPs /ffice of Davao, and to pa) moral and eAemplar) dama&es in the sum of 5$5,222 plus attorne)Ps fees and costs of suit! *5< seasona-l) filed an answer with counterclaim, den)in& the material averments of the complaint, the truth -ein& that the Tolentinos did not have an intention to redeem their said properties -ut onl) the homestead land! *5< counterclaimed for eAemplar) dama&es in the sum of 55,222 and attorne)Ps fees in the sum of 54,222 plus costs! /n April 12, 1$:+, the trial court rendered its decision dismissin& the complaint of the Tolentinos, with no particular pronouncement as to attorne)Ps fees -ut with costs a&ainst the Tolentinos! 0rom that decision, -oth the Tolentinos and *5< appealed to the respondent Court of Appeals, doc(eted under CA- !R! #o! 5+$2:- R, the Tolentinos claimin& that l! The lower court erred in findin& that the title to the land covered -) T!C!T! #o! 111+5 le&all) passed to the heirs of Ceferino de la Cru86 %! The lower court erred in holdin& that defendant-appellant 3herein respondent *5<4 was le&all) Bustified, in refusin& plaintiffs-appellantsP 3Tolentinos4 demand to -e allowed to redeem the lands in >uestion6 and +! The lower court erred in not &rantin& plaintiffs-appellantsP 3Tolentinos4 claim for dama&es!
while *5< claims that the trial court erred in not holdin& the Tolentinos lia-le for dama&es and attorne)Ps fees despite its findin&s that the) acted in evident -ad faith in T a! filin& the complaint in the redemption case6 and -! issuin& a crossed chec( drawn a&ainst the 5#*, Hidapawan *ranch, and li(ewise, in depositin& said chec( with the 9heriffPs /ffice alle&edl) to redeem the foreclosed properties and, thereafter, the da) followin& the deposit in issuin& a stop-pa)ment order on said chec(!
Actin& upon a written re>uest dated 'arch %@, 1$:@ filed -) the Tolentinos for the consolidation of the two appealed cases, CA- !R! #os! 5+$2:-R 3Civil Case #o! @,+24 and 54224-R 3Civil Case #o! 54+%4, the respondent Court of Appeals resolved, after considerin& the comment of the *5< and the opposition of the De la Cru8es, to &rant the motion for consolidation -) the Tolentinos!
4@
<n a consolidated decision 7 promul&ated on 0e-ruar) %%, 1$:,, the respondent Court of Appeals held. /n the *epurchase Case < 314 that Rdespite the order of the trial court as pra)ed for -) appellants &rantin& them a ten-da) period of eAtension to file their answer which was to eApire on 7une 1%, 1$@:, eAtended -) operation of law to 7une 1+, 1$@:, -ecause 7une 1% was a holida), the Tolentinos failed to file their answer! <nstead, on 7une 14, 1$@:, which was alread) late, the Tolentinos filed a motion to dismiss, which is not even a responsive pleadin&, followed -) their answer filed more than five months after, on #ovem-er %4, 1$@:! The Tolentinos havin& failed to o-serve the re>uirements of the Rules of Court, no a-use of discretion could -e imputed to the court a 'uo in orderin& them in default!R 8 Chile Rdefault orders are Budiciall) frowned upon, Nuirante vs! "erano 3=-+2%2:, 0e-ruar) %:, 1$:1, +: 9CRA ,214 eAplicitl) admonishes that such Pis true onl) in meritorious cases, that is, where the failure to file answer on time was due to fraud, accident, mista(e, or eAcusa-le ne&li&ence and when the eAistence of a &ood and su-stantial defense has -een shown!P #o showin& was made in the case at -ar, that the TolentinosP failure to file their answer on time was due to an) of these &rounds! The contention and insistence of counsel for the Tolentinos that he filed throu&h his cler( the motion to dismiss on 7une 1+ -ut onl) stamped 7une 14, 1$@:, attri-utin& ne&li&ence instead to the doc(et cler( of the lower court was not -elieved -) the lower court, and we 3Court of Appeals4 find no co&ent reason for -elievin& otherwise! R ) The Court of Appeals ruled further that Rcompoundin& the errors, is the failure of the Tolentinos and;or their counsel to appear on 7anuar) 1%, 1$@,, the date set for hearin& of their petition for relief, the reason &iven -) counsel that he was out-of-town when his cler( received the notice, and that his said cler( did not notif) him nor did he note said date on their trial calendar, -ein& clearl) a case of ineAcusa-le ne&li&ence! R 3%4 that the supposed eAistence of a &ood and meritorious defense relied -) the Tolentinos consistin& of the alle&ed eApiration of the five-)ear period for the repurchase of the homestead lot under Commonwealth Act #o! 141 is clearl) -elied -) the records of the case which show that the offer to repurchase the homestead land made -) the De la Cru8es was well within the 5-)ear period re>uired -) law6 and 3+4 that the TolentinosP claim that the lower court ordered the eAecution of the default Bud&ment -efore its finalit) due to the a-sence of service of the default Bud&ment on them is not well- ta(en -ecause this issue has alread) -een settled in CA !R! #o! 95-4@+%1 rendered on #ovem-er 15, 1$:1, where it was found, after an investi&ation was conducted on the alle&ed disappearance of that pa&e of the record where the receipts -) the respective parties were indicated, that the Tolentinos throu&h their counsel were dul) served with a cop) of the default Bud&ment! /n the *edemption Case 314 in dismissin& the TolentinosP appeal, the respondent court reasoned that althou&h there
4:
is no >uarrel that the Tolentinos had 1% months within which to redeem the properties sold at the 9heriffPs sale counted from the time it was re&istered on April %, 1$@$, the pro-lem, however, lies in the manner of the tender of pa)ment made -) them, &rantin& the) made one, Rsince consi&nation -) crossed chec( does not satisf) the re>uirements set forth in Article 1%4$ of the #ew Civil Code &overnin& the pa)ment of de-ts in mone), which Pshall -e made in the Currency stipulate and if it is not possi-le to deliver such currenc), then in the currency -hich is legal tender in the 5hilippines!P Admittedl), a chec(, even if &ood when offered, does not satisf) the re>uirements of a le&al tender, and for that ver) reason, *5< was not le&all) -ound to accept such tender of pa)ment!R ?ence, no error was committed -) the court a 'uo in dismissin& the TolentinosP complaint for redemption with dama&es! 3%4 in dismissin& *5<Ps appeal, the respondent Court stated that Rno -ad faith should -e attri-uted to the Tolentinos for filin& the instant case for redemption, in the a-sence of a proven motive to harass the *5< considerin& that in so filin& these cases, the Tolentinos acted in the -elief that the) are eAercisin& certain ri&hts under the law, and considerin& further that the), too, had to spend in prosecutin& their claims, no matter how unfounded the) ma) have proven to -e!R /n April %4, 1$:,, the Tolentinos filed a 'otion for Reconsideration 10 in the Court of Appeals of the decision rendered in CA- !R! #o! 5+$2:-R on the &round that Rthe ri&ht to redeem is not an o-li&ation or de-t -ut rather a privile&e, hence, the provisions of Article 1%4$ #!C!C! &overnin& pa)ment of de-ts in mone)R do not appl) in this case6 and, of the decision rendered in CA- !R! #o! 54224-R on the &round that the respondent court erred in not considerin& that the trial court a-used its discretion in declarin& the Tolentinos in default, and that the period within which the De la Cru8es can repurchase the homestead land had alread) eApired, This 'otion for Reconsideration was denied -) the respondent court for lac( of merit in a Resolution dated 'arch +2, 1$:$! ?ence, the instant petition for review from the fore&oin& consolidated Decision and Resolution raisin& the followin& issues. < C?DT?DR /R #/T ART<C=D 1%4$ /0 T?D #DC C<"<= C/DD A55=<D9 <# T?D CA9D AT *AR6 << C?DT?DR /R #/T T?D TD#DDR /0 5AI'D#T A#D C/#9< #AT</# 'ADD *I T?D T/=D#T<#/9 *D0/RD T?D C<TI 9?DR<00 /0 DA"A/ CDRD "A=<D6 and <<< C?DT?DR T?D DD0AG=T 7GD 'D#T A A<#9T T?D T/=D#T<#/9 <#
4,
C<"<= CA9D #/! 54+% 3CA- !R! #o! 54224-R4 ?A9 *DC/'D 0<#A= A#D DWDCGT/RI!
<t is worthwhile to remem-er that Article 1%4$ of the new Civil Code deals with a mode of eAtinction of an o-li&ation and eApressl) provides for the medium in the Rpa)ment of de-ts!R Thus, it provides that. The pa)ment of de-ts in mone) shall -e made in the currenc) stipulated, and if it is not possi-le to deliver such currenc), then in the currenc) which is le&al tender in the 5hilippines! The deliver) of promissor) notes pa)a-le to order, or -ills of eAchan&e or other mercantile documents shall produce the effect of pa)ment onl) when the) have -een cashed, or when throu&h the fault of the creditor the) have -een impaired! <n the meantime, the action derived from the ori&inal o-li&ation shall -e held in a-e)ance!
Ce are of the considered view that the afore>uoted Article should not -e applied in the instant case, hereinafter eAplained, toðer with the eAposition on the resolution of the second issue raised in this petition, the first two issues raised hin&in& ultimatel) on whether the Tolentinos ma) redeem the properties in suit! To start with, the Tolentinos are not inde-ted to *5< their mort&a&e inde-tedness havin& -een eAtin&uished with the foreclosure and sale of the mort&a&ed properties! After said foreclosure and sale, what remains is the ri&ht vested -) law in favor of the Tolentinos to redeem the properties within the prescri-ed period! This ri&ht of redemption is an a-solute privile&e, the eAercise of which is entirel) dependent upon the will and discretion of the redemptioners! There is, thus, no le&al o-li&ation to eAercise the ri&ht of redemption! 11 9aid ri&ht, can in no sense, -e considered an o-li&ation, for the Tolentinos are under no compulsion to eAercise the same! 9hould the) choose not to eAercise it, no-od) can compel them to do so nor win such choice &ive rise to a cause of action in favor of the purchaser at the auction sale! <n fact, the relationship -etween said purchaser and the redemptioners is not even that of creditor and de-tor! 12 /n the other hand, if the redemptioners choose to eAercise their ri&ht of redemption, it is the polic) of the law to aid rather than to defeat the ri&ht of redemption! 13 <t stands to reason therefore, that redemptions should -e loo(ed upon with favor and where no inBur) is to follow, a li-eral construction will -e &iven to our redemption laws as well as to the eAercise of the ri&ht of redemption! <n the instant case, the ends of Bustice would -e -etter served -) affordin& the Tolentinos the opportunit) to redeem the properties in >uestion other than the homestead land, in line with the polic) aforesaid, to which Ce adhere full)
4$
notwithstandin& the reason advanced -) the Court of Appeals in its Resolution, den)in& a reconsideration of its decision, which reads. Ce a&ree that the act of redeemin& of a propert) mort&a&ed is not an o-li&ation -ut a privile&e, in the sense that the mort&a&or ma) or ma) not redeem his propert)! That of course is a privile&e! ?e ma) choose to &ive up the propert) and have the mort&a&e foreclosed, or redeem the propert) with the o-li&ation of course to pa) the loan or inde-tedness! *ut where he elects to redeem the propert) and he has to pa) the loan for which the mort&a&e was constituted, then Art! 1%4$ of the Civil Code applies -ecause it involves now the Ppa)ment of de-ts!P <t is onl) the act of redeemin& or not that is considered a privile&e, -ut not the act of pa)in& the o-li&ation once the mort&a&or has elected to redeem the propert), in which case the chec( issued or drawn shall produce the effect of pa)ment onl) when it has -een cashed! 14
Gnder eAistin& Burisprudence, what the redemptioner should pa), is not the amount of the Rloan for which the mort&a&e was constitutedR as stated -) the Court of Appeals, -ut the auction purchase price plus 1 F interest per month on the said amount up to the time of redemption, toðer with the taAes or assessment paid -) the purchaser after the purchase, if an)! 1/ And in this connection, a formal offer to redeem, accompanied -) a bona fide tender of the redemption price, althou&h proper, is not essential where, as in the instant case, the ri&ht to redeem is eAercised thru the filin& of Budicial action, which as noted earlier was made simultaneousl) with the deposit of the redemption price with the 9heriff, within the period of redemption! The formal offer to redeem, accompanied -) a bona fide tender of the redemption price within the period of redemption prescri-ed -) law, is onl) essential to preserve the ri&ht of redemption for future enforcement even -e)ond such period of redemption! The filin& of the action itself, within the period of redemption, is e>uivalent to a formal offer to redeem! 1( 9hould the court allow redemption, the redemptioners should then pa) the amount alread) adverted to! 'oreover, when the action to redeem was filed, a simultaneous deposit of the redemption mone) was tendered to the 9heriff and under the last sentence of 9ection +1, Rule +$ of the Rules of Court, it is eApressl) provided that the tender of the redemption mone) ma) -e made to the 9heriff who made the sale! 17 And the redemption is not rendered in valid -) the fact that the said officer accepted a chec( for the amount necessar) to ma(e the redemption instead of re>uirin& pa)ment in mone)! <t &oes without sa)in& that if he had seen fit to do so, the officer could have re>uired pa)ment to -e made in lawful mone), and he undou-tedl), in acceptin& a chec(, placed himself in a position where he could -e lia-le to the purchaser at the pu-lic auction if an) dama&e had -een suffered -) the latter as a result of the medium in which pa)ment was made! *ut this cannot affect the validit) of the pa)ment! The chec( as a medium of pa)ment in commercial transactions is too firml) esta-lished -) usa&e to permit of an) dou-t upon this point at the present da)! 18 #o importance ma) thus -e attached to the circumstance that a stop-pa)ment order was issued a&ainst said chec( the da) followin& the deposit, for the same will not militate
52
a&ainst the ri&ht of the Tolentinos to redeem, in the same manner that a withdrawal of the redemption mone) -ein& deposited cannot -e deemed to have forfeited the ri&ht to redeem, such redemption -ein& optional and not compulsor)! 1) Cithal, it is not clearl) shown that said stop pa)ment order was made in -ad faith! *ut while we uphold the ri&ht of redemption of the Tolentinos, the same does not appl) to the homestead land, for the reason that shall -e indicated in the discussion of the third issue! <t is a matter -e)ond dispute that Ce can review decisions of the Court of Appeals onl) on errors of law, its findin&s @f fact -ein& &enerall) conclusive! *5< ar&ued that the default Bud&ment in Civil Case #o! 54+% 3CA- !R! #o! 54224-R4 had alread) -ecome final and eAecutor)6 that the lower court found, after an investi&ation was conducted on the matter, that petitioners were dul) served with the default Bud&ment6 that this findin& was affirmed -) the Court of Appeals in CA !R! #o! 95-4@+%1 rendered on #ovem-er 15, 1$:1, which decision !R! #o! 95-4@+%1 rendered on #ovem-er 15, 1$:1, which decision had alread) -een final and, therefore, the >uestion of whether or not petitioners were dul) served with a cop) of said Bud&ment should now -e considered closed, said >uestion -ein& factual! 20 As ma) -e eApected, the Tolentinos maintain that said >uestion is one of law6 that the) did not in fact receive a cop) of the default Bud&ment6 and that the onl) reason for the findin& of the lower court that there was a valid service of default Bud&ment was the sole testimon) of *5<Ps counsel, who cannot even recall the date when the alle&ed service was made, and there is no evidence as to the mode of such service! 21 <n resolvin& their diametricall) opposed propositions, it should -e remem-ered that for a >uestion to -e one of law, it must involve no eAamination of the pro-ative value of the evidence presented -) the liti&ants or an) of them! 22The >uer) here presented, necessaril) invites cali-ration of the evidence to determine whether or not there was reall) such service! As such, the >uestion must -e deemed to -e factual in character and content, and as correctl) pointed out -) *5<, the Burisprudence on the matter is that findin&s of facts of the lower court are accorded the hi&hest de&ree of respect! 23 <t is not the function of this Court to anal)8e or wei&ht the evidence all over a&ain, its Burisdiction -ein& limited to reviewin& errors of law that mi&ht have -een committed -) the lower court! 24 And as alread) intimated earlier, appreciation of evidence is within the domain of the respondent Court of Appeals -ecause its findin&s of facts, as a &eneral rule, are not reviewa-le -) the 9upreme Court! 2/ This has -een the oft-repeated and well-esta-lished rule which has -een reiterated in a lon& line of cases enumerated in Chan v. Court of Appeals 2( and %apas v. Court of Appeals, 27 and in the more recent cases of Baptista v. Carillo 28 and3da. de Catindig v. =eirs of Catalino *o'ue, 2) and Ce find no circumstance eAistin& in this case, to Bustif) a departure from the said rule, 'ore importantl), the petitioners not havin& appealed therefrom, the decision had alread) attained the character of finalit)! The >uestion of service cannot now -e reopened or raised a&ain in this proceedin&s for otherwise, there will -e no end to a liti&ation! 5u-lic polic) and sound practice demand that Bud&ment of courts should -ecome final at some
51
definite date fiAed -) law! 30 0inall), Ce find no a-use of discretion, much less a &rave a-use thereof, committed -) the lower court in issuin& an order, which was affirmed -) respondent Court of Appeals, den)in& the TolentinosP petition for relief from Bud&ment for lac( of merit, the same -ein& supported -) su-stantial evidence! <# "<DC /0 T?D 0/RD /<# C/#9<DDRAT</#9, the appealed consolidated decision and resolution of the Court of Appeals are here-) '/D<0<DD and Bud&ment is here-) rendered authori8in& the petitioners to redeem the properties su-Bect matter hereof, other than the homestead land, within thirt) 3+24 da)s from entr) of Bud&ment, and orderin& private respondent *5< to eAecute a deed of a-solute conve)ance thereof in favor of the petitioners upon pa)ment -) the latter of the purchase price thereof, with 1F per month interest thereon in addition, up to the time of redemption, toðer with the amount of an) taAes or assessments which *5< ma) have paid thereon after purchase, if an)! <n all other respects, the aforesaid consolidated decision and resolution of the Court of Appeals are here-) A00<R'DD! #o pronouncement as to costs at this instance! 9/ /RDDRDD! Barredo, Chairman!, A'uino, Concepcion, &r. and Abad Santos, &&., concur.
5%
G.R. No. )33)7 March 3, 1))7 TRA"ERS RO=AL AN!, petitioner, vs! CO2RT O% A00EALS, %ILRITERS G2ARANT= ASS2RANCE COR0ORATION a#$ CENTRAL AN! o8 ,h* 0HILI00INES, respondents!
TORRES, &R., J.: Assailed in this 5etition for Review on Certiorari is the Decision of the respondent Court of Appeals dated 7anuar) %$, 1$$2, 1 affirmin& the nullit) of the transfer of Central *an( Certificate of <nde-tedness 3C*C<4 #o! D,$1, 2 with a face value of 5522,222!22, from the 5hilippine Gnderwriters 0inance Corporation 35hilfinance4 to the petitioner TraderPs Ro)al *an( 3TR*4, under a Repurchase A&reement 3 dated 0e-ruar) 4, 1$,1, and a Detached Assi&nment 4 dated April %:, 1$,1! Doc(eted as Civil Case #o! ,+-1:$@@ in the Re&ional Trial Court of 'anila, *ranch +%, the action was ori&inall) filed as a 5etition for #andamus / under Rule @5 of the Rules of Court, to compel the Central *an( of the 5hilippines to re&ister the transfer of the su-Bect C*C< to petitioner Traders Ro)al *an( 3TR*4! <n the said petition, TR* stated that. +! /n #ovem-er %:, 1$:$, 0ilriters uarant) Assurance Corporation 30ilriters4 eAecuted a RDetached Assi&nmentR ! ! !, where-) 0ilriters, as re&istered owner, sold, transferred, assi&ned and delivered unto 5hilippine Gnderwriters 0inance Corporation 35hilfinance4 all its ri&hts and title to Central *an( Certificates of <nde-tedness of 5D9/9. 0<"D ?G#DRDD T?/G9A#D 35522,2224 and havin& an a&&re&ate value of 5D9/9. T?RDD '<==</# 0<"D ?G#DRDD T?/G9A#D 35+,522,222!2246 4! The aforesaid Detached Assi&nment 3AnneA RAR4 contains an eApress authori8ation eAecuted -) the transferor intended to complete the assi&nment throu&h the re&istration of the transfer in the name of 5hil0inance, which authori8ation is specificall) phrased as follows. P30ilriters4 here-) irrevoca-l) authori8ed the said issuer 3Central *an(4 to transfer the said -ond;certificates on the -oo(s of its fiscal a&ent6 5! /n 0e-ruar) 4, 1$,1, petitioner entered into a Repurchase A&reement with 5hil0inance ! ! !, where-), for and in consideration of the sum of 5D9/9. 0<"D ?G#DRDD T?/G9A#D 35522,222!224, 5hil0inance sold, transferred and delivered to petitioner C*C< 4-)ear, ,th series, 9erial #o! D,$1 with a face value of 5522,222!22 ! ! !, which C*C< was amon& those previousl) ac>uired -)
5+
5hil0inance from 0ilriters as averred in para&raph + of the 5etition6 @! 5ursuant to the aforesaid Repurchase A&reement 3AnneA R*R4, 5hilfinance a&reed to repurchase C*C< 9erial #o! D,$1 3AnneA RCR4, at the stipulated price of 5D9/9. 0<"D ?G#DRDD #<#DTDD# T?/G9A#D T?RDD ?G#DRDD 9<WTI-/#D S 11;122 3551$,+@1!114 on April %:, 1$,16 :! 5hil0inance failed to repurchase the C*C< on the a&reed date of maturit), April %:, 1$,1, when the chec(s it issued in favor of petitioner were dishonored for insufficient funds6 ,! /win& to the default of 5hil0inance, it eAecuted a Detached Assi&nment in favor of the 5etitioner to ena-le the latter to have its title completed and re&istered in the -oo(s of the respondent! And -) means of said Detachment, 5hilfinance transferred and assi&ned all, its ri&hts and title in the said C*C< 3AnneA RCR4 to petitioner and, furthermore, it did there-) Rirrevoca-l) authori8e the said issuer 3respondent herein4 to transfer the said -ond;certificate on the -oo(s of its fiscal a&ent!R ! ! ! $! 5etitioner presented the C*C< 3AnneA RCR4, toðer with the two 3%4 aforementioned Detached Assi&nments 3AnneAes R*R and RDR4, to the 9ecurities 9ervicin& Department of the respondent, and re>uested the latter to effect the transfer of the C*C< on its -oo(s and to issue a new certificate in the name of petitioner as a-solute owner thereof6 12! Respondent failed and refused to re&ister the transfer as re>uested, and continues to do so notwithstandin& petitionerPs valid and Bust title over the same and despite repeated demands in writin&, the latest of which is hereto attached as AnneA RDR and made an inte&ral part hereof6 11! The eApress provisions &overnin& the transfer of the C*C< were su-stantiall) complied with the petitionerPs re>uest for re&istration, to wit. R#o transfer thereof shall -e valid unless made at said office 3where the Certificate has -een re&istered4 -) the re&istered owner hereof, in person or -) his attorne) dul) authori8ed in writin&, and similarl) noted hereon, and upon pa)ment of a nominal transfer fee which ma) -e re>uired, a new Certificate shall -e issued to the transferee of the re&istered holder thereof!R and, without a dou-t, the Detached Assi&nments presented to respondent were sufficient authori8ations in writin& eAecuted -) the re&istered owner, 0ilriters, and its transferee, 5hil0inance, as re>uired -) the a-ove->uoted provision6 1%! Gpon such compliance with the aforesaid re>uirements, the ministerial duties of re&isterin& a transfer of ownership over the C*C< and issuin& a new
54
Gpon these assertions, TR* pra)ed for the re&istration -) the Central *an( of the su-Bect C*C< in its name! /n Decem-er 4, 1$,4, the Re&ional Trial Court the case too( co&ni8ance of the defendant Central *an( of the 5hilippinesP 'otion for Admission of Amended Answer with Counter Claim for <nterpleader ( there-) callin& to fore the respondent 0ilriters uarant) Assurance Corporation 30ilriters4, the re&istered owner of the su-Bect C*C< as respondent! 0or its part, 0ilriters interBected as 9pecial Defenses the followin&. 11! Respondent is the re&istered owner of C*C< #o! ,$16 1%! The C*C< constitutes part of the reserve investment a&ainst lia-ilities re>uired of respondent as an insurance compan) under the <nsurance Code6 1+! Cithout an) consideration or -enefit whatsoever to 0ilriters, in violation of law and the trust fund doctrine and to the preBudice of polic)holders and to all who have present or future claim a&ainst policies issued -) 0ilriters, Alfredo *anaria, then 9enior "ice-5resident-Treasur) of 0ilriters, without an) -oard resolution, (nowled&e or consent of the -oard of directors of 0ilriters, and without an) clearance or authori8ation from the <nsurance Commissioner, eAecuted a detached assi&nment purportedl) assi&nin& C*C< #o! ,$1 to 5hilfinance6 AAA AAA AAA 14! 9u-se>uentl), Al-erto 0a-ella, 9enior "ice-5resident-Comptroller are 5ilar 7aco-e, "ice-5resident-Treasur) of 0ilriters 3-oth of whom were holdin& the same positions in 5hilfinance4, without an) consideration or -enefit redoundin& to 0ilriters and to the &rave preBudice of 0ilriters, its polic) holders and all who have present or future claims a&ainst its policies, eAecuted similar detached assi&nment forms transferrin& the C*C< to plaintiff6 AAA AAA AAA 15! The detached assi&nment is patentl) void and inoperative -ecause the assi&nment is without the (nowled&e and consent of directors of 0ilriters, and not dul) authori8ed in writin& -) the *oard, as re>uirin& -) Article ", 9ection + of C* Circular #o! :@$6 1@! The assi&nment of the C*C< to 5hilfinance is a personal act of Alfredo
55
*anaria and not the corporate act of 0ilriters and such null and void6 a4 The assi&nment was eAecuted without consideration and for that reason, the assi&nment is void from the -e&innin& 3Article 142$, Civil Code46 -4 The assi&nment was eAecuted without an) (nowled&e and consent of the -oard of directors of 0ilriters6 c4 The C*C< constitutes reserve investment of 0ilriters a&ainst lia-ilities, which is a re>uirement under the <nsurance Code for its eAistence as an insurance compan) and the pursuit of its -usiness operations! The assi&nment of the C*C< is ille&al act in the sense of malum in se or malum prohibitum, for an)one to ma(e, either as corporate or personal act6 d4 The transfer of dimunition of reserve investments of 0ilriters is eApressl) prohi-ited -) law, is immoral and a&ainst pu-lic polic)6 e4 The assi&nment of the C*C< has resulted in the capital impairment and in the solvenc) deficienc) of 0ilriters 3and has in fact helped in placin& 0ilriters under conservatorship4, an inevita-le result (nown to the officer who eAecuted assi&nment! 1:! 5laintiff had acted in -ad faith and with (nowled&e of the ille&alit) and invalidit) of the assi&nment! a4 The C*C< #o! ,$1 is not a ne&otia-le instrument and as a certificate of inde-tedness is not pa)a-le to -earer -ut is a re&istered in the name of 0ilriters6 -4 The provision on transfer of the C*C<s provides that the Central *an( shall treat the registered o-ner as the absolute o-ner and that the value of the re&istered certificates shall -e pa)a-le onl) to the re&istered owner6 a sufficient notice to plaintiff that the assi&nments do not &ive them the re&istered ownerPs ri&ht as a-solute owner of the C*C<Ps6 c4 C* Circular :@$, 9eries of 1$,2 3Rules and Re&ulations overnin& C*C<s4 provides that the re&istered certificates are pa)a-le onl) to the re&istered owner 3Article <<, 9ection 14! 1,! 5laintiff (new full well that the assi&nment -) 5hilfinance of C*C< #o! ,$1 -) 0ilriters is not a re&ular transaction made in the usual of ordinar) course of -usiness6 a4 The C*C< constitutes part of the reserve investments of 0ilriters a&ainst lia-ilities re>uires -) the <nsurance Code and its assi&nment or transfer is eApressl) prohi-ited -) law! There was no attempt to &et an) clearance or authori8ation from the <nsurance Commissioner6
5@
-4 The assi&nment -) 0ilriters of the C*C< is clearl) not a transaction in the usual or re&ular course of its -usiness6 c4 The C*C< involved su-stantial amount and its assi&nment clearl) constitutes disposition of Rall or su-stantiall) allR of the assets of 0ilriters, which re>uires the affirmative action of the stoc(holders 39ection 42, Corporation [sic] Code! 7
<n its Decision 8 dated April %$, 1$,,, the Re&ional Trial Court of 'anila, *ranch WWW<<< found the assi&nment of C*C< #o! D,$1 in favor of 5hilfinance, and the su-se>uent assi&nment of the same C*C< -) 5hilfinance in favor of Traders Ro)al *an( null and void and of no force and effect! The dispositive portion of the decision reads. ACC/RD<# =I, Bud&ment is here-) rendered in favor of the respondent 0ilriters uarant) Assurance Corporation and a&ainst the plaintiff Traders Ro)al *an(. 3a4 Declarin& the assi&nment of C*C< #o! ,$1 in favor of 5hil0inance, and the su-se>uent assi&nment of C*C< -) 5hil0inance in favor of the plaintiff Traders Ro)al *an( as null and void and of no force and effect6 3-4 /rderin& the respondent Central *an( of the 5hilippines to disre&ard the said assi&nment and to pa) the value of the proceeds of the C*C< #o! D,$1 to the 0ilriters uarant) Assurance Corporation6 3c4 /rderin& the plaintiff Traders Ro)al *an( to pa) respondent 0ilriters uarant) Assurance Corp! The sum of 512,222 as attorne)Ps fees6 and 3d4 to pa) the costs! 9/ /RDDRDD! )
The petitioner assailed the decision of the trial court in the Court of Appeals 10, -ut their appeals li(ewise failed! The findin&s of the fact of the said court are here-) reproduced. The records reveal that defendant 0ilriters is the re&istered owner of C*C< #o! D,$1! Gnder a deed of assi&nment dated #ovem-er %:, 1$:1, 0ilriters transferred C*C< #o! D,$1 to 5hilippine Gnderwriters 0inance Corporation 35hilfinance4! 9u-se>uentl), 5hilfinance transferred C*C< #o! D,$1, which was still re&istered in the name of 0ilriters, to appellant Traders Ro)al *an( 3TR*4! The transfer was made under a repurchase a&reement dated 0e-ruar) 4, 1$,1, &rantin& 5hilfinance the ri&ht to repurchase the instrument on or -efore April %:, 1$,1! Chen 5hilfinance failed to -u) -ac( the note on maturit) date, it eAecuted
5:
a deed of assi&nment, dated April %:, 1$,1, conve)in& to appellant TR* all its ri&ht and the title to C*C< #o! D,$1! Armed with the deed of assi&nment, TR* then sou&ht the transfer and re&istration of C*C< #o! D,$1 in its name -efore the 9ecurit) and 9ervicin& Department of the Central *an( 3C*4! Central *an(, however, refused to effect the transfer and re&istration in view of an adverse claim filed -) defendant 0ilriters! =eft with no other recourse, TR* filed a special civil action for mandamus a&ainst the Central *an( in the Re&ional Trial Court of 'anila! The suit, however, was su-se>uentl) treated -) the lower court as a case of interpleader when C* pra)ed in its amended answer that 0ilriters -e impleaded as a respondent and the court adBud&e which of them is entitled to the ownership of C*C< #o! D,$1! 0ailin& to &et a favora-le Bud&ment! TR* now comes to this Court on appeal! 11
<n the appellate court, petitioner ar&ued that the su-Bect C*C< was a ne&otia-le instrument, and havin& ac>uired the said certificate from 5hilfinance as a holder in due course, its possession of the same is thus free fro an) defect of title of prior parties and from an) defense availa-le to prior parties amon& themselves, and it ma) thus, enforce pa)ment of the instrument for the full amount thereof a&ainst all parties lia-le thereon! 12
<n i&norin& said ar&ument, the appellate court that the C*C< is not a ne&otia-le instrument, since the instrument clearl) stated that it was pa)a-le to 0ilriters, the re&istered owner, whose name was inscri-ed thereon, and that the certificate lac(ed the words of ne&otia-ilit) which serve as an eApression of consent that the instrument ma) -e transferred -) ne&otiation! /-viousl), the assi&nment of the certificate from 0ilriters to 5hilfinance was fictitious, havin& made without consideration, and did not conform to Central *an( Circular #o! :@$, series of 1$,2, -etter (nown as the RRules and Re&ulations overnin& Central *an( Certificates of <nde-tednessR, which provided that an) Rassi&nment of re&istered certificates shall not -e valid unless made ! ! ! -) the re&istered owner thereof in person or -) his representative dul) authori8ed in writin&!R 5etitionerPs claimed interest has no -asis, since it was derived from 5hilfinance whose interest was ineAistent, havin& ac>uired the certificate throu&h simulation! Chat happened was 5hilfinance merel) -orrowed C*C< #o! D,$1 from 0ilriters, a sister corporation, to &uarantee its financin& operations! 9aid the Court.
5,
<n the case at -ar, Alfredo /! *anaria, who si&ned the deed of assi&nment purportedl) for and on -ehalf of 0ilriters, did not have the necessar) written authori8ation from the *oard of Directors of 0ilriters to act for the latter! 0or lac( of such authorit), the assi&nment did not therefore -ind 0ilriters and violated as the same time Central *an( Circular #o! :@$ which has the force and effect of a law, resultin& in the nullit) of the transfer 35eople v! Nue 5o =a), $4 5hil! @426 +' 5hilippines, <nc! vs! Commissioner of <nternal Revenue, 1@5 9CRA ::,4! <n sum, 5hilfinance ac>uired no title or ri&hts under C*C< #o! D,$1 which it could assi&n or transfer to Traders Ro)al *an( and which the latter can re&ister with the Central *an(! C?DRD0/RD, the Bud&ment appealed from is A00<R'DD, with costs a&ainst plaintiff-appellant! 9/ /RDDRDD! 13
5etitionerPs present position rests solel) on the ar&ument that 5hilfinance owns $2F of 0ilriters e>uit) and the two corporations have identical corporate officers, thus demandin& the application of the doctrine or piercin& the veil of corporate fiction, as to &ive validit) to the transfer of the C*C< from re&istered owner to petitioner TR*! 14 This renders the pa)ment -) TR* to 5hilfinance of C*C<, as actual pa)ment to 0ilriters! Thus, there is no merit to the lower courtPs rulin& that the transfer of the C*C< from 0ilriters to 5hilfinance was null and void for lac( of consideration! Admittedl), the su-Bect C*C< is not a ne&otia-le instrument in the a-sence of words of ne&otia-ilit) within the meanin& of the ne&otia-le instruments law 3Act %2+14! The pertinent portions of the su-Bect C*C< read. AAA AAA AAA The Central *an( of the 5hilippines 3the *an(4 for value received, here-) promises to pa) -earer, of if this Certificate of inde-tedness -e re&istered, to 0<=R<TDR9 GARA#TI A99GRA#CD C/R5/RAT</#, the re&istered owner hereof, the principal sum of 0<"D ?G#DRDD T?/G9A#D 5D9/9! AAA AAA AAA
5roperl) understood, a certificate of inde-tedness pertains to certificates for the creation and maintenance of a permanent improvement revolvin& fund, is similar to a R-ond,R 3,%
5$
'inn! %2%4! *ein& e>uivalent to a -ond, it is properl) understood as ac(nowled&ment of an o-li&ation to pa) a fiAed sum of mone)! <t is usuall) used for the purpose of lon& term loans! The appellate court ruled that the su-Bect C*C< is not a ne&otia-le instrument, statin& that. As worded, the instrument provides a promise Rto pa) 0ilriters uarant) Assurance Corporation, the re&istered owner hereof!R "er) clearl), the instrument is pa)a-le onl) to 0ilriters, the re&istered owner, whose name is inscri-ed thereon! <t lac(s the words of ne&otia-ilit) which should have served as an eApression of consent that the instrument ma) -e transferred -) ne&otiation! 1/
A readin& of the su-Bect C*C< indicates that the same is pa)a-le to 0<=R<TDR9 GARA#TI A99GRA#CD C/R5/RAT</#, and to no one else, thus, discountin& the petitionerPs su-mission that the same is a ne&otia-le instrument, and that it is a holder in due course of the certificate! The lan&ua&e of ne&otia-ilit) which characteri8e a ne&otia-le paper as a credit instrument is its freedom to circulate as a su-stitute for mone)! ?ence, freedom of ne&otia-ilit) is the touchtone relatin& to the protection of holders in due course, and the freedom of ne&otia-ilit) is the foundation for the protection which the law throws around a holder in due course 311 Am! 7ur! %d, +%4! This freedom in ne&otia-ilit) is totall) a-sent in a certificate inde-tedness as it merel) to pa) a sum of mone) to a specified person or entit) for a period of time! As held in Calte; Philippines!, /nc! v! Court of Appeals, 1(. The accepted rule is that the ne&otia-ilit) or non-ne&otia-ilit) of an instrument is determined from the writin&, that is, from the face of the instrument itself! <n the construction of a -ill or note, the intention of the parties is to control, if it can -e le&all) ascertained! Chile the writin& ma) -e read in the li&ht of surroundin& circumstance in order to more perfectl) understand the intent and meanin& of the parties, )et as the) have constituted the writin& to -e the onl) outward and visi-le eApression of their meanin&, no other words are to -e added to it or su-stituted in its stead! The dut) of the court in such case is to ascertain, not what the parties ma) have secretl) intended as contradistin&uished from what their words eApress, -ut what is the meanin& of the words the) have used! Chat the parties meant must -e determined -) what the) said!
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Thus, the transfer of the instrument from 5hilfinance to TR* was merel) an assi&nment, and is not &overned -) the ne&otia-le instruments law! The pertinent >uestion then is, was the transfer of the C*C< from 0ilriters to 5hilfinance and su-se>uentl) from 5hilfinance to TR*, in accord with eAistin& law, so as to entitle TR* to have the C*C< re&istered in its name with the Central *an(Q The followin& are the appellate courtPs pronouncements on the matter. Clearl) shown in the record is the fact that 5hilfinancePs title over C*C< #o! D,$1 is defective since it ac>uired the instrument from 0ilriters fictitiousl)! Althou&h the deed of assi&nment stated that the transfer was for Rvalue receivedR, there was reall) no consideration involved! Chat happened was 5hilfinance merel) -orrowed C*C< #o! D,$1 from 0ilriters, a sister corporation! Thus, for lac( of an) consideration, the assi&nment made is a complete nullit)! Chat is more, Ce find that the transfer made -) 0ilriters to 5hilfinance did not conform to Central *an( Circular #o! :@$, series of 1$,2, otherwise (nown as the RRules and Re&ulations overnin& Central *an( Certificates of <nde-tednessR, under which the note was issued! 5u-lished in the /fficial a8ette on #ovem-er 1$, 1$,2, 9ection + thereof provides that an) assi&nment of re&istered certificates shall not -e valid unless made ! ! ! -) the re&istered owner thereof in person or -) his representative dul) authori8ed in writin&! <n the case at -ar, Alfredo /! *anaria, who si&ned the deed of assi&nment purportedl) for and on -ehalf of 0ilriters, did not have the necessar) written authori8ation from the *oard of Directors of 0ilriters to act for the latter! 0or lac( of such authorit), the assi&nment did not therefore -ind 0ilriters and violated at the same time Central *an( Circular #o! :@$ which has the force and effect of a law, resultin& in the nullit) of the transfer 35eople vs! Nue 5o =a), $4 5hil! @426 +' 5hilippines, <nc! vs! Commissioner of <nternal Revenue, 1@5 9CRA ::,4! <n sum, 5hilfinance ac>uired no title or ri&hts under C*C< #o! D,$1 which it could assi&n or transfer to Traders Ro)al *an( and which the latter can re&ister with the Central *an(
5etitioner now ar&ues that the transfer of the su-Bect C*C< to TR* must upheld, as the respondent 0ilriters and 5hilfinance, thou&h separate corporate entities on paper, have used their corporate fiction to defraud TR* into purchasin& the su-Bect C*C<, which purchase now is refused re&istration -) the Central *an(! 9a)s the petitioner6 9ince 5hilfinance own a-out $2F of 0ilriters and the two companies have the
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same corporate officers, if the principle of piercin& the veil of corporate entit) were to -e applied in this case, then TR*Ps pa)ment to 5hilfinance for the C*C< purchased -) it could Bust as well -e considered a pa)ment to 0ilriters, the re&istered owner of the C*C< as to -ar the latter from claimin&, as it has, that it never received an) pa)ment for that C*C< sold and that said C*C< was sold without its authorit)! AAA AAA AAA Ce respectfull) su-mit that, considerin& that the Court of Appeals has held that the C*C< was merel) -orrowed -) 5hilfinance from 0ilriters, a sister corporation, to &uarantee its 35hilfinancePs4 financin& operations, if it were to -e consistent therewith, on the issued raised -) TR* that there was a piercin& a veil of corporate entit), the Court of Appeals should have ruled that such veil of corporate entit) was, in fact, pierced, and the pa)ment -) TR* to 5hilfinance should -e construed as pa)ment to 0ilriters! 17
Ce disa&ree with 5etitioner! 5etitioner cannot put up the eAcuse of piercin& the veil of corporate entit), as this merel) an e>uita-le remed), and ma) -e awarded onl) in cases when the corporate fiction is used to defeat pu-lic convenience, Bustif) wron&, protect fraud or defend crime or where a corporation is a mere alter e&o or -usiness conduit of a person! 18
5eiercin& the veil of corporate entit) re>uires the court to see throu&h the protective shroud which eAempts its stoc(holders from lia-ilities that ordinaril), the) could -e su-Bect to, or distin&uished one corporation from a seemin&l) separate one, were it not for the eAistin& corporate fiction! *ut to do this, the court must -e sure that the corporate fiction was misused, to such an eAtent that inBustice, fraud, or crime was committed upon another, disre&ardin&, thus, his, her, or its ri&hts! <t is the protection of the interests of innocent third persons dealin& with the corporate entit) which the law aims to protect -) this doctrine! The corporate separateness -etween 0ilriters and 5hilfinance remains, despite the petitioners insistence on the contrar)! 0or one, other than the alle&ation that 0ilriters is $2F owned -) 5hilfinance, and the identit) of one shall -e maintained as to the other, there is nothin& else which could lead the court under circumstance to disre&ard their corporate personalities! Thou&h it is true that when valid reasons eAist, the le&al fiction that a corporation is an
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entit) with a Buridical personalit) separate from its stoc(holders and from other corporations ma) -e disre&arded, 1) in the a-sence of such &rounds, the &eneral rule must upheld! The fact that 0ilfinance owns maBorit) shares in 0ilriters is not -) itself a &round to disre&ard the independent corporate status of 0ilriters! <n .iddel > Co!, /nc! vs! Collector of /nternal *evenue, 20 the mere ownership -) a sin&le stoc(holder or -) another corporation of all or nearl) all of the capital stoc( of a corporation is not of itself a sufficient reason for disre&ardin& the fiction of separate corporate personalities! <n the case at -ar, there is sufficient showin& that the petitioner was not defrauded at all when it ac>uired the su-Bect certificate of inde-tedness from 5hilfinance! /n its face the su-Bect certificates states that it is re&istered in the name of 0ilriters! This should have put the petitioner on notice, and prompted it to in>uire from 0ilriters as to 5hilfinancePs title over the same or its authorit) to assi&n the certificate! As it is, there is no showin& to the effect that petitioner had an) dealin&s whatsoever with 0ilriters, nor did it ma(e in>uiries as to the ownership of the certificate! The terms of the C*C< #o! D,$1 contain a provision on its TRA#90DR! Thus. TRA#90DR! This Certificate shall pass -) deliver) unless it is re&istered in the ownerPs name at an) office of the *an( or an) a&enc) dul) authori8ed -) the *an(, and such re&istration is noted hereon! After such re&istration no transfer thereof shall -e valid unless made at said office 3where the Certificates has -een re&istered4 -) the re&istered owner hereof, in person, or -) his attorne), dul) authori8ed in writin& and similarl) noted hereon and upon pa)ment of a nominal transfer fee which ma) -e re>uired, a new Certificate shall -e issued to the transferee of the re&istered owner thereof! The -an( or an) a&enc) dul) authori8ed -) the *an( ma) deem and treat the -earer of this Certificate, or if this Certificate is re&istered as herein authori8ed, the person in whose name the same is re&istered as the a-solute owner of this Certificate, for the purpose of receivin& pa)ment hereof, or on account hereof, and for all other purpose whether or not this Certificate shall -e overdue!
This is notice to petitioner to secure from 0ilriters a written authori8ation for the transfer or to re>uire 5hilfinance to su-mit such an authori8ation from 0ilriters! 5etitioner (new that 5hilfinance is not re&istered owner of the C*C< #o! D,$1! The fact that a non-owner was disposin& of the re&istered C*C< owned -) another entit) was a &ood reason for petitioner to verif) of in>uire as to the title 5hilfinance to dispose to the C*C<! 'oreover, C*C< #o! D,$1 is &overned -) C* Circular #o! :@$, series of 1$$2 21, (nown as the Rules and Re&ulations overnin& Central *an( Certificates of <nde-tedness, 9ection +, Article " of which provides that.
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9ec! +! Assi&nment of Re&istered Certificates! T Assi&nment of re&istered certificates shall not -e valid unless made at the office where the same have -een issued and re&istered or at the 9ecurities 9ervicin& Department, Central *an( of the 5hilippines, and -) the re&istered owner thereof, in person or -) his representative, dul) authori8ed in writin&! 0or this purpose, the transferee ma) -e desi&nated as the representative of the re&istered owner!
5etitioner, -ein& a commercial -an(, cannot fei&n i&norance of Central *an( Circular :@$, and its re>uirements! An entit) which deals with corporate a&ents within circumstances showin& that the a&ents are actin& in eAcess of corporate authorit), ma) not hold the corporation lia-le! 22 This is onl) fair, as ever)one must, in the eAercise of his ri&hts and in the performance of his duties, act with Bustice, &ive ever)one his due, and o-serve honest) and &ood faith! 23
The transfer made -) 0ilriters to 5hilfinance did not conform to the said! Central *an( Circular, which for all intents, is considered part of the law! As found -) the courts a 'uo, Alfredo /! *anaria, who had si&ned the deed of assi&nment from 0ilriters to 5hilfinance, purportedl) for and in favor of 0ilriters, did not have the necessar) written authori8ation from the *oard of Directors of 0ilriters to act for the latter! As it is, the sale from 0ilriters to 5hilfinance was fictitious, and therefore void and ineAistent, as there was no consideration for the same! This is fatal to the petitionerPs cause, for then, 5hilfinance had no title over the su-Bect certificate to conve) the Traders Ro)al *an(! )emo potest nisi 'uod de (ure potest T no man can do an)thin& eAcept what he can do lawfull)! Concededl), the su-Bect C*C< was ac>uired -) 0ilriters to form part of its le&al and capital reserves, which are re>uired -) law 24 to -e maintained at a mandated level! This was pointed out -) Dlias arcia, 'ana&er-in-Char&e of respondent 0ilriters, in his testimon) &iven -efore the court on 'a) +2, 1$,@! N Do )ou (now this Central *an( Certificate of <nde-tedness, in short, C*C< #o! D,$1 in the face value of 55222,222!22 su-Bect of this caseQ A Ies, sir! N Ch) do )ou (now thisQ A Cell, this was C*C< of the compan) sou&ht to -e eAamined -) the <nsurance Commission sometime in earl) 1$,1 and this C*C< #o! ,$1 was amon& the C*C<Ps that were found to -e missin&! N =et me ta(e )ou -ac( further -efore 1$,1! Did )ou have the (nowled&e of this C*C< #o! ,$1 -efore 1$,1Q
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A Ies, sir! This C*C< is an investment of 0ilriters re>uired -) the <nsurance Commission as le&al reserve of the compan)! N =e&al reserve for the purpose of whatQ A Cell, )ou see, the <nsurance companies are re>uired to put up le&al reserves under 9ection %1+ of the <nsurance Code e>uivalent to 42 percent of the premiums receipt and further, the <nsurance Commission re>uires this reserve to -e invested prefera-l) in &overnment securities or &overnment -inds! This is how this C*C< came to -e purchased -) the compan)!
<t cannot, therefore, -e ta(en out of the said funds, without violatin& the re>uirements of the law! Thus, the anauthori8ed use or distri-ution of the same -) a corporate officer of 0ilriters cannot -ind the said corporation, not without the approval of its *oard of Directors, and the maintenance of the re>uired reserve fund! Conse>uentl), the title of 0ilriters over the su-Bect certificate of inde-tedness must -e upheld over the claimed interest of Traders Ro)al *an(! ACC/RD<# =I, the petition is D<9'<99DD and the decision appealed from dated 7anuar) %$, 1$$2 is here-) A00<R'DD! 9/ /RDDRDD! *egalado, *omero and #endo$a, &&., concur. 5uno, 7!, too( no part!
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G.R. No. L<4)188 &a#:ar> 30, 1))0 0HILI00INE AIRLINES, INC., petitioner, vs! HON. CO2RT O% A00EALS, HON. &2"GE RICAR"O ". GALANO, Co:r, o8 %6r7, I#7,a#c* o8 Ma#65a, ra#ch 1III, &AIME !. "EL ROSARIO, "*+:,> Sh*r688, Co:r, o8 %6r7, I#7,a#c*, Ma#65a, a#$ AMELIA TAN,respondents!
*ehind the simple issue of validit) of an alias writ of eAecution in this case is a more fundamental >uestion! 9hould the Court allow a too literal interpretation of the Rules with an open invitation to (naver) to prevail over a more discernin& and Bust approachQ 9hould we not appl) the ancient rule of statutor) construction that laws are to -e interpreted -) the spirit which vivifies and not -) the letter which (illethQ This is a petition to review on certiorari the decision of the Court of Appeals in CA- !R! #o! 2:@$5 entitled RPhilippine Airlines, /nc. v. =on. &udge *icardo 1. 6alano, et al.?, dismissin& the petition for certiorari a&ainst the order of the Court of 0irst <nstance of 'anila which issued an alias writ of eAecution a&ainst the petitioner! The petition involvin& the alias writ of eAecution had its -e&innin&s on #ovem-er ,, 1$@:, when respondent Amelia Tan, under the name and st)le of A-le 5rintin& 5ress commenced a complaint for dama&es -efore the Court of 0irst <nstance of 'anila! The case was doc(eted as Civil Case #o! :1+2:, entitled Amelia %an, et al. v. Philippine Airlines, /nc! After trial, the Court of 0irst <nstance of 'anila, *ranch 1+, then presided over -) the late 7ud&e 7esus 5! 'orfe rendered Bud&ment on 7une %$, 1$:%, in favor of private respondent Amelia Tan and a&ainst petitioner 5hilippine Airlines, <nc! 35A=4 as follows. C?DRD0/RD, Bud&ment is here-) rendered, orderin& the defendant 5hilippine Air =ines. 1! /n the first cause of action, to pa) to the plaintiff the amount of 5:5,222!22 as actual dama&es, with le&al interest thereon from plaintiffs eAtra-Budicial demand made -) the letter of 7ul) %2, 1$@:6 %! /n the third cause of action, to pa) to the plaintiff the amount of 51,,%22!22, representin& the unreali8ed profit of 12F included in the contract price of 5%22,222!22 plus le&al interest thereon from 7ul) %2,1$@:6
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+! /n the fourth cause of action, to pa) to the plaintiff the amount of 5%2,222!22 as and for moral dama&es, with le&al interest thereon from 7ul) %2, 1 $@:6 4! /n the siAth cause of action, to pa) to the plaintiff the amount of 55,222!22 dama&es as and for attorne)Ps fee! 5laintiffs second and fifth causes of action, and defendantPs counterclaim, are dismissed! Cith costs a&ainst the defendant! 3CA Rollo, p! 1,4
/n 7ul) %,, 1$:%, the petitioner filed its appeal with the Court of Appeals! The case was doc(eted as CA- !R! #o! 512:$-R! /n 0e-ruar) +, 1$::, the appellate court rendered its decision, the dispositive portion of which reads. <# "<DC C?DRD/0, with the modification that 5A= is condemned to pa) plaintiff the sum of 5%5,222!22 as dama&es and 55,222!22 as attorne)Ps fee, Bud&ment is affirmed, with costs! 3CA Rollo, p! %$4
#otice of Bud&ment was sent -) the Court of Appeals to the trial court and on dates su-se>uent thereto, a motion for reconsideration was filed -) respondent Amelia Tan, dul) opposed -) petitioner 5A=! /n 'a) %+,1$::, the Court of Appeals rendered its resolution den)in& the respondentPs motion for reconsideration for lac( of merit! #o further appeal havin& -een ta(en -) the parties, the Bud&ment -ecame final and eAecutor) and on 'a) +1, 1$::, Bud&ment was correspondin&l) entered in the case! The case was remanded to the trial court for eAecution and on 9eptem-er %,1$::, respondent Amelia Tan filed a motion pra)in& for the issuance of a writ of eAecution of the Bud&ment rendered -) the Court of Appeals! /n /cto-er 11, 1$::, the trial court, presided over -) 7ud&e alano, issued its order of eAecution with the correspondin& writ in favor of the respondent! The writ was dul) referred to Deput) 9heriff Dmilio J! Re)es of *ranch 1+ of the Court of 0irst <nstance of 'anila for enforcement! 0our months later, on 0e-ruar) 11, 1$:,, respondent Amelia Tan moved for the issuance of an alias writ of eAecution statin& that the Bud&ment rendered -) the lower court, and affirmed with modification -) the Court of Appeals, remained unsatisfied!
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/n 'arch 1, 1$:,, the petitioner filed an opposition to the motion for the issuance of an alias writ of eAecution statin& that it had alread) full) paid its o-li&ation to plaintiff throu&h the deput) sheriff of the respondent court, Dmilio J! Re)es, as evidenced -) cash vouchers properl) si&ned and receipted -) said Dmilio J! Re)es! /n 'arch +,1$:,, the Court of Appeals denied the issuance of the alias writ for -ein& premature, orderin& the eAecutin& sheriff Dmilio J! Re)es to appear with his return and eAplain the reason for his failure to surrender the amounts paid to him -) petitioner 5A=! ?owever, the order could not -e served upon Deput) 9heriff Re)es who had a-sconded or disappeared! /n 'arch %,, 1$:,, motion for the issuance of a partial alias writ of eAecution was filed -) respondent Amelia Tan! /n April 1$, 1$:,, respondent Amelia Tan filed a motion to withdraw R'otion for 5artial Alias Crit of DAecutionR with 9u-stitute 'otion for Alias Crit of DAecution! /n 'a) 1, 1$:,, the respondent 7ud&e issued an order which reads. As pra)ed for -) counsel for the plaintiff, the 'otion to Cithdraw P'otion for 5artial Alias Crit of DAecution with 9u-stitute 'otion for Alias Crit of DAecution is here-) &ranted, and the motion for partial alias writ of eAecution is considered withdrawn! =et an Alias Crit of DAecution issue a&ainst the defendant for the fall satisfaction of the Bud&ment rendered! Deput) 9heriff 7aime H! del Rosario is here-) appointed 9pecial 9heriff for the enforcement thereof! 3CA Rollo, p! +44
/n 'a) 1,, 1$:,, the petitioner received a cop) of the first alias writ of eAecution issued on the same da) directin& 9pecial 9heriff 7aime H! del Rosario to lev) on eAecution in the sum of 5%5,222!22 with le&al interest thereon from 7ul) %2,1$@: when respondent Amelia Tan made an eAtra-Budicial demand throu&h a letter! =ev) was also ordered for the further sum of 55,222!22 awarded as attorne)Ps fees! /n 'a) %+, 1$:,, the petitioner filed an ur&ent motion to >uash the alias writ of eAecution statin& that no return of the writ had as )et -een made -) Deput) 9heriff Dmilio J! Re)es and that the Bud&ment de-t had alread) -een full) satisfied -) the petitioner as evidenced -) the cash vouchers si&ned and receipted -) the server of the writ of eAecution, Deput) 9heriff Dmilio J! Re)es! /n 'a) %@,1$:,, the respondent 7aime H! del Rosario served a notice of &arnishment on the depositor) -an( of petitioner, 0ar Dast *an( and Trust Compan), Rosario *ranch, *inondo, 'anila, throu&h its mana&er and &arnished the petitionerPs deposit in the said -an( in the total amount of 5@4,42,!22 as of 'a) 1@, 1$:,! ?ence, this petition for certiorari filed -) the 5hilippine Airlines, <nc!, on the &rounds that.
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< A# A=<A9 CR<T /0 DWDCGT</# CA##/T *D <99GDD C<T?/GT 5R</R RDTGR# /0 T?D /R< <#A= CR<T *I T?D <'5=D'D#T<# /00<CDR! << 5AI'D#T /0 7GD 'D#T T/ T?D <'5=D'D#T<# /00<CDR A9 D<RDCTDD <# T?D CR<T /0 DWDCGT</# C/#9T<TGTD9 9AT<90ACT</# /0 7GD 'D#T! <<< <#TDRD9T <9 #/T 5AIA*=D C?D# T?D DDC<9</# <9 9<=D#T A9 T/ T?D 5AI'D#T T?DRD/0! <" 9DCT</# 5, RG=D +$, 5ART<CG=AR=I RD0DR9 T/ =D"I /0 5R/5DRTI /0 7GD 'D#T DD*T/R A#D D<95/9A= /R 9A=D T?DRD/0 T/ 9AT<90I 7GD 'D#T!
Can an alias writ of eAecution -e issued without a prior return of the ori&inal writ -) the implementin& officerQ Ce rule in the affirmative and we >uote the respondent courtPs decision with approval. The issuance of the >uestioned alias writ of eAecution under the circumstances here o-tainin& is Bustified -ecause even with the a-sence of a 9heriffs return on the ori&inal writ, the unaltera-le fact remains that such a return is incapa-le of -ein& o-tained 3sic4 -ecause the officer who is to ma(e the said return has a-sconded and cannot -e -rou&ht to the Court despite the earlier order of the court for him to appear for this purpose! 3/rder of 0e-! %1, 1$:,, AnneA C, 5etition4! /-viousl), ta(in& co&ni8ance of this circumstance, the order of 'a) 11, 1$:, directin& the issuance of an alias writ was therefore issued! 3AnneA D! 5etition4! The need for such a return as a condition precedent for the issuance of an alias writ was Bustifia-l) dispensed with -) the court -elow and its action in this re&ard meets with our concurrence! A contrar) view will produce an a-horent situation where-) the mischief of an errin& officer of the court could -e utili8ed to impede indefinitel) the undisputed and awarded ri&hts which a prevailin& part) ri&htfull) deserves to o-tain and with dispatch! The final Bud&ment in this case should not indeed -e permitted to -ecome illusor) or incapa-le of eAecution for an indefinite and over eAtended period, as had alread)
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&udicium non debet esse illusorium@ suum effectum habere debet 3A Bud&ment ou&ht not to -e illusor) it ou&ht to have its proper effect4! <ndeed, technicalit) cannot -e countenanced to defeat the eAecution of a Bud&ment for eAecution is the fruit and end of the suit and is ver) aptl) called the life of the law 3<pe(dBian 'erchandisin& Co! v! Court of TaA Appeals, , 9CRA 5$ [1$@+]6 Commissioner of <nternal Revenue v! "isa)an Dlectric Co!, 1$ 9CRA @$:, @$, [1$@:]4! A Bud&ment cannot -e rendered nu&ator) -) the unreasona-le application of a strict rule of procedure! "ested ri&hts were never intended to rest on the re>uirement of a return, the office of which is merel) to inform the court and the parties, of an) and all actions ta(en under the writ of eAecution! Chere such information can -e esta-lished in some other manner, the a-sence of an eAecutin& officerPs return will not preclude a Bud&ment from -ein& treated as dischar&ed or -ein& eAecuted throu&h an alias writ of eAecution as the case ma) -e! 'ore so, as in the case at -ar! Chere the return cannot -e eApected to -e forthcomin&, to re>uire the same would -e to compel the enforcement of ri&hts under a Bud&ment to rest on an impossi-ilit), there-) allowin& the total avoidance of Bud&ment de-ts! 9o lon& as a Bud&ment is not satisfied, a plaintiff is entitled to other writs of eAecution 3 overnment of the 5hilippines v! Dchaus and on8ales, :1 5hil! +1,4! <t is a well (nown le&al maAim that he who cannot prosecute his Bud&ment with effect, sues his case vainl)! 'ore important in the determination of the propriet) of the trial courtPs issuance of an alias writ of eAecution is the issue of satisfaction of Bud&ment! Gnder the peculiar circumstances surroundin& this case, did the pa)ment made to the a-scondin& sheriff -) chec( in his name operate to satisf) the Bud&ment de-tQ The Court rules that the plaintiff who has won her case should not -e adBud&ed as havin& sued in vain! To decide otherwise would not onl) &ive her an empt) -ut a p)rrhic victor)! <t should -e emphasi8ed that under the initial Bud&ment, Amelia Tan was found to have -een wron&ed -) 5A=! 9he filed her complaint in 1$@:! After ten 3124 )ears of protracted liti&ation in the Court of 0irst <nstance and the Court of Appeals, 's! Tan won her case! <t is now 1$$2! Almost twent)-two 3%%4 )ears later, 's! Tan has not seen a centavo of what the courts
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have solemnl) declared as ri&htfull) hers! Throu&h a-solutel) no fault of her own, 's! Tan has -een deprived of what, technicall), she should have -een paid from the start, before +ABC, without need of her &oin& to court to enforce her ri&hts! And all -ecause 5A= did not issue the chec(s intended for her, in her name! Gnder the peculiar circumstances of this case, the pa)ment to the a-scondin& sheriff -) chec( in his name did not operate as a satisfaction of the Bud&ment de-t! <n &eneral, a pa)ment, in order to -e effective to dischar&e an o-li&ation, must -e made to the proper person! Article 1%42 of the Civil Code provides. 5a)ment shall -e made to the person in whose favor the o-li&ation has -een constituted, or his successor in interest, or an) person authori$ed to receive it. 3Dmphasis supplied4
Thus, pa)ment must -e made to the o-li&ee himself or to an a&ent havin& authorit), eApress or implied, to receive the particular pa)ment 3Glen v! Hnecttle 52 C)o $4, 5, [%d] 44@, 111 A=R @54! 5a)ment made to one havin& apparent authorit) to receive the mone) will, as a rule, -e treated as thou&h actual authorit) had -een &iven for its receipt! =i(ewise, if pa)ment is made to one who -) law is authori8ed to act for the creditor, it will wor( a dischar&e 3?endr) v! *enlisa +: 0la! @2$, %2 9/ ,22,+4 =RA %,+4! The receipt of mone) due on aBud&ment -) an officer authori8ed -) law to accept it will, therefore, satisf) the de-t 39ee 42 Am 7m :%$, %56 ?endr) v! *enlisa supra6 9eattle v! 9tirrat 55 Cash! 124 p! ,+4,%4 =RA [#9] 1%:54! The theor) is where pa)ment is made to a person authori8ed and reco&ni8ed -) the creditor, the pa)ment to such a person so authori8ed is deemed pa)ment to the creditor! Gnder ordinar) circumstances, pa)ment -) the Bud&ment de-tor in the case at -ar, to the sheriff should -e valid pa)ment to eAtin&uish the Bud&ment de-t! There are circumstances in this case, however, which compel a different conclusion! The pa)ment made -) the petitioner to the a-scondin& sheriff was not in cash or le&al tender -ut in chec(s! The chec(s were not pa)a-le to Amelia Tan or A-le 5rintin& 5ress -ut to the a-scondin& sheriff! Did such pa)ments eAtin&uish the Bud&ment de-tQ Article 1%4$ of the Civil Code provides. The pa)ment of de-ts in mone) shall -e made in the currenc) stipulated, and if it is not possi-le to deliver such currenc), then in the currenc) which is le&al tender in the 5hilippines!
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The deliver) of promissor) notes pa)a-le to order, or -ills of eAchan&e or other mercantile documents shall produce the effect of pa)ment onl) when the) have -een cashed, or when throu&h the fault of the creditor the) have -een impaired! <n the meantime, the action derived from the ori&inal o-li&ation shall -e held in a-e)ance!
<n the a-sence of an a&reement, either eApress or implied, pa)ment means the dischar&e of a de-t or o-li&ation in mone) 3G9 v! Ro-ertson, 5 5et! [G9] @41, , =! ed! %5:4 and unless the parties so a&ree, a de-tor has no ri&hts, eAcept at his own peril, to su-stitute somethin& in lieu of cash as medium of pa)ment of his de-t 3Anderson v! ill, :$ 'd!! +1%, %$ A 5%:, %5 =RA %22,4: Am! 9t! Rep! 42%4! Conse>uentl), unless authori8ed to do so -) law or -) consent of the o-li&ee a pu-lic officer has no authorit) to accept an)thin& other than mone) in pa)ment of an o-li&ation under a Bud&ment -ein& eAecuted! 9trictl) spea(in&, the acceptance -) the sheriff of the petitionerPs chec(s, in the case at -ar, does not, per se, operate as a dischar&e of the Bud&ment de-t! 9ince a ne&otia-le instrument is onl) a su-stitute for mone) and not mone), the deliver) of such an instrument does not, -) itself, operate as pa)ment 39ee! 1,$, Act %2+1 on #e&s! <nsts!6 Art! 1%4$, Civil Code6 *r)an =andon Co! v! American *an(, : 5hil! %556 Tan 9unco v! 9antos, $ 5hil! 446 %1 R!C!=! @2, @14! A chec(, whether a mana&erPs chec( or ordinar) chee(, is not le&al tender, and an offer of a chec( in pa)ment of a de-t is not a valid tender of pa)ment and ma) -e refused receipt -) the o-li&ee or creditor! 'ere deliver) of chec(s does not dischar&e the o-li&ation under a Bud&ment! The o-li&ation is not eAtin&uished and remains suspended until the pa)ment -) commercial document is actuall) reali8ed 3Art! 1%4$, Civil Code, par! +4! <f -ouncin& chec(s had -een issued in the name of Amelia Tan and not the 9heriffPs, there would have -een no pa)ment! After dishonor of the chec(s, 's! Tan could have run after other properties of 5A=! The theor) is that she has received no value for what had -een awarded her! *ecause the chec(s were drawn in the name of Dmilio J! Re)es, neither has she received an)thin&! The same rule should appl)! <t is ar&ued that if 5A= had paid in cash to 9heriff Re)es, there would have -een pa)ment in full le&al contemplation! The reasonin& is lo&ical -ut is it valid and properQ =o&ic has its limits in decision ma(in&! Ce should not follow rulin&s to their lo&ical eAtremes if in doin& so we arrive at unBust or a-surd results! <n the first place, 5A= did not pay in cash! <t paid in chee(s! And second, pa)ment in cash alwa)s carries with it certain cautions! #o-od) hands over -i& amounts of cash in a careless and inane manner! 'ature thou&ht is &iven to the possi-ilit) of the cash -ein& lost, of the -earer -ein& wa)laid or runnin& off with what he is carr)in& for another! 5a)ment in chec(s is precisel) intended to avoid the possi-ilit) of
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the mone) &oin& to the wron& part)! The situation is entirel) different where a 9heriff sei8es a car, a tractor, or a piece of land! =o&ic often has to &ive wa) to eAperience and to realit)! ?avin& paid with chec(s, 5A= should have done so properl)! 5a)ment in mone) or cash to the implementin& officer ma) -e deemed a-solute pa)ment of the Bud&ment de-t -ut the Court has never, in the least -it, su&&ested that Bud&ment de-tors should settle their o-li&ations -) turnin& over hu&e amounts of cash or le&al tender to sheriffs and other eAecutin& officers! 5a)ment in cash would result in dama&e or intermina-le liti&ations each time a sheriff with hu&e amounts of cash in his hands decides to a-scond! As a protective measure, therefore, the courts encoura&e the practice of pa)ments -) chee( provided ade>uate controls are instituted to prevent wron&ful pa)ment and ille&al withdrawal or dis-ursement of funds! <f particularl) -i& amounts are involved, escrow arran&ements with a -an( and carefull) supervised -) the court would -e the safer procedure! Actual transfer of funds ta(es place within the safet) of -an( premises! These practices are perfectl) le&al! The o-Bect is alwa)s the safe and incorrupt eAecution of the Bud&ment! <t is, indeed, out of the ordinar) that chec(s intended for a particular pa)ee are made out in the name of another! 'a(in& the chec(s pa)a-le to the Bud&ment creditor would have prevented the encashment or the ta(in& of undue advanta&e -) the sheriff, or an) person into whose hands the chec(s ma) have fallen, whether wron&full) or in -ehalf of the creditor! The issuance of the chec(s in the name of the sheriff clearl) made possi-le the misappropriation of the funds that were withdrawn! As eAplained and held -) the respondent court. !!! [H]nowin& as it does that the intended pa)ment was for the private part) respondent Amelia Tan, the petitioner corporation, utili8in& the services of its personnel who are or should -e (nowled&ea-le a-out the accepted procedures and resultin& conse>uences of the chec(s drawn, nevertheless, in this instance, without prudence, departed from what is &enerall) o-served and done, and placed as pa)ee in the chec(s the name of the errant 9heriff and not the name of the ri&htful pa)ee! 5etitioner there-) created a situation which permitted the said 9heriff to personall) encash said chec(s and misappropriate the proceeds thereof to his eAclusive personal -enefit! 0or the preBudice that resulted, the petitioner himself must -ear the fault! The Budicial &uideline which we ta(e note of states as follows. As -etween two innocent persons, one of whom must suffer the conse>uence of a -reach of trust, the one who made it possi-le -) his act of confidence must -ear the loss! 3*londeau, et al! v! #ano, et al!, =-41+::, 7ul) %@, 1$+5, @1 5hil! @%54
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?avin& failed to emplo) the proper safe&uards to protect itself, the Bud&ment de-tor whose act made possi-le the loss had -ut itself to -lame! The attention of this Court has -een called to the -ad practice of a num-er of eAecutin& officers, of re>uirin& chec(s in satisfaction of Bud&ment de-ts to -e made out in their own names! <f a sheriff directs a Bud&ment de-tor to issue the chec(s in the sheriffPs name, claimin& he must &et his commission or fees, the de-tor must report the sheriff immediatel) to the court which ordered the eAecution or to the 9upreme Court for appropriate disciplinar) action! 0ees, commissions, and salaries are paid throu&h re&ular channels! This improper procedure also allows such officers, who have siAt) 3@24 da)s within which to ma(e a return, to treat the mone)s as their personal finds and to deposit the same in their private accounts to earn siAt) 3@24 da)s interest, -efore said finds are turned over to the court or Bud&ment creditor 39ee *al&os v! "elasco, 12, 9CRA 5%5 [1$,1]4! Nuite as easil), such officers could put up the defense that said chec(s had -een issued to them in their private or personal capacit)! Cithout a receipt evidencin& pa)ment of the Bud&ment de-t, the misappropriation of finds -) such officers -ecomes clean and complete! The practice is in&enious -ut evil as it unBustl) enriches court personnel at the eApense of liti&ants and the proper administration of Bustice! The temptation could -e far &reater, as proved to -e in this case of the a-scondin& sheriff! The correct and prudent thin& for the petitioner was to have issued the chec(s in the intended pa)eePs name! The pernicious effects of issuin& chec(s in the name of a person other than the intended pa)ee, without the latterPs a&reement or consent, are as man) as the wa)s that an artful mind could concoct to &et around the safe&uards provided -) the law on ne&otia-le instruments! An an&r) liti&ant who loses a case, as a rule, would not want the winnin& part) to &et what he won in the Bud&ment! ?e would thin( of wa)s to dela) the winnin& part)Ps &ettin& what has -een adBud&ed in his favor! Ce cannot condone that practice especiall) in cases where the courts and their officers are involved! Ce rule a&ainst the petitioner! Anent the applica-ilit) of 9ection 15, Rule +$, as follows. 9ection 15! 4;ecution of money (udgments! T The officer must enforce an eAecution of a mone) Bud&ment -) lev)in& on all the propert), real and personal of ever) name and nature whatsoever, and which ma) -e disposed of for value, of the Bud&ment de-tor not eAempt from eAecution, or on a sufficient amount of such propert), if the) -e sufficient, and sellin& the same, and paying to the (udgment creditor, or his attorne), so much of the proceeds as will satisf) the Bud&ment! !!!
the respondent court held. Ce are o-li&ed to rule that the Bud&ment de-t cannot -e considered satisfied and therefore the orders of the respondent Bud&e &rantin& the alias writ of eAecution
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ma) not -e pronounced as a nullit)! AAA AAA AAA <t is clear and manifest that after lev) or &arnishment, for a Bud&ment to -e eAecuted there is the re>uisite of pa)ment -) the officer to the Bud&ment creditor, or his attorne), so much of the proceeds as will satisf) the Bud&ment and none such pa)ment had -een concededl) made )et -) the a-scondin& 9heriff to the private respondent Amelia Tan! The ultimate and essential step to complete the eAecution of the Bud&ment not havin& -een performed -) the Cit) 9heriff, the Bud&ment de-t le&all) and factuall) remains unsatisfied!
9trictl) spea(in& eAecution cannot -e e>uated with satisfaction of a Bud&ment! Gnder unusual circumstances as those o-tainin& in this petition, the distinction comes out clearl)! DAecution is the process which carries into effect a decree or Bud&ment 35ainter v! *er&lund, +1 Cal! App! %d! @+, ,: 5 %d +@2, +@+6 'iller v! =ondon, %$4 'ass +22, 1 #D %d 1$,, %226 *lac(Ps =aw Dictionar)4, whereas the satisfaction of a Bud&ment is the pa)ment of the amount of the writ, or a lawful tender thereof, or the conversion -) sale of the de-torPs propert) into an amount e>ual to that due, and, it ma) -e done otherwise than upon an eAecution 39ection 4:, Rule +$4! =ev) and deliver) -) an eAecution officer are not prere>uisites to the satisfaction of a Bud&ment when the same has alread) -een reali8ed in fact 39ection 4:, Rule +$4! DAecution is for the sheriff to accomplish while satisfaction of the Bud&ment is for the creditor to achieve! 9ection 15, Rule +$ merel) provides the sheriff with his duties as eAecutin& officer includin& deliver) of the proceeds of his lev) on the de-torPs propert) to satisf) the Bud&ment de-t! <t is -ut to stress that the implementin& officerPs dut) should not stop at his receipt of pa)ments -ut must continue until pa)ment is delivered to the o-li&or or creditor! 0inall), we find no error in the respondent courtPs pronouncement on the inclusion of interests to -e recovered under the alias writ of eAecution! This lo&icall) follows from our rulin& that 5A= is lia-le for -oth the lost chec(s and interest! The respondent courtPs decision in CA- !R! #o! 512:$-R does not totall) supersede the trial courtPs Bud&ment in Civil Case #o! :1+2:! <t merel) modified the same as to the principal amount awarded as actual dama&es! C?DRD0/RD, <# "<DC /0 T?D 0/RD /<# , the petition is here-) D<9'<99DD! The Bud&ment of the respondent Court of Appeals is A00<R'DD and the trial courtPs issuance of the alias writ of eAecution a&ainst the petitioner is upheld without preBudice to an) action it should ta(e a&ainst the errant sheriff Dmilio J! Re)es! The Court Administrator is ordered to follow up the actions ta(en a&ainst Dmilio J! Re)es! 9/ /RDDRDD!
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0ernan, C.&., Cru$, Paras, Bidin, 6ri2o"A'uino, #edialdea and *egalado, &&., concur.
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AN! O% THE 0HILI00INE ISLAN"S, petitioner, vs! CO2RT O% A00EALS a#$ EN&AMIN C. NA0IAA, respondents! =NARES<SANTIAGO, J.: This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA!R! C" #o! +:+$% affirmin& in toto that of the Re&ional Trial Court of 'a(ati, *ranch 1+$,% which dismissed the complaint filed -) petitioner *an( of the 5hilippine <slands a&ainst private respondent *enBamin C! #api8a for sum of mone)! /n 9eptem-er +, 1$,:, private respondent deposited in 0orei&n Currenc) Deposit Gnit 30CDG4 9avin&s Account #o! 2%,-1,:+ which he maintained in petitioner -an(Ps *uendia Avenue DAtension *ranch, Continental *an( 'ana&erPs Chec( #o! 22214:5:4 dated Au&ust 1:, 1$,4, pa)a-le to RcashR in the amount of Two Thousand 0ive ?undred Dollars 3V%,522!224 and dul) endorsed -) private respondent on its dorsal side! 5 <t appears that the chec( -elon&ed to a certain ?enr) who went to the office of private respondent and re>uested him to deposit the chec( in his dollar account -) wa) of accommodation and for the purpose of clearin& the same! 5rivate respondent acceded, and a&reed to deliver to Chan a si&ned -lan( withdrawal slip, with the understandin& that as soon as the chec( is cleared, -oth of them would &o to the -an( to withdraw the amount of the chec( upon private respondentPs presentation to the -an( of his pass-oo(! Gsin& the -lan( withdrawal slip &iven -) private respondent to Chan, on /cto-er %+, 1$,4, one Ru-en a)on, 7r! was a-le to withdraw the amount of V%,541!@: from 0CDG 9avin&s Account #o! 2%,-1,:! #ota-l), the withdrawal slip shows that the amount was pa)a-le to Ramon A! de u8man and A&nes C! de u8man and was dul) initialed -) the -ranch assistant mana&er, Teresita =indo!@ /n #ovem-er %2, 1$,4, petitioner received communication from the Cells 0ar&o *an( <nternational of #ew Ior( that the said chec( deposited -) private respondent was a counterfeit chec(: -ecause it was Rnot of the t)pe or st)le of chec(s issued -) Continental *an( <nternational!R, Conse>uentl), 'r! Ariel Re)es, the mana&er of petitionerPs *uendia Avenue DAtension *ranch, instructed one of its emplo)ees, *enBamin D! #api8a <", who is private respondentPs son, to inform his father that the chec( -ounced! $ Re)es himself sent a tele&ram to private respondent re&ardin& the dishonor of the chec(! <n turn, private respondentPs son wrote to Re)es statin& that the chec( -een assi&ned Rfor encashmentR to Ramon A! de u8man and;or A&nes C! de u8man after it shall have -een cleared upon instruction of Chan! ?e also said that upon learnin& of the dishonor of the chec(, his father immediatel) tried to contact Chan -ut the latter was out of town!12 5rivate respondentPs son undertoo( to return the amount of V%,522!22 to petitioner -an(! /n Decem-er 1,, 1$,4, Re)es reminded private respondent of his sonPs promise and
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warned that should he fail to return that amount within seven 3:4 da)s, the matter would -e referred to the -an(Ps law)ers for appropriate action to protect the -an(Ps interest! 11 This was followed -) a letter of the -an(Ps law)er dated April ,, 1$,5 demandin& the return of the V%,522!22!1% <n repl), private respondent wrote petitionerPs counsel on April %2, 1$,5 1+ statin& that he deposited the chec( Rfor clearin& purposesR onl) to accommodate Chan! ?e added. 0urther, please ta(e notice that said chec( was deposited on 9eptem-er +, 1$,4 and withdrawn on /cto-er %+, 1$,4, or a total period of fift) 3524 da)s had elapsed at the time of withdrawal! Also, it ma) not -e amiss to mention here that < merel) si&ned an authorit) to withdraw said deposit su-Bect to its clearin&, the reason wh) the transaction is not reflected in the pass-oo( of the account! *esides, < did not receive its proceeds as ma) -e &leaned from the withdrawal slip under the captioned si&nature of recipient!+,-phi+.nDt <f at all, m) o-li&ation on the transaction is moral in nature, which 3 sic4 < have -een and is 3sic4 still eAertin& utmost and maAimum efforts to collect from 'r! ?enr) Chan who is directl) lia-le under the circumstances! AAA AAA AAA
/n Au&ust 1%, 1$,@, petitioner filed a complaint a&ainst private respondent, pra)in& for the return of the amount of V%,522!22 or the prevailin& peso e>uivalent plus le&al interest from date of demand to date of full pa)ment, a sum e>uivalent to %2F of the total amount due as attorne)Ps fees, and liti&ation and;or costs of suit! 5rivate respondent filed his answer, admittin& that he indeed si&ned a R-lan(R withdrawal slip with the understandin& that the amount deposited would -e withdrawn onl) after the chec( in >uestion has -een cleared! ?e li(ewise alle&ed that he instructed the part) to whom he issued the si&ned -lan( withdrawal slip to return it to him after the -an( draftPs clearance so that he could lend that part) his pass-oo( for the purpose of withdrawin& the amount of V%,522!22! ?owever, without his (nowled&e, said part) was a-le to withdraw the amount of V%,541!@: from his dollar savin&s account throu&h collusion with one of petitionerPs emplo)ees! 5rivate respondent added that he had R&iven the 5laintiff fift) one 3514 da)s with which to clear the -an( draft in >uestion!R 5etitioner should have disallowed the withdrawal -ecause his pass-oo( was not presented! ?e claimed that petitioner had no one to -lame eAcept itself Rfor -ein& &rossl) ne&li&ent6R in fact, it had alle&edl) admitted havin& paid the amount in the chec( R-) mista(eR ! ! ! Rif not altoðer due to collusion and;or -ad faith on the part of 3its4 emplo)ees!R Char&in& petitioner with Rapparent i&norance of routine -an( procedures,R -) wa) of counterclaim, private respondent pra)ed for moral dama&es of 5122,222!22, eAemplar) dama&es of 552,222!22 and attorne)Ps fees of +2F of whatever amount that would -e awarded to him plus an honorarium of 5522!22 per appearance in court! 5rivate respondent also filed a motion for admission of a third part) complaint a&ainst
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Chan! ?e alle&ed that Rthru strate&em and;or manipulation,R Chan was a-le to withdraw the amount of V%,522!22 even without private respondentPs pass-oo(! Thus, private respondent pra)ed that third part) defendant Chan -e made to refund to him the amount withdrawn and to pa) attorne)Ps fees of 55,222!22 plus 5+22!22 honorarium per appearance! 5etitioner filed a comment on the motion for leave of court to admit the third part) complaint, whenever it asserted that per para&raph % of the Rules and Re&ulations &overnin& *5< savin&s accounts, private respondent alone was lia-le Rfor the value of the credit &iven on account of the draft or chec( deposited!R <t contended that private respondent was estopped from disclaimin& lia-ilit) -ecause he himself authori8ed the withdrawal of the amount -) si&nin& the withdrawal slip! 5etitioner pra)ed for the denial of the said motion so as not to undul) dela) the disposition of the main case assertin& that private respondentPs claim could -e ventilated in another case! 5rivate respondent replied that for the parties to o-tain complete relief and to avoid multiplicit) of suits, the motion to admit third part) complaint should -e &ranted! 'eanwhile, the trial court issued orders on Au&ust %5, 1$,: and /cto-er %,, 1$,: directin& private respondent to activel) participate in locatin& Chan! After private respondent failed to compl), the trial court, on 'a) 1,, 1$,,, dismissed the third part) complaint without preBudice! /n #ovem-er 4, 1$$1, a decision was rendered dismissin& the complaint! The lower court held that petitioner could not hold private respondent lia-le -ased on the chec(Ps face value alone! To so hold him lia-le Rwould render inutile the re>uirement of RclearanceR from the drawee -an( -efore the value of a particular forei&n chec( or draft can -e credited to the account of a depositor ma(in& such deposit!R The lower court further held that Rit was incum-ent upon the petitioner to credit the value of the chec( in >uestion to the account of the private respondent only upon receipt of the notice of final payment and should not have authori8ed the withdrawal from the latterPs account of the value or proceeds of the chec(!R ?avin& admitted that it committed a Rmista(eR in not waitin& for the clearance of the chec( -efore authori8in& the withdrawal of its value or proceeds, petitioner should suffer the resultant loss! /n appeal, the Court of Appeals affirmed the lower courtPs decision! The appellate court held that petitioner committed Rclears &ross ne&li&enceR in allowin& Ru-en a)on, 7r! to withdraw the mone) without presentin& private respondentPs pass-oo( and, -efore the chec( was cleared and in creditin& the amount indicated therein in private respondentPs account! <t stressed that the mere deposit of a chec( in private respondentPs account did not mean that the chec( was alread) private respondentPs propert)! The chec( still had to -e cleared and its proceeds can onl) -e withdrawn upon presentation of a pass-oo( in accordance with the -an(Ps rules and re&ulations! 0urthermore, petitionerPs contention that private respondent warranted the chec(Ps &enuineness -) endorsin& it is untena-le for it would render useless the clearance re>uirement! =i(ewise, the re>uirement of presentation of a pass-oo( to ascertain the propriet) of the accountin& reflected would -e a meanin&less eAercise! After all, these re>uirements are desi&ned to protect the -an(
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from deception or fraud! The Court of Appeals cited the case of *oman Catholic Bishop of #alolos, /nc. v. /AC ,14 where this Court stated that a personal chec( is not le&al tender or mone), and held that the chec( deposited in this case must -e cleared -efore its value could -e properl) transferred to private respondentPs account! Cithout filin& a motion for the reconsideration of the Court of AppealsP Decision, petitioner filed this petition for review on certiorari, raisin& the followin& issues. 1! C?DT?DR /R #/T RD95/#DD#T #A5<JA <9 =<A*=D G#DDR ?<9 CARRA#T<D9 A9 A D#DRA= <#D/R9DR! %! C?DT?DR /R #/T A C/#TRACT /0 A D#CI CA9 CRDATDD *DTCDD# RD95/#DD#T #A5<JA A#D RG*D# AI/#! +! C?DT?DR /R #/T 5DT<T</#DR CA9 A==/C<# T?D C<T?DRACA=! R/99=I #D =< D#T <#
5etitioner claims that private respondent, havin& affiAed his si&nature at the dorsal side of the chec(, should -e lia-le for the amount stated therein in accordance with the followin& provision of the #e&otia-le <nstruments =aw 3Act #o! %2+14. 9ec! @@! .iability of general indorser! T Dver) indorser who indorses without >ualification, warrants to all su-se>uent holders in due course T 3a4 The matters and thin&s mentioned in su-divisions 3a4, 3-4, and 3c4 of the neAt precedin& section6 and 3-4 That the instrument is at the time of his indorsement, valid and su-sistin&! And, in addition, he en&a&es that on due presentment, it shall -e accepted or paid, or -oth, as the case ma) -e, accordin& to its tenor, and that if it -e dishonored, and the necessar) proceedin&s on dishonor -e dul) ta(en, he will pa) the amount thereof to the holder, or to an) su-se>uent indorser who ma) -e compelled to pa) it! 9ec! @5, on the other hand, provides for the followin& warranties of a person ne&otiatin& an instrument -) deliver) or -) >ualified indorsement. 3a4 that the instrument is &enuine and in all respects what it purports to -e6 3-4 that he has a &ood title to it, and 3c4 that all prior parties had capacit) to contract!15 <n People v. #aniego,1@ this Court descri-ed the lia-ilities of an indorser as follows. AppellantPs contention that as mere indorser, she ma) not -e lia-le on account of the dishonor of the chec(s indorsed -) her, is li(ewise untena-le! Gnder the law, the holder or last indorsee of a ne&otia-le instrument has the ri&ht Rto enforce pa)ment of the instrument for the full amount thereof a&ainst all parties lia-le thereon! Amon&
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the Rparties lia-le thereon!R <s an indorser of the instrument, i!e!, Ra person placin& his si&nature upon an instrument otherwise than as a ma(er, drawer or acceptor ; ; unless he clearl) indicated -) appropriate words his intention to -e -ound in some other capacit)!R 9uch an indorser Rwho indorses without >ualification,R inter alia Ren&a&es that on due presentment, ; ; 3the instrument4 shall -e accepted or paid, or -oth, as the case ma) -e, accordin& to its tenor, and that if it -e dishonored, and the necessar) proceedin&s on dishonor -e dul) ta(en, he will pa) the amount thereof to the holder, or an) su-se>uent indorser who ma) -e compelled to pa) it!R 'anie&o ma) also -e deemed an Raccommodation part)R in the li&ht of the facts, i!e!, a person Rwho has si&ned the instrument as ma(er, drawer, acceptor, or indorser, without receivin& value thereof, and for the purpose of lendin& his name to some other person!R As such, she is under the law Rlia-le on the instrument to a holder for value, notwithstandin& such holder at the time of ta(in& the instrument (new ; ; 3her4 to -e onl) an accommodation part),R althou&h she has the ri&ht, after pa)in& the holder, to o-tain reim-ursement from the part) accommodated, Rsince the relation -etween them is in effect that of principal and suret), the accommodation part) -ein& the suret)! <t is thus clear that ordinaril) private respondent ma) -e held lia-le as an indorser of the chec( or even as an accommodation part)!1: ?owever, to hold private respondent lia-le for the amount of the chec( he deposited -) the strict application of the law and without considerin& the attendin& circumstances in the case would result in an inBustice and in the erosion of the pu-lic trust in the -an(in& s)stem! The interest of Bustice thus demands loo(in& into the events that led to the encashment of the chec(! 5etitioner asserts that -) si&nin& the withdrawal slip, private respondent Rpresented the opportunit) for the withdrawal of the amount in >uestion!R 5etitioner relied Ron the &enuine si&nature on the withdrawal slip, the personalit) of private respondentPs son and the lapse of more than fift) 3524 da)s from date of deposit of the Continental *an( draft, without the same -ein& returned )et!R1, Ce hold, however, that the propriet) of the withdrawal should -e &au&ed -) compliance with the rules thereon that -oth petitioner -an( and its depositors are dut)--ound to o-serve! <n the pass-oo( that petitioner issued to private respondent, the followin& rules on withdrawal of deposits appear. 4! Cithdrawals must -e made -) the depositor personall) -ut in some eAceptional circumstances, the *an( ma) allow withdrawal -) another upon the depositorPs written authorit) dul) authenticated6 and neither a deposit nor a withdrawal will -e permitted eAcept upon the presentation of the depositorPs savin&s pass-oo(, in which the amount deposited withdrawn shall -e entered onl) -) the *an(! 5! Cithdrawals ma) -e made -) draft, mail or tele&raphic transfer in currenc) of the account at the re>uest of the depositor in writin& on the withdrawal slip or -) authenticated ca-le! 9uch re>uest must indicate the name of the pa)ee;s, amount and the place where the funds are to -e paid! An) stamp, transmission and other char&es
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related to such withdrawals shall -e for the account of the depositor and shall -e paid -) him;her upon demand! Cithdrawals ma) also -e made in the form of travellers chec(s and in pesos! Cithdrawals in the form of notes;-ills are allowed su-Bect however, to their 3availa-ilit)4! @! Deposits shall not -e su-Bect to withdrawal -) chec(, and ma) -e withdrawal onl) in the manner a-ove provided, upon presentation of the depositorPs savin&s pass-oo( and with the withdrawal form supplied -) the *an( at the counter!1$ Gnder these rules, to -e a-le to withdraw from the savin&s account deposit under the 5hilippine forei&n currenc) deposit s)stem, two re>uisites must -e presented to petitioner -an( -) the person withdrawin& an amount. 3a4 a dul) filled-up withdrawal slip, and 3-4 the depositorPs pass-oo(! 5rivate respondent admits he si&ned a -lan( withdrawal slip ostensi-l) in violation of Rule #o! @ re>uirin& that the re>uest for withdrawal must name the pa)ee, the amount to -e withdrawn and the place where such withdrawal should -e made! That the withdrawal slip was in fact a -lan( one with onl) private respondentPs two si&natures affiAed on the proper spaces is -uttressed -) petitionerPs alle&ation in the instant petition that had private respondent indicated therein the person authori8ed to receive the mone), then Ru-en a)on, 7r! could not have withdrawn an) amount! 5etitioner contends that R3<4n failin& to do so 3i!e!, namin& his authori8ed a&ent4, he practicall) authori8ed an) possessor thereof to write an) amount and to collect the same!R%2 9uch contention would have -een valid if not for the fact that the withdrawal slip itself indicates a special instruction that the amount is pa)a-le to RRamon A! de u8man S;or A&nes C! de u8man!R 9uch -ein& the case, petitionerPs personnel should have -een dul) warned that a)on, who was also emplo)ed in petitionerPs *uendia Ave! DAtension -ranch,%1 was not the proper pa)ee of the proceeds of the chec(! /therwise, either Ramon or A&nes de u8man should have issued another authorit) to a)on for such withdrawal! /f course, at the dorsal side of the withdrawal slip is an Rauthorit) to withdrawR namin& a)on the person who can withdraw the amount indicated in the chec(! 5rivate respondent does not den) havin& si&ned such authorit)! ?owever, considerin& petitionerPs clear admission that the withdrawal slip was a -lan( one eAcept for private respondentPs si&nature, the unavoida-le conclusion is that the t)pewritten name of RRu-en C! a)on, 7r!R was intercalated and thereafter it was si&ned -) a)on or whoever was allowed -) petitioner to withdraw the amount! Gnder these facts, there could not have -een a principal-a&ent relationship -etween private respondent and a)on so as to render the former lia-le for the amount withdrawn! 'oreover, the withdrawal slip contains a -oAed warnin& that states. RThis receipt must -e si&ned and presented with the correspondin& forei&n currenc) savin&s pass-oo( -) the depositor in person! 0or withdrawals thru a representative, depositor should accomplish the authorit) at the -ac(!R The re>uirement of presentation of the pass-oo( when withdrawin& an amount cannot -e &iven mere lip service even thou&h the person ma(in& the withdrawal is authori8ed -) the depositor to do so! This is clear from Rule #o! @ set out -) petitioner so that, for the protection of the -an(Ps interest and as a reminder to the
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depositor, the withdrawal shall -e entered in the depositorPs pass-oo(! The fact that private respondentPs pass-oo( was not presented durin& the withdrawal is evidenced -) the entries therein showin& that the last transaction that he made with the -an( was on 9eptem-er +, 1$,4, the date he deposited the controversial chec( in the amount of V%,522!22!%% <n allowin& the withdrawal, petitioner li(ewise overloo(ed another rule that is printed in the pass-oo(! Thus. %! All deposits will -e received as current funds and will -e repaid in the same manner6 provided, however, that deposits of drafts, checks, mone) orders, etc! -ill be accented as sub(ect to collection only and credited to the account only upon receipt of the notice of final payment! Collection char&es -) the *an(Ps forei&n correspondent in effectin& such collection shall -e for the account of the depositor! <f the account has sufficient -alance, the collection shall -e de-ited -) the *an( a&ainst the account! <f, for an) reason, the proceeds of the deposited chec(s, drafts, mone) orders, etc!, cannot -e collected or if the *an( is re>uired to return such proceeds, the provisional entr) therefor made -) the *an( in the savin&s pass-oo( and its records shall -e deemed automaticall) cancelled re&ardless of the time that has elapsed, and whether or not the defective items can -e returned to the depositor6 and the *an( is here-) authori8ed to eAecute immediatel) the necessar) corrections, amendments or chan&es in its record, as well as on the savin&s pass-oo( at the first opportunit) to reflect such cancellation! 3Dmphasis and underlinin& supplied!4 As correctl) held -) the Court of Appeals, in depositin& the chec( in his name, private respondent did not -ecome the outri&ht owner of the amount stated therein! Gnder the a-ove rule, -) depositin& the chec( with petitioner, private respondent was, in a wa), merel) desi&natin& petitioner as the collectin& -an(! This is in consonance with the rule that a ne&otia-le instrument, such as a chec(, whether a mana&erPs chec( or ordinar) chec(, is not le&al tender!%+ As such, after receivin& the deposit, under its own rules, petitioner shall credit the amount in private respondentPs account or infuse value thereon onl) after the drawee -an( shall have paid the amount of the chec( or the chec( has -een cleared for deposit! A&ain, this is in accordance with ordinar) -an(in& practices and with this CourtPs pronouncement that Rthe collectin& -an( or last endorser &enerall) suffers the loss -ecause has the dut) to ascertain the &enuineness of all prior endorsements considerin& that the act of presentin& the chec( for pa)ment to the drawee is an assertion that the part) ma(in& the presentment has done its dut) to ascertain the &enuineness of the endorsements!R%4 The rule finds more meanin& in this case where the chec( involved is drawn on a forei&n -an( and therefore collection is more difficult than when the drawee -an( is a local one even thou&h the chec( in >uestion is a mana&erPs chec(!%5 <n Banco Atlantico v! Auditor 6eneral,%@ *anco Atlantico, a commercial -an( in 'adrid, 9pain, paid the amounts represented in three 3+4 chec(s to "ir&inia *oncan, the finance officer of the 5hilippine Dm-ass) in 'adrid! The -an( did so without previousl) clearin& the chec(s with the drawee -an(, the 5hilippine #ational *an( in #ew Ior(, on account of the Rspecial treatmentR that *oncan received from the personnel of *anco AtlanticoPs
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forei&n department! The Court held that the encashment of the chec(s without prior clearance is Rcontrar) to normal or ordinar) -an(in& practice speciall) so where the drawee -an( is a forei&n -an( and the amounts involved were lar&e!R Accordin&l), the Court approved the Auditor eneralPs denial of *anco AtlanticoPs claim for pa)ment of the value of the chec(s that was withdrawn -) *oncan! 9aid rulin& -rin&s to li&ht the fact that the -an(in& -usiness is affected with pu-lic interest! *) the nature of its functions, a -an( is under o-li&ation to treat the accounts of its depositors Rwith meticulous care, alwa)s havin& in mind the fiduciar) nature of their relationship!R%: As such, in dealin& with its depositors, a -an( should eAercise its functions not onl) with the dili&ence of a &ood father of a famil) -ut it should do so with the hi&hest de&ree of care!%, <n the case at -ar, petitioner, in allowin& the withdrawal of private respondentPs deposit, failed to eAercise the dili&ence of a &ood father of a famil)! <n total disre&ard of its own rules, petitionerPs personnel ne&li&entl) handled private respondentPs account to petitionerPs detriment! As this Court once said on this matter. #e&li&ence is the omission to do somethin& which a reasona-le man, &uided -) those considerations which ordinaril) re&ulate the conduct of human affairs, would do, or the doin& of somethin& which a prudent and reasona-le man would do! The sevent)ei&ht 3:,4-)ear-old, )et still relevant, case of 5icart v! 9mith, provides that test -) which to determine the eAistence of ne&li&ence in a particular case which ma) -e stated as follows. Did the defendant in doin& the alle&ed ne&li&ent act use that reasona-le care and caution which an ordinaril) prudent person would have used in the same situationQ <f not, then he is &uilt) of ne&li&ence! The law here in effect adopts the standard supposed to -e supplied -) the ima&inar) conduct of the discreet pater"familias of the Roman law! The eAistence of ne&li&ence in a &iven case is not determined -) reference to the personal Bud&ment of the actor in the situation -efore him! The law considers what would -e rec(less, -lameworth), or ne&li&ent in the man of ordinar) intelli&ence and prudence and determines lia-ilit) -) that!%$ 5etitioner violated its own rules -) allowin& the withdrawal of an amount that is definitel) over and a-ove the a&&re&ate amount of private respondentPs dollar deposits that had )et to -e cleared! The -an(Ps led&er on private respondentPs account shows that -efore he deposited V%,522!22, private respondent had a -alance of onl) V:52!22! +2 Gpon private respondentPs deposit of V%,522!22 on 9eptem-er +, 1$,4, that amount was credited in his led&er as a deposit resultin& in the correspondin& total -alance of V+,%52!22! +1 /n 9eptem-er 12, 1$,4, the amount of V@22!22 and the additional char&es of V12!22 were indicated therein as withdrawn there-) leavin& a -alance V%,@42!22! /n 9eptem-er +2, 1$,4, an interest of V11!5$ was reflected in the led&er and on /cto-er %+, 1$,4, the amount of V%,541!@: was entered as withdrawn with a -alance of V12$!$%! +% /n #ovem-er 1$, 1$,4 the word RholdR was written -eside the -alance of V12$!$%! ++ That must have -een the time when Re)es, petitionerPs -ranch mana&er, was informed unofficiall) of the fact that the chec( deposited was a counterfeit, -ut petitionerPs *uendia Ave! DAtension *ranch received a cop) of the communication thereon from Cells 0ar&o
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*an( <nternational in #ew Ior( the followin& da), #ovem-er %2, 1$,4! +4 Accordin& to Re)es, Cells 0ar&o *an( <nternational handled the clearin& of chec(s drawn a&ainst G!9! -an(s that were deposited with petitioner!+5 0rom these facts on record, it is at once apparent that petitionerPs personnel allowed the withdrawal of an amount -i&&er than the ori&inal deposit of V:52!22 and the value of the chec( deposited in the amount of V%,522!22 althou&h the) had not )et received notice from the clearin& -an( in the Gnited 9tates on whether or not the chec( was funded! Re)esP contention that after the lapse of the +5-da) period the amount of a deposited chec( could -e withdrawn even in the a-sence of a clearance thereon, otherwise it could ta(e a lon& time -efore a depositor could ma(e a withdrawal, +@ is untena-le! 9aid practice amounts to a disre&ard of the clearance re>uirement of the -an(in& s)stem! Chile it is true that private respondentPs havin& si&ned a -lan( withdrawal slip set in motion the events that resulted in the withdrawal and encashment of the counterfeit chec(, the ne&li&ence of petitionerPs personnel was the proAimate cause of the loss that petitioner sustained! 5roAimate cause, which is determined -) a miAed consideration of lo&ic, common sense, polic) and precedent, is Rthat cause, which, in natural and continuous se>uence, un-ro(en -) an) efficient intervenin& cause, produces the inBur), and without which the result would not have occurred!R +: The proAimate cause of the withdrawal and eventual loss of the amount of V%,522!22 on petitionerPs part was its personnelPs ne&li&ence in allowin& such withdrawal in disre&ard of its own rules and the clearin& re>uirement in the -an(in& s)stem! <n so doin&, petitioner assumed the ris( of incurrin& a loss on account of a for&ed or counterfeit forei&n chec( and hence, it should suffer the resultin& dama&e!+,-phi+.nDt C?DRD0/RD, the petition for review on certiorari is DD#<DD! The Decision of the Court of Appeals in CA- !R! C" #o! +:+$% is A00<R'DD! 9/ /RDDRDD! 1avide, &r., C.&., Puno, Eapunan and Pardo, &&., concur!
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