[Philippine Education Co., Inc. vs.

Soriano, 39 SCRA 587(1971)]

Statutes; Interpretation of statutes; Philippine Postal statutes being patterned after
United, States postal statutes are generally construed according to the latter.It is
not disputed that our postal statutes were patterned after similar statutes in force in
the United States. For this reason, ours are generally construed in accordance with
the construction given in the United States to their own postal statutes, in the
absence of any special reason justifying a departure from this policy or practice.
Negotiable instruments laws; Postal money order is not a negotiable instrument.
The weight of authority in the United States is that postal money orders are not
negotiable instruments, the reason being that in establishing and operating a postal
money order system, the government is not engaged in commercial transactions but
merely exercises a governmental power for the public benefit. Moreover, some of
the restrictions imposed upon money orders by postal laws and regulations are
inconsistent with the character of negotiable instruments. For instance, such laws
and regulations usually provide for not more than one endorsement; payment of
money orders may be withheld under a variety of circumstances (49 C.J., 1153).
[Philippine Education Co., Inc. vs. Soriano, 39 SCRA 587(1971)]
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-22405 June 30, 1971

PHILIPPINE EDUCATION CO., INC., plaintiff-appellant,
vs.
MAURICIO A. SORIANO, ET AL., defendant-appellees.
Marcial Esposo for plaintiff-appellant.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio G.
Ibarra and Attorney Concepcion Torrijos-Agapinan for defendants-appellees.

DIZON, J.:
An appeal from a decision of the Court of First Instance of Manila dismissing the
complaint filed by the Philippine Education Co., Inc. against Mauricio A. Soriano,
Enrico Palomar and Rafael Contreras.
On April 18, 1958 Enrique Montinola sought to purchase from the Manila Post Office
ten (10) money orders of P200.00 each payable to E.P. Montinola withaddress at
Lucena, Quezon. After the postal teller had made out money ordersnumbered

124685, 124687-124695, Montinola offered to pay for them with a private checks
were not generally accepted in payment of money orders, the teller advised him to
see the Chief of the Money Order Division, but instead of doing so, Montinola
managed to leave building with his own check and the ten(10) money orders without
the knowledge of the teller.
On the same date, April 18, 1958, upon discovery of the disappearance of the
unpaid money orders, an urgent message was sent to all postmasters, and the
following day notice was likewise served upon all banks, instructing them not to pay
anyone of the money orders aforesaid if presented for payment. The Bank of
America received a copy of said notice three days later.
On April 23, 1958 one of the above-mentioned money orders numbered 124688 was
received by appellant as part of its sales receipts. The following day it deposited the
same with the Bank of America, and one day thereafter the latter cleared it with the
Bureau of Posts and received from the latter its face value of P200.00.
On September 27, 1961, appellee Mauricio A. Soriano, Chief of the Money Order
Division of the Manila Post Office, acting for and in behalf of his co-appellee,
Postmaster Enrico Palomar, notified the Bank of America that money order No.
124688 attached to his letter had been found to have been irregularly issued and
that, in view thereof, the amount it represented had been deducted from the bank's
clearing account. For its part, on August 2 of the same year, the Bank of America
debited appellant's account with the same amount and gave it advice thereof by
means of a debit memo.
On October 12, 1961 appellant requested the Postmaster General to reconsider the
action taken by his office deducting the sum of P200.00 from the clearing account of
the Bank of America, but his request was denied. So was appellant's subsequent
request that the matter be referred to the Secretary of Justice for advice. Thereafter,
appellant elevated the matter to the Secretary of Public Works and Communications,
but the latter sustained the actions taken by the postal officers.
In connection with the events set forth above, Montinola was charged with theft in
the Court of First Instance of Manila (Criminal Case No. 43866) but after trial he was
acquitted on the ground of reasonable doubt.
On January 8, 1962 appellant filed an action against appellees in the Municipal Court
of Manila praying for judgment as follows:
WHEREFORE, plaintiff prays that after hearing defendants be
ordered:
(a) To countermand the notice given to the Bank of America on
September 27, 1961, deducting from the said Bank's clearing
account the sum of P200.00 represented by postal money order
No. 124688, or in the alternative indemnify the plaintiff in the
same amount with interest at 8-% per annum from September
27, 1961, which is the rate of interest being paid by plaintiff on its
overdraft account;

(b) To pay to the plaintiff out of their own personal funds, jointly
and severally, actual and moral damages in the amount of
P1,000.00 or in such amount as will be proved and/or determined
by this Honorable Court: exemplary damages in the amount of
P1,000.00, attorney's fees of P1,000.00, and the costs of action.
Plaintiff also prays for such other and further relief as may be
deemed just and equitable.
On November 17, 1962, after the parties had submitted the stipulation of facts
reproduced at pages 12 to 15 of the Record on Appeal, the above-named court
rendered judgment as follows:
WHEREFORE, judgment is hereby rendered, ordering the
defendants to countermand the notice given to the Bank of
America on September 27, 1961, deducting from said Bank's
clearing account the sum of P200.00 representing the amount of
postal money order No. 124688, or in the alternative, to indemnify
the plaintiff in the said sum of P200.00 with interest thereon at the
rate of 8-% per annum from September 27, 1961 until fully paid;
without any pronouncement as to cost and attorney's fees.
The case was appealed to the Court of First Instance of Manila where, after the
parties had resubmitted the same stipulation of facts, the appealed decision
dismissing the complaint, with costs, was rendered.
The first, second and fifth assignments of error discussed in appellant's brief are
related to the other and will therefore be discussed jointly. They raise this main
issue: that the postal money order in question is a negotiable instrument; that its
nature as such is not in anyway affected by the letter dated October 26, 1948 signed
by the Director of Posts and addressed to all banks with a clearing account with the
Post Office, and that money orders, once issued, create a contractual relationship of
debtor and creditor, respectively, between the government, on the one hand, and
the remitters payees or endorses, on the other.
It is not disputed that our postal statutes were patterned after statutes in force in
the United States. For this reason, ours are generally construed in accordance with
the construction given in the United States to their own postal statutes, in the
absence of any special reason justifying a departure from this policy or practice. The
weight of authority in the United States is that postal money orders are not
negotiable instruments (Bolognesi vs. U.S. 189 Fed. 395; U.S. vs. Stock Drawers
National Bank, 30 Fed. 912), the reason behind this rule being that, in establishing
and operating a postal money order system, the government is not engaging in
commercial transactions but merely exercises a governmental power for the public
benefit.
It is to be noted in this connection that some of the restrictions imposed upon
money orders by postal laws and regulations are inconsistent with the character of
negotiable instruments. For instance, such laws and regulations usually provide for
not more than one endorsement; payment of money orders may be withheld under
a variety of circumstances (49 C.J. 1153).

Of particular application to the postal money order in question are the conditions
laid down in the letter of the Director of Posts of October 26, 1948 (Exhibit 3) to the
Bank of America for the redemption of postal money orders received by it from its
depositors. Among others, the condition is imposed that "in cases of adverse claim,
the money order or money orders involved will be returned to you (the bank) and
the, corresponding amount will have to be refunded to the Postmaster, Manila, who
reserves the right to deduct the value thereof from any amount due you if such step
is deemed necessary." The conditions thus imposed in order to enable the bank to
continue enjoying the facilities theretofore enjoyed by its depositors, were accepted
by the Bank of America. The latter is therefore bound by them. That it is so is clearly
referred from the fact that, upon receiving advice that the amount represented by
the money order in question had been deducted from its clearing account with the
Manila Post Office, it did not file any protest against such action.
Moreover, not being a party to the understanding existing between the postal
officers, on the one hand, and the Bank of America, on the other, appellant has no
right to assail the terms and conditions thereof on the ground that the letter setting
forth the terms and conditions aforesaid is void because it was not issued by a
Department Head in accordance with Sec. 79 (B) of the Revised Administrative
Code. In reality, however, said legal provision does not apply to the letter in question
because it does not provide for a department regulation but merely sets down
certain conditions upon the privilege granted to the Bank of Amrica to accept and
pay postal money orders presented for payment at the Manila Post Office. Such
being the case, it is clear that the Director of Posts had ample authority to issue it
pursuant to Sec. 1190 of the Revised Administrative Code.
In view of the foregoing, We do not find it necessary to resolve the issues raised in
the third and fourth assignments of error.
WHEREFORE, the appealed decision being in accordance with law, the same is
hereby affirmed with costs.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Teehankee, Barredo
and Villamor, JJ., concur.

Philippine Airlines, Inc. vs. Court of Appeals, 181 SCRA 557(1990)

Civil Procedure; Execution; A judgment cannot be rendered nugatory by the
unreasonable application of a strict rule of procedure. So long as a judgment is not
satisfied, a plaintiff is entitled to other writs of execution.Indeed, technicality
cannot be countenanced to defeat the execution of a judgment for execution is the
fruit and end of the suit and is very aptly called the life of the law (Ipekdjian
Merchandising Co. v. Court of Tax Appeals, 8 SCRA 59 [1963]; Commissioner of
Internal Revenue v. Visayan Electric Co., 19 SCRA 697, 698 [1967]). A judgment
cannot be rendered nugatory by the unreasonable application of a strict rule of
procedure. Vested rights were never intended to rest on the requirement of a return,
the office of which is merely to inform the court and the parties, of any and all
actions taken under the writ of execution. Where such information can be
established in some other manner, the absence of an executing officers return will
not preclude a judgment from being treated as discharged or being executed
through an alias writ of execution as the case may be. More so, as in the case at bar.
Where the return cannot be expected to be forthcoming, to require the same would
be to compel the enforcement of rights under a judgment to rest on an impossibility,
thereby allowing the total avoidance of judgment debts. So long as a judgment is
not satisfied, a plaintiff is entitled to other writs of execution (Government of the
Philippines v. Echaus and Gonzales, 71 Phil. 318). It is a well known legal maxim that
he who cannot prosecute his judgment with effect, sues his case vainly.
Civil Law; Payment; The payment to the absconding sheriff by check in his name did
not operate as satisfaction of the judgment debt.Under the peculiar circumstances
of this case, the payment to the absconding sheriff by check in his name did not
operate as a satisfaction of the judgment debt.
Same; Same; A payment in order to be effective to discharge an obligation must be
made to the proper person.In general, a payment, in order to be effective to
discharge an obligation, must be made to the proper person. Thus, payment must
be made to the obligee himself or to an agent having authority, express or implied,
to receive the particular payment (Ulen v. Knecttle, 50 Wyo. 94, 58 [2d] 446, 11 ALR
65). Payment made to one having apparent authority to receive the money will, as a
rule, be treated as though actual authority had been given for its receipt. Likewise, if
payment is made to one who by law is authorized to act for the creditor, it will work
a discharge (Hendry v. Benlisa, 37 Fla. 609, 20 SO 800, 34 LRA 283). The receipt of
money due on a judgment by an officer authorized by law to accept it will, therefore,
satisfy the debt.
Same; Same; Same; Ordinarily, payment by the judgment debtor in the case at bar,
to the sheriff should be valid payment to extinguish the judgment debt.The theory
is where payment is made to a person authorized and recognized by the creditor,
the payment to such a person so authorized is deemed payment to the creditor.
Under ordinary circumstances, payment by the judgment debtor in the case at bar,
to the sheriff should be valid payment to extinguish the judgment debt.
Same; Same; Unless authorized to do so by law or by consent of the obligee, a
public officer has no authority to accept anything other than money in payment of
an obligation under a judgment being executed.In the absence of an agreement,
either express or implied, payment means the discharge of a debt or obligation in
money (US v. Robertson,5 Pet. [US] 641, 8 L. ed. 257) and unless the parties so
agree, a debtor has no rights, except at his own peril, to substitute something in lieu

of cash as medium of payment of his debt (Anderson v. Gill, 79 Md. 312, 29 A 527,
25 LRA 200, 47 Am. St. Rep. 402). Consequently, unless authorized to do so by law
or by consent of the obligee, a public officer has no authority to accept anything
other than money in payment of an obligation under a judgment being executed.
Strictly speaking, the acceptance by the sheriff of the petitioners checks, in the
case at bar, does not, per se, operate as a discharge of the judgment debt.
Commercial Law; Negotiable Instruments Law; A check whether managers check or
ordinary check is not a legal tender and an offer of a check in payment of a debt is
not a valid tender of payment and may be refused receipt by the obligee or creditor.
Since a negotiable instrument is only a substitute for money and not money, the
delivery of such an instrument does not, by itself, operate as payment (Sec. 189, Act
2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7
Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61) A check, whether a
managers check or ordinary check, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be refused receipt by
the obligee or creditor. Mere delivery of checks does not discharge the obligation
under a judgment. The obligation is not extinguished and remains suspended until
the payment by commercial document is actually realized. [Philippine Airlines, Inc.
vs. Court of Appeals, 181 SCRA 557(1990)]
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-49188 January 30, 1990
PHILIPPINE AIRLINES, INC., petitioner,
vs.
HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance
of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance,
Manila, and AMELIA TAN, respondents.

GUTIERREZ, JR., J.:

Behind the simple issue of validity of an alias writ of execution in this case is a more
fundamental question. Should the Court allow a too literal interpretation of the Rules
with an open invitation to knavery to prevail over a more discerning and just
approach? Should we not apply the ancient rule of statutory construction that laws
are to be interpreted by the spirit which vivifies and not by the letter which killeth?
This is a petition to review on certiorari the decision of the Court of Appeals in CAG.R. No. 07695 entitled "Philippine Airlines, Inc. v. Hon. Judge Ricardo D. Galano, et
al.", dismissing the petition for certiorari against the order of the Court of First
Instance of Manila which issued an alias writ of execution against the petitioner.
The petition involving the alias writ of execution had its beginnings on November 8,
1967, when respondent Amelia Tan, under the name and style of Able Printing Press
commenced a complaint for damages before the Court of First Instance of Manila.
The case was docketed as Civil Case No. 71307, entitled Amelia Tan, et al. v.
Philippine Airlines, Inc.

After trial, the Court of First Instance of Manila, Branch 13, then presided over by the
late Judge Jesus P. Morfe rendered judgment on June 29, 1972, in favor of private
respondent Amelia Tan and against petitioner Philippine Airlines, Inc. (PAL) as
follows:

Four months later, on February 11, 1978, respondent Amelia Tan moved for the
issuance of an alias writ of execution stating that the judgment rendered by the
lower court, and affirmed with modification by the Court of Appeals, remained
unsatisfied.

WHEREFORE, judgment is hereby rendered, ordering the defendant Philippine Air

Lines:

On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of
an alias writ of execution stating that it had already fully paid its obligation to
plaintiff through the deputy sheriff of the respondent court, Emilio Z. Reyes, as
evidenced by cash vouchers properly signed and receipted by said Emilio Z. Reyes.

1. On the first cause of action, to pay to the plaintiff the amount of P75,000.00 as
actual damages, with legal interest thereon from plaintiffs extra-judicial demand
made by the letter of July 20, 1967;
2. On the third cause of action, to pay to the plaintiff the amount of P18,200.00,
representing the unrealized profit of 10% included in the contract price of
P200,000.00 plus legal interest thereon from July 20,1967;

On March 3,1978, the Court of Appeals denied the issuance of the alias writ for
being premature, ordering the executing sheriff Emilio Z. Reyes to appear with his
return and explain the reason for his failure to surrender the amounts paid to him by
petitioner PAL. However, the order could not be served upon Deputy Sheriff Reyes
who had absconded or disappeared.

3. On the fourth cause of action, to pay to the plaintiff the amount of P20,000.00 as
and for moral damages, with legal interest thereon from July 20, 1 967;

On March 28, 1978, motion for the issuance of a partial alias writ of execution was
filed by respondent Amelia Tan.

4. On the sixth cause of action, to pay to the plaintiff the amount of P5,000.00
damages as and for attorney's fee.

On April 19, 1978, respondent Amelia Tan filed a motion to withdraw "Motion for
Partial Alias Writ of Execution" with Substitute Motion for Alias Writ of Execution. On
May 1, 1978, the respondent Judge issued an order which reads:

Plaintiffs second and fifth causes of action, and defendant's counterclaim, are
dismissed.
With costs against the defendant. (CA Rollo, p. 18)
On July 28, 1972, the petitioner filed its appeal with the Court of Appeals. The case
was docketed as CA-G.R. No. 51079-R.
On February 3, 1977, the appellate court rendered its decision, the dispositive
portion of which reads:
IN VIEW WHEREOF, with the modification that PAL is condemned to pay plaintiff the
sum of P25,000.00 as damages and P5,000.00 as attorney's fee, judgment is
affirmed, with costs. (CA Rollo, p. 29)
Notice of judgment was sent by the Court of Appeals to the trial court and on dates
subsequent thereto, a motion for reconsideration was filed by respondent Amelia
Tan, duly opposed by petitioner PAL.
On May 23,1977, the Court of Appeals rendered its resolution denying the
respondent's motion for reconsideration for lack of merit.
No further appeal having been taken by the parties, the judgment became final and
executory and on May 31, 1977, judgment was correspondingly entered in the case.
The case was remanded to the trial court for execution and on September 2,1977,
respondent Amelia Tan filed a motion praying for the issuance of a writ of execution
of the judgment rendered by the Court of Appeals. On October 11, 1977, the trial
court, presided over by Judge Galano, issued its order of execution with the
corresponding writ in favor of the respondent. The writ was duly referred to Deputy
Sheriff Emilio Z. Reyes of Branch 13 of the Court of First Instance of Manila for
enforcement.

As prayed for by counsel for the plaintiff, the Motion to Withdraw 'Motion for Partial
Alias Writ of Execution with Substitute Motion for Alias Writ of Execution is hereby
granted, and the motion for partial alias writ of execution is considered withdrawn.
Let an Alias Writ of Execution issue against the defendant for the fall satisfaction of
the judgment rendered. Deputy Sheriff Jaime K. del Rosario is hereby appointed
Special Sheriff for the enforcement thereof. (CA Rollo, p. 34)
On May 18, 1978, the petitioner received a copy of the first alias writ of execution
issued on the same day directing Special Sheriff Jaime K. del Rosario to levy on
execution in the sum of P25,000.00 with legal interest thereon from July 20,1967
when respondent Amelia Tan made an extra-judicial demand through a letter. Levy
was also ordered for the further sum of P5,000.00 awarded as attorney's fees.
On May 23, 1978, the petitioner filed an urgent motion to quash the alias writ of
execution stating that no return of the writ had as yet been made by Deputy Sheriff
Emilio Z. Reyes and that the judgment debt had already been fully satisfied by the
petitioner as evidenced by the cash vouchers signed and receipted by the server of
the writ of execution, Deputy Sheriff Emilio Z. Reyes.
On May 26,1978, the respondent Jaime K. del Rosario served a notice of garnishment
on the depository bank of petitioner, Far East Bank and Trust Company, Rosario
Branch, Binondo, Manila, through its manager and garnished the petitioner's deposit
in the said bank in the total amount of P64,408.00 as of May 16, 1978. Hence, this
petition for certiorari filed by the Philippine Airlines, Inc., on the grounds that:
I
AN ALIAS WRIT OF EXECUTION CANNOT BE ISSUED WITHOUT PRIOR RETURN OF THE
ORIGINAL WRIT BY THE IMPLEMENTING OFFICER.
II

PAYMENT OF JUDGMENT TO THE IMPLEMENTING OFFICER AS DIRECTED IN THE WRIT

OF EXECUTION CONSTITUTES SATISFACTION OF JUDGMENT.

Philippines v. Echaus and Gonzales, 71 Phil. 318). It is a well known legal maxim that
he who cannot prosecute his judgment with effect, sues his case vainly.

III

More important in the determination of the propriety of the trial court's issuance of
an alias writ of execution is the issue of satisfaction of judgment.

INTEREST IS NOT PAYABLE WHEN THE DECISION IS SILENT AS TO THE PAYMENT

THEREOF.
IV
SECTION 5, RULE 39, PARTICULARLY REFERS TO LEVY OF PROPERTY OF JUDGMENT
DEBTOR AND DISPOSAL OR SALE THEREOF TO SATISFY JUDGMENT.
Can an alias writ of execution be issued without a prior return of the original writ by
the implementing officer?
We rule in the affirmative and we quote the respondent court's decision with
approval:
The issuance of the questioned alias writ of execution under the circumstances here
obtaining is justified because even with the absence of a Sheriffs return on the
original writ, the unalterable fact remains that such a return is incapable of being
obtained (sic) because the officer who is to make the said return has absconded and
cannot be brought to the Court despite the earlier order of the court for him to
appear for this purpose. (Order of Feb. 21, 1978, Annex C, Petition). Obviously,
taking cognizance of this circumstance, the order of May 11, 1978 directing the
issuance of an alias writ was therefore issued. (Annex D. Petition). The need for such
a return as a condition precedent for the issuance of an alias writ was justifiably
dispensed with by the court below and its action in this regard meets with our
concurrence. A contrary view will produce an abhorent situation whereby the
mischief of an erring officer of the court could be utilized to impede indefinitely the
undisputed and awarded rights which a prevailing party rightfully deserves to obtain
and with dispatch. The final judgment in this case should not indeed be permitted to
become illusory or incapable of execution for an indefinite and over extended
period, as had already transpired. (Rollo, pp. 35-36)
Judicium non debet esse illusorium; suum effectum habere debet (A judgment ought
not to be illusory it ought to have its proper effect).
Indeed, technicality cannot be countenanced to defeat the execution of a judgment
for execution is the fruit and end of the suit and is very aptly called the life of the
law (Ipekdjian Merchandising Co. v. Court of Tax Appeals, 8 SCRA 59 [1963];
Commissioner of Internal Revenue v. Visayan Electric Co., 19 SCRA 697, 698 [1967]).
A judgment cannot be rendered nugatory by the unreasonable application of a strict
rule of procedure. Vested rights were never intended to rest on the requirement of a
return, the office of which is merely to inform the court and the parties, of any and
all actions taken under the writ of execution. Where such information can be
established in some other manner, the absence of an executing officer's return will
not preclude a judgment from being treated as discharged or being executed
through an alias writ of execution as the case may be. More so, as in the case at bar.
Where the return cannot be expected to be forthcoming, to require the same would
be to compel the enforcement of rights under a judgment to rest on an impossibility,
thereby allowing the total avoidance of judgment debts. So long as a judgment is
not satisfied, a plaintiff is entitled to other writs of execution (Government of the

Under the peculiar circumstances surrounding this case, did the payment made to
the absconding sheriff by check in his name operate to satisfy the judgment debt?
The Court rules that the plaintiff who has won her case should not be adjudged as
having sued in vain. To decide otherwise would not only give her an empty but a
pyrrhic victory.
It should be emphasized that under the initial judgment, Amelia Tan was found to
have been wronged by PAL.
She filed her complaint in 1967.
After ten (10) years of protracted litigation in the Court of First Instance and the
Court of Appeals, Ms. Tan won her case.
It is now 1990.
Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the
courts have solemnly declared as rightfully hers. Through absolutely no fault of her
own, Ms. Tan has been deprived of what, technically, she should have been paid
from the start, before 1967, without need of her going to court to enforce her rights.
And all because PAL did not issue the checks intended for her, in her name.
Under the peculiar circumstances of this case, the payment to the absconding sheriff
by check in his name did not operate as a satisfaction of the judgment debt.
In general, a payment, in order to be effective to discharge an obligation, must be
made to the proper person. Article 1240 of the Civil Code provides:
Payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.
(Emphasis supplied)
Thus, payment must be made to the obligee himself or to an agent having authority,
express or implied, to receive the particular payment (Ulen v. Knecttle 50 Wyo 94,
58 [2d] 446, 111 ALR 65). Payment made to one having apparent authority to
receive the money will, as a rule, be treated as though actual authority had been
given for its receipt. Likewise, if payment is made to one who by law is authorized to
act for the creditor, it will work a discharge (Hendry v. Benlisa 37 Fla. 609, 20 SO
800,34 LRA 283). The receipt of money due on ajudgment by an officer authorized
by law to accept it will, therefore, satisfy the debt (See 40 Am Jm 729, 25; Hendry v.
Benlisa supra; Seattle v. Stirrat 55 Wash. 104 p. 834,24 LRA [NS] 1275).
The theory is where payment is made to a person authorized and recognized by the
creditor, the payment to such a person so authorized is deemed payment to the
creditor. Under ordinary circumstances, payment by the judgment debtor in the case
at bar, to the sheriff should be valid payment to extinguish the judgment debt.
There are circumstances in this case, however, which compel a different conclusion.

The payment made by the petitioner to the absconding sheriff was not in cash or
legal tender but in checks. The checks were not payable to Amelia Tan or Able
Printing Press but to the absconding sheriff.
Did such payments extinguish the judgment debt?
Article 1249 of the Civil Code provides:
The payment of debts in money shall be made in the currency stipulated, and if it is
not possible to deliver such currency, then in the currency which is legal tender in
the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have
been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in
abeyance.
In the absence of an agreement, either express or implied, payment means the
discharge of a debt or obligation in money (US v. Robertson, 5 Pet. [US] 641, 8 L. ed.
257) and unless the parties so agree, a debtor has no rights, except at his own peril,
to substitute something in lieu of cash as medium of payment of his debt (Anderson
v. Gill, 79 Md.. 312, 29 A 527, 25 LRA 200,47 Am. St. Rep. 402). Consequently,
unless authorized to do so by law or by consent of the obligee a public officer has no
authority to accept anything other than money in payment of an obligation under a
judgment being executed. Strictly speaking, the acceptance by the sheriff of the
petitioner's checks, in the case at bar, does not, per se, operate as a discharge of
the judgment debt.
Since a negotiable instrument is only a substitute for money and not money, the
delivery of such an instrument does not, by itself, operate as payment (See. 189, Act
2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon Co. v. American Bank, 7
Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a
manager's check or ordinary cheek, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be refused receipt by
the obligee or creditor. Mere delivery of checks does not discharge the obligation
under a judgment. The obligation is not extinguished and remains suspended until
the payment by commercial document is actually realized (Art. 1249, Civil Code, par.
3).
If bouncing checks had been issued in the name of Amelia Tan and not the Sheriff's,
there would have been no payment. After dishonor of the checks, Ms. Tan could have
run after other properties of PAL. The theory is that she has received no value for
what had been awarded her. Because the checks were drawn in the name of Emilio
Z. Reyes, neither has she received anything. The same rule should apply.
It is argued that if PAL had paid in cash to Sheriff Reyes, there would have been
payment in full legal contemplation. The reasoning is logical but is it valid and
proper? Logic has its limits in decision making. We should not follow rulings to their
logical extremes if in doing so we arrive at unjust or absurd results.
In the first place, PAL did not pay in cash. It paid in cheeks.
And second, payment in cash always carries with it certain cautions. Nobody hands
over big amounts of cash in a careless and inane manner. Mature thought is given to

the possibility of the cash being lost, of the bearer being waylaid or running off with
what he is carrying for another. Payment in checks is precisely intended to avoid the
possibility of the money going to the wrong party. The situation is entirely different
where a Sheriff seizes a car, a tractor, or a piece of land. Logic often has to give way
to experience and to reality. Having paid with checks, PAL should have done so
properly.
Payment in money or cash to the implementing officer may be deemed absolute
payment of the judgment debt but the Court has never, in the least bit, suggested
that judgment debtors should settle their obligations by turning over huge amounts
of cash or legal tender to sheriffs and other executing officers. Payment in cash
would result in damage or interminable litigations each time a sheriff with huge
amounts of cash in his hands decides to abscond.
As a protective measure, therefore, the courts encourage the practice of payments
by cheek provided adequate controls are instituted to prevent wrongful payment
and illegal withdrawal or disbursement of funds. If particularly big amounts are
involved, escrow arrangements with a bank and carefully supervised by the court
would be the safer procedure. Actual transfer of funds takes place within the safety
of bank premises. These practices are perfectly legal. The object is always the safe
and incorrupt execution of the judgment.
It is, indeed, out of the ordinary that checks intended for a particular payee are
made out in the name of another. Making the checks payable to the judgment
creditor would have prevented the encashment or the taking of undue advantage by
the sheriff, or any person into whose hands the checks may have fallen, whether
wrongfully or in behalf of the creditor. The issuance of the checks in the name of the
sheriff clearly made possible the misappropriation of the funds that were withdrawn.
As explained and held by the respondent court:
... [K]nowing as it does that the intended payment was for the private party
respondent Amelia Tan, the petitioner corporation, utilizing the services of its
personnel who are or should be knowledgeable about the accepted procedures and
resulting consequences of the checks drawn, nevertheless, in this instance, without
prudence, departed from what is generally observed and done, and placed as payee
in the checks the name of the errant Sheriff and not the name of the rightful payee.
Petitioner thereby created a situation which permitted the said Sheriff to personally
encash said checks and misappropriate the proceeds thereof to his exclusive
personal benefit. For the prejudice that resulted, the petitioner himself must bear
the fault. The judicial guideline which we take note of states as follows:
As between two innocent persons, one of whom must suffer the consequence of a
breach of trust, the one who made it possible by his act of confidence must bear the
loss. (Blondeau, et al. v. Nano, et al., L-41377, July 26, 1935, 61 Phil. 625)
Having failed to employ the proper safeguards to protect itself, the judgment debtor
whose act made possible the loss had but itself to blame.
The attention of this Court has been called to the bad practice of a number of
executing officers, of requiring checks in satisfaction of judgment debts to be made
out in their own names. If a sheriff directs a judgment debtor to issue the checks in
the sheriff's name, claiming he must get his commission or fees, the debtor must
report the sheriff immediately to the court which ordered the execution or to the
Supreme Court for appropriate disciplinary action. Fees, commissions, and salaries

are paid through regular channels. This improper procedure also allows such officers,
who have sixty (60) days within which to make a return, to treat the moneys as their
personal finds and to deposit the same in their private accounts to earn sixty (60)
days interest, before said finds are turned over to the court or judgment creditor
(See Balgos v. Velasco, 108 SCRA 525 [1981]). Quite as easily, such officers could
put up the defense that said checks had been issued to them in their private or
personal capacity. Without a receipt evidencing payment of the judgment debt, the
misappropriation of finds by such officers becomes clean and complete. The practice
is ingenious but evil as it unjustly enriches court personnel at the expense of
litigants and the proper administration of justice. The temptation could be far
greater, as proved to be in this case of the absconding sheriff. The correct and
prudent thing for the petitioner was to have issued the checks in the intended
payee's name.
The pernicious effects of issuing checks in the name of a person other than the
intended payee, without the latter's agreement or consent, are as many as the ways
that an artful mind could concoct to get around the safeguards provided by the law
on negotiable instruments. An angry litigant who loses a case, as a rule, would not
want the winning party to get what he won in the judgment. He would think of ways
to delay the winning party's getting what has been adjudged in his favor. We cannot
condone that practice especially in cases where the courts and their officers are
involved. We rule against the petitioner.
Anent the applicability of Section 15, Rule 39, as follows:
Section 15. Execution of money judgments. The officer must enforce an execution
of a money judgment by levying on all the property, real and personal of every
name and nature whatsoever, and which may be disposed of for value, of the
judgment debtor not exempt from execution, or on a sufficient amount of such
property, if they be sufficient, and selling the same, and paying to the judgment
creditor, or his attorney, so much of the proceeds as will satisfy the judgment. ...
the respondent court held:
We are obliged to rule that the judgment debt cannot be considered satisfied and
therefore the orders of the respondent judge granting the alias writ of execution may
not be pronounced as a nullity.
xxx xxx xxx
It is clear and manifest that after levy or garnishment, for a judgment to be executed
there is the requisite of payment by the officer to the judgment creditor, or his
attorney, so much of the proceeds as will satisfy the judgment and none such
payment had been concededly made yet by the absconding Sheriff to the private
respondent Amelia Tan. The ultimate and essential step to complete the execution of
the judgment not having been performed by the City Sheriff, the judgment debt
legally and factually remains unsatisfied.
Strictly speaking execution cannot be equated with satisfaction of a judgment.
Under unusual circumstances as those obtaining in this petition, the distinction
comes out clearly.
Execution is the process which carries into effect a decree or judgment (Painter v.
Berglund, 31 Cal. App. 2d. 63, 87 P 2d 360, 363; Miller v. London, 294 Mass 300, 1
NE 2d 198, 200; Black's Law Dictionary), whereas the satisfaction of a judgment is

the payment of the amount of the writ, or a lawful tender thereof, or the conversion
by sale of the debtor's property into an amount equal to that due, and, it may be
done otherwise than upon an execution (Section 47, Rule 39). Levy and delivery by
an execution officer are not prerequisites to the satisfaction of a judgment when the
same has already been realized in fact (Section 47, Rule 39). Execution is for the
sheriff to accomplish while satisfaction of the judgment is for the creditor to achieve.
Section 15, Rule 39 merely provides the sheriff with his duties as executing officer
including delivery of the proceeds of his levy on the debtor's property to satisfy the
judgment debt. It is but to stress that the implementing officer's duty should not
stop at his receipt of payments but must continue until payment is delivered to the
obligor or creditor.
Finally, we find no error in the respondent court's pronouncement on the inclusion of
interests to be recovered under the alias writ of execution. This logically follows from
our ruling that PAL is liable for both the lost checks and interest. The respondent
court's decision in CA-G.R. No. 51079-R does not totally supersede the trial court's
judgment in Civil Case No. 71307. It merely modified the same as to the principal
amount awarded as actual damages.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The
judgment of the respondent Court of Appeals is AFFIRMED and the trial court's
issuance of the alias writ of execution against the petitioner is upheld without
prejudice to any action it should take against the errant sheriff Emilio Z. Reyes. The
Court Administrator is ordered to follow up the actions taken against Emilio Z. Reyes.
SO ORDERED.
Fernan, C.J., Cruz, Paras, Bidin, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Metropolitan Bank and Trust Company vs. Court of Appeals, 194 SCRA 169(1991)
Civil Law; Obligations and Contracts; Agency; The agent is responsible not only for
fraud, but also for negligence, which shall be judged with more or less rigor by the
courts, according to whether the agency was or was not for a compensation.The
negligence of Metro-bank has been sufficiently established. To repeat for emphasis,
it was the clearance given by it that assured Golden Savings it was already safe to
allow Gomez to withdraw the proceeds of the treasury warrants he had deposited.
Metrobank misled Golden Savings. There may have been no express clearance, as
Metrobank insists (although this is refuted by Golden Savings) but in any case that
clearance could be implied from its allowing Golden Savings to withdraw from its
account not only once or even twice but three times. The total withdrawal was in
excess of its original balance before the treasury warrants were deposited, which
only added to its belief that the treasury warrants had indeed been cleared.
Mercantile Law; Negotiable Instruments; Requisites of Negotiabil-ity; An instrument
to be negotiable must contain an unconditional promise or order to pay a sum
certain in money.SEC. 3. When promise is unconditional.An unqualified order or
promise to pay is unconditional within the meaning of this Act though coupled with
(a) An indication of a particular fund out of which reimbursement is to be made or a
particular account to be debited with the amount; or (b) A statement of the
trasaction which gives rise to the instrument. But an order or promise to pay out of a
particular fund is not unconditional. The indication of Fund 501 as the source of the
payment to be made on the treasury warrants makes the order or promise to pay
not uncon-ditional and the warrants themselves non-negotiable. There should be
no question that the exception on Section 3 of the Negotiable Instruments Law is
applicable in the case at bar. [Metropolitan Bank and Trust Company vs. Court of
Appeals, 194 SCRA 169(1991)]
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 88866

February 18, 1991

METROPOLITAN BANK & TRUST COMPANY, petitioner,

vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO,
MAGNO CASTILLO and GLORIA CASTILLO, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Magno and Lucia Castillo.
Agapito S. Fajardo and Jaime M. Cabiles for respondent Golden Savings & Loan
Association, Inc.

CRUZ, J.:
This case, for all its seeming complexity, turns on a simple question of negligence.
The facts, pruned of all non-essentials, are easily told.
The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout
the Philippines and even abroad. Golden Savings and Loan Association was, at the

time these events happened, operating in Calapan, Mindoro, with the other private
respondents as its principal officers.
In January 1979, a certain Eduardo Gomez opened an account with Golden Savings
and deposited over a period of two months 38 treasury warrants with a total value of
P1,755,228.37. They were all drawn by the Philippine Fish Marketing Authority and
purportedly signed by its General Manager and countersigned by its Auditor. Six of
these were directly payable to Gomez while the others appeared to have been
indorsed by their respective payees, followed by Gomez as second indorser. 1
On various dates between June 25 and July 16, 1979, all these warrants were
subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited
to its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They
were then sent for clearing by the branch office to the principal office of Metrobank,
which forwarded them to the Bureau of Treasury for special clearing. 2
More than two weeks after the deposits, Gloria Castillo went to the Calapan branch
several times to ask whether the warrants had been cleared. She was told to wait.
Accordingly, Gomez was meanwhile not allowed to withdraw from his account. Later,
however, "exasperated" over Gloria's repeated inquiries and also as an
accommodation for a "valued client," the petitioner says it finally decided to allow
Golden Savings to withdraw from the proceeds of the
warrants. 3
The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the
second on July 13, 1979, in the amount of P310,000.00, and the third on July 16,
1979, in the amount of P150,000.00. The total withdrawal was P968.000.00. 4
In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his
own account, eventually collecting the total amount of P1,167,500.00 from the
proceeds of the apparently cleared warrants. The last withdrawal was made on July
16, 1979.
On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had
been dishonored by the Bureau of Treasury on July 19, 1979, and demanded the
refund by Golden Savings of the amount it had previously withdrawn, to make up the
deficit in its account.
The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial
Court of Mindoro. 5 After trial, judgment was rendered in favor of Golden Savings,
which, however, filed a motion for reconsideration even as Metrobank filed its notice
of appeal. On November 4, 1986, the lower court modified its decision thus:
ACCORDINGLY, judgment is hereby rendered:
1. Dismissing the complaint with costs against the plaintiff;
2. Dissolving and lifting the writ of attachment of the properties of defendant Golden
Savings and Loan Association, Inc. and defendant Spouses Magno Castillo and Lucia
Castillo;
3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of
the sum of P1,754,089.00 and to reinstate and credit to such account such amount
existing before the debit was made including the amount of P812,033.37 in favor of
defendant Golden Savings and Loan Association, Inc. and thereafter, to allow

defendant Golden Savings and Loan Association, Inc. to withdraw the amount
outstanding thereon before the debit;
4. Ordering the plaintiff to pay the defendant Golden Savings and Loan Association,
Inc. attorney's fees and expenses of litigation in the amount of P200,000.00.
5. Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia
Castillo attorney's fees and expenses of litigation in the amount of P100,000.00.
SO ORDERED.
6

On appeal to the respondent court, the decision was affirmed, prompting

Metrobank to file this petition for review on the following grounds:
1. Respondent Court of Appeals erred in disregarding and failing to apply the clear
contractual terms and conditions on the deposit slips allowing Metrobank to charge
back any amount erroneously credited.
(a) Metrobank's right to charge back is not limited to instances where the checks or
treasury warrants are forged or unauthorized.
(b) Until such time as Metrobank is actually paid, its obligation is that of a mere
collecting agent which cannot be held liable for its failure to collect on the warrants.
2. Under the lower court's decision, affirmed by respondent Court of Appeals,
Metrobank is made to pay for warrants already dishonored, thereby perpetuating the
fraud committed by Eduardo Gomez.
3. Respondent Court of Appeals erred in not finding that as between Metrobank and
Golden Savings, the latter should bear the loss.
4. Respondent Court of Appeals erred in holding that the treasury warrants involved
in this case are not negotiable instruments.
The petition has no merit.
From the above undisputed facts, it would appear to the Court that Metrobank was
indeed negligent in giving Golden Savings the impression that the treasury warrants
had been cleared and that, consequently, it was safe to allow Gomez to withdraw
the proceeds thereof from his account with it. Without such assurance, Golden
Savings would not have allowed the withdrawals; with such assurance, there was no
reason not to allow the withdrawal. Indeed, Golden Savings might even have
incurred liability for its refusal to return the money that to all appearances belonged
to the depositor, who could therefore withdraw it any time and for any reason he
saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings
deposited them to its account with Metrobank. Golden Savings had no clearing
facilities of its own. It relied on Metrobank to determine the validity of the warrants
through its own services. The proceeds of the warrants were withheld from Gomez
until Metrobank allowed Golden Savings itself to withdraw them from its own
deposit. 7 It was only when Metrobank gave the go-signal that Gomez was finally
allowed by Golden Savings to withdraw them from his own account.
The argument of Metrobank that Golden Savings should have exercised more care in
checking the personal circumstances of Gomez before accepting his deposit does

not hold water. It was Gomez who was entrusting the warrants, not Golden Savings
that was extending him a loan; and moreover, the treasury warrants were subject to
clearing, pending which the depositor could not withdraw its proceeds. There was no
question of Gomez's identity or of the genuineness of his signature as checked by
Golden Savings. In fact, the treasury warrants were dishonored allegedly because of
the forgery of the signatures of the drawers, not of Gomez as payee or indorser.
Under the circumstances, it is clear that Golden Savings acted with due care and
diligence and cannot be faulted for the withdrawals it allowed Gomez to make.
By contrast, Metrobank exhibited extraordinary carelessness. The amount involved
was not trifling more than one and a half million pesos (and this was 1979). There
was no reason why it should not have waited until the treasury warrants had been
cleared; it would not have lost a single centavo by waiting. Yet, despite the lack of
such clearance and notwithstanding that it had not received a single centavo from
the proceeds of the treasury warrants, as it now repeatedly stresses it allowed
Golden Savings to withdraw not once, not twice, but thrice from the uncleared
treasury warrants in the total amount of P968,000.00
Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about
the clearance and it also wanted to "accommodate" a valued client. It "presumed"
that the warrants had been cleared simply because of "the lapse of one week." 8 For
a bank with its long experience, this explanation is unbelievably naive.
And now, to gloss over its carelessness, Metrobank would invoke the conditions
printed on the dorsal side of the deposit slips through which the treasury warrants
were deposited by Golden Savings with its Calapan branch. The conditions read as
follows:
Kindly note that in receiving items on deposit, the bank obligates itself only as the
depositor's collecting agent, assuming no responsibility beyond care in selecting
correspondents, and until such time as actual payment shall have come into
possession of this bank, the right is reserved to charge back to the depositor's
account any amount previously credited, whether or not such item is returned. This
also applies to checks drawn on local banks and bankers and their branches as well
as on this bank, which are unpaid due to insufficiency of funds, forgery,
unauthorized overdraft or any other reason. (Emphasis supplied.)
According to Metrobank, the said conditions clearly show that it was acting only as a
collecting agent for Golden Savings and give it the right to "charge back to the
depositor's account any amount previously credited, whether or not such item is
returned. This also applies to checks ". . . which are unpaid due to insufficiency of
funds, forgery, unauthorized overdraft of any other reason." It is claimed that the
said conditions are in the nature of contractual stipulations and became binding on
Golden Savings when Gloria Castillo, as its Cashier, signed the deposit slips.
Doubt may be expressed about the binding force of the conditions, considering that
they have apparently been imposed by the bank unilaterally, without the consent of
the depositor. Indeed, it could be argued that the depositor, in signing the deposit
slip, does so only to identify himself and not to agree to the conditions set forth in
the given permit at the back of the deposit slip. We do not have to rule on this
matter at this time. At any rate, the Court feels that even if the deposit slip were
considered a contract, the petitioner could still not validly disclaim responsibility
thereunder in the light of the circumstances of this case.

In stressing that it was acting only as a collecting agent for Golden Savings,
Metrobank seems to be suggesting that as a mere agent it cannot be liable to the
principal. This is not exactly true. On the contrary, Article 1909 of the Civil Code
clearly provides that
Art. 1909. The agent is responsible not only for fraud, but also for negligence,
which shall be judged 'with more or less rigor by the courts, according to whether
the agency was or was not for a compensation.
The negligence of Metrobank has been sufficiently established. To repeat for
emphasis, it was the clearance given by it that assured Golden Savings it was
already safe to allow Gomez to withdraw the proceeds of the treasury warrants he
had deposited Metrobank misled Golden Savings. There may have been no express
clearance, as Metrobank insists (although this is refuted by Golden Savings) but in
any case that clearance could be implied from its allowing Golden Savings to
withdraw from its account not only once or even twice but three times. The total
withdrawal was in excess of its original balance before the treasury warrants were
deposited, which only added to its belief that the treasury warrants had indeed been
cleared.
Metrobank's argument that it may recover the disputed amount if the warrants are
not paid for any reason is not acceptable. Any reason does not mean no reason at
all. Otherwise, there would have been no need at all for Golden Savings to deposit
the treasury warrants with it for clearance. There would have been no need for it to
wait until the warrants had been cleared before paying the proceeds thereof to
Gomez. Such a condition, if interpreted in the way the petitioner suggests, is not
binding for being arbitrary and unconscionable. And it becomes more so in the case
at bar when it is considered that the supposed dishonor of the warrants was not
communicated to Golden Savings before it made its own payment to Gomez.
The belated notification aggravated the petitioner's earlier negligence in giving
express or at least implied clearance to the treasury warrants and allowing
payments therefrom to Golden Savings. But that is not all. On top of this, the
supposed reason for the dishonor, to wit, the forgery of the signatures of the general
manager and the auditor of the drawer corporation, has not been established. 9 This
was the finding of the lower courts which we see no reason to disturb. And as we
said in MWSS v. Court of Appeals: 10
Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be
established by clear, positive and convincing evidence. This was not done in the
present case.
A no less important consideration is the circumstance that the treasury warrants in
question are not negotiable instruments. Clearly stamped on their face is the word
"non-negotiable." Moreover, and this is of equal significance, it is indicated that they
are payable from a particular fund, to wit, Fund 501.
The following sections of the Negotiable Instruments Law, especially the
underscored parts, are pertinent:
Sec. 1. Form of negotiable instruments. An instrument to be negotiable must
conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
xxx

xxx

xxx

Sec. 3. When promise is unconditional. An unqualified order or promise to pay is

unconditional within the meaning of this Act though coupled with
(a) An indication of a particular fund out of which reimbursement is to be made or a
particular account to be debited with the amount; or
(b) A statement of the transaction which gives rise to the instrument judgment.
But an order or promise to pay out of a particular fund is not unconditional.
The indication of Fund 501 as the source of the payment to be made on the treasury
warrants makes the order or promise to pay "not unconditional" and the warrants
themselves non-negotiable. There should be no question that the exception on
Section 3 of the Negotiable Instruments Law is applicable in the case at bar. This
conclusion conforms to Abubakar vs. Auditor General 11 where the Court held:
The petitioner argues that he is a holder in good faith and for value of a negotiable
instrument and is entitled to the rights and privileges of a holder in due course, free
from defenses. But this treasury warrant is not within the scope of the negotiable
instrument law. For one thing, the document bearing on its face the words "payable
from the appropriation for food administration, is actually an Order for payment out
of "a particular fund," and is not unconditional and does not fulfill one of the
essential requirements of a negotiable instrument (Sec. 3 last sentence and section
[1(b)] of the Negotiable Instruments Law).
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings
assumed that they were "genuine and in all respects what they purport to be," in
accordance with Section 66 of the Negotiable Instruments Law. The simple reason is
that this law is not applicable to the non-negotiable treasury warrants. The
indorsement was made by Gloria Castillo not for the purpose of guaranteeing the
genuineness of the warrants but merely to deposit them with Metrobank for clearing.
It was in fact Metrobank that made the guarantee when it stamped on the back of
the warrants: "All prior indorsement and/or lack of endorsements guaranteed,
Metropolitan Bank & Trust Co., Calapan Branch."
The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine
Islands, 12 but we feel this case is inapplicable to the present controversy.1wphi1
That case involved checks whereas this case involves treasury warrants. Golden
Savings never represented that the warrants were negotiable but signed them only
for the purpose of depositing them for clearance. Also, the fact of forgery was
proved in that case but not in the case before us. Finally, the Court found the Jai Alai
Corporation negligent in accepting the checks without question from one Antonio
Ramirez notwithstanding that the payee was the Inter-Island Gas Services, Inc. and it
did not appear that he was authorized to indorse it. No similar negligence can be
imputed to Golden Savings.

We find the challenged decision to be basically correct. However, we will have to

amend it insofar as it directs the petitioner to credit Golden Savings with the full
amount of the treasury checks deposited to its account.
The total value of the 32 treasury warrants dishonored was P1,754,089.00, from
which Gomez was allowed to withdraw P1,167,500.00 before Golden Savings was
notified of the dishonor. The amount he has withdrawn must be charged not to
Golden Savings but to Metrobank, which must bear the consequences of its own
negligence. But the balance of P586,589.00 should be debited to Golden Savings, as
obviously Gomez can no longer be permitted to withdraw this amount from his
deposit because of the dishonor of the warrants. Gomez has in fact disappeared. To
also credit the balance to Golden Savings would unduly enrich it at the expense of
Metrobank, let alone the fact that it has already been informed of the dishonor of the
treasury warrants.
WHEREFORE, the challenged decision is AFFIRMED, with the modification that
Paragraph 3 of the dispositive portion of the judgment of the lower court shall be
reworded as follows:
3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter
allowing defendant Golden Savings & Loan Association, Inc. to withdraw the amount
outstanding thereon, if any, after the debit.
SO ORDERED.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Caltex (Philippines), Inc. vs. Court of Appeals, 212 SCRA 448(1992)

Commercial Law; Negotiable Instruments Law; Requisites for an instrument to
become negotiable.Section 1 of Act No. 2031, otherwise known as the Negotiable
Instruments Law, enumerates the requisites for an instrument to become
negotiable, viz: (a) It must be in writing and signed by the maker or drawer; (b)
Must contain an unconditional promise or order to pay a sum certain in money; (c)
Must be payable on demand, or at a fixed or determinable future time; (d) Must be
payable to order or to bearer; and (e) Where the instrument is addressed to a
drawee, he must be named or otherwise indicated therein with reasonable
certainty.
Same; Same; Same; The negotiability or non-negotiability of an instrument is
determined from the writing that is from the face of the instrument itself.On this
score, the accepted rule is that the negotiability or non-negotiability of an
instrument is determined from the writing, that is, from the face of the instrument
itself. In the construction of a bill or note, the intention of the parties is to control, if
it can be legally ascertained. While the writing may be read in the light of
surrounding circumstances in order to more perfectly understand the intent and
meaning of the parties, yet as they have constituted the writing to be the only
outward and visible expression of their meaning, no other words are to be added to
it or substituted in its stead. The duty of the court in such case is to ascertain, not
what the parties may have secretly intended as contradistinguished from what their
words express, but what is the meaning of the words they have used. What the
parties meant must be determined by what they said.
Same; Same; Same; An instrument is negotiated when it is transferred from one
person to another in such a manner as to constitute the transferee the holder
thereof and a holder may be the payee or indorsee of a bill or note who is in
possession of it or the bearer thereof.Under the Negotiable Instruments Law, an
instrument is negotiated when it is transferred from one person to another in such a
manner as to constitute the transferee the holder thereof, and a holder may be the
payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. In
the present case, however, there was no negotiation in the sense of a transfer of the
legal title to the CTDs in favor of petitioner in which situation, for obvious reasons,
mere delivery of the bearer CTDs would have sufficed. Here, the delivery thereof
only as security for the purchases of Angel de la Cruz (and we even disregard the
fact that the amount involved was not disclosed) could at the most constitute
petitioner only as a holder for value by reason of his lien. Accordingly, a negotiation
for such purpose cannot be effected by mere delivery of the instrument since,
necessarily, the terms thereof and the subsequent disposition of such security, in
the event of non-payment of the principal obligation, must be contractually provided
for.
Same; Same; Same; Where the holder has a lien on the instrument arising from
contract, he is deemed a holder for value to the extent of his lien.The pertinent
law on this point is that where the holder has a lien on the instrument arising from
contract, he is deemed a holder for value to the extent of his lien. As such holder of
collateral security, he would be a pledgee but the requirements there-for and the
effects thereof, not being provided for by the Negotiable Instruments Law, shall be
governed by the Civil Code provisions on pledge of incorporeal rights.
Civil Law; Estoppel; Under the doctrine of estoppel, an admission or representation
is rendered conclusive upon the person making it and cannot be denied or disproved

as against the person relying thereon.In a letter dated November 26, 1982
addressed to respondent Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager,
wrote: x x x These certificates of deposit were negotiated to us by Mr. Angel dela
Cruz to guarantee his purchases of fuel products (Italics ours.) This admission is
conclusive upon petitioner, its protestations notwithstanding. Under the doctrine of
estoppel, an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.
A party may not go back on his own acts and representations to the prejudice of the
other party who relied upon them. In the law of evidence, whenever a party has, by
his own declaration, act, or omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such belief, he cannot, in any
litigation arising out of such declaration, act, or omission, be permitted to falsify it.
Same; Same; An issue raised for the first time on appeal and not raised timely in the
proceedings in the lower court is barred by estoppel.As respondent court correctly
observed, with appropriate citation of some doctrinal authorities, the foregoing
enumeration does not include the issue of negligence on the part of respondent
bank. An issue raised for the first time on appeal and not raised timely in the
proceedings in the lower court is barred by estoppel. Questions raised on appeal
must be within the issues framed by the parties and, consequently, issues not raised
in the trial court cannot be raised for the first time on appeal.
Remedial Law; Pre-trial; The determination of issues at a pretrial conference bars the
consideration of other questions on appeal.Pre-trial is primarily intended to make
certain that all issues necessary to the disposition of a case are properly raised.
Thus, to obviate the element of surprise, parties are expected to disclose at a pretrial conference all issues of law and fact which they intend to raise at the trial,
except such as may involve privileged or impeaching matters. The determination of
issues at a pre-trial conference bars the consideration of other questions on appeal.
[Caltex (Philippines), Inc. vs. Court of Appeals, 212 SCRA 448(1992)]
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 97753 August 10, 1992
CALTEX (PHILIPPINES), INC., petitioner,
vs.
COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.
Bito, Lozada, Ortega & Castillo for petitioners.
Nepomuceno, Hofilea & Guingona for private.

REGALADO, J.:
This petition for review on certiorari impugns and seeks the reversal of the decision
promulgated by respondent court on March 8, 1991 in CA-G.R. CV No. 23615 1
affirming with modifications, the earlier decision of the Regional Trial Court of Manila,
Branch XLII, 2 which dismissed the complaint filed therein by herein petitioner
against respondent bank.

The undisputed background of this case, as found by the court a quo and adopted by
respondent court, appears of record:

delivered to herein plaintiff "as security for purchases made with Caltex Philippines,
Inc." by said depositor (TSN, February 9, 1987, pp. 54-68).

1. On various dates, defendant, a commercial banking institution, through its Sucat

Branch issued 280 certificates of time deposit (CTDs) in favor of one Angel dela Cruz
who deposited with herein defendant the aggregate amount of P1,120,000.00, as
follows: (Joint Partial Stipulation of Facts and Statement of Issues, Original Records,
p. 207; Defendant's Exhibits 1 to 280);

7. On November 26, 1982, defendant received a letter (Defendant's Exhibit 563)

from herein plaintiff formally informing it of its possession of the CTDs in question
and of its decision to pre-terminate the same.

CTD CTD
Dates Serial Nos. Quantity Amount
22 Feb. 82 90101 to 90120 20 P80,000
26 Feb. 82 74602 to 74691 90 360,000
2 Mar. 82 74701 to 74740 40 160,000
4 Mar. 82 90127 to 90146 20 80,000
5 Mar. 82 74797 to 94800 4 16,000
5 Mar. 82 89965 to 89986 22 88,000
5 Mar. 82 70147 to 90150 4 16,000
8 Mar. 82 90001 to 90020 20 80,000
9 Mar. 82 90023 to 90050 28 112,000
9 Mar. 82 89991 to 90000 10 40,000
9 Mar. 82 90251 to 90272 22 88,000

Total 280 P1,120,000
===== ========
2. Angel dela Cruz delivered the said certificates of time (CTDs) to herein plaintiff in
connection with his purchased of fuel products from the latter (Original Record, p.
208).
3. Sometime in March 1982, Angel dela Cruz informed Mr. Timoteo Tiangco, the
Sucat Branch Manger, that he lost all the certificates of time deposit in dispute. Mr.
Tiangco advised said depositor to execute and submit a notarized Affidavit of Loss,
as required by defendant bank's procedure, if he desired replacement of said lost
CTDs (TSN, February 9, 1987, pp. 48-50).
4. On March 18, 1982, Angel dela Cruz executed and delivered to defendant bank
the required Affidavit of Loss (Defendant's Exhibit 281). On the basis of said affidavit
of loss, 280 replacement CTDs were issued in favor of said depositor (Defendant's
Exhibits 282-561).
5. On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from
defendant bank in the amount of Eight Hundred Seventy Five Thousand Pesos
(P875,000.00). On the same date, said depositor executed a notarized Deed of
Assignment of Time Deposit (Exhibit 562) which stated, among others, that he (de la
Cruz) surrenders to defendant bank "full control of the indicated time deposits from
and after date" of the assignment and further authorizes said bank to pre-terminate,
set-off and "apply the said time deposits to the payment of whatever amount or
amounts may be due" on the loan upon its maturity (TSN, February 9, 1987, pp. 6062).
6. Sometime in November, 1982, Mr. Aranas, Credit Manager of plaintiff Caltex
(Phils.) Inc., went to the defendant bank's Sucat branch and presented for
verification the CTDs declared lost by Angel dela Cruz alleging that the same were

8. On December 8, 1982, plaintiff was requested by herein defendant to furnish the

former "a copy of the document evidencing the guarantee agreement with Mr. Angel
dela Cruz" as well as "the details of Mr. Angel dela Cruz" obligation against which
plaintiff proposed to apply the time deposits (Defendant's Exhibit 564).
9. No copy of the requested documents was furnished herein defendant.
10. Accordingly, defendant bank rejected the plaintiff's demand and claim for
payment of the value of the CTDs in a letter dated February 7, 1983 (Defendant's
Exhibit 566).
11. In April 1983, the loan of Angel dela Cruz with the defendant bank matured and
fell due and on August 5, 1983, the latter set-off and applied the time deposits in
question to the payment of the matured loan (TSN, February 9, 1987, pp. 130-131).
12. In view of the foregoing, plaintiff filed the instant complaint, praying that
defendant bank be ordered to pay it the aggregate value of the certificates of time
deposit of P1,120,000.00 plus accrued interest and compounded interest therein at
16% per annum, moral and exemplary damages as well as attorney's fees.
After trial, the court a quo rendered its decision dismissing the instant complaint.

On appeal, as earlier stated, respondent court affirmed the lower court's dismissal of
the complaint, hence this petition wherein petitioner faults respondent court in
ruling (1) that the subject certificates of deposit are non-negotiable despite being
clearly negotiable instruments; (2) that petitioner did not become a holder in due
course of the said certificates of deposit; and (3) in disregarding the pertinent
provisions of the Code of Commerce relating to lost instruments payable to bearer. 4
The instant petition is bereft of merit.
A sample text of the certificates of time deposit is reproduced below to provide a
better understanding of the issues involved in this recourse.
SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR
THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine
Currency, repayable to said depositor 731 days. after date, upon presentation and
surrender of this certificate, with interest at the rate of 16% per cent per annum.

(Sgd. Illegible) (Sgd. Illegible)

witness:

a None, your Honor.

AUTHORIZED SIGNATURES

Respondent court ruled that the CTDs in question are non-negotiable instruments,
nationalizing as follows:
. . . While it may be true that the word "bearer" appears rather boldly in the CTDs
issued, it is important to note that after the word "BEARER" stamped on the space
provided supposedly for the name of the depositor, the words "has deposited" a
certain amount follows. The document further provides that the amount deposited
shall be "repayable to said depositor" on the period indicated. Therefore, the text of
the instrument(s) themselves manifest with clarity that they are payable, not to
whoever purports to be the "bearer" but only to the specified person indicated
therein, the depositor. In effect, the appellee bank acknowledges its depositor Angel
dela Cruz as the person who made the deposit and further engages itself to pay said
depositor the amount indicated thereon at the stipulated date. 6
We disagree with these findings and conclusions, and hereby hold that the CTDs in
question are negotiable instruments. Section 1 Act No. 2031, otherwise known as
the Negotiable Instruments Law, enumerates the requisites for an instrument to
become negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
The CTDs in question undoubtedly meet the requirements of the law for
negotiability. The parties' bone of contention is with regard to requisite (d) set forth
above. It is noted that Mr. Timoteo P. Tiangco, Security Bank's Branch Manager way
back in 1982, testified in open court that the depositor reffered to in the CTDs is no
other than Mr. Angel de la Cruz.
xxx xxx xxx
Atty. Calida:
q In other words Mr. Witness, you are saying that per books of the bank, the
depositor referred (sic) in these certificates states that it was Angel dela Cruz?
witness:
a Yes, your Honor, and we have the record to show that Angel dela Cruz was the one
who cause (sic) the amount.
Atty. Calida:
q And no other person or entity or company, Mr. Witness?

xxx xxx xxx

Atty. Calida:
q Mr. Witness, who is the depositor identified in all of these certificates of time
deposit insofar as the bank is concerned?
witness:
a Angel dela Cruz is the depositor. 8
xxx xxx xxx
On this score, the accepted rule is that the negotiability or non-negotiability of an
instrument is determined from the writing, that is, from the face of the instrument
itself. 9 In the construction of a bill or note, the intention of the parties is to control, if
it can be legally ascertained. 10 While the writing may be read in the light of
surrounding circumstances in order to more perfectly understand the intent and
meaning of the parties, yet as they have constituted the writing to be the only
outward and visible expression of their meaning, no other words are to be added to
it or substituted in its stead. The duty of the court in such case is to ascertain, not
what the parties may have secretly intended as contradistinguished from what their
words express, but what is the meaning of the words they have used. What the
parties meant must be determined by what they said. 11
Contrary to what respondent court held, the CTDs are negotiable instruments. The
documents provide that the amounts deposited shall be repayable to the depositor.
And who, according to the document, is the depositor? It is the "bearer." The
documents do not say that the depositor is Angel de la Cruz and that the amounts
deposited are repayable specifically to him. Rather, the amounts are to be repayable
to the bearer of the documents or, for that matter, whosoever may be the bearer at
the time of presentment.
If it was really the intention of respondent bank to pay the amount to Angel de la
Cruz only, it could have with facility so expressed that fact in clear and categorical
terms in the documents, instead of having the word "BEARER" stamped on the space
provided for the name of the depositor in each CTD. On the wordings of the
documents, therefore, the amounts deposited are repayable to whoever may be the
bearer thereof. Thus, petitioner's aforesaid witness merely declared that Angel de la
Cruz is the depositor "insofar as the bank is concerned," but obviously other parties
not privy to the transaction between them would not be in a position to know that
the depositor is not the bearer stated in the CTDs. Hence, the situation would
require any party dealing with the CTDs to go behind the plain import of what is
written thereon to unravel the agreement of the parties thereto through facts
aliunde. This need for resort to extrinsic evidence is what is sought to be avoided by
the Negotiable Instruments Law and calls for the application of the elementary rule
that the interpretation of obscure words or stipulations in a contract shall not favor
the party who caused the obscurity. 12
The next query is whether petitioner can rightfully recover on the CTDs. This time,
the answer is in the negative. The records reveal that Angel de la Cruz, whom
petitioner chose not to implead in this suit for reasons of its own, delivered the CTDs

amounting to P1,120,000.00 to petitioner without informing respondent bank thereof

at any time. Unfortunately for petitioner, although the CTDs are bearer instruments,
a valid negotiation thereof for the true purpose and agreement between it and De la
Cruz, as ultimately ascertained, requires both delivery and indorsement. For,
although petitioner seeks to deflect this fact, the CTDs were in reality delivered to it
as a security for De la Cruz' purchases of its fuel products. Any doubt as to whether
the CTDs were delivered as payment for the fuel products or as a security has been
dissipated and resolved in favor of the latter by petitioner's own authorized and
responsible representative himself.
In a letter dated November 26, 1982 addressed to respondent Security Bank, J.Q.
Aranas, Jr., Caltex Credit Manager, wrote: ". . . These certificates of deposit were
negotiated to us by Mr. Angel dela Cruz to guarantee his purchases of fuel products"
(Emphasis ours.) 13 This admission is conclusive upon petitioner, its protestations
notwithstanding. Under the doctrine of estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved
as against the person relying thereon. 14 A party may not go back on his own acts
and representations to the prejudice of the other party who relied upon them. 15 In
the law of evidence, whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to
act upon such belief, he cannot, in any litigation arising out of such declaration, act,
or omission, be permitted to falsify it. 16
If it were true that the CTDs were delivered as payment and not as security,
petitioner's credit manager could have easily said so, instead of using the words "to
guarantee" in the letter aforequoted. Besides, when respondent bank, as defendant
in the court below, moved for a bill of particularity therein 17 praying, among others,
that petitioner, as plaintiff, be required to aver with sufficient definiteness or
particularity (a) the due date or dates of payment of the alleged indebtedness of
Angel de la Cruz to plaintiff and (b) whether or not it issued a receipt showing that
the CTDs were delivered to it by De la Cruz as payment of the latter's alleged
indebtedness to it, plaintiff corporation opposed the motion. 18 Had it produced the
receipt prayed for, it could have proved, if such truly was the fact, that the CTDs
were delivered as payment and not as security. Having opposed the motion,
petitioner now labors under the presumption that evidence willfully suppressed
would be adverse if produced. 19
Under the foregoing circumstances, this disquisition in Intergrated Realty
Corporation, et al. vs. Philippine National Bank, et al. 20 is apropos:
. . . Adverting again to the Court's pronouncements in Lopez, supra, we quote
therefrom:
The character of the transaction between the parties is to be determined by their
intention, regardless of what language was used or what the form of the transfer
was. If it was intended to secure the payment of money, it must be construed as a
pledge; but if there was some other intention, it is not a pledge. However, even
though a transfer, if regarded by itself, appears to have been absolute, its object
and character might still be qualified and explained by contemporaneous writing
declaring it to have been a deposit of the property as collateral security. It has been
said that a transfer of property by the debtor to a creditor, even if sufficient on its
face to make an absolute conveyance, should be treated as a pledge if the debt
continues in inexistence and is not discharged by the transfer, and that accordingly
the use of the terms ordinarily importing conveyance of absolute ownership will not

be given that effect in such a transaction if they are also commonly used in pledges
and mortgages and therefore do not unqualifiedly indicate a transfer of absolute
ownership, in the absence of clear and unambiguous language or other
circumstances excluding an intent to pledge.
Petitioner's insistence that the CTDs were negotiated to it begs the question. Under
the Negotiable Instruments Law, an instrument is negotiated when it is transferred
from one person to another in such a manner as to constitute the transferee the
holder thereof, 21 and a holder may be the payee or indorsee of a bill or note, who is
in possession of it, or the bearer thereof. 22 In the present case, however, there was
no negotiation in the sense of a transfer of the legal title to the CTDs in favor of
petitioner in which situation, for obvious reasons, mere delivery of the bearer CTDs
would have sufficed. Here, the delivery thereof only as security for the purchases of
Angel de la Cruz (and we even disregard the fact that the amount involved was not
disclosed) could at the most constitute petitioner only as a holder for value by
reason of his lien. Accordingly, a negotiation for such purpose cannot be effected by
mere delivery of the instrument since, necessarily, the terms thereof and the
subsequent disposition of such security, in the event of non-payment of the principal
obligation, must be contractually provided for.
The pertinent law on this point is that where the holder has a lien on the instrument
arising from contract, he is deemed a holder for value to the extent of his lien. 23 As
such holder of collateral security, he would be a pledgee but the requirements
therefor and the effects thereof, not being provided for by the Negotiable
Instruments Law, shall be governed by the Civil Code provisions on pledge of
incorporeal rights, 24 which inceptively provide:
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be
pledged. The instrument proving the right pledged shall be delivered to the creditor,
and if negotiable, must be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the
thing pledged and the date of the pledge do not appear in a public instrument.
Aside from the fact that the CTDs were only delivered but not indorsed, the factual
findings of respondent court quoted at the start of this opinion show that petitioner
failed to produce any document evidencing any contract of pledge or guarantee
agreement between it and Angel de la Cruz. 25 Consequently, the mere delivery of
the CTDs did not legally vest in petitioner any right effective against and binding
upon respondent bank. The requirement under Article 2096 aforementioned is not a
mere rule of adjective law prescribing the mode whereby proof may be made of the
date of a pledge contract, but a rule of substantive law prescribing a condition
without which the execution of a pledge contract cannot affect third persons
adversely. 26
On the other hand, the assignment of the CTDs made by Angel de la Cruz in favor of
respondent bank was embodied in a public instrument. 27 With regard to this other
mode of transfer, the Civil Code specifically declares:
Art. 1625. An assignment of credit, right or action shall produce no effect as against
third persons, unless it appears in a public instrument, or the instrument is recorded
in the Registry of Property in case the assignment involves real property.
Respondent bank duly complied with this statutory requirement. Contrarily,
petitioner, whether as purchaser, assignee or lien holder of the CTDs, neither proved

the amount of its credit or the extent of its lien nor the execution of any public
instrument which could affect or bind private respondent. Necessarily, therefore, as
between petitioner and respondent bank, the latter has definitely the better right
over the CTDs in question.
Finally, petitioner faults respondent court for refusing to delve into the question of
whether or not private respondent observed the requirements of the law in the case
of lost negotiable instruments and the issuance of replacement certificates therefor,
on the ground that petitioner failed to raised that issue in the lower court. 28
On this matter, we uphold respondent court's finding that the aspect of alleged
negligence of private respondent was not included in the stipulation of the parties
and in the statement of issues submitted by them to the trial court. 29 The issues
agreed upon by them for resolution in this case are:
1. Whether or not the CTDs as worded are negotiable instruments.
2. Whether or not defendant could legally apply the amount covered by the CTDs
against the depositor's loan by virtue of the assignment (Annex "C").
3. Whether or not there was legal compensation or set off involving the amount
covered by the CTDs and the depositor's outstanding account with defendant, if any.
4. Whether or not plaintiff could compel defendant to preterminate the CTDs before
the maturity date provided therein.
5. Whether or not plaintiff is entitled to the proceeds of the CTDs.
6. Whether or not the parties can recover damages, attorney's fees and litigation
expenses from each other.
As respondent court correctly observed, with appropriate citation of some doctrinal
authorities, the foregoing enumeration does not include the issue of negligence on
the part of respondent bank. An issue raised for the first time on appeal and not
raised timely in the proceedings in the lower court is barred by estoppel. 30
Questions raised on appeal must be within the issues framed by the parties and,
consequently, issues not raised in the trial court cannot be raised for the first time
on appeal. 31
Pre-trial is primarily intended to make certain that all issues necessary to the
disposition of a case are properly raised. Thus, to obviate the element of surprise,
parties are expected to disclose at a pre-trial conference all issues of law and fact
which they intend to raise at the trial, except such as may involve privileged or
impeaching matters. The determination of issues at a pre-trial conference bars the
consideration of other questions on appeal. 32
To accept petitioner's suggestion that respondent bank's supposed negligence may
be considered encompassed by the issues on its right to preterminate and receive
the proceeds of the CTDs would be tantamount to saying that petitioner could raise
on appeal any issue. We agree with private respondent that the broad ultimate issue
of petitioner's entitlement to the proceeds of the questioned certificates can be
premised on a multitude of other legal reasons and causes of action, of which
respondent bank's supposed negligence is only one. Hence, petitioner's submission,
if accepted, would render a pre-trial delimitation of issues a useless exercise. 33

Still, even assuming arguendo that said issue of negligence was raised in the court
below, petitioner still cannot have the odds in its favor. A close scrutiny of the
provisions of the Code of Commerce laying down the rules to be followed in case of
lost instruments payable to bearer, which it invokes, will reveal that said provisions,
even assuming their applicability to the CTDs in the case at bar, are merely
permissive and not mandatory. The very first article cited by petitioner speaks for
itself.
Art 548. The dispossessed owner, no matter for what cause it may be, may apply to
the judge or court of competent jurisdiction, asking that the principal, interest or
dividends due or about to become due, be not paid a third person, as well as in
order to prevent the ownership of the instrument that a duplicate be issued him.
(Emphasis ours.)
xxx xxx xxx
The use of the word "may" in said provision shows that it is not mandatory but
discretionary on the part of the "dispossessed owner" to apply to the judge or court
of competent jurisdiction for the issuance of a duplicate of the lost instrument.
Where the provision reads "may," this word shows that it is not mandatory but
discretional. 34 The word "may" is usually permissive, not mandatory. 35 It is an
auxiliary verb indicating liberty, opportunity, permission and possibility. 36
Moreover, as correctly analyzed by private respondent, 37 Articles 548 to 558 of the
Code of Commerce, on which petitioner seeks to anchor respondent bank's
supposed negligence, merely established, on the one hand, a right of recourse in
favor of a dispossessed owner or holder of a bearer instrument so that he may
obtain a duplicate of the same, and, on the other, an option in favor of the party
liable thereon who, for some valid ground, may elect to refuse to issue a
replacement of the instrument. Significantly, none of the provisions cited by
petitioner categorically restricts or prohibits the issuance a duplicate or replacement
instrument sans compliance with the procedure outlined therein, and none
establishes a mandatory precedent requirement therefor.
WHEREFORE, on the modified premises above set forth, the petition is DENIED and
the appealed decision is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Padilla and Nocon, JJ., concur.

Ang Tek Lian vs. Court of Appeals, 87 Phil. 383(1950)

1.CRIMINAL LAW; "ESTAFA"; ISSUING CHECK WITH INSUFFICIENT BANK DEPOSIT TO
COVER THE SAME.One who issues a check payable to cash to accomplish deceit
and knows that at the time had no sufficient deposit with the bank to cover the
amount of the check and without informing the payee of such circumstances, is
guilty of estafa as provided by article 315, paragraph (d), subsection 2 of the
Revised Penal Code.
2.NEGOTIABLE INSTRUMENTS; CHECK DRAWN PAYABLE TO THE ORDER OF "CASH";
INDORSEMENT.A check payable to the order of "cash" is a check payable to
bearer, and the bank may pay it to the person presenting it for payment without the
drawer's indorsement. [Ang Tek Lian vs. Court of Appeals, 87 Phil. 383(1950)]
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-2516

September 25, 1950

ANG TEK LIAN, petitioner,

vs.
THE COURT OF APPEALS, respondent.
Laurel, Sabido, Almario and Laurel for petitioner.
Office of the Solicitor General Felix Bautista Angelo and Solicitor Manuel Tomacruz
for respondent.
BENGZON, J.:
For having issued a rubber check, Ang Tek Lian was convicted of estafa in the Court
of First Instance of Manila. The Court of Appeals affirmed the verdict.
It appears that, knowing he had no funds therefor, Ang Tek Lian drew on Saturday,
November 16, 1946, the check Exhibits A upon the China Banking Corporation for
the sum of P4,000, payable to the order of "cash". He delivered it to Lee Hua Hong in
exchange for money which the latter handed in act. On November 18, 1946, the
next business day, the check was presented by Lee Hua Hong to the drawee bank
for payment, but it was dishonored for insufficiency of funds, the balance of the
deposit of Ang Tek Lian on both dates being P335 only.
The Court of Appeals believed the version of Lee Huan Hong who testified that "on
November 16, 1946, appellant went to his (complainant's) office, at 1217 Herran,
Paco, Manila, and asked him to exchange Exhibit A which he (appellant) then
brought with him with cash alleging that he needed badly the sum of P4,000
represented by the check, but could not withdraw it from the bank, it being then
already closed; that in view of this request and relying upon appellant's assurance
that he had sufficient funds in the blank to meet Exhibit A, and because they used to
borrow money from each other, even before the war, and appellant owns a hotel and
restaurant known as the North Bay Hotel, said complainant delivered to him, on the
same date, the sum of P4,000 in cash; that despite repeated efforts to notify him
that the check had been dishonored by the bank, appellant could not be located
any-where, until he was summoned in the City Fiscal's Office in view of the

complaint for estafa filed in connection therewith; and that appellant has not paid as
yet the amount of the check, or any part thereof."
Inasmuch as the findings of fact of the Court of Appeals are final, the only question
of law for decision is whether under the facts found, estafa had been accomplished.
Article 315, paragraph (d), subsection 2 of the Revised Penal Code, punishes
swindling committed "By post dating a check, or issuing such check in payment of
an obligation the offender knowing that at the time he had no funds in the bank, or
the funds deposited by him in the bank were not sufficient to cover the amount of
the check, and without informing the payee of such circumstances".
We believe that under this provision of law Ang Tek Lian was properly held liable. In
this connection, it must be stated that, as explained in People vs. Fernandez (59
Phil., 615), estafa is committed by issuing either a postdated check or an ordinary
check to accomplish the deceit.
It is argued, however, that as the check had been made payable to "cash" and had
not been endorsed by Ang Tek Lian, the defendant is not guilty of the offense
charged. Based on the proposition that "by uniform practice of all banks in the
Philippines a check so drawn is invariably dishonored," the following line of
reasoning is advanced in support of the argument:
. . . When, therefore, he (the offended party ) accepted the check (Exhibit A) from
the appellant, he did so with full knowledge that it would be dishonored upon
presentment. In that sense, the appellant could not be said to have acted
fraudulently because the complainant, in so accepting the check as it was drawn,
must be considered, by every rational consideration, to have done so fully aware of
the risk he was running thereby." (Brief for the appellant, p. 11.)
We are not aware of the uniformity of such practice. Instances have undoubtedly
occurred wherein the Bank required the indorsement of the drawer before honoring
a check payable to "cash." But cases there are too, where no such requirement had
been made . It depends upon the circumstances of each transaction.
Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the
order of "cash" is a check payable to bearer, and the bank may pay it to the person
presenting it for payment without the drawer's indorsement.
A check payable to the order of cash is a bearer instrument. Bacal vs. National City
Bank of New York (1933), 146 Misc., 732; 262 N. Y. S., 839; Cleary vs. De Beck Plate
Glass Co. (1907), 54 Misc., 537; 104 N. Y. S., 831; Massachusetts Bonding &
Insurance Co. vs. Pittsburgh Pipe & Supply Co. (Tex. Civ. App., 1939), 135 S. W. (2d),
818. See also H. Cook & Son vs. Moody (1916), 17 Ga. App., 465; 87 S. E., 713.
Where a check is made payable to the order of "cash", the word cash "does not
purport to be the name of any person", and hence the instrument is payable to
bearer. The drawee bank need not obtain any indorsement of the check, but may
pay it to the person presenting it without any indorsement. . . . (Zollmann, Banks
and Banking, Permanent Edition, Vol. 6, p. 494.)
Of course, if the bank is not sure of the bearer's identity or financial solvency, it has
the right to demand identification and /or assurance against possible complications,
for instance, (a) forgery of drawer's signature, (b) loss of the check by the rightful
owner, (c) raising of the amount payable, etc. The bank may therefore require, for its

protection, that the indorsement of the drawer or of some other person known to
it be obtained. But where the Bank is satisfied of the identity and /or the
economic standing of the bearer who tenders the check for collection, it will pay the
instrument without further question; and it would incur no liability to the drawer in
thus acting.
A check payable to bearer is authority for payment to holder. Where a check is in the
ordinary form, and is payable to bearer, so that no indorsement is required, a bank,
to which it is presented for payment, need not have the holder identified, and is not
negligent in falling to do so. . . . (Michie on Banks and Banking, Permanent Edition,
Vol. 5, p. 343.)
. . . Consequently, a drawee bank to which a bearer check is presented for payment
need not necessarily have the holder identified and ordinarily may not be charged
with negligence in failing to do so. See Opinions 6C:2 and 6C:3 If the bank has no
reasonable cause for suspecting any irregularity, it will be protected in paying a
bearer check, "no matter what facts unknown to it may have occurred prior to the
presentment." 1 Morse, Banks and Banking, sec. 393.
Although a bank is entitled to pay the amount of a bearer check without further
inquiry, it is entirely reasonable for the bank to insist that holder give satisfactory
proof of his identity. . . . (Paton's Digest, Vol. I, p. 1089.)
Anyway, it is significant, and conclusive, that the form of the check Exhibit A was
totally unconnected with its dishonor. The Court of Appeals declared that it was
returned unsatisfied because the drawer had insufficient funds not because the
drawer's indorsement was lacking.
Wherefore, there being no question as to the correctness of the penalty imposed on
the appellant, the writ of certiorari is denied and the decision of the Court of Appeals
is hereby affirmed, with costs.
Moran, C. J., Ozaeta, Paras, Pablo, Tuason, and Reyes, JJ., concur.

Republic Planters Bank vs. Court of Appeals, 216 SCRA 738(1992)

Commercial Law; Negotiable Instruments Law; Under the Negotiable Instruments
Law, persons who write their names on the face of promissory notes are makers and
are liable as such.Under the Negotiable Instruments Law, persons who write their
names on the face of promissory notes are makers and are liable as such. By signing
the notes, the maker promises to pay to the order of the payee or any holder
according to the tenor thereof. Based on the above provisions of law, there is no
denying that private respondent Fermin Canlas is one of the co-makers of the
promissory notes. As such, he cannot escape liability arising therefrom.
Same; Same; Same; An instrument which begins with I ,WE or Either of us
promise to pay, when signed by two or more persons, makes them solidarily liable.
Where an instrument containing the words I promise to pay is signed by two or
more persons, they are deemed to be jointly and severally liable thereon. An
instrument which begins with I, We, or Either of us promise to pay, when
signed by two or more persons, makes them solidarily liable. The fact that the
singular pronoun is used indicates that the promise is individual as to each other;
meaning that each of the co-signers is deemed to have made an independent
singular promise to pay the notes in full.
Same; Same; Same; Same; A joint and several note is one in which the makers bind
themselves both jointly and individually to the payee so that all may be sued
together for its enforcement or the creditor may select one or more as the object of
the suit.In the case at bar, the solidary liability of private respondent Fermin
Canlas is made clearer and certain, without reason for ambiguity, by the presence of
the phrase joint and several as describing the unconditional promise to pay to the
order of Republic Planters Bank. A joint and several note is one in which the makers
bind themselves both jointly and individually to the payee so that all may be sued
together for its enforcement, or the creditor may select one or more as the object of
the suit. A joint and several obligation in common law corresponds to a civil law
solidary obligation; that is, one of several debtors bound in such wise that is liable
for the entire amount, and not merely for his proportionate share.
Corporation Law; The corporation, upon such change in its name, is in no sense a
new corporation, nor the successor of the original corporation.The corporation,
upon such change in its name, is in no sense a new corporation, nor the successor of
the original corporation. It is the same corporation with a different name, and its
character is in no respect changed.
Same; Same; A change in the corporate name does not make a new corporation and
whether affected by special act or under a general law has no effect on the identity
of the corporation or on its property, rights or liabilities.A change in the corporate
name does not make a new corporation, and whether effected by special act or
under a general law, has no effect on the identity of the corporation, or on its
property, rights, or liabilities.
Same; Same; Same; The corporation continues as before responsible in its new
name for all debts or other liabilities which it had previously contracted or incurred.
The corporation continues, as before, responsible in its new name for all debts or
other liabilities which it had previously contracted or incurred.

Same; Same; Same; Same; Generally, officers or directors under the old corporate
name bear no personal liability for acts done or contracts entered into by officers of
the corporation if duly authorized.As a general rule, officers or directors under the
old corporate name bear no personal liability for acts done or contracts entered into
by officers of the corporation, if duly authorized. Inasmuch as such officers acted in
their capacity as agent of the old corporation and the change of name meant only
the continuation of the old juridical entity, the corporation bearing the same name is
still bound by the acts of its agents if authorized by the Board.
Usury Law; Interest; The rates under the Usury Law, as amended by Presidential
Decree No. 116, are applicable only to interests by way of compensation for the use
or forbearance of money.This Courthas held that the rates under the Usury Law, as
amended by Presidential Decree No. 116, are applicable only to interests by way of
compensation for the use or forbearance of money. Article 2209 of the Civil Code, on
the other hand, governs interests by way of damages. This fine distinction was not
taken into consideration by the appellate court, which instead made a general
statement that the interest rate be at 12% per annum.
Same; Same; Same; Central Bank Circular No. 905, Series of 1982 removed the
Usury Law ceiling on interest rates.Inasmuch as this Court had declared that
increases in interest rates are not subject to any ceiling prescribed by the Usury
Law, the appellate court erred in limiting the interest rate at 12% per annum.
Central Bank Circular No. 905, Series of 1982 removed the Usury Law ceiling on
interest rates. [Republic Planters Bank vs. Court of Appeals, 216 SCRA 738(1992)]
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 93073 December 21, 1992
REPUBLIC PLANTERS BANK, petitioner,
vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.

CAMPOS, JR., J.:

This is an appeal by way of a Petition for Review on Certiorari from the decision * of
the Court of Appeals in CA G.R. CV No. 07302, entitled "Republic Planters
Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and
Fermin Canlas, Defendant-Appellant", which affirmed the decision ** in Civil Case No.
82-5448 except that it completely absolved Fermin Canlas from liability under the
promissory notes and reduced the award for damages and attorney's fees. The RTC
decision, rendered on June 20, 1985, is quoted hereunder:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff Republic Planters Bank, ordering defendant Pinch Manufacturing Corporation
(formerly Worldwide Garment Manufacturing, Inc.) and defendants Shozo Yamaguchi
and Fermin Canlas to pay, jointly and severally, the plaintiff bank the following sums
with interest thereon at 16% per annum from the dates indicated, to wit:

Under the promissory note (Exhibit "A"), the sum of P300,000.00 with interest from
January 29, 1981 until fully paid; under promissory note (Exhibit "B"), the sum of
P40,000.00 with interest from November 27, 1980; under the promissory note
(Exhibit "C"), the sum of P166,466.00 which interest from January 29, 1981; under
the promissory note (Exhibit "E"), the sum of P86,130.31 with interest from January
29, 1981; under the promissory note (Exhibit "G"), the sum of P12,703.70 with
interest from November 27, 1980; under the promissory note (Exhibit "H"), the sum
of P281,875.91 with interest from January 29, 1981; and under the promissory note
(Exhibit "I"), the sum of P200,000.00 with interest from January 29, 1981.
Under the promissory note (Exhibit "D") defendants Pinch Manufacturing Corporation
(formerly named Worldwide Garment Manufacturing, Inc.), and Shozo Yamaguchi are
ordered to pay jointly and severally, the plaintiff bank the sum of P367,000.00 with
interest of 16% per annum from January 29, 1980 until fully paid
Under the promissory note (Exhibit "F") defendant corporation Pinch (formerly
Worldwide) is ordered to pay the plaintiff bank the sum of P140,000.00 with interest
at 16% per annum from November 27, 1980 until fully paid.
Defendant Pinch (formely Worldwide) is hereby ordered to pay the plaintiff the sum
of P231,120.81 with interest at 12% per annum from July 1, 1981, until fully paid and
the sum of P331,870.97 with interest from March 28, 1981, until fully paid.
All the defendants are also ordered to pay, jointly and severally, the plaintiff the sum
of P100,000.00 as and for reasonable attorney's fee and the further sum equivalent
to 3% per annum of the respective principal sums from the dates above stated as
penalty charge until fully paid, plus one percent (1%) of the principal sums as
service charge.
With costs against the defendants.
SO ORDERED.

From the above decision only defendant Fermin Canlas appealed to the then
Intermediate Court (now the Court Appeals). His contention was that inasmuch as he
signed the promissory notes in his capacity as officer of the defunct Worldwide
Garment Manufacturing, Inc, he should not be held personally liable for such
authorized corporate acts that he performed. It is now the contention of the
petitioner Republic Planters Bank that having unconditionally signed the nine (9)
promissory notes with Shozo Yamaguchi, jointly and severally, defendant Fermin
Canlas is solidarity liable with Shozo Yamaguchi on each of the nine notes.
We find merit in this appeal.
From the records, these facts are established: Defendant Shozo Yamaguchi and
private respondent Fermin Canlas were President/Chief Operating Officer and
Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of Board
Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private
respondent Fermin Canlas were authorized to apply for credit facilities with the
petitioner Republic Planters Bank in the forms of export advances and letters of
credit/trust receipts accommodations. Petitioner bank issued nine promissory notes,
marked as Exhibits A to I inclusive, each of which were uniformly worded in the
following manner:

___________, after date, for value received, I/we, jointly and severaIly promise to pay
to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines,
the sum of ___________ PESOS(....) Philippine Currency...
On the right bottom margin of the promissory notes appeared the signatures of
Shozo Yamaguchi and Fermin Canlas above their printed names with the phrase
"and (in) his personal capacity" typewritten below. At the bottom of the promissory
notes appeared: "Please credit proceeds of this note to:
________ Savings Account ______XX Current Account
No. 1372-00257-6
of WORLDWIDE GARMENT MFG. CORP.
These entries were separated from the text of the notes with a bold line which ran
horizontally across the pages.
In the promissory notes marked as Exhibits C, D and F, the name Worldwide
Garment Manufacturing, Inc. was apparently rubber stamped above the signatures
of defendant and private respondent.
On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its
corporate name to Pinch Manufacturing Corporation.
On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of
money covered among others, by the nine promissory notes with interest thereon,
plus attorney's fees and penalty charges. The complainant was originally brought
against Worldwide Garment Manufacturing, Inc. inter alia, but it was later amended
to drop Worldwide Manufacturing, Inc. as defendant and substitute Pinch
Manufacturing Corporation it its place. Defendants Pinch Manufacturing Corporation
and Shozo Yamaguchi did not file an Amended Answer and failed to appear at the
scheduled pre-trial conference despite due notice. Only private respondent Fermin
Canlas filed an Amended Answer wherein he, denied having issued the promissory
notes in question since according to him, he was not an officer of Pinch
Manufacturing Corporation, but instead of Worldwide Garment Manufacturing, Inc.,
and that when he issued said promissory notes in behalf of Worldwide Garment
Manufacturing, Inc., the same were in blank, the typewritten entries not appearing
therein prior to the time he affixed his signature.
In the mind of this Court, the only issue material to the resolution of this appeal is
whether private respondent Fermin Canlas is solidarily liable with the other
defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on the
nine promissory notes.
We hold that private respondent Fermin Canlas is solidarily liable on each of the
promissory notes bearing his signature for the following reasons:
The promissory motes are negotiable instruments and must be governed by the
Negotiable Instruments Law. 2
Under the Negotiable lnstruments Law, persons who write their names on the face of
promissory notes are makers and are liable as such. 3 By signing the notes, the
maker promises to pay to the order of the payee or any holder 4 according to the
tenor thereof. 5 Based on the above provisions of law, there is no denying that

private respondent Fermin Canlas is one of the co-makers of the promissory notes.
As such, he cannot escape liability arising therefrom.

acts of its agents if authorized by the Board. Under the Negotiable Instruments Law,
the liability of a person signing as an agent is specifically provided for as follows:

Where an instrument containing the words "I promise to pay" is signed by two or
more persons, they are deemed to be jointly and severally liable thereon. 6 An
instrument which begins" with "I" ,We" , or "Either of us" promise to, pay, when
signed by two or more persons, makes them solidarily liable. 7 The fact that the
singular pronoun is used indicates that the promise is individual as to each other;
meaning that each of the co-signers is deemed to have made an independent
singular promise to pay the notes in full.

Sec. 20. Liability of a person signing as agent and so forth. Where the instrument
contains or a person adds to his signature words indicating that he signs for or on
behalf of a principal , or in a representative capacity, he is not liable on the
instrument if he was duly authorized; but the mere addition of words describing him
as an agent, or as filling a representative character, without disclosing his principal,
does not exempt him from personal liability.

In the case at bar, the solidary liability of private respondent Fermin Canlas is made
clearer and certain, without reason for ambiguity, by the presence of the phrase
"joint and several" as describing the unconditional promise to pay to the order of
Republic Planters Bank. A joint and several note is one in which the makers bind
themselves both jointly and individually to the payee so that all may be sued
together for its enforcement, or the creditor may select one or more as the object of
the suit. 8 A joint and several obligation in common law corresponds to a civil law
solidary obligation; that is, one of several debtors bound in such wise that each is
liable for the entire amount, and not merely for his proportionate share. 9 By making
a joint and several promise to pay to the order of Republic Planters Bank, private
respondent Fermin Canlas assumed the solidary liability of a debtor and the payee
may choose to enforce the notes against him alone or jointly with Yamaguchi and
Pinch Manufacturing Corporation as solidary debtors.
As to whether the interpolation of the phrase "and (in) his personal capacity" below
the signatures of the makers in the notes will affect the liability of the makers, We do
not find it necessary to resolve and decide, because it is immaterial and will not
affect to the liability of private respondent Fermin Canlas as a joint and several
debtor of the notes. With or without the presence of said phrase, private respondent
Fermin Canlas is primarily liable as a co-maker of each of the notes and his liability is
that of a solidary debtor.
Finally, the respondent Court made a grave error in holding that an amendment in a
corporation's Articles of Incorporation effecting a change of corporate name, in this
case from Worldwide Garment manufacturing Inc to Pinch Manufacturing Corporation
extinguished the personality of the original corporation.
The corporation, upon such change in its name, is in no sense a new corporation,
nor the successor of the original corporation. It is the same corporation with a
different name, and its character is in no respect changed. 10
A change in the corporate name does not make a new corporation, and whether
effected by special act or under a general law, has no affect on the identity of the
corporation, or on its property, rights, or liabilities. 11
The corporation continues, as before, responsible in its new name for all debts or
other liabilities which it had previously contracted or incurred. 12
As a general rule, officers or directors under the old corporate name bear no
personal liability for acts done or contracts entered into by officers of the
corporation, if duly authorized. Inasmuch as such officers acted in their capacity as
agent of the old corporation and the change of name meant only the continuation of
the old juridical entity, the corporation bearing the same name is still bound by the

Where the agent signs his name but nowhere in the instrument has he disclosed the
fact that he is acting in a representative capacity or the name of the third party for
whom he might have acted as agent, the agent is personally liable to take holder of
the instrument and cannot be permitted to prove that he was merely acting as agent
of another and parol or extrinsic evidence is not admissible to avoid the agent's
personal liability. 13
On the private respondent's contention that the promissory notes were delivered to
him in blank for his signature, we rule otherwise. A careful examination of the notes
in question shows that they are the stereotype printed form of promissory notes
generally used by commercial banking institutions to be signed by their clients in
obtaining loans. Such printed notes are incomplete because there are blank spaces
to be filled up on material particulars such as payee's name, amount of the loan,
rate of interest, date of issue and the maturity date. The terms and conditions of the
loan are printed on the note for the borrower-debtor 's perusal. An incomplete
instrument which has been delivered to the borrower for his signature is governed
by Section 14 of the Negotiable Instruments Law which provides, in so far as
relevant to this case, thus:
Sec. 14. Blanks: when may be filled. Where the instrument is wanting in any
material particular, the person in possesion thereof has a prima facie authority to
complete it by filling up the blanks therein. ... In order, however, that any such
instrument when completed may be enforced against any person who became a
party thereto prior to its completion, it must be filled up strictly in accordance with
the authority given and within a reasonable time...
Proof that the notes were signed in blank was only the self-serving testimony of
private respondent Fermin Canlas, as determined by the trial court, so that the trial
court ''doubts the defendant (Canlas) signed in blank the promissory notes". We
chose to believe the bank's testimony that the notes were filled up before they were
given to private respondent Fermin Canlas and defendant Shozo Yamaguchi for their
signatures as joint and several promissors. For signing the notes above their
typewritten names, they bound themselves as unconditional makers. We take
judicial notice of the customary procedure of commercial banks of requiring their
clientele to sign promissory notes prepared by the banks in printed form with blank
spaces already filled up as per agreed terms of the loan, leaving the borrowersdebtors to do nothing but read the terms and conditions therein printed and to sign
as makers or co-makers. When the notes were given to private respondent Fermin
Canlas for his signature, the notes were complete in the sense that the spaces for
the material particular had been filled up by the bank as per agreement. The notes
were not incomplete instruments; neither were they given to private respondent
Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments
Law is not applicable.

The ruling in case of Reformina vs. Tomol relied upon by the appellate court in
reducing the interest rate on the promissory notes from 16% to 12% per annum
does not squarely apply to the instant petition. In the abovecited case, the rate of
12% was applied to forebearances of money, goods or credit and court judgemets
thereon, only in the absence of any stipulation between the parties.
In the case at bar however , it was found by the trial court that the rate of interest is
9% per annum, which interest rate the plaintiff may at any time without notice, raise
within the limits allowed law. And so, as of February 16, 1984 , the plaintiff had fixed
the interest at 16% per annum.
This Court has held that the rates under the Usury Law, as amended by Presidential
Decree No. 116, are applicable only to interests by way of compensation for the use
or forebearance of money. Article 2209 of the Civil Code, on the other hand, governs
interests by way of damages. 15 This fine distinction was not taken into consideration
by the appellate court, which instead made a general statement that the interest
rate be at 12% per annum.
Inasmuch as this Court had declared that increases in interest rates are not subject
to any ceiling prescribed by the Usury Law, the appellate court erred in limiting the
interest rates at 12% per annum. Central Bank Circular No. 905, Series of 1982
removed the Usury Law ceiling on interest rates. 16
In the 1ight of the foregoing analysis and under the plain language of the statute
and jurisprudence on the matter, the decision of the respondent: Court of Appeals
absolving private respondent Fermin Canlas is REVERSED and SET ASIDE. Judgement
is hereby rendered declaring private respondent Fermin Canlas jointly and severally
liable on all the nine promissory notes with the following sums and at 16% interest
per annum from the dates indicated, to wit:
Under the promissory note marked as exhibit A, the sum of P300,000.00 with
interest from January 29, 1981 until fully paid; under promissory note marked as
Exhibit B, the sum of P40,000.00 with interest from November 27, 1980: under the
promissory note denominated as Exhibit C, the amount of P166,466.00 with interest
from January 29, 1981; under the promissory note denominated as Exhibit D, the
amount of P367,000.00 with interest from January 29, 1981 until fully paid; under
the promissory note marked as Exhibit E, the amount of P86,130.31 with interest
from January 29, 1981; under the promissory note marked as Exhibit F, the sum of
P140,000.00 with interest from November 27, 1980 until fully paid; under the
promissory note marked as Exhibit G, the amount of P12,703.70 with interest from
November 27, 1980; the promissory note marked as Exhibit H, the sum of
P281,875.91 with interest from January 29, 1981; and the promissory note marked
as Exhibit I, the sum of P200,000.00 with interest on January 29, 1981.
The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide
Garment Manufacturing, Inc.) and Shozo Yamaguchi, for not having appealed from
the decision of the trial court, shall be adjudged in accordance with the judgment
rendered by the Court a quo.
With respect to attorney's fees, and penalty and service charges, the private
respondent Fermin Canlas is hereby held jointly and solidarity liable with defendants
for the amounts found, by the Court a quo. With costs against private respondent.
SO ORDERED.

Narvasa, C.J., (Chairman), Feliciano, Regalado and Nocon, JJ., concur.

Evangelista vs. Mercator Finance Corp., 409 SCRA 410(2003)

Civil Procedure; Motions; Summary Judgment; The crucial question in a motion for
summary judgment is where the issues raised in the pleadings are genuine or
fictitious.Summary judgment is a procedural technique aimed at weeding out
sham claims or defenses at an early stage of the litigation. The crucial question in a
motion for summary judgment is whether the issues raised in the pleadings are
genuine or fictitious, as shown by affidavits, depositions or admissions
accompanying the motion.
Same; Same; Same; Genuine Issue; The proper inquiry would therefore be whether
the affirmative defenses offered by petitioners constitute genuine issue of fact
requiring a full-blown trial.A genuine issue means an issue of fact which calls for
the presentation of evidence, as distinguished from an issue which is fictitious or
contrived so as not to constitute a genuine issue for trial. To forestall summary
judgment, it is essential for the non-moving party to confirm the existence of
genuine issues where he has substantial, plausible and fairly arguable defense, i.e.,
issues of fact calling for the presentation of evidence upon which a reasonable
finding of fact could return a verdict for the non-moving party. The proper inquiry
would therefore be whether the affirmative defenses offered by petitioners
constitute genuine issue of fact requiring a full-blown trial.
Civil Law; Contracts; Suretyship; Liability; A surety is bound by the same
consideration that makes the contract effective between the parties thereto.A
surety is one who is solidarily liable with the principal. Petitioners cannot claim that
they did not personally receive any consideration for the contract for wellentrenched is the rule that the consideration necessary to support a surety
obligation need not pass directly to the surety, a consideration moving to the
principal alone being sufficient. A surety is bound by the same consideration that
makes the contract effective between the principal parties thereto. [Evangelista vs.
Mercator Finance Corp., 409 SCRA 410(2003)]
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 148864

August 21, 2003

owners of five (5) parcels of land2 contained in the Real Estate Mortgage3 executed
by them and Embassy Farms, Inc. ("Embassy Farms"). They alleged that they
executed the Real Estate Mortgage in favor of Mercator Financing Corporation
("Mercator") only as officers of Embassy Farms. They did not receive the proceeds of
the loan evidenced by a promissory note, as all of it went to Embassy Farms. Thus,
they contended that the mortgage was without any consideration as to them since
they did not personally obtain any loan or credit accommodations. There being no
principal obligation on which the mortgage rests, the real estate mortgage is void. 4
With the void mortgage, they assailed the validity of the foreclosure proceedings
conducted by Mercator, the sale to it as the highest bidder in the public auction, the
issuance of the transfer certificates of title to it, the subsequent sale of the same
parcels of land to respondent Lydia P. Salazar ("Salazar"), and the transfer of the
titles to her name, and lastly, the sale and transfer of the properties to respondent
Lamecs Realty & Development Corporation ("Lamecs").
Mercator admitted that petitioners were the owners of the subject parcels of land. It,
however, contended that "on February 16, 1982, plaintiffs executed a Mortgage in
favor of defendant Mercator Finance Corporation for and in consideration of certain
loans, and/or other forms of credit accommodations obtained from the Mortgagee
(defendant Mercator Finance Corporation) amounting to EIGHT HUNDRED FORTYFOUR THOUSAND SIX HUNDRED TWENTY-FIVE & 78/100 (P844,625.78) PESOS,
Philippine Currency and to secure the payment of the same and those others that
the MORTGAGEE may extend to the MORTGAGOR (plaintiffs) x x x." 5 It contended
that since petitioners and Embassy Farms signed the promissory note 6 as co-makers,
aside from the Continuing Suretyship Agreement 7 subsequently executed to
guarantee the indebtedness of Embassy Farms, and the succeeding promissory
notes8 restructuring the loan, then petitioners are jointly and severally liable with
Embassy Farms. Due to their failure to pay the obligation, the foreclosure and
subsequent sale of the mortgaged properties are valid.
Respondents Salazar and Lamecs asserted that they are innocent purchasers for
value and in good faith, relying on the validity of the title of Mercator. Lamecs
admitted the prior ownership of petitioners of the subject parcels of land, but alleged
that they are the present registered owner. Both respondents likewise assailed the
long silence and inaction by petitioners as it was only after a lapse of almost ten
(10) years from the foreclosure of the property and the subsequent sales that they
made their claim. Thus, Salazar and Lamecs averred that petitioners are in estoppel
and guilty of laches.9

SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. EVANGELISTA, Petitioners,

vs.
MERCATOR FINANCE CORP., LYDIA P. SALAZAR, LAMEC'S ** REALTY AND
DEVELOPMENT CORP. and the REGISTER OF DEEDS OF BULACAN, Respondents.

During pre-trial, the parties agreed on the following issues:

DECISION
PUNO, J.:

b. Whether or not the extra-judicial foreclosure proceedings undertaken on subject

parcels of land to satisfy the indebtedness of Embassy Farms, Inc. is (sic) null and
void;

Petitioners, Spouses Evangelista ("Petitioners"), are before this Court on a Petition

for Review on Certiorari under Rule 45 of the Revised Rules of Court, assailing the
decision of the Court of Appeals dismissing their petition.

c. Whether or not the sale made by defendant Mercator Finance Corp. in favor of
Lydia Salazar and that executed by the latter in favor of defendant Lamecs Realty
and Development Corp. are null and void;

Petitioners filed a complaint1 for annulment of titles against respondents, Mercator

Finance Corporation, Lydia P. Salazar, Lamecs Realty and Development Corporation,
and the Register of Deeds of Bulacan. Petitioners claimed being the registered

d. Whether or not the parties are entitled to damages.10

a. Whether or not the Real Estate Mortgage executed by the plaintiffs in favor of
defendant Mercator Finance Corp. is null and void;

After pre-trial, Mercator moved for summary judgment on the ground that except as
to the amount of damages, there is no factual issue to be litigated. Mercator argued
that petitioners had admitted in their pre-trial brief the existence of the promissory
note, the continuing suretyship agreement and the subsequent promissory notes
restructuring the loan, hence, there is no genuine issue regarding their liability. The
mortgage, foreclosure proceedings and the subsequent sales are valid and the
complaint must be dismissed.11
Petitioners opposed the motion for summary judgment claiming that because their
personal liability to Mercator is at issue, there is a need for a full-blown trial. 12
The RTC granted the motion for summary judgment and dismissed the complaint. It
held:
A reading of the promissory notes show (sic) that the liability of the signatories
thereto are solidary in view of the phrase "jointly and severally." On the promissory
note appears (sic) the signatures of Eduardo B. Evangelista, Epifania C. Evangelista
and another signature of Eduardo B. Evangelista below the words Embassy Farms,
Inc. It is crystal clear then that the plaintiffs-spouses signed the promissory note not
only as officers of Embassy Farms, Inc. but in their personal capacity as well(.)
Plaintiffs(,) by affixing their signatures thereon in a dual capacity have bound
themselves as solidary debtor(s) with Embassy Farms, Inc. to pay defendant
Mercator Finance Corporation the amount of indebtedness. That the principal
contract of loan is void for lack of consideration, in the light of the foregoing is
untenable.13
Petitioners motion for reconsideration was denied for lack of merit.14 Thus,
petitioners went up to the Court of Appeals, but again were unsuccessful. The
appellate court held:
The appellants insistence that the loans secured by the mortgage they executed
were not personally theirs but those of Embassy Farms, Inc. is clearly self-serving
and misplaced. The fact that they signed the subject promissory notes in the(ir)
personal capacities and as officers of the said debtor corporation is manifest on the
very face of the said documents of indebtedness (pp. 118, 128-131, Orig. Rec.).
Even assuming arguendo that they did not, the appellants lose sight of the fact that
third persons who are not parties to a loan may secure the latter by pledging or
mortgaging their own property (Lustan vs. Court of Appeals, 266 SCRA 663,
675). x x x. In constituting a mortgage over their own property in order to secure the
purported corporate debt of Embassy Farms, Inc., the appellants undeniably
assumed the personality of persons interested in the fulfillment of the principal
obligation who, to save the subject realities from foreclosure and with a view
towards being subrogated to the rights of the creditor, were free to discharge the
same by payment (Articles 1302 [3] and 1303, Civil Code of the Philippines). 15
(emphases in the original)
The appellate court also observed that "if the appellants really felt aggrieved by the
foreclosure of the subject mortgage and the subsequent sales of the realties to other
parties, why then did they commence the suit only on August 12, 1997 (when the
certificate of sale was issued on January 12, 1987, and the certificates of title in the
name of Mercator on September 27, 1988)?" Petitioners "procrastination for about
nine (9) years is difficult to understand. On so flimsy a ground as lack of
consideration, (w)e may even venture to say that the complaint was not worth the
time of the courts."16

A motion for reconsideration by petitioners was likewise denied for lack of merit. 17
Thus, this petition where they allege that:
The court a quo erred and acted with grave abuse of discretion amounting to lack or
excess of jurisdiction in affirming in toto the May 4, 1998 order of the trial court
granting respondents motion for summary judgment despite the existence of
genuine issues as to material facts and its non-entitlement to a judgment as a
matter of law, thereby deciding the case in a way probably not in accord with
applicable decisions of this Honorable Court.18
we affirm.
Summary judgment "is a procedural technique aimed at weeding out sham claims or
defenses at an early stage of the litigation."19 The crucial question in a motion for
summary judgment is whether the issues raised in the pleadings are genuine or
fictitious, as shown by affidavits, depositions or admissions accompanying the
motion. A genuine issue means "an issue of fact which calls for the presentation of
evidence, as distinguished from an issue which is fictitious or contrived so as not to
constitute a genuine issue for trial." 20 To forestall summary judgment, it is essential
for the non-moving party to confirm the existence of genuine issues where he has
substantial, plausible and fairly arguable defense, i.e., issues of fact calling for the
presentation of evidence upon which a reasonable finding of fact could return a
verdict for the non-moving party. The proper inquiry would therefore be whether the
affirmative defenses offered by petitioners constitute genuine issue of fact requiring
a full-blown trial.21
In the case at bar, there are no genuine issues raised by petitioners. Petitioners do
not deny that they obtained a loan from Mercator. They merely claim that they got
the loan as officers of Embassy Farms without intending to personally bind
themselves or their property. However, a simple perusal of the promissory note and
the continuing suretyship agreement shows otherwise. These documentary evidence
prove that petitioners are solidary obligors with Embassy Farms.
The promissory note22 states:
For value received, I/We jointly and severally promise to pay to the order of
MERCATOR FINANCE CORPORATION at its office, the principal sum of EIGHT
HUNDRED FORTY-FOUR THOUSAND SIX HUNDRED TWENTY-FIVE PESOS & 78/100 (P
844,625.78), Philippine currency, x x x, in installments as follows:
September 16, 1982

P154,267.87

October 16, 1982

P154,267.87

November 16, 1982

P154,267.87

December 16, 1982

P154,267.87

January 16, 1983

P154,267.87

February 16, 1983

P154,267.87

xxx

xxx

xxx

The note was signed at the bottom by petitioners Eduardo B. Evangelista and
Epifania C. Evangelista, and Embassy Farms, Inc. with the signature of Eduardo B.
Evangelista below it.
The Continuing Suretyship Agreement23 also proves the solidary obligation of
petitioners, viz:
(Embassy Farms, Inc.)
Principal
(Eduardo B. Evangelista)
Surety
(Epifania C. Evangelista)
Surety
(Mercator Finance Corporation)
Creditor
To: MERCATOR FINANCE COPORATION
(1) For valuable and/or other consideration, EDUARDO B. EVANGELISTA and EPIFANIA
C. EVANGELISTA (hereinafter called Surety), jointly and severally unconditionally
guarantees (sic) to MERCATOR FINANCE COPORATION (hereinafter called Creditor),
the full, faithful and prompt payment and discharge of any and all indebtedness of
EMBASSY FARMS, INC. (hereinafter called Principal) to the Creditor.
xxx

xxx

xxx

(3) The obligations hereunder are joint and several and independent of the
obligations of the Principal. A separate action or actions may be brought and
prosecuted against the Surety whether or not the action is also brought and
prosecuted against the Principal and whether or not the Principal be joined in any
such action or actions.
xxx

xxx

xxx

The agreement was signed by petitioners on February 16, 1982. The promissory
notes24 subsequently executed by petitioners and Embassy Farms, restructuring
their loan, likewise prove that petitioners are solidarily liable with Embassy Farms.
Petitioners further allege that there is an ambiguity in the wording of the promissory
note and claim that since it was Mercator who provided the form, then the ambiguity
should be resolved against it.
Courts can interpret a contract only if there is doubt in its letter. 25 But, an
examination of the promissory note shows no such ambiguity. Besides, assuming
arguendo that there is an ambiguity, Section 17 of the Negotiable Instruments Law
states, viz:
SECTION 17. Construction where instrument is ambiguous. Where the language of
the instrument is ambiguous or there are omissions therein, the following rules of
construction apply:
xxx

xxx

xxx

(g) Where an instrument containing the word "I promise to pay" is signed by two or
more persons, they are deemed to be jointly and severally liable thereon.
Petitioners also insist that the promissory note does not convey their true intent in
executing the document.1wphi1 The defense is unavailing. Even if petitioners
intended to sign the note merely as officers of Embassy Farms, still this does not
erase the fact that they subsequently executed a continuing suretyship agreement.
A surety is one who is solidarily liable with the principal. 26 Petitioners cannot claim
that they did not personally receive any consideration for the contract for wellentrenched is the rule that the consideration necessary to support a surety
obligation need not pass directly to the surety, a consideration moving to the
principal alone being sufficient. A surety is bound by the same consideration that
makes the contract effective between the principal parties thereto. 27 Having
executed the suretyship agreement, there can be no dispute on the personal liability
of petitioners.
Lastly, the parol evidence rule does not apply in this case. 28 We held in Tarnate v.
Court of Appeals,29 that where the parties admitted the existence of the loans and
the mortgage deeds and the fact of default on the due repayments but raised the
contention that they were misled by respondent bank to believe that the loans were
long-term accommodations, then the parties could not be allowed to introduce
evidence of conditions allegedly agreed upon by them other than those stipulated in
the loan documents because when they reduced their agreement in writing, it is
presumed that they have made the writing the only repository and memorial of
truth, and whatever is not found in the writing must be understood to have been
waived and abandoned.
IN VIEW WHEREOF, the petition is dismissed. Treble costs against the petitioners.
SO ORDERED.
Panganiban, and Sandoval-Gutierrez, JJ., concur.
Corona, and Carpio-Morales, JJ., on official leave.

Ilano vs. Espaol, 478 SCRA 365(2005)

Actions; Pleadings and Practice; Complaints; Causes of Action; A cause of action has
three elements(1) the legal right of the plaintiff, (2) the correlative obligation of
the defendant, and (3) the act or omission of the defendant in violation of said legal
right.A cause of action has three elements: (1) the legal right of the plaintiff, (2)
the correlative obligation of the defendant, and (3) the act or omission of the
defendant in violation of said legal right. In determining the presence of these
elements, inquiry is confined to the four corners of the complaint including its
annexes, they being parts thereof. If these elements are absent, the complaint
becomes vulnerable to a motion to dismiss on the ground of failure to state a cause
of action.
Same; Same; Same; Bill of Particulars; Where the allegations of a complaint are
vague, indefinite, or in the form of conclusion, its dismissal is not proper for the
defendant may ask for more particulars.While some of the allegations may lack
particulars, and are in the form of conclusions of law, the elements of a cause of
action are present. For even if some are not stated with particularity, petitioner
alleged 1) her legal right not to be bound by the instruments which were bereft of
consideration and to which her consent was vitiated; 2) the correlative obligation on
the part of the defendantsrespondents to respect said right; and 3) the act of the
defendantsrespondents in procuring her signature on the instruments through
deceit, abuse of confidence machination, fraud, falsification, forgery,
defraudation, and bad faith, and with malice, malevolence and selfish intent.
Where the allegations of a complaint are vague, indefinite, or in the form of
conclusion, its dismissal is not proper for the defendant may ask for more
particulars. [Ilano vs. Espaol, 478 SCRA 365(2005)]
Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 161756 December 16, 2005
VICTORIA J. ILANO represented by her Attorney-in-fact, MILO ANTONIO C.
ILANO, Petitioners,
vs.
HON. DOLORES L. ESPAOL, in her capacity as Executive Judge, RTC of
Imus, Cavite, Br. 90, and, AMELIA ALONZO, EDITH CALILAP, DANILO
CAMACLANG, ESTELA CAMACLANG, ALLAN CAMACLANG, LENIZA REYES,
EDWIN REYES, JANE BACAREL, CHERRY CAMACLANG, FLORA CABRERA,
ESTELITA LEGASPI, CARMENCITA GONZALES, NEMIA CASTRO, GLORIA
DOMINGUEZ, ANNILYN C. SABALE and several JOHN DOES, Respondents.
DECISION
CARPIO MORALES, J.:

The Court of Appeals having affirmed the dismissal by Branch 20 of the Regional
Trial Court (RTC) of Cavite at Imus, for lack of cause of action, Civil Case No. 207900, the complaint filed by herein petitioner Victoria J. Ilano for
Revocation/Cancellation of Promissory Notes and Bills of Exchange (Checks) with
Damages and Prayer for Preliminary Injunction or Temporary Restraining Order
(TRO),1 against herein respondents 15 named defendants (and several John Does), a
recital of the pertinent allegations in the complaint, quoted verbatim as follows, is in
order:
xxx
3. That defendant AMELIA O. ALONZO, is a trusted employee of [petitioner]. She has
been with them for several years already, and through the years, defendant ALONZO
was able to gain the trust and confidence of [petitioner] and her family;
4. That due to these trust and confidence reposed upon defendant ALONZO by
[petitioner], there were occasions when defendant ALONZO was entrusted with
[petitioners] METROBANK Check Book containing either signed or unsigned blank
checks, especially in those times when [petitioner] left for the United States for
medical check-up;
5. Sometime during the second week of December 1999, or thereabouts, defendant
ALONZO by means of deceit and abuse of confidence succeeded in procuring
Promissory Notes and signed blank checks from [petitioner] who was then
recuperating from illness;
6. That as stated, aside from the said blank checks, defendant ALONZO likewise
succeeded in inducing [petitioner] to sign the Promissory Notes antedated
June 8, 1999 in the amount of PESOS: ONE MILLION FOUR HUNDRED TWENTY
EIGHT THOUSAND TWO HUNDRED SEVENTY TWO (Php 1,428,272.00) payable to
defendants EDITH CALILAP and DANILO CALILAP, and another Promissory Noted
dated March 1999 in the amount of PESOS: ONE MILLION (Php
1,000,000.00) payable to the same defendants EDITH CALILAP and DANILO
CALILAP, copies of said Promissory Notes are hereto attached as Annexes "A" and
"A-1" hereof;
7. That another Promissory Note antedated October 1, 1999 thru the
machination of defendant ALONZO, was signed by [petitioner] in the amount
of PESOS: THREE MILLION FORTY SIX THOUSAND FOUR HUNDRED ONE (Php
3,046,401.00) excluding interest, in favor of her co-defendants ESTELA CAMACLANG,
ALLAN CAMACLANG, LENIZA REYES, EDWIN REYES, JANE BACAREL and CHERRY
CAMACLANG, a copy of said Promissory Note is hereto attached as Annex "B" hereof;
8. That the Promissory Notes and blank checks were procured thru fraud
and deceit. The consent of the [petitioner] in the issuance of the two (2)
aforementioned Promissory Notes was vitiated. Furthermore, the same were
issued for want of consideration, hence, the same should be cancelled, revoked or
declared null and void;
9. That as clearly shown heretofore, defendant ALONZO in collusion with her codefendants, ESTELA CAMACLANG, ALLAN CAMACLANG and ESTELITA LEGASPI
likewise was able to induce plaintiff to sign several undated blank checks,
among which are:

 Metrobank Check No. 0111544

Metrobank Check No. 0111545

Edith Calilap/Danilo Calilap

1,220,000.00 0111462

Gloria Dominguez/

1,046,040.00 0111543

Metrobank Check No. 0111546

Metrobank Check No. 0111547
Carmencita Gonzales
Metrobank Check No. 0111515
all in the total amount of Php 3,031,600.00, copies of said checks are hereto
attached as Annexes "C", "C-1", "C-2", "C-3" and "C-4", respectively;
10. That aside from the checks mentioned heretofore, defendant ALONZO,
confederated and conspired with the following co-defendants, FLORA CABRERA,
NEMIA CASTRO, EDITH CALILAP, DANILO CALILAP, GLORIA DOMINGUEZ,
CARMENCITA GONZALES and ANNILYN C. SABALE and took advantage of the
signature of [petitioner] in said blank checks which were later on completed
by them indicated opposite their respective names and the respective amount
thereof, as follows:

NAME

AMOUNT

METROBANK Check
No.

Flora Cabrera

Php 337,584.58 0111460

Flora Cabrera

98,000.00 0111514

Nemia Castro

100,000.00 0111542

Nemia Castro

150,000.00 0084078

Edith Calilap/Danilo Calilap

490,000.00 0111513

Edith Calilap/Danilo Calilap

790,272.00 0111512

Annilyn C. Sable

150,000.00 0085134

Annilyn C. Sable

250,000.00 0085149

Annilyn C. Sable

186,000.00 0085112

Copy attached as Annexes "D", "D-1", "D-2", "D-3", "D-4", "D-5", "D-6", "D-7", "D-8",
"D-9" and "D-10", respectively;
Furthermore, defendant ALONZO colluded and conspired with defendant
NEMIA CASTO in procuring the signature of [petitioner] in documents
denominated as "Malayang Salaysay" dated July 22, 1999 in the amount of
PESOS: ONE HUNDRED FIFTY THOUSAND (Php 150,000.00) and another
"Malayang Salaysay" dated November 22, 1999 in the amount of PESOS: ONE
HUNDRED THOUSAND (Php 100,000.00) Annexes "D-11" and "D-12" hereof;
11. That said defendants took undue advantage of the signature of
[petitioner] in the said blank checks and furthermore forged and or
falsified the signature of [petitioner] in other unsigned checks and as it
was made to appear that said [petitioner] is under the obligation to pay
them several amounts of money, when in truth and in fact, said
[petitioner] does not owe any of said defendant any single amount;
12. That the issuance of the aforementioned checks or Promissory Notes or
the aforementioned "Malayang Salaysay" to herein defendants were
tainted with fraud and deceit, and defendants conspired with one another
to defraud herein [petitioner] as the aforementioned documents were
issued for want of consideration;
13. That the aforesaid defendants conspiring and confederating together and
helping one another committed acts of falsification and defraudation which
they should be held accountable under law;

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

in all bad faith and malice, with malevolence and selfish intent are causing
anxiety, tension, sleepless nights, wounded feelings, and embarrassment
to [petitioner] entitling her to moral damages of at least in the amount of PESOS:
FIVE HUNDRED THOUSAND (Php 500,000.00);
15. That to avoid repetition of similar acts and as a correction for the public good,
the defendants should be held liable to [petitioner] for exemplary damages in the
sum of not less than the amount of PESOS: TWO HUNDRED THOUSAND (Php
200,000.00);
16. That to protect the rights and interest of the [petitioner] in the illegal actuations
of the defendants, she was forced to engage the services of counsel for which she
was obliged to pay the sum of PESOS: ONE HUNDRED THOUSAND (Php 100,000.00)
by way of Attorneys fees plus the amount of PESOS: THREE THOUSAND (Php
3,000.00) per appearance in court;
x x x (Emphasis and underscoring supplied)
The named defendants-herein respondents filed their respective Answers invoking,
among other grounds for dismissal, lack of cause of action, for while the checks
subject of the complaint had been issued on account and for value, some had been
dishonored due to "ACCOUNT CLOSED;" and the allegations in the complaint are
bare and general.
By Order2 dated October 12, 2000, the trial court dismissed petitioners complaint
for failure "to allege the ultimate facts"-bases of petitioners claim that her right was
violated and that she suffered damages thereby.
On appeal to the Court of Appeals, petitioner contended that the trial court:
A. . . . FAILED TO STATE CLEARLY AND DISTINCTLY THE FACTS AND LAW ON WHICH
THE APPEALED ORDER WAS BASED, THEREBY RENDERING SAID ORDER NULL AND
VOID.
B. . . . ERRED IN HOLDING THAT THE COMPLAINT FAILED TO ALLEGE ULTIMATE FACTS
ON WHICH [PETITIONER] RELIES ON HER CLAIM THEREBY DISMISSING THE CASE FOR
LACK OF CAUSE OF ACTION.
C. . . . ERRED IN GIVING DUE COURSE TO THE MOTION TO DISMISS THAT CONTAINED
A FAULTY NOTICE OF HEARING AS THE SAME IS MERELY ADDRESSED TO THE
BRANCH CLERK OF COURT.3
In its Decision4 of March 21, 2003 affirming the dismissal order of the trial court, the
appellate court held that the elements of a cause of action are absent in the case:
Such allegations in the complaint are only general averments of fraud, deceit and
bad faith. There were no allegations of facts showing that the acts complained of
were done in the manner alleged. The complaint did not clearly ascribe the extent of
the liability of each of [respondents]. Neither did it state any right or cause of action
on the part of [petitioner] to show that she is indeed entitled to the relief prayed for.
In the first place, the record shows that subject checks which she sought to cancel or

revoke had already been dishonored and stamped "ACCOUNT CLOSED." In fact,
there were already criminal charges for violation of Batas Pambansa Blg. 22 filed
against [petitioner] previous to the filing of the civil case for revocation/cancellation.
Such being the case, there was actually nothing more to cancel or revoke. The
subject checks could no longer be negotiated. Thus, [petitioners] allegation that the
[respondents] were secretly negotiating with third persons for their delivery and/or
assignment, is untenable.
In the second place, we find nothing on the face of the complaint to show that
[petitioner] denied the genuineness or authenticity of her signature on the subject
promissory notes and the allegedly signed blank checks. She merely alleged abuse
of trust and confidence on the part of [Alonzo]. Even assuming arguendo that such
allegations were true, then [petitioner] cannot be held totally blameless for her
predicament as it was by her own negligence that subject instruments/signed blank
checks fell into the hands of third persons. Contrary to [petitioners] allegations, the
promissory notes show that some of the [respondents] were actually creditors of
[petitioner] and who were issued the subject checks as securities for the
loan/obligation incurred. Having taken the instrument in good faith and for value, the
[respondents] are therefore considered holders thereof in due course and entitled to
payment.
x x x (Underscoring supplied)
Hence, the present petition for review on certiorari, petitioner faulting the appellate
court:
1. . . . in sustaining the dismissal of the complaint upon the ground of failure to state
a cause of action when there are other several causes of action which ventilate such
causes of action in the complaint;
2. . . . in finding that a requirement that a Decision which should express therein
clearly and distinctly the facts and the law on which it is based does not include
cases which had not reached pre-trial or trial stage;
3. . . . in not finding that a notice of hearing which was addressed to the Clerk of
Court is totally defective and that subsequent action of the court did not cure the
flaw.5
In issue then is whether petitioners complaint failed to state a cause of action.
A cause of action has three elements: (1) the legal right of the plaintiff, (2) the
correlative obligation of the defendant, and (3) the act or omission of the defendant
in violation of said legal right. In determining the presence of these elements,
inquiry is confined to the four corners of the complaint 6 including its annexes, they
being parts thereof.7 If these elements are absent, the complaint becomes
vulnerable to a motion to dismiss on the ground of failure to state a cause of action. 8
As reflected in the above-quoted allegations in petitioners complaint, petitioner is
seeking twin reliefs, one for revocation/cancellation of promissory notes and checks,
and the other for damages.

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

Section 6. Omission; seal; particular money. The validity and negotiable

character of an instrument are not affected by the fact that
(a) It is not dated; or
(b) Does not specify the value given, or that any value had been given therefor; or
(c) Does not specify the place where it is drawn or the place where it is payable; or

While some of the allegations may lack particulars, and are in the form of
conclusions of law, the elements of a cause of action are present. For even if some
are not stated with particularity, petitioner alleged 1) her legal right not to be bound
by the instruments which were bereft of consideration and to which her consent was
vitiated; 2) the correlative obligation on the part of the defendants-respondents to
respect said right; and 3) the act of the defendants-respondents in procuring her
signature on the instruments through "deceit," "abuse of confidence" "machination,"
"fraud," "falsification," "forgery," "defraudation," and "bad faith," and "with malice,
malevolence and selfish intent."
Where the allegations of a complaint are vague, indefinite, or in the form of
conclusions, its dismissal is not proper for the defendant may ask for more
particulars.9
With respect to the checks subject of the complaint, it is gathered that, except for
Check No. 0084078,10 they were drawn all against petitioners Metrobank Account
No. 00703-955536-7.
Annex "D-8"11 of the complaint, a photocopy of Check No. 0085134, shows that it
was dishonored on January 12, 2000 due to "ACCOUNT CLOSED." When petitioner
then filed her complaint on March 28, 2000, all the checks subject hereof which were
drawn against the same closed account were already rendered valueless or nonnegotiable, hence, petitioner had, with respect to them, no cause of action.
With respect to above-said Check No. 0084078, however, which was drawn against
another account of petitioner, albeit the date of issue bears only the year 1999, its
validity and negotiable character at the time the complaint was filed on March 28,
2000 was not affected. For Section 6 of the Negotiable Instruments Law provides:

(d) Bears a seal; or

(e) Designates a particular kind of current money in which payment is to be made.
x x x (Emphasis supplied)
However, even if the holder of Check No. 0084078 would have filled up the month
and day of issue thereon to be "December" and "31," respectively, it would have, as
it did, become stale six (6) months or 180 days thereafter, following current banking
practice.12
It is, however, with respect to the questioned promissory notes that the present
petition assumes merit. For, petitioners allegations in the complaint relative thereto,
even if lacking particularity, does not as priorly stated call for the dismissal of the
complaint.
WHEREFORE, the petition is PARTLY GRANTED.
The March 21, 2003 decision of the appellate court affirming the October 12, 2000
Order of the trial court, Branch 20 of the RTC of Imus, Cavite, is AFFIRMED with
MODIFICATION in light of the foregoing discussions. The trial court is DIRECTED to
REINSTATE Civil Case No. 2079-00 to its docket and take further proceedings
thereon only insofar as the complaint seeks the revocation/cancellation of the
subject promissory notes and damages.
Let the records of the case be then REMANDED to the trial court.