[G.R. No. 132560.

January 30, 2002]

WESTMONT
BANK
(formerly
ASSOCIATED
CORP.), petitioner, vs. EUGENE ONG, respondent.

BANKING

DECISION
QUISUMBING, J.:

This is a petition for review of the decision dated January 13, 1998, of the
Court of Appeals in CA-G.R. CV No. 28304 ordering the petitioner to pay
respondent P1,754,787.50 plus twelve percent (12%) interest per annum
computed from October 7, 1977, the date of the first extrajudicial demand,
plus damages.
[1]

The facts of this case are undisputed.

Respondent Eugene Ong maintained a current account with petitioner,
formerly the Associated Banking Corporation, but now known as Westmont
Bank. Sometime in May 1976, he sold certain shares of stocks through Island
Securities Corporation. To pay Ong, Island Securities purchased two (2)
Pacific Banking Corporation managers checks, both dated May 4, 1976,
issued in the name of Eugene Ong as payee. Before Ong could get hold of
the checks, his friend Paciano Tanlimco got hold of them, forged Ongs
signature and deposited these with petitioner, where Tanlimco was also a
depositor. Even though Ongs specimen signature was on file, petitioner
accepted and credited both checks to the account of Tanlimco, without
verifying the signature indorsements appearing at the back thereof. Tanlimco
then immediately withdrew the money and absconded.
[2]

Instead of going straight to the bank to stop or question the payment, Ong
first sought the help of Tanlimcos family to recover the amount. Later, he
reported the incident to the Central Bank, which like the first effort,
unfortunately proved futile.
It was only on October 7, 1977, about five (5) months from discovery of
the fraud, did Ong cry foul and demanded in his complaint that petitioner pay
the value of the two checks from the bank on whose gross negligence he
imputed his loss. In his suit, he insisted that he did not deliver, negotiate,
endorse or transfer to any person or entity the subject checks issued to him
and asserted that the signatures on the back were spurious.
[3]

The bank did not present evidence to the contrary, but simply contended
that since plaintiff Ong claimed to have never received the originals of the two
(2) checks in question from Island Securities, much less to have authorized
Tanlimco to receive the same, he never acquired ownership of these
checks. Thus, he had no legal personality to sue as he is not a real party in
interest. The bank then filed a demurrer to evidence which was denied.
On February 8, 1989, after trial on the merits, the Regional Trial Court of
Manila, Branch 38, rendered a decision, thus:
IN VIEW OF THE FOREGOING, the court hereby renders judgment for the plaintiff
and against the defendant, and orders the defendant to pay the plaintiff:

1. The sum of P1,754,787.50 representing the total face value of the two checks in
question, exhibits A and B, respectively, with interest thereon at the legal rate of
twelve percent (12%) per annum computed from October 7, 1977 (the date of the
first extrajudicial demand) up to and until the same shall have been paid in full;
2. Moral damages in the amount of P250,000.00;
3. Exemplary or corrective damages in the sum of P100,000.00 by way of example or
correction for the public good;
4. Attorneys fees of P50,000.00 and costs of suit.

Defendants counterclaims are dismissed for lack of merit.

SO ORDERED.

[4]

Petitioner elevated the case to the Court of Appeals without success. In its
decision, the appellate court held:
WHEREFORE, in view of the foregoing, the appealed decision is AFFIRMED in toto.
[5]

Petitioner now comes before this Court on a petition for review, alleging
that the Court of Appeals erred:
I

... IN AFFIRMING THE TRIAL COURTS CONCLUSION THAT RESPONDENT

HAS A CAUSE OF ACTION AGAINST THE PETITIONER.
II

... IN AFFIRMING THE TRIAL COURTS DECISION FINDING PETITIONER

LIABLE TO RESPONDENT AND DECLARING THAT THE LATTER MAY
RECOVER DIRECTLY FROM THE FORMER; AND
III

... IN NOT ADJUDGING RESPONDENT GUILTY OF LACHES AND IN NOT

ABSOLVING PETITIONER FROM LIABILITY.
Essentially the issues in this case are: (1) whether or not respondent Ong
has a cause of action against petitioner Westmont Bank; and (2) whether or
not Ong is barred to recover the money from Westmont Bank due to laches.
Respondent admitted that he was never in actual or physical possession
of the two (2) checks of the Island Securities nor did he authorize Tanlimco or
any of the latters representative to demand, accept and receive the same. For
this reason, petitioner argues, respondent cannot sue petitioner because
under Section 51 of the Negotiable Instruments Law it is only when a person
becomes a holder of a negotiable instrument can he sue in his own
name. Conversely, prior to his becoming a holder, he had no right or cause of
action under such negotiable instrument. Petitioner further argues that since
Section 191 of the Negotiable Instruments Law defines a holder as the payee
or indorsee of a bill or note, who is in possession of it, or the bearer thereof, in
order to be a holder, it is a requirement that he be in possession of the
instrument or the bearer thereof. Simply stated, since Ong never had
possession of the checks nor did he authorize anybody, he did not become a
holder thereof hence he cannot sue in his own name.
[6]

[7]

[8]

Petitioner also cites Article 1249 of the Civil Code explaining that a check,
even if it is a managers check, is not legal tender. Hence, the creditor cannot
be compelled to accept payment thru this means. It is petitioners position
that for all intents and purposes, Island Securities has not yet tendered
payment to respondent Ong, thus, any action by Ong should be directed
towards collecting the amount from Island Securities. Petitioner claims that
Ongs cause of action against it has not ripened as of yet. It may be that
petitioner would be liable to the drawee bank - - but that is a matter between
petitioner and drawee-bank, Pacific Banking Corporation.
[9]

[10]

[11]

For its part, respondent Ong leans on the ruling of the trial court and the
Court of Appeals which held that the suit of Ong against the petitioner bank is
a desirable shortcut to reach the party who ought in any event to be ultimately
liable. It likewise cites the ruling of the courts a quo which held that according
to the general rule, a bank who has obtained possession of a check upon an
unauthorized or forged indorsement of the payees signature and who collects
the amount of the check from the drawee is liable for the proceeds thereof to
the payee. The theory of said rule is that the collecting banks possession of
such check is wrongful.
[12]

[13]

Respondent also cites Associated Bank vs. Court of Appeals which held
that the collecting bank or last endorser generally suffers the loss because it
has the duty to ascertain the genuineness of all prior endorsements. The
collecting bank is also made liable because it is privy to the depositor who
negotiated the check. The bank knows him, his address and history because
he is a client. Hence, it is in a better position to detect forgery, fraud or
irregularity in the indorsement.
[14]

[15]

Anent Article 1249 of the Civil Code, Ong points out that bank checks are
specifically governed by the Negotiable Instruments Law which is a special
law and only in the absence of specific provisions or deficiency in the special
law may the Civil Code be invoked.
[16]

Considering the contentions of the parties and the evidence on record, we

find no reversible error in the assailed decisions of the appellate and trial
courts, hence there is no justifiable reason to grant the petition.
Petitioners claim that respondent has no cause of action against the bank
is clearly misplaced. As defined, a cause of action is the act or omission by
which a party violates a right of another. The essential elements of a cause
of action are: (a) a legal right or rights of the plaintiff, (b) a correlative
obligation of the defendant, and (c) an act or omission of the defendant in
violation of said legal right.
[17]

[18]

The complaint
respondents right as
involved, petitioners
amount gets to the
because of a blatant
respondents rights.

filed before the trial court expressly alleged

payee of the managers checks to receive the amount
correlative duty as collecting bank to ensure that the
rightful payee or his order, and a breach of that duty
act of negligence on the part of petitioner which violated

[19]

Under Section 23 of the Negotiable Instruments Law:

When a signature is forged or made without the authority of the person whose
signature it purports to be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, or to enforce payment thereof against any

party thereto, can be acquired through or under such signature, unless the party
against whom it is sought to enforce such right is precluded from setting up the
forgery or want of authority.
Since the signature of the payee, in the case at bar, was forged to make it
appear that he had made an indorsement in favor of the forger, such signature
should be deemed as inoperative and ineffectual. Petitioner, as the collecting
bank, grossly erred in making payment by virtue of said forged signature. The
payee, herein respondent, should therefore be allowed to recover from the
collecting bank.
The collecting bank is liable to the payee and must bear the loss because
it is its legal duty to ascertain that the payees endorsement was genuine
before cashing the check. As a general rule, a bank or corporation who has
obtained possession of a check upon an unauthorized or forged indorsement
of the payees signature and who collects the amount of the check from the
drawee, is liable for the proceeds thereof to the payee or other owner,
notwithstanding that the amount has been paid to the person from whom the
check was obtained.
[20]

[21]

The theory of the rule is that the possession of the check on the forged or
unauthorized indorsement is wrongful, and when the money had been
collected on the check, the bank or other person or corporation can be held as
for moneys had and received, and the proceeds are held for the rightful
owners who may recover them. The position of the bank taking the check on
the forged or unauthorized indorsement is the same as if it had taken the
check and collected the money without indorsement at all and the act of the
bank amounts to conversion of the check.
[22]

Petitioners claim that since there was no delivery yet and respondent has
never acquired possession of the checks, respondents remedy is with the
drawer and not with petitioner bank.Petitioner relies on the view to the effect
that where there is no delivery to the payee and no title vests in him, he ought
not to be allowed to recover on the ground that he lost nothing because he
never became the owner of the check and still retained his claim of debt
against the drawer. However, another view in certain cases holds that even if
the absence of delivery is considered, such consideration is not material. The
rationale for this view is that in said cases the plaintiff uses one action to
reach, by a desirable short cut, the person who ought in any event to be
ultimately liable as among the innocent persons involved in the transaction. In
other words, the payee ought to be allowed to recover directly from the
collecting bank, regardless of whether the check was delivered to the payee
or not.
[23]

[24]

Considering the circumstances in this case, in our view, petitioner could

not escape liability for its negligent acts. Admittedly, respondent Eugene Ong
at the time the fraudulent transaction took place was a depositor of petitioner
bank. Banks are engaged in a business impressed with public interest, and it
is their duty to protect in return their many clients and depositors who transact
business with them. They have the obligation to treat their clients account
meticulously and with the highest degree of care, considering the fiduciary
nature of their relationship. The diligence required of banks, therefore, is more
than that of a good father of a family. In the present case, petitioner was held
to be grossly negligent in performing its duties. As found by the trial court:
[25]

[26]

xxx (A)t the time the questioned checks were accepted for deposit to Paciano
Tanlimcos account by defendant bank, defendant bank, admittedly had in its files
specimen signatures of plaintiff who maintained a current account with them (Exhibits
L-1 and M-1; testimony of Emmanuel Torio). Given the substantial face value of the
two checks, totalling P1,754,787.50, and the fact that they were being deposited by a
person not the payee, the very least defendant bank should have done, as any
reasonable prudent man would have done, was to verify the genuineness of the
indorsements thereon. The Court cannot help but note that had defendant conducted
even the most cursory comparison with plaintiffs specimen signatures in its files
(Exhibit L-1 and M-1) it would have at once seen that the alleged indorsements were
falsified and were not those of the plaintiff-payee. However, defendant apparently
failed to make such a verification or, what is worse did so but, chose to disregard the
obvious dissimilarity of the signatures.The first omission makes it guilty of gross
negligence; the second of bad faith. In either case, defendant is liable to plaintiff for
the proceeds of the checks in question.
[27]

These findings are binding and conclusive on the appellate and the
reviewing courts.
On the second issue, petitioner avers that respondent Ong is barred by
laches for failing to assert his right for recovery from the bank as soon as he
discovered the scam. The lapse of five months before he went to seek relief
from the bank, according to petitioner, constitutes laches.
In turn, respondent contends that petitioner presented no evidence to
support its claim of laches. On the contrary, the established facts of the case
as found by the trial court and affirmed by the Court of Appeals are that
respondent left no stone unturned to obtain relief from his predicament.
On the matter of delay in reporting the loss, respondent calls attention to
the fact that the checks were issued on May 4, 1976, and on the very next
day, May 5, 1976, these were already credited to the account of Paciano
Tanlimco and presented for payment to Pacific Banking Corporation. So even
if the theft of the checks were discovered and reported earlier, respondent
argues, it would not have altered the situation as the encashment of the
checks was consummated within twenty four hours and facilitated by the
gross negligence of the petitioner bank.
[28]

Laches may be defined as the failure or neglect for an unreasonable and

unexplained length of time, to do that which, by exercising due diligence,
could or should have been done earlier. It is negligence or omission to assert
a right within a reasonable time, warranting a presumption that the party
entitled thereto has either abandoned or declined to assert it. It concerns
itself with whether or not by reason of long inaction or inexcusable neglect, a
person claiming a right should be barred from asserting the same, because to
allow him to do so would be unjust to the person against whom such right is
sought to be enforced.
[29]

[30]

In the case at bar, it cannot be said that respondent sat on his rights. He
immediately acted after knowing of the forgery by proceeding to seek help
from the Tanlimco family and later the Central Bank, to remedy the situation
and recover his money from the forger, Paciano Tanlimco. Only after he had
exhausted possibilities of settling the matter amicably with the family of
Tanlimco and through the CB, about five months after the unlawful transaction
took place, did he resort to making the demand upon the petitioner and
eventually before the court for recovery of the money value of the two

checks. These acts cannot be construed as undue delay in or abandonment

of the assertion of his rights.
Moreover, the claim of petitioner that respondent should be barred by
laches is clearly a vain attempt to deflect responsibility for its negligent act. As
explained by the appellate court, it is petitioner which had the last clear
chance to stop the fraudulent encashment of the subject checks had it
exercised due diligence and followed the proper and regular banking
procedures in clearing checks. As we had earlier ruled, the one who had the
last clear opportunity to avoid the impending harm but failed to do so is
chargeable with the consequences thereof.
[31]

[32]

WHEREFORE, the instant petition is DENIED for lack of merit. The

assailed decision of the Court of Appeals, sustaining the judgment of the
Regional Trial Court of Manila, is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

[G.R. No. 142047. July 10, 2006]

SPS. SERGIO AND MILAGROS OJEDA versus ANDRELINA ORBETA
Third Division
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court dated JULY 10, 2006.
G.R. No. 142047 (Sps. Sergio and Milagros Ojeda versus Andrelina Orbeta)
Petitioner spouses Sergio Ojeda and Milagros Ojeda seek a reversal of the February 24, 2000
Decision[1] rendered by the Court of Appeals in CA-G.R. CV No. 59985 entitled Andrelina Orbeta v. Sps.
Sergio Ojeda and Milagros Ojeda. The questioned decision affirmed the February 23, 1995 Decision [2] of the
Regional Trial Court, Branch 106 of Quezon City in Civil Case No. Q-91-7794.
cralaw

cralaw

The facts of this case are not complicated.

From 1986 to 1989, the spouses Ojeda obtained various loans they would use as additional capital from
Andrelina Orbeta, a general merchandiser and former market stall holder. Over time, Orbeta extended a
total of 18 loans to the spouses. [3] Although the couple failed to pay their obligations on time, Orbeta
continued to accommodate them, and lent them more money on the assurance that they would soon pay all
their debts. Every time Orbeta would verbally demand payment, she was told that payment was forthcoming
and there was nothing to worry about since the spouses' business was doing well and the couple had a
daughter based in Japan who always sent them money. To their sincerity, they aver, they even delivered a
copy of the registration papers of one of their vehicles to Orbeta.
cralaw

Notwithstanding all their promises, however, the spouses' obligations remained unpaid. Orbeta made
numerous demands but all attempts to collect from the couple proved futile. Frustrated by their failure to
pay, Orbeta through her lawyer sent a demand letter to the spouses on March 1989. [4] Eventually, on July
1989, after an accounting of all outstanding loans due, Milagros Ojeda issued Security Bank and Trust
Company Check No. 027836 dated September 1, 1989 for P487,133.87, representing full settlement of all
obligations due in favor of Orbeta. When presented for payment, however, the check was dishonored for
having been drawn against an account already closed.
cralaw

Consequently, Orbeta filed Criminal Case No. Q-90-10226 for violation of Batas Pambansa Bilang 22 against
Milagros Ojeda with the Regional Trial Court of Quezon City.[5] After a plea of guilty, judgment was rendered
against the accused in a decision[6] dated October 11, 1990. The dispositive portion of the decision read:
cralaw

cralaw

WHEREFORE, considering the plea of Guilty entered by accused Milagros Ojeda this morning, the Court
hereby renders judgment:
1. Finding said accused GUILTY beyond reasonable doubt of the offense charged;
2. Sentencing her to suffer the penalty of ONE (1) YEAR imprisonment; and
3. To pay costs.
The decision was promulgated in open Court this morning in the presence of the accused herself, Assistant
City Prosecutor Perpetuo LB Alonzo and Atty. Renerio S. Payumo.
SO ORDERED.
Consistent with the reservation made by Ojeda in the BP 22 case, Civil Case No. Q-91-7794 was
subsequently filed against the spouses to collect on the civil aspect of the BP 22 case. In the civil case, the
Regional Trial Court ruled as follows:
WHEREFORE, finding no cogent reason to deny the relief being prayed for, the cause of action of plaintiff
having been fully established and proven by preponderant evidence, judgment is hereby rendered ordering
defendants to pay plaintiff:
1.
The amount of Four Hundred Eighty Seven Thousand One Hundred Thirteen and 87/100
(P487,113.87) pesos with 12% interest from filing of the case until fully paid.
2.

25% of the principal obligation as and by way of attorney's fees.

3.

Cost of suit.

SO ORDERED.[7]

cralaw

Aggrieved, the spouses brought their case to the Court of Appeals where the Regional Trial Court's judgment
was affirmed, to wit:
WHEREFORE, with the sole modification that the award for attorney's fee[s] is hereby eliminated, the
Judgment appealed from is in all other respects AFFIRMED, with the costs of this instance to be taxed
against the defendants-appellants.
SO ORDERED.[8]

cralaw

Before us now are the following issues: (1) Are the spouses liable for issuing Security Bank and Trust
Company Check No. 027836? (2) Did the Court of Appeals err in upholding the propriety of the civil case
that was instituted separately from the BP 22 case?
To justify their prayer for a reversal of the Court of Appeals' decision, the spouses insist that there are
special and important reasons present in the case which constitute a question of law and there was a
misapprehension of facts committed by the Court of Appeals which must be rectified.
Petitioners maintain that any obligation arising from Security Bank and Trust Company Check No. 027836 is
invalid and illegal since the same was issued in blank except for the signature of Milagros Ojeda. They
further claim that they already paid P55,000 to satisfy their obligation to Orbeta of P30,000 only. The couple
also aver that the motion of Orbeta to file a separate civil action was merely noted by the Regional Trial
Court in the BP 22 case and there was no order granting the institution of a separate civil action.
Respondent Orbeta, on the other hand, counters that the errors raised by the spouses deal with questions of
fact which have already been passed upon and decided by the Regional Trial Court and the Court of Appeals
and cannot now be raised in this petition for review. Orbeta also contends that, the couple cannot assert for
the first time that the motion to file a separate civil action was merely noted and no order was issued by the
Regional Trial Court granting the same since a full blown trial had been conducted without the said issue
having been raised by the spouses, hence, they are barred from doing so, since they are considered to have
waived any objection they may have had on the subject. Finally, Orbeta points out that the judgment in the
BP 22 case did not contain an award for civil liability which is tantamount to the Regional Trial Court's
approval of the motion.[9]
cralaw

To resolve the first issue, we must here emphasize that the jurisdiction of this Court in a petition such as this
is limited to reviewing errors of law that might have been committed by the lower court. The allegation of
the spouses that Security Bank and Trust Company Check No. 027836 was delivered to Orbeta in blank
except for the signature of Milagros Ojeda and the amount of P10,000 annotated at the back of the check,
and their contention that they cannot be held liable for the face value of the check since Milagros Ojeda was
not the one who filled up the date, name of the payee and the amount appearing on the
check, are questions of fact that require us to re-examine the evidence presented by the contending parties
during trial. This cannot be done in a petition for review. Under Rule 45, only questions of law may be raised

in a petition for review, except in very few specified instances, e.g. where there is variance in the factual
findings of the trial and appellate courts. Since both the Regional Trial Court and the Court of Appeals agree
on the cited facts, we are bound by their factual findings.
In any event, the spouses do not deny that the check was delivered to Orbeta and that the signature
appearing on the check belongs to Milagros Ojeda. Even if the check was delivered to Orbeta in blank, we
must stress that the presumption is that the latter had prima facie authority to complete the check by filling
up the same. Here, the provision of Section 14 of the Negotiable Instruments Law is pertinent:
SEC. 14. Blanks; when may be filled. - Where the instrument is wanting in any material particular, the
person in possession thereof has a prima facie authority to complete it by filling up the
blanks therein. And a signature on a blank paper delivered by the person making the signature in order
that the paper may be converted into a negotiable instrument operates as a prima facieauthority to fill it up
as such for any amount. 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. But if any such instrument, after
completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and
he may enforce it as if it had been filled up strictly in accordance with the authority given and within a
reasonable time. (Emphasis supplied.)
The law merely requires that the instrument be in the possession of a person other than the drawer or
maker, and from such possession, together with the fact that the instrument is wanting in a material
particular, the law presumes agency to fill up the blanks. [10] Because of the presumption of authority, the
burden of proving that there was no authority or that the authority granted was exceeded is placed on the
person questioning such authority.[11] There is nothing on record to show that the prima facie presumption
created by the afore-quoted section was successfully refuted by the spouses. Therefore, the couple's stance
that they cannot be held liable for the check because they were not the ones who wrote the date, the name
of the payee and the amount, is untenable.
cralaw

cralaw

On the second issue, it appears that an urgent motion to file a separate civil action was filed by Orbeta on
October 11, 1990, which motion was correspondingly noted by the Regional Trial Court in its decision.
[12]
Since the civil liability involved in this case is one that arises from a crime, the rule is that the same is
impliedly instituted with the criminal action unless the offended party expressly waives the civil action;
reserves his right to institute it separately; or institutes the civil action prior to the filing of the criminal case.
[13]
The purpose of the rule requiring reservation is to prevent the offended party from recovering damages
twice for the same act or omission.[14]
cralaw

cralaw

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Orbeta's intention to reserve her right to recover the civil liability arising from the BP 22 case is clear from
the time she filed the urgent motion.[15] The fact that the Regional Trial Court did not provide for an award
of damages in its decision is also a clear recognition of Orbeta's reservation.
cralaw

Contrary to the spouses' argument, an order by the Regional Trial Court granting the urgent motion to file a
separate civil action is not necessary since the rules only require that the offended party make the
reservation before the prosecution starts to present its evidence and under circumstances affording the
offended party a reasonable opportunity to make such reservation.
Lastly, we agree with respondent that it is now too late for the spouses to question the institution of the civil
case separately from the BP 22 case. A full blown trial was conducted in the civil case with the participation
of the spouses, but they never raised any objection thereto, and they cannot be allowed here and now to
raise this issue for the first time.
WHEREFORE, the instant petition is DENIED. The February 24, 2000 Decision of the Court of Appeals
sustaining the February 23, 1995 Decision of the Regional Trial Court is AFFIRMED.
Costs against petitioners.
SO ORDERED.
Very truly yours,
(Sgd.) LUCITA ABJELINA-SORIANO
Clerk of Court

FIRST DIVISION
EQUITABLE PCI BANK (the
Banking
Entity
into
which
Philippine
Commercial

G.R. No. 156207

Present:
PANGANIBAN, C.J.

International Bank was merged),

Petitioner,

Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR. and
CHICO-NAZARIO, JJ.

- versus Promulgated:
September 15, 2006
ROWENA ONG,
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CHICO-NAZARIO, J.:
On 29 November 1991, Warliza Sarande deposited in her account at Philippine
Commercial International (PCI) Bank Magsaysay Avenue, Santa Ana
District, Davao City Branch, under Account No. 8502-00347-6, a PCI Bank
General Santos City Branch, TCBT[1] Check No. 0249188 in the amount
of P225,000.00. Upon inquiry by Serande at PCI Bank on 5 December 1991 on
whether TCBT Check No. 0249188 had been cleared, she received an affirmative
answer. Relying on this assurance, she issued two checks drawn against the
proceeds of TCBT Check No. 0249188. One of these was PCI Bank Check No.
073661 dated 5 December 1991 for P132,000.00 which Sarande issued to
respondent Rowena Ong Owing to a business transaction. On the same
day, Ong presented to PCI Bank Magsaysay Avenue Branch said Check No.
073661, and instead ofencashing it, requested PCI Bank to convert the proceeds
thereof into a managers check, which the PCI Bank obliged. Whereupon, Ong was
issued PCI Bank Managers Check No. 10983 dated 5 December 1991 for the sum
of P132,000.00, the value of Check No. 073661.
The next day, 6 December 1991, Ong deposited PCI Bank Managers Check No.
10983 in her account with Equitable Banking Corporation Davao City
Branch. On 9 December 1991, she received a check return-slip informing her that
PCI Bank had stopped the payment of the said check on the ground of irregular
issuance. Despite several demands made by her to PCI Bank for the payment of the
amount in PCI Bank Managers Check No. 10983, the same was met with refusal;
thus, Ong was constrained to file a Complaint for sum of money, damages and
attorneys fees against PCI Bank.[2]
From PCI Banks version, TCBT-General Santos City Check No. 0249188 was
returned on 5 December 1991 at 5:00 pm on the ground that the account against
which it was drawn was already closed. According to PCI Bank, it immediately
gave notice to Sarande and Ong about the return of Check No. 0249188 and

requested Ong to return PCI Bank Managers Check No. 10983 inasmuch as the
return of Check No. 0249188 on the ground that the account from which it was
drawn had already been closed resulted in a failure or want of consideration for the
issuance of PCI Bank Managers Check No. 10983.[3]
After the pre-trial conference, Ong filed a motion for summary judgment.
[4]
Though they were duly furnished with a copy of the motion for summary
judgment, PCI Bank and its counsel failed to appear at the scheduled hearing.
[5]
Neither did they file any written comment or opposition thereto. The trial court
thereafter ordered Ong to formally offer her exhibits in writing, furnishing copies
of the same to PCI Bank which was directed to file its comment or objection.[6]
Ong complied with the Order of the trial court, but PCI Bank failed to file any
comment or objection within the period given to it despite receipt of the same
order.[7] The trial court then granted the motion for summary judgment and in its
Order dated 2 March 1995, it held:
IN THE LIGHT OF THE FOREGOING, the motion for summary
judgment is GRANTED, ordering defendant Philippine Commercial
International Bank to pay the plaintiff the amount of ONE HUNDRED
THIRTY-TWO THOUSAND PESOS (P132,000.00) equivalent to the
amount of PCIB Managers Check No. 10983.
Set the reception of the plaintiffs evidence with respect to the damages
claimed in the complaint.[8]

PCI Bank filed a Motion for Reconsideration which the trial court denied in its
Order dated 11 April 1996.[9] After the reception of Ongs evidence in support of her
claim for damages, the trial court rendered its Decision [10] dated 3 May
1999 wherein it ruled:
IN LIGHT OF THE FOREGOIN CONSIDERATION, and as plaintiff
has preponderantly established by competent evidence her claims in the
Complaint, judgment in hereby rendered for the plaintiff against the
defendant-bank ordering the latter:
1. To pay the plaintiff the sum of FIFTY THOUSAND PESOS
(P50,000.00) in the concept of moral damages;
2. To pay the plaintiff the sum of TWENTY THOUSAND PESOS
(P20,000.00) as exemplary damages;
3. To pay the plaintiff the sum of THREE THOUSAND FIVE
HUNDRED PESOS (P3,500.00) representing actual expenses;
4. To pay the plaintiff the sum of TWENTY THOUSAND PESOS
(P20,000.00) as and for attorneys fees; and
5. To pay the costs.[11]

From this decision, PCI Bank sought recourse before the Court of Appeals. In a
Decision[12] dated 29 October 2002, the appellate court denied the appeal of PCI
Bank and affirmed the orders and decision of the trial court.
Unperturbed, PCI Bank then filed the present petition for review before this Court
and raised the following issues:
1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
GRAVE AND REVERSIBLE ERROR WHEN IT SUSTAINED THE
LOWER COURTS ORDER DATED 2 MARCH 1999 GRANTING
RESPONDENTS MOTION FOR SUMMARY JUDGMENT
NOTWITHSTANDING THE GLARING FACT THAT THERE ARE
GENUINE, MATERIAL AND FACTUAL ISSUES WHICH REQUIRE
THE PRESENTATION OF EVIDENCE.
2. WHETHER OR NOT THE COURT OF APPEALS WAS IN ERROR
WHEN IT SUSTAINED THE LOWER COURTS DECISION DATED 3
MAY 1999 GRANTING THE RELIEFS PRAYED FOR IN
RESPONDENT ONGS COMPLAINT INSPITE OF THE FACT THAT
RESPONDENT ONG WOULD BE UNJUSTLY ENRICHED AT THE
EXPENSE OF PETITIONER BANK, IF PETITIONER BANK
WOULD BE REQUIRED TO PAY AN UNFUNDED CHECK.
3. WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERRORS WHEN IT AFFIRMED THE COURT A
QUOS DECISIION DATED 3 MAY 1999AWARDING DAMAGES TO
RESPONDENT ONG AND HOLDING THAT RESPONDENT ONG
HAD PREPONDERANTLY ESTABLISHED BY COMPETENT
EVIDENCE HER CLAIMS IN THE COMPLAINT INSPITE OF THE
FACT THAT THE EVIDENCE ON RECORD DOES NOT JUSTIFY
THE AWARD OF DAMAGES.
4. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR WHEN IT AFFIRMED THE LOWER
COURTS FACTUAL FINDING IN ITS DECISION DATED 3 MAY
1999 HOLDING RESPONDENT ONG A HOLDER IN DUE COURSE
INSPITE OF THE FACT THAT THE REQUISITE OF GOOD FAITH
AND FOR VALUE IS LACKING AND DESPITE THE ABSENCE OF
A PROPER TRIAL TO DETERMINE SUCH FACTUAL ISSUE.
5. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A
REVERSIBLE ERROR WHEN IT UPHELD THE LOWER COURTS
DECISION DATED 3 MAY 1999 DENYING PETITIONER EPCI
BANKS COUNTERCLAIM INSPITE OF THE FACT THAT IT WAS
SHOWN THAT RESPONDENT ONGS COMPLAINT LACKS MERIT.
[13]

We affirm the Decision of the trial court and the Court of Appeals.
The provision on summary judgment is found in Section 1, Rule 35 of the 1997
Rules of Court:

SECTION 1. Summary judgment for claimant. A party seeking to

recover upon a claim, counterclaim, or cross-claim or to obtain a
declaratory relief may, at any time after the pleading in answer thereto
has been served, move with supporting affidavits, depositions or
admissions for a summary judgment in his favor upon all or any part
thereof.

Thus, it has been held that a summary judgment is proper where, upon a motion
filed after the issues had been joined and on the basis of the pleadings and papers
filed, the court finds that there is no genuine issue as to any material fact to except
as to the amount of damages. A genuine issue has been defined as an issue of fact
which calls for the presentation of evidence, as distinguished from an issue which
is sham, fictitious, contrived and patently unsubstantial so as not to constitute a
genuine issue for trial.[14]
A court may grant summary judgment to settle expeditiously a case if, on motion
of either party, there appears from the pleadings, depositions, admissions, and
affidavits that no important issues of fact are involved, except the amount of
damages.[15] Rule 35, Section 3, of the Rules of Court provides two requisites for
summary judgment to be proper: (1) there must be no genuine issue as to any
material fact, except for the amount of damages; and (2) the party presenting the
motion for summary judgment must be entitled to a judgment as a matter of law.[16]
Certainly, when the facts as pleaded appear uncontested or undisputed, then theres
no real or genuine issue or question as to the facts, and summary judgment is
called for.[17]
By admitting it committed an error, clearing the check of Sarande and issuing in
favor of Ong not just any check but a managers check for that matter, PCI Banks
liability is fixed. Under the circumstances, we find that summary judgment was
proper and a hearing would serve no purpose. That summary judgment is
appropriate was incisively expounded by the trial court when it made the following
observation:
[D]efendant-bank had certified plaintiffs PCIB Check No. 073661 and
since certification is equivalent to acceptance, defendant-bank
as drawee bank is bound on the instrument upon certification and it is
immaterial to such liability in favor of the plaintiff who is a holder in due
course whether the drawer (Warliza Sarande) had funds or not with the
defendant-bank (Security vs. State Bank, 154 N.W. 282) or the drawer
was indebted to the bank for more than the amount of the check (Nat.
Bank vs. Schmelz, Nat. Bank, 116 S.E. 880) as the certifying bank as all
the liabilities under Sec. 62 of the Negotiable Instruments Law which
refers to liability of acceptor (Title Guarantee vs. Emadee Realty Corp.,
240 N.Y. 36).
It may be true that plaintiffs PCIB Check No. 073661 for P132,000.00
which was paid to her by Warliza Sarande was actually not funded but
since plaintiff became a holder in due course, defendant-bank cannot
interpose a defense of want or lack of consideration because that defense

is equitable or personal and cannot prosper against a holder in due course

pursuant to Section 28 of the Negotiable Instruments Law. Therefore,
when the aforementioned check was endorsed and presented by the
plaintiff and certified to and accepted by defendant-bank in the purchase
of PCIB Managers Check No. 1983 in the amount of P132,000.00, there
was a valid consideration.[18]

The property of summary judgment was further explained by this Court when it
pronounced that:
The theory of summary judgment is that although an answer may on its
face appear to tender issues requiring trial yet if it is demonstrated by
affidavits, depositions, or admissions that those issues are not genuine,
but sham or fictitious, the Court is unjustified in dispensing with the trial
and rendering summary judgment for plaintiff. The court is expected to
act chiefly on the basis of the affidavits, depositions, admissions
submitted by the movant, and those of the other party in opposition
thereto. The hearing contemplated (with 10-day notice) is for the
purpose of determining whether the issues are genuine or not, not to
receive evidence on the issues set up in the pleadings. A hearing is not
thus de riguer. The matter may be resolved, and usually is, on the basis
of affidavits, depositions, admissions. This is not to say that a hearing
may be regarded as a superfluity. It is not, and the Court has plenary
discretion to determine the necessity therefore. [19]

The second and fourth issues are inter-related and so they shall be resolved
together. The second issue has reference to PCI Banks claim of unjust enrichment
on the part of Ong if it would be compelled to make good the managers check it
had issued. As asserted by PCI Bank under the fourth issue, Ong is not a holder in
due course because the managers check was drawn against a closed account;
therefore, the same was issued without consideration.
On the matter of unjust enrichment, the fundamental doctrine of unjust enrichment
is the transfer of value without just cause or consideration. The elements of this
doctrine are: enrichment on the part of the defendant; impoverishment on the part
of the plaintiff; and lack of cause. The main objective is to prevent one to enrich
himself at the expense of another.[20] It is based on the equitable postulate that it is
unjust for a person to retain benefit without paying for it. [21] It is well to stress that
the check of Sarande had been cleared by the PCI Bank for which reason the
former issued the check to Ong. A check which has been cleared and credited to
the account of the creditor shall be equivalent to a delivery to the creditor of cash
in an amount equal to the amount credited to his account.[22]
Having cleared the check earlier, PCI Bank, therefore, became liable to Ong and it
cannot allege want or failure of consideration between it and Sarande. Under
settled jurisprudence, Ong is a stranger as regards the transaction between PCI
Bank and Sarande.[23]

PCI Bank next insists that since there was no consideration for the issuance of the
managers check, ergo, Ong is not a holder in due course. This claim is equally
without basis.Pertinent provisions of the Negotiable Instruments Law are
hereunder quoted:
SECTION 52. What constitutes a holder in due course. A holder in due
course is a holder who has taken the instrument under the following
conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without
notice it had been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person negotiating
it.

The same law provides further:

Sec. 24. Presumption of consideration. Every negotiable instrument is
deemed prima facie to have been issued for a valuable consideration; and
every person whose signature appears thereon to have become a party
thereto for value.
Sec. 26. What constitutes holder for value. Where value has at any time
been given for the instrument, the holder is deemed a holder for value in
respect to all parties who become such prior to that time.
Sec. 28. Effect of want of consideration. Absence or failure of
consideration is a matter of defense as against any person not a holder in
due course; and partial failure of consideration is a
defense pro tanto, whether the failure is an ascertained and liquidated
amount or otherwise.

Easily discernible is that what Ong obtained from PCI Bank was not just any
ordinary check but a managers check. A managers check is an order of the bank to
pay, drawn upon itself, committing in effect its total resources, integrity and honor
behind its issuance. By its peculiar character and general use in commerce, a
managers check is regarded substantially to be as good as the money it represents.
[24]

A managers check stands on the same footing as a certified check. [25] The effect of
certification is found in Section 187, Negotiable Instruments Law.

Sec. 187. Certification of check; effect of. Where a check is certified by

the bank on which it is drawn, the certification is equivalent to an
acceptance.[26]

The effect of issuing a managers check was incontrovertibly elucidated when we

declared that:
A managers check is one drawn by the banks manager upon the bank
itself. It is similar to a cashiers check both as to effect and use. A
cashiers check is a check of the banks cashier on his own or another
check. In effect, it is a bill of exchange drawn by the cashier of a bank
upon the bank itself, and accepted in advance by the act of its issuance. It
is really the banks own check and may be treated as a promissory note
with the bank as a maker. The check becomes the primary obligation of
the bank which issues it and constitutes its written promise to pay upon
demand.The mere issuance of it is considered an acceptance thereof.
x x x.[27]

In the case of New Pacific Timber & Supply Co., Inc. v. Seneris[28]:

[S]ince the said check had been certified by the drawee bank, by the
certification, the funds represented by the check are transferred from the
credit of the maker to that of the payee or holder, and for all intents and
purposes, the latter becomes the depositor of the drawee bank, with
rights and duties of one in such situation. Where a check is certified by
the bank on which it is drawn, the certification is equivalent to
acceptance. Said certification implies that the check is drawn upon
sufficient funds in the hands of the drawee, that they have been set apart
for its satisfaction, and that they shall be so applied whenever the check
is presented for payment. It is an understanding that the check is good
then, and shall continue good, and this agreement is as binding on the
bank as its notes circulation, a certificate of deposit payable to the order
of depositor, or any other obligation it can assume. The object of
certifying a check, as regards both parties, is to enable the holder to use
it as money. When the holder procures the check to be certified, the
check operates as an assignment of a part of the funds to the
creditors. Hence, the exception to the rule enunciated under Section 63
of the Central Bank Act to the effect that a check which has been cleared
and credited to the account of the creditor shall be equivalent to a
delivery to the creditor in cash in an amount equal to the amount credited
to his account shall apply in this case x x x.

By accepting PCI Bank Check No. 073661 issued by Sarande to Ong and issuing
in turn a managers check in exchange thereof, PCI Bank assumed the liabilities of
an acceptor under Section 62 of the Negotiable Instruments Law which states:
Sec. 62. Liability of acceptor. The acceptor by accepting the instruments
engages that he will pay it according to the tenor of his acceptance; and
admits

(a) The existence of the drawer, the genuineness of his signature, and his
capacity and authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.

With the above jurisprudential basis, the issues on Ong being not a holder in due
course and failure or want of consideration for PCI Banks issuance of the managers
check is out of sync.
Section 2, of Republic Act No. 8791, The General Banking Law of 2000 decrees:
SEC. 2. Declaration of Policy. The State recognizes the vital role of
banks in providing an environment conducive to the sustained
development of the national economy and the fiduciary nature of
banking that requires high standards of integrity and performance. In
furtherance thereof, the State shall promote and maintain a stable and
efficient banking and financial system that is globally competitive,
dynamic and responsive to the demands of a developing economy.
In Associated Bank v. Tan,[29] it was reiterated:

x x x the degree of diligence required of banks is more than that of a

good father of a family where the fiduciary nature of their relationship
with their depositors is concerned. Indeed, the banking business is vested
with the trust and confidence of the public; hence the appropriate
standard of diligence must be very high, if not the highest degree of
diligence.

Measured against these standards, the next question that needs to be addressed
is: Did PCI Bank exercise the requisite degree of diligence required of it? From all
indications, it did not. PCI Bank distinctly made the following uncontested
admission:
1. On 29 November 1991, one Warliza Sarande deposited to her savings
account with PCI Banks Magsaysay Avenue Branch, TCBT-General
Santos Branch Check No. 0249188 forP225,000.00. Said check,
however, was inadvertently sent by PCI Bank through local clearing
when it should have been sent through inter-regional clearing since
the check was drawn at TCBT-General Santos City.
2. On 5 December 1991, Warliza Sarande inquired whether TCBT Check
No. 0249188 had been cleared. Not having received any advice from
the drawee bank within the regular clearing period for the return of
locally cleared checks, and unaware then of the error of not having sent
the check through inter-regional clearing, PCI Bank advised her
that Check No. 024188 is treated as cleared. x x x.[30] (Emphasis
supplied.)

From the foregoing, it is palpable and readily apparent that PCI Bank failed to
exercise the highest degree of care[31] required of it under the law.
In the case of Philippine National Bank v. Court of Appeals,[32] we declared:
The banking system has become an indispensable institution in the
modern world and plays a vital role in the economic life of every
civilized society. Whether as mere passive entities for the safe-keeping
and saving of money or as active instruments of business and commerce,
banks have attained an ubiquitous presence among the people, who have
come to regard them with respect and even gratitude and, most of all,
confidence.

Having settled the other issues, we now resolve the question on the award of moral
and exemplary damages by the trial court to the respondent.
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury.Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendants wrongful act or
omission.[33] The requisites for an award of moral damages are well-defined,
thus, firstly, evidence of besmirched reputation or physical, mental or
psychological suffering sustained by the claimant; secondly, a culpable act or
omission factually established; thirdly, proof that the wrongful act or omission of
the defendant is the proximate cause of the damages sustained by the claimant;
and fourthly, that the case is predicated on any of the instances expressed or
envisioned by Article 2219[34] and Article 2220[35] of the Civil Code. All these
elements are present in the instant case.[36]
In the first place, by refusing to make good the managers check it has
issued, Ong suffered embarrassment and humiliation arising from the dishonor of
the said check.[37]Secondly, the culpable act of PCI Bank in having cleared the
check of Serande and issuing the managers check to Ong is undeniable. Thirdly,
the proximate cause of the loss is attributable to PCI Bank. Proximate cause is
defined as that cause which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result would
not have occurred.[38] In this case, the proximate cause of the loss is the act of PCI
Bank in having cleared the check of Sarande and its failure to exercise that degree
of diligence required of it under the law which resulted in the loss to Ong.
On exemplary damages, Article 2229 of the Civil Code states:
Art. 2229. Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.

The law allows the grant of exemplary damages to set an example for the public
good. The banking system has become an indispensable institution in the modern
world and plays a vital role in the economic life of every civilized society. Whether
as mere passive entities for the safe-keeping and saving of money or as active
instruments of business and commerce, banks have attained an ubiquitous presence
among the people, who have come to regard them with respect and even gratitude
and most of all, confidence. For this reason, banks should guard against injury
attributable to negligence or bad faith on its part. [39] Without a doubt, it has been
repeatedly emphasized that since the banking business is impressed with public
interest, of paramount importance thereto is the trust and confidence of the public
in general. Consequently, the highest degree of diligence is expected, and high
standards of integrity and performance are even required of it. [40] Having failed in
this respect, the award of exemplary damages is warranted.
Article 2216 of the Civil Code provides:
ART. 2216. No proof of pecuniary loss is necessary in order that moral,
nominal, temperate, liquidated or exemplary damages may be
adjudicated. The assessment of such damages, except liquidated ones, is
left to the discretion of the court, according to the circumstances of each
case.

Based on the above provision, the determination of the amount to be awarded

(except liquidated damages) is left to the sound discretion of the court according to
the circumstances of each case.[41] In the case before us, we find that the award of
moral damages in the amount of P50,000.00 and exemplary damages in the amount
of P20,000.00 is reasonable and justified.
With the above disquisition, there is no necessity of further discussing the last issue
on the PCI Banks counterclaim based on the supposed lack of merit
of Ongs complaint.
WHEREFORE, premises considered, the Petition is DENIED and the Decision
of the Court of Appeals dated 29 October 2002 in CA-G.R. CV No. 65000
affirming
the
Decision
dated
3
may
1999,
of
the Regional Trial Court of Davao City, Branch 14, in Civil Case No. 21458-92,
are AFFIRMED.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

FACTS:

Warliza Sarande deposited in her account at Philippine Commercial International

(PCI) Bank a PCI Bank TCBT Check of P225K.

December 5 1991: Upon inquiry by Serande at PCI Bank on whether

the TCBT Check had been cleared, she received an affirmative answer.

Relying on this assurance, she issued 2 checks drawn against the proceeds of
TCBT Check.

PCI Bank Check No. 073661 dated 5 December 1991 for P132K which
Sarande issued to respondent Rowena Ong owing to a business transaction.
On the same day, Ong presented to PCI Bank requesting PCI Bank

to convert the proceeds into a manager's check, which the PCI Bank obliged.

December 6 1991: Ong deposited PCI Bank Manager's Check in her account with
Equitable Banking Corporation

December 9 1991: she received a check return-slip informing her that PCI Bank
had stopped the payment of the check on the ground of irregular issuance.

Despite several demands made, it was refused

Ong was constrained to file a Complaint for sum of money, damages and
attorney's fees against PCI Bank

CA affirmed RTC: favored Ong

ISSUE: W/N Ong can hold PCI liable

HELD: YES. Petition is DENIED. CA affirmed.

By admitting it committed an error, clearing the check of Sarande and issuing in

favor of Ong not just any check but a manager's check for that matter, PCI Bank's
liability is fixed

certification = acceptance,
Equitable PCI as drawee bank is bound on the instrument upon
certification and it is immaterial to such liability in favor of Ong who is a holder in
due course whether the drawer (Warliza Sarande) had funds or not with the
Equitable PCI Bank

No unjust enrichment

SECTION 52. What constitutes a holder in due course. A holder in due course is a
holder who has taken the instrument under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice it had
been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.
The same law provides further:

Sec. 24. Presumption of consideration. Every negotiable instrument is deemed prima

facie to have been issued for a valuable consideration; and every person whose
signature appears thereon to have become a party thereto for value.
Sec. 26. What constitutes holder for value. Where value has at any time been given
for the instrument, the holder is deemed a holder for value in respect to all parties who
become such prior to that time.
Sec. 28. Effect of want of consideration. Absence or failure of consideration is a
matter of defense as against any person not a holder in due course; and partial failure
of consideration is a defense pro tanto, whether the failure is an ascertained and
liquidated amount or otherwise.

manager's check
an order of the bank to pay, drawn upon itself, committing in effect its

total resources, integrity and honor behind its issuance

regarded substantially to be as good as the money it represents

same footing as a certified check

The object of certifying a check, as regards both parties, is to

enable the holder to use it as money.

check operates as an assignment of a part of the funds to the

creditors

Sec. 187. Certification of check; effect of. Where a check is certified by the bank on
which it is drawn, the certification is equivalent to an acceptance

Section 63 of the Central Bank Act to the effect "that a check which has been cleared
and credited to the account of the creditor shall be equivalent to a delivery to the
creditor in cash in an amount equal to the amount credited to his account

Sec. 62. Liability of acceptor. The acceptor by accepting the instruments engages that
he will pay it according to the tenor of his acceptance; and admits
(a) The existence of the drawer, the genuineness of his signature, and his capacity and
authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.