RONALD R.

CRUDA
Negotiable Instruments
Case Digest

Mitra vs. People

G.R. No. 191404

Facts of the Case:

Petitioner Mitra was the treasurer and Cabrera was the president of Lucky Nine Credit
Corporation (LNCC), a corporation engaged in the business of money lending. Respondent Felicisimo
Tarcelo invested money in LNCC. As the usual practice in money placement transactions, Tarcelo was
issued checks equivalent to the amounts he invested plus the interest on his investments.

When Tarcelo presented the checks for payment, they were dishonored for the reason of
"account closed." Tarcelo made several oral demands on LNCC for the payment of said checks but he
was frustrated hence he filed seven information for violation of Batas Pambansa blg. 22 (BP 22) in the
amount of P925,000.00 before the MTCC. The court decided in favor of Tarcelo.

Petitioners appealed to RTC contending that; 1) they signed the seven checks in blank with no
name of the payee, no amount stated and no date of maturity; 2) they did not know when and to whom
those checks would be issued; 3) the seven checks were only among those in one or two booklets of
checks they were made to sign at that time, and; 4) that they signed the checks so as not to delay the
transactions of LNCC because they did not regularly hold office there. Petition was still denied.
Meanwhile Cabrera died. Mitra alone file a petition for review claiming among others, alleging that
there was no proper service on her of the notice of dishonor Notice of Dishonor. CA denied for lack of
merit, hence this petition;

Issues:

1. Whether or not the elements of violation of BP 22 must be proved beyond reasonable doubt as
against the corporation who carries the account where the subject checks were drawn before liability
attaches to the signatories.

2. Whether or not there is proper service of Notice of Dishonor and demand to pay to the petitioner and
the late Cabrera.

Ruling:

The convenience afforded by checks is damaged by unfunded checks that adversely affect
confidence in commercial and banking activities, and ultimately injure public interest.

1. NO. The 3rd paragraph of sec.1 of BP 22 reads: "Where the check is drawn by a corporation,
company or entity, the person or persons who actually signed the check in behalf of such drawer shall
be liable under this act." This provision recognizes the reality that a corporation can only act through its
officers. Hence its wording is unequivocal and mandatory that the person who actually signed the
corporate check shall be held liable for violation of BP 22. This provision does not contain any condition,
qualification or limitation.

2. Yes. There is no dispute that Mitra signed the checks and that the bank dishonored the checks
because the account had been closed. Notice of Dishonor was properly given, but Mitra failed to pay the
checks or make arrangements for their payment within 5 days from notice.
LBP vs. Monets Export and Manufacturing, Corp.
G.R. No. 184971

Facts of the Case:

On June 25, 1981 petitioner Land Bank of the Philippines (Land Bank) and respondent Monets
Export and Manufacturing Corporation (Monet) executed an Export Packing Credit Line Agreement
(Agreement) under which the bank gave Monet a credit line of P250,000.00, secured by the proceeds of
its export letters of credit, promissory notes, a continuing guaranty executed by respondent spouses
Vicente V. Tagle, Sr. and Ma. Consuelo G. Tagle (the Tagles), and a third-party mortgage executed by one
Pepita C. Mendigoria. Land Bank renewed and amended this credit line agreement several times until it
reached a ceiling of P5 million.

By August 31, 1992 Monets obligation under the Agreement had swelled to P11,464,246.19.
and since Monet failed to pay despite demands, the bank filed a collection suit against Monet and the
Tagles before the Regional Trial Court (RTC) of Manila. In their answer, Monet and the Tagles claimed
that Land Bank had refused to collect the US$33,434.00 receivables on Monets export letter of credit
against Wishbone Trading Company of Hong Kong while making an unauthorized payment of
US$38,768.40 on its import letter of credit to Beautilike (H.K.) Ltd. This damaged Monets business
interests since it ran short of funds to carry on with its usual business.

After trial or on July 15, 1997 the RTC rendered a decision[2] that, among other things,
recognized obligations to Land Bank in the amount reflected in Exhibit 39, the banks Schedule of
Amortization from its Loans and Discount Department, but without any penalty. The RTC ordered Monet
and the Tagles to pay Land Bank only P2.5 million as opposed to the latters claim of P11,464,246.19.

Land Bank filed a motion for reconsideration, actually a motion to reopen the hearing, to enable
it to adduce in evidence a Consolidated Billing Statement as of October 31, 2006 to show how much
Monet and the Tagles still owed the bank. But the trial court denied the motion. Land Bank appealed the
order to the CA but the latter rendered a decision on May 30, 2008, affirming the RTC orders.

Issue:

Whether or not the RTC and the CA acted correctly in denying petitioner Land Banks motion to
reopen the hearing to allow it to present the banks updated Consolidated Billing Statement as
of October 31, 2006 that reflects respondents Monet and the Tagles remaining indebtedness to it.

Ruling:

In reverting back to Exhibit 39, which covers just one of many promissory notes that Monet and
the Tagles executed in favor of Land Bank, the RTC and the CA have shown an unjustified obstinacy and
a lack of understanding of what the Court wanted done to clear up the issue of how much Monet and
the Tagles still owed the bank. The bank lawyer who claimed that Land Bank had no further evidence to
present during the hearing was of course in error and it probably warranted a dismissal of the banks
claim for failure to prosecute. But the banks motion for reconsideration, asking for an opportunity to
present evidence of the status of the loans, opened up a chance for the RTC to abide by what the Court
required of it. It committed error, together with the CA, in ruling that a reopening of the hearing would
serve no useful purpose.
Pentacapital v Mahinay
G.R. No. 171736

Facts of the Case:

Petitioner Pentacapital Investment Corporation filed a complaint for a sum of money against
respondent Makilito Mahinay based on two separate loans obtained by the latter, amounting
to P1,520,000.00 and P416,800.00, or a total amount of P1,936,800.00. These loans were evidenced by
two promissory notes.

Respondent while admitting that he indeed signed the promissory notes, he insisted that he
never took out a loan and that the notes were not intended to be evidences of indebtedness. By way of
counterclaim, respondent prayed for the payment of moral and exemplary damages plus attorneys
fees.
Respondent avers that he was the counsel of Ciudad Real Development Inc. (CRDI). In 1994,
Pentacapital Realty Corporation (Pentacapital Realty) offered to buy parcels of land known as the
Molino Properties, owned by CRDI. The Molino Properties were sold. As the Molino Properties were the
subject of a pending case, Pentacapital Realty paid only the down payment amounting
to P12,000,000.00. CRDI allegedly instructed Pentacapital Realty to pay the formers creditors, including
respondent who thus received a check worth P1,715,156.90.
Respondent, Pentacapital Realty and CRDI allegedly agreed that respondent had a charging lien
equivalent to 20% of the total consideration of the sale in the amount of P10,277,040.00. Pending the
submission of the Entry of Judgment and as a sign of good faith, respondent purportedly returned
the P1,715,156.90 check to Pentacapital Realty. However, the Molino Properties continued to be
haunted by the seemingly interminable court actions initiated by different parties which thus prevented
respondent from collecting his commission.

On motion of respondent, the Regional Trial Court (RTC) allowed him to file a Third Party
Complaint against CRDI, subject to the payment of docket fees.
Admittedly, respondent earlier instituted an action for Specific Performance against Pentacapital Realty
before the RTC of Cebu City, Branch 57, praying for the payment of his commission on the sale of the
Molino Properties. In an Amended Complaint, respondent referred to the action he instituted as one of
Preliminary Mandatory Injunction instead of Specific Performance. Acting on Pentacapital Realtys
Motion to Dismiss, the RTC dismissed the case for lack of cause of action. The dismissal became final and
executory.

With the dismissal of the aforesaid case, respondent filed a Motion to Permit Supplemental
Compulsory Counterclaim. In addition to the damages that respondent prayed for in his compulsory
counterclaim, he sought the payment of his commission amounting to P10,316,640.00, plus interest at
the rate of 16% per annum, as well as attorneys fees equivalent to 12% of his principal claim.

Issue:
Whether or not the attorneys fees as liquidated damages can be reduced by the court?

Ruling:

Yes.

The promissory notes likewise required the payment of a penalty charge of 3% per month or
36% per annum. We find such rates unconscionable. This Court has recognized a penalty clause as an
accessory obligation which the parties attach to a principal obligation for the purpose of ensuring the
performance thereof by imposing on the debtor a special prestation (generally consisting of the
payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately
fulfilled. However, a penalty charge of 3% per month is unconscionable; hence, we reduce it to 1% per
month or 12% per annum, pursuant to Article 1229 of the Civil Code which states:

Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been
partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty
may also be reduced by the courts if it is iniquitous or unconscionable.
 Lastly, respondent promised to pay 25% of his outstanding obligations as attorneys fees in case
of non-payment thereof. Attorneys fees here are in the nature of liquidated damages. As long as said
stipulation does not contravene law, morals, or public order, it is strictly binding upon respondent.
Nonetheless, courts are empowered to reduce such rate if the same is iniquitous or unconscionable
pursuant to the above-quoted provision.
This sentiment is echoed in Article 2227 of the Civil Code, to wit:
Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable.
Hence, the court reduced the stipulated attorneys fees from 25% to 10%.