AUGUST 7 Cases

[A 01]
G.R. No. 175350
June 13, 2012
EQUITABLE BANKING CORP V SPECIAL STEEL PRODUCTS AND AUGUSTO PARDO

DOCTRINE:
A crossed check with the notation “account payee only” can only be deposited in the
named payee’s account.
It is gross negligence for a bank to ignore this rule solely on the basis of a third party’s
oral representations of having a good title thereto.

FACTS:
● Special Steel Products is a private domestic corporation selling steel products
● Pardo is SSPI’s President and majority stockholder
● Interco is its regular customer
● Jose Isidoro Uy, ​alias ​Jolly Uy (Uy), is an Interco employee, in charge of purchasig department
and the son-in-law of its majority stockholder
● Equitable—depository bank of Interco and of Uy

● 1991: SSPI sold welding electrodes to Interco

● FIRST Sales Invoice: 345.5K —DUE DATE: March 16, 1991
● SECOND Sales Invoice: 313.8K — DUE DATE: May 11, 1991
● The invoices provided that Interco would pay interest at 36% per annum in case of delay
● In payment for the above welding electrodes, Interco issued three checks payable to the order of
SSPI
● Each check was crossed with the notation “account payee only” and was drawn against
Equitable.
● The records do not identify the signatory for these three checks, or explain how Uy, Interco’s
purchasing officer, came into possession of these checks.
● The records only disclose that Uy presented each crossed check to Equitable on the day of its
issuance and claimed that he had good title thereto.
● He demanded the deposit of the checks in his personal accounts in Equitable
● Equitable acceded to Uy’s demands on the ASSUMPTION that Uy, as the son-in-law of Interco’s
majority stockholder, was acting pursuant to Interco’s orders.
● The bank also relied on Uy’s status as a valued client.
● Thus, Equitable accepted the checks for deposit in Uy’s personal accounts and stamped “ALL
PRIOR ENDORSEMENT AND/OR LACK OF ENDORSEMENT GUARANTEED” on their dorsal
portion.
● Uy promptly withdrew the proceeds of the checks.
● SSPI reminded Interco of the unpaid welding electrodes, explaining that its immediate need for
payment as it was experiencing some financial crisis of its own.
● INTERCO’S REPLY: It has already issued 3 checks payable to SSPI and drawn against
Equitable, which was denied by SSPI.
● Later on it was discovered that it was Uy, not SSPI, who received the proceeds of 3 checks.
● Interco finally paid the value of 3 checks to SSPI plus portion of accrued interests.
 ● Interco refused to pay entire accrued interest on the ground that it was not responsible for the
delay.
● Hence, Pardo filed a complaint for damages against Uy and Equitable Bank’ alleging that the 3
crossed checks, all payable to order of SSPI could be deposited and encashed by SSPI only.
● RTC: IN FAVOR OF SSPI and PARDO
● Affirmed that SSPI had a cause of action for quasi-delict against Equitable
● CA: AFFIRMED

ISSUE: Whether SSPI has a cause of action against Equitable for ​quasi​-delict

HELD: YES.
SSPI does not ask Equitable or Uy to deliver to it the proceeds of the checks as the rightful payee.
The courts below correctly ruled that SSPI has a cause of action for quasi-delict.

The checks that Interco issued in favor of SSPI were all crossed, made payable to SSPI’s order and
contained the notation “account payee only.”

This creates a reasonable expectation that the payee alone would receive the proceeds of the checks and
that diversion of the checks would be averted.

This expectation arises from the accepted banking practice that crossed checks are intended for deposit
in the named payee’s account ​ONLY AND NO OTHER.
At the very least, crossed checks should place a bank on notice that it should exercise more
caution or expend more than a cursory inquiry, to ascertain whether the payee on the check has
authorized the holder to deposit the same in different account.

A crossed check with the notation “account payee only” can only be deposited in the named payee’s
account. It is gross negligence for a bank to ignore this rule solely on the basis of a third party’s oral
representations of having a good title there to.

WHEREFORE, premises considered, the Petition is PARTIALLY GRANTED. The assailed October 13,
2006 Decision of the Court of Appeals in CA-G.R. CV No. 62425 is MODIFIED by:
1. REDUCING the award of actual damages to respondents to the rate of 6% per annum of the
value of the three checks from July 1991 to June 1993 or a period of twenty-three months;
2. REDUCING the award of moral damages in favor of Augusto L. Pardo from P3,000,000.00 to P
50,000.00; and
3. REVERSING the dismissal of Equitable Banking CorporationÊs cross-claim against Jose Isidoro
Uy, ​alias ​Jolly Uy. Jolly Uy is hereby ORDERED to REIMBURSE Equitable Banking Corporation
the amounts that the latter will pay to respondents.

Additionally, the Court hereby REVERSES the dismissal of Equitable Banking Corporation’s counterclaim
for damages against Special Steel Products, Inc. This Court ORDERS Special Steel Products, Inc. to
PAY Equitable Banking Corporation actual damages in the total amount of P30,204.36, for the wrongful
preliminary attachment of its properties.
The rest of the assailed Decision is AFFIRMED. SO ORDERED.
[A 02] Bataan Cigar v. CA
GR # 93048 | March 3, 1994
Petitioner:​ BATAAN CIGAR AND CIGARETTE FACTORY, INC.
Respondent: ​THE COURT OF APPEALS and STATE INVESTMENT HOUSE, INC.
Negotiable Instruments: Checks

DOCTRINE
The act of crossing the check serves as warning to the holder that the check has been issued for a
definite purpose so that he must inquire if he has received the check pursuant to that purpose. Otherwise,
he is not a holder in due course.

FACTS
➢ Bataan Cigar & Cigarette Factory, Inc. (BCCFI) engaged George King to deliver 2,000 bales of
tobacco leaf.
○ As payment, BCCFI issued crossed checks in the total amount of P820,000.00.
➢ Petitioner agreed to purchase additional 2,500 bales of tobacco leaves, despite the supplier's
failure to deliver in accordance with their earlier agreement.
○ Petitioner issued postdated crossed checks in the total amount of P1,100,000.00.
➢ During these times, George King sold the checks issued to him by petitioner to SIHI.
➢ Since George King failed to deliver the bales of tobacco leaf as agreed despite petitioner's
demand, BCCFI issued a stop payment order on all checks payable to George King, including
checks sold to SIHI.
➢ SIHI failed to collect from BCCFI. It instituted the present case, naming only BCCFI as party
defendant.
➢ The trial court pronounced SIHI as having a valid claim being a holder in due course.
○ It further said that the non-inclusion of George King as party defendant is immaterial in
this case, since he, as payee, is not an indispensable party.
Hence, this petition.

ISSUE
W/N the private respondent is a holder in due course of the crossed check. – NO

RULING & RATIO

NO
➢ Based on Section 52 of the NIL, for a person who has taken the instrument to be a holder in due
course, the following must concur:
○ That it is complete and regular upon its face;
○ That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, if such was the fact;
○ That he took it in good faith and for value;
○ 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.
➢ Section 52 further states that every holder is deemed prima facie a holder in due course.
○ However, when it is shown that the title of any person who has negotiated the instrument
was defective, the burden is on the holder to prove that he or some person under whom
he claims, acquired the title as holder in due course.
➢ In the case at bar, the private respondent came to possession of crossed checks through the
endorsement of George King.
 ➢ The crossing of checks should put the holder on inquiry and upon him devolves the duty to
ascertain the indorser's title to the check or the nature of his possession.
○ Failing in this respect, the holder is declared guilty of gross negligence amounting to legal
absence of good faith, contrary to Sec. 52(c) of the Negotiable Instruments Law.
○ Thus, the holder of the check is not a holder in due course.
➢ In this case, George King, having failed to deliver the tobacco bales ordered from him, did not
acquire the title to the check.
○ Since the indorser’s title to the check is defective, SIHI is not a holder in due course.

DISPOSITION
WHEREFORE, finding that the court a quo erred in the application of law, the instant petition is hereby
GRANTED. The decision of the Regional Trial Court as affirmed by the Court of Appeals is hereby
REVERSED. Cost against private respondent.

NOTES
➢ A check is defined by law as a bill of exchange drawn on a bank payable on demand.
➢ A crossed check is one where two parallel lines are drawn across its face or across a corner
thereof. It may be crossed generally or specially.
○ A check is crossed specially when the name of a particular banker or a company is
written between the parallel lines drawn.
○ It is crossed generally when only the words "and company" are written or nothing is
written at all between the parallel lines.
○ It may be issued so that the presentment can be made only by a bank.
➢ NIL does not mention ‘crossed checks’ but the Code of Commerce refers to such.
➢ The negotiability of a check is not affected by its being crossed, whether specially or generally.
➢ To preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a
check should have the following effects:
○ the check may not be encashed but only deposited in the bank;
○ the check may be negotiated only once — to one who has an account with a bank;
○ and the act of crossing the check serves as warning to the holder that the check has
been issued for a definite purpose so that he must inquire if he has received the check
pursuant to that purpose, otherwise, he is not a holder in due course.

[A 03] EQUITABLE PCI BANK v ONG

GR#:​156207 September 15, 2006
Topic: ​Check​; ​Manager’s or Cashier’s Check
Petitioner: ​EQUITABLE PCI BANK (the Banking Entity into which Philippine Commercial International
Bank was merged)
Respondent: ​ROWENA ONG
Doctrine: A ​manager's 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 manager's check is regarded substantially to be as good as the money it represents.

FACTS:
1. ​Warliza Sarande deposited in her account PCI Bank a check in the amount of P225,000.00
TCBT Check No. 0249188.
 2. Upon inquiry by Serande at PCI Bank ​on whether the check 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.

→ ​December 5​: PCI ​Bank Check No. 073661​-- P132,000.00 which Sarande issued to
respondent Rowena Ong Owing to a business transaction.

→​On the same day, Ong presented to PCI said check and instead of encashing it,
requested PCI Bank to convert the proceeds thereof into a ​manager's check​, which
the PCI Bank obliged​.

→​Whereupon, Ong was issued PCI ​Bank Manager's Check No. 10983 ​dated 5
December 1991 for the sum of P132,000.00, the value of Check No. 073661.

3. The next day, Ong deposited PCI ​Bank Manager's Check No. 10983 in her account with
Equitable Banking Corporation Davao City Branch.
4. 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.
5. Despite several demands made by her to PCI Bank for the payment of the amount in ​PCI Bank
Manager's Check No. 10983​, the same was met with refusal; thus, Ong was constrained to
file a Complaint for sum of money, damages and attorney's fees against PCI Bank

PCI BANK’S VERSION:

1. 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.
2. It immediately gave notice to Sarande and Ong about the return of ​Check No. 0249188 and
requested Ong to return it to PCI along with ​Bank Manager's Check No. 10983 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 Manager's Check No. 10983​.
3. In a summary judgement filed by Ong, Defendant (PCI) was ordered to pay plaintiff (132K-
equivalent of manager’s check)
4. PCI Bank filed a Motion for Reconsideration which the trial court denied. PCI Bank sought
recourse before CA, appeal denied.

ISSUE​: W/N ONG WAS A HOLDER IN DUE COURSE

RULING/RATION:​ YES

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.

→ What Ong obtained from PCI Bank was not just any ordinary check but a ​manager's check.​ A
manager's 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 manager's check is regarded
substantially to be as good as the money it represents​.

A manager's check stands on the same footing as a certified check. 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
A manager's check is one drawn by the bank's manager upon the bank itself. ​It is similar to a
cashier's check both as to effect and use​. A cashier's check is a check of the bank's 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 bank's 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.

→ By accepting PCI Bank Check No. 073661 issued by Sarande to Ong and issuing in turn a manager's
check in exchange thereof, ​PCI Bank assumed the liabilities of an acceptor under Section 62 of the
Negotiable Instruments Law

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.

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 bank​s 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.

→ 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​."

DISPOSITION: ​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 a 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.

[B 01]
Petitioner: THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE
BRANCHES (HSBC)

Respondent: COMMISSIONER OF INTERNAL REVENUE

Doctrine: ​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.

FACTS:

Ø HSBC performs custodial services on behalf of its investor-clients with respect to their passive
investments in the Philippines, particularly investments in shares of stocks in domestic corporations.
As a custodian bank, HSBC serves as the collection/payment agent.

Ø HSBC’s investor-clients maintain Philippine peso and/or foreign currency accounts, which are
managed by HSBC through instructions given through electronic messages. The said instructions are
standard forms known in the banking industry as SWIFT, or "Society for Worldwide Interbank
Financial Telecommunication." In purchasing shares of stock and other investment in securities, the
investor-clients would send electronic messages from abroad instructing HSBC to debit their local or
foreign currency accounts and to pay the purchase price therefor upon receipt of the securities.

Ø Pursuant to the electronic messages of its investor-clients, HSBC purchased and paid Documentary
Stamp Tax (DST) from September to December 1997 and also from January to December 1998
amounting to P19,572,992.10 and P32,904,437.30, respectively.

Ø On Aug. 23, 1999, BIR, thru its then Commissioner, issued BIR Ruling to the effect that instructions or
advises from abroad on the management of funds located in the Philippines which do not involve
transfer of funds from abroad are not subject to DST. A documentary stamp tax shall be imposed on
any bill of exchange or order for payment purporting to be drawn in a foreign country but payable in
the Philippines.
Ø HSBC filed on an administrative claim for the refund of allegedly representing erroneously paid DST to
the BIR. As its claims for refund were not acted upon by the BIR, HSBC subsequently brought the
matter to the CTA, which favored HSBC and ordered payment of refund or issuance of tax credit.

Ø CA reversed decisions of the CTA and ruled that the electronic messages of HSBC’s investor-clients
are subject to DST.

ISSUE: ​Whether or not the electronic messages are considered transactions pertaining to negotiable
instruments?

Ruling:​ NO.
The Court agrees with the CTA that the DST under Section 181 of the Tax Code is levied on the
acceptance or payment of "a bill of exchange purporting to be drawn in a foreign country but payable in
the Philippines" and that "a bill of exchange is an unconditional order in writing addressed by one person
to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand
or at a fixed or determinable future time a sum certain in money to order or to bearer." A bill of exchange
is one of two general forms of negotiable instruments under the Negotiable Instruments Law.

The Court further agrees with the CTA that the electronic messages of HSBC’s investor-clients containing
instructions to debit their respective local or foreign currency accounts in the Philippines and pay a certain
named recipient also residing in the Philippines is not the transaction contemplated under Section 181 of
the Tax Code as such instructions are "parallel to an automatic bank transfer of local funds from a
savings account to a checking account maintained by a depositor in one bank."

The Court favorably adopts the finding of the CTA that the electronic messages "cannot be considered
negotiable instruments as they lack the feature of negotiability, which, is the ability to be transferred" and
that the said electronic messages are "mere memoranda" of the transaction consisting of the "actual
debiting of the [investor-client-payor’s] local or foreign currency account in the Philippines" and "entered
as such in the books of account of the local bank," HSBC.

More fundamentally, the instructions given through electronic messages that are subjected to DST in
these cases are not negotiable instruments as they do not comply with the requisites of negotiability
under Section 1 of the Negotiable Instruments Law, which provides:

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.
The electronic messages are not signed by the investor-clients as supposed drawers of a bill of
exchange; they do not contain an unconditional order to pay a sum certain in money as the payment is
supposed to come from a specific fund or account of the investor-clients; and, they are not payable to
order or bearer but to a specifically designated third party. Thus, the electronic messages are not bills of
exchange. As there was no bill of exchange or order for the payment drawn abroad and made payable
here in the Philippines, there could have been no acceptance or payment that will trigger the imposition of
the DST under Section 181 of the Tax Code.

Ratio:​ WHEREFORE, the petitions are hereby GRANTED and the Decisions dated May 2, 2002 in CTA
Case No. 6009 and dated December 18, 2002 in CTA Case No. 5951 of the Court of Tax Appeals are
REINSTATED.SO ORDERED.

[B 02]
PACIFICA JIMENEZ petitioner-appellee, vs. DR. JOSE BUCOY, administrator-appellant.

DOCTRINE: ​In order that a promissory note may be negotiable, it must contain an unconditional promise
to pay. It is not essential that the word “promise” should be used. Any words equivalent to a promise or
assumption of full responsibility for the payment of the note like “payable”, “to be paid”, “I agree to pay”,
“due on demand” on the face of an instrument are sufficient to constitute a promise to pay.

FACTS:
In the intestate of Luther Young and Pacita Young who died in 1954 and 1952 respectively, Pacifica
Jimenez presented for payment four promissory notes for different amounts totalling twenty-one thousand
pesos (P21,000). ​Acknowledging receipt by Pacita during the Japanese occupation, in the currency then
prevailing, the administrator (Bucoy) manifested willingness to pay.

Executed in the month of August 1944, the first promissory note read as follows:
“Received from Miss Pacifica Jimenez the total amount of P10,000 ten thousand pesos payable six
months after the war, without interest.”
The other three notes were couched in the same terms, except as to amounts and dates.
There can be no serious question that the notes were promises to pay "six months after the war," the
amounts mentioned.

However, the appellant administrator (Bucoy) calls attention to the fact that the notes contained NO
express promise to pay.

ISSUE:
Whether the promissory notes contained express promise to pay.

RULING:
Yes. The notes herein-above quoted amounted in effect to "a promise to pay ten thousand pesos six
months after the war, without interest." And so of the other notes. An acknowledgment may become a
promise by the addition of words by which a promise of payment is naturally implied, such as, "payable,"
"payable on a given day”, "payable on demand," "paid when called for,". To constitute a good promissory
note, no precise words of contract are necessary, provided they amount, in legal effect, to a promise to
pay. In other words, if over and above the mere acknowledgment of the debt there may be collected from
the words used a promise to pay it, the instrument may be regarded as a promissory note.
RATIO:
Wherefore, in view of the foregoing considerations, the appealed decision is affirmed, except as to the
attorney's fees which are hereby disapproved. So ordered.

[B 03] NACAR v GALLERY FRAMES

GR# 189871
Topic: ​Sum payable must be certain
Petitioner: ​Dario Nacar
Respondent: ​Gallery Frames and/or Felipe Bordey, Jr.
DOCTRINE: In the absence of an express stipulation as to the rate of interest that would govern the
parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate
allowed in judgments shall be six percent (6%) per annum effective July 1, 2013.

FACTS:
1. Petitioner filed a complaint against the respondent which was favored by the Labor Arbiter on the
ground of constructive dismissal. Petitioner was awarded backwages and separation pay
amounting to ₱158,919.92. Several appeals were made by the respondent before the NLRC, CA
and Supreme Court but all got denied. Thus, resolution became final and executory on May 27,
2002 . Case was referred back to Labor Arbiter.
2. Petitioner filed a Motion for Correct Computation, praying that his back wages be computed from
the date of dismissal up to the finality of the Resolution. Amount arrived at after the recomputation
is ₱471,320.31. Respondent filed a Motion to Quash Writ of Execution claiming that the decision
was already final and executory.
3. The case was subject to recomputation again which amounted to ₱147,560.19.
4. Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary
award to include the appropriate interests. Labor Arbiter granted the motion, but only up to the
amount of ₱11,459.73.
5. Petitioner appealed before the NLRC but got denied. It was followed by by a Motion for
Reconsideration but also got denied. Petitioner sought recourse to CA but got denied.

ISSUE/S: ​WON re-computation made was legally proper

RULING & RATIO:

YES. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.

When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from
such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.

NOTES:
Respondents are Ordered to Pay petitioner:
(1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up to May
27, 2002, when the Resolution of this Court in G.R. No. 151332 became final and executory;
(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay per year
of service; and
(3) interest of twelve percent (12%) per annum of the total monetary awards, computed from May 27,
2002 to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits
awarded and due to petitioner in accordance with this Decision.

[B 04] SALAS v CA
GR#: ​76788 January 22, 1990
Topic: ​Must be payable to order or to bearer
Petitioner: ​JUANITA SALAS
Private Respondent: ​FILINVEST FINANCE & LEASING CORPORATION
Doctrine: ​The instrument in order to be considered negotiable must contain the so- called "words of
negotiability — i.e., must be payable to 'order' or 'bearer.'" Under Section 8 of the Negotiable Instruments
Law, there are only two ways by which an instrument may be made payable to order. There must always
be a specified person named in the instrument and the bill or note is to be paid to the person designated
in the instrument or to any person to whom he has indorsed and delivered the same. Without the words
"or order" or "to the order of", the instrument is payable only to the person designated therein and is
therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a
holder of a negotiable instrument, but will merely "step into the shoes" of the person designated in the
instrument and will thus be open to all defenses available against the latter.

FACTS:
1. Juanita Salas (petitioner) bought a motor vehicle from the Violago Motor Sales Corporation for as
evidenced by a promissory note.
2. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation (private
respondent) which financed the purchase.
3. Salas defaulted in her installments allegedly due to a discrepancy in the engine and chassis numbers
of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and
deed of chattel mortgage, which fact she discovered when the vehicle figured in an accident.
4. Failure to pay prompted private respondent Filinvest Finance & Leasing Corporation to initiate a Civil
Case for a sum of money against petitioner Salas before the Regional Trial Court of Pampanga,
 which rendered a decision ordering Salas to pay the sum of Php 28, 414.40 with interest rate of 14%
owed to Filinvest Finance & Leasing Corporation.

5. Aggrieved, Salas instituted an appeal of the decision imputing fraud, bad faith and misrepresentation
against VMS for having delivered a different vehicle to petitioner, and likewise prayed for a reversal of
the RTC decision.
6. Likewise Filinvest Finance & Leasing Corporation also instituted its appeal.
7. The CA rendered its decision modifying the RTC decision in favor of Filinvest Finance & Leasing
Corporation A perusal of the evidence shows that the amount of P58,138.20 stated in the promissory
note is the amount assumed by Salas in financing the purchase of Filinvest Finance & Leasing
Corporation’s motor vehicle from the Violago Motor Sales Corp., the monthly amortization of which is
P1,614.95 for 36 months. Considering that Salas was able to pay twice (as admitted by the plaintiff,
defendant's account became delinquent only beginning May, 1980) or in the total sum of P3,229.90,
she is therefore liable to pay the remaining balance of P54,908.30 at 14% per annum from October 2,
1980 until full payment.

​
8. Hence the petition of Salas upon the Supreme Court, which focuses on the alleged fraud, bad faith
and misrepresentation of Violago Motor Sales Corporation in the conduct of its business and which
fraud, bad faith and misrepresentation supposedly released Salas from any liability to Filinvest
Finance & Leasing Corporation who should instead proceed against Violago Motor Sales
Corporation.
9. It is the contention of Salas that since the agreement between her and the Violago Motor Sales
Corporation was nonexistent, none had been assigned in favor of Filinvest Finance & Leasing
Corporation

ISSUE​: W/N the promissory note in question is a negotiable instrument, which will bar completely
all the available defenses of the petitioner against private respondent?

RULING/RATION:​ YES

Petitioner's liability on the promissory note, the due execution and genuineness of which she never
denied under oath is, under the foregoing factual milieu, as inevitable as it is clearly established.

The Supreme Court cited Consolidated Plywood Industries Inc. v. IFC Leasing and Acceptance Corp to
distinguish a negotiable instrument and a non-negotiable instrument to wit:

“Among others, the instrument in order to be considered negotiable must contain the so- called "words of
negotiability — i.e., must be payable to 'order' or 'bearer.'" Under Section 8 of the Negotiable Instruments
Law, there are only two ways by which an instrument may be made payable to order. There must always
be a specified person named in the instrument and the bill or note is to be paid to the person designated
in the instrument or to any person to whom he has indorsed and delivered the same. Without the words
"or order" or "to the order of", the instrument is payable only to the person designated therein and is
therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a
holder of a negotiable instrument, but will merely "step into the shoes" of the person designated in the
instrument and will thus be open to all defenses available against the latter. Such being the situation in
the above-cited case, it was held that therein private respondent is not a holder in due course but a mere
assignee against whom all defenses available to the assignor may be raised”
In the case at bar, however, the situation is different. Indubitably, the basis of private respondent's claim
against petitioner is a promissory note which bears all the earmarks of negotiability

A careful study of the questioned promissory note shows that it is a negotiable instrument, having
complied with the requisites under the law as follows:

[a] it is in writing and signed by the maker Juanita Salas;

[b] it contains an unconditional promise to pay the amount of P58,138.20;
[c] it is payable at a fixed or determinable future time which is "P1,614.95 monthly for 36 months
due and payable on the 21st day of each month starting March 21, 1980 thru and inclusive of
Feb. 21, 1983;"
[d] it is payable to Violago Motor Sales Corporation, or order and as such,
[e] the drawee is named or indicated with certainty.

It was negotiated by indorsement in writing on the instrument itself ​payable to the Order of Filinvest
Finance and Leasing Corporation and it is an indorsement of the entire instrument.

Accordingly, Filinvest Finance and Leasing Corporation holds the instrument free from any defect of title
of prior parties, and free from defenses available to prior parties among themselves, and may enforce
payment of the instrument for the full amount thereof.

This being so, petitioner cannot set up against respondent the defense of nullity of the contract of sale
between her and VMS.

IN VIEW OF THE FOREGOING, the assailed decision is hereby AFFIRMED. With costs against
petitioner.