G.R. No.

130756 January 21, 1999

ESTER B. MARALIT, petitioner,

vs.
JESUSA CORAZON L. IMPERIAL, respondent.
Facts:
Petitioner Maralit claimed that, as a consequence of the materially altered treasury
warrantencashed by respondent imperial, she was held personally liable by the PNB for the
total amount of P320,287.30. However, respondent claimed that she merely helped a relative,
Aida Abengoza, to encashthe treasury warrant and that she did not know the amounts were
altered nor did she represent topetitioner that the treasury warrants are genuine and that upon
being informed of dishonor, sheimmediately contacted her relative and signed an
acknowledgement to pay the total amount of thetreasury warrant.
Issue:
Whether or not respondent should be held liable as a general indorse.
Held:
The Court symphatizes with the petitioner that there was indeed damage and loss, but said
loss ischargeable to the respondent who upon her indorsements warrant that the instrument is
genuine in allrespect what it purports to be and that she will pay the amount thereof in case of
dishonor. Thus, while the MTC found petitioner partly responsible for the encashment of the
altered checks, it foundrespondent civilly liable because of her indorsements of the treasury
warrants, in addition to the factthat respondent executed a notarized acknowledgment of debt
promising to pay the total amount of said warrants.
Negotiable Instruments Case Digest: BPI V. CA (2000)

G.R. No. 112392 February 29, 2000

Lessons Applicable: Liabilities of the Parties (Negotiable Instruments Law)

FACTS:
September 3, 1987: Bejanmin Napiza deposited in Foreign Currency Deposit Unit (FCDU)
Savings Account which he maintained in BPI a Continental Bank Manager's Check dated
August 17, 1984, payable to "cash" $2,500.00 check belonged to Henry who went to the office
of Napiza and requested him to deposit the check in his dollar account by way of
accommodation and for the purpose of clearing the same. Napiza acceded, and agreed to
deliver to Chan a signed blank withdrawal slip, with the understanding that as soon as the
check is cleared, both of them would go to the bank to withdraw October 23, 1984: Using the
blank withdrawal slip given by Napiza to Chan, Ruben Gayon, Jr. was able to withdraw the
withdrawal slip shows that the amount was payable to Ramon A. de Guzman and Agnes C. de
Guzman and was duly initialed by the branch assistant manager, Teresita Lindo. November
20, 1984: BPI received communication from the Wells Fargo Bank International of New York
that check deposited by Napiza was a counterfeit check because it was "not of the type or style
of checks issued by Continental Bank International." Mr. Ariel Reyes, manager of BPI,
instructed one of its employees, Benjamin D. Napiza IV, who is Napiza's son, to inform his
father that the check bounced. Reyes himself sent a telegram to Napiza regarding the dishonor
of the check Napiza's son told Reyes that: check been assigned "for encashment" to Ramon A.
de Guzman and/or Agnes C. de Guzman after it shall have been cleared upon instruction of
Chan his father immediately tried to contact Chan but Chan was out of town Napiza's son
undertook to return the amount of $2,500.00 to BPI August 12, 1986: BPI filed a complaint
against Napiza for the return of $2,500.00 or the prevailing peso equivalent plus legal interest,
attorney's fees, and litigation and/or costs of suit

Napiza: admitting that he indeed signed a "blank" withdrawal slip with the understanding that
the amount deposited would be withdrawn only after the check in question has been cleared.
However, without his knowledge, it was withdrawn through collusion with one of BPI's
employees. BPI aslo filed a motion for admission of a third party complaint against Chan. He
alleged that "thru strategem and/or manipulation," Chan was able to withdraw the amount of
$2,500.00 even without Napiza's passbook. November 4, 1991: Lower Court dismissed the
complaint. Having admitted that it committed a "mistake" in not waiting for the clearance of the
check before authorizing the withdrawal of its value or proceeds, BPI should suffer the
resultant loss.

CA: Affirmed the lower courts decision

BPI committed "clears gross negligence" in allowing Ruben Gayon, Jr. to withdraw the money
without presenting BPI's passbook and, before the check was cleared and in crediting the
amount indicated therein in Napiza's account. BPI claims that Napiza, having affixed his
signature at the dorsal side of the check, should be liable in accordance to Sec. 66 of the
Negotiable Instrument Law

Sec. 66. Liability of general indorser. — Every indorser who indorses without qualification,
warrants to all subsequent holders in due course —
(a) The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding
section; and
(b) That the instrument is at the time of his indorsement, valid and subsisting.
And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as
the case may be, according to its tenor, and that if it be dishonored, and the necessary
proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any
subsequent indorser who may be compelled to pay it.

Sec. 65, on the other hand, provides for the following warranties of a person negotiating an
instrument by delivery or by qualified indorsement: (a) that the instrument is genuine and in all
respects what it purports to be; (b) that he has a good title to it, and (c) that all prior parties had
capacity to contract.

ISSUE:

W/N Napiza can be held liable as an indorser or accommodation party

HELD:

NO.
ordinarily Napiza may be held liable as an indorser of the check or even as an accommodation
party. However, to hold Napiza liable for the amount of the check he deposited by the strict
application of the law and without considering the attending circumstances in the case would
result in an injustice and in the erosion of the public trust in the banking system. The interest of
justice thus demands looking into the events that led to the encashment of the check. under
the Philippine foreign currency deposit system, two requisites must be presented to petitioner
bank by the person withdrawing an amount:
(a) a duly filled-up withdrawal slip, and

Napiza signed a blank deposit slip BUT withdrawal slip itself indicates a special instruction that
the amount is payable to "Ramon A. de Guzman &/or Agnes C. de Guzman."

(b) the depositor's passbook

In depositing the check in his name, Napiza did not become the outright owner of the amount
stated therein. By depositing the check with BPI, he was, in a way, merely designating BPI as
the collecting bank. This is in consonance with the rule that a negotiable instrument, such as a
check, whether a manager's check or ordinary check, is not legal tender. Negligence is the
omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would do. While it is true that Napiza's having signed a blank
withdrawal slip set in motion the events that resulted in the withdrawal and encashment of the
counterfeit check, the negligence of BPI's personnel was the proximate cause of the loss that
petitioner sustained. Proximate cause, which is determined by a mixed consideration of logic,
common sense, policy and precedent, is "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."

The proximate cause = disregard of its own rules and the clearing requirement in the banking
system
2.

BPI vs. Court of Appeals and Napiza

Facts:

Private respondent Benjamin Napiza deposited in his foreign current deposit with BPI a
dollarcheck owned by Henry Chan in which he affixed his signature at the dorsal side thereof.
For thispurpose, Napiza gave Chan a signed blank withdrawal slip. However, Gayon Jr. got
hold of thewithdrawal slip and used it to withdraw the proceeds of the dollar check, even before
the check wascleared and without the presentation of the bank passbook.

Issues:

Whether or not petitioner can hold private respondent liable for the proceeds of the check
forhaving affixed his signature at the dorsal side as indorser.

Held:

No. It is thus clear that ordinarily private respondent may be held liable as an indorser of the
checkor even as an accommodation party.[17] However, to hold private respondent liable for
the amount of the check he deposited by the strict application of the law and without
considering the attendingcircumstances in the case would result in an injustice and in the
erosion of the public trust in thebanking system. The interest of justice thus demands looking
into the events that led to the encashmentof the check.
Wong v. Court of Appeals

G.R. No. 117857, 2 February 2001, 351 SCRA 100

FACTS: Pg50

Petitioner Wong was an agent of Limtong Press. Inc. (LPI), a manufacturer of calendars. LPI
would print sample calendars, then give them to agents to present to customers. The agents
would get the purchase orders of customers and forward them to LPI. After printing the
calendars, LPI would ship the calendars directly to the customers.

Thereafter, the agents would come around to collect the payments. Petitioner, however, had a
history of unremitted collections, which he duly acknowledged in a confirmation receipt he co-
signed with his wife. Hence, petitioner’s customers were required to issue postdated checks
before LPI would accept their purchase orders.

In early December 1985, Wong issued six (6) postdated checks totaling P18,025.00, all dated
December 30, 1985 and drawn payable to the order of LPI. These checks were initially
intended to guarantee the calendar orders of customers who failed to issue post-dated checks.

However, following company policy, LPI refused to accept the checks as guarantees. Instead,
the parties agreed to apply the checks to the payment of petitioner’s unremitted collections for
1984 amounting to P18,077.07. LPI waived the P52.07 difference. Before the maturity of the
checks, petitioner prevailed upon LPI not to deposit the checks and promised to replace them
within 30 days. However, petitioner reneged on his promise.

Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial Banking Corporation
(RCBC). The checks were returned for the reason “account closed.” The dishonor of the
checks was evidenced by the RCBC return slip.

On June 20, 1986, complainant through counsel notified the petitioner of the dishonor.
Petitioner failed to make arrangements for payment within five (5) banking days.

On November 6, 1987, petitioner was charged with three (3) counts of violation of B.P. Blg.
224 under three separate Informations for the three checks amounting to P5,500.00,
P3,375.00, and P6,410.00.

Petitioner was similarly charged in Criminal Case No. 12057 for ABC Check No. 660143463 in
the amount of P3,375.00, and in Criminal Case No. 12058 for ABC Check No. 660143464 for
P6,410.00. Both cases were raffled to the same trial court. The version of the defense is that
petitioner issued the six (6) checks to guarantee the 1985 calendar bookings of his customers.
According to petitioner, he issued the checks not as payment for any obligation, but to
guarantee the orders of his customers. Petitioner appealed his conviction to the Court of
Appeals.
On October 28, 1994, it affirmed the trial court’s decision in toto. Hence, the present petition.

ISSUE:

Whether or not the prosecution was able to establish beyond reasonable doubt all the
elements of the offense penalized under B.P. Blg. 22.

RULING:

Yes.

As to the second element, B.P. Blg. 22 creates a presumption juris tantum that the second
element prima facie exists when the first and third elements of the offense are present. Thus,
the maker’s knowledge is presumed from the dishonor of the check for insufficiency of funds.

Petitioner contends that the first element does not exist because the checks were not issued to
apply for account or for value. He attempts to distinguish his situation from the usual “cut-and-
dried” B.P. 22 case by claiming that the checks were issued as guarantee and the obligations
they were supposed to guarantee were already paid.

This flawed argument has no factual basis, the RTC and CA having both ruled that the checks
were in payment for unremitted collections, and not as guarantee. Likewise, the argument has
no legal basis, for what B.P. Blg. 22 punishes is the issuance of a bouncing check and not the
purpose for which it was issued nor the terms and conditions relating to its issuance. As to the
second element, B.P. Blg. 22 creates a presumption juris tantum that the second
element prima facie exists when the first and third elements of the offense are present. Thus,
the maker’s knowledge is presumed from the dishonor of the check for insufficiency of funds.

An essential element of the offense is “knowledge” on the part of the maker or drawer of the
check of the insufficiency of his funds in or credit with the bank to cover the check upon its
presentment. Since this involves a state of mind difficult to establish, the statute itself creates
a prima facie presumption of such knowledge where payment of the check “is refused by the
drawee because of insufficient funds in or credit with such bank when presented within ninety
(90) days from the date of the check.”

To mitigate the harshness of the law in its application, the statute provides that such
presumption shall not arise if within five (5) banking days from receipt of the notice of dishonor,
the maker or drawer makes arrangements for payment of the check by the bank or pays the
holder the amount of the check.

The clear import of the law is to establish a prima facie presumption of knowledge of such
insufficiency of funds under the following conditions (1) presentment within 90 days from date
of the check, and (2) the dishonor of the check and failure of the maker to make arrangements
for payment in full within 5 banking days after notice thereof.
That the check must be deposited within ninety (90) days is simply one of the conditions for
the prima facie presumption of knowledge of lack of funds to arise. It is not an element of the
offense.

2.

[G.R. No. 117857. June 25, 2001.]

LUIS S. WONG, Petitioner, v. COURT OF APPEALS and PEOPLE OF THE
PHILIPPINES, Respondents.

PETITIONER Luis S. Wong, through counsel, seeks reconsideration of our decision on this
case promulgated on February 2, 2001.

In that decision, following policy guidelines set forth in AC No. 12-2000, we deleted the penalty
of imprisonment imposed on him below. But we ordered him to pay fines of P6,750.00,
P12,820.00 and P11,000.00 respectively corresponding to twice the face value of three checks
involved in Criminal Cases Nos. CBU-12057, 12058, and 12055; as well as civil indemnity in
the amount of P18,025.00, in connection with his conviction for violation of the Bouncing
Checks Law (BP Blg. 22).chanrob1es virtua1 1aw 1ibrary

In his motion for reconsideration now before us, he avers, inter alia, that the amount of civil
indemnity imposed is erroneous. He states that:jgc:chanrobles.com.ph

"The error in the statement of the amount of civil indemnity is quite obviously caused by the
inadvertent addition of the three checks issued by petitioner which were the subject of another
case where he had long ago been acquitted. This acquittal is duly noted by this Honorable
Court in footnote 5 of page 3 of its Decision. The error, though the product of inadvertence, is
error nonetheless. And it must be corrected, with all due respect." (Motion for Reconsideration,
p. 2.)

FINDING his motion for reconsideration meritorious but only with respect to the prayer for
recomputation of civil indemnity to be imposed, we now set the amount thereof to only
P15,285.00, which is the correct sum of the face value of the three checks involved in the
present case.

ACCORDINGLY, the dispositive portion of our Decision in this case is hereby amended to read
as follows:jgc:chanrobles.com.ph

"WHEREFORE, the petition is DENIED. Petitioner Luis S. Wong is found liable for violation of
Batas Pambansa Blg. 22 but the penalty imposed on him is hereby MODIFIED so that the
sentence of imprisonment is deleted. Petitioner is ORDERED to pay a FINE of (1) P6,750.00,
equivalent to double the amount of the check involved in Criminal Case No. CBU-12057, (2)
P12,820.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-
12058, and (3) P11,000.00, equivalent to double the amount of the check involved in Criminal
Case No. CBU-12055, with subsidiary imprisonment in case of insolvency to pay the aforesaid
fines. Finally, as civil indemnity, petitioner is also ordered to pay to LPI the face value of said
checks totaling P15,285.00 with legal interest thereon from the time of filing the criminal
charges in court, as well as to pay the costs." chanrob1es virtua1 1aw 1ibrary

SO ORDERED.

G.R. No. 144887 | Nov 17 2014 | Azcuna, J.Petitioners:

Alfredo Rigor vs. Respondents: People of the Philippines

Rules of Court Rule 110 Sec 15

DOCTRINE

TC San Juan may try the case despite it being issued at Rural BankSan Juan, deposited at
PSBank San Juan, but dishonored at AssocBank Tarlac.

FACTS

Nov 16 1989

Alfredo Rigor applied for a P500k commercial loan fromRural Bank (RB) San Juan on Nov 16
1989. Rigor signed aPromissory Note (PN) stating a 24% interest per year. Theloan was
approved by RB San Juan Manager de Guzmanand Controller Agapito Uy. A cashiers check
with P487k netproceeds of loan was issued to Rigor. Rigor endorsed andencashed the check
with the RB San Juan teller Cruz whostamped the word “Paid”. Rigor issued an undated
Associated Bank (AB) Tarlac Branch check in the amount ofP500k payable to RB San Juan.
The application, approvaland receipt of proceeds were all in one day because Rigor isthe
kumpare of RB San Juan President and he is well-knownto directors because they all come
from Tarlac. Rigor failed to pay the loan upon maturity of the loan on Dec 16 1989.Rigor
personally asked a 2 month extension but still failed to pay soasked for another 2 month
extension. Rigor failed to pay and askedfor a 30 day extension on Apr 16 1990 but was now
denied by deGuzman de Guzman sent a formal demand letter on Apr 25 1990. RB San Juan
deposited the AB check with PSBank (PSB) San Juanon May 25 1990, but was returned
because the account was closed. AB Tarlac Employee Pasion declared the account was
closed andhad at most P40k. Hence, the check was dishonored in Tarlacdespite it being
deposited in PSB San Juan and was formerly issuedwith RB San Juan. Rigor denied the
charges and claimed. Uy and Uy’s sister Agnes Angeles proposed to Rigor tosecure a P500k
loan from RB San Juan. P200k in Rigor’s name and P300k in Uy’s name where Angeles is to
pay the unpaid loans of borrowers in their sidebanking activities. Uy told Rigor he can put up
his 4-door Mercedes Benz ascollateral for the P200k loan for it to be approved and theP300k
will have no collateral. Rigor agreed and signed a bank loan application form, PNand chattel
mortgage for his Benz. Uy gave Rigor 2 premiere bank checks for P100k each. Rigor issued
an undated personal check for P500k. Check was deposited later in May but the check
bounced. Rigor told Uy to get the Benz as payment of the P200k loan. Uy refused and said he
wanted to be paid the whole amountof P500k. Trial Court of Pasig found Rigor guilty of
violation of Sec 1 BP 22 onJul 8 1994. Rigor was sentenced to an imprisonment of 6
monthsand to pay P500k to RB San Juan. Rigor contends the Trial Court of Pasig had no
jurisdiction over the case since there was no proofoffered that his check was issued, delivered,
dishonored or thatknowledge of insufficiency of the funds occurred in San Juan, Manila.

ISSUE

W/N the Trial Court of Pasig had jurisdiction to try and decide casefor violation of BP
22. –YESG.R.

The Court of Appeals correctly ruled, thus:

xxx

Knowledge involves a state of mind difficult to establish. We hold that appellant’s

admission of the insufficiency of his fund at the time he issued the check constitutes the
very element of "knowledge" contemplated in Sec. 1 of BP 22. The prima facie
presumption of knowledge required in Sec. 2, Ibid., does not apply because (a) the
check was presented for payment only on May 25, 1990 or beyond the 90-day period,
which expired on May 16, 1990, counted from the maturity date of the check on
February 16, 1990 and (b) an actually admitted knowledge of a fact needs no
presumption.

While it is true that if a check is presented beyond ninety (90) days from its due date,
there is no more presumption of knowledge by the drawer that at the time of issue his
check has no sufficient funds, the presumption in this case is supplanted by appellant’s
own admission that he did not hide the fact that he had no sufficient funds for the check.
In fact, it appears that when he authorized RBSJ to date his check on February 16,
1990, his current account was already closed two weeks earlier, on February 2, 1990. 13

Petitioner, however, argues that since the officers of the bank knew that he did not have
sufficient funds, he has not violated Batas Pambansa Bilang 22.

This case, however, involves an ordinary loan transaction between petitioner and the Rural
Bank of San Juan wherein petitioner issued the check certainly to be applied to the payment of
his loan since the check and the loan have the same value of P500,000. Whether petitioner
agreed to give a portion of the proceeds of his loan to Agustin Uy, an officer of complainant
bank, to finance Uy’s and his (petitioner) sister’s alleged "side-banking" activity, such
agreement is immaterial to petitioner’s liability for issuing the dishonored check under Batas
Pambansa Bilang 22.

Further, the presence of the third element of the offense is shown by the fact that after the
check was deposited for encashment, it was dishonored by Associated Bank for reason of
"closed account" as evidenced by its Check Return Slip. 22 Despite receipt of a notice of
dishonor from complainant bank, petitioner failed to pay his obligation.
Petitioner next contends that he did not receive a notice of dishonor, the absence of which
precludes criminal prosecution.

The contention is likewise of no merit.

The notice of dishonor of a check may be sent to the drawer or maker by the drawee bank, the
holder of the check, or the offended party either by personal delivery or by registered
mail.23 The notice of dishonor to the maker of a check must be in writing. 24

In this case, prosecution witness Edmarcos Basangan testified that after petitioner’s check was
dishonored, he and co-employee Carlos Garcia went to petitioner’s residence in Tarlac to
inform him about it. Thereafter, petitioner wrote a letter dated June 28, 1990 to Atty. Joselito
Lim, RBSJ chairman of the Board of Directors, proposing a manner of paying the loan. The
letter was referred to the bank manager who sent petitioner another demand letter 25 dated
September 17, 1990 through registered mail. 26 Said letter informed petitioner of the dishonor of
his check for the reason of account closed, and required him to settle his obligation.

Violations of Batas Pambansa Bilang 22 are categorized as transitory or continuing crimes. 29 In
such crimes, some acts material and essential to the crimes and requisite to their
consummation occur in one municipality or territory and some in another, in which event, the
court of either has jurisdiction to try the cases, it being understood that the first court taking
cognizance of the case excludes the other. 30 Hence, a person charged with a transitory crime
may be validly tried in any municipality or territory where the offense was in part committed. 31

The evidence clearly shows that the undated check was issued and delivered at the Rural
Bank of San Juan, Metro Manila 32 on November 16, 1989, and subsequently the check was
dated February 16, 1990 thereat. On May 25, 1990, the check was deposited with PS Bank,
San Juan Branch, Metro Manila.33 Thus, the Court of Appeals correctly ruled:

Violations of B.P. 22 are categorized as transitory or continuing crimes. A suit on the

check can be filed in any of the places where any of the elements of the offense
occurred, that is, where the check is drawn, issued, delivered or dishonored. x x x

The information at bar effectively charges San Juan as the place of drawing and
issuing. The jurisdiction of courts in criminal cases is determined by the allegations of
the complaint or information. Although, the check was dishonored by the drawee,
Associated Bank, in its Tarlac Branch, appellant has drawn, issued and delivered it at
RBSJ, San Juan. The place of issue and delivery was San Juan and knowledge, as an
essential part of the offense, was also overtly manifested in San Juan. There is no
question that crimes committed in November, 1989 in San Juan are triable by the RTC
stationed in Pasig. In short both allegation and proof in this case sufficiently vest
jurisdiction upon the RTC in Pasig City. 34

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals, in
CA-G.R. CR No. 18855, is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 101163 January 11, 1993

STATE INVESTMENT HOUSE, INC., petitioner,

vs.
COURT OF APPEALS and NORA B. MOULIC, respondents.

Pg 53 pareho
Doctrine:

The withdrawal of the money from the drawee bank to avoid liability on the checks
cannotprejudice the rights of holders in due course. For the reason that the holder who takes
thenegotiated paper makes a contract with the parties on the face of the instrument; there isan
implied representation that funds or credit are available for the payment of
theinstrument in the bank upon which it is withdrawn.

Facts:

Nora B. Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold
oncommission, 2 post-dated Equitable Banking Corporation checks in the amount of
P50,000each, one dated 30 August 1979 and the other, 30 September 1979. Thereafter, the
payeenegotiated the checks to the State Investment House Inc. (SIHI). Moulic failed to sell
thepieces of jewelry, so she returned them to the payee before maturity of the checks.
Thechecks, however, could no longer be retrieved as they had already been
negotiated.Consequently, before their maturity dates, Moulic withdrew her funds from the
drawee bank.Upon presentment for payment, the checks were dishonored for insufficiency of
funds. On20 December 1979, SIHI allegedly notified Moulic of the dishonor of
the checks andrequested that it be paid in cash instead, although Moulic avers that no such
notice wasgiven her. On 6 October 1983, SIHI sued to recover the value of the checks plus
attorney'sfees and expenses of litigation. In her Answer, Moulic contends that
she incurred noobligation on the checks because the jewelry was never sold
and the checks werenegotiated without her knowledge and consent. She also instituted a
Third-Party Complaintagainst Corazon Victoriano, who later assumed full responsibility for the
checks. On 26 May1988, the trial court dismissed the Complaint as well asthe Third-Party
Complaint, and ordered SIHI to pay Moulic P3,000.00 for attorney's fees. SIHIelevated the
order of dismissal to the Court of Appeals, but the appellate court affirmed thetrial court on the
ground that the Notice of Dishonor to Moulic was made beyond the periodprescribed by the
Negotiable Instruments Law and that even if SIHI did serve such notice onMoulic within the
reglementary period it would be of no consequence as the checks shouldnever have been
presented for payment. SIHI filed the petition for review.

Issue [1]: Whether the alleged issuance of the post-dated checks as security is a ground
forthe discharge of the instrument as against a holder in due course.

Held [1]: Section 119 of the Negotiable Instrument Law outlined the grounds in which an
instrument isdischarged. The provision states that "A negotiable instrument is
discharged: (a) Bypayment in due course by or on behalf of the princi. Whether the post-
dated checks, issuedas security, is a ground for the discharge of the instrument as
against a holder in duecourse. pal debtor; (b) By payment in due course by the party
accommodated, where theinstrument is made or accepted for his accommodation; (c) By the
intentional cancellationthereof by the holder; (d) By any other act which will discharge a simple
contract for thepayment of money; (e) When the principal debtor becomes the holder of the
instrument ator after maturity in his own right." Obviously, MOULIC may only invoke
paragraphs (c) and(d) as possible grounds for the discharge of the instrument. But, the
intentional cancellationcontemplated under paragraph (c) is that cancellation effected by
destroying the instrumenteither by tearing it up, burning it, or writing the word "cancelled" on
the instrument. The actof destroying the instrument must also be made by the
holder of the instrumentintentionally. Since MOULIC failed to get back possession
of the post-dated checks, theintentional cancellation of the said checks is altogether
impossible. On the other hand, theacts which will discharge a simple contract for the payment
of money under paragraph (d)are determined by other existing legislations since Section 119
does not specify what theseacts are, e.g., Art. 1231 of the Civil Code which enumerates the
modes of extinguishingobligations. Again, none of the modes outlined therein is applicable in
the instant case asSection 119 contemplates of a situation where the holder of the instrument
is the creditorwhile its drawer is the debtor. Herein, the payee, Corazon
Victoriano, was no longerMOULIC's creditor at the time the jewelry was returned.
Correspondingly, MOULIC may notunilaterally discharge herself from her liability by the mere
expediency of withdrawing herfunds from the drawee bank. She is thus liable as she has no
legal basis to excuse herselffrom liability on her checks to a holder in due cours

Issue [2]: Whether the requirement that SIHI should give Notice of Dishonor to MOULIC
isindispensable.

Held [2]: The need for notice is not absolute; there are exceptions under Section
114 of theNegotiable Instruments Law. Section 114 (When notice need not be
given to drawer)provides that "Notice of dishonor is not required to be given to the drawer in
the followingcases: (a) Where the drawer and the drawee are the same person; (b) When the
drawee is afictitious person or a person not having capacity to contract; (c) When the drawer is
theperson to whom the instrument is presented for payment; (d) Where the drawer has no
rightto expect or require that the drawee or acceptor will honor the instrument; (e) Where
thedrawer had countermanded payment." Indeed, MOULIC'S actuations leave much
to bedesired. She did not retrieve the checks when she returned the jewelry. She simply
withdrewher funds from her drawee bank and transferred them to another to protect herself.
Afterwithdrawing her funds, she could not have expected her checks to be honored. In
otherwords, she was responsible for the dishonor of her checks, hence, there was no need
toserve her Notice of Dishonor, which is simply bringing to the knowledge of the drawer
orindorser of the instrument, either verbally or by writing, the fact that a specified
instrument,upon proper proceedings taken, has not been accepted or has not been paid, and
that theparty notified is expected to pay it. In addition, the Negotiable Instruments Law was
enactedfor the purpose of facilitating, not hindering or hampering transactions in commercial
paper.Thus, the said statute should not be tampered with haphazardly or lightly. Nor should it
bebrushed aside in order to meet the necessities in a single case. The holder who takes
thenegotiated paper makes a contract with the parties on the face of the instrument. There
isan implied representation that funds or credit are available for the payment of
theinstrument in the bank upon which it is drawn. Consequently, the withdrawal of the
moneyfrom the drawee bank to avoid liability on the checks cannot prejudice the rights of
holdersin due course. Herein, such withdrawal renders the drawer, Moulic, liable to SIHI, a
holder indue course of the checks. SIHI could not expect payment as MOULIC left no funds
with thedrawee bank to meet her obligation on the checks, so that Notice of Dishonor would
befutile
FRANCISCO T. SYCIP v. CA, GR No. 125059, 2000-03-17

Facts:

Francisco T. Sycip agreed to buy, on installment, from Francel Realty Corporation (FRC), a
townhouse unit. Upon execution of the contract to sell, Sycip... issued to FRC , forty-eight...
postdated checks. After moving in his unit, Sycip complained to FRC regarding defects in the
unit and incomplete features of the townhouse project.

FRC continued to present for encashment Sycip's postdated checks in its possession. Sycip
sent "stop payment orders" to the bank. When FRC continued to present the other postdated
checks to the bank as the due date fell, the bank advised

Sycip to close his checking account to avoid paying bank charges every time he made a "stop
payment" order on the forthcoming checks. Due to the closure of petitioner's checking account,
the drawee bank dishonored six postdated checks. FRC filed a complaint against petitioner...
for violations of B.P. Blg. 22 involving said dishonored checks. The trial court found petitioner
guilty of violating Section 1 of B.P. Blg. 22

Issues:

whether or not the Court of Appeals erred in affirming the conviction of petitioner for violation of
the Bouncing Checks Law.

Ruling:

In this case, we find that although the first element of the offense exists, the other elements
have not been established beyond reasonable doubt. Postdating simply means that on the
date indicated on its face, the check would be properly funded, not that the checks should be
deemed as issued only then. But we find from the records no showing that the time said
checks were issued, petitioner had knowledge that his deposit or credit in the bank would be
insufficient to cover them when presented for... encashment. The closure of petitioner's
Account... was not for insufficiency of funds. It was made upon the advice of the drawee bank,
to avoid payment of hefty bank charges each time petitioner issued a "stop payment" order
to... prevent encashment of postdated checks in private respondent's possession. we are of
the view that petitioner had a valid cause to order his bank to stop payment.

BANK OF AMERICA, NT & SA v. ASSOCIATED CITIZENS BANK, BA-FINANCE

CORPORATION, MILLER OFFSET PRESS, INC., UY KIATCHUNG, CHING UY SENG, UY
CHUNG GUAN SENG, and COURT OFAPPEALS

Topic: Material Acceptance

FACTS:

BA-Finance Corporation entered into a transaction with Miller OffsetPress, Inc. through the
latter’s authorized representatives,respondents herein. BA-Finance granted Miller a credit line
facilitythrough which the latter could assign or discount its trade receivableswith the
former.Miller discounted and assigned several trade receivables to BA-Finance by executing
Deeds of Assignment in favor of the latter. Inconsideration of the assignment, BA-Finance
issued four checkspayable to the "Order of Miller Offset Press, Inc." with the notation"For
Payee’s Account Only." These checks were drawn against Bankof America.The 4 checks were
deposited by respondent Ching Uy Seng, corporatesecretary of Miller, in his joint bank account
with respondent UyChung Guan Seng in Associated Bank. Associated Bank stamped
thechecks with the notation "all prior endorsements and/or lack ofendorsements guaranteed,"
and sent them through clearing. Later,the drawee bank, Bank of America, honored the checks
and paid theproceeds to Associated Bank as collecting bank.Miller failed to deliver to BA-
Finance the proceeds of the assignedtrade receivables. Consequently, BA-Finance filed a
complaintagainst respondents for collection of the amount which BA-Financeallegedly paid in
consideration of the assignment.Respondents denied signing the Continuing Suretyship
Agreementwith BA-Finance. In view thereof, BA-Finance impleaded Bank ofAmerica as
additional defendant for allowing encashment andcollection of the checks by persons other
than the payee namedthereon. Bank of America filed a Third Party Complaint
againstAssociated Bank.The RTC rendered judgment against Bank of America, ordering it
topay BA Finance the value of the 4 checks. Judgment is likewiserendered ordering
Associated Bank to reimburse Bank of America.The CA affirmed with the modification that
respondents are alsoordered to pay Associated Bank the value of the 4 checks.

ISSUE:
Whether or not Bank of America, as drawee bank whoaccepted and honored the 4 checks, is
liable to pay BA-Finance theamount of said checks
HELD:
Yes. The drawee bank is under strict liability, based on the contractbetween the bank and its
customer (drawer), to pay the check only to the payee or the payee’s order. The drawer’s
instructions are reflected on the face and by the terms of the check. When thedrawee bank
pays a person other than the payee named on thecheck, it does not comply with the terms of
the check and violates its duty to charge the drawer’s account only for properly payable items.
Thus, the drawee shall be liable for the amount charged to the drawer’s account. A check with
two parallel lines in the upper left hand corner meansthat it could only be deposited and could
not be converted into cash.Thus, the effect of crossing a check relates to the mode of payment

Ang Yu Asuncion vs CA G.R. No. 109125, December 2, 1994

FACTS:

Petitioners allege that they are tenants or lessees of residential and commercial spaces owned
by defendants in Ongpin Street, Binondo, Manila since 1935 and that on several occasions
before October 9, 1986, defendants informed plaintiffs that they are offering to sell the
premises and are giving them priority to acquire the same. During the negotiations, Bobby Cu
Unjieng offered a price of P6-million while petitioners made a counter offer of P5-million. On
October 24, 1986, petitioners asked the respondents to specify the terms and conditions of the
offer to sell. Petitioners now raise that since respondents failed to specify the terms and
conditions of the offer to sell and because of information received that the latter were about to
sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the
property to them.

The trial court found that the respondents’ offer to sell was never accepted by the petitioners
for the reason that they did not agree upon the terms and conditions of the proposed sale,
hence, there was no contract of sale at all. The Court of Appeals affirmed the decision of the
lower court. This decision was brought to the Supreme Court by petition for review on certiorari
which subsequently denied the appeal on May 6, 1991 “for insufficiency in form and
substance”.

On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this
Court, the Cu Unjieng spouses executed a Deed of Sale transferring the property in question
to herein respondent Buen Realty and Development Corporation, for P15,000,000.00. On July
1, 1991, respondent as the new owner of the subject property wrote a letter to the petitioners
demanding that the latter vacate the premises. On July 16, 1991, the petitioners wrote a reply
to respondent corporation stating that the latter brought the property subject to the notice of lis
pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name
of the Cu Unjiengs.

The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case
No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123. On
August 30, 1991, the RTC ordered the Cu Unjiengs to execute the necessary Deed of Sale of
the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
consideration of P15 Million pesos in recognition of petitioners’ right of first refusal and that a
new Transfer Certificate of Title be issued in favor of the buyer. The court also set aside the
title issued to Buen Realty Corporation for having been executed in bad faith. On September
22, 1991, the Judge issued a writ of execution.

On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside
and declared without force and effect the above questioned orders of the court a quo.

ISSUE:

Whether or not Buen Realty can be bound by the writ of execution by virtue of the notice of lis
pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of
the latter’s purchase of the property on 15 November 1991 from the Cu Unjiengs.

HELD:

We affirm the decision of the appellate court.

In the law on sales, the so-called “right of first refusal” is an innovative juridical relation.
Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of
the Civil Code. In a right of first refusal, while the object might be made determinate, the
exercise of the right, however, would be dependent not only on the grantor’s eventual intention
to enter into a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely
belonging to a class of preparatory juridical relations governed not by contracts (since the
essential elements to establish the vinculum juris would still be indefinite and inconclusive) but
by, among other laws of general application, the pertinent scattered provisions of the Civil
Code on human conduct.

The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a
“right of first refusal” in favor of petitioners. The consequence of such a declaration entails no
more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners
are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy
is not a writ of execution on the judgment, since there is none to execute, but an action for
damages in a proper forum for the purpose.

Furthermore, Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be
held subject to the writ of execution issued by respondent Judge, let alone ousted from the
ownership and possession of the property, without first being duly afforded its day in court.
G.R. No. 164051               October 3, 2012

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
LILIAN S. SORIANO, Respondent.

DECISION

PEREZ, J.:

We arc urged in this petition for review on certiorari to reverse and set aside the Decision of
the Court of Appeals in C A-G.R. SP No. 76243 1 finding no grave abuse of discretion in the
ruling of the Secretary of the Department of Justice ( DOJ) which, in turn, dismissed the
criminal complaint for Estafa, i.e., violation of Section 13 of Presidential Decree No. 1 15 (Trust
Receipts Law), in relation to Article 315, paragraph (b) of the Revised Penal Code, filed by
petitioner Philippine National Bank (PNB) against respondent Lilian S. Soriano (Soriano). 2

First, the ostensibly simple facts as found by the Court of Appeals and adopted by PNB in its
petition and memorandum:

On March 20, 1997, [PNB] extended a credit facility in the form of [a] Floor Stock Line (FSL) in
the increased amount of Thirty Million Pesos (₱30 Million) to Lisam Enterprises, Inc. [LISAM],
a family-owned and controlled corporation that maintains Current Account No. 445830099-8
with petitioner PNB.

x x x. Soriano is the chairman and president of LISAM, she is also the authorized signatory in
all LISAM’s Transactions with [PNB].

On various dates, LISAM made several availments of the FSL in the total amount of Twenty
Nine Million Six Hundred Forty Five Thousand Nine Hundred Forty Four Pesos and Fifty Five
Centavos (₱ 29,645,944.55), the proceeds of which were credited to its current account with
[PNB]. For each availment, LISAM through [Soriano], executed 52 Trust Receipts (TRs). In
addition to the promissory notes, showing its receipt of the items in trust with the duty to turn-
over the proceeds of the sale thereof to [PNB].

Sometime on January 21-22, 1998, [PNB’s] authorized personnel conducted an actual physical
inventory of LISAM’s motor vehicles and motorcycles and found that only four (4) units covered
by the TRs amounting to One Hundred Forty Thousand Eight Hundred Pesos (₱158,100.00)
(sic) remained unsold.

Out of the Twenty Nine Million Six Hundred Forty Four Thousand Nine Hundred Forty Four
Pesos and Fifty Five Centavos (₱29,644,944.55) as the outstanding principal balance [of] the
total availments on the line covered by TRs, [LISAM] should have remitted to [PNB], Twenty
Nine Million Four Hundred Eighty Seven Thousand Eight Hundred Forty Four Pesos and Fifty
Five Centavos (₱29,487,844.55). Despite several formal demands, respondent Soriano failed
and refused to turn over the said [amount to] the prejudice of [PNB]. 3

Given the terms of the TRs which read, in pertinent part:

RECEIVED in Trust from the [PNB], Naga Branch, Naga City, Philippines, the motor vehicles
("Motor Vehicles") specified and described in the Invoice/s issued by HONDA PHILIPPINES,
INC. (HPI) to Lisam Enterprises, Inc., (the "Trustee") hereto attached as Annex "A" hereof, and
in consideration thereof, the trustee hereby agrees to hold the Motor Vehicles in storage as the
property of PNB, with the liberty to sell the same for cash for the Trustee’s account and to
deliver the proceeds thereof to PNB to be applied against its acceptance on the Trustee’s
account. Under the terms of the Invoices and (sic) the Trustee further agrees to hold the said
vehicles and proceeds of the sale thereof in Trust for the payment of said acceptance and of
any [of] its other indebtedness to PNB.

xxxx

For the purpose of effectively carrying out all the terms and conditions of the Trust herein
created and to insure that the Trustee will comply strictly and faithfully with all undertakings
hereunder, the Trustee hereby agrees and consents to allow and permit PNB or its
representatives to inspect all of the Trustee’s books, especially those pertaining to its
disposition of the Motor Vehicles and/or the proceeds of the sale hereof, at any time and
whenever PNB, at its discretion, may find it necessary to do so.

The Trustee’s failure to account to PNB for the Motor Vehicles received in Trust and/or for the
proceeds of the sale thereof within thirty (30) days from demand made by PNB shall
constitute prima facie evidence that the Trustee has converted or misappropriated said
vehicles and/or proceeds thereof for its benefit to the detriment and prejudice of PNB. 4

and Soriano’s failure to account for the proceeds of the sale of the motor vehicles, PNB, as
previously adverted to, filed a complaint-affidavit before the Office of the City Prosecutor of
Naga City charging Soriano with fifty two (52) counts of violation of the Trust Receipts Law, in
relation to Article 315, paragraph 1(b) of the Revised Penal Code.
In refutation, Soriano filed a counter-affidavit asserting that:

1. The obligation of [LISAM] which I represent, and consequently[,] my obligation, if any, is

purely civil in nature. All of the alleged trust receipt agreements were availments made by the
corporation [LISAM] on the PNB credit facility known as "Floor Stock Line" (FSL), which is just
one of the several credit facilities granted to [LISAM] by PNB. When my husband Leandro A.
Soriano, Jr. was still alive, [LISAM] submitted proposals to PNB for the restructuring of all of
[LISAM’s] credit facilities. After exchanges of several letters and telephone calls, Mr. Josefino
Gamboa, Senior Vice President of PNB on 12 May 1998 wrote [LISAM] informing PNB’s lack
of objection to [LISAM’s] proposal of restructuring all its obligations. x x x.

2. On September 22, 1998 Mr. Avengoza sent a letter to [LISAM], complete with attached copy
of PNB Board’s minutes of meeting, with the happy information that the Board of Directors of
PNB has approved the conversion of [LISAM’s] existing credit facilities at PNB, which includes
the FSL on which the Trust receipts are availments, to [an] Omnibus Line (OL) available by
way of Revolving Credit Line (RCL), Discounting Line Against Post-Dated Checks (DLAPC),
and Domestic Bills Purchased Line (DBPL) and with a "Full waiver of penalty charges on RCL,
FSL (which is the Floor Stock Line on which the trust receipts are availments) and Time Loan.
x x x.

3. The [FSL] and the availments thereon allegedly secured by Trust Receipts, therefore, was
(sic) already converted into[,] and included in[,] an Omnibus Line (OL) of ₱106 million on
September 22, 1998, which was actually a Revolving Credit Line (RCL)[.] 5

PNB filed a reply-affidavit maintaining Soriano’s criminal liability under the TRs:

2. x x x. While it is true that said restructuring was approved, the same was never implemented
because [LISAM] failed to comply with the conditions of approval stated in B/R No. 6, such as
the payment of the interest and other charges and the submission of the title of the 283 sq. m.
of vacant residential lot, x x x Tandang Sora, Quezon City, as among the common conditions
stated in paragraph V, of B/R 6. The nonimplementation of the approved restructuring of the
account of [LISAM] has the effect of reverting the account to its original status prior to the said
approval. Consequently, her claim that her liability for violation of the Trust Receipt Agreement
is purely civil does not hold water.6

In a Resolution,7 the City Prosecutor of Naga City found, thus:

WHEREFORE, the undersigned finds prima facie evidence that respondent LILIAN SORIANO

is probably guilty of violation of [the] Trust Receipt Law, in relation to Article 315 par. 1 (b) of
the Revised Penal Code, let therefore 52 counts of ESTAFA be filed against the respondent. 8

Consequently, on 1 August 2001, the same office filed Informations against Soriano for fifty
two (52) counts of Estafa (violation of the Trust Receipts Law), docketed as Criminal Case
Nos. 2001-0641 to 2001-0693, which were raffled to the Regional Trial Court (RTC), Branch
21, Naga City.
Meanwhile, PNB filed a petition for review of the Naga City Prosecutor’s Resolution before the
Secretary of the DOJ.

In January 2002, the RTC ordered the dismissal of one of the criminal cases against Soriano,
docketed as Criminal Case No. 2001-0671. In March of the same year, Soriano was arraigned
in, and pled not guilty to, the rest of the criminal cases. Thereafter, on 16 October 2002, the
RTC issued an Order resetting the continuation of the pre-trial on 27 November 2002.

On the other litigation front, the DOJ, in a Resolution 9 dated 25 June 2002, reversed and set
aside the earlier resolution of the Naga City Prosecutor:

WHEREFORE, the questioned resolution is REVERSED and SET ASIDE and the City

Prosecutor of Naga City is hereby directed to move, with leave of court, for the withdrawal of
the informations for estafa against Lilian S. Soriano in Criminal Case Nos. 2001-0641 to 0693
and to report the action taken thereon within ten (10) days from receipt thereof. 10

On various dates the RTC, through Pairing Judge Novelita Villegas Llaguno, issued the
following Orders:

1. 27 November 200211

When this case was called for continuation of pre-trial, [Soriano’s] counsel appeared. However,
Prosecutor Edgar Imperial failed to appear.

Records show that a copy of the Resolution from the Department of Justice promulgated on
October 28, 2002 was received by this Court, (sic) denying the Motion for Reconsideration of
the Resolution No. 320, series of 2002 reversing that of the City Prosecutor of Naga City and
at the same time directing the latter to move with leave of court for the withdrawal of the
informations for Estafa against Lilian Soriano.

Accordingly, the prosecution is hereby given fifteen (15) days from receipt hereof within which
to comply with the directive of the Department of Justice.

2. 21 February 200312

Finding the Motion to Withdraw Informations filed by Pros. Edgar Imperial duly approved by the
City Prosecutor of Naga City to be meritorious the same is hereby granted. As prayed for, the
Informations in Crim. Cases Nos. RTC 2001-0641 to 2001-0693 entitled, People of the
Philippines vs. Lilian S. Soriano, consisting of fifty-two (52) cases except for Crim. Case No.
RTC 2001-0671 which had been previously dismissed, are hereby ordered WITHDRAWN.

3. 15 July 200313

The prosecution of the criminal cases herein filed being under the control of the City
Prosecutor, the withdrawal of the said cases by the Prosecution leaves this Court without
authority to re-instate, revive or refile the same.
Wherefore, the Motion for Reconsideration filed by the private complainant is hereby DENIED.

With the denial of its Motion for Reconsideration of the 25 June 2002 Resolution of the
Secretary of the DOJ, PNB filed a petition for certiorari before the Court of Appeals alleging
that:

A. THE SECRETARY OF THE DOJ COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO WANT OR EXCESS OF JURISDICTION IN REVERSING AND SETTING
ASIDE THE RESOLUTON OF THE CITY PROSECUTOR OF NAGA CITY FINDING A PRIMA
FACIE CASE AGAINST PRIVATE RESPONDENT [SORIANO], FOR THE SAME HAS NO
LEGAL BASES AND IS NOT IN ACCORD WITH THE JURISPRUDENTIAL RULINGS ON
THE MATTER.14

As stated at the outset, the appellate court did not find grave abuse of discretion in the
questioned resolution of the DOJ, and dismissed PNB’s petition for certiorari.

Hence, this appeal by certiorari.

Before anything else, we note that respondent Soriano, despite several opportunities to do so,
failed to file a Memorandum as required in our Resolution dated 16 January 2008. Thus, on 8
July 2009, we resolved to dispense with the filing of Soriano’s Memorandum.

In its Memorandum, PNB posits the following issues:

I. Whether or not the Court of Appeals gravely erred in concurring with the finding of the DOJ
that the approval by PNB of [LISAM’s] restructuring proposal of its account with PNB had
changed the status of [LISAM’s] obligations secured by Trust Receipts to one of an ordinary
loan, non-payment of which does not give rise to a criminal liability.

II. Whether or not the Court of Appeals gravely erred in concluding and concurring with the
June 25, 2002 Resolution of the DOJ directing the withdrawal of the Information for Estafa
against the accused in Criminal Case Nos. 2001-0641 up to 0693 considering the well-
established rule that once jurisdiction is vested in court, it is retained up to the end of the
litigation.

III. Whether or not the reinstatement of the 51 counts (Criminal Case No. 2001-0671 was
already dismissed) of criminal cases for estafa against Soriano would violate her constitutional
right against double jeopardy.15

Winnowed from the foregoing, we find that the basic question is whether the Court of Appeals
gravely erred in affirming the DOJ’s ruling that the restructuring of LISAM’s loan secured by
trust receipts extinguished Soriano’s criminal liability therefor.

It has not escaped us that PNB’s second and third issues delve into the three (3) Orders of the
RTC which are not the subject of the petition before us. To clarify, the instant petition assails
the Decision of the appellate court in CA-G.R. SP No. 76243 which, essentially, affirmed the
ruling of the DOJ in I.S. Nos. 2000-1123, 2000-1133 and 2000-1184. As previously narrated,
the DOJ Resolution became the basis of the RTC’s Orders granting the withdrawal of the
Informations against Soriano. From these RTC Orders, the remedy of PNB was to file a
petition for certiorari before the Court of Appeals alleging grave abuse of discretion in the
issuance thereof.

However, for clarity and to obviate confusion, we shall first dispose of the peripheral issues
raised by PNB:

1. Whether the withdrawal of Criminal Cases Nos. 2001-0641 to 2001-0693 against Soriano as
directed by the DOJ violates the well-established rule that once the trial court acquires
jurisdiction over a case, it is retained until termination of litigation.

2. Whether the reinstatement of Criminal Cases Nos. 2001-0641 to 2001-0693 violate the
constitutional provision against double jeopardy.

We rule in the negative.

Precisely, the withdrawal of Criminal Cases Nos. 2001-0641 to 2001-0693 was ordered by the
RTC. In particular, the Secretary of the DOJ directed City Prosecutor of Naga City to
move, with leave of court, for the withdrawal of the Informations for estafa against Soriano.
Significantly, the trial court gave the prosecution fifteen (15) days within which to comply with
the DOJ’s directive, and thereupon, readily granted the motion. Indeed, the withdrawal of the
criminal cases did not occur, nay, could not have occurred, without the trial court’s imprimatur.
As such, the DOJ’s directive for the withdrawal of the criminal cases against Soriano did not
divest nor oust the trial court of its jurisdiction.

Regrettably, a perusal of the RTC’s Orders reveals that the trial court relied solely on the
Resolution of the DOJ Secretary and his determination that the Informations for estafa against
Soriano ought to be withdrawn. The trial court abdicated its judicial power and refused to
perform a positive duty enjoined by law. On one occasion, we have declared that while the
recommendation of the prosecutor or the ruling of the Secretary of Justice is persuasive, it is
not binding on courts.16 We shall return to this point shortly.

In the same vein, the reinstatement of the criminal cases against Soriano will not violate her
constitutional right against double jeopardy.

Section 7,17 Rule 117 of the Rules of Court provides for the requisites for double jeopardy to
set in: (1) a first jeopardy attached prior to the second; (2) the first jeopardy has been validly
terminated; and (3) a second jeopardy is for the same offense as in the first. A first jeopardy
attaches only (a) after a valid indictment; (b) before a competent court; (c) after arraignment;
(d) when a valid plea has been entered; and (e) when the accused has been acquitted or
convicted, or the case dismissed or otherwise terminated without his express consent.18

In the present case, the withdrawal of the criminal cases did not include a categorical dismissal
thereof by the RTC. Double jeopardy had not set in because Soriano was not acquitted nor
was there a valid and legal dismissal or termination of the fifty one (51) cases against her. It
stands to reason therefore that the fifth requisite which requires conviction or acquittal of the
accused, or the dismissal of the case without the approval of the accused, was not met.

On both issues, the recent case of Cerezo v. People,19 is enlightening. In Cerezo, the trial court
simply followed the prosecution’s lead on how to proceed with the libel case against the three
accused. The prosecution twice changed their mind on whether there was probable cause to
indict the accused for libel. On both occasions, the trial court granted the prosecutor’s motions.
Ultimately, the DOJ Secretary directed the prosecutor to re-file the Information against the
accused which the trial court forthwith reinstated. Ruling on the same issues raised by PNB in
this case, we emphasized, thus:

x x x. In thus resolving a motion to dismiss a case or to withdraw an Information, the trial court
should not rely solely and merely on the findings of the public prosecutor or the Secretary of
Justice. It is the court’s bounden duty to assess independently the merits of the motion, and
this assessment must be embodied in a written order disposing of the motion. x x x.

In this case, it is obvious from the March 17, 2004 Order of the RTC, dismissing the criminal
case, that the RTC judge failed to make his own determination of whether or not there was
a prima facie case to hold respondents for trial. He failed to make an independent evaluation
or assessment of the merits of the case. The RTC judge blindly relied on the manifestation and
recommendation of the prosecutor when he should have been more circumspect and judicious
in resolving the Motion to Dismiss and Withdraw Information especially so when the
prosecution appeared to be uncertain, undecided, and irresolute on whether to indict
respondents.

The same holds true with respect to the October 24, 2006 Order, which reinstated the case.
The RTC judge failed to make a separate evaluation and merely awaited the resolution of the
DOJ Secretary. This is evident from the general tenor of the Order and highlighted in the
following portion thereof:

As discussed during the hearing of the Motion for Reconsideration, the Court will resolve it
depending on the outcome of the Petition for Review. Considering the findings of the
Department of Justice reversing the resolution of the City Prosecutor, the Court gives favorable
action to the Motion for Reconsideration.

By relying solely on the manifestation of the public prosecutor and the resolution of the DOJ
Secretary, the trial court abdicated its judicial power and refused to perform a positive duty
enjoined by law. The said Orders were thus stained with grave abuse of discretion and violated
the complainant’s right to due process. They were void, had no legal standing, and produced
no effect whatsoever.

xxxx

It is beyond cavil that double jeopardy did not set in. Double jeopardy exists when the following
requisites are present: (1) a first jeopardy attached prior to the second; (2) the first jeopardy
has been validly terminated; and (3) a second jeopardy is for the same offense as in the first. A
first jeopardy attaches only (a) after a valid indictment; (b) before a competent court; (c) after
arraignment; (d) when a valid plea has been entered; and (e) when the accused has been
acquitted or convicted, or the case dismissed or otherwise terminated without his
express consent.

Since we have held that the March 17, 2004 Order granting the motion to dismiss was
committed with grave abuse of discretion, then respondents were not acquitted nor was there
a valid and legal dismissal or termination of the case. Ergo, the fifth requisite which requires
the conviction and acquittal of the accused, or the dismissal of the case without the approval of
the accused, was not met. Thus, double jeopardy has not set in. 20 (Emphasis supplied)

We now come to the crux of the matter: whether the restructuring of LISAM’s loan account
extinguished Soriano’s criminal liability.

PNB admits that although it had approved LISAM’s restructuring proposal, the actual
restructuring of LISAM’s account consisting of several credit lines was never reduced into
writing. PNB argues that the stipulations therein such as the provisions on the schedule of
payment of the principal obligation, interests, and penalties, must be in writing to be valid and
binding between the parties. PNB further postulates that assuming the restructuring was
reduced into writing, LISAM failed to comply with the conditions precedent for its effectivity,
specifically, the payment of interest and other charges, and the submission of the titles to the
real properties in Tandang Sora, Quezon City. On the whole, PNB is adamant that the events
concerning the restructuring of LISAM’s loan did not affect the TR security, thus, Soriano’s
criminal liability thereunder subsists.

On the other hand, the appellate court agreed with the ruling of the DOJ Secretary that the
approval of LISAM’s restructuring proposal, even if not reduced into writing, changed the
status of LISAM’s loan from being secured with Trust Receipts (TR’s) to one of an ordinary
loan, non-payment of which does not give rise to criminal liability. The Court of Appeals
declared that there was no breach of trust constitutive of estafa through misappropriation or
conversion where the relationship between the parties is simply that of creditor and debtor, not
as entruster and entrustee.

We cannot subscribe to the appellate court’s reasoning. The DOJ Secretary’s and the Court of
Appeals holding that, the supposed restructuring novated the loan agreement between the
parties is myopic.

To begin with, the purported restructuring of the loan agreement did not constitute novation.

Novation is one of the modes of extinguishment of obligations; 21 it is a single juridical act with a
diptych function. The substitution or change of the obligation by a subsequent one
extinguishes the first, resulting in the creation of a new obligation in lieu of the old. 22 It is not a
complete obliteration of the obligor-obligee relationship, but operates as a relative extinction of
the original obligation.
Article 1292 of the Civil Code which provides:

Art. 1292. In order that an obligation may be extinguished by another which substitutes the
same, it is imperative that it be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.

contemplates two kinds of novation: express or implied. The extinguishment of the old
obligation by the new one is a necessary element of novation, which may be effected either
expressly or impliedly.

In order for novation to take place, the concurrence of the following requisites is indispensable:

(1) There must be a previous valid obligation;

(2) There must be an agreement of the parties concerned to a new contract;

(3) There must be the extinguishment of the old contract; and

(4) There must be the validity of the new contract. 23

Novation is never presumed, and the animus novandi, whether totally or partially, must appear
by express agreement of the parties, or by their acts that are too clear and unmistakable. The
contracting parties must incontrovertibly disclose that their object in executing the new contract
is to extinguish the old one. Upon the other hand, no specific form is required for an implied
novation, and all that is prescribed by law would be an incompatibility between the two
contracts.24 Nonetheless, both kinds of novation must still be clearly proven. 25

In this case, without a written contract stating in unequivocal terms that the parties were
novating the original loan agreement, thus undoubtedly eliminating an express novation, we
look to whether there is an incompatibility between the Floor Stock Line secured by TR’s and
the subsequent restructured Omnibus Line which was supposedly approved by PNB.

Soriano is confident with her assertion that PNB’s approval of her proposal to restructure
LISAM’s loan novated the loan agreement secured by TR’s. Soriano relies on the following:

1. x x x. All the alleged trust receipt agreements were availments made by [LISAM] on the PNB
credit facility known as "Floor Stock Line," (FSL) which is just one of the several credit facilities
granted to [LISAM] by PNB. When my husband Leandro A. Soriano, Jr. was still alive, [LISAM]
submitted proposals to PNB for the restructuring of all of [LISAM’s] credit facilities. After
exchanges of several letters and telephone calls, Mr. Josefino Gamboa, Senior Vice President
of PNB on 12 May 1998 wrote [LISAM] informing PNB’s lack of objection to [LISAM’s] proposal
of restructuring all its obligations. x x x.

2. On September 22, 1998, Mr. Avengoza sent a letter to [LISAM], complete with attached
copy of PNB’s Board’s minutes of meeting, with the happy information that the Board of
Directors of PNB has approved the conversion of [LISAM’s] existing credit facilities at PNB,
which includes the FSL on which the trust receipts are availments, to [an] Omnibus Line (OL)
available by way of Revolving Credit Line (RCL), Discounting Line Against Post-Dated Checks
(DLAPC), and Domestic Bills Purchased Line (DBPL) and with a "Full waiver of penalty
charges on RCL, FSL (which is the Floor Stock Line on which the trust receipts are availments)
and Time Loan. x x x.26

Soriano’s reliance thereon is misplaced. The approval of LISAM’s restructuring proposal is not
the bone of contention in this case. The pith of the issue lies in whether, assuming a
restructuring was effected, it extinguished the criminal liability on the loan obligation secured
by trust receipts, by extinguishing the entruster-entrustee relationship and substituting it with
that of an ordinary creditor-debtor relationship. Stated differently, we examine whether the
Floor Stock Line is incompatible with the purported restructured Omnibus Line.

The test of incompatibility is whether the two obligations can stand together, each one having
its independent existence. If they cannot, they are incompatible and the latter obligation
novates the first. Corollarily, changes that breed incompatibility must be essential in nature and
not merely accidental. The incompatibility must take place in any of the essential elements of
the obligation, such as its object, cause or principal conditions thereof; otherwise, the change
would be merely modificatory in nature and insufficient to extinguish the original obligation. 27

We have scoured the records and found no incompatibility between the Floor Stock Line and
the purported restructured Omnibus Line. While the restructuring was approved in principle,
the effectivity thereof was subject to conditions precedent such as the payment of interest and
other charges, and the submission of the titles to the real properties in Tandang Sora, Quezon
City. These conditions precedent imposed on the restructured Omnibus Line were never
refuted by Soriano who, oddly enough, failed to file a Memorandum. To our mind, Soriano’s
bare assertion that the restructuring was approved by PNB cannot equate to a finding of an
implied novation which extinguished Soriano’s obligation as entrustee under the TR’s.

Moreover, as asserted by Soriano in her counter-affidavit, the waiver pertains to penalty

charges on the Floor Stock Line. There is no showing that the waiver extinguished Soriano’s
obligation to "sell the [merchandise] for cash for [LISAM’s] account and to deliver the proceeds
thereof to PNB to be applied against its acceptance on [LISAM’s] account." Soriano further
agreed to hold the "vehicles and proceeds of the sale thereof in Trust for the payment of said
acceptance and of any of its other indebtedness to PNB." Well-settled is the rule that, with
respect to obligations to pay a sum of money, the obligation is not novated by an instrument
that expressly recognizes the old, changes only the terms of payment, adds other obligations
not incompatible with the old ones, or the new contract merely supplements the old
one.28 Besides, novation does not extinguish criminal liability. 29 It stands to reason therefore,
that Soriano’s criminal liability under the TR’s subsists considering that the civil obligations
under the Floor Stock Line secured by TR’s were not extinguished by the purported
restructured Omnibus Line.

In Transpacific Battery Corporation v. Security Bank and Trust Company,30 we held that the
restructuring of a loan agreement secured by a TR does not per se novate or extinguish the
criminal liability incurred thereunder:
x x x Neither is there an implied novation since the restructuring agreement is not incompatible
with the trust receipt transactions.

Indeed, the restructuring agreement recognizes the obligation due under the trust receipts
when it required "payment of all interest and other charges prior to restructuring." With respect
to Michael, there was even a proviso under the agreement that the amount due is subject to
"the joint and solidary liability of Spouses Miguel and Mary Say and Michael Go Say." While
the names of Melchor and Josephine do not appear on the restructuring agreement, it cannot
be presumed that they have been relieved from the obligation. The old obligation continues to
subsist subject to the modifications agreed upon by the parties.

The circumstance that motivated the parties to enter into a restructuring agreement was the
failure of petitioners to account for the goods received in trust and/or deliver the proceeds
thereof. To remedy the situation, the parties executed an agreement to restructure
Transpacific's obligations.

The Bank only extended the repayment term of the trust receipts from 90 days to one year with
monthly installment at 5% per annum over prime rate or 30% per annum whichever is higher.
Furthermore, the interest rates were flexible in that they are subject to review every
amortization due. Whether the terms appeared to be more onerous or not is
immaterial.1âwphi1 Courts are not authorized to extricate parties from the necessary
consequences of their acts. The parties will not be relieved from their obligations as there was
absolutely no intention by the parties to supersede or abrogate the trust receipt transactions.
The intention of the new agreement was precisely to revive the old obligation after the original
period expired and the loan remained unpaid. Well-settled is the rule that, with respect to
obligations to pay a sum of money, the obligation is not novated by an instrument that
expressly recognizes the old, changes only the terms of payment, adds other obligations not
incompatible with the old ones, or the new contract merely supplements the old one. 31

Based on all the foregoing, we find grave error in the Court of Appeals dismissal of PNB’s
petition for certiorari. Certainly, while the determination of probable cause to indict a
respondent for a crime lies with the prosecutor, the discretion must not be exercised in a
whimsical or despotic manner tantamount to grave abuse of discretion.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP
No. 76243 finding no grave abuse of discretion on the part of the Secretary of Justice
is REVERSED and SET ASIDE.

The Resolution of the Secretary of Justice dated 25 June 2002, directing the City Prosecutor of
Naga City to move for the withdrawal of the Informations for estafa in relation to the Trust
Receipts Law against respondent Lilian S. Soriano, and his 29 October 2002 Resolution,
denying petitioner's Motion for Reconsideration, are ANNULLED and SET ASIDE for having
been issued with grave abuse of discretion; and the Resolution or the Naga City Prosecutor's
Office dated 19 March 2001, finding probable cause against herein respondent,
is REINSTATED. Consequently, the Orders of the Regional Trial Court, Branch 21 of Naga
City in Criminal Cases Nos. 2001-0641 to 2001-0693, except Criminal Case No. 2001-0671,
dated 27 November 2002, 21 February 2003 and 15 July 2003 are SET ASIDE and its Order
of 16 October 2002 resetting the continuation or the pre-trial is REINSTATED. The RTC is
further ordered to conduct the pretrial with dispatch.

SO ORDERED.

JOSE PORTUGAL PEREZ

Associate Justice