FEDERICO O. BORROMEO v.

AMANCIO SUN
G.R. NO. 75908 OCTOBER 22, 1999

FACTS:
Private respondent Amancio Sun filed an action against Lourdes O. Borromeo (in her
capacity as corporate secretary), Federico O. Borromeo and Federico O. Borromeo (F.O.B.), Inc.,
to compel the transfer to his name in the books of F.O.B., Inc., 23,223 shares of stock registered
in the name of Federico O. Borromeo, as evidenced by a Deed of Assignment.
Private respondent averred that all the shares of stock of F.O.B. Inc. registered in the name
of Federico O. Borromeo belong to him, as the said shares were placed in the name of Federico
O. Borromeo only to give the latter personality and importance in the business world. He alleged
that Federico O. Borromeo executed in his favor a Deed of Assignment with respect to the said
23,223 shares of stock.
On the other hand, petitioner Federico O. Borromeo disclaimed any participation in the
execution of the Deed of Assignment, theorizing that his supposed signature thereon was forged.
The lower court rendered a decision declaring as genuine the signature of Borromeo. On
appeal by petitioners, the Court of Appeals adjudged as forgery the controverted signature of
Federico O. Borromeo. Amancio Sun interposed a motion for reconsideration of the said decision,
contending that Segundo Tabayoyong, petitioners' expert witness, is not a credible witness.
Acting on the aforesaid motion for reconsideration, the Court of Appeals reconsidered its decision

ISSUE:
Whether or not the Deed of Assignment is genuine.

HELD:
Yes. That the Deed of Assignment is dated January 16, 1974 while the questioned signature
was found to be circa 1954-1957, and not that of 1974, is of no moment. It does not necessarily
mean, that the deed is a forgery. Pertinent records reveal that the subject Deed of Assignment is
embodied in a blank form for the assignment of shares with authority to transfer such shares in
the books of the corporation. It was clearly intended to be signed in blank to facilitate the
assignment of shares from one person to another at any future time. This is similar to Section 14
of the Negotiable Instruments Law where the blanks may be filled up by the holder, the signing in
blank being with the assumed authority to do so. Indeed, as the shares were registered in the
name of Federico O. Borromeo just to give him personality and standing in the business
community, private respondent had to have a counter evidence of ownership of the shares
involve. Thus, the execution of the deed of assignment in blank, to be filled up whenever
needed. The same explains the discrepancy between the date of the deed of assignment and the
date when the signature was affixed thereto. WHEREFORE, the Petition is DISMISSED for lack
of merit.
Jaime Biana v George Gimenez
GR No 132768 September 9, 2005

FACTS
In a labor case filed entitled Santos Mendones vs. Gimenez Park Subdivision and herein
respondent George Gimenez, the defendants were ordered to pay a total of P5,248.50 to
Mendones.
Due to defendants’ failure to pay the judgment obligation, sheriff Madera levied and
attached 4 parcels of urban land situated in Naga City with an area of more than 74 hectares. On
December 6, 1978, a public auction was conducted where Mendones won as sole bidder with his
bid of P8,908.50 representing the judgment obligation plus expenses of execution.
Gimenez asserted that he was not informed of the execution sale and that it was known
only when he was asked to pay for the full publication fee and immediately paid them. He was
then informed that the redemption price including interest and sheriff fee is P6,615.89. He then
issued checks worth P5,615.89 in the name of sheriff Garchitorena, since sheriff Madera was not
around to facilitate the redemption.
On December 3, 1979, sheriff Madera informed the counsel of Gimenez that the 1-year
redemption period will soon expire and that he still has a subsisting balance of P4,367.81.
Gimenez asked for the details of said account and disagreed with its itemization since he had
already paid for the publication fee. Seriff Madera executed a Definite Deed of Sale in favor of
Mendones.
Gimenez then requested sheriff Garchitorena to execute a deed of redemption in his favor.
His request having been refused, Gimenez filed an acion for mandamus with damages to compel
the sheriffs to execute the deed of redemption and nullification of the Deed of Sale.
During pendency of the case, Mendones assigned his right over the subject property to
petitioner Jaime Biana in consideration of P1,000,000.00. RTC ruled in favor of Gimenez.
Petitioner filed a motion for reconsideration to the Court of Appeals. CA affirmed the RTC’s
decision. Hence, the instant petition.

ISSUE
W/N the provincial sheriff may be legally compelled to execute a deed of redemption in
favor of respondent Gimenez.
RULING

Yes. The instant case involves not the payment of an obligation but the exercise of a right,
i.e., the right of redemption. Accordingly, the Civil Code provisions on payment of obligations may
not be applied here. What applies here is the settled rule that a mere tender of a check is sufficient
to compel redemption.
In Fortunato v. CA it was ruled that a check may be used for the exercise of the right of
redemption. The tender of a check is sufficient to compel redemption but it is not in itself, a
payment that relieves the redemptioner from his liability to pay the redemption price.
Furthermore, this has been strengthened by the fact that Sherriff Madera himself deducted
the four post dated checks issued by Gimenez from the latter’s liabilities when he submitted the
itemization requested by the latter’s counsel. WHEREFORE, the instant petition is DENIED and
the assailed Decision and Resolution of the Court of Appeals AFFIRMED in toto.
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,


vs.


COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO, respondents.

The Government Corporate Counsel for petitioner.
Lorenzo A. Sales for private respondents.

Facts:

Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and Mrs.
Flaviano Lagasca, executed a deed of mortgage, in favor of petitioner Government Service
Insurance System (GSIS) and subsequently, another deed of mortgage, in connection with two
loans granted by the latter in the sums of P 11,500.00 and P 3,000.00, respectively. A parcel of
land co-owned by said mortgagor spouses, was given as security under the aforesaid two
deeds. They also executed a ‘promissory note” which states in part:

… for value received, we the undersigned … JOINTLY, SEVERALLY and SOLIDARILY, promise
to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P 11,500.00)
Philippine Currency, with interest at the rate of six (6%) per centum compounded monthly payable
in . . . (120) equal monthly installments of . . . (P 127.65) each.
Both parties relied on the provisions of Section 29 of Act No. 2031, otherwise known as the
Negotiable Instruments Law, which provide that an accommodation party is one who has signed
an instrument as maker, drawer, acceptor of indorser without receiving value therefor, but is held
liable on the instrument to a holder for value although the latter knew him to be only an
accommodation party.
ISSUE
Whether or not the executed promissory note is a negotiable instrument.
RULING
No.
The promissory note hereinbefore quoted, as well as the mortgage deeds subject of this case,
are clearly not negotiable instruments. These documents do not comply with the fourth requisite
to be considered as such under Section 1 of Act No. 2031 because they are neither payable to
order nor to bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid
requisite, the provisions of Act No. 2031 would not apply; governance shall be afforded, instead,
by the provisions of the Civil Code and special laws on mortgages.

Here, both parties relied on the provisions of Section 29 of Act No. 2031, otherwise known as the
Negotiable Instruments Law, which provide that an accommodation party is one who has signed
an instrument as maker, drawer, acceptor of indorser without receiving value therefor, but is held
liable on the instrument to a holder for value although the latter knew him to be only an
accommodation party.

This approach of both parties appears to be misdirected and their reliance misplaced. The
promissory note hereinbefore quoted, as well as the mortgage deeds subject of this case, are
clearly not negotiable instruments. These documents do not comply with the fourth requisite to be
considered as such under Section 1 of Act No. 2031 because they are neither payable to order
nor to bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid requisite,
the provisions of Act No. 2031 would not apply; governance shall be afforded, instead, by the
provisions of the Civil Code and special laws on mortgages.
TRADERS ROYAL BANK, petitioner,
vs.
COURT OF APPEALS, FILRITERS GUARANTY
ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES, respondents.

FACTS:

Filriters registered owner of Central Bank Certificate of Indebtedness (CBCI). Filriters transferred
it to Philfinance by one of its officers without authorization from the company. Subsequently,
Philfinance transferred same CBCI to Traders Royal Bank (TRB) under a repurchase agreement.
When Philfinance failed to do so, The TRB tried to register in its name in the CBCI. The Central
Bank did not want to recognize the transfer.

Docketed as Civil Case No. 83-17966 in the Regional Trial Court of Manila, Branch 32, the action
was originally filed as a Petition for Mandamus 5 under Rule 65 of the Rules of Court, to compel
the Central Bank of the Philippines to register the transfer of the subject CBCI to petitioner Traders
Royal Bank (TRB).

DECISION OF LOWER COURTS: * RTC: transfer is null and void. * CA: The appellate court ruled
that the subject CBCI is not a negotiable instrument. Philfinance acquired no title or rights under
CBCI No. D891 which it could assign or transfer to Traders Royal Bank and which the latter can
register with the Central Bank. Thus, the transfer of the instrument from Philfinance to TRB was
merely an assignment, and is not governed by the negotiable instruments law.

APPLICABLE LAWS:

Under section 1 of Act no. 2031 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.

Under section 3, Article V of Rules and Regulations Governing Central Bank Certificates of
Indebtedness states that the assignment of registered certificates shall not be valid unless made
at the office where the same have been issued and registered or at the Securities Servicing
Department, Central Bank of the Philippines, and by the registered owner thereof, in person or by
his representative, duly authorized in writing. For this purpose, the transferee may be designated
as the representative of the registered owner. ISSUES & RULING: 1. Whether the CBCI is
negotiable instrument or not.

The pertinent portions of the subject CBCI read:

xxx xxx xxx

The Central Bank of the Philippines (the Bank) for value received, hereby promises to pay bearer,
of if this Certificate of indebtedness be registered, to FILRITERS GUARANTY ASSURANCE
CORPORATION, the registered owner hereof, the principal sum of FIVE HUNDRED THOUSAND
PESOS.

Issue:

1. W/N the CBCI is a negotiable instrument

2. Whether the Assignment of registered certificate is valid or null and void.

1. No. The CBCI is not a negotiable instrument, since the instrument clearly stated that it was
payable to Filriters, and the certificate lacked the words of negotiability which serve as an
expression of consent that the instrument may be transferred by negotiation.

Before the instruments become negotiable instruments, the instrument must conform to the
requirements under the Negotiable Instrument Law. Otherwise, instrument shall not bind the
parties.

2. It is null and void. Obviously, the Assignment of certificate from Filriters to Philfinance was null
and void. One of officers who signed the deed of assignment on behalf of Filriters did not have
the necessary written authorization from the Board of Directors of Filriters. For lack of such
authority the assignment is considered null and void.

Clearly shown in the record is the fact that Philfinance’s title over CBCI is defective
since it acquired the instrument from Filriters fictitiously. Under 1409 of the Civil Code those
contracts which are absolutely simulated or fictitious are considered void and inexistent from the
beginning.

Petitioner knew that Philfinance is not registered owner of the CBCI No. D891. The fact that a
non-owner was disposing of the registered CBCI owned by another entity was a good reason for
petitioner to verify of inquire as to the title Philfinance to dispose to the CBCI.

OTHER NOTES:
1. the mere ownership by a single stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of
separate corporate personalities.
NOTE: TOPIC ASSIGNED-HISTORY OF NIL

PHILIPPINE NATIONAL BANK, Plaintiff-Appellant, v. JOSE C. ZULUETA, Defendant-

Appellee.

G.R. No. L-7271. August 30, 1957

FACTS:

In the Manila court of first instance, the Philippine National Bank sued the defendant,
Zulueta upon a letter of credit and a draft for the amount of $14,449.15. Although willing to pay
the equivalent in pesos of the draft, plus bank charges, the defendant objected to the 17% excise
tax imposed by Republic Act No. 601 which the Bank tried to collect. Both documents, he
contended, had been issued and had matured before the approval of said Act, therefore the excise
tax should not be charged.

The trial court rendered judgment exempting defendant from the 17% excise tax; but
ordered him to deliver to plaintiff the sum of P37,622.11 plus daily interest of P3.9938 on
P29,154.55 beginning from January 9, 1953. The trial judge expressed the belief that such
amount had been remitted before the enactment of Republic Act 601, because considering the
practice of banks of replenishing their agencies abroad with necessary funds, he deemed it
improbable that the Manila Office of the Bank — in two years had not reimburse its New York
Agency for the amount advanced on account of the draft.

PNB filed an appeal insisting on the right to collect 17% excise or exchange tax.

ISSUE:
Whether or not PNB can insist on its right to collect 17% excise or exchange tax.

RULING:

NO, PNB cannot. Zuleata, should not pay it. Defendant's responsibility is for $14,449.15
due in Manila on October 4, 1949 (plus bank fees). He is under obligation to deliver such amount
in pesos as were the equivalent of $14,449.15. The rate prevailing on the day judgment is
rendered requiring Zulueta to pay cannot be held to be the legal rate.
When a foreign bill of exchange expressed in foreign money becomes payable here, it is
payable at the rate of exchange in effect on the day it should have been paid not at the rate of
exchange prevailing when action therein is brought or when judgment is rendered.
An obligation which has been incurred before the creation of the 17% tax, under Republic
Act 601, may not be validly burdened with such tax, because the law imposing it could not be
deemed to have impaired obligations already existing at the time of its approval.

The document is negotiable and is governed by the Negotiable Instruments Law. But this
statute does not certain any express provision on the question. We know the draft is a foreign bill
of exchange, because, drawn in New York, it is payable here. (See. 129 Negotiable Instruments
Law.) We also know that although the amount payable is expressed in dollars — not current
money here — it is still negotiable, for it may be discharged with pesos of equivalent amount. The
problem arises when we try to determine the "equivalent amount", because the rate of exchange
fluctuates from day to day.

There are decisions in America to the effect that, "the rate of exchange in effect at the time
the bill should have been paid" controls. (11 C.J.S. p. 264.)

Such decisions agree with the provisions of the Bills of Exchange Act of England and could
be taken as enunciating the correct principle, inasmuch as our Negotiable Instruments Law,
practically copied the American Uniform Negotiable Instruments Law which in turn was
based largely on the Bills of Exchange Act of England of 1882. In fact we practically followed Commented [JM1]: HISTORY OF NIL, decisions of the courts
this rule in Westminster Bank vs. K. Nassor, 58 Phil. 855. in US and England based on aforecited Act can be applied in
our Jurisdiction.
There is one decision applying the rate of exchange at the time judgment is entered. (11
C. J. S. p.264.) This decision however seems not to have taken into account the Bills of Exchange
Act above mentioned. And we have rejected its view in the Westminster case, supra.
Furthermore it related to a bill expressly made payable in a foreign currency — which is
not the case here. And the theory would probably produce undesirable effects upon commercial
documents, for it would make the amount uncertain, the parties to the bill not being able to foresee
the day judgment would be rendered.

The trial judge expressed the belief that such amount had been remitted before the
enactment of Republic Act 601, because considering the practice of banks of replenishing their
agencies abroad with necessary funds, he deemed it improbable that the Manila Office of the
Bank — in two years had not reimburse its New York Agency for the amount advanced on account
of the draft. This belief most probably accorded with reality; because as early as May 17, 1949
the New York Agency had "charged" the amount of this draft against the account of the Manila
office there, — which means the Agency had reimbursed itself the amount of the draft out of the
funds of the Manila Office then in its possession (in New York) or coming to its possession
afterwards.

The amount of the draft had been remitted or paid to the New York Agency in May 1949,
for the reason that Zulueta is charged with remitter’s commission" and 5% interest on the amount
of the draft (and such commission) beginning from May 17, 1949, This necessarily implies that
the New York Agency had been reimbursed of the draft’s amount (or such amount was remitted)
on May 17, 1949.
Now, in May 1949 no 17% exchange tax was payable upon such remittance; and the
Manila office did not pay it. Therefore Zulueta should not pay it too.
State Investment House Inc. vs. CA

GR No. 101163 January 11, 1993

Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewelry to be sold on
commission, two postdated checks in the amount of fifty thousand each. Thereafter, Victoriano
negotiated the checks to State Investment House, Inc. When Moulic failed to sell the jewellry, she
returned it to Victoriano before the maturity of the checks. However, the checks cannot be
retrieved as they have been negotiated. Before the maturity date Moulic withdrew her funds from
the bank contesting that she incurred no obligation on the checks because the jewellery was
never sold and the checks are negotiated without her knowledge and consent. Upon presentment
of for payment, the checks were dishonoured for insufficiency of funds.

Issues:
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure or
absence of consideration

Held:

1. Yes, Section 52 of the NIL provides what constitutes a holder in due course.
Sec. 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 that it was
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 evidence shows that: on the faces of the post dated checks were complete and
regular; that State Investment House Inc. bought the checks from Victoriano before the due dates;
that it was taken in good faith and for value; and there was no knowledge with regard that the
checks were issued as security and not for value. A prima facie presumption exists that a holder
of a negotiable instrument is a holder in due course. Moulic failed to prove the contrary.

2. No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose
for which they were issued and therefore is not a holder in due course.

Section 119 of NIL provides how an instruments be discharged.

Sec. 119. Instrument; how discharged. — A negotiable instrument is discharged: (a) By
payment in due course by or on behalf of the principal debtor; (b) By payment in due course by
the party accommodated, where the instrument is made or accepted for his accommodation; (c)
By the intentional cancellation thereof by the holder; (d) By any other act which will discharge a
simple contract for the payment of money; (e) When the principal debtor becomes the holder of
the instrument at or after maturity in his own right.
Moulic can only invoke paragraphs c and d as possible grounds for the discharge of the
instruments. Since Moulic failed to get back the possession of the checks as provided by
paragraph c, intentional cancellation of instrument is impossible. As provided by paragraph d, the
acts which will discharge a simple contract of payment of money will discharge the instrument.
Correlating Article 1231 of the Civil Code which enumerates the modes of extinguishing
obligation, none of those modes outlined therein is applicable in the instant case.
Thus, Moulic may not unilaterally discharge herself from her liability by mere expediency
of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to
excuse herself from liability on her check to a holder in due course. Moreover, the fact that the
petitioner failed to give notice of dishonor is of no moment. The need for such notice is not
absolute; there are exceptions provided by Sec 114 of NIL.
Sec. 114. When notice need not be given to drawer. — Notice of dishonor is not required
to be given to the drawer in the following cases: (a) Where the drawer and the drawee are the
same person; (b) When the drawee is a fictitious person or a person not having capacity to
contract; (c) When the drawer is the person to whom the instrument is presented for payment: (d)
Where the drawer has no right to expect or require that the drawee or acceptor will honor the
instrument; (e) Where the drawer had countermanded payment.
In other words, she was responsible for the dishonor of her checks, hence, there was no
need to serve her Notice of Dishonor, which is simply bringing to the knowledge of the drawer or
indorser 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 the party notified
is expected to pay it
 In addition, the Negotiable Instruments Law was enacted for 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 be brushed aside
in order to meet the necessities in a single case.

The drawing and negotiation of a check have certain effects aside from the transfer
of title or the incurring of liability in regard to the instrument by the transferor. The holder
who takes the negotiated paper makes a contract with the parties on the face of the
instrument. There is an implied representation that funds or credit are available for the
payment of the instrument in the bank upon which it is drawn.
Consequently, the withdrawal of the money from the drawee bank to avoid liability on the
checks cannot prejudice the rights of holders in due course. In the instant case, such withdrawal
renders the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the checks.
Commented [JM2]: FEATURES OF
NEGOTIABLE(ACCUMULATION OF SECONDARY CONTRACTS)
when Nis are transferred through negotiation, secondary
contracts are accumulated, indorsers become secondarily
liable to any holder UNLESS they have valid defense. Thus, it
gives more security and there us greater probability of
payment.
Chan Wan Vs. Tan Kim and Chen So
G.R. No. L-15380. September 30, 1960

Facts:
Tan Kim and her husband (Chen So) issued 11 checks payable to “cash or bearer” to be drawn
against their account with the Equitable Banking Corporation. The checks were negotiated to the
White House Shoe Supply (company). White House then deposited the checks to their China
Bank account. China Bank then presented the checks to Equitable Bank, but the checks were
returned because Equitable Bank then had no funds to cover the checks. China Bank then
stamped the checks with “Account Closed” and “Non-negotiable - China Bank Corporation”. But
somehow, Chan Wan got hold of these checks (Chan Wan was not able to explain in court how
he got hold of the checks). Chan Wan now wants to encash the checks but Equitable Bank refused
accept the said checks.
Issue:
Whether or not Chan 'an is a holder in due course.
Held:
No. As a general rule, a dishonored check/instrument may still be negotiated either by
indorsement or delivery and the holder may be a holder in due course provided that he received
no notice regarding the dishonor of the instrument. In this case, the checks were already crossed
on their face hence Chan Wan was properly notified of the dishonor of the checks at the time of
his acquisition.
Far East Bank vs. Gold Palace Jewellery Co.
G.R. No. 168274. August 20, 2008

Facts:
In June 1998, a foreigner, identified as Samuel Tagoe, purchased from the respondent Gold
Palace Jewellery Co. several pieces of jewelry valued at P258,000.00. In payment of the same,
he offered Foreign Draft No. M-069670 issued by the United Overseas Bank (Malaysia)
addressed to the Land Bank of the Philippines, Manila (LBP), and payable to the respondent
company for P380,000.00.
Yang issued Cash Invoice, to the foreigner, informing him that the pieces of jewelry would be
released when the draft had already been cleared. Respondent Julie Yang-Go, the manager of
Gold Palace deposited the draft in the company’s Far East account. LBP cleared the draft, and
GoldPalace’s account with Far East was credited. The foreigner was then able to get the goods,
and because the amount in the draft was more than the value of the goods purchased, she issued,
as his change, Far East Check No. 173088 for P122,000.00. This check was later presented for
encashment and was, in fact, paid by the said bank.
On June 1998, or after around three weeks, LBP informed Far East that the amount in said
Foreign Draft had been materially altered from P300.00 to P380,000.00 and that it was returning
the same. Intending to debit the amount from respondent’s account, Far East subsequently
refunded the P380,000.00 earlier paid by LBP. Meanwhile, Far East was able to debit only
P168,053.36 from the GoldPalace’s account as the respondent has already utilized their funds.
This was debited without their permission. The bank informed the GoldPalace later thru a phone
call.
On August 1998, petitioner demanded from respondents the payment of P211,946. Because Gold
Palace did not heed the demand, Far East consequently instituted civil case for sum of money
and damages before the RTC in Makati.
RTC ruled in favor of Far East, ordering Gold Palace to pay the former P211,946.64 as actual
damages and P50,000.00 as attorney’s fees. The trial court ruled that, on the basis of its
warranties as a general indorser, Gold Palace was liable to Far East.
On appeal, the CA, reversed the ruling of the trial court and awarded respondents’ counterclaim.
It ruled in the main that Far East failed to undergo the proceedings on the protest of the foreign
draft or to notify Gold Palace of the draft’s dishonor; thus, Far East could not charge Gold Palace
on its secondary liability as an endorser.
Issue:
Whether or not Gold Palace can be held liable

Held:
No. Act No. 2031, or the Negotiable Instruments Law (NIL), explicitly provides that the acceptor,
by accepting the instrument, engages that he will pay it according to the tenor of his acceptance.
His actual payment of the amount in the check implies not only his assent to the order of the
drawer and a recognition of his corresponding obligation to pay the aforementioned sum, but also,
his clear compliance with that obligation. In this case, the drawee bank cleared and paid the
subject foreign draft and forwarded the amount thereof to the collecting bank. The latter, Far East,
then credited to GoldPalace’s account the payment it received. Following the plain language of
the law, the drawee, by the said payment, recognized and complied with its obligation to pay in
accordance with the tenor of his acceptance. Stated simply, LBP was liable on its payment of the
check according to the tenor of the check at the time of payment, which was the raised amount.
SC also notes that Respondent Gold Palace was not a participant in the alteration of the draft,
was not negligent, and was a holder in due course—it received the draft complete and regular on
its face. Gold Palace relied on the drawee bank’s clearance and payment of the draft. Respondent
is also protected by the said Section 62. Commercial policy favors the protection of any one who,
in due course, changes his position on the faith of the drawee bank’s clearance and payment of
a check or draft.
The fault is in LBP; having the most convenient means to correspond with UOB, did not first verify
the amount of the draft before it cleared and paid the same. Gold Palace, on the other hand, had
no facility to ascertain with the drawer, UOB Malaysia, the true amount in the draft. Thus, the
collecting agent, Far East, should not have debited the money paid by the drawee bank from
respondent company’s account.
When Gold Palace deposited the check with Far East, the latter, under the terms of the deposit
and the provisions of the NIL, became an agent of the former for the collection of the amount in
the draft. Far East then was able to collect from LBP. As the transaction in this case had been
closed and the principal-agent relationship between the payee (GoldPalace) and the collecting
bank (Far East) had already ceased, the latter in returning the amount to the drawee bank (LBP)
was already acting on its own and should now be responsible for its own actions. The drawee
bank had no right to recover what it paid.
Likewise, Far East cannot invoke the warranty of the payee/depositor who indorsed the instrument
for collection to shift the burden it brought upon itself. This is precisely because the said
indorsement is only for purposes of collection which, under Section 36 of the NIL, is a restrictive
indorsement.[47] It did not in any way transfer the title of the instrument to the collecting bank.
Far East did not own the draft, it merely presented it for payment. Considering that the warranties
of a general indorser as provided in Section 66 of the NIL are based upon a transfer of title and
are available only to holders in due course. Without any legal right to do so, the collecting bank,
therefore, could not debit respondent’s account for the amount it refunded to the drawee bank.
SC ruled that, for doing so, Far East must return what it had erroneously taken. The remedy under
the law is not against Gold Palace but against the drawee-bank or the person responsible for the
alteration.
Lozano v. Martinez. 146 SCRA 323

FACTS:

The constitutionality of Batas Pambansa Bilang 22 (BP 22 for short), popularly known as the
Bouncing Check Law, which was approved on April 3, 1979, is the sole issue presented by these
petitions for decision. The question is definitely one of first impression in SC’s jurisdiction.

These petitions arose from cases involving prosecution of offenses under the statute. The
defendants in those cases moved seasonably to quash the informations on the ground that the
acts charged did not constitute an offense, the statute being unconstitutional. The motions were
denied by the respondent trial courts, except in one case, which is the subject of G. R. No. 75789,
wherein the trial court declared the law unconstitutional and dismissed the case. The parties
adversely affected have come to SC for relief.

The language of BP 22 is broad enough to cover all kinds of checks, whether present dated or
postdated, or whether issued in payment of pre-existing obligations or given in mutual or
simultaneous exchange for something of value.
ISSUES:
one of the issues of constitutionality in this case is W/N BP 22 impairs freedom of contract.
W/N a check although not a legal tender could be a substitute for currency in commercial and
financial transactions.
RULING:

The gravamen of the offense punished by BP 22 is the act of making and issuing a worthless
check or a check that is dishonored upon its presentation for payment. It is not the non-payment
of an obligation which the law punishes. The law is not intended or designed to coerce a debtor
to pay his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the making of
worthless checks and putting them in circulation. Because of its deleterious effects on the public
interest, the practice is proscribed by the law. The law punishes the act not as an offense against
property, but an offense against public order.

By definition, a check is a bill of exchange drawn on a bank and payable on demand. 27 It is a

written order on a bank, purporting to be drawn against a deposit of funds for the payment of all
events, of a sum of money to a certain person therein named or to his order or to cash and payable
on demand. 28 Unlike a promissory note, a check is not a mere undertaking to pay an amount of
money. It is an order addressed to a bank and partakes of a representation that the drawer has
funds on deposit against which the check is drawn, sufficient to ensure payment upon its
presentation to the bank. There is therefore an element of certainty or assurance that the
instrument wig be paid upon presentation. For this reason, checks have become widely accepted
as a medium of payment in trade and commerce. Although not legal tender, checks have come
to be perceived as convenient substitutes for currency in commercial and financial transactions.
The basis or foundation of such perception is confidence. If such confidence is shakes the
usefulness of checks as currency substitutes would be greatly diminished or may become nit Any
practice therefore tending to destroy that confidence should be deterred for the proliferation of
worthless checks can only create havoc in trade circles and the banking community.

SC find no valid ground to sustain the contention that BP 22 impairs freedom of contract. The
freedom of contract which is constitutionally protected is freedom to enter into "lawful" contracts.
Contracts which contravene public policy are not lawful. 33 Besides, we must bear in mind that
checks can not be categorized as mere contracts. It is a commercial instrument which, in this
modem day and age, has become a convenient substitute for money; it forms part of the
banking system and therefore not entirely free from the regulatory power of the state.

WHEREFORE, judgment is rendered granting the petition in G.R. No. 75789 and setting aside
the order of the respondent Judge dated August 19, 1986.
[G.R. No. 89252. May 24, 1993.]

RAUL SESBREÑO, Petitioner, v. HON. COURT OF APPEALS, DELTA MOTORS

CORPORATION and PILIPINAS BANK, Respondents.

Salva, Villanueva & Associates for Delta Motors Corporation.

Reyes, Salazar & Associates for Pilipinas Bank.

SYLLABUS

MERCANTILE LAW; NEGOTIABLE INSTRUMENTS LAW; NEGOTIATION

ASSIGNMENT AND TRANSFER, DIFFERENTIATED. — The negotiation of a negotiable
instrument must be distinguished from the assignment or transfer of an instrument whether
that be negotiable or non-negotiable. Only an instrument qualifying as a negotiable
instrument under the relevant statute may be negotiated either by indorsement thereof
coupled with delivery, or by delivery alone where the negotiable instrument is in bearer
form. A negotiable instrument may, however, instead of being negotiated, also be
assigned or transferred. The legal consequences of negotiation as distinguished from
assignment of a negotiable instrument are, of course, different. A non-negotiable
instrument may, obviously, not be negotiated; but it may be assigned or transferred,
absent an express prohibition against assignment or transfer written in the face of the
instrument.

PROMISSORY NOTE; NON-NEGOTIABILITY THEREOF DOES NOT PROHIBIT ITS

TRANSFERABILITY AND ASSIGNABILITY; CASE AT BAR. — DMC PN No. 2731, while
marked "non-negotiable," was not at the same time stamped "non-transferrable" or "non-
assignable." It contained no stipulation which prohibited Philfinance from assigning or
transferring, in whole or in part, that Note.

FACTS:

On 9 February 1981, petitioner Raul Sesbreño made a money market placement in the
amount of P300,000.00 with the Philippine Underwriters Finance Corporation
("Philfinance"), Cebu Branch; the placement, with a term of thirty-two (32) days, would
mature on 13 March 1981. Philfinance, also on 9 February 1981, issued documents to
petitioner.
On 2 April 1981, petitioner approached Ms. Elizabeth de Villa of private respondent
Pilipinas, Makati Branch, and handed to her a demand letter informing the bank that his
placement with Philfinance in the amount reflected in the DCR No. 10805 had remained
unpaid and outstanding, and that he in effect was asking for the physical delivery of the
underlying promissory note. Petitioner then examined the original of the DMC PN No. 2731
and found: that the security had been issued on 10 April 1980; that it would mature on 6
April 1981; that it had a face value of P2,300,833.33, with Philfinance as "payee" and
private respondent Delta Motors Corporation ("Delta") as "maker;" and that on face of the
promissory note was stamped "NON-NEGOTIABLE." Pilipinas did not deliver the Note,
nor any certificate of participation in respect thereof, to petitioner.

Petitioner later made similar demand letters, dated 3 July 1981 and 3 August 1981, 2
again asking private respondent Pilipinas for physical delivery of the original of DMC PN
No. 2731. Pilipinas allegedly referred all of petitioner’s demand letters to Philfinance for
written instructions, as had been supposedly agreed upon in a "Securities Custodianship
Agreement" between Pilipinas and Philfinance. Philfinance never did provide the
appropriate instructions; Pilipinas never released DMC PN No. 2731, nor any other
instrument in respect thereof, to petitioner.

Petitioner also made a written demand on 14 July 1981 3 upon private respondent Delta
for the partial satisfaction of DMC PN No. 2731, explaining that Philfinance, as payee
thereof, had assigned to him said Note to the extent of P307,933.33. Delta, however,
denied any liability to petitioner on the promissory note, and explained in turn that it had
previously agreed with Philfinance to offset its DMC PN No. 2731 (along with DMC PN
No. 2730) against Philfinance PN No. 143-A issued in favor of Delta.

As petitioner had failed to collect his investment and interest thereon, he filed on 28
September 1982 an action for damages with the Regional Trial Court ("RTC") of Cebu
City, Branch 21, against private respondents Delta and Pilipinas. 5 The trial court, in a
decision dated 5 August 1987, dismissed the complaint and counterclaims for lack of merit
and for lack of cause of action, with costs against petitioner.

Petitioner appealed to respondent Court of Appeals but was denied.

Hence, this Petition for Review on Certiorari.

ISSUE: one of the issue in this case is W/N respondent Court of Appeals gravely erred in
concluding that Sesbreno cannot recover from private respondent Delta his assigned
portion of DMC PN No. 2731 because of prohibition of non negotiability.

RULING:

Petitioner admits that DMC PN No. 2731 was non-negotiable but contends that that Note
had been validly transferred, in part, to him by assignment and that as a result of such
transfer, Delta as debtor-maker of the Note, was obligated to pay petitioner the portion of
that Note assigned to him by the payee Philfinance.chanrobles virtualawlibrary

Delta, however, disputes petitioner’s contention and argues:chanrob1es virtual 1aw library

(1) that DMC PN No. 2731 was not intended to be negotiated or otherwise transferred by
Philfinance as manifested by the word "non-negotiable" stamp across the face of the Note
10 and because maker Delta and payee Philfinance intended that this Note would be offset
against the outstanding obligation of Philfinance represented by Philfinance PN No. 143-
A issued to Delta as payee;

Firstly, it is important to bear in mind that the negotiation of a negotiable instrument must
be distinguished from the assignment or transfer of an instrument whether that be
negotiable or non-negotiable. Only an instrument qualifying as a negotiable instrument
under the relevant statute may be negotiated either by indorsement thereof coupled with
delivery, or by delivery alone where the negotiable instrument is in bearer form. A
negotiable instrument may, however, instead of being negotiated, also be assigned or
transferred. The legal consequences of negotiation as distinguished from assignment of
a negotiable instrument are, of course, different. A non-negotiable instrument may,
obviously, not be negotiated; but it may be assigned or transferred, absent an express
prohibition against assignment or transfer written in the face of the instrument.

"The words ‘not negotiable,’ stamped on the face of the bill of lading, did not destroy its
assignability, but the sole effect was to exempt the bill from the statutory provisions relative
thereto, and a bill, though not negotiable, may be transferred by assignment; the assignee
taking subject to the equities between the original parties." 12 (Emphasis added)

DMC PN No. 2731, while marked "non-negotiable," was not at the same time stamped
"non-transferrable" or "non-assignable." It contained no stipulation which prohibited
Philfinance from assigning or transferring, in whole or in part, that Note.

We find nothing in his "Letter of Agreement" which can be reasonably construed as a

prohibition upon Philfinance assigning or transferring all or part of DMC PN No. 2731,
before the maturity thereof. It is scarcely necessary to add that, even had this "Letter of
Agreement" set forth an explicit prohibition of transfer upon Philfinance, such a prohibition
cannot be invoked against an assignee or transferee of the Note who parted with valuable
consideration in good faith and without notice of such prohibition.
G.R. No. 156132 October 12, 2006

CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS' FINANCE
CORPORATION, doing business under the name and style of FNCB Finance, petitioners,
vs.
MODESTA R. SABENIANO, respondent.

FACTS:
According to petitioner Citibank, respondent incurred her loans. When respondent was unable to
pay the first set of PNs upon their maturity, these were rolled-over or renewed several times,
necessitating the execution by respondent of new PNs in favor of petitioner Citibank.
All the PNs stated that the purpose of the loans covered thereby is "To liquidate existing
obligation," except for PN No. 34534, which stated for its purpose "personal investment."
When respondent failed to pay the second set of PNs upon their maturity, an exchange of letters
ensued between respondent and/or her representatives, on one hand, and the representatives of
petitioners, on the other.
Unfortunately, on 7 October 1987, a fire gutted the 7th floor of petitioner Citibank's building at
Paseo de Roxas St., Makati, Metro Manila. The original copies of the MCs, which supposedly
represent the proceeds of the first set of PNs, as well as that of other documentary evidence
related to the case, were among those burned in the said fire.

Respondent disputed petitioners' narration of the circumstances surrounding her loans with
petitioner Citibank and the alleged authority she gave for the off-set or compensation of her money
market placements and deposit accounts with petitioners against her loan obligation.

Respondent denied outright executing the first set of PNs, except for one (PN No. 34534 in
particular).

Respondent likewise questioned the MCs presented by petitioners, except for one (MC No.
228270 in particular), as proof that she received the proceeds of the loans covered by the first set
of PNs.

As to the second set of PNs, respondent acknowledged having signed them all.

ISSUE:

W/N there exist a loan between Citibank and Sabeniano.

HELD:

The Court ruled in the affirmative.

After going through the testimonial and documentary evidence presented by both sides to this
case, it is this Court's assessment that respondent did indeed have outstanding loans with
petitioner Citibank.

Respondent's outstanding obligation for ₱1,920,000.00 had been sufficiently documented by

petitioner Citibank.

The second set of PNs is a mere renewal of the prior loans originally covered by the first set of
PNs, except for PN No. 34534. The first set of PNs is supported, in turn, by the existence of the
MCs that represent the proceeds thereof received by the respondent.

It bears to emphasize that the proceeds of the loans were paid to respondent in MCs, with the
respondent specifically named as payee. MCs checks are drawn by the bank's manager upon the
bank itself and regarded to be as good as the money it represents.

The crossed MCs presented by petitioner Bank were indeed deposited in several different bank
accounts and cleared by the Clearing Office of the Central Bank of the Philippines, as evidenced
by the stamp marks and notations on the said checks. The crossed MCs are already in the
possession of petitioner Citibank, the drawee bank, which was ultimately responsible for the
payment of the amount stated in the checks. Given that a check is more than just an instrument
of credit used in commercial transactions for it also serves as a receipt or evidence for the drawee
bank of the cancellation of the said check due to payment, then, the possession by petitioner
Citibank of the said MCs, duly stamped "Paid" gives rise to the presumption that the said MCs
were already paid out to the intended payee, who was in this case, the respondent.

This Court finds applicable herein the presumptions that private transactions have been fair and
regular, and that the ordinary course of business has been followed. There is no question that the
loan transaction between petitioner Citibank and the respondent is a private transaction.

The afore-stated presumptions are disputable, meaning, they are satisfactory if uncontradicted,
but may be contradicted and overcome by other evidence. Respondent, however, was unable to
present sufficient and credible evidence to dispute these presumptions.
G.R. No. 72593 April 30, 1987

CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY WEE, and RODOLFO T.

VERGARA, petitioners,
vs.
IFC LEASING AND ACCEPTANCE CORPORATION, respondent.

FACTS:

Consolidated Plywood Industries Inc. (CPII) is a corporation engaged in the logging business. It
had for its program of logging activities for the year 1978 the opening of additional roads, and
simultaneous logging operations along the route of said roads, in its logging concession area at
Baganga, Manay, and Caraga, Davao Oriental.

For this purpose, it needed 2 additional units of tractors. Cognizant of CPII’s need and purpose,
Atlantic Gulf & Pacific Company of Manila, through its sister company and marketing arm,
Industrial Products Marketing (IPM), a corporation dealing in tractors and other heavy equipment
business, offered to sell to CPII 2 “Used” Allis Crawler Tractors, 1 an HD-21-B and the other an
HD-16-B. After conducting said inspection, IPM assured CPII that the “Used” Allis Crawler
Tractors which were being offered were fit for the job, and gave the corresponding warranty of 90
days performance of the machines and availability of parts. With said assurance and warranty,
and relying on the IPM’s skill and judgment, CPII through Henry Wee and Rodolfo T. Vergara,
president and vice-president, respectively, agreed to purchase on installment said 2 units of
“Used” Allis Crawler Tractors. It also paid the down payment of P 210,000.00. On 5 April 1978,
IPM issued the sales invoice for the 2 units of tractors. At the same time, the deed of sale with
chattel mortgage with promissory note was executed.

Barely 14 days had elapsed after their delivery when one of the tractors broke down and after
another 9 days, the other tractor likewise broke down. IPM sent to the jobsite its mechanics to
conduct the necessary repairs, but the tractors did not come out to be what they should be after
the repairs were undertaken because the units were no longer serviceable. Because of the
breaking down of the tractors, the road building and simultaneous logging operations of CPII were
delayed and Vergara advised IPM that the payments of the installments as listed in the promissory
note would likewise be delayed until IPM completely fulfills its obligation under its warranty.

Since the tractors were no longer serviceable, on 7 April 1979, Wee asked IPM to pull out the
units and have them reconditioned, and thereafter to offer them for sale. The proceeds were to
be given to IFC Leasing and the excess, if any, to be divided between IPM and CPII which offered
to bear 1/2 of the reconditioning cost. No response to this letter was received by CPII and despite
several follow-up calls, IPM did nothing with regard to the request, until the complaint in the case
was filed by IFC Leasing against CPII, Wee, and Vergara. The complaint was filed by IFC Leasing
against CPII, et al. for the recovery of the principal sum of P 1,093,789.71, accrued interest of P
151,618.86 as of 15 August 1979, accruing interest thereafter at the rate of 12% per annum,
attorney’s fees of P 249,081.71 and costs of suit.

CPII, et al. filed their amended answer praying for the dismissal of the complaint. In a decision
dated 20 April 1981, the trial court rendered judgment, ordering CPII, et al. to pay jointly and
severally in their official and personal capacities

On 17 July 1985, the Intermediate Appellate Court issued the decision affirming in toto the
decision of the trial court.

ISSUE:
W/N THE PROMISSORY NOTE IS A NEGOTIABLE INSTRUMENT.
HELD:
The petition is impressed with merit. The promissory note in question is not a negotiable
instrument.
Considering that paragraph (d), Section 1 of the Negotiable Instruments Law requires that a
promissory note "must be payable to order or bearer, " it cannot be denied that the promissory
note in question is not a negotiable instrument.
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'. These words serve as an expression of
consent that the instrument may be transferred. This... consent is indispensable since a maker
assumes greater risks under a negotiable instrument than under a non-negotiable one.
There must always be a specified person named in the instrument. It means that 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.
Therefore, considering that the subject promissory note is not a negotiable instrument, it follows
that the respondent can never be a holder in due course but remains a mere assignee of the note
in question. Thus, the petitioner may raise against the respondent all... defenses available to it
as against the seller-assignor, Industrial Products Marketing.
G.R. No. 175851 | July 4, 2012

EMILIA LIM,
vs.
MINDANAO WINES & LIQUOR GALLERIA, a Single Proprietorship Business Outfit Owned
by Evelyn S. Valdevieso

*NI as evidence (proof of transaction).

Facts:

Indicated by a sales invoice and Statement of Accounts, respondent Mindanao Wines and Liquor
Galleria (Mindanao Wines) delivered several cases of liquors to H & E Commercial owned by
Emilia, for which the latter issued four Philippine National Bank (PNB) postdated checks worth
₱25,000.00 each.

The two checks bounced for the reasons ‘ACCOUNT CLOSED’ and ‘DRAWN AGAINST
INSUFFICIENT FUNDS. For this reason, Mindanao Wines, thru its proprietress Evelyn
Valdevieso, demanded from H & E Commercial the payment of their value through two separate
letters both dated November 18, 1996.

The demands went unheeded. And with this reason, Mindanao Wines filed a case for violations
of BP 22 against Emilia before Branch 2 of the Municipal Trial Court in Cities (MTCC) of Davao
City.

The prosecution presented Nieves Veloso as its sole witness. She testified that Emilia has been
a customer of Mindanao Wines who purchased from it assorted liquors. Evidenced by a sales
invoice, it was further testified that the orders were delivered by the latter’s salesman Marcelino
Bersaluna (Marcelino) to H & E Commercial in San Francisco, Agusan del Sur which he received
the four PNB checks and endorsed them to Mindanao Wines.

Out of these four PNB checks, two were already paid, i.e., one was collected while the other
redeemed in court.10

Nieves admitted that she neither saw Emilia issue the checks nor accompanied Marcelino in
delivering the orders to H & E Commercial or in collecting the unpaid checks. She also
acknowledged that the sales order was unsigned and explained that sales orders of customers
are handled by the Credit and Collection Department of Mindanao Wines.

After the prosecution rested its case, Emilia filed a Demurrer to Evidence claiming
insufficiency of evidence. She asserted that not one of the elements of BP 22 was proven
because the witness merely relied upon the reports of the salesman; that the purchases
covered by Sales Invoice No. 1711 were unauthorized because the corresponding job order
was unsigned; and that it was never established that the bank dishonored the checks or
that she was even sent a notice of dishonor.

Ruling of the MTCC

The MTCC granted the Demurrer to Evidence. It ruled that while Emilia did issue the checks for
value, the prosecution nevertheless miserably failed to prove one essential element that
consummates the crime of BP 22, i.e., the fact of dishonor of the two subject checks. It noted
that other than the checks, no bank representative testified about presentment and dishonor. The
MTCC still found her civilly liable because when she redeemed one of the checks during the
pendency of the criminal cases, the MTCC considered the same as an acknowledgement on
her part of her obligation with Mindanao Wines.

Ruling of the RTC

Emilia appealed to the Regional Trial Court (RTC) of Davao City, Branch 13. It was contended
that since the MTCC dismissed the criminal cases ‘on the ground of insufficient evidence,’ the
civil aspect of the criminal cases should likewise be automatically dismissed.

The RTC dismissed the appeal and clarified that the MTCC dismissed the criminal cases based
on ‘reasonable doubt’ and not on ‘insufficiency of evidence.’ And while the prosecution failed to
prove criminal liability beyond reasonable doubt, Emilia’s indebtedness was nonetheless
proven by preponderance of evidence, the quantum of evidence required to prove the
same.

The prosecution however had established that the accused had issued the checks subject
of these cases. The accused had impliedly admitted that she was the maker of the checks
subject of [these] case[s] when she redeemed a third check from the complainant. In fact,
the accused had never categorically denied having issued the checks subject of these
cases. When the accused filed the Demurrer to Evidence, she had hypothetically admitted
the evidence presented by the prosecution to be true, and this includes the allegation of
the prosecution that the accused issued the checks subject of these cases for value.

Ruling of the CA

Emilia filed before the CA a Petition for Review still insisting that the MTCC’s dismissal was based
on ‘insufficiency of evidence’ and that same pertains to both the criminal and civil aspects of BP
22. She reiterated that there was no basis for the civil award made by the MTCC since the
prosecution failed to show evidence of her civil liability and that a court can only award civil liability
in cases of acquittals based on reasonable doubt and not on insufficiency of evidence.

The CA dismissed the petition and emphasized that even if acquitted, an accused may still be
held civilly liable if a) the acquittal was based on reasonable doubt or b) the court declared that
the liability of the accused is only civil. It was noted that Emilia had never denied issuing the
subject checks for value which, in themselves constituted evidence of indebtedness. Moreover,
she failed to refute the prosecution’s evidence when she filed a Demurrer to Evidence.

Through her motion for reconsideration, Emilia alleged that the ‘preponderance of evidence’
required in determining civil liability does not apply to her as she never presented any evidence
at all, implying that in such a determination, both parties should have presented their respective
evidence for the purpose of ascertaining as to which of the evidence presented is superior.

The CA, however, rejected the motion and held that ‘insufficiency’ does not mean the ‘total
absence of evidence,’ but that ‘evidence is lacking of what is necessary or required to make out
her case.

Issue:

Whether or not there is no piece of “admissible evidence” presented in the case that may be taken
into account to prove civil liability.

Held:

No. In the case, it was emphasized that a check may be evidence of indebtedness. A check, the
entries of which are in writing, could prove a loan transaction." Thus, even acquitted to the
violations of BP 22, she should nevertheless pay the debt she owes.

Moreover, it was stated that the dismissal as one based on insufficiency of evidence as Emilia
wants to put it, the same is still tantamount to a dismissal based on reasonable doubt. The MTCC
dismissed the criminal cases because one essential element of BP 22 was missing. The evidence
was insufficient to prove said element of the crime as no proof of dishonor of the checks was
presented by the prosecution. This only means that the trial court cannot convict Emilia of the
crime since the prosecution failed to prove her guilt beyond reasonable doubt, the quantum of
evidence required in criminal cases. The lack of such proof of dishonor does not mean that Emilia
has no existing debt with Mindanao Wines, a civil aspect which is proven by another quantum of
evidence, a mere preponderance of evidence.
TING TING PUA, Petitioner,
vs.
SPOUSES BENITO LO BUN TIONG and CAROLINE SIOK
CHING TENG, Respondents.

G.R. No. 198660

October 23, 2013

Ponente: PRESBITERO J. VELASCO, JR.

FACTS:

The controversy arose from a Complaint for a Sum of Money filed by petitioner Pua against
respondent-spouses Benito Lo Bun Tiong Benito and Caroline Siok Ching Teng Caroline. In the
complaint, Pua prayed, among other things, that respondents, pay her the amount eight million
five hundred thousand pesos (PhP 8,500,000), covered by a check issued by respondent-
Caroline.

As petitioner Pua narrated, her sister, Lilian Balboa (Lilian), vouched for respondents’ ability to
pay so that when respondents approached her, she immediately acceded and lent money to
respondents without requiring any collateral except post-dated checks bearing the borrowed
amounts. In all, respondents issued 17 checks for a total amount of one million nine hundred
seventy-five thousand pesos (PhP 1,975,000). These checks were dishonored upon presentment
to the drawee bank. As a result of the dishonor, petitioner demanded payment. Respondents,
however, pleaded for more time because of their financial difficulties.

Sometime in September 1996, when their financial situation turned better, respondents allegedly
called and asked petitioner Pua for the computation of their loan obligations. Hence, petitioner
handed them a computation dated October 2, 1996 which showed that, at the agreed 2%
compounded interest rate per month, the amount of the loan payable to petitioner rose to PhP
13,218,544.20. On receiving the computation, the respondent asked petitioner to reduce their
indebtedness to PhP 8,500,000, which petitioner agreed as she wanted to get paid.

Respondents then delivered to petitioner Asiatrust Check No. BND057750 bearing the reduced
amount of PhP 8,500,000 dated March 30, 1997 but was also dishonored when it was presented
by petitioner to the drawee bank.

Hence, petitioner decided to file a complaint to collect the money owed her by respondents.

For the defense, respondents categorically denied obtaining a loan from petitioner and narrated
that, in August 1995, she and petitioner’s sister, Lilian, forged a partnership that operated a
mahjong business. As the partners anticipated that Caroline will not always be in town to prepare
these checks, she left with Lilian five (5) pre-signed and consecutively numbered checks on the
condition that these checks will only be used to cover the costs of the business operations.
However, respondent Caroline and Lilian had a serious disagreement that resulted in the
dissolution of their partnership and the cessation of their business. In the haste of the dissolution
and as a result of their bitter separation, respondent Caroline alleged that she forgot about the
five (5) pre-signed checks she left with Lilian.

Respondent Caroline, likewise, categorically denied having completed Check No. BND057750 by
using a check writer or typewriter as she had no check writer and she had always completed
checks in her own handwriting.

More so, Caroline postulated that the complaint is designed to allow Pua’s sister, Lilian, to recover
her losses in the foreign exchange business she had with Caroline in the 1980s.

The witness for the respondents, Ms. Tuazon, testified that respondent Caroline opened Asiatrust
Account No. 5513-0054-9 in September 1994. She claimed that the average maintaining balance
of respondent Caroline was PhP 2,000 and the highest amount issued by Caroline from her
account was PhP 435,000. She maintained that respondent Caroline had always completed her
checks with her own handwriting and not with a check writer. On October 15, 1996, Caroline’s
checking account was closed at the instance of the bank due to 69 instances of check issuance
against insufficient balance.

RTC RULING

After trial, the RTC issued its Decision dated January 31, 2006 in favor of petitioner. In holding
thus, the RTC stated that the possession by petitioner of the checks signed by Caroline, under
the Negotiable Instruments Law, raises the presumption that they were issued and delivered for
a valuable consideration.

Aggrieved, respondents went to the CA.

The appellate court set aside the RTC Decision holding that Asiatrust Bank Check No.
BND057550 was an incomplete delivered instrument and that petitioner has failed to prove the
existence of respondents’ indebtedness to her.

The Motion for Reconsideration was likewise denied by CA. Hence, this petition.

ISSUE:

Whether or not the checks presented by the petitioner as evidence can serve as a valid proof of
respondent’ indebtedness.

HELD:

The Supreme Court departed from the findings of the CA. The dispositive portion of the Decision
reads as follows:

xxx

WHEREFORE, the Motion for Reconsideration is GRANTED. The Resolution of this

Court dated April 18, 2012 is set aside and a new one entered REVERSING and
SETTING ASIDE the Decision dated March 31, 2011 and the Resolution dated
September 26, 2011 of the Court of Appeals in CA-G.R. CV No. 93755. The Decision in
Civil Case No. 97-83027 of the Regional Trial Court (RTC) of the City of Manila, Branch
29 is REINSTATED with MODIFICATION.

Accordingly, respondents Benito Lo Bun Tiong and Caroline Siok Ching Teng are
ordered jointly and solidarily to pay petitioner PhP 1,975,000 plus 6% interest per annum
from April 18, 1997, until fully paid, and ₱200,000.00 as attorney’s fees

RATIONALE:

The Supreme Court ratiocinated that, in a suit for a recovery of sum of money, as the case at bar,
the plaintiff-creditor has the burden of proof to show that defendant had not paid her the amount
of the contracted loan. However, it has also been long established that where the plaintiff-creditor
possesses and submits in evidence an instrument showing the indebtedness, a presumption that
the credit has not been satisfied arises in her favor. Thus, the defendant is, in appropriate
instances, required to overcome the said presumption and present evidence to prove the fact of
payment so that no judgment will be entered against him.

SC narrates that the CA had discounted the value of the only hard pieces of evidence extant in
the present case—the checks issued by respondent Caroline in 1988 and 1996 that were in the
possession of, and presented in court by, petitioner.

The 17 original checks, completed and delivered to petitioner, are sufficient by themselves to
prove the existence of the loan obligation of the respondents to petitioner.

As provided for in Section 24 of the Negotiable Instruments Law (NIL):

Section 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 for value.
The Supreme Court notes that respondent Caroline had not denied the genuineness of these
checks. Instead, respondents argue that they were given to various other persons and
petitioner had simply collected all these 17 checks from them in order to damage respondents’
reputation. This account is not only incredible; it runs counter to human experience, as enshrined
in Sec. 16 of the NIL which provides that:

x x x . When an instrument is no longer in the possession of the person who signed

it and it is complete in its terms "a valid and intentional delivery by him is presumed
until the contrary is proved."

The Supreme Court, in addition, takes into consideration the following evidence:

• The original copies of the bank return slips offered by petitioner in evidence. These return
slips show that the 1988 checks issued by respondent Caroline were dishonored by the
drawee banks because they were "drawn against insufficient funds."

• The Decision of the appellate court, affirmed by the Supreme Court, which categorically
debunked the same defense advanced by respondents Caroline in two related cases for
violation of BP. 22 filed by petitioner’s brother-in-law against herein respondent.

• Respondent Caroline displayed of cavalier attitude towards the value, and the obligation
concomitant with the issuance, of a check. As attested to by respondents’ very own
witness, respondent Caroline has a documented history of issuing insufficiently funded
checks for 69 times, at the very least. This fact alone bolsters petitioner’s allegation that
the checks delivered to her by respondent Caroline were similarly not funded.

Based on the evidence submitted by the parties and the legal presumptions arising therefrom,
petitioner’s evidence outweighs that of respondents. This preponderance of evidence in favor of
Pua requires that a judgment ordering respondents to pay their obligation be entered.

In Magdiwang Realty Corp. v. Manila Banking Corp., SC stressed that the quantum of evidence
required in civil cases—preponderance of evidence—"is a phrase which, in the last analysis,
means probability to truth. It is evidence which is more convincing to the court as worthier of belief
than that which is offered in opposition thereto."

CITED JURISPRUDENCE

Pacheco v. Court of Appeals, the Supreme Court has expressly recognized that a check
"constitutes an evidence of indebtedness" and is a veritable "proof of an obligation." Hence, it can
be used "in lieu of and for the same purpose as a promissory note."

Lozano v. Martinez, SC pointed out that a check functions more than a promissory note since it
not only contains an undertaking to pay an amount of money but is an "order addressed to a bank
and partakes of a representation that the drawer has funds on deposit against which the check is
drawn, sufficient to ensure payment upon its presentation to the bank."

Lim v. Mindanao Wines and Liquour Galleria stating that "a check, the entries of which are in
writing, could prove a loan transaction."
VILLANUEVA V. SANTOS
G.R. No. L-45625
APRIL 28, 1939

FACTS: The plaintiff was the judicial administrator of the deceased Lorenzo Villanueva. She
commenced in the Court of First Instance of Bulacan against the defendant to annul the deed of
sale executed by the deceased while they were alive, selling two parcels of land with the right to
repurchase in favor of the defendant.

The parties reached a compromise in which they agreed that the plaintiff shall pay to the
defendant the sum of P356.60 to repurchase the two parcels of land, with legal interest, and
should they fail to pay, the plaintiff shall deliver the possession of said parcels.

On the date of the expiration of the period granted to the plaintiff to pay the repurchase
price, Villanueva offered the defendant a check with a value of 421.04, issued by Ramon Meneses
against the Bank of the Philippine Islands as payment of the repurchase price. The defendant
refused to accept the check as payment, insisting that the payment should be made in money or
legal tender.

Through their counsel, the plaintiff deposited the check to the clerk of court, and at the
same time, put in a motion asking that the payment be deemed effected and the two parcels of
land. The court rendered the assailed decision, holding the consignation to be invalid, ordering
the plaintiff to deliver the parcels of land to the defendant.

ISSUE: Whether or not the consignation was invalid, and it did not have the effect of paying her
obligation.

RULING: “Yes. The court correctly held that the consignation was unavailing and that it did not
produce any legal effect because the defendant did not accept it and it was not in the form of
money or legal tender.”

“Article 1170 of the Civil Code provides that payment of debts of money shall be made in
the specie stipulation and, should it not be possible to deliver such specie, in silver or gold coin
legally current; and provides, further, that the delivery of promissory notes payable to order, or
drafts or other commercial paper, shall produce the effects of payment only when realized or
when, by the fault of the creditor, the privileges inherent in their negotiable character have been
lost. Under this legal provision the defendant was not under a duty to accept the check because
it is known that it does not constitute legal tender, and the consignation having been refused, it
did not produce any legal effect and could not be considered as payment made by the plaintiff of
the repurchase price.”

“In Belisario vs. Natividad ([1934]), 60 Phil., 156), it was held that a creditor is not bound
to accept a check in satisfaction of his demand, because a check, even if good when offered,
does not meet the requirements of a legal tender.”
NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA, Petitioners, vs. THE HONORABLE COURT
OF APPEALS and EDEN TAN, Respondents.ch
G.R. No. 100290, June 4, 1993
FACTS: A suit for a collection of a sum of money was filed against the Tibajia spouses by Eden
Tan to whom a favorable decision was rendered by the lower court.
The Tibajia espouses delivered to the deputy sheriff the total money judgment in cashier’s check
and cash which Eden Tan refused to accept as payment.
ISSUE: Whether or not the cashier’s check tendered by petitioners for payment of the judgment
debt is “legal tender.”
RULING: No. A check whether a manager’s check or ordinary check is not legal tender. An offer
of a check in payment of a debt is not a valid tender of payment and may be refused receipt by
the obligee or creditor.