G.R. No.

141181             April 27, 2007

SAMSON CHING, Petitioner,
vs.
CLARITA NICDAO and HON. COURT OF APPEALS, Respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is a petition for review on certiorari filed by Samson Ching of the Decision1 dated November 22,
1999 of the Court of Appeals (CA) in CA-G.R. CR No. 23055. The assailed decision acquitted respondent Clarita
Nicdao of eleven (11) counts of violation of Batas Pambansa Bilang (BP) 22, otherwise known as "The Bouncing
Checks Law." The instant petition pertains and is limited to the civil aspect of the case as it submits that
notwithstanding respondent Nicdao’s acquittal, she should be held liable to pay petitioner Ching the amounts of the
dishonored checks in the aggregate sum of ₱20,950,000.00.

Factual and Procedural Antecedents

On October 21, 1997, petitioner Ching, a Chinese national, instituted criminal complaints for eleven (11) counts of
violation of BP 22 against respondent Nicdao. Consequently, eleven (11) Informations were filed with the First
Municipal Circuit Trial Court (MCTC) of Dinalupihan-Hermosa, Province of Bataan, which, except as to the amounts
and check numbers, uniformly read as follows:

The undersigned accuses Clarita S. Nicdao of a VIOLATION OF BATAS PAMBANSA BILANG 22, committed as
follows:

That on or about October 06, 1997, at Dinalupihan, Bataan, Philippines, and within the jurisdiction of this Honorable
Court, the said accused did then and there willfully and unlawfully make or draw and issue Hermosa Savings & Loan
Bank, Inc. Check No. [002524] dated October 06, 1997 in the amount of [₱20,000,000.00] in payment of her
obligation with complainant Samson T.Y. Ching, the said accused knowing fully well that at the time she issued the
said check she did not have sufficient funds in or credit with the drawee bank for the payment in full of the said
check upon presentment, which check when presented for payment within ninety (90) days from the date thereof,
was dishonored by the drawee bank for the reason that it was drawn against insufficient funds and notwithstanding
receipt of notice of such dishonor the said accused failed and refused and still fails and refuses to pay the value of
the said check in the amount of [P20,000,000.00] or to make arrangement with the drawee bank for the payment in
full of the same within five (5) banking days after receiving the said notice, to the damage and prejudice of the said
Samson T.Y. Ching in the aforementioned amount of [P20,000,000.00], Philippine Currency.

CONTRARY TO LAW.

Dinalupihan, Bataan, October 21, 1997.

(Sgd.) SAMSON T.Y. CHING

Complainant

The cases were docketed as Criminal Cases Nos. 9433 up to 9443 involving the following details:

Check No. Amount Date Private Complainant Reason for the Dishonor
002524 2
₱ 20,000,000 Oct. 6, 1997 Samson T.Y. Ching DAIF*
0088563 150,000 Oct. 6, 1997 " "
012142 4
100,000 Oct. 6, 1997 " "
0045315 50,000 Oct. 6, 1997 " "
 0022546 100,000 Oct. 6, 1997 " "
008875 7
100,000 Oct. 6, 1997 " "
0089368 50,000 Oct. 6, 1997 " "
002273 9
50,000 Oct. 6, 1997 " "
00894810 150,000 Oct. 6, 1997 " "
008935 11
100,000 Oct. 6, 1997 " "
01037712 100,000 Oct. 6, 1997 " "

At about the same time, fourteen (14) other criminal complaints, also for violation of BP 22, were filed against
respondent Nicdao by Emma Nuguid, said to be the common law spouse of petitioner Ching. Allegedly fourteen (14)
checks, amounting to ₱1,150,000.00, were issued by respondent Nicdao to Nuguid but were dishonored for lack of
sufficient funds. The Informations were filed with the same MCTC and docketed as Criminal Cases Nos. 9458 up to
9471.

At her arraignment, respondent Nicdao entered the plea of "not guilty" to all the charges. A joint trial was then
conducted for Criminal Cases Nos. 9433-9443 and 9458-9471.

For the prosecution in Criminal Cases Nos. 9433-9443, petitioner Ching and Imelda Yandoc, an employee of the
Hermosa Savings & Loan Bank, Inc., were presented to prove the charges against respondent Nicdao. On direct-
examination,13 petitioner Ching preliminarily identified each of the eleven (11) Hermosa Savings & Loan Bank
(HSLB) checks that were allegedly issued to him by respondent Nicdao amounting to ₱20,950,000.00. He identified
the signatures appearing on the checks as those of respondent Nicdao. He recognized her signatures because
respondent Nicdao allegedly signed the checks in his presence. When petitioner Ching presented these checks for
payment, they were dishonored by the bank, HSLB, for being "DAIF" or "drawn against insufficient funds."

Petitioner Ching averred that the checks were issued to him by respondent Nicdao as security for the loans that she
obtained from him. Their transaction began sometime in October 1995 when respondent Nicdao,
proprietor/manager of Vignette Superstore, together with her husband, approached him to borrow money in order
for them to settle their financial obligations. They agreed that respondent Nicdao would leave the checks undated
and that she would pay the loans within one year. However, when petitioner Ching went to see her after the lapse of
one year to ask for payment, respondent Nicdao allegedly said that she had no cash.

Petitioner Ching claimed that he went back to respondent Nicdao several times more but every time, she would tell
him that she had no money. Then in September 1997, respondent Nicdao allegedly got mad at him for being
insistent and challenged him about seeing each other in court. Because of respondent Nicdao's alleged refusal to
pay her obligations, on October 6, 1997, petitioner Ching deposited the checks that she issued to him. As he earlier
stated, the checks were dishonored by the bank for being "DAIF." Shortly thereafter, petitioner Ching, together with
Emma Nuguid, wrote a demand letter to respondent Nicdao which, however, went unheeded. Accordingly, they
separately filed the criminal complaints against the latter.

On cross-examination,14 petitioner Ching claimed that he had been a salesman of the La Suerte Cigar and Cigarette
Manufacturing for almost ten (10) years already. As such, he delivered the goods and had a warehouse. He
received salary and commissions. He could not, however, state his exact gross income. According to him, it
increased every year because of his business. He asserted that aside from being a salesman, he was also in the
business of extending loans to other people at an interest, which varied depending on the person he was dealing
with.

Petitioner Ching confirmed the truthfulness of the allegations contained in the eleven (11) Informations that he filed
against respondent Nicdao. He reiterated that, upon their agreement, the checks were all signed by respondent
Nicdao but she left them undated. Petitioner Ching admitted that he was the one who wrote the date, October 6,
1997, on those checks when respondent Nicdao refused to pay him.

With respect to the ₱20,000,000.00 check (Check No. 002524), petitioner Ching explained that he wrote the date
and amount thereon when, upon his estimation, the money that he regularly lent to respondent Nicdao beginning
October 1995 reached the said sum. He likewise intimated that prior to 1995, they had another transaction
amounting to ₱1,200,000.00 and, as security therefor, respondent Nicdao similarly issued in his favor checks in
varying amounts of ₱100,000.00 and ₱50,000.00. When the said amount was fully paid, petitioner Ching returned
the checks to respondent Nicdao.

Petitioner Ching maintained that the eleven (11) checks subject of Criminal Cases Nos. 9433-9443 pertained to
respondent Nicdao’s loan transactions with him beginning October 1995. He also mentioned an instance when
respondent Nicdao’s husband and daughter approached him at a casino to borrow money from him. He lent them
₱300,000.00. According to petitioner Ching, since this amount was also unpaid, he included it in the other amounts
that respondent Nicdao owed to him which totaled ₱20,000,000.00 and wrote the said amount on one of respondent
Nicdao’s blank checks that she delivered to him.

Petitioner Ching explained that from October 1995 up to 1997, he regularly delivered money to respondent Nicdao,
in the amount of ₱1,000,000.00 until the total amount reached ₱20,000,000.00. He did not ask respondent Nicdao
to acknowledge receiving these amounts. Petitioner Ching claimed that he was confident that he would be paid by
respondent Nicdao because he had in his possession her blank checks. On the other hand, the latter allegedly had
no cause to fear that he would fill up the checks with just any amount because they had trust and confidence in
each other. When asked to produce the piece of paper on which he allegedly wrote the amounts that he lent to
respondent Nicdao, petitioner Ching could not present it; he reasoned that it was not with him at that time.

It was also averred by petitioner Ching that respondent Nicdao confided to him that she told her daughter Janette,
who was married to a foreigner, that her debt to him was only between ₱3,000,000.00 and ₱5,000,000.00.
Petitioner Ching claimed that he offered to accompany respondent Nicdao to her daughter in order that they could
apprise her of the amount that she owed him. Respondent Nicdao refused for fear that it would cause disharmony in
the family. She assured petitioner Ching, however, that he would be paid by her daughter.

Petitioner Ching reiterated that after the lapse of one (1) year from the time respondent Nicdao issued the checks to
him, he went to her several times to collect payment. In all these instances, she said that she had no cash. Finally,
in September 1997, respondent Nicdao allegedly went to his house and told him that Janette was only willing to pay
him between ₱3,000,000.00 and ₱5,000,000.00 because, as far as her daughter was concerned, that was the only
amount borrowed from petitioner Ching. On hearing this, petitioner Ching angrily told respondent Nicdao that she
should not have allowed her debt to reach ₱20,000,000.00 knowing that she would not be able to pay the full
amount.

Petitioner Ching identified the demand letter that he and Nuguid sent to respondent Nicdao. He explained that he no
longer informed her about depositing her checks on his account because she already made that statement about
seeing him in court. Again, he admitted writing the date, October 6, 1997, on all these checks.

Another witness presented by the prosecution was Imelda Yandoc, an employee of HSLB. On direct-
examination,15 she testified that she worked as a checking account bookkeeper/teller of the bank. As such, she
received the checks that were drawn against the bank and verified if they were funded. On October 6, 1997, she
received several checks issued by respondent Nicdao. She knew respondent Nicdao because the latter maintained
a savings and checking account with them. Yandoc identified the checks subject of Criminal Cases Nos. 9433-9443
and affirmed that stamped at the back of each was the annotation "DAIF". Further, per the bank’s records, as of
October 8, 1997, only a balance of ₱300.00 was left in respondent Nicdao’s checking account and ₱645.83 in her
savings account. On even date, her account with the bank was considered inactive.

On cross-examination,16 Yandoc stated anew that respondent Nicdao’s checks bounced on October 7, 1997 for
being "DAIF" and her account was closed the following day, on October 8, 1997. She informed the trial court that
there were actually twenty-five (25) checks of respondent Nicdao that were dishonored at about the same time. The
eleven (11) checks were purportedly issued in favor of petitioner Ching while the other fourteen (14) were
purportedly issued in favor of Nuguid. Yandoc explained that respondent Nicdao or her employee would usually call
the bank to inquire if there was an incoming check to be funded.

For its part, the defense proffered the testimonies of respondent Nicdao, Melanie Tolentino and Jocelyn Nicdao. On
direct-examination,17 respondent Nicdao stated that she only dealt with Nuguid. She vehemently denied the
allegation that she had borrowed money from both petitioner Ching and Nuguid in the total amount of
₱22,950,000.00. Respondent Nicdao admitted, however, that she had obtained a loan from Nuguid but only for
₱2,100,000.00 and the same was already fully paid. As proof of such payment, she presented a Planters Bank
demand draft dated August 13, 1996 in the amount of ₱1,200,000.00. The annotation at the back of the said
demand draft showed that it was endorsed and negotiated to the account of petitioner Ching.

In addition, respondent Nicdao also presented and identified several cigarette wrappers18 at the back of which
appeared computations. She explained that Nuguid went to the grocery store everyday to collect interest payments.
The principal loan was ₱2,100,000.00 with 12% interest per day. Nuguid allegedly wrote the payments for the daily
interests at the back of the cigarette wrappers that she gave to respondent Nicdao.

The principal loan amount of ₱2,100,000.00 was allegedly delivered by Nuguid to respondent Nicdao in varying
amounts of ₱100,000.00 and ₱150,000.00. Respondent Nicdao refuted the averment of petitioner Ching that prior to
1995, they had another transaction.

With respect to the ₱20,000,000.00 check, respondent Nicdao admitted that the signature thereon was hers but
denied that she issued the same to petitioner Ching. Anent the other ten (10) checks, she likewise admitted that the
signatures thereon were hers while the amounts and payee thereon were written by either Jocelyn Nicdao or
Melanie Tolentino, who were employees of Vignette Superstore and authorized by her to do so.

Respondent Nicdao clarified that, except for the ₱20,000,000.00 check, the other ten (10) checks were handed to
Nuguid on different occasions. Nuguid came to the grocery store everyday to collect the interest payments.
Respondent Nicdao said that she purposely left the checks undated because she would still have to notify Nuguid if
she already had the money to fund the checks.

Respondent Nicdao denied ever confiding to petitioner Ching that she was afraid that her daughter would get mad if
she found out about the amount that she owed him. What allegedly transpired was that when she already had the
money to pay them (presumably referring to petitioner Ching and Nuguid), she went to them to retrieve her checks.
However, petitioner Ching and Nuguid refused to return the checks claiming that she (respondent Nicdao) still owed
them money. She demanded that they show her the checks in order that she would know the exact amount of her
debt, but they refused. It was at this point that she got angry and dared them to go to court.

After the said incident, respondent Nicdao was surprised to be notified by HSLB that her check in the amount of
₱20,000,000.00 was just presented to the bank for payment. She claimed that it was only then that she
remembered that sometime in 1995, she was informed by her employee that one of her checks was missing. At that
time, she did not let it bother her thinking that it would eventually surface when presented to the bank.

Respondent Nicdao could not explain how the said check came into petitioner Ching’s possession. She explained
that she kept her checks in an ordinary cash box together with a stapler and the cigarette wrappers that contained
Nuguid’s computations. Her saleslady had access to this box. Respondent Nicdao averred that it was Nuguid who
offered to give her a loan as she would allegedly need money to manage Vignette Superstore. Nuguid used to run
the said store before respondent Nicdao’s daughter bought it from Nuguid’s family, its previous owner. According to
respondent Nicdao, it was Nuguid who regularly delivered the cash to respondent Nicdao or, if she was not at the
grocery store, to her saleslady. Respondent Nicdao denied any knowledge that the money loaned to her by Nuguid
belonged to petitioner Ching.

At the continuation of her direct-examination,19 respondent Nicdao said that she never dealt with petitioner Ching
because it was Nuguid who went to the grocery store everyday to collect the interest payments. When shown the
₱20,000,000.00 check, respondent Nicdao admitted that the signature thereon was hers but she denied issuing it as
a blank check to petitioner Ching. On the other hand, with respect to the other ten (10) checks, she also admitted
that the signatures thereon were hers and that the amounts thereon were written by either Josie Nicdao or Melanie
Tolentino, her employees whom she authorized to do so. With respect to the payee, it was purposely left blank
allegedly upon instruction of Nuguid who said that she would use the checks to pay someone else.

On cross-examination,20 respondent Nicdao explained that Josie Nicdao and Melanie Tolentino were caretakers of
the grocery store and that they manned it when she was not there. She likewise confirmed that she authorized them
to write the amounts on the checks after she had affixed her signature thereon. She stressed, however, that the
₱20,000,000.00 check was the one that was reported to her as lost or missing by her saleslady sometime in 1995.
She never reported the matter to the bank because she was confident that it would just surface when it would be
presented for payment.
Again, respondent Nicdao identified the cigarette wrappers which indicated the daily payments she had made to
Nuguid. The latter allegedly went to the grocery store everyday to collect the interest payments. Further, the figures
at the back of the cigarette wrappers were written by Nuguid. Respondent Nicdao asserted that she recognized her
handwriting because Nuguid sometimes wrote them in her presence. Respondent Nicdao maintained that she had
already paid Nuguid the amount of ₱1,200,000.00 as evidenced by the Planters Bank demand draft which she gave
to the latter and which was subsequently negotiated and deposited in petitioner Ching’s account. In connection
thereto, respondent Nicdao refuted the prosecution’s allegation that the demand draft was payment for a previous
transaction that she had with petitioner Ching. She clarified that the payments that Nuguid collected from her
everyday were only for the interests due. She did not ask Nuguid to make written acknowledgements of her
payments.

Melanie Tolentino was presented to corroborate the testimony of respondent Nicdao. On direct-
examination,21 Tolentino stated that she worked at the Vignette Superstore and she knew Nuguid because her
employer, respondent Nicdao, used to borrow money from her. She knew petitioner Ching only by name and that he
was the "husband" of Nuguid.

As an employee of the grocery store, Tolentino stated that she acted as its caretaker and was entrusted with the
custody of respondent Nicdao’s personal checks. Tolentino identified her own handwriting on some of the checks
especially with respect to the amounts and figures written thereon. She said that Nuguid instructed her to leave the
space for the payee blank as she would use the checks to pay someone else. Tolentino added that she could not
recall respondent Nicdao issuing a check to petitioner Ching in the amount of ₱20,000,000.00. She confirmed that
they lost a check sometime in 1995. When informed about it, respondent Nicdao told her that the check could have
been issued to someone else, and that it would just surface when presented to the bank.

Tolentino recounted that Nuguid came to the grocery store everyday to collect the interest payments of the loan. In
some instances, upon respondent Nicdao’s instruction, Tolentino handed to Nuguid checks that were already signed
by respondent Nicdao. Sometimes, Tolentino would be the one to write the amount on the checks. Nuguid, in turn,
wrote the amounts on pieces of paper which were kept by respondent Nicdao.

On cross-examination,22 Tolentino confirmed that she was authorized by respondent Nicdao to fill up the checks and
hand them to Nuguid. The latter came to the grocery store everyday to collect the interest payments. Tolentino
claimed that in 1995, in the course of chronologically arranging respondent Nicdao’s check booklets, she noticed
that a check was missing. Respondent Nicdao told her that perhaps she issued it to someone and that it would just
turn up in the bank. Tolentino was certain that the missing check was the same one that petitioner Ching presented
to the bank for payment in the amount of ₱20,000,000.00.

Tolentino stated that she left the employ of respondent Nicdao sometime in 1996. After the checks were dishonored
in October 1997, Tolentino got a call from respondent Nicdao. After she was shown a fax copy thereof, Tolentino
confirmed that the ₱20,000,000.00 check was the same one that she reported as missing in 1995.

Jocelyn Nicdao also took the witness stand to corroborate the testimony of the other defense witnesses. On direct-
examination,23 she averred that she was a saleslady at the Vignette Superstore from August 1994 up to April 1998.
She knew Nuguid as well as petitioner Ching.

Jocelyn Nicdao further testified that respondent Nicdao was indebted to Nuguid. Jocelyn Nicdao used to fill up the
checks of respondent Nicdao that had already been signed by her and give them to Nuguid. The latter came to the
grocery store everyday to pick up the interest payments. Jocelyn Nicdao identified the checks on which she wrote
the amounts and, in some instances, the name of Nuguid as payee. However, most of the time, Nuguid allegedly
instructed her to leave as blank the space for the payee.

Jocelyn Nicdao identified the cigarette wrappers as the documents on which Nuguid acknowledged receipt of the
interest payments. She explained that she was the one who wrote the minus entries and they represented the daily
interest payments received by Nuguid.

On cross-examination,24 Jocelyn Nicdao stated that she was a distant cousin of respondent Nicdao. She stopped
working for her in 1998 because she wanted to take a rest. Jocelyn Nicdao reiterated that she handed the checks to
Nuguid at the grocery store.
After due trial, on December 8, 1998, the MCTC rendered judgment in Criminal Cases Nos. 9433-9443 convicting
respondent Nicdao of eleven (11) counts of violation of BP 22. The MCTC gave credence to petitioner Ching’s
testimony that respondent Nicdao borrowed money from him in the total amount of ₱20,950,000.00. Petitioner
Ching delivered ₱1,000,000.00 every month to respondent Nicdao from 1995 up to 1997 until the sum reached
₱20,000,000.00. The MCTC also found that subsequent thereto, respondent Nicdao still borrowed money from
petitioner Ching. As security for these loans, respondent Nicdao issued checks to petitioner Ching. When the latter
deposited the checks (eleven in all) on October 6, 1997, they were dishonored by the bank for being "DAIF."

The MCTC explained that the crime of violation of BP 22 has the following elements: (a) the making, drawing and
issuance of any check to apply to account or for value; (b) the knowledge of the maker, drawer or issuer that at the
time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full
upon its presentment; and (c) subsequent dishonor of the check by the drawee bank for insufficiency of funds or
credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop
payment.25

According to the MCTC, all the foregoing elements are present in the case of respondent Nicdao’s issuance of the
checks subject of Criminal Cases Nos. 9433-9443. On the first element, respondent Nicdao was found by the MCTC
to have made, drawn and issued the checks. The fact that she did not personally write the payee and date on the
checks was not material considering that under Section 14 of the Negotiable Instruments Law, "where the
instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to
complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the
signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority
to fill it up as such for any amount x x x." Respondent Nicdao admitted that she authorized her employees to provide
the details on the checks after she had signed them.

The MCTC disbelieved respondent Nicdao’s claim that the ₱20,000,000.00 check was the same one that she lost in
1995. It observed that ordinary prudence would dictate that a lost check would at least be immediately reported to
the bank to prevent its unauthorized endorsement or negotiation. Respondent Nicdao made no such report to the
bank. Even if the said check was indeed lost, the MCTC faulted respondent Nicdao for being negligent in keeping
the checks that she had already signed in an unsecured box.

The MCTC further ruled that there was no evidence to show that petitioner Ching was not a holder in due course as
to cause it (the MCTC) to believe that the said check was not issued to him. Respondent Nicdao’s admission of
indebtedness was sufficient to prove that there was consideration for the issuance of the checks.

The second element was also found by the MCTC to be present as it held that respondent Nicdao, as maker,
drawer or issuer, had knowledge that at the time of issue she did not have sufficient funds in or credit with the
drawee bank for the payment in full of the checks upon their presentment.

As to the third element, the MCTC established that the checks were subsequently dishonored by the drawee bank
for being "DAIF" or drawn against insufficient funds. Stamped at the back of each check was the annotation "DAIF."
The bank representative likewise testified to the fact of dishonor.

Under the foregoing circumstances, the MCTC declared that the conviction of respondent Nicdao was warranted. It
stressed that the mere act of issuing a worthless check was malum prohibitum; hence, even if the checks were
issued in the form of deposit or guarantee, once dishonored, the same gave rise to the prosecution for and
conviction of BP 22.26 The decretal portion of the MCTC decision reads:

WHEREFORE, in view of the foregoing, the accused is found guilty of violating Batas Pambansa Blg. 22 in 11
counts, and is hereby ordered to pay the private complainant the amount of ₱20,950,000.00 plus 12% interest per
annum from date of filing of the complaint until the total amount had been paid. The prayer for moral damages is
denied for lack of evidence to prove the same. She is likewise ordered to suffer imprisonment equivalent to 1 year
for every check issued and which penalty shall be served successively.

SO ORDERED.27
Incidentally, on January 11, 1999, the MCTC likewise rendered its judgment in Criminal Cases Nos. 9458-9471 and
convicted respondent Nicdao of the fourteen (14) counts of violation of BP 22 filed against her by Nuguid.

On appeal, the Regional Trial Court (RTC) of Dinalupihan, Bataan, Branch 5, in separate Decisions both dated May
10, 1999, affirmed in toto the decisions of the MCTC convicting respondent Nicdao of eleven (11) and fourteen (14)
counts of violation of BP 22 in Criminal Cases Nos. 9433-9443 and 9458-9471, respectively.

Respondent Nicdao forthwith filed with the CA separate petitions for review of the two decisions of the RTC. The
petition involving the eleven (11) checks purportedly issued to petitioner Ching was docketed as CA-G.R. CR No.
23055 (assigned to the 13th Division). On the other hand, the petition involving the fourteen (14) checks purportedly
issued to Nuguid was docketed as CA-G.R. CR No. 23054 (originally assigned to the 7th Division but transferred to
the 6th Division). The Office of the Solicitor General (OSG) filed its respective comments on the said petitions.
Subsequently, the OSG filed in CA-G.R. CR No. 23055 a motion for its consolidation with CA-G.R. CR No. 23054.
The OSG prayed that CA-G.R. CR No. 23055 pending before the 13th Division be transferred and consolidated with
CA-G.R. CR No. 23054 in accordance with the Revised Internal Rules of the Court of Appeals (RIRCA).

Acting on the motion for consolidation, the CA in CA-G.R. CR No. 23055 issued a Resolution dated October 19,
1999 advising the OSG to file the motion in CA-G.R. CR No. 23054 as it bore the lowest number. Respondent
Nicdao opposed the consolidation of the two cases. She likewise filed her reply to the comment of the OSG in CA-
G.R. CR No. 23055.

On November 22, 1999, the CA (13th Division) rendered the assailed Decision in CA-G.R. CR No. 23055 acquitting
respondent Nicdao of the eleven (11) counts of violation of BP 22 filed against her by petitioner Ching. The decretal
portion of the assailed CA Decision reads:

WHEREFORE, being meritorious, the petition for review is hereby GRANTED. Accordingly, the decision dated May
10, 1999, of the Regional Trial Court, 3rd Judicial Region, Branch 5, Bataan, affirming the decision dated December
8, 1998, of the First Municipal Circuit Trial Court of Dinalupihan-Hermosa, Bataan, convicting petitioner Clarita S.
Nicdao in Criminal Cases No. 9433 to 9443 of violation of B.P. Blg. 22 is REVERSED and SET ASIDE and another
judgment rendered ACQUITTING her in all these cases, with costs de oficio.

SO ORDERED.28

On even date, the CA issued an Entry of Judgment declaring that the above decision has become final and
executory and is recorded in the Book of Judgments.

In acquitting respondent Nicdao in CA-G.R. CR No. 23055, the CA made the following factual findings:

Petitioner [respondent herein] Clarita S. Nicdao, a middle-aged mother and housekeeper who only finished high
school, has a daughter, Janette Boyd, who is married to a wealthy expatriate.

Complainant [petitioner herein] Samson Ching is a Chinese national, who claimed he is a salesman of La Suerte
Cigar and Cigarette Factory.

Emma Nuguid, complainant’s live-in partner, is a CPA and formerly connected with Sycip, Gorres and Velayo.
Nuguid used to own a grocery store now known as the Vignette Superstore. She sold this grocery store, which was
about to be foreclosed, to petitioner’s daughter, Janette Boyd. Since then, petitioner began managing said store.
However, since petitioner could not always be at the Vignette Superstore to keep shop, she entrusted to her
salesladies, Melanie Tolentino and Jocelyn Nicdao, pre-signed checks, which were left blank as to amount and the
payee, to cover for any delivery of merchandise sold at the store. The blank and personal checks were placed in a
cash box at Vignette Superstore and were filled up by said salesladies upon instruction of petitioner as to amount,
payee and date.

Soon thereafter, Emma Nuguid befriended petitioner and offered to lend money to the latter which could be used in
running her newly acquired store. Nuguid represented to petitioner that as former manager of the Vignette
Superstore, she knew that petitioner would be in need of credit to meet the daily expenses of running the business,
particularly in the daily purchases of merchandise to be sold at the store. After Emma Nuguid succeeded in
befriending petitioner, Nuguid was able to gain access to the Vignette Superstore where petitioner’s blank and pre-
signed checks were kept.29

In addition, the CA also made the finding that respondent Nicdao borrowed money from Nuguid in the total amount
of ₱2,100,000.00 secured by twenty-four (24) checks drawn against respondent Nicdao’s account with HSLB. Upon
Nuguid’s instruction, the checks given by respondent Nicdao as security for the loans were left blank as to the payee
and the date. The loans consisted of (a) ₱950,000.00 covered by ten (10) checks subject of the criminal complaints
filed by petitioner Ching (CA-G.R. CR No. 23055); and (b) ₱1,150,000.00 covered by fourteen (14) checks subject of
the criminal complaints filed by Nuguid (CA-G.R. CR No. 23054). The loans totaled ₱2,100,000.00 and they were
transacted between respondent Nicdao and Nuguid only. Respondent Nicdao never dealt with petitioner Ching.

Against the foregoing factual findings, the CA declared that, based on the evidence, respondent Nicdao had already
fully paid the loans. In particular, the CA referred to the Planters Bank demand draft in the amount of ₱1,200,000.00
which, by his own admission, petitioner Ching had received. The appellate court debunked petitioner Ching’s
allegation that the said demand draft was payment for a previous transaction. According to the CA, petitioner Ching
failed to adduce evidence to prove the existence of a previous transaction between him and respondent Nicdao.

Apart from the demand draft, the CA also stated that respondent Nicdao made interest payments on a daily basis to
Nuguid as evidenced by the computations written at the back of the cigarette wrappers. Based on these
computations, as of July 21, 1997, respondent Nicdao had made a total of ₱5,780,000.00 payments to Nuguid for
the interests alone. Adding up this amount and that of the Planters Bank demand draft, the CA placed the payments
made by respondent Nicdao to Nuguid as already amounting to ₱6,980,000.00 for the principal loan amount of only
₱2,100,000.00.

The CA negated petitioner Ching’s contention that the payments as reflected at the back of the cigarette wrappers
could be applied only to the interests due. Since the transactions were not evidenced by any document or writing,
the CA ratiocinated that no interests could be collected because, under Article 1956 of the Civil Code, "no interest
shall be due unless it has been expressly stipulated in writing."

The CA gave credence to the testimony of respondent Nicdao that when she had fully paid her loans to Nuguid, she
tried to retrieve her checks. Nuguid, however, refused to return the checks to respondent Nicdao. Instead, Nuguid
and petitioner Ching filled up the said checks to make it appear that: (a) petitioner Ching was the payee in five
checks; (b) the six checks were payable to cash; (c) Nuguid was the payee in fourteen (14) checks. Petitioner Ching
and Nuguid then put the date October 6, 1997 on all these checks and deposited them the following day. On
October 8, 1997, through a joint demand letter, they informed respondent Nicdao that her checks were dishonored
by HSLB and gave her three days to settle her indebtedness or else face prosecution for violation of BP 22.

With the finding that respondent Nicdao had fully paid her loan obligations to Nuguid, the CA declared that she
could no longer be held liable for violation of BP 22. It was explained that to be held liable under BP 22, it must be
established, inter alia, that the check was made or drawn and issued to apply on account or for value. According to
the CA, the word "account" refers to a pre-existing obligation, while "for value" means an obligation incurred
simultaneously with the issuance of the check. In the case of respondent Nicdao’s checks, the pre-existing
obligations secured by them were already extinguished after full payment had been made by respondent Nicdao to
Nuguid. Obligations are extinguished by, among others, payment.30 The CA believed that when petitioner Ching and
Nuguid refused to return respondent Nicdao’s checks despite her total payment of ₱6,980,000.00 for the loans
secured by the checks, petitioner Ching and Nuguid were using BP 22 to coerce respondent Nicdao to pay a debt
which she no longer owed them.

With respect to the ₱20,000,000.00 check, the CA was not convinced by petitioner Ching’s claim that he delivered
₱1,000,000.00 every month to respondent Nicdao until the amount reached ₱20,000,000.00 and, when she refused
to pay the same, he filled up the check, which she earlier delivered to him as security for the loans, by writing
thereon the said amount. In disbelieving petitioner Ching, the CA pointed out that, contrary to his assertion, he was
never employed by the La Suerte Cigar and Cigarette Manufacturing per the letter of Susan Resurreccion, Vice-
President and Legal Counsel of the said company. Moreover, as admitted by petitioner Ching, he did not own the
house where he and Nuguid lived.

Moreover, the CA characterized as incredible and contrary to human experience that petitioner Ching would, as he
claimed, deliver a total sum of ₱20,000,000.00 to respondent Nicdao without any documentary proof thereof, e.g.,
written acknowledgment that she received the same. On the other hand, it found plausible respondent Nicdao’s
version of the story that the ₱20,000,000.00 check was the same one that was missing way back in 1995. The CA
opined that this missing check surfaced in the hands of petitioner Ching who, in cahoots with Nuguid, wrote the
amount ₱20,000,000.00 thereon and deposited it in his account. To the mind of the CA, the inference that the check
was stolen was anchored on competent circumstantial evidence. Specifically, Nuguid, as previous manager/owner
of the grocery store, had access thereto. Likewise applicable, according to the CA, was the presumption that the
person in possession of the stolen article was presumed to be guilty of taking the stolen article.31

The CA emphasized that the ₱20,000,000.00 check was never delivered by respondent Nicdao to petitioner Ching.
As such, the said check without the details as to the date, amount and payee, was an incomplete and undelivered
instrument when it was stolen and ended up in petitioner Ching’s hands. On this point, the CA applied Sections 15
and 16 of the Negotiable Instruments Law:

SEC. 15. Incomplete instrument not delivered. – Where an incomplete instrument has not been delivered, it will not,
if completed and negotiated without authority, be a valid contract in the hands of any holder, as against any person
whose signature was placed thereon before delivery.

SEC. 16. Delivery; when effectual; when presumed. – Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and
as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made
either by or under the authority of the party making, drawing, accepting or indorsing, as the case may be; and, in
such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the
purpose of transferring the property. But where the instrument is in the hands of a holder in due course, a valid
delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the
instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional
delivery by him is presumed until the contrary is proved.

The CA held that the ₱20,000,000.00 check was filled up by petitioner Ching without respondent Nicdao’s authority.
Further, it was incomplete and undelivered. Hence, petitioner Ching did not acquire any right or interest therein and
could not assert any cause of action founded on the

stolen checks.32 Under these circumstances, the CA concluded that respondent could not be held liable for violation
of BP 22.

The Petitioner’s Case

As mentioned earlier, the instant petition pertains and is limited solely to the civil aspect of the case as petitioner
Ching argues that notwithstanding respondent Nicdao’s acquittal of the eleven (11) counts of violation of BP 22, she
should be held liable to pay petitioner Ching the amounts of the dishonored checks in the aggregate sum of
₱20,950,000.00.

He urges the Court to review the findings of facts made by the CA as they are allegedly based on a
misapprehension of facts and manifestly erroneous and contradicted by the evidence. Further, the CA’s factual
findings are in conflict with those of the RTC and MCTC.

Petitioner Ching vigorously argues that notwithstanding respondent Nicdao’s acquittal by the CA, the Supreme
Court has the jurisdiction and authority to resolve and rule on her civil liability. He invokes Section 1, Rule 111 of the
Revised Rules of Court which, prior to its amendment, provided, in part:

SEC. 1. Institution of criminal and civil actions. – When a criminal action is instituted, the civil action for the recovery
of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action,
reserves his right to institute it separately, or institutes the civil action prior to the criminal action.

Such civil action includes the recovery of indemnity under the Revised Penal Code, and damages under Articles 32,
33, 34 and 2176 of the Civil Code of the Philippines arising from the same act or omission of the accused. x x x

Supreme Court Circular No. 57-9733 dated September 16, 1997 is also cited as it provides in part:
1. The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to necessarily include the
corresponding civil action, and no reservation to file such civil action separately shall be allowed or recognized. x x x

Petitioner Ching theorizes that, under Section 1, Rule 111 of the Revised Rules of Court, the civil action for the
recovery of damages under Articles 32, 33, 34, and 2176 arising from the same act or omission of the accused is
impliedly instituted with the criminal action. Moreover, under the above-quoted Circular, the criminal action for
violation of BP 22 necessarily includes the corresponding civil action, which is the recovery of the amount of the
dishonored check representing the civil obligation of the drawer to the payee.

In seeking to enforce the alleged civil liability of respondent Nicdao, petitioner Ching maintains that she had loan
obligations to him totaling ₱20,950,000.00. The existence of the same is allegedly established by his testimony
before the MCTC. Also, he asks the Court to take judicial notice that for a monetary loan secured by a check, the
check itself is the evidence of indebtedness.

He insists that, contrary to her protestation, respondent Nicdao also transacted with him, not only with Nuguid.
Petitioner Ching pointed out that during respondent Nicdao’s testimony, she referred to her creditors in plural form,
e.g. "[I] told them, most checks that I issued I will inform them if I have money." Even respondent Nicdao’s
employees allegedly knew him; they testified that Nuguid instructed them at times to leave as blank the payee on
the checks as they would be paid to someone else, who turned out to be petitioner Ching.

It was allegedly erroneous for the CA to hold that he had no capacity to lend ₱20,950,000.00 to respondent Nicdao.
Petitioner Ching clarified that what he meant when he testified before the MCTC was that he was engaged in
dealership with La Suerte Cigar and Cigarette Manufacturing, and not merely its sales agent. He stresses that he
owns a warehouse and is also in the business of lending money. Further, the CA’s reasoning that he could not
possibly have lent ₱20,950,000.00 to respondent Nicdao since petitioner Ching and Nuguid did not own the house
where they live, is allegedly non sequitur.

Petitioner Ching maintains that, contrary to the CA’s finding, the Planters Bank demand draft for ₱1,200,000.00 was
in payment for respondent Nicdao’s previous loan transaction with him. Apart from the ₱20,000,000.00 check, the
other ten (10) checks (totaling ₱950,000.00) were allegedly issued by respondent Nicdao to petitioner Ching as
security for the loans that she obtained from him from 1995 to 1997. The existence of another loan obligation prior
to the said period was allegedly established by the testimony of respondent Nicdao’s own witness, Jocelyn Nicdao,
who testified that when she started working in Vignette Superstore in 1994, she noticed that respondent Nicdao was
already indebted to Nuguid.

Petitioner Ching also takes exception to the CA’s ruling that the payments made by respondent Nicdao as reflected
on the computations at the back of the cigarette wrappers were for both the principal loan and interests. He insists
that they were for the interests alone. Even respondent Nicdao’s testimony allegedly showed that they were daily
interest payments. Petitioner Ching further avers that the interest payments totaling ₱5,780,000.00 can only mean
that, contrary to respondent Nicdao’s claim, her loan obligations amounted to much more than ₱2,100,000.00.
Further, she is allegedly estopped from questioning the interests because she willingly paid the same.

Petitioner Ching also harps on respondent Nicdao’s silence when she received his and Nuguid’s demand letter to
her. Through the said letter, they notified her that the twenty-five (25) checks valued at ₱22,100,000.00 were
dishonored by the HSLB, and that she had three days to settle her ndebtedness with them, otherwise, face
prosecution. Respondent Nicdao’s silence, i.e., her failure to deny or protest the same by way of reply, vis-à-vis the
demand letter, allegedly constitutes an admission of the statements contained therein.

On the other hand, the MCTC’s decision, as affirmed by the RTC, is allegedly based on the evidence on record; it
has been established that the checks were respondent Nicdao’s personal checks, that the signatures thereon were
hers and that she had issued them to petitioner Ching. With respect to the ₱20,000,000.00 check, petitioner Ching
assails the CA’s ruling that it was stolen and was never delivered or issued by respondent Nicdao to him. The issue
of the said check being stolen was allegedly not raised during trial. Further, her failure to report the alleged theft to
the bank to stop payment of the said lost or missing check is allegedly contrary to human experience. Petitioner
Ching describes respondent Nicdao’s defense of stolen or lost check as incredible and, therefore, false.
Aside from the foregoing substantive issues that he raised, petitioner Ching also faults the CA for not acting and
ordering the consolidation of CA-G.R. CR No. 23055 with CA-G.R. CR No. 23054. He informs the Court that latter
case is still pending with the CA.

In fine, it is petitioner Ching’s view that the CA gravely erred in disregarding the findings of the MCTC, as affirmed
by the RTC, and submits that there is more than sufficient preponderant evidence to hold respondent Nicdao civilly
liable to him in the amount of ₱20,950,000.00. He thus prays that the Court direct respondent Nicdao to pay him the
said amount plus 12% interest per annum computed from the date of written demand until the total amount is fully
paid.

The Respondent’s Counter-Arguments

Respondent Nicdao urges the Court to deny the petition. She posits preliminarily that it is barred under Section 2(b),
Rule 111 of the Revised Rules of Court which states:

SEC. 2. Institution of separate of civil action. - Except in the cases provided for in Section 3 hereof, after the criminal
action has been commenced, the civil action which has been reserved cannot be instituted until final judgment in the
criminal action.

xxxx

(b) Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a
declaration in a final judgment that the fact from which the civil might arise did not exist.

According to respondent Nicdao, the assailed CA decision has already made a finding to the effect that the fact
upon which her civil liability might arise did not exist. She refers to the ruling of the CA that the ₱20,000,000.00
check was stolen; hence, petitioner Ching did not acquire any right or interest over the said check and could not
assert any cause of action founded on the said check. Consequently, the CA held that respondent Nicdao had no
obligation to make good the stolen check and cannot be held liable for violation of BP 22. She also refers to the
CA’s pronouncement relative to the ten (10) other checks that they were not issued to apply on account or for value,
considering that the loan obligations secured by these checks had already been extinguished by her full payment
thereof.

To respondent Nicdao’s mind, these pronouncements are equivalent to a finding that the facts upon which her civil
liability may arise do not exist. The instant petition, which seeks to enforce her civil liability based on the eleven (11)
checks, is thus allegedly already barred by the final and executory decision acquitting her.

In any case, respondent Nicdao contends that the CA did not commit serious misapprehension of facts when it
found that the ₱20,000,000.00 check was a stolen check and that she never made any transaction with petitioner
Ching. Moreover, the other ten (10) checks were not issued to apply on account or for value. These findings are
allegedly supported by the evidence on record which consisted of the respective testimonies of the defense
witnesses to the effect that: respondent Nicdao had the practice of leaving pre-signed checks placed inside an
unsecured cash box in the Vignette Superstore; the salesladies were given the authority to fill up the said checks as
to the amount, payee and date; Nuguid beguiled respondent Nicdao to obtain loans from her; as security for the
loans, respondent Nicdao issued checks to Nuguid; when the salesladies gave the checks to Nuguid, she instructed
them to leave blank the payee and date; Nuguid had access to the grocery store; in 1995, one of the salesladies
reported that a check was missing; in 1997, when she had fully paid her loans to Nuguid, respondent Nicdao tried to
retrieve her checks but Nuguid and petitioner Ching falsely told her that she still owed them money; they then
maliciously filled up the checks making it appear that petitioner Ching was the payee in the five checks and the six
others were payable to "cash"; and knowing fully well that these checks were not funded because respondent
Nicdao already fully paid her loans, petitioner Ching and Nuguid deposited the checks and caused them to be
dishonored by HSLB.

It is pointed out by respondent Nicdao that her testimony (that the ₱20,000,000.00 check was the same one that
she lost sometime in 1995) was corroborated by the respective testimonies of her employees. Another indication
that it was stolen was the fact that among all the checks which ended up in the hands of petitioner Ching and
Nuguid, only the ₱20,000,000.00 check was fully typewritten; the rest were invariably handwritten as to the
amounts, payee and date.

Respondent Nicdao defends the CA’s conclusion that the ₱20,000,000.00 check was stolen on the ground that an
appeal in a criminal case throws open the whole case to the appellate court’s scrutiny. In any event, she maintains
that she had been consistent in her theory of defense and merely relied on the disputable presumption that the
person in possession of a stolen article is presumed to be the author of the theft.

Considering that it was stolen, respondent Nicdao argues, the ₱20,000,000.00 check was an incomplete and
undelivered instrument in the hands of petitioner Ching and he did not acquire any right or interest therein. Further,
he cannot assert any cause of action founded on the said stolen check. Accordingly, petitioner Ching’s attempt to
collect payment on the said check through the instant petition must fail.

Respondent Nicdao describes as downright incredible petitioner Ching’s testimony that she owed him a total sum of
₱20,950,000.00 without any documentary proof of the loan transactions. She submits that it is contrary to human
experience for loan transactions involving such huge amounts of money to be devoid of any documentary proof. In
relation thereto, respondent Nicdao underscores that petitioner Ching lied about being employed as a salesman of
La Suerte Cigar and Cigarette Manufacturing. It is underscored that he has not adequately shown that he
possessed the financial capacity to lend such a huge amount to respondent Nicdao as he so claimed.

Neither could she be held liable for the ten (10) other checks (in the total amount of ₱950,000,000.00) because as
respondent Nicdao asseverates, she merely issued them to Nuguid as security for her loans obtained from the latter
beginning October 1995 up to 1997. As evidenced by the Planters Bank demand draft in the amount of
₱1,200,000.00, she already made payment in 1996. The said demand draft was negotiated to petitioner Ching’s
account and he admitted receipt thereof. Respondent Nicdao belies his claim that the demand draft was payment
for a prior existing obligation. She asserts that petitioner Ching was unable to present evidence of such a previous
transaction.

In addition to the Planters Bank demand draft, respondent Nicdao insists that petitioner Ching received, through
Nuguid, cash payments as evidenced by the computations written at the back of the cigarette wrappers. Nuguid
went to the Vignette Superstore everyday to collect these payments. The other defense witnesses corroborated this
fact. Petitioner Ching allegedly never disputed the accuracy of the accounts appearing on these cigarette wrappers;
nor did he dispute their authenticity and accuracy.

Based on the foregoing evidence, the CA allegedly correctly held that, computing the amount of the Planters Bank
demand draft (₱1,200,000.00) and those reflected at the back of the cigarette wrappers (₱5,780,000.00),
respondent Nicdao had already paid petitioner Ching and Nuguid a total sum of ₱6,980,000.00 for her loan
obligations totaling only ₱950,000.00, as secured by the ten (10) HSLB checks excluding the stolen ₱20,000,000.00
check.

Respondent Nicdao rebuts petitioner Ching’s argument (that the daily payments were applied to the interests), and
claims that this is illegal. Petitioner Ching cannot insist that the daily payments she made applied only to the
interests on the loan obligations, considering that there is admittedly no document evidencing these loans, hence,
no written stipulation for the payment of interests thereon. On this point, she invokes Article 1956 of the Civil Code,
which proscribes the collection of interest payments unless expressly stipulated in writing.

Respondent Nicdao emphasizes that the ten (10) other checks that she issued to Nuguid as security for her loans
had already been discharged upon her full payment thereof. It is her belief that these checks can no longer be used
to coerce her to pay a debt that she does not owe.

On the CA’s failure to consolidate CA-G.R. CR No. 23055 and CA-G.R. CR No. 23054, respondent Nicdao proffers
the explanation that under the RIRCA, consolidation of the cases is not mandatory. In fine, respondent Nicdao urges
the Court to deny the petition as it failed to discharge the burden of proving her civil liability with the required
preponderance of evidence. Moreover, the CA’s acquittal of respondent Nicdao is premised on the finding that,
apart from the stolen check, the ten (10) other checks were not made to apply to a valid, due and demandable
obligation. This, in effect, is a categorical ruling that the fact from which the civil liability of respondent Nicdao may
arise does not exist.
 The Court’s Rulings

The petition is denied for lack of merit.

Notwithstanding respondent Nicdao’s acquittal, petitioner Ching is entitled to appeal the civil aspect of the case
within the reglementary period

It is axiomatic that "every person criminally liable for a felony is also civilly liable."34 Under the pertinent provision of
the Revised Rules of Court, the civil action is generally impliedly instituted with the criminal action. At the time of
petitioner Ching’s filing of the Informations against respondent Nicdao, Section 1,35 Rule 111 of the Revised Rules of
Court, quoted earlier, provided in part:

SEC. 1. Institution of criminal and civil actions. – When a criminal action is instituted, the civil action for the recovery
of civil liability is impliedly instituted with the criminal action, unless the offended party waives the civil action,
reserves his right to institute it separately, or institutes the civil action prior to the criminal action.

Such civil action includes the recovery of indemnity under the Revised Penal Code, and damages under Articles 32,
33, 34 and 2176 of the Civil Code of the Philippines arising from the same act or omission of the accused.

xxxx

As a corollary to the above rule, an acquittal does not necessarily carry with it the extinguishment of the civil liability
of the accused. Section 2(b)36 of the same Rule, also quoted earlier, provided in part:

(b) Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a
declaration in a final judgment that the fact from which the civil might arise did not exist.

It is also relevant to mention that judgments of acquittal are required to state "whether the evidence of the
prosecution absolutely failed to prove the guilt of the accused or merely failed to prove his guilt beyond reasonable
doubt. In either case, the judgment shall determine if the act or omission from which the civil liability might arise did
not exist."37

In Sapiera v. Court of Appeals,38 the Court enunciated that the civil liability is not extinguished by acquittal: (a) where
the acquittal is based on reasonable doubt; (b) where the court expressly declares that the liability of the accused is
not criminal but only civil in nature; and (c) where the civil liability is not derived from or based on the criminal act of
which the accused is acquitted. Thus, under Article 29 of the Civil Code –

ART. 29. When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved
beyond reasonable doubt, a civil action for damages for the same act or omission may be instituted. Such action
requires only a preponderance of evidence. Upon motion of the defendant, the court may require the plaintiff to file a
bond to answer for damages in case the complaint should be found to be malicious.

If in a criminal case the judgment of acquittal is based upon reasonable doubt, the court shall so declare. In the
absence of any declaration to that effect, it may be inferred from the text of the decision whether or not the acquittal
is due to that ground.

The Court likewise expounded in Salazar v. People39 the consequences of an acquittal on the civil aspect in this
wise:

The acquittal of the accused does not prevent a judgment against him on the civil aspect of the criminal case where:
(a) the acquittal is based on reasonable doubt as only preponderance of evidence is required; (b) the court declared
that the liability of the accused is only civil; (c) the civil liability of the accused does not arise from or is not based
upon the crime of which the accused is acquitted. Moreover, the civil action based on the delict is extinguished if
there is a finding in the final judgment in the criminal action that the act or omission from which the civil liability may
arise did not exist or where the accused did not commit the act or omission imputed to him.
If the accused is acquitted on reasonable doubt but the court renders judgment on the civil aspect of the criminal
case, the prosecution cannot appeal from the judgment of acquittal as it would place the accused in double
jeopardy. However, the aggrieved party, the offended party or the accused or both may appeal from the judgment
on the civil aspect of the case within the period therefor.

From the foregoing, petitioner Ching correctly argued that he, as the offended party, may appeal the civil aspect of
the case notwithstanding respondent Nicdao’s acquittal by the CA. The civil action was impliedly instituted with the
criminal action since he did not reserve his right to institute it separately nor did he institute the civil action prior to
the criminal action.

Following the long recognized rule that "the appeal period accorded to the accused should also be available to the
offended party who seeks redress of the civil aspect of the decision," the period to appeal granted to petitioner
Ching is the same as that granted to the accused.40 With petitioner Ching’s timely filing of the instant petition for
review of the civil aspect of the CA’s decision, the Court thus has the jurisdiction and authority to determine the civil
liability of respondent Nicdao notwithstanding her acquittal.

In order for the petition to prosper, however, it must establish that the judgment of the CA acquitting respondent
Nicdao falls under any of the three categories enumerated in Salazar and Sapiera, to wit:

(a) where the acquittal is based on reasonable doubt as only preponderance of evidence is required;

(b) where the court declared that the liability of the accused is only civil; and

(c) where the civil liability of the accused does not arise from or is not based upon the crime of which the
accused is acquitted.

Salazar also enunciated that the civil action based on the delict is extinguished if there is a finding in the final
judgment in the criminal action that the act or omission from which the civil liability may arise did not exist or where
the accused did not commit the act or omission imputed to him.

For reasons that will be discussed shortly, the Court holds that respondent Nicdao cannot be held civilly liable to
petitioner Ching.

The acquittal of respondent Nicdao likewise effectively extinguished her civil liability

A painstaking review of the case leads to the conclusion that respondent Nicdao’s acquittal likewise carried with it
the extinction of the action to enforce her civil liability. There is simply no basis to hold respondent Nicdao civilly
liable to petitioner Ching.

First, the CA’s acquittal of respondent Nicdao is not merely based on reasonable doubt. Rather, it is based on the
finding that she did not commit the act penalized under BP 22. In particular, the CA found that the ₱20,000,000.00
check was a stolen check which was never issued nor delivered by respondent Nicdao to petitioner Ching. As such,
according to the CA, petitioner Ching "did not acquire any right or interest over Check No. 002524 and cannot assert
any cause of action founded on said check,"41 and that respondent Nicdao "has no obligation to make good the
stolen check and cannot, therefore, be held liable for violation of B.P. Blg. 22."42

With respect to the ten (10) other checks, the CA established that the loans secured by these checks had already
been extinguished after full payment had been made by respondent Nicdao. In this connection, the second element
for the crime under BP 22, i.e., "that the check is made or drawn and issued to apply on account or for value," is not
present.

Second, in acquitting respondent Nicdao, the CA did not adjudge her to be civilly liable to petitioner Ching. In fact,
the CA explicitly stated that she had already fully paid her obligations. The CA computed the payments made by
respondent Nicdao vis-à-vis her loan obligations in this manner:

Clearly, adding the payments recorded at the back of the cigarette cartons by Emma Nuguid in her own handwriting
totaling ₱5,780,000.00 and the ₱1,200,000.00 demand draft received by Emma Nuguid, it would appear that
petitioner [respondent herein] had already made payments in the total amount of ₱6,980,000.00 for her loan
obligation of only ₱2,100,000.00 (₱950,000.00 in the case at bar and ₱1,150,000.00 in CA-G.R. CR No. 23054).43

On the other hand, its finding relative to the ₱20,000,000.00 check that it was a stolen check necessarily absolved
respondent Nicdao of any civil liability thereon as well.

Third, while petitioner Ching attempts to show that respondent Nicdao’s liability did not arise from or was not based
upon the criminal act of which she was acquitted (ex delicto) but from her loan obligations to him (ex contractu),
however, petitioner Ching miserably failed to prove by preponderant evidence the existence of these unpaid loan
obligations. Significantly, it can be inferred from the following findings of the CA in its decision acquitting respondent
Nicdao that the act or omission from which her civil liability may arise did not exist. On the ₱20,000,000.00 check,
the CA found as follows:

True, indeed, the missing pre-signed and undated check no. 002524 surfaced in the possession of complainant
Ching who, in cahoots with his paramour Emma Nuguid, filled up the blank check with his name as payee and in the
fantastic amount of ₱20,000,000.00, dated it October 6, 1997, and presented it to the bank on October 7, 1997,
along with the other checks, for payment. Therefore, the inference that the check was stolen is anchored on
competent circumstantial evidence. The fact already established is that Emma Nuguid , previous owner of the store,
had access to said store. Moreover, the possession of a thing that was stolen , absent a credible reason, as in this
case, gives rise to the presumption that the person in possession of the stolen article is presumed to be guilty of
taking the stolen article (People v. Zafra, 237 SCRA 664).

As previously shown, at the time check no. 002524 was stolen, the said check was blank in its material aspect (as to
the name of payee, the amount of the check, and the date of the check), but was already pre-signed by petitioner. In
fact, complainant Ching himself admitted that check no. 002524 in his possession was a blank check (TSN, Jan. 7,
1998, pp. 24-27, Annex J, Petition).

Moreover, since it has been established that check no. 002524 had been missing since 1995 (TSN, Sept. 9, 1998,
pp. 14-15, Annex DD, Petition; TSN, Sept. 10, 1998, pp. 43-46, Annex EE, Petition), it is abundantly clear that said
check was never delivered to complainant Ching. Check no. 002524 was an incomplete and undelivered instrument
when it was stolen and ended up in the hands of complainant Ching. Sections 15 and 16 of the Negotiable
Instruments Law provide:

xxxx

In the case of check no. 002524, it is admitted by complainant Ching that said check in his possession was a blank
check and was subsequently completed by him alone without authority from petitioner. Inasmuch as check no.
002524 was incomplete and undelivered in the hands of complainant Ching, he did not acquire any right or interest
therein and cannot, therefore, assert any cause of action founded on said stolen check (Development Bank of the
Philippines v. Sima We, 219 SCRA 736, 740).

It goes without saying that since complainant Ching did not acquire any right or interest over check no. 002524 and
cannot assert any cause of action founded on said check, petitioner has no obligation to make good the stolen
check and cannot, therefore, be held liable for violation of B.P. Blg. 22.44

Anent the other ten (10) checks, the CA made the following findings:

Evidence sufficiently shows that the loans secured by the ten (10) checks involved in the cases subject of this
petition had already been paid. It is not controverted that petitioner gave Emma Nuguid a demand draft valued at
₱1,200,000 to pay for the loans guaranteed by said checks and other checks issued to her. Samson Ching admitted
having received the demand draft which he deposited in his bank account. However, complainant Samson Ching
claimed that the said demand draft represents payment for a previous obligation incurred by petitioner. However,
complainant Ching failed to adduce any evidence to prove the existence of the alleged obligation of the petitioner
prior to those secured by the subject checks.

Apart from the payment to Emma Nuguid through said demand draft, it is also not disputed that petitioner made
cash payments to Emma Nuguid who collected the payments almost daily at the Vignette Superstore. As of July 21,
1997, Emma Nuguid collected cash payments amounting to approximately ₱5,780,000.00. All of these cash
payments were recorded at the back of cigarette cartons by Emma Nuguid in her own handwriting, the authenticity
and accuracy of which were never denied by either complainant Ching or Emma Nuguid.

Clearly, adding the payments recorded at the back of the cigarette cartons by Emma Nuguid in her own handwriting
totaling ₱5,780,000.00 and the ₱1,200,000.00 demand draft received by Emma Nuguid, it would appear that
petitioner had already made payments in the total amount of ₱6,980,000.00 for her loan in the total amount of
₱6,980,000.00 for her loan obligation of only ₱2,100,000.00 (₱950,000.00 in the case at bar and P1,150,000.00 in
CA-G.R. CR No. 23054).45

Generally checks may constitute evidence of indebtedness.46 However, in view of the CA’s findings relating to the
eleven (11) checks - that the ₱20,000,000.00 was a stolen check and the obligations secured by the other ten (10)
checks had already been fully paid by respondent Nicdao – they can no longer be given credence to establish
respondent Nicdao’s civil liability to petitioner Ching. Such civil liability, therefore, must be established by
preponderant evidence other than the discredited checks.

After a careful examination of the records of the case,47 the Court holds that the existence of respondent Nicdao’s
civil liability to petitioner Ching in the amount of ₱20,950,000.00 representing her unpaid obligations to the latter has
not been sufficiently established by preponderant evidence. Petitioner Ching mainly relies on his testimony before
the MCTC to establish the existence of these unpaid obligations. In gist, he testified that from October 1995 up to
1997, respondent Nicdao obtained loans from him in the total amount of ₱20,950,000.00. As security for her
obligations, she issued eleven (11) checks which were invariably blank as to the date, amounts and payee. When
respondent Nicdao allegedly refused to pay her obligations despite his due demand, petitioner filled up the checks
in his possession with the corresponding amounts and date and deposited them in his account. They were
subsequently dishonored by the HSLB for being "DAIF" and petitioner Ching accordingly filed the criminal
complaints against respondent Nicdao for violation of BP 22.

It is a basic rule in evidence that the burden of proof lies on the party who makes the allegations – Et incumbit
probatio, qui dicit, non qui negat; cum per rerum naturam factum negantis probatio nulla sit (The proof lies upon him
who affirms, not upon him who denies; since, by the nature of things, he who denies a fact cannot produce any
proof).48 In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence.
Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and is usually
considered to be synonymous with the term "greater weight of evidence" or "greater weight of the credible
evidence." Preponderance of evidence is a phrase which, in the last analysis, means probability of the truth. It is
evidence which is more convincing to the court as worthy of belief than that which is offered in opposition
thereto.49 Section 1, Rule 133 of the Revised Rules of Court offers the guidelines in determining preponderance of
evidence:

SEC. 1. Preponderance of evidence, how determined. – In civil cases, the party having the burden of proof must
establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of
evidence on the issues involved lies, the court may consider all the facts and circumstances of the case, the
witnesses’ manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are
testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest
or want of interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The
court may also consider the number of witnesses, though the preponderance is not necessarily with the greater
number.

Unfortunately, petitioner Ching’s testimony alone does not constitute preponderant evidence to establish respondent
Nicdao’s civil liability to him amounting to ₱20,950,000.00. Apart from the discredited checks, he failed to adduce
any other documentary evidence to prove that respondent Nicdao still has unpaid obligations to him in the said
amount. Bare allegations, unsubstantiated by evidence, are not equivalent to proof under our Rules.50

In contrast, respondent Nicdao’s defense consisted in, among others, her allegation that she had already paid her
obligations to petitioner Ching through Nuguid. In support thereof, she presented the Planters Bank demand draft for
₱1,200,000.00. The said demand draft was negotiated to petitioner Ching’s account and he admitted receipt of the
value thereof. Petitioner Ching tried to controvert this by claiming that it was payment for a previous transaction
between him and respondent Nicdao. However, other than his self-serving claim, petitioner Ching did not proffer any
documentary evidence to prove the existence of the said previous transaction. Considering that the Planters Bank
demand draft was dated August 13, 1996, it is logical to conclude that, absent any evidence to the contrary, it
formed part of respondent Nicdao’s payment to petitioner Ching on account of the loan obligations that she obtained
from him since October 1995.

Additionally, respondent Nicdao submitted as evidence the cigarette wrappers at the back of which were written the
computations of the daily payments that she had made to Nuguid. The fact of the daily payments was corroborated
by the other witnesses for the defense, namely, Jocelyn Nicdao and Tolentino. As found by the CA, based on these
computations, respondent Nicdao had made a total payment of ₱5,780,000.00 to Nuguid as of July 21,
1997.51 Again, the payments made, as reflected at the back of these cigarette wrappers, were not disputed by
petitioner Ching. Hence, these payments as well as the amount of the Planters Bank demand draft establish that
respondent Nicdao already paid the total amount of ₱6,980,000.00 to Nuguid and petitioner Ching.

The Court agrees with the CA that the daily payments made by respondent Nicdao amounting to ₱5,780,000.00
cannot be considered as interest payments only. Even respondent Nicdao testified that the daily payments that she
made to Nuguid were for the interests due. However, as correctly ruled by the CA, no interests could be properly
collected in the loan transactions between petitioner Ching and respondent Nicdao because there was no stipulation
therefor in writing. To reiterate, under Article 1956 of the Civil Code, "no interest shall be due unless it has been
expressly stipulated in writing."

Neither could respondent Nicdao be considered to be estopped from denying the validity of these interests.
Estoppel cannot give validity to an act that is prohibited by law or one that is against public policy.52 Clearly, the
collection of interests without any stipulation therefor in writing is prohibited by law. Consequently, the daily
payments made by respondent Nicdao amounting to ₱5,780,000.00 were properly considered by the CA as
applying to the principal amount of her loan obligations.

With respect to the ₱20,000,000.00 check, the defense of respondent Nicdao that it was stolen and that she never
issued or delivered the same to petitioner Ching was corroborated by the other defense witnesses, namely,
Tolentino and Jocelyn Nicdao.

All told, as between petitioner Ching and respondent Nicdao, the requisite quantum of evidence - preponderance of
evidence - indubitably lies with respondent Nicdao. As earlier intimated, she cannot be held civilly liable to petitioner
Ching for her acquittal; under the circumstances which have just been discussed lengthily, such acquittal carried
with it the extinction of her civil liability as well.

The CA committed no reversible error in not consolidating CA-G.R. CR No. 23055 and CA-G.R. CR No. 23054

During the pendency of CA-G.R. CR No. 23055 and CA-G.R. CR No. 23054 in the CA, the pertinent provision of the
RIRCA on consolidation of cases provided:

SEC. 7. Consolidation of Cases. – Whenever two or more allied cases are assigned to different Justices, they may
be consolidated for study and report to a single Justice.

(a) At the instance of any party or Justice to whom the case is assigned for study and report, and with the conformity
of all the Justices concerned, the consolidation may be allowed when the cases to be consolidated involve the same
parties and/or related questions of fact and/or law.53

The use of the word "may" denotes the permissive, not mandatory, nature of the above provision, Thus, no grave
error could be imputed to the CA when it proceeded to render its decision in CA-G.R. CR No. 23055, without
consolidating it with CA-G.R. CR No. 23054.

WHEREFORE, premises considered, the Petition is DENIED for lack of merit.

SO ORDERED.

THIRD DIVISION

G.R. No. 198660               October 23, 2013

TING TING PUA, Petitioner,
vs.
SPOUSES BENITO LO BUN TIONG and CAROLINE SIOK CHING TENG, Respondents.

RESOLUTION

VELASCO, JR., J.:

Under consideration is the Motion for Reconsideration interposed by petitioner Ting Ting Pua Pua) of our Resolution
dated April 18, 2012 effectively affirming the Decision1 and Resolution2 dated March 31, 2011 and September 26,
2011, respectively, of the Court of Appeals CA) In CA- G.R. CV No. 93755, which, in turn, reversed the Decision of
the Regional Trial Court RTC) of the City of Manila, Branch 29 in Civil Case No. 97-83027.

As culled from the adverted R TC Decision, as adopted for the most part by the CA, the antecedent facts may be
summarized as follows:

The controversy arose from a Complaint for a Sum of Money3 filed by petitioner Pua against respondent-spouses
Benito Lo Bun Tiong Benito) and Caroline Siok Ching Teng Caroline). In the complaint, Pua prayed that, among
other things, respondents, or then defendants, pay Pua the amount eight million five hundred thousand pesos (PhP
8,500,000), covered by a check. (Exhibit "A," for plaintiff)

During trial, petitioner Pua clarified that the PhP 8,500,000 check was given by respondents to pay the loans they
obtained from her under a compounded interest agreement on various dates in 1988.4 As 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.5 In all, respondents issued 176 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.7

As a result of the dishonor, petitioner demanded payment. Respondents, however, pleaded for more time because
of their financial difficulties.8 Petitioner Pua obliged and simply reminded the respondents of their indebtedness from
time to time.9

Sometime in September 1996, when their financial situation turned better, respondents allegedly called and asked
petitioner Pua for the computation of their loan obligations.10 Hence, petitioner handed them a computation dated
October 2, 199611 which showed that, at the agreed 2% compounded interest rate per month, the amount of the loan
payable to petitioner rose to thirteen million two hundred eighteen thousand five hundred forty-four pesos and
20/100 (PhP 13,218,544.20).12 On receiving the computation, the respondents asked petitioner to reduce their
indebtedness to PhP 8,500,000.13 Wanting to get paid the soonest possible time, petitioner Pua agreed to the
lowered amount.14

Respondents then delivered to petitioner Asiatrust Check No. BND057750 bearing the reduced amount of PhP
8,500,000 dated March 30, 1997 with the assurance that the check was good.15 In turn, respondents demanded the
return of the 17 previously dishonored checks. Petitioner, however, refused to return the bad checks and advised
respondents that she will do so only after the encashment of Asiatrust Check No. BND057750.16

Like the 17 checks, however, Check No. BND057750 was also dishonored when it was presented by petitioner to
the drawee bank. Hence, as claimed by petitioner, she decided to file a complaint to collect the money owed her by
respondents.

For the defense, both respondents Caroline and Benito testified along with Rosa Dela Cruz Tuazon (Tuazon), who
was the OIC-Manager of Asiatrust-Binondo Branch in 1997. Respondents categorically denied obtaining a loan from
petitioner.17 Respondent Caroline, in particular, narrated that, in August 1995, she and petitioner’s sister, Lilian,
forged a partnership that operated a mahjong business. Their agreement was for Lilian to serve as the capitalist
while respondent Caroline was to act as the cashier. Caroline also agreed to use her personal checks to pay for the
operational expenses including the payment of the winners of the games.18 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 checks19 on the condition that these checks will only be used to cover the costs of the business
operations and in no circumstance will the amount of the checks exceed PhP 5,000.20

In March 1996, 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.21 It
was only when Lilian’s husband, Vicente Balboa (Vicente), filed a complaint for sum of money in February 1997
against respondents to recover five million one hundred seventy-five thousand two hundred fifty pesos (PhP
5,175,250), covering three of the five post-dated and pre-signed checks.22

Respondent Caroline 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.23 She insisted
that petitioner and her sister completed the check after its delivery.24 Furthermore, she could not have gone to see
petitioner Pua with her husband as they had been separated in fact for nearly 10 years.25 As for the 17 checks
issued by her in 1988, Caroline alleged that they were not intended for Pua but were issued for the benefit of other
persons.26 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. Respondent Benito corroborated Caroline’s
testimony respecting their almost a decade separation.27 As such, he could not have had accompanied his wife to
see petitioner to persuade the latter to lower down any alleged indebtedness.28 In fact, Benito declared, before the
filing of the Complaint, he had never met petitioner Pua, let alone approached her with his wife to borrow
money.29 He claimed that he was impleaded in the case to attach his property and force him to enter into an
amicable settlement with petitioner.30 Benito pointed out that Check No. BND057750 was issued under Asiatrust
Account No. 5513-0054-9, which is solely under the name of his wife.31

The witness for the respondents, Ms. Tuazon, testified that respondent Caroline opened Asiatrust Account No.
5513-0054-9 in September 1994.32 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 435,000.33 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.34

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. On the other hand, the court a
quo discounted the testimony for the defense completely denying respondents’ loan obligation to Pua.35

The trial court, however, refused to order respondents to pay petitioner the amount of PhP 8,500,000 considering
that the agreement to pay interest on the loan was not expressly stipulated in writing by the parties. The RTC,
instead, ordered respondents to pay the principal amount of the loan as represented by the 17 checks plus legal
interest from the date of demand. As rectified,36 the dispositive portion of RTC’s Decision reads:

Defendant-spouses Benito Lo Bun Tiong and Caroline Siok Ching Teng, are hereby ordered jointly and solidarily:

1. To pay plaintiff ₱1,975,000.00 plus 12% interest per annum from September 30, 1998, until fully paid;

2. To pay plaintiff attorney’s fees of ₱200,000.00; and

3. To pay the costs of the suit.

Aggrieved, respondents went to the CA arguing that the court a quo erred in finding that they obtained and are liable
for a loan from petitioner. To respondents, petitioner has not sufficiently proved the existence of the loan that they
supposedly acquired from her way back in the late 1980s by any written agreement or memorandum.

By Decision of March 31, 2011, as reiterated in a Resolution dated September 26, 2011, 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. Hence, the CA added,
petitioner does not have a cause of action against respondents.37
Hence, petitioner came to this Court via a Petition for Review on Certiorari38 alleging grievous reversible error on the
part of the CA in reversing the findings of the court a quo.

As adverted to at the outset, the Court, in a Minute Resolution dated April 18, 2012, resolved to deny the petition.39

In this Motion for Reconsideration,40 petitioner pleads that this Court take a second hard look on the facts and issues
of the present case and affirm the RTC’s case disposition. Petitioner argues, in the main, that the finding of the
appellate court that petitioner has not established respondents’ indebtedness to her is not supported by the
evidence on record and is based solely on respondents’ general denial of liability.

Respondents, on the other hand, argued in their Comment on the Motion for Reconsideration dated October 6, 2012
that the CA correctly ruled that Asiatrust Check No. BND057550 is an incomplete instrument which found its way
into petitioner’s hands and that the petitioner failed to prove respondents’ indebtedness to her. Petitioner, so
respondents contend, failed to show to whom the 17 1988 checks were delivered, for what consideration or
purpose, and under whose account said checks were deposited or negotiated.

Clearly, the issue in the present case is factual in nature as it involves an inquiry into the very existence of the debt
supposedly owed by respondents to petitioner.

The general rule is that this Court in petitions for review on certiorari only concerns itself with questions of law, not of
fact,41 the resolution of factual issues being the primary function of lower courts.42 However, several exceptions have
been laid down by jurisprudence to allow the scrutiny of the factual arguments advanced by the contending parties,
viz: (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly
mistaken, absurd or impossible ; (3) there is grave abuse of discretion; (4) the judgment is based on a
misapprehension of facts; (5) the findings of fact are conflicting ; (6) there is no citation of specific evidence on which
the factual findings are based; (7) the findings of absence of fact are contradicted by the presence of evidence on
record ; (8) the findings of the CA are contrary to those of the trial court ; (9) the CA manifestly overlooked certain
relevant and undisputed facts that, if properly considered, would justify a different conclusion ; (10) the findings of
the CA are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties.43 At
the very least, therefore, the inconsonance of the findings of the RTC and the CA regarding the existence of the
loan sanctions the recalibration of the evidence presented by the parties before the trial court.

In the main, petitioner asserts that respondents owed her a sum of money way back in 1988 for which the latter
gave her several checks. These checks, however, had all been dishonored and petitioner has not been paid the
amount of the loan plus the agreed interest. In 1996, respondents approached her to get the computation of their
liability including the 2% compounded interest. After bargaining to lower the amount of their liability, respondents
supposedly gave her a postdated check bearing the discounted amount of the money they owed to petitioner. Like
the 1988 checks, the drawee bank likewise dishonored this check. To prove her allegations, petitioner submitted the
original copies of the 17 checks issued by respondent Caroline in 1988 and the check issued in 1996, Asiatrust
Check No. BND057750. In ruling in her favor, the RTC sustained the version of the facts presented by petitioner.

Respondents, on the other hand, completely deny the existence of the debt asserting that they had never
approached petitioner to borrow money in 1988 or in 1996. They hypothesize, instead, that petitioner Pua is simply
acting at the instance of her sister, Lilian, to file a false charge against them using a check left to fund a gambling
business previously operated by Lilian and respondent Caroline. While not saying so in express terms, the appellate
court considered respondents’ denial as worthy of belief.

After another circumspect review of the records of the present case, however, this Court is inclined to depart from
the findings of the CA.

Certainly, in a suit for a recovery of sum of money, as here, 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.44
In overruling the trial court, however, the CA opined that petitioner "failed to establish [the] alleged indebtedness in
writing."45 Consequently, so the CA held, respondents were under no obligation to prove their defense. Clearly, 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.

In Pacheco v. Court of Appeals,46 this Court has expressly recognized that a check "constitutes an evidence of
indebtedness"47 and is a veritable "proof of an obligation."48 Hence, it can be used "in lieu of and for the same
purpose as a promissory note."49 In fact, in the seminal case of Lozano v. Martinez,50 We 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."51 This Court reiterated this rule
in the relatively recent Lim v. Mindanao Wines and Liquour Galleria stating that "a check, the entries of which are in
writing, could prove a loan transaction."52 This very same principle underpins 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.

Consequently, 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. Note that respondent Caroline had not denied
the genuineness of these checks.53 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.54 This
account is not only incredible; it runs counter to human experience, as enshrined in Sec. 16 of the NIL which
provides that 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 appellate court’s justification in giving credit to respondents’ contention that the respondents had delivered the
17 checks to persons other than petitioner lies on the supposed failure of petitioner "to establish for whose accounts
[the checks] were deposited and subsequently dishonored."55 This is clearly contrary to the evidence on record. It
seems that the appellate court overlooked 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."56 Further, a close scrutiny of these return slips
will reveal that the checks were deposited either in petitioner’s account57 or in the account of her brother, Ricardo
Yulo—a fact she had previously testified to explaining that petitioner indorsed some checks to her brother to pay for
a part of the capital she used in her financing business.58

As for the Asiatrust check issued by respondent Caroline in 1996 to substitute the compounded value of the 1988
checks, the appellate court likewise sympathized with respondents’ version of the story holding that it is buttressed
by respondents’ allegations describing the same defense made in the two related cases filed against them by
petitioner’s brother-in-law, Vicente Balboa.  These related cases consisted of a criminal case for violation of BP
1âwphi1

2259 and a civil case for collection of sum of money60 involving three (3) of the five (5) consecutively numbered
checks she allegedly left with Lilian.61 It should be noted, however, that while respondents were exculpated from
their criminal liability,62 in Sps. Benito Lo Bun Tiong and Caroline Siok Ching Teng v. Vicente Balboa,63 this Court
sustained the factual findings of the appellate court in the civil case finding respondents civilly liable to pay the
amount of the checks.

It bears to note that the Decision of the appellate court categorically debunked the same defense advanced by
respondents in the present case primarily because of Caroline’s admission to the contrary. The Decision of the
appellate court found without any reversible error by this Court reads, thus:

The claim of Caroline Siok Ching Teng that the three (3) checks were part of the blank checks she issued and
delivered to Lilian Balboa, wife of plaintiff-appellee, and intended solely for the operational expenses of their
mahjong business is belied by her admission that she issued three (3) checks (Exhs. "A", "B" "C") because Vicente
showed the listing of their account totaling ₱5,175,250.00 (TSN, November 17, 1997, p. 10).64 x x x

Clearly, respondents’ defense that Caroline left blank checks with petitioner’s sister who, it is said, is now
determined to recoup her past losses and bring financial ruin to respondents by falsifying the same blank checks,
had already been thoroughly passed upon and rejected by this Court. It cannot, therefore, be used to support
respondents’ denial of their liability.

Respondents’ other defenses are equally unconvincing. They assert that petitioner could not have accepted a check
worth PhP 8.5 million considering that she should have known that respondent Caroline had issued several checks
for PhP 25,000 each in favor of Lilian and all of them had bounced.65 Needless to state, an act done contrary to law
cannot be sustained to defeat a legal obligation; repeated failure to honor obligations covered by several negotiable
instruments cannot serve to defeat yet another obligation covered by another instrument.

Indeed, it seems that respondent Caroline had displayed a 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.66 This fact alone
bolsters petitioner’s allegation that the checks delivered to her by respondent Caroline were similarly not funded.

In Magdiwang Realty Corp. v. Manila Banking Corp., We 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."67 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.

As aptly held by the court a quo, however, respondents cannot be obliged to pay the interest of the loan on the
ground that the supposed agreement to pay such interest was not reduced to writing. Article 1956 of the Civil Code,
which refers to monetary interest, specifically mandates that no interest shall be due unless it has been expressly
stipulated in writing.68 Thus, the collection of interest in loans or forbearance of money is allowed only when these
two conditions concur: (1) there was an express stipulation for the payment of interest; (2) the agreement for the
payment of the interest was reduced in writing.69 Absent any of these two conditions, the money debtor cannot be
made liable for interest. Thus, petitioner is entitled only to the principal amount of the loan plus the allowable legal
interest from the time of the demand,70 at the rate of 6% per annum.71

Respondent Benito cannot escape the joint and solidary liability to pay the loan on the ground that the obligation
arose from checks solely issued by his wife. Without any evidence to the contrary, it is presumed that the proceeds
of the loan redounded to the benefit of their family. Hence, the conjugal partnership is liable therefor.72 The
unsupported allegation that respondents were separated in fact, standing alone, does not persuade this Court to
solely bind respondent Caroline and exempt Benito. As the head of the family, there is more reason that respondent
Benito should answer for the liability incurred by his wife presumably in support of their family.

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.

SO ORDERED.

G.R. No. 211564

BENJAMIN EVANGELISTA, Petitioner
vs.
SCREENEX,  INC., represented by ALEXANDER G, YU, Respondent
1
 DECISION

SERENO, CJ.:

This is a Petition  for Review on Certiorari seeking to set aside the Decision  and Resolution  rendered by the Court
2 3 4

of Appeals (CA) Manila, Fifth Division, in CA-G.R. SP No. 110680.

ANTECEDENT FACTS

The facts as summarized by the CA are as follows:

Sometime in 1991, [Evangelista] obtained a loan from respondent Screenex, Inc. which issued two (2) checks to
[Evangelista]. The first check was UCPB Check No. 275345 for ₱l,000,000 and the other one is China Banking
Corporation Check No. BDO 8159110 for ₱500,000. There were also vouchers of Screenex that were signed by the
accused evidencing that he received the 2 checks in acceptance of the loan granted to him.

As security for the payment of the loan, [Evangelista] gave two (2) open-dated checks: UCPB Check Nos. 616656
and 616657, both pay to the order of Screenex, Inc. From the time the checks were issued by [Evangelista], they
were held in safe keeping together with the other documents and papers of the company by Philip Gotuaco, Sr.,
father-in-law of respondent Alexander Yu, until the former's death on 19 November 2004.

Before the checks were deposited, there was a personal demand from the family for [Evangelista] to settle the loan
and likewise a demand letter sent by the family lawyer.5

On 25 August 2005, petitioner was charged with violation of Batas Pambansa (BP) Blg. 22 in Criminal Case Nos.
343615-16 filed with the Metropolitan Trial Court (MeTC) of Makati City, Branch 61.  The Information reads:
6

That sometime in 1991, in the City of Makati, Metro Manila, Philippines, a place within the jurisdiction of this
Honorable Court, the above-named accused, did then and there, willfully, unlawfully and feloniously make out, draw,
and issue to SCREENEX INC., herein represented by ALEXANDER G. YU, to apply on account or for value the
checks described below:

  Check No. Date Amount

United Coconut AGR 616656 12-22-04 ₱l ,000,000.00
Planters Bank AGR 616657 12-22-04 500,000.00

said accused well knowing that at the time of issue thereof, said accused did not have sufficient funds in or credit
with the drawee bank for the payment in full of the face amount of such check upon its presentment which check
when presented for payment within ninety (90) days from the date thereof, was subsequently dishonored by the
drawee bank for the reason "ACCOUNT CLOSED" and despite receipt of notice of such dishonor, the said accused
failed to pay said payee the face amount of said checks or to make arrangement for full payment thereof within five
(5) banking days after receiving notice.

CONTRARY TO LAW. 7

Petitioner pleaded not guilty when arraigned, and trial proceeded. 8

THE RULING OF THE METC

The MeTC found that the prosecution had indeed proved the first two elements of cases involving violation of BP 22:
i.e. the accused makes, draws or issues any check to apply to account or for value, and the check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit; or the check would have been dishonored for the
same reason had not the drawer, without any valid reason, ordered the bank to stop payment. The trial court
pointed out, though, that the prosecution failed to prove the third element; i.e. at the time of the issuance of the
check to the payee, the latter did not have sufficient funds in, or credit with, the drawee bank for payment of the
check in full upon its presentment.  In the instant case, the court held that while prosecution witness Alexander G.
9

Yu declared that the lawyer had sent a demand letter to Evangelista, Yu failed to prove that the letter had actually
been received by addressee. Because there was no way to determine when the five-day period should start to toll,
there was a failure to establish prima facie evidence of knowledge of the insufficiency of funds on the part of
Evangelista.  Hence, the court acquitted him of the criminal charges.
10

Ruling on the civil aspect of the cases, the court held that while Evangelista admitted to having issued and delivered
the checks to Gotuaco and to having fully paid the amounts indicated therein, no evidence of payment was
presented.  It further held that the creditor's possession of the instrument of credit was sufficient evidence that the
11

debt claimed had not yet been paid.  In the end, Evangelista was declared liable for the corresponding civil
12

obligation.
13

The dispositive portion of the Decision  reads: 14

WHEREFORE, judgment is rendered acquitting the accused BENJAMIN EVANGELISTA for failure of the
prosecution to establish all the elements constituting the offense of Violation of B.P. 22 for two (2) counts. However,
accused is hereby ordered to pay his civil obligation to the private complainant in the total amount of ONE MILLION
FIVE HUNDRED THOUSAND PESOS (₱l,500,000) plus twelve (12%) percent interest per annum from the date of
the filing of the two sets of Information until fully paid and to pay the costs of suit.

SO ORDERED. 15

THE RULING OF THE RTC

Evangelista filed a timely Notice of Appeal  and raised two errors of the MeTC before the Regional Trial Court
16

(RTC) of Makati City, Branch 147. Docketed therein as Criminal Case Nos. 08-1723 and 08-1724, the appeal posed
the following issues: (1) the lower court erred in not appreciating the fact that the prosecution failed to prove the civil
liability of Evangelista to private complainant; and (2) any civil liability attributable to Evangelista had been
extinguished and/or was barred by prescription. 17

After the parties submitted their respective Memoranda,  the R TC ruled that the checks should be taken as
18

evidence of Evangelista's indebtedness to Gotuaco, such that even if the criminal aspect of the charge had not been
established, the obligation subsisted.  Also, the alleged payment by Evangelista was an affirmative defense that he
19

had the burden of proving, but that he failed to discharge.  With respect to the defense of prescription, the RTC
20

ruled in this wise:

As to the defense of prescription, the same cannot be successfully invoked in this appeal. The 10-year prescriptive
period of the action under Art. 1144 of the New Civil Code is computed from the time the right of action accrues. The
terms and conditions of the loan obligation have not been shown, as only the checks evidence the same. It has not
been shown when the loan obligation was to mature such that there is no basis to show or from which to infer, when
the cause of action (non-payment of the loan) which would give the obligee the right to seek redress for the non-
payment of the obligation, accrued. In other words, the reckoning point of prescription has not been established.

Prosecution witness Alexander G. Yu was not competent to state that the loan was contracted in 1991 as in fact, Yu
admitted that it was a few months before his father-in-law (Philip Gotuaco) died when the latter told him about
accused's failure to pay his obligation. That was a few months before November 19, 2004, date of death of his
father-in-law.

At any rate, the right of action in this case is not upon a written contract, for which reason, Art. 1144, New Civil
Code, on prescription does not apply. 21

In a Decision  dated 18 December 2008, the R TC dismissed the appeal and affirmed the MeTC decision in
22

toto.  The Motion for Reconsideration  was likewise denied in an Order  dated 19 August 2009.
23 24 25

THE RULING OF THE CA

Evangelista filed a petition for review  before the CA insisting that the lower court erred in finding him liable to pay
26

the sum with interest at 12% per annum from the date of filing until full payment. He further alleged that witness Yu
was not competent to testify on the loan transaction; that the insertion of the date on the checks without the
knowledge of the accused was an alteration that avoided the checks; and that the obligation had been extinguished
by prescription.27

Screenex, Inc., represented by Yu, filed its Comment.  Yu claimed that he had testified on the basis of his personal
28

dealings with his father-in-law, whom Evangelista dealt with in obtaining the loan. He further claimed that during the
trial, petitioner never raised the competence of the witness as an issue.  Moreover, Yu argued that prescription set
29

in from the accrual of the obligation; hence, while the loan was transacted in 1991, the demand was made in
February 2005, which was within the 10-year prescriptive period.  Yu also argued that while Evangelista claimed
30

under oath that the loan had been paid in 1992, he was not able to present any proof of payment.  Meanwhile, Yu
31

insisted that the material alteration invoked by Evangelista was unavailing, since the checks were undated; hence,
nothing had been altered.  Finally, Yu argued that Evangelista should not be allowed to invoke prescription, which
32

he was raising for the first time on appeal, and for which no evidence was adduced in the court of origin. 33

The CA denied the petition.  It held that (1) the reckoning time for the prescriptive period began when the instrument
34

was issued and the corresponding check returned by the bank to its depositor;  (2) the issue of prescription was
35

raised for the first time on appeal with the RTC;  (3) the writing of the date on the check cannot be considered as an
36

alteration, as the checks were undated, so there was nothing to change to begin with;  (4) the loan obligation was
37

never denied by petitioner, who claimed that it was settled in 1992, but failed to show any proof of
payment.  Quoting the MeTC Decision, the CA declared:
38

[t]he mere possession of a document evidencing an obligation by the person in whose favor it was executed, merely
raises a presumption of nonpayment which may be overcome by proof of payment, or by satisfactory explanation of
the fact that the instrument is found in the hands of the original creditor not inconsistent with the fact of payment. 39

The dispositive portion reads:

WHEREFORE, premises considered, the petition is DENIED. The assailed August 19, 2009 Order of the Regional
Trial Court, Branch 147, Makati City, denying petitioner's Motion for Reconsideration of the Court's December 18,
2008 Decision in Crim. Case Nos. 08-1723 and 08- 1724 are AFFIRMED.

SO ORDERED. 40

Petitioner filed a Motion for Reconsideration,  which was similarly denied in a Resolution  dated 27 February 2014.
41 42

Hence, this Petition,  in which petitioner contends that the lower court erred in ordering the accused to pay his
43

alleged civil obligation to private complainant. In particular, he argues that the court did not consider the
prosecution's failure to prove his civil liability to respondent, and that any civil liability there might have been was
already extinguished and/or barred by prescription. 44

Meanwhile, respondent filed its Comment,  arguing that the date of prescription was reckoned from the date of the
45

check, 22 December 2004. So when the complaint was filed on 25 August 2005, it was supposedly well within the
prescriptive period of ten (10) years under Article 1144 of the New Civil Code. 46

OUR RULING

With petitioner's acquittal of the criminal charges for violation of BP 22, the only issue to be resolved in this petition
is whether the CA committed a reversible error in holding that petitioner is still liable for the total amount of ₱l.5
million indicated in the two checks.

We rule in favor of petitioner.

A check is discharged by any other

act which will discharge a simple
contract for the payment of money.
In BP 22 cases, the action for the corresponding civil obligation is deemed instituted with the criminal action.  The
47

criminal action for violation of BP 22 necessarily includes the corresponding civil action, and no reservation to file
such civil action separately shall be allowed or recognized. 48

The rationale for this rule has been elucidated in this wise: Generally, no filing fees are required for criminal cases,
but because of the inclusion of the civil action in complaints for violation of B.P. 22, the Rules require the payment of
docket fees upon the filing of the complaint. This rule was enacted to help declog court dockets which are filled with
B.P. 22 cases as creditors actually use the courts as collectors. Because ordinarily no filing fee is charged in
criminal cases for actual damages, the payee uses the intimidating effect of a criminal charge to collect his
credit gratis and sometimes. upon being paid, the trial court is not even informed thereof. The inclusion of the civil
action in the criminal case is expected to significantly lower the number of cases filed before the courts for collection
based on dishonored checks. It is also expected to expedite the disposition of these cases. Instead of instituting two
separate cases, one for criminal and another for civil, only a single suit shall be filed and tried. It should be stressed
that the policy laid down by the Rules is to discourage the separate filing of the civil action. The Rules even prohibit
the reservation of a separate civil action, which means that one can no longer file a separate civil case after the
criminal complaint is filed in court. The only instance when separate proceedings are allowed is when the civil action
is filed ahead of the criminal case. Even then, the Rules encourage the consolidation of the civil and criminal cases.
We have previously observed that a separate civil action for the purpose of recovering the amount of the dishonored
checks would only prove to be costly, burdensome and time-consuming for both parties and would further delay the
final disposition of the case. This multiplicity of suits must be avoided.  (Citations omitted)
49

This notwithstanding, the civil action deemed instituted with the criminal action is treated as an "independent civil
liability based on contract." 50

By definition, a check is a bill of exchange drawn on a bank 'payable on demand.  It is a negotiable instrument -
51

written and signed by a drawer containing an unconditional order to pay on demand a sum certain in money.  It is 52

an undertaking that the drawer will pay the amount indicated thereon. Section 119 of the NIL, however, states that a
negotiable instrument like a check may be discharged by any other act which will discharge a simple contract for the
payment of money, to wit:

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. (Emphasis
supplied)

A check therefore is subject to prescription of actions upon a written contract. Article 1144 of the Civil Code
provides:

Article 1144. The following actions must be brought within ten years from the time the right of action accrues:

1) Upon a written contract;

2) Upon an obligation created by law;

3) Upon a judgment. (Emphasis supplied)

Barring any extrajudicial or judicial demand that may toll the 10-year prescription period and any evidence which
may indicate any other time when the obligation to pay is due, the cause of action based on a check is reckoned
from the date indicated on the check.

If the check is undated, however, as in the present petition, the cause of action is reckoned from the date of the
issuance of the check. This is so because regardless of the omission of the date indicated on the check, Section
17  of the Negotiable Instruments Law instructs that an undated check is presumed dated as of the time of its
53

issuance.

While the space for the date on a check may also be filled, it must, however, be filled up strictly in accordance with
the authority given and within a reasonable time.  Assuming that Yu had authority to insert the dates in the checks,
54

the fact that he did so after a lapse of more than 10 years from their issuance certainly cannot qualify as changes
made within a reasonable time.

Given the foregoing, the cause of action on the checks has become stale, hence, time-barred. No written
extrajudicial or judicial demand was shown to have been made within 10 years which could have tolled the period.
Prescription has indeed set in.

Prescription allows the court to

dismiss the case motu proprio.

We therefore have no other recourse but to grant the instant petition on the ground of prescription. Even if that
defense was belatedly raised before the RTC for the first time on appeal from the ruling of the Me TC, we
nonetheless dismiss the complaint, seeking to enforce the civil liability of Evangelista based on the undated checks,
by applying Section 1 of Rule 9 of the Rules of Court, to wit:

Section 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the
court shall dismiss the claim.

While it was on appeal before the RTC that petitioner invoked the defense of prescription, we find that the pleadings
and the evidence on record indubitably establish that the action to hold petitioner liable for the two checks has
already prescribed.

The delivery of the check produces

the effect of payment when through
the fault of the creditor they have
been impaired

It is a settled rule that the creditor's possession of the evidence of debt is proof that the debt has not been
discharged by payment.  It is likewise an established tenet that a negotiable instrument is only a substitute for
55

money and not money, and the delivery of such an instrument does not, by itself, operate as payment.  Thus, in BPI
56

v. Spouses Royeca,  we ruled that despite the lapse of three years from the time the checks were issued, the
57

obligation still subsisted and was merely suspended until the payment by commercial document could actually be
realized.
58

However, payment is deemed effected and the obligation for which the check was given as conditional payment is
treated discharged, if a period of 10 years or more has elapsed from the date indicated on the check until the date of
encashment or presentment for payment. The failure to encash the checks within a reasonable time after issue, or
more than 10 years in this instance, not only results in the checks becoming stale but also in the obligation to pay
being deemed fulfilled by operation of law.

Art. 1249 of the Civil Code specifically provides that checks should be presented for payment within a reasonable
period after their issuance, to wit:
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver
such currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce
the effect of payment only when they have been cashed, or when through the fault of the creditor they have been
impaired.

In the meantime, the action derived from the original obligation shall be held in the abeyance. (Emphasis supplied)

This rule is similarly stated in the Negotiable Instruments Law as follows:

Sec. 186. Within what time a check must be presented. - A check must be presented for p:iyment within a
reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused
by the delay. (Emphasis supplied)

These provisions were the very same ones we cited when we discharged a check by reason of the creditor's
unreasonable or unexplained delay in encashing it. In Papa v. Valencia,  the respondents supposedly paid the
59

petitioner the purchase price of the lots in cash and in check. The latter disputed this claim and argued that he had
never encashed the checks, and that he could no longer recall the transaction that happened 10 years earlier. This
Court ruled:

Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years undoubtedly
resulted in the impairment of the check through his unreasonable and unexplained delay.

While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art.
1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor's unreasonable delay in
presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if
he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of
the debt or obligation for which it was given. It has, likewise, been held that if no presentment is made at all, the
drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused. This is in
harmony with Article 1249 of the Civil Code under which payment by way of check or other negotiable instrument is
conditioned on its being cashed, except when through the fault of the creditor, the instrument is impaired. The payee
of a check would be a creditor under this provision and if its no-payment is caused by his negligence, payment will
be deemed effected and the obligation for which the check was given as conditional payment will be
discharged.  (Citations omitted and emphasis supplied)
60

Similarly in this case, we find that the delivery of the checks, despite the subsequent failure to encash them within a
period of 10 years or more, had the effect of payment. Petitioner is considered discharged from his obligation to pay
and can no longer be pronounced civilly liable for the amounts indicated thereon.

WHEREFORE, the instant Petition is GRANTED. The Decision dated 1 October 2013 and Resolution dated 27
February 2014 in CA-G.R. SP No. 110680 are SET ASIDE. The Complaint against petitioner is hereby DISMISSED.

SO ORDERED.

G.R. No. 175350               June 13, 2012

EQUITABLE BANKING CORPORATION, INC. Petitioner,

vs.
SPECIAL STEEL PRODUCTS, and AUGUSTO L. PARDO, Respondents.

DECISION

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

Before the Court is a Petition for Review on Certiorari of the October 13, 2006 Decision of the Court of Appeals (CA)
in CA-G.R. CV No. 62425. The dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered, the May 4, 1998 Decision of the Regional Trial Court of Pasig City, Branch
168, in Civil Case No. 63561, is hereby AFFIRMED.

SO ORDERED. 1

Factual Antecedents

Respondent Special Steel Products, Inc. (SSPI) is a private domestic corporation selling steel products. Its co-
respondent Augusto L. Pardo (Pardo) is SSPI’s President and majority stockholder. 2

International Copra Export Corporation (Interco) is its regular customer. 3

Jose Isidoro Uy, alias Jolly Uy (Uy), is an Interco employee, in charge of the purchasing department, and the son-in-
4 

law of its majority stockholder. 5

Petitioner Equitable Banking Corporation (Equitable or bank) is a private domestic corporation engaged in
banking and is the depository bank of Interco and of Uy.
6 

In 1991, SSPI sold welding electrodes to Interco, as evidenced by the following sales invoices:

Sales Invoice No. 65042 dated February 14, 1991 for ₱325,976.34 7

Sales Invoice No. 65842 dated April 11, 1991 for ₱345,412.80 8

Sales Invoice No. 65843 dated April 11, 1991 for ₱313,845.84 9

The due dates for these invoices were March 16, 1991 (for the first sales invoice) and May 11, 1991 (for the others).
The invoices provided that Interco would pay interest at the rate of 36% per annum in case of delay.

In payment for the above welding electrodes, Interco issued three checks payable to the order of SSPI on July 10,
1991, July 16, 1991, and July 29, 1991. Each check was crossed with the notation "account payee only" and was
10  11  12 

drawn against Equitable. The records do not identify the signatory for these three checks, or explain how Uy,
Interco’s purchasing officer, came into possession of these checks.

The records only disclose that Uy presented each crossed check to Equitable on the day of its issuance and claimed
that he had good title thereto. He demanded the deposit of the checks in his personal accounts in Equitable,
13 

Account No. 18841-2 and Account No. 03474-0. 14

Equitable acceded to Uy’s demands on the assumption that Uy, as the son-in-law of Interco’s majority
stockholder, was acting pursuant to Interco’s orders. The bank also relied on Uy’s status as a valued client. Thus,
15  16 

Equitable accepted the checks for deposit in Uy’s personal accounts and stamped "ALL PRIOR ENDORSEMENT
17 

AND/OR LACK OF ENDORSEMENT GUARANTEED" on their dorsal portion. Uy promptly withdrew the proceeds
18 

of the checks.

In October 1991, SSPI reminded Interco of the unpaid welding electrodes, amounting to ₱985,234.98. It reiterated
19 

its demand on January 14, 1992. SSPI explained its immediate need for payment as it was experiencing some
20 

financial crisis of its own. Interco replied that it had already issued three checks payable to SSPI and drawn against
Equitable. SSPI denied receipt of these checks.
On August 6, 1992, SSPI requested information from Equitable regarding the three checks. The bank refused to
give any information invoking the confidentiality of deposits. 21

The records do not disclose the circumstances surrounding Interco’s and SSPI’s eventual discovery of Uy’s scheme.
Nevertheless, it was determined that Uy, not SSPI, received the proceeds of the three checks that were payable to
SSPI. Thus, on June 30, 1993 (twenty-three months after the issuance of the three checks), Interco finally paid the
value of the three checks to SSPI, plus a portion of the accrued interests. Interco refused to pay the entire accrued
interest of ₱767,345.64 on the ground that it was not responsible for the delay. Thus, SSPI was unable to collect
₱437,040.35 (at the contracted rate of 36% per annum) in interest income. 22

SSPI and its president, Pardo, filed a complaint for damages with application for a writ of preliminary attachment
against Uy and Equitable Bank. The complaint alleged that the three crossed checks, all payable to the order of
SSPI and with the notation "account payee only," could be deposited and encashed by SSPI only. However, due to
Uy’s fraudulent representations, and Equitable’s indispensable connivance or gross negligence, the restrictive
nature of the checks was ignored and the checks were deposited in Uy’s account. Had the defendants not diverted
the three checks in July 1991, the plaintiffs could have used them in their business and earned money from them.
Thus, the plaintiffs prayed for an award of actual damages consisting of the unrealized interest income from the
proceeds of the checks for the two-year period that the defendants withheld the proceeds from them (from July 1991
up to June 1993). 23

In his personal capacity, Pardo claimed an award of ₱3 million as moral damages from the defendants. He allegedly
suffered hypertension, anxiety, and sleepless nights for fear that the government would charge him for tax evasion
or money laundering. He maintained that defendants’ actions amounted to money laundering and that it unfairly
implicated his company in the scheme. As for his fear of tax evasion, Pardo explained that the Bureau of Internal
Revenue might notice a discrepancy between the financial reports of Interco (which might have reported the checks
as SSPI’s income in 1991) and those of SSPI (which reported the income only in 1993). Since Uy and Equitable
were responsible for Pardo’s worries, they should compensate him jointly and severally therefor. 24

SSPI and Pardo also prayed for exemplary damages and attorney’s fees. 25

In support of their application for preliminary attachment, the plaintiffs alleged that the defendants are guilty of fraud
in incurring the obligation upon which the action was brought and that there is no sufficient security for the claim
sought to be enforced in this action.26

The trial court granted plaintiffs’ application. It issued the writ of preliminary attachment on September 20,
27 

1993, upon the filing of plaintiffs’ bond for ₱500,000.00. The sheriff served and implemented the writ against the
28 

personal properties of both defendants. 29

Upon Equitable’s motion and filing of a counter-bond, however, the trial court eventually discharged the
attachment against it.
30  31

Equitable then argued for the dismissal of the complaint for lack of cause of action. It maintained that interest
income is due only when it is expressly stipulated in writing. Since Equitable and SSPI did not enter into any
contract, Equitable is not liable for damages, in the form of unobtained interest income, to SSPI. Moreover, SSPI’s
32 

acceptance of Interco’s payment on the sales invoices is a waiver or extinction of SSPI’s cause of action based on
the three checks. 33

Equitable further argued that it is not liable to SSPI because it accepted the three crossed checks in good
faith. Equitable averred that, due to Uy’s close relations with the drawer of the checks, the bank had basis to
34 

assume that the drawer authorized Uy to countermand the original order stated in the check (that it can only be
deposited in the named payee’s account). Since only Uy is responsible for the fraudulent conversion of the checks,
he should reimburse Equitable for any amounts that it may be made liable to plaintiffs. 35

The bank counter-claimed that SSPI is liable to it in damages for the wrongful and malicious attachment of
Equitable’s personal properties. The bank maintained that SSPI knew that the allegation of fraud against the bank is
a falsehood. Further, the bank is financially capable to meet the plaintiffs’ claim should the latter receive a favorable
judgment. SSPI was aware that the preliminary attachment against the bank was unnecessary, and intended only to
humiliate or destroy the bank’s reputation. 36

Meanwhile, Uy answered that the checks were negotiated to him; that he is a holder for value of the checks and that
he has a good title thereto. He did not, however, explain how he obtained the checks, from whom he obtained his
37 

title, and the value for which he received them. During trial, Uy did not present any evidence but adopted Equitable’s
evidence as his own.

Ruling of the Regional Trial Court  38

The RTC clarified that SSPI’s cause of action against Uy and Equitable is for quasi-delict. SSPI is not seeking to
enforce payment on the undelivered checks from the defendants, but to recover the damage that it sustained from
the wrongful non-delivery of the checks. 39

The crossed checks belonged solely to the payee named therein, SSPI. Since SSPI did not authorize anyone to
receive payment in its behalf, Uy clearly had no title to the checks and Equitable had no right to accept the said
checks from Uy. Equitable was negligent in permitting Uy to deposit the checks in his account without verifying Uy’s
right to endorse the crossed checks. The court reiterated that banks have the duty to scrutinize the checks
deposited with it, for a determination of their genuineness and regularity. The law holds banks to a high standard
because banks hold themselves out to the public as experts in the field. Thus, the trial court found Equitable’s
explanation regarding Uy’s close relations with the drawer unacceptable. 40

Uy’s conversion of the checks and Equitable’s negligence make them liable to compensate SSPI for the actual
damage it sustained. This damage consists of the income that SSPI failed to realize during the delay. The trial court
41 

then equated this unrealized income with the interest income that SSPI failed to collect from Interco. Thus, it ordered
Uy and Equitable to pay, jointly and severally, the amount of ₱437,040.35 to SSPI as actual damages. 42

It also ordered the defendants to pay exemplary damages of ₱500,000.00, attorney’s fees amounting to
₱200,000.00, as well as costs of suit. 43

The trial court likewise found merit in Pardo’s claim for moral damages. It found that Pardo suffered anxiety,
sleepless nights, and hypertension in fear that he would face criminal prosecution. The trial court awarded Pardo the
amount of ₱3 million in moral damages. 44

The dispositive portion of the trial court’s Decision reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs Special Steel Products, Inc., and Augusto L. Pardo
and against defendants Equitable Banking Corporation [and] Jose Isidoro Uy, alias "Jolly Uy," ordering defendants
to jointly and severally pay plaintiffs the following:

1. ₱437,040.35 as actual damages;

2. ₱3,000,000.00 as moral damages to Augusto L. Pardo;

3. ₱500,000.00 as exemplary damages;

4. ₱200,000.00 as attorney’s fees; and

5. Costs of suit.

Defendant EBC’s counterclaim is hereby DISMISSED for lack of factual and legal basis.

Likewise, the crossclaim filed by defendant EBC against defendant Jose Isidoro Uy and the crossclaim filed by
defendant Jose Isidoro Uy against defendant EBC are hereby DISMISSED for lack of factual and legal basis.

SO ORDERED.
Pasig City, May 4, 1998. 45

The trial court denied Equitable’s motion for reconsideration in its Order dated November 19, 1998. 46

Only Equitable appealed to the CA, reiterating its defenses below.

47 

Appealed Ruling of the Court of Appeals 48

The appellate court found no merit in Equitable’s appeal.

It affirmed the trial court’s ruling that SSPI had a cause of action for quasi-delict against Equitable. The CA noted
49 

that the three checks presented by Uy to Equitable were crossed checks, and strictly made payable to SSPI only.
This means that the checks could only be deposited in the account of the named payee. Thus, the CA found that
50 

Equitable had the responsibility of ensuring that the crossed checks are deposited in SSPI’s account only. Equitable
violated this duty when it allowed the deposit of the crossed checks in Uy’s account.51

The CA found factual and legal basis to affirm the trial court’s award of moral damages in favor of Pardo. 52

It likewise affirmed the award of exemplary damages and attorney’s fees in favor of SSPI. 53

Issues

1. Whether SSPI has a cause of action against Equitable for quasi-delict;

2. Whether SSPI can recover, as actual damages, the stipulated 36% per annum interest from Equitable;

3. Whether speculative fears and imagined scenarios, which cause sleepless nights, may be the basis for the award
of moral damages; and

4. Whether the attachment of Equitable’s personal properties was wrongful.

Our Ruling

SSPI’s cause of action

This case involves a complaint for damages based on quasi-delict. SSPI asserts that it did not receive prompt
payment from Interco in July 1991 because of Uy’s wilful and illegal conversion of the checks payable to SSPI, and
of Equitable’s gross negligence, which facilitated Uy’s actions. The combined actions of the defendants deprived
SSPI of interest income on the said moneys from July 1991 until June 1993. Thus, SSPI claims damages in the form
of interest income for the said period from the parties who wilfully or negligently withheld its money from it.

Equitable argues that SSPI cannot assert a right against the bank based on the undelivered checks. It cites 54 

provisions from the Negotiable Instruments Law and the case of Development Bank of Rizal v. Sima Wei to argue 55 

that a payee, who did not receive the check, cannot require the drawee bank to pay it the sum stated on the checks.

Equitable’s argument is misplaced and beside the point. SSPI’s cause of action is not based on the three checks.
SSPI does not ask Equitable or Uy to deliver to it the proceeds of the checks as the rightful payee. SSPI does not
assert a right based on the undelivered checks or for breach of contract. Instead, it asserts a cause of action based
on quasi-delict. A quasi-delict is an act or omission, there being fault or negligence, which causes damage to
another. Quasi-delicts exist even without a contractual relation between the parties. The courts below correctly ruled
that SSPI has a cause of action for quasi-delict against Equitable.

The checks that Interco issued in favor of SSPI were all crossed, made payable to SSPI’s order, and contained the
notation "account payee only." This creates a reasonable expectation that the payee alone would receive the
proceeds of the checks and that diversion of the checks would be averted. This expectation arises from the
accepted banking practice that crossed checks are intended for deposit in the named payee’s account only and no
other. At the very least, the nature of crossed checks should place a bank on notice that it should exercise more
56 

caution or expend more than a cursory inquiry, to ascertain whether the payee on the check has authorized the
holder to deposit the same in a different account. It is well to remember that "[t]he banking system has become an
indispensable institution in the modern world and plays a vital role in the economic life of every civilized society.
Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business
and commerce, banks have attained an [sic] ubiquitous presence among the people, who have come to regard
them with respect and even gratitude and, above all, trust and confidence. In this connection, it is important that
banks should guard against injury attributable to negligence or bad faith on its part. As repeatedly emphasized,
since the banking business is impressed with public interest, the trust and confidence of the public in it is of
paramount importance. Consequently, the highest degree of diligence is expected, and high standards of integrity
and performance are required of it." 57

Equitable did not observe the required degree of diligence expected of a banking institution under the existing
factual circumstances.

The fact that a person, other than the named payee of the crossed check, was presenting it for deposit should have
put the bank on guard. It should have verified if the payee (SSPI) authorized the holder (Uy) to present the same in
its behalf, or indorsed it to him. Considering however, that the named payee does not have an account with
Equitable (hence, the latter has no specimen signature of SSPI by which to judge the genuineness of its
indorsement to Uy), the bank knowingly assumed the risk of relying solely on Uy’s word that he had a good title to
the three checks. Such misplaced reliance on empty words is tantamount to gross negligence, which is the
"absence of or failure to exercise even slight care or diligence, or the entire absence of care, evincing a thoughtless
disregard of consequences without exerting any effort to avoid them." 58

Equitable contends that its knowledge that Uy is the son-in-law of the majority stockholder of the drawer, Interco,
made it safe to assume that the drawer authorized Uy to countermand the order appearing on the check. In other
words, Equitable theorizes that Interco reconsidered its original order and decided to give the proceeds of the
checks to Uy. That the bank arrived at this conclusion without anything on the face of the checks to support it is
59 

demonstrative of its lack of caution. It is troubling that Equitable proceeded with the transaction based only on its
knowledge that Uy had close relations with Interco. The bank did not even make inquiries with the drawer, Interco
(whom the bank considered a "valued client"), to verify Uy’s representation. The banking system is placed in peril
when bankers act out of blind faith and empty promises, without requiring proof of the assertions and without
making the appropriate inquiries. Had it only exercised due diligence, Equitable could have saved both Interco and
the named payee, SSPI, from the trouble that the bank’s mislaid trust wrought for them.

Equitable’s pretension that there is nothing under the circumstances that rendered Uy’s title to the checks
questionable is outrageous. These are crossed checks, whose manner of discharge, in banking practice, is
restrictive and specific. Uy’s name does not appear anywhere on the crossed checks. Equitable, not knowing the
named payee on the check, had no way of verifying for itself the alleged genuineness of the indorsement to Uy. The
checks bear nothing on their face that supports the belief that the drawer gave the checks to Uy. Uy’s relationship to
Interco’s majority stockholder will not justify disregarding what is clearly ordered on the checks.

Actual damages

For its role in the conversion of the checks, which deprived SSPI of the use thereof, Equitable is solidarily liable with
Uy to compensate SSPI for the damages it suffered.

Among the compensable damages are actual damages, which encompass the value of the loss sustained by the
plaintiff, and the profits that the plaintiff failed to obtain. Interest payments, which SSPI claims, fall under the second
60 

category of actual damages.

SSPI computed its claim for interest payments based on the interest rate stipulated in its contract with Interco. It
explained that the stipulated interest rate is the actual interest income it had failed to obtain from Interco due to the
defendants’ tortious conduct.

The Court finds the application of the stipulated interest rate erroneous.
SSPI did not recover interest payments at the stipulated rate from Interco because it agreed that the delay was not
Interco’s fault, but that of the defendants’. If that is the case, then Interco is not in delay (at least not after issuance
of the checks) and the stipulated interest payments in their contract did not become operational. If Interco is not
liable to pay for the 36% per annum interest rate, then SSPI did not lose that income. SSPI cannot lose something
that it was not entitled to in the first place. Thus, SSPI’s claim that it was entitled to interest income at the rate
stipulated in its contract with Interco, as a measure of its actual damage, is fallacious.

More importantly, the provisions of a contract generally take effect only among the parties, their assigns and
heirs. SSPI cannot invoke the contractual stipulation on interest payments against Equitable because it is neither a
61 

party to the contract, nor an assignee or an heir to the contracting parties.

Nevertheless, it is clear that defendants’ actions deprived SSPI of the present use of its money for a period of two
years. SSPI is therefore entitled to obtain from the tortfeasors the profits that it failed to obtain from July 1991 to
June 1993. SSPI should recover interest at the legal rate of 6% per annum, this being an award for damages based
62 

on quasi-delict and not for a loan or forbearance of money.

Moral damages

Both the trial and appellate courts awarded Pardo ₱3 million in moral damages. Pardo claimed that he was
frightened, anguished, and seriously anxious that the government would prosecute him for money laundering and
tax evasion because of defendants’ actions. In other words, he was worried about the repercussions that
63 

defendants’ actions would have on him.

Equitable argues that Pardo’s fears are all imagined and should not be compensated. The bank points out that none
of Pardo’s fears panned out. 64

Moral damages are recoverable only when they are the proximate result of the defendant’s wrongful act or
omission. Both the trial and appellate courts found that Pardo indeed suffered as a result of the diversion of the
65 

three checks. It does not matter that the things he was worried and anxious about did not eventually materialize. It is
rare for a person, who is beset with mounting problems, to sift through his emotions and distinguish which fears or
anxieties he should or should not bother with. So long as the injured party’s moral sufferings are the result of the
defendants’ actions, he may recover moral damages.

The Court, however, finds the award of ₱3 million excessive. Moral damages are given not to punish the defendant
but only to give the plaintiff the means to assuage his sufferings with diversions and recreation. We find that the
66 

award of ₱50,000.00 as moral damages is reasonable under the circumstances.

67 

Equitable to recover amounts from Uy

Equitable then insists on the allowance of their cross-claim against Uy. The bank argues that it was Uy who was
enriched by the entire scheme and should reimburse Equitable for whatever amounts the Court might order it to pay
in damages to SSPI. 68

Equitable is correct. There is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is
derived at the expense of or with damages to another. In the instant case, the fraudulent scheme concocted by Uy
69 

allowed him to improperly receive the proceeds of the three crossed checks and enjoy the profits from these
proceeds during the entire time that it was withheld from SSPI. Equitable, through its gross negligence and mislaid
trust on Uy, became an unwitting instrument in Uy’s scheme. Equitable’s fault renders it solidarily liable with Uy,
insofar as respondents are concerned. Nevertheless, as between Equitable and Uy, Equitable should be allowed to
recover from Uy whatever amounts Equitable may be made to pay under the judgment. It is clear that Equitable did
not profit in Uy’s scheme. Disallowing Equitable’s cross-claim against Uy is tantamount to allowing Uy to unjustly
enrich himself at the expense of Equitable. For this reason, the Court allows Equitable’s cross-claim against Uy.

Preliminary attachment

Equitable next assails as error the trial court’s dismissal of its counter-claim for wrongful preliminary attachment. It
maintains that, contrary to SSPI’s allegation in its application for the writ, there is no showing whatsoever that
Equitable was guilty of fraud in allowing Uy to deposit the checks. Thus, the trial court should not have issued the
writ of preliminary attachment in favor of SSPI. The wrongful attachment compelled Equitable to incur expenses for
a counter-bond, amounting to ₱30,204.26, and caused it to sustain damage, amounting to ₱5 million, to its goodwill
and business credit. 70

SSPI submitted the following affidavit in support of its application for a writ of preliminary attachment:

I, Augusto L. Pardo, of legal age, under oath hereby depose and declare:

1. I am one of the plaintiffs in the above-entitled case; the other plaintiff is our family corporation, Special
Steel Products, Inc., of which I am the president and majority stockholder; I caused the preparation of the
foregoing Complaint, the allegations of which I have read, and which I hereby affirm to be true and correct
out of my own personal knowledge;

2. The corporation and I have a sufficient cause of action against defendants Isidoro Uy alias Jolly Uy and
Equitable Banking Corporation, who are guilty of fraud in incurring the obligation upon which this action is
brought, as particularly alleged in the Complaint, which allegations I hereby adopt and reproduce herein;

3. There is no sufficient security for our claim in this action and that the amount due us is as much as the
sum for which the order is granted above all legal counterclaims;

4. We are ready and able to put up a bond executed to the defendants in an amount to be fixed by the
Court[,] conditioned on the payment of all costs[,] which may be adjudged to defendants[,] and all
damages[,] which they may sustain by reason of the attachment of the court, should [the court] finally
adjudge that we are not entitled thereto. 71

The complaint (to which the supporting affidavit refers) cites the following factual circumstances to justify
SSPI’s application:

6. x x x Yet, notwithstanding the fact that SPECIAL STEEL did not open an account with EQUITABLE BANK
as already alleged, thru its connivance with defendant UY in his fraudulent scheme to defraud SPECIAL
STEEL, or at least thru its gross negligence EQUITABLE BANK consented to or allowed the opening of
Account No. 18841-2 at its head office and Account No. 03474-0 at its Ermita Branch in the name of
SPECIAL STEEL without the latter’s knowledge, let alone authority or consent, but obviously on the bases of
spurious or falsified documents submitted by UY or under his authority, which documents EQUITABLE
BANK did not bother to verify or check their authenticity with SPECIAL STEEL. 72

xxxx

9. On August 6, 1992, plaintiffs, thru counsel, wrote EQUITABLE BANK about the fraudulent transactions
involving the aforesaid checks, which could not have been perpetrated without its indispensable participation
and cooperation, or gross negligence, and therein solicited its cooperation in securing information as to the
anomalous and irregular opening of the false accounts maintained in SPECIAL STEEL’s name, but
EQUITABLE BANK malevolently shirking from its responsibility to prevent the further perpetration of fraud,
conveniently, albeit unjustifiably, invoked the confidentiality of the deposits and refused to give any
information, and accordingly denied SPECIAL STEEL’s valid request, thereby knowingly shielding the
identity of the ma[le]factors involved [in] the unlawful and fraudulent transactions.73

The above affidavit and the allegations of the complaint are bereft of specific and definite allegations of fraud
against Equitable that would justify the attachment of its properties. In fact, SSPI admits its uncertainty whether
Equitable’s participation in the transactions involved fraud or was a result of its negligence. Despite such uncertainty
with respect to Equitable’s participation, SSPI applied for and obtained a preliminary attachment of Equitable’s
properties on the ground of fraud. We believe that such preliminary attachment was wrongful. "[A] writ of preliminary
attachment is too harsh a provisional remedy to be issued based on mere abstractions of fraud. Rather, the rules
require that for the writ to issue, there must be a recitation of clear and concrete factual circumstances manifesting
that the debtor practiced fraud upon the creditor at the time of the execution of their agreement in that said debtor
had a preconceived plan or intention not to pay the creditor." No proof was adduced tending to show that Equitable
74 

had a preconceived plan not to pay SSPI or had knowingly participated in Uy’s scheme.

That the plaintiffs eventually obtained a judgment in their favor does not detract from the wrongfulness of the
preliminary attachment.  While "the evidence warrants [a] judgment in favor of [the] applicant, the proofs may
1âwphi1

nevertheless also establish that said applicant’s proffered ground for attachment was inexistent or specious, and
hence, the writ should not have issued at all x x x."
75

For such wrongful preliminary attachment, plaintiffs may be held liable for damages. However, Equitable is entitled
only to such damages as its evidence would allow, for the wrongfulness of an attachment does not automatically
76 

warrant the award of damages. The debtor still has the burden of proving the nature and extent of the injury that it
suffered by reason of the wrongful attachment. 77

The Court has gone over the records and found that Equitable has duly proved its claim for, and is entitled to
recover, actual damages. In order to lift the wrongful attachment of Equitable’s properties, the bank was compelled
to pay the total amount of ₱30,204.26 in premiums for a counter-bond. However, Equitable failed to prove that it
78 

sustained damage to its "goodwill and business credit" in consequence of the alleged wrongful attachment. There
was no proof of Equitable’s contention that respondents’ actions caused it public embarrassment and a bank run.

WHEREFORE, premises considered, the Petition is PARTIALLY GRANTED. The assailed October 13, 2006
Decision of the Court of Appeals in CA-G.R. CV No. 62425 is MODIFIED by:

1. REDUCING the award of actual damages to respondents to the rate of 6% per annum of the value of the
three checks from July 1991 to June 1993 or a period of twenty-three months;

2. REDUCING the award of moral damages in favor of Augusto L. Pardo from ₱3,000,000.00 to ₱
50,000.00; and

3. REVERSING the dismissal of Equitable Banking Corporation’s cross-claim against Jose Isidoro Uy, alias
Jolly Uy. Jolly Uy is hereby ORDERED to REIMBURSE Equitable Banking Corporation the amounts that the
latter will pay to respondents.

Additionally, the Court hereby REVERSES the dismissal of Equitable Banking Corporation’s counterclaim for
damages against Special Steel Products, Inc. This Court ORDERS Special Steel Products, Inc. to PAY Equitable
Banking Corporation actual damages in the total amount of ₱30,204.36, for the wrongful preliminary attachment of
its properties.

The rest of the assailed Decision is AFFIRMED.

SO ORDERED.

G.R. No. 89802 May 7, 1992

ASSOCIATED BANK and CONRADO CRUZ, petitioners,

vs.
HON. COURT OF APPEALS, and MERLE V. REYES, doing business under the name and style "Melissa's
RTW," respondents.

Soluta, Leonidas, Marifosque, Javier, Liboon & aguila Law Offices for petitioners.

Roberto B. Lugue for private respondent.

CRUZ, J.:

The sole issue raised in this case is whether or not the private respondent has a cause of action against the
petitioners for their encashment and payment to another person of certain crossed checks issued in her favor.

The private respondent is engaged in the business of ready-to-wear garments under the firm name "Melissa's
RTW." She deals with, among other customers, Robinson's Department Store, Payless Department Store,
Rempson Department Store, and the Corona Bazaar.

These companies issued in payment of their respective accounts crossed checks payable to Melissa's RTW in the
amounts and on the dates indicated below:

PAYOR BANK AMOUNT DATE

Payless Solid Bank P3,960.00 January 19, 1982

Robinson's FEBTC 4,140.00 December 18, 1981
Robinson's FEBTC 1,650.00 December 24, 1981
Robinson's FEBTC 1,980.00 January 12, 1982
Rempson TRB 1,575.00 January 9, 1982
Corona RCBC 2,500.00 December 22, 1981

When she went to these companies to collect on what she thought were still unpaid accounts, she was informed of
the issuance of the above-listed crossed checks. Further inquiry revealed that the said checks had been deposited
with the Associated Bank (hereinafter, "the Bank") and subsequently paid by it to one Rafael Sayson, one of its
"trusted depositors," in the words of its branch manager and co-petitioner, Conrado Cruz, Sayson had not been
authorized by the private respondent to deposit and encash the said checks.

The private respondent sued the petitioners in the Regional Trial Court of Quezon City for recovery of the total value
of the checks plus damages. After trial, judgment was rendered requiring them to pay the private respondent the
total value of the subject checks in the amount of P15,805.00 plus 12% interest, P50,000.00 actual damages,
P25,000.00 exemplary damages, P5,000.00 attorney's fees, and the costs of the suit.  1

The petitioners appealed to the respondent court, reiterating their argument that the private respondent had no
cause of action against them and should have proceeded instead against the companies that issued the checks. In
disposing of this contention, the Court of Appeals   said:
2

The cause of action of the appellee in the case at bar arose from the illegal, anomalous and irregular
acts of the appellants in violating common banking practices to the damage and prejudice of the
appellees, in allowing to be deposited and encashed as well as paying to improper parties without
the knowledge, consent, authority or endorsement of the appellee which totalled P15,805.00, the six
(6) checks in dispute which were "crossed checks" or "for payee's account only," the appellee being
the payee.

The three (3) elements of a cause of action are present in the case at bar, namely: (1) a right in favor
of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on
the part of the named defendant to respect or not to violate such right; and (3) an act or omission on
the part of such defendant violative of the right of the plaintiff or constituting a breach thereof.
(Republic Planters Bank vs. Intermediate Appellate Court, 131 SCRA 631).

And such cause of action has been proved by evidence of great weight. The contents of the said
checks issued by the customers of the appellee had not been questioned. There is no dispute that
the same are crossed checks or for payee's account only, which is Melissa's RTW. The appellee had
clearly shown that she had never authorized anyone to deposit the said checks nor to encash the
same; that the appellants had allowed all said checks to be deposited, cleared and paid to one
Rafael Sayson in violation of the instructions in the said crossed checks that the same were for
payee's account only; and that the appellee maintained a savings account with the Prudential Bank,
 Cubao Branch, Quezon City which never cleared the said checks and the appellee had been
damaged by such encashment of the same.

We affirm.

Under accepted banking practice, crossing a check is done by writing two parallel lines diagonally on the left top
portion of the checks. The crossing is special where the name of a bank or a business institution is written between
the two parallel lines, which means that the drawee should pay only with the intervention of that company.   The 3

crossing is general where the words written between the two parallel lines are "and Co." or "for payee's account
only," as in the case at bar. This means that the drawee bank should not encash the check but merely accept it for
deposit.  4

In State Investment House vs. IAC,   this Court declared that "the effects of crossing a check are: (1) that the check
5

may not be encashed but only deposited in the bank; (2) that the check may be negotiated only once –– to one who
has an account with a bank; and (3) that the act of crossing the check serves as a warning to the holder that the
check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that
purpose."

The effects therefore of crossing a check relate to the mode of its presentment for payment. Under Sec. 72 of the
Negotiable Instruments Law, presentment for payment, to be sufficient, must be made by the holder or by some
person authorized to receive payment on his behalf. Who the holder or authorized person is depends on the
instruction stated on the face of the check.

The six checks in the case at bar had been crossed and issued "for payee's account only." This could only signify
that the drawers had intended the same for deposit only by the person indicated, to wit, Melissa's RTW.

The petitioners argue that the cause of action for violation of the common instruction found on the face of the checks
exclusively belongs to the issuers thereof and not to the payee. Moreover, having acted in good faith as they merely
facilitated the encashment of the checks, they cannot be made liable to the private respondent.

The subject checks were accepted for deposit by the Bank for the account of Rafael Sayson although they were
crossed checks and the payee was not Sayson but Melissa's RTW. The Bank stamped thereon its guarantee that
"all prior endorsements and/or lack of endorsements (were) guaranteed." By such deliberate and positive act, the
Bank had for all legal intents and purposes treated the said checks as negotiable instruments and, accordingly,
assumed the warranty of the endorser.

The weight of authority is to the effect that "the possession of check on a forged or unauthorized indorsement is
wrongful, and when the money is collected on the check, the bank can be held 'for moneys had and received."   The 6

proceeds are held for the rightful owner of the payment and may be recovered by him. The position of the bank
taking the check on the forged or unauthorized indorsement is the same as if it had taken the check and collected
without indorsement at all. The act of the bank amounts to conversion of the check.  7

It is not disputed that the proceeds of the subject checks belonged to the private respondent. As she had not at any
time authorized Rafael Sayson to endorse or encash them, there was conversion of the funds by the Bank.

When the Bank paid the checks so endorsed notwithstanding that title had not passed to the endorser, it did so at its
peril and became liable to the payee for the value of the checks. This liability attached whether or not the Bank was
aware of the unauthorized endorsement. 8

The petitioners were negligent when they permitted the encashment of the checks by Sayson. The Bank should have first verified his right to endorse the crossed
checks, of which he was not the payee, and to deposit the proceeds of the checks to his own account. The Bank was by reason of the nature of the checks put
upon notice that they were issued for deposit only to the private respondent's account. Its failure to inquire into Sayson's authority was a breach of a duty it owed
to the private respondent.

As the Court stressed in Banco de Oro Savings and Mortgage Bank vs. Equitable Banking Corp.,   "the law imposes 9

a duty of diligence on the collecting bank to scrutinize checks deposited with it, for the purpose of determining their
genuineness and regularity. The collecting bank, being primarily engaged in banking, holds itself out to the public as
the expert on this field, and the law thus holds it to a high standard of conduct."
The petitioners insist that the private respondent has no cause of action against them because they have no privity
of contract with her. They also argue that it was Eddie Reyes, the private respondent's own husband, who endorsed
the checks.

Assuming that Eddie Reyes did endorse the crossed checks, we hold that the Bank would still be liable to the
private respondent because he was not authorized to make the endorsements. And even if the endorsements were
forged, as alleged, the Bank would still be liable to the private respondent for not verifying the endorser's authority.
There is no substantial difference between an actual forging of a name to a check as an endorsement by a person
not authorized to make the signature and the affixing of a name to a check as an endorsement by a person not
authorized to endorse it. 
10

The Bank does not deny collecting the money on the endorsement. It was its responsibility to inquire as to the
authority of Rafael Sayson to deposit crossed checks payable to Melissa's RTW upon a prior endorsement by Eddie
Reyes. The failure of the Bank to make this inquiry was a breach of duty that made it liable to the private respondent
for the amount of the checks.

There being no evidence that the crossed checks were actually received by the private respondent, she would have
a right of action against the drawer companies, which in turn could go against their respective drawee banks, which
in turn could sue the herein petitioner as collecting bank. In a similar situation, it was held that, to simplify
proceedings, the payee of the illegally encashed checks should be allowed to recover directly from the bank
responsible for such encashment regardless of whether or not the checks were actually delivered to the
payee.   We approve such direct action in the case at bar.
11

It is worth repeating that before presenting the checks for clearing and for payment, the Bank had stamped on the
back thereof the words: "All prior endorsements and/or lack of endorsements guaranteed," and thus made the
assurance that it had ascertained the genuineness of all prior endorsements.

We find that the respondent court committed no reversible error in holding that the private respondent had a valid
cause of action against the petitioners and that the latter are indeed liable to her for their unauthorized encashment
of the subject checks. We also agree with the reduction of the award of the exemplary damages for lack of sufficient
evidence to support them.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

Narvasa, C.J., Griño-Aquino, Medialdea and Bellosillo, JJ., concur.

G.R. No. 190432

ASIA BREWERY, INC. and CHARLIE S. GO, Petitioners,

vs.
EQUITABLE PCI BANK (now BANCO DE ORO-EPCI, INC.), Respondents

DECISION

SERENO, CJ,:

This is a petition for review  under Rule 45 assailing the Orders  of the Regional Trial Court (RTC) of Makati City in
1 2

Civil Case No. 04-336. The RTC ordered the dismissal of petitioners' Complaint for lack of cause of action and
denied their motion for reconsideration.

Petitioner Asia Brewery, Inc. (ABI) is a corporation organized and existing under the laws of the Philippines, while
petitioner Charlie S. Go (Go) was, at the time of the filing of this Petition, its assistant vice president for
finance.  Respondent is a banking institution also organized and existing under the laws of the Philippines.
3 4
On 23 March 2004, petitioners filed a Complaint  for payment, reimbursement, or restitution against respondent
5

before the RTC. On 7 May 2004, the latter filed its Answer (with Counterclaims),  in which it also raised the special
6

and/or affirmative defense of lack of cause of action, among others.

Records show that after an exchange of pleadings between the parties,  the RTC issued the assailed Orders without
7

proceeding to trial. It dismissed the Complaint for lack of cause of action, and also denied respondent's
counterclaims. Respondent did not appeal from that ruling. Only petitioners moved for reconsideration, but their
motion was likewise denied.

ANTECEDENT FACTS

The antecedent facts, as alleged by petitioners, are as follows:

Within the period of September 1996 to July 1998, 10 checks and 16 demand drafts (collectively, "instruments")
were issued in the name of Charlie Go.  The instruments, with a total value of ₱3,785,257.38, bore the annotation
8

"endorsed by PCI Bank, Ayala Branch, All Prior Endorsement And/Or Lack of Endorsement Guaranteed."  All the 9

demand drafts, except those issued by the Lucena City and Ozamis branches of Allied Bank, were crossed.  10

In their Complaint, petitioners narrate:

10. None of the above checks and demand drafts set out under the First, Second, Third, Fourth, Fifth, and Sixth
Causes of Action reached payee, co-plaintiff Charlie S. Go.

11. All of the above checks and demand drafts fell into the hands of a certain Raymond U. Keh, then a Sales
Accounting Manager of plaintiff Asia Brewery, Inc., who falsely, willfully, and maliciously pretending to be the payee,
co-plaintiff Charlie S. Go, succeeded in opening accounts with defendant Equitable PCI Bank in the name of Charlie
Go and thereafter deposited the said checks and demand drafts in said accounts and withdrew the proceeds thereof
to the damage and prejudice of plaintiff Asia Brewery, Inc.  11

Raymond Keh was allegedly charged with and convicted of theft and ordered to pay the value of the checks, but not
a single centavo was collected, because he jumped bail and left the country while the cases were still being tried.  12

In demanding payment from respondent, petitioners relied on Associated Bank v. CA,   in which this Court held "the
13

possession of check on a forged or unauthorized indorsement is wrongful, and when the money is collected on the
check, the bank can be held for moneys had and received."  14

In its Answer, respondent interpreted paragraphs 10 and 11 of the Complaint as an admission that the instruments
had not been delivered to the payee, petitioner Go.   It argued that the Complaint failed to state a cause of action
15

and that petitioners had no cause of action against it, because I) the Complaint failed to indicate that ABI was a
party to any of the instruments;   and 2) Go never became the holder or owner of the instruments due to nondelivery
16

and, hence, did not acquire any right or interest.   Respondent also opined that the claims were only enforceable
17

against the drawers of the checks and the purchasers of the demand drafts, and not against it as a mere "presentor
bank," because the nondelivery to Go was analogous to payment to a wrong party.  18

Respondent argued that Development Bank of Rizal v. Sima Wei   was squarely applicable to the case and cited
19

these portions of the Decision therein: 20

Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him. Delivery
of an instrument means transfer of possession, actual or constructive, from one person to another. Without the initial
delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. Moreover, such
delivery must be intended to give effect to the instrument.

The allegations of the petitioner in the original complaint show that the two (2) China Bank checks. numbered
384934 and 384935, were not delivered to the payee, the petitioner herein. Without the delivery of said checks to
petitioner-payee, the former did not acquire any right or interest therein and cannot therefore assert any cause
of action,founded on said checks, whether against the drawer Sima Wei or against the Producers Bank or any of the
other respondents.
 xxxx

However, insofar as the other respondents are concerned, petitioner Bank has no privity with them. Since petitioner
Bank never received the checks on which it based its action against said respondents, it never owned them (the
checks) nor did it acquire any interest therein. Thus, anything which the respondents may have done with respect to
said checks could not have prejudiced petitioner Bank. It had no right or interest in the checks which could have
been violakd hy said respondents. Petitioner Bank has therefore no cause of action against said respondents, in the
alternative or otherwise. If at all it is Sima Wei, the drawer, who would have a cause of action against her co-
respondents, if the allegations in the complaint are found to be true.

The RTC agreed with respondent that Development Bank v. Sima Wei was applicable.  It ruled that petitioners
21

could not have any cause of action against respondent, because the instruments had never been delivered; and that
the cause of action pertained to the drawers of the checks and the purchasers of the demand drafts.  As to the
22

propriety of a direct suit against respondent, the trial court found that the former exercised diligence in ascertaining
the true identity of Charlie Go, although he later turned out to be an impostor. This was unlike the finding
in Associated Bank v. CA  where the collecting bank allowed a person who was clearly not the payee to deposit the
23

checks and withdraw the amounts. 24

ISSUES

Petitioners argue that the trial court seriously erred in dismissing their Complaint for lack of cause of action. They
maintain that the al legations were sufficient to establish a cause of action in favor of Go.  They insist that the
25

allegation that the instruments were payable to Go was sutTtcient to establish a cause of action.  According to
26

them, the fact that the instruments never reached the payee did not mean that there was no delivery, because
delivery can be either actual or constructive.   They point out that Section 16 of the Negotiable Instruments Law
27

even provides for a presumption of delivery.   They further argue that the defense of lack of delivery is personal to
28

the maker or drawer, and that respondent was neither.  Petitioners emphasize that all the instruments were crossed
29

(except those issued by the Lucena and Ozamis branches of Allied Bank) and bore the annotation by respondent
that: "[A]ll prior endorsement and/or lack of endorsement guaranteed." In this light, the bank was allegedly estopped
from claiming nondelivery. 30

Petitioners observe that there was no other reason given for the dismissal of the case aside from lack of cause of
action. They stress that not a single witness or documentary evidence was presented in support of the affirmative
defense.31

COURT'S RULING

A reading of the Order dated 30 January 2008 reveals that the RTC dismissed the Complaint for lack of cause of
action prior to trial. At that time, this Court, in the 2003 case Bank of America NT&SA v. CA,   had already
32

emphasized that lack or absence of cause of action is not a ground for the dismissal of a complaint; and that the
issue may only be raised after questions of fact have been resolved on the basis of stipulations, admissions, or
evidence presented.

In this case, the trial court proceeded to rule in favor of the dismissal simply because it believed that the facts of
another case were "[o]n all fours [with] the instant controversy."  It was gravely erroneous, and deeply alarming, for
33

the RTC to have reached such a conclusion without first establishing the facts of the case pending before it. It must
be noted that the documents submitted to it were mere photocopies that had yet to be examined, proven,
authenticated, and admitted.

We are compelled to correct this glaring and serious error committed by the trial court. Accordingly, we grant the
petition.

Failure to state a cause of action is not the same as lack of cause of action; the terms are not interchangeable. It
may be observed that lack of cause of action is not among the grounds that may be raised in a motion to dismiss
under Rule 16 of the Rules of Court. The dismissal of a Complaint for lack of cause of action is based on Section 1
of Rule 33, which provides:
Section 1. Demurrer to evidence. - After the plaintiff has completed the presentation of his evidence, the defendant
may move for dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. If his
motion is denied he shall have the right to present evidence. If the motion is granted but on appeal the order of
dismissal is reversed he shall be deemed to have waived the right to present evidence. (Emphasis supplied)

If the Complaint fails to state a cause of action, a motion to dismiss must be made before a responsive pleading is
filed; and the issue can be resolved only on the basis of the allegations in the initiatory pleading.  On the other hand,
34

if the Complaint lacks a cause of action, the motion to dismiss must be filed after the plaintiff has rested its case.  35

In the first situation, the veracity of the allegations is immaterial; however, in the second situation, the judge must
determine the veracity of the allegations based on the evidence presented.  36

In PNB v. Spouses Rivera,   this Court upheld the CA ruling that the trial court therein erred in dismissing the
37

Complaint on the ground of lack of cause of action. We said that ''dismissal due to lack of cause of action may be
raised any time after the questions of fact have been resolved on the basis of stipulations, admissions, or evidence
presented by the plaintiff."  In the case at bar, the action has not even reached the pretrial stage.
38

In Pamaran v. Bank of Commerce,   petitioners came directly to this Court and raised the issue of whether the trial
39

court had erred in dismissing its Complaint only upon a motion to dismiss by way of affirmative defenses raised in
the Answer of the defendant therein. The Court ruled then:

Not only did the RTC Olongapo disregard the allegations in the Complaint, it also failed to consider that the
Bankcom's arguments necessitate the examination of the evidence that can be done through a full-blown
trial. The determination of whether Rosa has a right over the subject house and of whether Bankcom violated this
right cannot be addressed in a mere motion to dismiss. Such determination requires the contravention of the
allegations in the Complaint and the full adjudication of the merits of the case based on all the evidence adduced by
the parties. (Emphasis supplied)

In the same manner, the arguments raised by both of the parties to this case require an examination of evidence.
Even a determination of whether there was "delivery" in the legal sense necessitates a presentation of evidence. It
was erroneous for the RTC to have concluded that there was no delivery, just because the checks did not reach the
payee. It failed to consider Section 16 of the Negotiable Instruments Law, which envisions instances when
instruments may have been delivered to a person other than the payee. The provision states:

Sec. 16. Delivery; when effectual; when presumed. - Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties
and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must
be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may he;
and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for
the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in
due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively
presumed. And where the instrument is no longer in the possession of a party whose signature appears
thereon, a valid and intentional delivery by him is presumed until the contrary is proved. (Emphasis supplied)

Hence, in order to resolve whether the Complaint lacked a cause of action, respondent must have presented
evidence to dispute the presumption that the signatories validly and intentionally delivered the instrument.

Even assuming that the trial court merely used the wrong terminology, that it intended to dismiss the Complaint on
the ground of failure to state a cause of action, the Complaint would still have to be reinstated.

The test to determine whether a complaint states a cause of action against the defendants is this: admitting
hypothetically the truth of the allegations of fact made in the complaint, may a judge validly grant the relief
demanded in the complaint? 40

We believe that petitioner met this test.

A cause of action has three elements: 1) the legal right of the plaintiff; 2) the correlative obligation of the defendant
not to violate the right; and 3) the act or omission of the defendant in violation of that legal right.  In the case at bar,
41

petitioners alleged in their Complaint as follows:

1) They have a legal right to be paid for the value of the instruments.

18. In the said case of Associated Bank vs. Court of Appeals, it was held that the "weight of authority is to the effect
that 'the possession of a check on a forged or unauthorized indorsement is wrongful, and when the money is
collected on the check, the bank can be held for moneys had and received.' The proceeds are held for the rightful
owner of the payment and may be recovered by him. The position of the bank taking the check on the forged or
unauthorized indorsement is the same as if it had taken the check and collected without indorsement at all. The act
of the bank amounts to conversion of the check. " 42

2) Respondent has a correlative obligation to pay, having guaranteed all prior endorsements.

15. All of the commercial checks and demand drafts mentioned in the First, Second, Third, Fourth, Fifth and Sixth
Causes of Action were endorsed by PCI-Bank-Ayala Branch "All Prior Endorsement And / Or Lack of Endorsement
Guaranteed.  43

3) Respondent refused to pay despite demand.

17. In a letter dated 19 November 2003 which was duly received by defendant Equitable PCI Bank, Legal Services
Division, on December 17, 2003, plaintiff Charlie S. Go, relying on the decision in Associated Bank v. Court of
Appeals, 208 SCRA 465, demanded from defendant Equitable PCI Bank payment, reimbursement or restitution of
the value of the commercial checks and demand drafts mentioned in the First, Second, Third, Fourth, Fifth and Sixth
Causes of Action.  x x x
1âwphi1

xxxx

19. Instead of acceding to plaintiffs' valid and justifiable demand, defendant Equitable PCI Bank refused x x x. 44

It is of no moment that respondent denies that it has any obligation to pay. In determining the presence of the
elements, the inquiry is confined to the four corners of the complaint.  In fact, even if some of the allegations are in
45

the form of conclusions of law, the elements of a cause of action may still be present.  46

The Court believes that it need not delve into the issue of whether the instruments have been delivered, because it
is a matter of defense that would have to be proven during trial on the merits. In Aquino v. Quiazon,   we held that if
47

the allegations in a complaint furnish sufficient basis on which the suit may be maintained, the complaint should not
be dismissed regardless of the defenses that may be raised by the defendants.  In other words, "[a]n affirmative
48

defense, raising the ground that there is no cause of action as against the defendants poses a question of fact that
should be resolved after the conduct of the trial on the merits." 49

WHEREFORE, the petition is GRANTED. The Order dated 30 January 2008 issued by Judge Benjamin T. Pozon
and the Order dated 23 November 2009 issued by Judge Winlove Dumayas in Civil Case No. 04- 336
are REVERSED and SET ASIDE. The Complaint is REINSTATED, and the case is ordered REMANDED to the
Regional Trial Court of Makati City for further proceedings. Let the records of the case be likewise remanded to the
court a quo.

SO ORDERED.

G.R. No. 126568             April 30, 2003

QUIRINO GONZALES LOGGING CONCESSIONAIRE, QUIRINO GONZALES and EUFEMIA
GONZALES, petitioners,
vs.
THE COURT OF APPEALS (CA) and REPUBLIC PLANTERS BANK, respondents.

CARPIO MORALES, J.:

In the expansion of its logging business, petitioner Quirino Gonzales Logging Concessionaire (QGLC), through its
proprietor, general manager — co-petitioner Quirino Gonzales, applied on October 15, 1962 for credit
accommodations1 with respondent Republic Bank (the Bank), later known as Republic Planters Bank.

The Bank approved QGLC's application on December 21, 1962, granting it a credit line of P900,000.002 broken into
an overdraft line of P500,000.00 which was later reduced to P450,000.00 and a Letter of Credit (LC) line of
P400,000.00.3

Pursuant to the grant, the Bank and petitioners QGLC and the spouses Quirino and Eufemia Gonzales executed ten
documents: two denominated "Agreement for Credit in Current Account,"4 four denominated "Application and
Agreement for Commercial Letter of Credit,"5 and four denominated "Trust Receipt."6

Petitioners' obligations under the credit line were secured by a real estate mortgage on four parcels of land: two in
Pandacan, Manila, one in Makati (then part of Rizal), and another in Diliman, Quezon City.7

In separate transactions, petitioners, to secure certain advances from the Bank in connection with QGLC's
exportation of logs, executed a promissory note in 1964 in favor of the Bank. They were to execute three more
promissory notes in 1967.

In 1965, petitioners having long defaulted in the payment of their obligations under the credit line, the Bank
foreclosed the mortgage and bought the properties covered thereby, it being the highest bidder in the auction sale
held in the same year. Ownership over the properties was later consolidated in the Bank on account of which new
titles thereto were issued to it.8

On January 27, 1977, alleging non-payment of the balance of QGLC's obligation after the proceeds of the
foreclosure sale were applied thereto, and non-payment of the promissory notes despite repeated demands, the
Bank filed a complaint for "sum of money" (Civil Case No. 106635) against petitioners before the Regional Trial
Court (RTC) of Manila.

The complaint listed ten causes of action. The first concerns the overdraft line under which the Bank claimed that
petitioners withdrew amounts (unspecified) at twelve percent per annum which were unpaid at maturity and that
after it applied the proceeds of the foreclosure sale to the overdraft debt, there remained an unpaid balance of
P1,224,301.56.

The Bank's second to fifth causes of action pertain to the LC line under which it averred that on the strength of the
LCs it issued, the beneficiaries thereof drew and presented sight drafts to it which it all paid after petitioners'
acceptance; and that it delivered the tractors and equipment subject of the LCs to petitioners who have not paid
either the full or part of the face value of the drafts.

Specifically with respect to its second cause of action, the Bank alleged that it issued LC No. 63-0055D on January
15, 1963 in favor of Monark International Incorporated9 covering the purchase of a tractor10 on which the latter
allegedly drew a sight draft with a face value of P71,500.00,11 which amount petitioners have not, however, paid in
full.

Under its third cause of action, the Bank charged that it issued LC No. 61-1110D on December 27, 1962 also in
favor of Monark International covering the purchase of another tractor and other equipment;12 and that Monark
International drew a sight draft with a face value of P80,350.00,13 and while payments for the value thereof had been
made by petitioners, a balance of P68,064.97 remained.
Under the fourth cause of action, the Bank maintained that it issued LC No. 63-0182D on February 11, 1963 in favor
of J.B.L. Enterprises, Inc.14 covering the purchase of two tractors,15 and J.B.L. Enterprises drew on February 13,
1963 a sight draft on said LC in the amount of P155,000.00 but petitioners have not paid said amount.

On its fifth cause of action, the Bank alleged that it issued LC No. 63-0284D on March 14, 1963 in favor of Super
Master Auto Supply (SMAS) covering the purchase of "Eight Units GMC (G.I.) Trucks"; that on March 14, 1963,
SMAS drew a sight draft with a face value of P64,000.0016 on the basis of said LC; and that the payments made by
petitioners for the value of said draft were deficient by P45,504.74.

The Bank thus prayed for the settlement of the above-stated obligations at an interest rate of eleven percent per
annum, and for the award of trust receipt commissions, attorney's fees and other fees and costs of collection.

The sixth to ninth causes of action are anchored on the promissory notes issued by petitioners allegedly to secure
certain advances from the Bank in connection with the exportation of logs as reflected above.17 The notes were
payable 30 days after date and provided for the solidary liability of petitioners as well as attorney's fees at ten
percent of the total amount due18 in the event of their non-payment at maturity.

The note dated June 18, 1964, subject of the sixth cause of action, has a face value of P55,000.00 with interest rate
of twelve percent per annum;19 that dated July 7, 1967 subject of the seventh has a face value of P20,000.00;20 that
dated July 18, 1967 subject of the eighth has a face value of P38,000.00;21 and that dated August 23, 1967 subject
of the ninth has a face value of P11,000.00.22 The interest rate of the last three notes is pegged at thirteen
percent per annum.23

On its tenth and final cause of action, the Bank claimed that it has accounts receivable from petitioners in the
amount of P120.48.

In their Answer24 of March 3, 1977, petitioners admit the following: having applied for credit accommodations totaling
P900,000.00 to secure which they mortgaged real properties; opening of the LC/Trust Receipt Line; the issuance by
the Bank of the various LCs; and the foreclosure of the real estate mortgage and the consolidation of ownership
over the mortgaged properties in favor of the Bank. They deny, however, having availed of the credit
accommodations and having received the value of the promissory notes, as they do deny having physically received
the tractors and equipment subject of the LCs.

As affirmative defenses, petitioners assert that the complaint states no cause of action, and assuming that it does,
the same is/are barred by prescription or null and void for want of consideration.

By Order of March 10, 1977, Branch 36 of the Manila RTC attached the preferred shares of stocks of the spouses
Quirino and Eufemia Gonzales with the Bank with a total par value of P414,000.00.

Finding for petitioners, the trial court rendered its Decision of April 22, 1992 the dispositive portion of which reads:

WHEREFORE, judgment is rendered as follows:

1. All the claims of plaintiff particularly those described in the first to the tenth causes of action of its
complaint are denied for the reasons earlier mentioned in the body of this decision;

2. As regards the claims of defendants pertaining to their counterclaim (Exhibits "1", "2" and "3"), they are
hereby given ten (10) years from the date of issuance of the torrens title to plaintiff and before the transfer
thereof in good faith to a third party buyer within which to ask for the reconveyance of the real properties
foreclosed by plaintiff,

3. The order of attachment which was issued against the preferred shares of stocks of defendants-spouses
Quirino Gonzales and Eufemia Gonzales with the Republic Bank now known as Republic Planters Bank
dated March 21, 1977 is hereby dissolved and/or lifted, and

4. Plaintiff is likewise ordered to pay the sum of P20,000.00, as and for attorney's fees, with costs against
plaintiff.
 SO ORDERED.

In finding for petitioners, the trial court ratiocinated:25

Art. 1144 of the Civil Code states that an action upon a written contract prescribes in ten (10) years from the
time the right of action accrues. Art. 1150 states that prescription starts to run from the day the action may
be brought. The obligations allegedly created by the written contracts or documents supporting plaintiff's first
to the sixth causes of action were demandable at the latest in 1964. Thus when the complaint was filed on
January 27, 1977 more than ten (10) years from 1964 [when the causes of action accrued] had already
lapsed. The first to the sixth causes of action are thus barred by prescription. . . .

As regards the seventh and eight causes of action, the authenticity of which documents were partly in doubt
in the light of the categorical and uncontradicted statements that in 1965, defendant Quirino Gonzales
logging concession was terminated based on the policy of the government to terminate logging concessions
covering less than 20,000 hectares. If this is the case, the Court is in a quandary why there were log exports
in 1967? Because of the foregoing, the Court does not find any valid ground to sustain the seventh and
eight causes of action of plaintiff's complaint.

As regards the ninth cause of action, the Court is baffled why plaintiff extended to defendants another loan
when defendants according to plaintiff's records were defaulting creditors? The above facts and
circumstances has (sic) convinced this Court to give credit to the testimony of defendants' witnesses that the
Gonzales spouses signed the documents in question in blank and that the promised loan was never
released to them. There is therefore a total absence of consent since defendants did not give their consent
to loans allegedly procured, the proceeds of which were never received by the alleged debtors, defendants
herein. . . .

Plaintiff did not present evidence to support its tenth cause of action. For this reason, it must consequently
be denied for lack of evidence.

On the matter of [the] counterclaims of defendants, they seek the return of the real and personal properties
which they have given in good faith to plaintiff. Again, prescription may apply. The real properties of
defendants acquired by plaintiff were foreclosed in 1965 and consequently, defendants had one (1) year to
redeem the property or ten (10) years from issuance of title on the ground that the obligation foreclosed was
fictitious.

xxx           xxx           xxx

On appeal,26 the Court of Appeals (CA) reversed the decision of the trial court by Decision27 of June 28, 1996 which
disposed as follows:28

WHEREFORE, premises considered, the appealed decision (dated April 22, 1992) of the Regional Trial
Court (Branch 36) in Manila in Civil Case No. 82-4141 is hereby REVERSED — and let the case be
remanded back to the court a quo for the determination of the amount(s) to be awarded to the [the Bank]-
appellant relative to its claims against the appellees.

SO ORDERED.

With regard to the first to sixth causes of action, the CA upheld the contention of the Bank that the notices of
foreclosure sale were "tantamount" to demand letters upon the petitioners which interrupted the running of the
prescriptive period.29

As regards the seventh to ninth causes of action, the CA also upheld the contention of the Bank that the written
agreements-promissory notes prevail over the oral testimony of petitioner Quirino Gonzales that the cancellation of
their logging concession in 1967 made it unbelievable for them to secure in 1967 the advances reflected in the
promissory notes.30

With respect to petitioners' counterclaim, the CA agreed with the Bank that:31
 Certainly, failure on the part of the trial court to pass upon and determine the authenticity and genuineness
of [the Bank's] documentary evidence [the trial court having ruled on the basis of prescription of the Bank's
first to sixth causes of action] makes it impossible for the trial court' to eventually conclude that the obligation
foreclosed (sic) was fictitious. Needless to say, the trial court's ruling averses (sic) the well-entrenched rule
that 'courts must render verdict on their findings of facts." (China Banking Co. vs. CA, 70 SCRA 398)

Furthermore, the defendants-appellees' [herein petitioners'] counterclaim is basically an action for the
reconveyance of their properties, thus, the trial court's earlier ruling that the defendants-appellees'
counterclaim has prescribed is itself a ruling that the defendants-appellees' separate action for
reconveyance has also prescribed.

The CA struck down the trial court's award of attorney's fees for lack of legal basis.32

Hence, petitioners now press the following issues before this Court by the present petition for review on certiorari:

1. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT RESPONDENT-

APPELLEES (SIC.) REPUBLIC PLANTERS BANK['S] FIRST, SECOND, THIRD, FOURTH, FIFTH AND
SIXTH CAUSES OF ACTION HAVE NOT PRESCRIBED CONTRARY TO THE FINDINGS OF THE LOWER
COURT, RTC BRANCH 36 THAT THE SAID CAUSES OF ACTION HAVE ALREADY PRESCRIBED.

2. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT RESPODNENT-

APPELLEES (SIC.) REPUBLIC PLANTERS BANK['S] SEVENTH, EIGHT AND NINTH CAUSES OF
ACTION APPEARS (SIC.) TO BE IMPRESSED WITH MERIT CONTRARY TO THE FINDINGS OF THE
LOWER COURT RTC BRANCH 36 THAT THE SAID CAUSES HAVE NO VALID GROUND TO SUSTAIN
[THEM] AND FOR LACK OF EVIDENCE.

3. WHETHER OR NOT RESPONDENT COURT [ERRED] IN REVERSING THE FINDINGS OF THE

REGIONAL TRIAL COURT BRANCH 36 OF MANILA THAT PETITIONERS-APPELLANT (SIC.) MAY SEEK
THE RETURN OF THE REAL AND PERSONAL PROPERTIES WHICH THEY MAY HAVE GIVEN IN
GOOD FAITH AS THE SAME IS BARRED BY PRESCRIPTION AND THAT PETITIONERS-APPELLANT
(SIC.) HAD ONE (1) YEAR TO REDEEM THE PROPERTY OR TEN (10) YEARS FROM ISSUANCE OF
THE TITLE ON THE GROUND THAT THE OBLIGATION FORECLOSED WAS FICTITIOUS.

4. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT PEITIONERS-

APPELLANTS [SIC] ARE NOT ENTITLED TO AN AWARD OF ATTORNEY'S FEES.

The petition is partly meritorious.

On the first issue. The Civil Code provides that an action upon written contract, an obligation created by law, and a
judgment must be brought within ten years from the time the right of action accrues.33

The finding of the trial court that more than ten years had elapsed since the right to bring an action on the Bank's
first to sixth causes had arisen34 is not disputed. The Bank contends, however, that "the notices of foreclosure sale
in the foreclosure proceedings of 1965 are tantamount to formal demands upon petitioners for the payment of their
past due loan obligations with the Bank, hence, said notices of foreclosure sale interrupted/forestalled the running of
the prescriptive period."35

The Bank's contention does not impress. Prescription of actions is interrupted when they are filed before the court,
when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the
debt by the debtor.36

The law specifically requires a written extrajudicial demand by the creditors which is absent in the case at bar. The
contention that the notices of foreclosure are "tantamount" to a written extrajudicial demand cannot be appreciated,
the contents of said notices not having been brought to light.

But even assuming arguendo that the notices interrupted the running of the prescriptive period, the argument would
still not lie for the following reasons:
With respect to the first to the fifth causes of action, as gleaned from the complaint, the Bank seeks the recovery of
the deficient amount of the obligation after the foreclosure of the mortgage. Such suit is in the nature of a mortgage
action because its purpose is precisely to enforce the mortgage contract.37 A mortgage action prescribes after ten
years from the time the right of action accrued.38

The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in the sale of the
property at public auction and the outstanding obligation at the time of the foreclosure proceedings.39 In the present
case, the Bank, as mortgagee, had the right to claim payment of the deficiency after it had foreclosed the mortgage
in 1965.40 In other words, the prescriptive period started to run against the Bank in 1965. As it filed the complaint
only on January 27, 1977, more than ten years had already elapsed, hence, the action on its first to fifth causes had
by then prescribed. No other conclusion can be reached even if the suit is considered as one upon a written contract
or upon an obligation to pay the deficiency which is created by law,41 the prescriptive period of both being also ten
years.42

As regards the promissory note subject of the sixth cause of action, its period of prescription could not have been
interrupted by the notices of foreclosure sale not only because, as earlier discussed, petitioners' contention that the
notices of foreclosure are tantamount to written extra-judicial demand cannot be considered absent any showing of
the contents thereof, but also because it does not appear from the records that the said note is covered by the
mortgage contract.

Coming now to the second issue, petitioners seek to evade liability under the Bank's seventh to ninth causes of
action by claiming that petitioners Quirino and Eufemia Gonzales signed the promissory notes in blank; that they
had not received the value of said notes, and that the credit line thereon was unnecessary in view of their money
deposits, they citing "Exhibits 2 to 2-B,"43 in, and unremitted proceeds on log exports from, the Bank. In support of
their claim, they also urge this Court to look at Exhibits "B" (the Bank's recommendation for approval of petitioners'
application for credit accommodations), "P" (the "Application and Agreement for Commercial Letter of Credit" dated
January 16, 1963) and "T" (the "Application and Agreement for Commercial Letter of Credit" dated February 14,
1963).

The genuineness and due execution of the notes had, however, been deemed admitted by petitioners, they having
failed to deny the same under oath.44 Their claim that they signed the notes in blank does not thus lie.

Petitioners' admission of the genuineness and due execution of the promissory notes notwithstanding, they raise
want of consideration45 thereof. The promissory notes, however, appear to be negotiable as they meet the
requirements of Section 146 of the Negotiable Instruments Law. Such being the case, the notes are prima
facie deemed to have been issued for consideration.47 It bears noting that no sufficient evidence was adduced by
petitioners to show otherwise.

Exhibits "2" to "2-B" to which petitioners advert in support of their claim that the credit line on the notes was
unnecessary because they had deposits in, and remittances due from, the Bank deserve scant consideration. Said
exhibits are merely claims by petitioners under their then proposals for a possible settlement of the case dated
February 3, 1978. Parenthetically, the proposals were not even signed by petitioners but by certain Attorneys
Osmundo R. Victoriano and Rogelio P. Madriaga.

In any case, it is no defense that the promissory notes were signed in blank as Section 1448 of the Negotiable
Instruments Law concedes the prima facie authority of the person in possession of negotiable instruments, such as
the notes herein, to fill in the blanks.

As for petitioners' reliance on Exhibits "B", "P" and "T," they have failed to show the relevance thereof to the seventh
up to the ninth causes of action of the Bank.

On the third issue, petitioners asseverate that with the trial court's dismissal of the Bank's complaint and the denial
of its first to sixth causes of action, it is but fair and just that the real properties which were mortgaged and
foreclosed be returned to them.49 Such, however, does not lie. It is not disputed that the properties were foreclosed
under Act No. 3135 (An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real
Estate Mortgages), as amended. Though the Bank's action for deficiency is barred by prescription, nothing irregular
attended the foreclosure proceedings to warrant the reconveyance of the properties covered thereby.
As for petitioners' prayer for moral and exemplary damages, it not having been raised as issue before the courts
below, it can not now be considered. Neither can the award of attorney's fees for lack of legal basis.

WHEREFORE, the CA Decision is hereby AFFIRMED with MODIFICATION.

Republic Bank's Complaint with respect to its first to sixth causes of action is hereby DISMISSED. Its complaint with
respect to its seventh to ninth causes of action is REMANDED to the court of origin, the Manila Regional Trial Court,
Branch 36, for it to determine the amounts due the Bank thereunder.

SO ORDERED.