First DIVISION

November 20, 2017

G.R. No. 211564

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

DECISION

SERENO, CJ.:

This is a Petition2 for Review on Certiorari seeking to set aside the Decision3 and

Resolution4 rendered by the Court 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 61.6 The Information reads:

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.9 In the instant case, the court
held that while prosecution witness Alexander G. 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.10 Hence, the court acquitted him of the criminal charges.

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.11 It further held that the creditor's possession of
the instrument of credit was sufficient evidence that the debt claimed had not yet been paid.12 In
the end, Evangelista was declared liable for the corresponding civil obligation.13

The dispositive portion of the Decision14 reads:

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 Appeal16 and raised two errors of the MeTC before the
Regional Trial Court (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,18 the R TC ruled that the checks should
be taken as evidence of Evangelista's indebtedness to Gotuaco, such that even if the criminal
aspect of the charge had not been established, the obligation subsisted.19 Also, the alleged
payment by Evangelista was an affirmative defense that he had the burden of proving, but that he
failed to discharge.20 With respect to the defense of prescription, the RTC 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 Decision22 dated 18 December 2008, the R TC dismissed the appeal and affirmed the MeTC
decision in toto.23 The Motion for Reconsideration24 was likewise denied in an Order25 dated 19
August 2009.

THE RULING OF THE CA

Evangelista filed a petition for review26 before the CA insisting that the lower court erred in
finding him liable to pay 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.28 Yu claimed that he had testified on the
basis of his personal 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.29 Moreover, Yu argued that prescription set 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.30 Yu also argued that while Evangelista
claimed under oath that the loan had been paid in 1992, he was not able to present any proof of
payment.31 Meanwhile, Yu insisted that the material alteration invoked by Evangelista was
unavailing, since the checks were undated; hence, nothing had been altered.32 Finally, Yu argued
that Evangelista should not be allowed to invoke prescription, which 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.34 It held that (1) the reckoning time for the prescriptive period began
when the instrument was issued and the corresponding check returned by the bank to its
depositor;35 (2) the issue of prescription was raised for the first time on appeal with the
RTC;36 (3) the writing of the date on the check cannot be considered as an alteration, as the
checks were undated, so there was nothing to change to begin with;37 (4) the loan obligation was
never denied by petitioner, who claimed that it was settled in 1992, but failed to show any proof
of payment.38 Quoting the MeTC Decision, the CA declared:

[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,41 which was similarly denied in a

Resolution42 dated 27 February 2014.

Hence, this Petition,43 in which petitioner contends that the lower court erred in ordering the
accused to pay his 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,45 arguing that the date of prescription was reckoned
from the date of the 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.47 The 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.49 (Citations omitted)

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.51 It is a
negotiable instrument - written and signed by a drawer containing an unconditional order to pay
on demand a sum certain in money.52 It is 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 1753 of the Negotiable Instruments Law instructs that an undated
check is presumed dated as of the time of its 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.54 Assuming that Yu had
authority to insert the dates in the checks, 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.55 It is likewise an established tenet that a negotiable instrument
is only a substitute for money and not money, and the delivery of such an instrument does not, by
itself, operate as payment.56 Thus, in BPI v. Spouses Royeca,57 we ruled that despite the lapse of
three years from the time the checks were issued, the 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,59 the
respondents supposedly paid the 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.60 (Citations omitted and emphasis supplied)

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.

FIRST DIVISION

[G.R. No. 105188. January 23, 1998.]

MYRON C. PAPA, Administrator of the Testate Estate of Angela M. Butte, Petitioner, v.

A.U. VALENCIA and CO. INC., FELIX PEÑARROYO, SPS. ARSENIO B. REYES &
AMANDA SANTOS, and DELFIN JAO, Respondents.

Quijano and Padilla, for Petitioners.

Padilla Jimenez Kintanar and Asuncion Law Offices, for Private Respondent.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; PAYMENT BY CHECK WHEN

CONDITIONED ON ITS BEING CASHED EXCEPT THROUGH THE FAULT OF THE
CREDITOR THE INSTRUMENT IS IMPAIRED; WHERE NON-PAYMENT IS CAUSED BY
HIS NEGLIGENCE, PAYMENT IS DEEMED EFFECTED. — While it is true that the delivery
of a cheek 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
non-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.

2. REMEDIAL LAW; ACTIONS; APPROPRIATE ACTION MAY BE FILLED TO

ENFORCE A LIEN ON AN ASSIGNMENT OF MORTGAGE RIGHTS; ACTION
DIFFERENT FROM SPECIFIC PERFORMANCE; CASE AT BAR. — We regard to the
alleged assignment of mortgage rights, respondent Court of Appeals has found that the
conditions under which said mortgage rights of the bank were assigned are not clear. Indeed, a
perusal of the original records of the case would show that there is nothing there that could shed
light on the transactions leading to the said assignment of rights; nor is there any evidence on
record of the conditions under which said mortgage rights were assigned. What is certain is that
despite the said assignment of mortgage rights, the title to the subject property has remained in
the name of the late Angela M. Butte. This much is admitted by petitioner himself in his answer
to respondents’ complaint as well as in the third party complaint that petitioner filed against
respondent-spouses Arsenio B. Reyes and Amanda Santos. Assuming arguendo that the
mortgage rights of the Associated Citizens Bank had been assigned to the estate of Ramon Papa,
Jr., and granting that the assigned Mortgage rights validly exist and constitute a lien on the
property, the estate may file the appropriate action to enforce such lien. The cause of action for
specific performance which respondents Valencia and Peñarroyo have against petitioner is
different from the cause of action which estate of Ramon Papa, Jr. may have to enforce whatever
rights or liens it has on the property by reason of its being an alleged assignee of the bank’s
rights of mortgage.

3. ID.; ID.; REPRESENTATIVE PARTIES; AN EXECUTOR OR ADMINISTRATOR MAY

BE SUED WITHOUT GOING THE STATE OF THE DECEASED. — Finally, the estate of
Angela M. Butte is not an indispensable party. Under Section 3 of Rule 3 of the Rules of Court,
an executor or administrator may sue or be sued without joining the party for whose benefit the
action is presented or defended.

4. ID.; ID.; SUBSISTING AND PRIOR MORTGAGE RIGHTS MAY BE ENFORCED

REGARDLESS OF CHANGE OF OWNERSHIP. — Neither is the estate of Ramon Papa, Jr. an
indispensable party without whom, no final determination of the action can be had. Whatever
prior and subsisting mortgage rights the estate of Ramon Papa, Jr. has over the property may still
be enforced regardless of the change in ownership thereof.

DECISION

KAPUNAN, J.:
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Myron C.
Papa seeks to reverse and set aside 1) the Decision dated 27 January 1992 of the Court of
Appeals which affirmed with modification the decision of the trial court; and 2) the Resolution
dated 22 April 1992 of the same court, which denied petitioner’s motion for reconsideration of
the above decision.chanrobles.com:cralaw:red

The antecedent facts of this case are as follows:chanrob1es virtual 1aw library

Sometime in June 1982, herein private respondents A.U. Valencia and Co., Inc. (hereinafter
referred to as respondent Valencia, for brevity) and Felix Peñarroyo (hereinafter called
respondent Peñarroyo), filed with the Regional Trial Court of Pasig, Branch 151, a complaint for
specific performance against herein petitioner Myron C. Papa, in his capacity as administrator of
the Testate Estate of one Angela M. Butte.

The complaint alleged that on 15 June 1973, petitioner Myron C. Papa, acting as attorney-in-fact
of Angela M. Butte, sold to respondent Peñarroyo, through respondent Valencia, a parcel of land,
consisting of 286.60 square meters, located at corner Retiro and Cadiz Streets, La Loma, Quezon
City, and covered by Transfer Certificate of Title No. 28993 of the Register of Deeds of Quezon
City; that prior to the alleged sale, the said property, together with several other parcels of land
likewise owned by Angela M. Butte, had been mortgaged by her to the Associated Banking
Corporation (now Associated Citizens Bank); that after the alleged sale, but before the title to the
subject property had been released, Angela M. Butte passed away; that despite representations
made by herein respondents to the bank to release the title to the property sold to respondent
Peñarroyo, the bank refused to release it unless and until all the mortgaged properties of the late
Angela M. Butte were also redeemed; that in order to protect his rights and interests over the
property, respondent Peñarroyo caused the annotation on the title of an adverse claim as
evidenced by Entry No. PE. — 6118/T-28993, inscribed on 18 January 1977.

The complaint further alleged that it was only upon the release of the title to the property,
sometime in April 1977, that respondents Valencia and Peñarroyo discovered that the mortgage
rights of the bank had been assigned to one Tomas L. Parpana (now deceased), as special
administrator of the Estate of Ramon Papa. Jr., on 12 April 1977; that since then, herein
petitioner had been collecting monthly rentals in the amount of P800.00 from the tenants of the
property, knowing that said property had already been sold to private respondents on 15 June
1973; that despite repeated demands from said respondents, petitioner refused and failed to
deliver the title to the property. Thereupon, respondents Valencia and Peñarroyo filed a
complaint for specific performance, praying that petitioner be ordered to deliver to respondent
Peñarroyo the title to the subject property (TCT 28993); to turn over to the latter the sum of
P72,000.00 as accrued rentals as of April 1982, and the monthly rental of P800.00 until the
property is delivered to respondent Peñarroyo; to pay respondents the sum of P20,000.00 as
attorney’s fees; and to pay the costs of the suit.

In his Answer, petitioner admitted that the lot had been mortgaged to the Associated Banking
Corporation (now Associated Citizens Bank). He contended, however, that the complaint did not
state a cause of action; that the real property in interest was the Testate Estate of Angela M.
Butte, which should have been joined as a party defendant; that the case amounted to a claim
against the Estate of Angela M. Butte and should have been filed in Special Proceedings No. A-
17910 before the Probate Court in Quezon City; and that, if as alleged in the complaint, the
property had been assigned to Tomas L. Parpana, as special administrator of the Estate of Ramon
Papa, Jr., said estate should be impleaded. Petitioner, likewise, claimed that he could not recall in
detail the transaction which allegedly occurred in 1973; that he did not have TCT No. 28993 in
his possession; that he could not be held personally liable as he signed the deed merely as
attorney-in-fact of said Angela M. Butte. Finally, petitioner asseverated that as a result of the
filing of the case, he was compelled to hire the services of counsel for a fee of P20,000.00, for
which respondents should be held liable.

Upon his motion, herein private respondent Delfin Jao was allowed to intervene in the case.
Making common cause with respondents Valencia and Peñarroyo, respondent Jao alleged that
the subject lot which had been sold to respondent Peñarroyo through respondent Valencia was in
turn sold to him on 20 August 1973 for the sum of P71,500.00, upon his paying earnest money in
the amount of P5,000.00. He, therefore, prayed that judgment be rendered in favor of
respondents Valencia and Peñarroyo; and, that after the delivery of the title to said respondents,
the latter in turn be ordered to execute in his favor the appropriate deed of conveyance covering
the property in question and to turn over to him the rentals which aforesaid respondents sought to
collect from petitioner Myron C. Papa.

Respondent Jao, likewise, averred that as a result of petitioner’s refusal to deliver the title to the
property to respondents Valencia and Peñarroyo, who in turn failed to deliver the said title to
him, he suffered mental anguish and serious anxiety for which he sought payment of moral
damages; and, additionally, the payment of attorney’s fees and costs.

For his part, Petitioner, as administrator of the Testate Estate of Angela M. Butte, filed a third-
party complaint against herein private respondents, spouses Arsenio B. Reyes and Amanda
Santos (respondent Reyes spouses, for short). He averred, among others, that the late Angela M.
Butte was the owner of the subject property; that due to non-payment of real estate tax said
property was sold at public auction by the City Treasurer of Quezon City to the respondent
Reyes spouses on 21 January 1980 for the sum of P14,000.00; that the one-year period of
redemption had expired; that respondents Valencia and Peñarroyo had sued petitioner Papa as
administrator of the estate of Angela M. Butte, for the delivery of the title to the property; that
the same aforenamed respondents had acknowledged that the price paid by them was
insufficient, and that they were willing to add a reasonable amount or a minimum of P55,000.00
to the price upon delivery of the property, considering that the same was estimated to be worth
P143,000.00; that petitioner was willing to reimburse respondent Reyes spouses whatever
amount they might have paid for taxes and other charges, since the subject property was still
registered in the name of the late Angela M. Butte; that it was inequitable to allow respondent
Reyes spouses to acquire property estimated to be worth P143,000.00, for a measly sum of
P14,000.00. Petitioner prayed that judgment be rendered cancelling the tax sale to respondent
Reyes spouses; restoring the subject property to him upon payment by him to said respondent
Reyes spouses of the amount of P14,000.00, plus legal interest; and, ordering respondents
Valencia and Peñarroyo to pay him at least P55,000.00 plus everything they might have to pay
the Reyes spouses in recovering the property.
Respondent Reyes spouses in their Answer raised the defense of prescription of petitioner’s right
to redeem the property.

At the trial, only respondent Peñarroyo testified. All the other parties only submitted
documentary proof.

On 29 June 1987, the trial court rendered a decision, the dispositive portion of which reads.

WHEREUPON, judgment is hereby rendered as follows:chanrob1es virtual 1aw library

1) Allowing defendant to redeem from third-party defendants and ordering the latter to allow the
former to redeem the property in question, by paying the sum of P14,000.00 plus legal interest of
12% thereon from January 2, 1980;

2) Ordering defendant to execute a Deed of Absolute Sale in favor of plaintiff Felix Peñarroyo
covering the property in question and to deliver peaceful possession and enjoyment of the said
property to the said plaintiff, free from any liens and encumbrances;

Should this not be possible, for any reason not attributable to defendant, said defendant is
ordered to pay to plaintiff Felix Peñarroyo the sum of P45,000.00 plus legal interest of 12% from
June 15, 1973;

3) Ordering plaintiff Felix Peñarroyo to execute and deliver to intervenor a deed of absolute sale
over the same property, upon the latter’s payment to the former of the balance of the purchase
price of P71,500.00;

Should this not be possible, plaintiff Felix Peñarroyo is ordered to pay intervenor the sum of
P5,000.00 plus legal interest of 12% from August 23, 1973; and

4) Ordering defendant to pay plaintiffs the amount of P5,000.00 for and as attorney’s fees and
litigation expenses.

SO ORDERED. 1

Petitioner appealed the aforesaid decision of the trial court to the Court of Appeals, alleging
among others that the sale was never "consummated" as he did not encash the check (in the
amount of P40,000.00) given by respondents Valencia and Peñarroyo in payment of the full
purchase price of the subject lot. He maintained that what said respondents had actually paid was
only the amount of P5,000.00 (in cash) as earnest money.

Respondent Reyes spouses, likewise, appealed the above decision. However, their appeal was
dismissed because of failure to file their appellants’ brief.

On 27 January 1992, the Court of Appeals rendered a decision, affirming with modification the
trial court’s decision, thus:chanrob1es virtual 1aw library
WHEREFORE, the second paragraph of the dispositive portion of the appealed decision is
MODIFIED, by ordering the defendant-appellant to deliver to plaintiff-appellees the owner’s
duplicate of TCT No. 28993 of Angela M. Butte and the peaceful possession and enjoyment of
the lot in question or, if the owner’s duplicate certificate cannot be produced, to authorize the
Register of Deeds to cancel it and issue a certificate of title in the name of Felix Peñarroyo. In all
other respects, the decision appealed from is AFFIRMED. Costs against defendant-appellant
Myron C. Papa.

SO ORDERED. 2

In affirming the trial court’s decision, respondent court held that contrary to petitioner’s claim
that he did not encash the aforesaid check, and therefore, the sale was not consummated, there
was no evidence at all that petitioner did not, in fact, encash said check. On the other hand,
respondent Peñarroyo testified in court that petitioner Papa had received the amount of
P45,000.00 and issued receipts therefor. According to respondent court, the presumption is that
the check was encashed, especially since the payment by check was not denied by defendant-
appellant (herein petitioner) who, in his Answer, merely alleged that he "can no longer recall the
transaction which is supposed to have happened 10 years ago." 3

On petitioner’s claim that he cannot be held personally liable as he had acted merely as attorney-
in-fact of the owner, Angela M. Butte, respondent court held that such contention is without
merit. This action was not brought against him in his personal capacity, but in his capacity as the
administrator of the Testate Estate of Angela M. Butte. 4

On petitioner’s contention that the estate of Angela M. Butte should have been joined in the
action as the real party in interest, respondent court held that pursuant to Rule 3, Section 3 of the
Rules of Court, the estate of Angela M. Butte does not have to be joined in the action. Likewise,
the estate of Ramon Papa, Jr., is not an indispensable party under Rule 3, Section 7 of the same
Rules. For the fact is that Ramon Papa, Jr., or his estate, was not a party to the Deed of Absolute
Sale, and it is basic law that contracts bind only those who are parties thereto. 5

Respondent court observed that the conditions under which the mortgage rights of the bank were
assigned are not clear. In any case, any obligation which the estate of Angela M. Butte might
have to the estate of Ramon Papa, Jr. is strictly between them. Respondents Valencia and
Peñarroyo are not bound by any such obligation.chanrobles virtual lawlibrary

Petitioner filed a motion for reconsideration of the above decision, which motion was denied by
respondent Court of Appeals.

Hence, this petition wherein petitioner raises the following issues:chanrob1es virtual 1aw library

I. THE CONCLUSION OR FINDING OF THE COURT OF APPEALS THAT THE SALE IN

QUESTION WAS CONSUMMATED IS GROUNDED ON SPECULATION OR
CONJECTURE, AND IS CONTRARY TO THE APPLICABLE LEGAL PRINCIPLE.

II. THE COURT OF APPEALS, IN MODIFYING THE DECISION OF THE TRIAL COURT,
ERRED BECAUSE IT, IN EFFECT, CANCELLED OR NULLIFIED AN ASSIGNMENT OF
THE SUBJECT PROPERTY IN FAVOR OF THE ESTATE OF RAMON PAPA, JR. WHICH
IS NOT A PARTY IN THIS CASE.chanroblesvirtualawlibrary

III. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE ESTATE OF
ANGELA M. BUTTE AND THE ESTATE OF RAMON PAPA, JR. ARE INDISPENSABLE
PARTIES IN THIS CASE. 6

Petitioner argues that respondent Court of Appeals erred in concluding that the alleged sale of
the subject property had been consummated. He contends that such a conclusion is based on the
erroneous presumption that the check (in the amount of P40,000.00) had been cashed, citing Art.
1249 of the Civil Code, which provides, in part, that payment by checks shall produce the effect
of payment only when they have been cashed or when through the fault of the creditor they have
been impaired. 7 Petitioner insists that he never cashed said check; and, such being the case, its
delivery never produced the effect of payment. Petitioner, while admitting that he had issued
receipts for the payments, asserts that said receipts, particularly the receipt of PCIB Check No.
761025 in the amount of P40,000.00, do not prove payment. He avers that there must be a
showing that said check had been encashed. If, according to petitioner, the check had been
encashed, respondent Peñarroyo should have presented PCIB Check No. 761025 duly stamped
received by the payee, or at least its microfilm copy.

Petitioner finally avers that, in fact, the consideration for the sale was still in the hands of
respondents Valencia and Peñarroyo, as evidenced by a letter addressed to him in which said
respondents wrote, in part:chanrob1es virtual 1aw library

. . . Please be informed that I had been authorized by Dr. Ramon Papa Jr., heir of Mrs. Angela M.
Butte to pay you the aforementioned amount of P75,000.00 for the release and cancellation of
subject property’s mortgage. The money is with me and if it is alright with you, I would like to
tender the payment as soon as possible. . . 8

We find no merit in petitioner’s arguments.

It is an undisputed fact that respondents Valencia and Peñarroyo had given petitioner Myron C.
Papa the amounts of Five Thousand Pesos (P5,000.00) in cash on 24 May 1973, and Forty
Thousand Pesos (P40,000.00) in check on 15 June 1973, in payment of the purchase price of the
subject lot. Petitioner himself admits having received said amounts, 9 and having issued receipts
therefor. 10 Petitioner’s assertion that he never encashed the aforesaid check is not substantiated
and is at odds with his statement in his answer that "he can no longer recall the transaction which
is supposed to have happened 10 years ago." After more than ten (10) years from the payment in
part by cash and in part by check, the presumption is that the check had been encashed. As
already stated, he even waived the presentation of oral evidence.

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 cheek 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. 11 It has, likewise, been held that if no presentment is made at
all, the drawer cannot be held liable irrespective of loss or injury 12 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 non-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. 13

Considering that respondents Valencia and Peñarroyo had fulfilled their part of the contract of
sale by delivering the payment of the purchase price, said respondents, therefore, had the right to
compel petitioner to deliver to them the owner’s duplicate of TCT No. 28993 of Angela M. Butte
and the peaceful possession and enjoyment of the lot in question.

With regard to the alleged assignment of mortgage rights, respondent Court of Appeals has
found that the conditions under which said mortgage rights of the bank were assigned are not
clear. Indeed, a perusal of the original records of the case would show that there is nothing there
that could shed light on the transactions leading to the said assignment of rights; nor is there any
evidence on record of the conditions under which said mortgage rights were assigned. What is
certain is that despite the said assignment of mortgage rights, the title to the subject property has
remained in the name of the late Angela M. Butte. 14 This much is admitted by petitioner
himself in his answer to respondents’ complaint as well as in the third-party complaint that
petitioner filed against respondent-spouses Arsenio B. Reyes and Amanda Santos. 15 Assuming
arguendo that the mortgage rights of the Associated Citizens Bank had been assigned to the
estate of Ramon Papa, Jr., and granting that the assigned mortgage rights validly exist and
constitute a lien on the property, the estate may file the appropriate action to enforce such lien.
The cause of action for specific performance which respondents Valencia and Peñarroyo have
against petitioner is different from the cause of action which the estate of Ramon Papa, Jr. may
have to enforce whatever rights or liens it has on the property by reason of its being an alleged
assignee of the bank’s rights of mortgage.

Finally, the estate of Angela M. Butte is not an indispensable party. Under Section 3 of Rule 3 of
the Rules of Court, an executor or administrator may sue or be sued without joining the party for
whose benefit the action is presented or defended, thus:chanrob1es virtual 1aw library

Sec. 3. Representative parties. — A trustee of an express trust, a guardian, executor or

administrator, or a party authorized by statute, may sue or be sued without joining the party for
whose benefit the action is presented or defended; but the court may, at any stage of the
proceedings, order such beneficiary to be made a party. An agent acting in his own name and for
the benefit of an undisclosed principal may sue or be sued without joining the principal except
when the contract involves things belonging to the principal. 16
Neither is the estate of Ramon Papa, Jr. an indispensable party without whom, no final
determination of the action can be had. Whatever prior and subsisting mortgage rights the estate
of Ramon Papa, Jr. has over the property may still be enforced regardless of the change in
ownership thereof.

WHEREFORE, the petition for review is hereby DENIED and the Decision of the Court of
Appeals, dated 27 January 1992 is AFFIRMED.

SO ORDERED.