EN BANC

[G.R. No. L-15126. November 30, 1961.]

VICENTE R. DE OCAMPO & CO., plaintiff-appellee, vs. ANITA
GATCHALlAN, ET AL., defendants-appellants.
Vicente Formoso, Jr. for plaintiff-appellee.
Reyes & Pangalangan for defendants-appellants.
SYLLABUS
1. BILLS, NOTES AND CHECKS; NEGOTIABLE INSTRUMENTS; HOLDER IN
DUE COURSE. Section 52 (c) provides that a holder in due course is one who
takes the instrument "in good faith and for value;" Section 59, "that every holder
is deemed prima facie to be holder in due course;" and Section 52 (d), that in
order that one may be a holder in due course it is necessary that "at the time the
instrument was negotiated" to him "he had no notice of any . . . defect in the title
of the person negotiating it;" and lastly Section 59, that every holder is
deemed prima facie to be a holder in due course.
2. ID.; ID.; WHEN A HOLDER IS NOT A HOLDER IN DUE COURSE. Where
a holder's title is defective or suspicious, it cannot be stated that the payee
acquired the check without the knowledge of said defect in holder's title, and for
this reason the presumption that it is a holder in due course or that it acquired the
instrument in good faith does not exist.
3. ID.; ID.; HOLDER IN DUE COURSE; WHEN PROOF OF GOOD FAITH
REQUIRED. Where the payee acquired the check under circumstances which
should have put it to inquiry, why the holder had the check and used it, to pay his
own personal account, the duty devolved upon it to prove that it actually acquired
said check in good faith.

DECISION

LABRADOR, J :
p

Appeal from a judgment of the Court of First Instance of Manila, Hon.

Conrado M. Vasquez, presiding, sentencing the defendants to pay the plaintiff
the sum of P600, with legal interest from September 10, 1953 until paid, and
to pay the costs.
The action is for the recovery of the value of a check for P600 payable to the
plaintiff and drawn by defendant Anita C. Gatchalian. The complaint sets forth the
check and alleges that plaintiff received it in payment of the indebtedness of one
Matilde Gonzales; that upon receipt of said check, plaintiff gave Matilde
Gonzales P158.25, the difference between the face value of the check and
Matilde Gonzales' indebtedness. The defendants admit the execution of the
check but they allege in their answer, as affirmative defense, that it was issued
subject to a condition, which was not fulfilled, and that plaintiff was guilty of gross
negligence in not taking steps to protect itself.
At the time of the trial, the parties submitted a stipulation of facts, which reads as
follows:
"Plaintiff

and

defendants

through

their

respective

undersigned attorney's respectfully submit the following Agreed

Stipulation of Facts;
First. That on or about 8 September 1953, in the evening,
defendant Anita C. Gatchalian who was then interested in looking
for a car for the use of her husband and the family, was shown and
offered a car by Manuel Gonzales who was accompanied by Emil
Fajardo, the latter being personally known to defendant Anita C.
Gatchalian;
Second. That Manuel Gonzales represented to defendant
Anita C. Gatchalian that he was duly authorized by the owner of the

car, Ocampo Clinic, to look for a buyer of said car and to negotiate
for and accomplish said sale, but which facts were not known to
plaintiff;
Third. That defendant Anita C. Gatchalian, finding the
price of the car quoted by Manuel Gonzales to her satisfaction,
requested Manuel Gonzales to bring the car the day following
together with the certificate of registration of the car, so that her
husband would be able to see same; that on this request of
defendant Anita C. Gatchalian, Manuel Gonzales advised her that
the owner of the car will not be willing to give the certificate of
registration unless there is a showing that the party interested in
the purchase of said car is ready and willing to make such
purchase and that for this purpose Manuel Gonzales requested
defendant Anita C. Gatchalian to give him, (Manuel Gonzales) a
check which will be shown to the owner as evidence of buyer's
good faith in the intention to purchase the said car, the said check
to be for safekeeping only of Manuel Gonzales and to be returned
to defendant Anita C. Gatchalian the following day when Manuel
Gonzales brings the car and the certificate of registration, but which
facts were not known to plaintiff;
Fourth. That relying on these representations of Manuel
Gonzales and with this assurance that said check will be only for
safekeeping and which will be returned to said defendant the
following day when the car and its certificate of registration will be
brought by Manuel Gonzales to defendants, but which facts were
not known to plaintiff, defendant Anita C. Gatchalian drew and
issued a check, Exh. 'B'; that Manuel Gonzales executed and
issued a receipt for said check, Exh. '1';
Fifth. That on the failure of Manuel Gonzales to appear
the day following and on his failure to bring the car and its
certificate of registration and to return the check, Exh. 'B' on the

following day as previously agreed upon, defendant Anita C.

Gatchalian issued a 'Stop Payment Order' on the check, Exh. '3',
with the drawee bank. Said 'Stop Payment Order' was issued
without previous notice on plaintiff, not being known to defendant,
Anita C. Gatchalian and who furthermore had no reason to know
check was given to plaintiff;
Sixth. That defendants, both or either of them, did not
know personally Manuel Gonzales or any member of his family at
any time prior to September 1953; but that defendant Hipolito
Gatchalian is personally acquainted with V. R. de Ocampo;
Seventh. That defendants, both or either of them, had no
arrangements or agreement with the Ocampo Clinic at any time
prior to, on or after 9 September 1953 for the hospitalization of the
wife of Manuel Gonzales and neither or both of said defendants
had assumed, expressly or impliedly, with the Ocampo Clinic, the
obligation of Manuel Gonzales or his wife for the hospitalization of
the latter;
Eight. That defendants, both or either of them, had no
obligation or liability, directly or indirectly with the Ocampo Clinic
before, or on 9 September 1953;
Ninth. That Manuel Gonzales having received the check
Exh.

'B'

from

defendant

Anita

C.

Gatchalian

under

the

representations and conditions herein above specified, delivered

the same to the Ocampo Clinic, in payment of the fees and
expenses arising from the hospitalization of his wife;
Tenth. That plaintiff for and in consideration of fees and
expenses of hospitalization and the release of the wife of Manuel
Gonzales from its hospital, accepted said check, applying P441.75
(Exhibit 'A') thereof to payment of said fees and expenses and
delivering to Manuel Gonzales the amount of P158.25 (as per

receipt, Exhibit 'D') representing the balance on the amount of the

said check, Exh. 'B';
Eleventh. That the acts of acceptance of the check and
application of its proceeds in the manner specified above were
made without previous inquiry by plaintiff from defendants;
Twelfth. That plaintiff filed or caused to be filed with the
Office of the City Fiscal of Manila, a complaint for estafa against
Manuel Gonzales based on and arising from the acts of said
Manuel Gonzales in paying his obligations with plaintiff and
receiving the cash balance of the check, Exh. 'B' and that said
complaint was subsequently dropped;
Thirteenth. That the exhibits mentioned in this stipulation
and the other exhibits submitted previously, be considered as parts
of this stipulation, without necessity of formally offering them in
evidence;
WHEREFORE, it is most respectfully prayed that this agreed
stipulation of facts be admitted and that the parties hereto be given
fifteen days from today within which to submit simultaneously their
memorandum to discuss the issues of law arising from the facts,
reserving to either party the right to submit reply memorandum, if
necessary, within ten days from receipt of their main memoranda."
(pp. 21-25, Defendant's Record on Appeal)

No other evidence was submitted and upon said stipulation the court rendered
the judgment already alluded to above.
In their appeal defendants-appellants contend that the check is not a negotiable
instrument, under the facts and circumstances stated in the stipulation of facts,
and that plaintiff is not a holder in due course. In support of the first contention, it
is argued that defendant Gatchalian had no intention to transfer her property in
the instrument as it was for safekeeping merely and, therefore, there was no
delivery required by law (Section 16, Negotiable Instruments Law); that assuming

for the sake of argument that delivery was not for safekeeping merely, the
delivery was conditional and the condition was not fulfilled.
In support of the contention that plaintiff-appellee is not a holder in due course,
the appellant argues that plaintiff-appellee cannot be a holder in due course
because there was no negotiation prior to plaintiff-appellee's acquiring the
possession of the check; that a holder in due course presupposes a prior party
from whose hands negotiation proceeded, and in the case at bar, plaintiffappellee is the payee, the maker and the payee being original parties. It is also
claimed that the plaintiff-appellee is not a holder in due course because it
acquired the check with notice of defect in the title of the holder, Manuel
Gonzales, and because under the circumstances stated in the stipulation of facts
there were circumstances that brought suspicion about Gonzales' possession
and negotiation, which circumstances should have placed the plaintiff-appellee
under the duty to inquire into the title of the holder. The circumstances are as
follows:
"The check is not a personal check of Manuel Gonzales.
(Paragraph Ninth, Stipulation of Facts). Plaintiff could have inquired
why a person would use the check of another to pay his own debt.
Furthermore, plaintiff had the 'means of knowledge' inasmuch as
defendant Hipolito Gatchalian is personally acquainted with V. R.
de Ocampo (Paragraph Sixth, Stipulation of Facts.)

"The maker Anita C. Gatchalian is a complete stranger to

Manuel Gonzales and Dr. V. R. de Ocampo (Paragraph Sixth,
Stipulation of Facts).
"The maker is not in any manner obligated to Ocampo Clinic
nor to Manuel Gonzales. (Par. 7, Stipulation of Facts.)
"The check could not have been intended to pay the hospital
fees which amounted only to P441.75. The check is in the amount

of P600.00, which is in excess of the amount due plaintiff. (Par. 10,

Stipulation of Facts).
"It was necessary for plaintiff to give Manuel Gonzales
change in the sum of P158.25 (Par. 10, Stipulation of Facts). Since
Manuel Gonzales is the party obliged to pay, plaintiff should have
been more cautious and wary in accepting a piece of paper and
disbursing cold cash.
"The check is payable to bearer. Hence, any person who
holds it should have been subjected to inquiries. EVEN IN A BANK,
CHECKS ARE NOT CASHED WITHOUT INQUIRY FROM THE
BEARER. The same inquiries should have been made by plaintiff."
(Defendants-appellants brief, pp. 52-53).

Answering the first contention of appellant, counsel for plaintiff-appellee argues

that in accordance with the best authority on the Negotiable Instruments Law,
plaintiff-appellee may be considered as a holder in due course, citing Brannan's
Negotiable Instruments Law, 6th edition, page 252. On this issue Brannan holds
that a payee may be a holder in due course and says that to this effect is the
greater weight of authority, thus:
"Whether the payee may be a holder in due course under
the N. I. L., as he was at common law, is a question upon which the
courts are in serious conflict. There can be no doubt that a proper
interpretation of the act read as a whole leads to the conclusion
that a payee may be a holder in due course under any
circumstance in which he meets the requirements of Sec. 52.
"The argument of Professor Brannan in an earlier edition of
this work has never been successfully answered and is here
repeated
"Section 191 defines 'holder' as the payee or indorsee of a
bill or note, who is in possession of it, or the bearer thereof. Sec. 52
defines a holder in due course as 'a holder who has taken the

instrument under the following conditions: 1. That it is complete and

regular on its face. 2. That he became the holder of it before it was
overdue, and without notice that it had been previously dishonored,
it such was the fact. 3. That he took it in good faith and for value. 4.
That at the time it was negotiated to him he had no notice of any
infirmity in the instrument or defect in the title of the person
negotiating it.'
"Since 'holder', as defined in sec. 191, includes a payee who
is in possession the word holder in the first clause of sec. 52 and in
the second subsection may be replaced by the definition in sec.
191 so as to read 'a holder in due course is a payee or indorsee
who is in possession,' etc." (Brannan's on Negotiable Instruments
Law, 6th ed., p. 543).

The first argument of the defendants-appellants, therefore, depends upon

whether or not the plaintiff-appellee is a holder in due course. If it is such a holder
in due course, it is immaterial that it was the payee and an immediate party to the
instrument.
The other contention of the plaintiff is that there has been no negotiation of the
instrument, because the drawer did not deliver the instrument to Manuel
Gonzales with the intention of negotiating the same, or for the purpose of giving
effect thereto, for as the stipulation of facts declares the check was to remain in
the possession of Manuel Gonzales, and was not to be negotiated, but was to
serve merely as evidence of good faith of defendants in their desire to purchase
the car being sold to them. Admitting that such was the intention of the drawer of
the check when she delivered it to Manuel Gonzales, it was no fault of the
plaintiff-appellee drawee if Manuel Gonzales delivered the check or negotiated it.
As the check was payable to the plaintiff-appellee, and was entrusted to Manuel
Gonzales by Gatchalian, the delivery to Manuel Gonzales was a delivery by the
drawer to his own agent; in other words, Manuel Gonzales was the agent of the
drawer Anita Gatchalian insofar as the possession of the check is concerned. So,
when the agent of drawer Manuel Gonzales negotiated the check with the

intention of getting its value from plaintiff- appellee, negotiation took place
through no fault of the plaintiff- appellee, unless it can be shown that the plaintiffappellee should be considered as having notice of the defect in the possession of
the holder Manuel Gonzales. Our resolution of this issue leads us to a
consideration of the last question presented by the appellants, i.e., whether the
plaintiff-appellee may be considered as a holder in due course.
Section 52, Negotiable Instruments Law, defines holder in due course, thus:
"A holder in due course is a holder who has taken the
instrument under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue,
and without notice that it had been previously dishonored, if such
was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice
of any infirmity in the instrument or defect in the title of the person
negotiating it."

The stipulation of facts expressly states that plaintiff-appellee was not aware of
the circumstances under which the check was delivered to Manuel Gonzales, but
we agree with the defendants-appellants that the circumstances indicated by
them in their briefs, such as the fact that appellants had no obligation or liability
to the Ocampo Clinic; that the amount of the check did not correspond exactly
with the obligation of Matilde Gonzales to Dr. V. R. de Ocampo; and that the
check had two parallel lines in the upper left hand corner, which practice means
that the check could only be deposited but may not be converted into cash all
these circumstances should have put the plaintiff-appellee to inquiry as to the
why and wherefore of the possession of the check by Manuel Gonzales, and why
he used it to pay Matilde's account. It was payee's duty to ascertain from the
holder Manuel Gonzales what the nature of the latter's title to the check was or

the nature of his possession. Having failed in this respect, we must declare that
plaintiff-appellee was guilty of gross neglect in not finding out the nature of the
title and possession of Manuel Gonzales, amounting to legal absence of good
faith, and it may not be considered as a holder of the check in good faith, to such
effect is the consensus of authority.
"In order to show that the defendant had 'knowledge of such
facts that his action in taking the instrument amounted to bad faith,'
it is not necessary to prove that the defendant knew the exact fraud
that was practiced upon the plaintiff by the defendant's assignor, it
being sufficient to show that the defendant had notice that there
was something wrong about his assignor's acquisition of title,
although he did not have notice of the particular wrong that was
committed. Paika v. Perry, 225 Mass. 563, 114 N. E. 830.
"It is sufficient that the buyer of a note had notice or
knowledge that the note was in some way tainted with fraud. It is
not necessary that he should know the particulars or even the
nature of the fraud, since all that is required is knowledge of such
facts that his action in taking the note amounted to bad faith. Ozark
Motor Co. v. Horton (Mo. App.), 196 S. W. 395. Accord. Davis v.
First Nat. Bank, 26 Ariz. 621, 229 Pac. 391.
"Liberty bonds stolen from the plaintiff were brought by the
thief, a boy fifteen years old, less than five feet tall, immature in
appearance and bearing on his face the stamp of a degenerate, to
the defendants' clerk for sale. The boy stated that they belonged to
his mother. The defendants paid the boy for the bonds without any
further inquiry. Held, the plaintiff could recover the value of the
bonds. The term 'bad faith' does not necessarily involve furtive
motives but means bad faith in a commercial sense. The manner in
which the defendants conducted their Liberty Loan department
provided an easy way for thieves to dispose of their plunder. It was
a case of 'no questions asked' Although gross negligence does not

of itself constitute bad faith, it is evidence from which bad faith may
be inferred. The circumstances thrust the duty upon the defendants
to make further inquiries and they had no right to shut their eyes
deliberately to obvious facts. Morris v. Muir, 111 Misc. Rep. 739,
181 N. Y. Supp. 913, affd. in memo., 191 App. Div. 947, 181 N. Y.
Supp. 945." (pp. 640-642, Brannan's Negotiable Instruments Law,
6th ed.).

The above considerations would seem sufficient to justify our ruling that plaintiffappellee should not be allowed to recover the value of the check. Let us now
examine the express provisions of the Negotiable Instruments Law pertinent to
the matter to find if our ruling conforms thereto. Section 52 (c) provides that a
holder in due course is one who takes the instrument "in good faith and for
value;" Section 59, "that every holder is deemed prima facie to be a holder in due
course;" and Section 52 (d), that in order that one may be a holder in due course
it is necessary that "at the time the instrument was negotiated to him "he had no
notice of any . . . defect in the title of the person negotiating it;" and lastly Section
59, that every holder is deemed prima facie to be a holder in due course.
In the case at bar the rule that a possessor of the instrument is prima facie a
holder in due course does not apply because there was a defect in the title of the
holder (Manuel Gonzales), because the instrument is not payable to him or to
bearer. On the other hand, the stipulation of facts indicated by the appellants in
their brief, like the fact that the drawer had no account with the payee; that the
holder did not show or tell the payee why he had the check in his possession and
why he was using it for the payment of his own personal account show that
holder's title was defective or suspicious, to say the least. As holder's title was
defective or suspicious, it cannot be stated that the payee acquired the check
without knowledge of said defect in holder's title, and for this reason the
presumption that it is a holder in due course or that it acquired the instrument in
good faith does not exist. And having presented no evidence that it acquired the
check in good faith, it (payee) cannot be considered as a holder in due course. In
other words, under the circumstances of the case, instead of the presumption

that payee was a holder in good faith, the fact is that it acquired possession of
the instrument under circumstances that should have put it to inquiry as to the
title of the holder who negotiated the check to it. The burden was, therefore,
placed upon it to show that notwithstanding the suspicious circumstances, it
acquired the check in actual good faith.

The rule applicable to the case at bar is that describe in the case of Howard
National Bank v. Wilson, et al., 96 Vt. 438, 120 At. 889, 894, where the Supreme
Court of Vermont made the following disquisition:
"Prior to the Negotiable Instruments Act, two distinct lines of
cases had developed in this country. The first had its origin in Gill v.
Cubitt, 3 B. & C. 466, 10 E. L. 21b, where the rule was distinctly
laid down by the court of King's Bench that the purchaser of
negotiable paper must exercise reasonable prudence and caution,
and that, if the circumstances were such as ought to have excited
the suspicion of a prudent and careful man, and he made no
inquiry, he did not stand in the legal position of a bona fide holder.
The rule was adopted by the courts of this country generally and
seem to have become a fixed rule in the law of negotiable paper.
Later in Goodman v. Harvey, 4 A. & E. 870 31 E. C. L. 381, the
English court abandoned its former position and adopted the rule
that nothing short of actual bad faith or fraud in the purchaser
would deprive him of the character of a bona fide purchaser and let
in defenses existing between prior parties, that no circumstances of
suspicion merely, or want of proper caution in the purchaser, would
have this effect, and that even gross negligence would have no
effect, except as evidence tending to establish bad faith or fraud.
Some of the American courts adhered to the earlier rule, while
others followed the change inaugurated in Goodman vs. Harvey.
The question was before this court in Roth vs. Colvin, 32 Vt. 125,
and, on full consideration of the question, a rule was adopted in

harmony with that announced in Gill vs. Cubitt, which has been
adhered to in subsequent cases, including those cited above.
Stated briefly, one line of cases including our own had adopted the
test of the reasonably prudent man and the other that of actual
good faith. It would seem that it was the intent of the Negotiable
Instruments Act to harmonize this disagreement by adopting the
latter test. That such is the view generally accepted by the courts
appears from a recent review of the cases concerning what
constitutes notice of defect. Brannan on Neg. Ins. Law, 187-201. To
effectuate the general purpose of the act to make uniform the
Negotiable Instruments Law of those states which should enact it,
we are constrained to hold (contrary to the rule adopted in our
former decisions) that negligence on the part of the plaintiff, or
suspicious circumstances sufficient to put a prudent man on
inquiry, will not of themselves prevent a recovery, but are to be
considered merely as evidence bearing on the question of bad
faith. See G. L. 3113, 3172, where such a course is required in
construing other uniform acts.
"It comes to this then: When the case has taken such shape
that the plaintiff is called upon to prove himself a holder in due
course to be entitled to recover, he is required to establish the
conditions entitling him to standing as such, including good faith in
taking the instrument. It devolves upon him to disclose the facts
and circumstances attending the transfer, from which good or bad
faith in the transaction may be inferred."

In the case at bar as the payee acquired the check under circumstances which
should have put it to inquiry, why the holder had the check and used it to pay his
own personal account, the duty devolved upon it, plaintiff-appellee, to prove that
it actually acquired said check in good faith. The stipulation of facts contains no
statement of such good faith, hence we are forced to the conclusion that plaintiff

payee has not proved that it acquired the check in good faith and may not be
deemed a holder in due course thereof.
For the foregoing considerations, the decision appealed from should be, as it is
hereby, reversed, and the defendants are absolved from the complaint. With
costs against plaintiff-appellee.
Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes,
Dizon and De Leon, JJ., concur.
Bengzon, C.J., concurs in the result.
(Vicente R. De Ocampo & Co. v. Gatchalian, G.R. No. L-15126, November 30,
1961)
|||

SECOND DIVISION
[G.R. No. 70145. November 13, 1986.]
MARCELO

A.

MESINA, petitioner, vs. THE

HONORABLE

INTERMEDIATE APPELLATE COURT, HON. ARSENIO M.

GONONG, in his capacity as Judge of Regional Trial Court
Manila (Branch VIII), JOSE GO, and ALBERT UY, respondents.

DECISION

PARAS, J :
p

This is an appeal by certiorari from the decision of the then Intermediate

Appellate Court (IAC for short), now the Court of Appeals (CA) in AC-G.R. S.P.
04710, dated Jan. 22, 1985, which dismissed the petition for certiorari and
prohibition filed by Marcelo A. Mesina against the trial court in Civil Case No. 8422515. Said case (an Interpleader) was filed by Associated Bank against Jose
Go and Marcelo A. Mesina regarding their conflicting claims over Associated
Bank Cashier's Check No. 011302 for P800,000.00, dated December 29, 1983.
Briefly, the facts and statement of the case are as follows:
Respondent Jose Go, on December 29, 1983, purchased from Associated Bank
Cashier's Check No. 011302 for P800,000.00. Unfortunately, Jose Go left said
check on the top of the desk of the bank manager when he left the bank. The
bank manager entrusted the check for safekeeping to a bank official, a certain
Albert Uy, who had then a visitor in the person of Alexander Lim, Uy had to
answer a phone call on a nearby telephone after which he proceeded to the
men's room. When he returned to his desk, his visitor Lim was already gone.
When Jose Go inquired for his cashier's check from Albert Uy, the check was not
in his folder and nowhere to be found. The latter advised Jose Go to go to the
bank to accomplish a "STOP PAYMENT" order, which suggestion Jose Go

immediately followed. He also executed an affidavit of loss. Albert Uy went to the

police to report the loss of the check, pointing to the person of Alexander Lim as
the one who could shed light on it.
The records of the police show that Associated Bank received the lost check for
clearing on December 31, 1983, coming from Prudential Bank, Escolta Branch.
The check was immediately dishonored by Associated Bank by sending it back to
Prudential Bank, with the words "Payment Stopped" stamped on it. However, the
same was again returned to Associated Bank on January 4, 1984 and for the
second time it was dishonored. Several days later, respondent Associated Bank
received a letter, dated January 9, 1984, from a certain Atty. Lorenzo Navarro
demanding payment on the cashier's check in question, which was being held by
his client. He however refused to reveal the name of his client and threatened to
sue, if payment is not made. Respondent bank, in its letter, dated January 20,
1984, replied saying the check belonged to Jose Go who lost it in the bank and is
laying claim to it.
On February 1, 1984, police sent a letter to the Manager of the Prudential Bank,
Escolta Branch, requesting assistance in identifying the person who tried to
encash the check but said bank refused saying that it had to protect its client's
interest and the identity could only be revealed with the client's conformity.
Unsure of what to do on the matter, respondent Associated Bank on February 2,
1984 filed an action for Interpleader naming as respondent, Jose Go and one
John Doe, Atty. Navarro's then unnamed client. On even date, respondent bank
received summons and copy of the complaint for damages of a certain Marcelo
A. Mesina from the Regional Trial Court (RTC) of Caloocan City filed on January
23, 1984 bearing the number C-11139. Respondent bank moved to amend its
complaint, having been notified for the first time of the name of Atty. Navarro's
client and substituted Marcelo A. Mesina for John Doe. Simultaneously,
respondent bank, thru representative Albert Uy, informed Cpl. Gimao of the
Western Police District that the lost check of Jose Go is in the possession of
Marcelo Mesina, herein petitioner. When Cpl. Gimao went to Marcelo Mesina to
ask how he came to possess the check, he said it was paid to him by Alexander

Lim in a "certain transaction" but refused to elucidate further. An information for

theft (Annex J) was instituted against Alexander Lim and the corresponding
warrant for his arrest was issued (Annex 6-A) which up to the date of the filing of
this instant petition remains unserved because of Alexander Lim's successful
evasion thereof.
Meanwhile, Jose Go filed his answer on February 24, 1984 in the Interpleader
Case and moved to participate as intervenor in the complaint for damages. Albert
Uy filed a motion for intervention and answer in the complaint for Interpleader.
On the scheduled date of pre-trial conference in the interpleader case, it was
disclosed that the "John Doe" impleaded as one of the defendants is actually
petitioner Marcelo A. Mesina. Petitioner instead of filing his answer to the
complaint in the interpleader filed on May 17, 1984 an Omnibus Motion to
Dismiss Ex Abudante Cautela alleging lack of jurisdiction in view of the absence
of an order to litigate, failure to state a cause of action and lack of personality to
sue. Respondent bank in the other civil case (CC-11139) for damages moved to
dismiss suit in view of the existence already of the Interpleader case.
The trial court in the interpleader case issued an order dated July 13, 1984,
denying the motion to dismiss of petitioner Mesina and ruling that respondent
bank's complaint sufficiently pleaded a cause of action for interpleader. Petitioner
filed his motion for reconsideration which was denied by the trial court on
September 26, 1984. Upon motion for respondent Jose Go dated October 31,
1984, respondent judge issued an order on November 6, 1984 declaring
petitioner in default since his period to answer has already expired and set
the ex-parte presentation of respondent bank's evidence on November 7, 1984.
Petitioner Mesina filed a petition for certiorari with preliminary injunction with IAC
to set aside 1) order of respondent court denying his omnibus Motion to Dismiss
2) order of respondent court denying his Motion for Reconsideration and 3) the
order of default against him.

On January 22, 1985, IAC rendered its decision dismissing the petition for
certiorari. Petitioner Mesina filed his Motion for Reconsideration which was also
denied by the same court in its resolution dated February 18, 1985.
Meanwhile, on same date (February 18, 1985), the trial court in Civil Case #8422515 (Interpleader) rendered a decision, the dispositive portion reading as
follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered
ordering plaintiff Associate Bank to replace Cashier's Check No. 011302
in favor of Jose Go or its cash equivalent with legal rate of interest from
date of complaint, and with costs of suit against the latter.
SO ORDERED."

On March 29, 1985, the trial court in Civil Case No. C-11139, for damages,
issued an order, the pertinent portion of which states:
"The records of this case show that on August 20, 1984 proceedings in
this case was (were) ordered suspended because the main issue in Civil
Case No. 84-22515 and in this instant case are the same which is: who
between Marcelo Mesina and Jose Go is entitled to payment of
Associated Bank's Cashier's Check No. CC-011302? Said issue having
been resolved already in Civil Case No. 84-22515, really this instant
case has become moot and academic.
WHEREFORE, in view of the foregoing, the motion should be as it is
hereby granted and this case is ordered dismissed.
In view of the foregoing ruling no more action should be taken on the
"Motion For Reconsideration (of the Order admitting the Intervention)"
dated June 21, 1984 as well as the Motion For Reconsideration dated
September 10, 1984.
SO ORDERED."

Petitioner now comes to Us, alleging that:

1. IAC erred in ruling that a cashier's check can be countermanded even

in the hands of a holder in due course.
2. IAC erred in countenancing the filing and maintenance of an
interpleader suit by a party who had earlier been sued on the same
claim.
3. IAC erred in upholding the trial court's order declaring petitioner as in
default when there was no proper order for him to plead in the
interpleader complaint.
4. IAC went beyond the scope of its certiorari jurisdiction by making
findings of facts in advance of trial.

Petitioner now interposes the following prayer:

1. Reverse the decision of the IAC, dated January 22, 1985 and set
aside the February 18, 1985 resolution denying the Motion for
Reconsideration.
2. Annul the orders of respondent Judge of RTC Manila giving due
course to the interpleader suit and declaring petitioner in default.

Petitioner's allegations hold no water. Theories and examples advanced by

petitioner on causes and effects of a cashier's check such as 1) it cannot be
countermanded in the hands of a holder in due course and 2) a cashier's check is
a bill of exchange drawn by the bank against itself are general principles
which cannot be aptly applied to the case at bar, without considering other
things. Petitioner failed to substantiate his claim that he is a holder in due course
and for consideration or value as shown by the established facts of the case.
Admittedly, petitioner became the holder of the cashier's check as endorsed by
Alexander Lim who stole the check. He refused to say how and why it was
passed to him. He had therefore notice of the defect of his title over the check
from the start. The holder of a cashier's check who is not a holder in due course
cannot enforce such check against the issuing bank which dishonors the same. If
a payee of a cashier's check obtained it from the issuing bank by fraud, or if there

is some other reason why the payee is not entitled to collect the check, the
respondent bank would, of course, have the right to refuse payment of the check
when presented by the payee, since respondent bank was aware of the facts
surrounding I he loss of the check in question. Moreover, there is no similarity in
the cases cited by petitioner since respondent bank did not issue the cashier's
check in payment of its obligation. Jose Go bought it from respondent bank for
purposes of transferring his funds from respondent bank to another bank near his
establishment realizing that carrying money in this form is safer than if it wherein
cash. The check was Jose Go's property when it was misplaced or stolen hence
he stopped its payment. At the outset, respondent bank knew it was Jose Go's
check and no one else since Go had not paid or indorsed it to anyone. The bank
was therefore liable to nobody on the check but Jose Go. The bank had no
intention to issue it to petitioner but only to buyer Jose Go. When payment on it
was therefore stopped, respondent bank was not the one who did it but Jose Go,
the owner of the check. Respondent bank could not be drawer and drawee for
clearly, Jose Go owns the money it represents and he is therefore the drawer
and the drawee in the same manner as if he has a current account and he issued
a check against it; and from the moment said cashier's check was lost and or
stolen no one outside of Jose Go can be termed a holder in due course because
Jose Go had not indorsed it in due course. The check in question suffers from
the infirmity of not having been properly negotiated and for value by respondent
Jose Go who as already been said is the real owner of said instrument.

In his second assignment of error, petitioner stubbornly insists that there is no

showing of conflicting claims and interpleader is out of the question. There is
enough evidence to establish the contrary. Considering the aforementioned facts
and circumstances, respondent bank merely took the necessary precaution not
to make a mistake as to whom to pay and therefore interpleader was its proper
remedy. It has been shown that the interpleader suit was filed by respondent
bank because petitioner and Jose Go were both laying their claims on the check,
petitioner asking payment thereon and Jose Go as the purchaser or owner. The

allegation of petitioner that respondent bank had effectively relieved itself of its
primary liability under the check by simply filing a complaint for interpleader is
belied by the willingness of respondent bank to issue a certificate of time deposit
in the amount of P800,000 representing the cashier's check in question in the
name of the Clerk of Court of Manila to be awarded to whoever will be found by
the court as validly entitled to it. Said validity will depend on the strength of the
parties' respective rights and titles thereto. Bank filed the interpleader suit not
because petitioner sued it but because petitioner is laying claim to the same
check that Go is claiming. On the very day that the bank instituted the case in
interpleader, it was not aware of any suit for damages filed by petitioner against it
as supported by the fact that the interpleader case was first entitled Associated
Bank vs. Jose Go and John Doe, but later on changed to Marcelo A. Mesina for
John Doe when his name became known to respondent bank.
In his third assignment of error, petitioner assails the then respondent IAC in
upholding the trial court's order declaring petitioner in default when there was no
proper order for him to plead in the interpleader case. Again, such contention is
untenable. The trial court issued an order, compelling petitioner and respondent
Jose Go to file their Answers setting forth their respective claims. Subsequently,
a Pre-Trial Conference was set with notice to parties to submit position papers.
Petitioner argues in his memorandum that this order requiring petitioner to file his
answer was issued without jurisdiction alleging that since he is presumably a
holder in due course and for value, how can he be compelled to litigate against
Jose Go who is not even a party to the check? Such argument is trite and
ridiculous if we have to consider that neither his name or Jose Go's name
appears on the check. Following such line of argument. petitioner is not a party to
the check either and therefore has no valid claim to the Check. Furthermore, the
Order of the trial court requiring the parties to file their answers is to all intents
and purposes an order to interplead, substantially and essentially and therefore
in compliance with the provisions of Rule 63 of the Rules of Court. What else is
the purpose of a law suit but to litigate?

LLphil

The records of the case show that respondent bank had to resort to details in
support of its action for Interpleader. Before it resorted to Interpleader,
respondent bank took all precautionary and necessary measures to bring out the
truth. On the other hand, petitioner concealed the circumstances known to him
and now that private respondent bank brought these circumstances out in court
(which eventually rendered its decision in the light of these facts), petitioner
charges it with "gratuitous excursions into these non-issues." Respondent IAC
cannot rule on whether respondent RTC committed an abuse of discretion or not,
without being apprised of the facts and reasons why respondent Associated
Bank instituted the Interpleader case. Both parties were given an opportunity to
present their sides. Petitioner chose to withhold substantial facts. Respondents
were not forbidden to present their side this is the purpose of the Comment of
respondent to the petition. IAC decided the question by considering both the
facts submitted by petitioner and those given by respondents. IAC did not act
therefore beyond the scope of the remedy sought in the petition.
WHEREFORE, finding that the instant petition is merely dilatory, the same is
hereby denied and the assailed orders of the respondent court are hereby
AFFIRMED in toto.
SO ORDERED.
Feria, Fernan, Alampay and Gutierrez, Jr., JJ ., concur.
|||

(Mesina v. Intermediate Appellate Court, G.R. No. 70145, November 13, 1986)