Petitioner BPI, in its answer, alleged that on August 31, 1991, Julio R.

Templonuevo, third-party defendant and herein also a private respondent, demanded

FIRST DIVISION from the former payment of the amount of Two Hundred Sixty-Seven Thousand, Six
Hundred Ninety-Two Pesos and Fifty Centavos (P267,692.50) representing the
aggregate value of three (3) checks, which were allegedly payable to him, but which
BANK OF THE PHILIPPINE ISLANDS, G.R. No. 136202 were deposited with the petitioner bank to private respondent Salazars account
(Account No. 0203-1187-67) without his knowledge and corresponding endorsement.
Petitioner, Present:
Accepting that Templonuevos claim was a valid one, petitioner BPI froze
PUNO, C.J., Chairperson,Account No. 0201-0588-48 of A.A. Salazar and Construction and Engineering
- versus - SANDOVAL-GUTIERREZ, Services, instead of Account No. 0203-1187-67 where the checks were deposited, since
CORONA, this account was already closed by private respondent Salazar or had an insufficient
AZCUNA, and balance.
GARCIA, JJ.
Private respondent Salazar was advised to settle the matter with Templonuevo
but they did not arrive at any settlement. As it appeared that private respondent Salazar
was not entitled to the funds represented by the checks which were deposited and
COURT OF APPEALS, ANNABELLE A. accepted for deposit, petitioner BPI decided to debit the amount of P267,707.70 from
SALAZAR, and JULIO R. TEMPLONUEVO, Promulgated: her Account No. 0201-0588-48 and the sum of P267,692.50 was paid to Templonuevo
Respondents. by means of a cashiers check. The difference between the value of the checks
January 25, 2007 (P267,692.50) and the amount actually debited from her account (P267,707.70)
represented bank charges in connection with the issuance of a cashiers check to
x-----------------------------------------------------------------------------------------x Templonuevo.

DECISION In the answer to the third-party complaint, private respondent Templonuevo

AZCUNA, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking the
reversal of the Decision[1] dated April 3, 1998, and the Resolution[2] dated November 9,
1998, of the Court of Appeals in CA-G.R. CV No. 42241.
The facts[3] are as follows:
admitted the payment to him of P267,692.50 and argued that said payment was to
correct the malicious deposit made by private respondent Salazar to her private
account, and that petitioner banks negligence and tolerance regarding the matter was
violative of the primary and ordinary rules of banking. He likewise contended that the
debiting or taking of the reimbursed amount from the account of private respondent
Salazar by petitioner BPI was a matter exclusively between said parties and may be
pursuant to banking rules and regulations, but did not in any way affect him. The
debiting from another account of private respondent Salazar, considering that her other
account was effectively closed, was not his concern.

A.A. Salazar Construction and Engineering Services filed an action for a sum After trial, the RTC rendered a decision, the dispositive portion of which reads
of money with damages against herein petitioner Bank of the Philippine Islands (BPI) thus:
on December 5, 1991 before Branch 156 of the Regional Trial Court (RTC) of Pasig WHEREFORE, premises considered, judgment is hereby
City. The complaint was later amended by substituting the name of Annabelle A. rendered in favor of the plaintiff [private respondent Salazar] and
Salazar as the real party in interest in place of A.A. Salazar Construction and against the defendant [petitioner BPI] and ordering the latter to pay as
Engineering Services. Private respondent Salazar prayed for the recovery of the amount follows:
of Two Hundred Sixty-Seven Thousand, Seven Hundred Seven Pesos and Seventy
Centavos (P267,707.70) debited by petitioner BPI from her account. She likewise 1. The amount of P267,707.70 with 12% interest
prayed for damages and attorneys fees. thereon from September 16, 1991 until the said
amount is fully paid;

1
 2. The amount of P30,000.00 as and for actual
damages;
3. The amount of P50,000.00 as and for moral
damages;
4. The amount of P50,000.00 as and for exemplary
damages;
5. The amount of P30,000.00 as and for attorneys
fees; and
6. Costs of suit.
The counterclaim is hereby ordered DISMISSED for lack
of factual basis.
The third-party complaint [filed by petitioner] is hereby
likewise ordered DISMISSED for lack of merit.
Third-party defendants [i.e., private respondent
Templonuevos] counterclaim is hereby likewise DISMISSED for
lack of factual basis.
SO ORDERED.[4]
On appeal, the Court of Appeals (CA) affirmed the decision of the RTC and
held that respondent Salazar was entitled to the proceeds of the three (3) checks
notwithstanding the lack of endorsement thereon by the payee. The CA concluded that
Salazar and Templonuevo had previously agreed that the checks payable to JRT
Construction and Trading[5] actually belonged to Salazar and would be deposited to her
account, with petitioner acquiescing to the arrangement.[6]
Petitioner therefore filed this petition on these grounds:
I.
The Court of Appeals committed reversible error in misinterpreting
Section 49 of the Negotiable Instruments Law and Section 3 (r and
s) of Rule 131 of the New Rules on Evidence.
II.
The Court of Appeals committed reversible error in NOT applying
the provisions of Articles 22, 1278 and 1290 of the Civil Code in
favor of BPI.
III.
The Court of Appeals committed a reversible error in holding,
based on a misapprehension of facts, that the account from which
BPI debited the amount of P267,707.70 belonged to a corporation
with a separate and distinct personality.
IV.
The Court of Appeals committed a reversible error in holding,
based entirely on speculations, surmises or conjectures, that there
was an agreement between SALAZAR and TEMPLONUEVO that
checks payable to TEMPLONUEVO may be deposited by
SALAZAR to her personal account and that BPI was privy to this
agreement.
V.
The Court of Appeals committed reversible error in holding, based
entirely on speculation, surmises or conjectures, that SALAZAR
suffered great damage and prejudice and that her business standing
was eroded.
VI.
The Court of Appeals erred in affirming instead of reversing the
decision of the lower court against BPI and dismissing SALAZARs
complaint.
VII.
The Honorable Court erred in affirming the decision of the lower
court dismissing the third-party complaint of BPI.[7]
The issues center on the propriety of the deductions made by petitioner from
private respondent Salazars account. Stated otherwise, does a collecting bank, over the
objections of its depositor, have the authority to withdraw unilaterally from such
depositors account the amount it had previously paid upon certain unendorsed order
instruments deposited by the depositor to another account that she later closed?
Petitioner argues thus:
1. There is no presumption in law that a check payable to order,
when found in the possession of a person who is neither a payee nor
the indorsee thereof, has been lawfully transferred for value. Hence,
the CA should not have presumed that Salazar was a transferee for
value within the contemplation of Section 49 of the Negotiable
Instruments Law,[8] as the latter applies only to a holder defined
under Section 191of the same.[9]
2. Salazar failed to adduce sufficient evidence to prove that her
possession of the three checks was lawful despite her allegations that
these checks were deposited pursuant to a prior internal arrangement
with Templonuevo and that petitioner was privy to the arrangement.
2
 3. The CA should have applied the Civil Code provisions on legal
compensation because in deducting the subject amount from
Salazars account, petitioner was merely rectifying the undue
payment it made upon the checks and exercising its prerogative to
alter or modify an erroneous credit entry in the regular course of its
business.
4. The debit of the amount from the account of A.A. Salazar
Construction and Engineering Services was proper even though the
value of the checks had been originally credited to the personal
account of Salazar because A.A. Salazar Construction and
Engineering Services, an unincorporated single proprietorship, had
no separate and distinct personality from Salazar.
5. Assuming the deduction from Salazars account was improper,
the CA should not have dismissed petitioners third-party complaint
against Templonuevo because the latter would have the legal duty to
return to petitioner the proceeds of the checks which he previously
received from it.
6. There was no factual basis for the award of damages to Salazar.
The petition is partly meritorious.
First, the issue raised by petitioner requires an inquiry into the factual findings
made by the CA. The CAs conclusion that the deductions from the bank account of
A.A. Salazar Construction and Engineering Services were improper stemmed from its
finding that there was no ineffective payment to Salazar which would call for the
exercise of petitioners right to set off against the formers bank deposits. This finding,
in turn, was drawn from the pleadings of the parties, the evidence adduced during trial
and upon the admissions and stipulations of fact made during the pre-trial, most
significantly the following:
(a) That Salazar previously had in her possession the following
checks:
(1) Solid Bank Check No. CB766556 dated January 30,
1990 in the amount of P57,712.50;
(2) Solid Bank Check No. CB898978 dated July 31,
1990 in the amount of P55,180.00; and,
(3) Equitable Banking Corporation Check No. 32380638
dated August 28, 1990 for the amount of P154,800.00;
(b) That these checks which had an aggregate amount of P267,692.50
were payable to the order of JRT Construction and Trading, the name and style under
which Templonuevo does business;
(c) That despite the lack of endorsement of the designated payee upon
such checks, Salazar was able to deposit the checks in her personal savings account
with petitioner and encash the same;
(d) That petitioner accepted and paid the checks on three (3) separate
occasions over a span of eight months in 1990; and
(e) That Templonuevo only protested the purportedly unauthorized
encashment of the checks after the lapse of one year from the date of the last check.[10]
Petitioner concedes that when it credited the value of the checks to the
account of private respondent Salazar, it made a mistake because it failed to notice the
lack of endorsement thereon by the designated payee. The CA, however, did not lend
credence to this claim and concluded that petitioners actions were deliberate, in view
of its admission that the mistake was committed three times on three separate
occasions, indicating acquiescence to the internal arrangement between Salazar and
Templonuevo. The CA explained thus:
It was quite apparent that the three checks which appellee
Salazar deposited were not indorsed. Three times she deposited them
to her account and three times the amounts borne by these checks
were credited to the same. And in those separate occasions, the bank
did not return the checks to her so that she could have them indorsed.
Neither did the bank question her as to why she was depositing the
checks to her account considering that she was not the payee thereof,
thus allowing us to come to the conclusion that defendant-appellant
BPI was fully aware that the proceeds of the three checks belong to
appellee.
For if the bank was not privy to the agreement between
Salazar and Templonuevo, it is most unlikely that appellant BPI (or
any bank for that matter) would have accepted the checks for deposit
on three separate times nary any question. Banks are most finicky
over accepting checks for deposit without the corresponding
indorsement by their payee. In fact, they hesitate to accept indorsed
checks for deposit if the depositor is not one they know very well. [11]
The CA likewise sustained Salazars position that she received the checks from
Templonuevo pursuant to an internal arrangement between them, ratiocinating as
follows:
3
 If there was indeed no arrangement between Templonuevo
and the plaintiff over the three questioned checks, it baffles us why it
was only on August 31, 1991 or more than a year after the third and
last check was deposited that he demanded for the refund of the total
amount of P267,692.50.
A prudent man knowing that payment is due him would
have demanded payment by his debtor from the moment the same
became due and demandable. More so if the sum involved runs in
hundreds of thousand of pesos. By and large, every person, at the
very moment he learns that he was deprived of a thing which
rightfully belongs to him, would have created a big fuss. He would
not have waited for a year within which to do so. It is most
inconceivable that Templonuevo did not do this.[12]
Generally, only questions of law may be raised in an appeal
by certiorari under Rule 45 of the Rules of Court.[13]Factual findings of the CA are
entitled to great weight and respect, especially when the CA affirms the factual
findings of the trial court.[14] Such questions on whether certain items of evidence
should be accorded probative value or weight, or rejected as feeble or spurious, or
whether or not the proofs on one side or the other are clear and convincing and
adequate to establish a proposition in issue, are questions of fact. The same holds true
for questions on whether or not the body of proofs presented by a party, weighed and
analyzed in relation to contrary evidence submitted by the adverse party may be said to
be strong, clear and convincing, or whether or not inconsistencies in the body of proofs
of a party are of such gravity as to justify refusing to give said proofs weight all these
are issues of fact which are not reviewable by the Court.[15]
This rule, however, is not absolute and admits of certain exceptions, namely:
a) when the conclusion is a finding grounded entirely on speculations, surmises, or
conjectures; b) when the inference made is manifestly mistaken, absurd, or impossible;
c) when there is a grave abuse of discretion; d) when the judgment is based on a
misapprehension of facts; e) when the findings of fact are conflicting; f) when the CA,
in making its findings, went beyond the issues of the case and the same are contrary to
the admissions of both appellant and appellee; g) when the findings of the CA are
contrary to those of the trial court; h) when the findings of fact are conclusions without
citation of specific evidence on which they are based; i) when the finding of fact of the
CA is premised on the supposed absence of evidence but is contradicted by the
evidence on record; and j) when the CA manifestly overlooked certain relevant facts
not disputed by the parties and which, if properly considered, would justify a different
conclusion.[16]
In the present case, the records do not support the finding made by the CA
and the trial court that a prior arrangement existed between Salazar and Templonuevo
regarding the transfer of ownership of the checks. This fact is crucial as Salazars
entitlement to the value of the instruments is based on the assumption that she is a
transferee within the contemplation of Section 49 of the Negotiable Instruments Law.
Section 49 of the Negotiable Instruments Law contemplates a situation
whereby the payee or indorsee delivers a negotiable instrument for value without
indorsing it, thus:
Transfer without indorsement; effect of- Where the holder of
an instrument payable to his order transfers it for value without
indorsing it, the transfer vests in the transferee such title as the
transferor had therein, and the transferee acquires in addition, the
right to have the indorsement of the transferor. But for the purpose of
determining whether the transferee is a holder in due course, the
negotiation takes effect as of the time when the indorsement is
actually made. [17]
It bears stressing that the above transaction is an equitable assignment and the
transferee acquires the instrument subject to defenses and equities available among
prior parties. Thus, if the transferor had legal title, the transferee acquires such title
and, in addition, the right to have the indorsement of the transferor and also the right,
as holder of the legal title, to maintain legal action against the maker or acceptor or
other party liable to the transferor. The underlying premise of this provision, however,
is that a valid transfer of ownership of the negotiable instrument in question has taken
place.
Transferees in this situation do not enjoy the presumption of ownership in
favor of holders since they are neither payees nor indorsees of such instruments. The
weight of authority is that the mere possession of a negotiable instrument does not in
itself conclusively establish either the right of the possessor to receive payment, or of
the right of one who has made payment to be discharged from liability. Thus,
something more than mere possession by persons who are not payees or indorsers of
the instrument is necessary to authorize payment to them in the absence of any other
facts from which the authority to receive payment may be inferred. [18]
The CA and the trial court surmised that the subject checks belonged to
private respondent Salazar based on the pre-trial stipulation that Templonuevo incurred
a one-year delay in demanding reimbursement for the proceeds of the same. To the
Courts mind, however, such period of delay is not of such unreasonable length as to
estop Templonuevo from asserting ownership over the checks especially considering
that it was readily apparent on the face of the instruments[19] that these were crossed
checks.
In State Investment House v. IAC,[20] the Court enumerated the effects of
crossing a check, thus: (1) that the check 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
4
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 such holder must inquire if
the check has been received pursuant to that purpose.
Thus, even if the delay in the demand for reimbursement is taken in
conjunction with Salazars possession of the checks, it cannot be said that the
presumption of ownership in Templonuevos favor as the designated payee therein was
sufficiently overcome. This is consistent with the principle that if instruments payable
to named payees or to their order have not been indorsed in blank, only such payees or
their indorsees can be holders and entitled to receive payment in their own right. [21]
The presumption under Section 131(s) of the Rules of Court stating that a
negotiable instrument was given for a sufficient consideration will not inure to the
benefit of Salazar because the term given does not pertain merely to a transfer of
physical possession of the instrument. The phrase given or indorsed in the context of a
negotiable instrument refers to the manner in which such instrument may be
negotiated. Negotiable instruments are negotiated by transfer to one person or another
in such a manner as to constitute the transferee the holder thereof. If payable to bearer
it is negotiated by delivery. If payable to order it is negotiated by the indorsement
completed by delivery.[22] The present case involves checks payable to order. Not
being a payee or indorsee of the checks, private respondent Salazar could not be
a holder thereof.
It is an exception to the general rule for a payee of an order instrument to
transfer the instrument without indorsement. Precisely because the situation is
abnormal, it is but fair to the maker and to prior holders to require possessors to prove
without the aid of an initial presumption in their favor, that they came into possession
by virtue of a legitimate transaction with the last holder. [23] Salazar failed to discharge
this burden, and the return of the check proceeds to Templonuevo was therefore
warranted under the circumstances despite the fact that Templonuevo may not have
clearly demonstrated that he never authorized Salazar to deposit the checks or to
encash the same. Noteworthy also is the fact that petitioner stamped on the back of the
checks the words: "All prior endorsements and/or lack of endorsements guaranteed,"
thereby making the assurance that it had ascertained the genuineness of all prior
endorsements. Having assumed the liability of a general indorser, petitioners liability
to the designated payee cannot be denied.
Consequently, petitioner, as the collecting bank, had the right to debit Salazars
account for the value of the checks it previously credited in her favor. It is of no
moment that the account debited by petitioner was different from the original account
to which the proceeds of the check were credited because both admittedly belonged to
Salazar, the former being the account of the sole proprietorship which had no separate
and distinct personality from her, and the latter being her personal account.
The right of set-off was explained in Associated Bank v. Tan:[24]
A bank generally has a right of set-off over the deposits
therein for the payment of any withdrawals on the part of a depositor.
The right of a collecting bank to debit a client's account for the value
of a dishonored check that has previously been credited has fairly
been established by jurisprudence. To begin with, Article 1980 of the
Civil Code provides that "[f]ixed, savings, and current deposits of
money in banks and similar institutions shall be governed by the
provisions concerning simple loan.
Hence, the relationship between banks and depositors has
been held to be that of creditor and debtor. Thus, legal compensation
under Article 1278 of the Civil Code may take place "when all the
requisites mentioned in Article 1279 are present," as follows:
(1) That each one of the obligors be bound
principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consist in a sum of money, or
if the things due are consumable, they be
of the same kind, and also of the same
quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any
retention or controversy, commenced by
third persons and communicated in due
time to the debtor.
While, however, it is conceded that petitioner had the right of set-off over the
amount it paid to Templonuevo against the deposit of Salazar, the issue of whether it
acted judiciously is an entirely different matter.[25] As businesses affected with public
interest, and because of the nature of their functions, banks are under obligation to treat
the accounts of their depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.[26] In this regard, petitioner was clearly remiss in
its duty to private respondent Salazar as its depositor.
To begin with, the irregularity appeared plainly on the face of the checks.
Despite the obvious lack of indorsement thereon, petitioner permitted the encashment
of these checks three times on three separate occasions. This negates petitioners claim
that it merely made a mistake in crediting the value of the checks to Salazars account
and instead bolsters the conclusion of the CA that petitioner recognized Salazars claim
of ownership of checks and acted deliberately in paying the same, contrary to ordinary
banking policy and practice. It must be emphasized that the law imposes 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
5
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.[27] The taking and collection of a check
without the proper indorsement amount to a conversion of the check by the bank. [28]
More importantly, however, solely upon the prompting of Templonuevo, and
with full knowledge of the brewing dispute between Salazar and Templonuevo,
petitioner debited the account held in the name of the sole proprietorship of Salazar
without even serving due notice upon her. This ran contrary to petitioners assurances
to private respondent Salazar that the account would remain untouched, pending the
resolution of the controversy between her and Templonuevo. [29] In this connection, the
CA cited the letter dated September 5, 1991 of Mr. Manuel Ablan, Senior Manager of
petitioner banks Pasig/Ortigas branch, to private respondent Salazar informing her that
her account had been frozen, thus:
From the tenor of the letter of Manuel Ablan, it is safe to
conclude that Account No. 0201-0588-48 will remain frozen or
untouched until herein [Salazar] has settled matters with
Templonuevo. But, in an unexpected move, in less than two weeks
(eleven days to be precise) from the time that letter was written,
[petitioner] bank issued a cashiers check in the name of Julio R.
Templonuevo of the J.R.T. Construction and Trading for the sum
of P267,692.50 (Exhibit 8) and debited said amount from Ms. Arcillas
account No. 0201-0588-48 which was supposed to be frozen or
controlled. Such a move by BPI is, to Our minds, a clear case of
negligence, if not a fraudulent, wanton and reckless disregard of the
right of its depositor.
given the opportunity to protect her interest when petitioner unilaterally withdrew the
above amount from her account without informing her that it had already done so.
For the above reasons, the Court finds no reason to disturb the award of
damages granted by the CA against petitioner. This whole incident would have been
avoided had petitioner adhered to the standard of diligence expected of one engaged in
the banking business. A depositor has the right to recover reasonable moral damages
even if the banks negligence may not have been attended with malice and bad faith, if
the former suffered mental anguish, serious anxiety, embarrassment and
humiliation.[31] Moral damages are not meant to enrich a complainant at the expense of
defendant. It is only intended to alleviate the moral suffering she has undergone. The
award of exemplary damages is justified, on the other hand, when the acts of the bank
are attended by malice, bad faith or gross negligence. The award of reasonable
attorneys fees is proper where exemplary damages are awarded. It is proper where
depositors are compelled to litigate to protect their interest. [32]
WHEREFORE, the petition is partially GRANTED. The assailed Decision
dated April 3, 1998 and Resolution dated April 3, 1998 rendered by the Court of
Appeals in CA-G.R. CV No. 42241 are MODIFIED insofar as it ordered petitioner
Bank of the Philippine Islands to return the amount of Two Hundred Sixty-seven
Thousand Seven Hundred and Seven and 70/100 Pesos (P267,707.70) to respondent
Annabelle A. Salazar, which portion is REVERSED and SET ASIDE. In all other
respects, the same are AFFIRMED.
No costs.

The records further bear out the fact that respondent Salazar had issued
several checks drawn against the account of A.A. Salazar Construction and
Engineering Services prior to any notice of deduction being served. The CA sustained
private respondent Salazars claim of damages in this regard:

The act of the bank in freezing and later debiting the amount
of P267,692.50 from the account of A.A. Salazar Construction and
Engineering Services caused plaintiff-appellee great damage and
prejudice particularly when she had already issued checks drawn
against the said account. As can be expected, the said checks
bounced. To prove this, plaintiff-appellee presented as exhibits
photocopies of checks dated September 8, 1991, October 28, 1991,
and November 14, 1991 (Exhibits D, E and F respectively)[30]

These checks, it must be emphasized, were subsequently dishonored, thereby

causing private respondent Salazar undue embarrassment and inflicting damage to her
standing in the business community. Under the circumstances, she was clearly not

6
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 97753 August 10, 1992
CALTEX (PHILIPPINES), INC., petitioner,
vs.
COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents.
Bito, Lozada, Ortega & Castillo for petitioners.
Nepomuceno, Hofileña & Guingona for private.
REGALADO, J.:
This petition for review on certiorari impugns and seeks the reversal of the
decision promulgated by respondent court on March 8, 1991 in CA-G.R. CV
No. 23615 1 affirming with modifications, the earlier decision of the Regional
Trial Court of Manila, Branch XLII, 2 which dismissed the complaint filed therein
by herein petitioner against respondent bank.
The undisputed background of this case, as found by the court a quo and
adopted by respondent court, appears of record:
1. On various dates, defendant, a commercial banking
institution, through its Sucat Branch issued 280 certificates of
time deposit (CTDs) in favor of one Angel dela Cruz who
deposited with herein defendant the aggregate amount of
P1,120,000.00, as follows: (Joint Partial Stipulation of Facts
and Statement of Issues, Original Records, p. 207;
Defendant's Exhibits 1 to 280);
CTD CTD
Dates Serial Nos. Quantity Amount
22 Feb. 82 90101 to 90120 20 P80,000
26 Feb. 82 74602 to 74691 90 360,000
2 Mar. 82 74701 to 74740 40 160,000
4 Mar. 82 90127 to 90146 20 80,000
5 Mar. 82 74797 to 94800 4 16,000
5 Mar. 82 89965 to 89986 22 88,000
5 Mar. 82 70147 to 90150 4 16,000
8 Mar. 82 90001 to 90020 20 80,000
9 Mar. 82 90023 to 90050 28 112,000
9 Mar. 82 89991 to 90000 10 40,000
9 Mar. 82 90251 to 90272 22 88,000
——— ————
Total 280 P1,120,000
===== ========
2. Angel dela Cruz delivered the said certificates of time
(CTDs) to herein plaintiff in connection with his purchased of
fuel products from the latter (Original Record, p. 208).
3. Sometime in March 1982, Angel dela Cruz informed Mr.
Timoteo Tiangco, the Sucat Branch Manger, that he lost all the
certificates of time deposit in dispute. Mr. Tiangco advised
said depositor to execute and submit a notarized Affidavit of
Loss, as required by defendant bank's procedure, if he desired
replacement of said lost CTDs (TSN, February 9, 1987, pp.
48-50).
4. On March 18, 1982, Angel dela Cruz executed and
delivered to defendant bank the required Affidavit of Loss
(Defendant's Exhibit 281). On the basis of said affidavit of loss,
280 replacement CTDs were issued in favor of said depositor
(Defendant's Exhibits 282-561).
5. On March 25, 1982, Angel dela Cruz negotiated and
obtained a loan from defendant bank in the amount of Eight
Hundred Seventy Five Thousand Pesos (P875,000.00). On
the same date, said depositor executed a notarized Deed of
Assignment of Time Deposit (Exhibit 562) which stated,
among others, that he (de la Cruz) surrenders to defendant
bank "full control of the indicated time deposits from and after
date" of the assignment and further authorizes said bank to
pre-terminate, set-off and "apply the said time deposits to the
payment of whatever amount or amounts may be due" on the
loan upon its maturity (TSN, February 9, 1987, pp. 60-62).
7
6. Sometime in November, 1982, Mr. Aranas, Credit Manager
of plaintiff Caltex (Phils.) Inc., went to the defendant bank's
Sucat branch and presented for verification the CTDs declared
lost by Angel dela Cruz alleging that the same were delivered
to herein plaintiff "as security for purchases made with Caltex
Philippines, Inc." by said depositor (TSN, February 9, 1987,
pp. 54-68).
7. On November 26, 1982, defendant received a letter
(Defendant's Exhibit 563) from herein plaintiff formally
informing it of its possession of the CTDs in question and of its
decision to pre-terminate the same.
8. On December 8, 1982, plaintiff was requested by herein
defendant to furnish the former "a copy of the document
evidencing the guarantee agreement with Mr. Angel dela
Cruz" as well as "the details of Mr. Angel dela Cruz" obligation
against which plaintiff proposed to apply the time deposits
(Defendant's Exhibit 564).
9. No copy of the requested documents was furnished herein
defendant.
10. Accordingly, defendant bank rejected the plaintiff's
demand and claim for payment of the value of the CTDs in a
letter dated February 7, 1983 (Defendant's Exhibit 566).
11. In April 1983, the loan of Angel dela Cruz with the
defendant bank matured and fell due and on August 5, 1983,
the latter set-off and applied the time deposits in question to
the payment of the matured loan (TSN, February 9, 1987, pp.
130-131).
12. In view of the foregoing, plaintiff filed the instant complaint,
praying that defendant bank be ordered to pay it the aggregate
value of the certificates of time deposit of P1,120,000.00 plus
accrued interest and compounded interest therein at 16% per
annum, moral and exemplary damages as well as attorney's
fees.
After trial, the court a quo rendered its decision dismissing the
instant complaint. 3
On appeal, as earlier stated, respondent court affirmed the lower court's
dismissal of the complaint, hence this petition wherein petitioner faults
respondent court in ruling (1) that the subject certificates of deposit are non-
negotiable despite being clearly negotiable instruments; (2) that petitioner did
not become a holder in due course of the said certificates of deposit; and (3) in
disregarding the pertinent provisions of the Code of Commerce relating to lost
instruments payable to bearer. 4
The instant petition is bereft of merit.
A sample text of the certificates of time deposit is reproduced below to provide
a better understanding of the issues involved in this recourse.
SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has
deposited in this Bank the sum of PESOS:
FOUR THOUSAND ONLY, SECURITY BANK
SUCAT OFFICE P4,000 & 00 CTS Pesos,
Philippine Currency, repayable to said
depositor 731 days. after date, upon
presentation and surrender of this certificate,
with interest at the rate of 16% per cent per
annum.
(Sgd. Illegible) (Sgd. Illegible)
—————————— ———————————
AUTHORIZED SIGNATURES 5
Respondent court ruled that the CTDs in question are non-negotiable
instruments, nationalizing as follows:
. . . While it may be true that the word "bearer" appears rather
boldly in the CTDs issued, it is important to note that after the
8
 word "BEARER" stamped on the space provided supposedly
for the name of the depositor, the words "has deposited" a
certain amount follows. The document further provides that the
amount deposited shall be "repayable to said depositor" on the
period indicated. Therefore, the text of the instrument(s)
themselves manifest with clarity that they are payable, not to
whoever purports to be the "bearer" but only to the specified
person indicated therein, the depositor. In effect, the appellee
bank acknowledges its depositor Angel dela Cruz as the
person who made the deposit and further engages itself to pay
said depositor the amount indicated thereon at the stipulated
date. 6
We disagree with these findings and conclusions, and hereby hold that the
CTDs in question are negotiable instruments. Section 1 Act No. 2031,
otherwise known as the Negotiable Instruments Law, enumerates the
requisites for an instrument to become negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a
sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable
future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
certainty.
The CTDs in question undoubtedly meet the requirements of the law for
negotiability. The parties' bone of contention is with regard to requisite (d) set
forth above. It is noted that Mr. Timoteo P. Tiangco, Security Bank's Branch
Manager way back in 1982, testified in open court that the depositor reffered to
in the CTDs is no other than Mr. Angel de la Cruz.
xxx xxx xxx
Atty. Calida:
q In other words Mr. Witness, you are saying
that per books of the bank, the depositor
referred (sic) in these certificates states that it
was Angel dela Cruz?
witness:
a Yes, your Honor, and we have the record to
show that Angel dela Cruz was the one who
cause (sic) the amount.
Atty. Calida:
q And no other person or entity or company,
Mr. Witness?
witness:
a None, your Honor. 7
xxx xxx xxx
Atty. Calida:
q Mr. Witness, who is the depositor identified
in all of these certificates of time deposit
insofar as the bank is concerned?
witness:
a Angel dela Cruz is the depositor. 8
xxx xxx xxx
On this score, the accepted rule is that the negotiability or non-negotiability of
an instrument is determined from the writing, that is, from the face of the
instrument itself.9 In the construction of a bill or note, the intention of the
parties is to control, if it can be legally ascertained. 10 While the writing may be
read in the light of surrounding circumstances in order to more perfectly
understand the intent and meaning of the parties, yet as they have constituted
the writing to be the only outward and visible expression of their meaning, no
other words are to be added to it or substituted in its stead. The duty of the
court in such case is to ascertain, not what the parties may have secretly
intended as contradistinguished from what their words express, but what is the
9
meaning of the words they have used. What the parties meant must be
determined by what they said. 11
Contrary to what respondent court held, the CTDs are negotiable instruments.
The documents provide that the amounts deposited shall be repayable to the
depositor. And who, according to the document, is the depositor? It is the
"bearer." The documents do not say that the depositor is Angel de la Cruz and
that the amounts deposited are repayable specifically to him. Rather, the
amounts are to be repayable to the bearer of the documents or, for that matter,
whosoever may be the bearer at the time of presentment.
If it was really the intention of respondent bank to pay the amount to Angel de
la Cruz only, it could have with facility so expressed that fact in clear and
categorical terms in the documents, instead of having the word "BEARER"
stamped on the space provided for the name of the depositor in each CTD. On
the wordings of the documents, therefore, the amounts deposited are
repayable to whoever may be the bearer thereof. Thus, petitioner's aforesaid
witness merely declared that Angel de la Cruz is the depositor "insofar as the
bank is concerned," but obviously other parties not privy to the transaction
between them would not be in a position to know that the depositor is not the
bearer stated in the CTDs. Hence, the situation would require any party
dealing with the CTDs to go behind the plain import of what is written thereon
to unravel the agreement of the parties thereto through facts aliunde. This
need for resort to extrinsic evidence is what is sought to be avoided by the
Negotiable Instruments Law and calls for the application of the elementary rule
that the interpretation of obscure words or stipulations in a contract shall not
favor the party who caused the obscurity. 12
The next query is whether petitioner can rightfully recover on the CTDs. This
time, the answer is in the negative. The records reveal that Angel de la Cruz,
whom petitioner chose not to implead in this suit for reasons of its own,
delivered the CTDs amounting to P1,120,000.00 to petitioner without informing
respondent bank thereof at any time. Unfortunately for petitioner, although the
CTDs are bearer instruments, a valid negotiation thereof for the true purpose
and agreement between it and De la Cruz, as ultimately ascertained, requires
both delivery and indorsement. For, although petitioner seeks to deflect this
fact, the CTDs were in reality delivered to it as a security for De la Cruz'
purchases of its fuel products. Any doubt as to whether the CTDs were
delivered as payment for the fuel products or as a security has been dissipated
and resolved in favor of the latter by petitioner's own authorized and
responsible representative himself.
In a letter dated November 26, 1982 addressed to respondent Security Bank,
J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . . These certificates of
deposit were negotiated to us by Mr. Angel dela Cruz to guarantee his
purchases of fuel products" (Emphasis ours.) 13 This admission is conclusive
upon petitioner, its protestations notwithstanding. Under the doctrine of
estoppel, an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person
relying thereon. 14 A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon them. 15 In
the law of evidence, whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to believe a particular thing
true, and to act upon such belief, he cannot, in any litigation arising out of such
declaration, act, or omission, be permitted to falsify it. 16
If it were true that the CTDs were delivered as payment and not as security,
petitioner's credit manager could have easily said so, instead of using the
words "to guarantee" in the letter aforequoted. Besides, when respondent
bank, as defendant in the court below, moved for a bill of particularity
therein 17 praying, among others, that petitioner, as plaintiff, be required to aver
with sufficient definiteness or particularity (a) the due date or dates
of payment of the alleged indebtedness of Angel de la Cruz to plaintiff and (b)
whether or not it issued a receipt showing that the CTDs were delivered to it by
De la Cruz as payment of the latter's alleged indebtedness to it, plaintiff
corporation opposed the motion. 18 Had it produced the receipt prayed for, it
could have proved, if such truly was the fact, that the CTDs were delivered as
payment and not as security. Having opposed the motion, petitioner now
labors under the presumption that evidence willfully suppressed would be
adverse if produced. 19
Under the foregoing circumstances, this disquisition in Intergrated Realty
Corporation, et al. vs. Philippine National Bank, et al. 20 is apropos:
. . . Adverting again to the Court's pronouncements in Lopez,
supra, we quote therefrom:
The character of the transaction between the
parties is to be determined by their intention,
regardless of what language was used or
what the form of the transfer was. If it was
intended to secure the payment of money, it
must be construed as a pledge; but if there
was some other intention, it is not a pledge.
However, even though a transfer, if regarded
by itself, appears to have been absolute, its
object and character might still be qualified
and explained by contemporaneous writing
declaring it to have been a deposit of the
property as collateral security. It has been
10
 said that a transfer of property by the debtor
to a creditor, even if sufficient on its face to
make an absolute conveyance, should be
treated as a pledge if the debt continues in
inexistence and is not discharged by the
transfer, and that accordingly the use of the
terms ordinarily importing conveyance of
absolute ownership will not be given that
effect in such a transaction if they are also
commonly used in pledges and mortgages
and therefore do not unqualifiedly indicate a
transfer of absolute ownership, in the absence
of clear and unambiguous language or other
circumstances excluding an intent to pledge.
Petitioner's insistence that the CTDs were negotiated to it begs the question.
Under the Negotiable Instruments Law, an instrument is negotiated when it is
transferred from one person to another in such a manner as to constitute the
transferee the holder thereof, 21 and a holder may be the payee or indorsee of
a bill or note, who is in possession of it, or the bearer thereof. 22 In the present
case, however, there was no negotiation in the sense of a transfer of the legal
title to the CTDs in favor of petitioner in which situation, for obvious reasons,
mere delivery of the bearer CTDs would have sufficed. Here, the delivery
thereof only as security for the purchases of Angel de la Cruz (and we even
disregard the fact that the amount involved was not disclosed) could at the
most constitute petitioner only as a holder for value by reason of his lien.
Accordingly, a negotiation for such purpose cannot be effected by mere
delivery of the instrument since, necessarily, the terms thereof and the
subsequent disposition of such security, in the event of non-payment of the
principal obligation, must be contractually provided for.
The pertinent law on this point is that where the holder has a lien on the
instrument arising from contract, he is deemed a holder for value to the extent
of his lien. 23 As such holder of collateral security, he would be a pledgee but
the requirements therefor and the effects thereof, not being provided for by the
Negotiable Instruments Law, shall be governed by the Civil Code provisions on
pledge of incorporeal rights, 24 which inceptively provide:
Art. 2095. Incorporeal rights, evidenced by negotiable
instruments, . . . may also be pledged. The instrument proving
the right pledged shall be delivered to the creditor, and if
negotiable, must be indorsed.
Art. 2096. A pledge shall not take effect against third persons
if a description of the thing pledged and the date of the pledge
do not appear in a public instrument.
Aside from the fact that the CTDs were only delivered but not indorsed, the
factual findings of respondent court quoted at the start of this opinion show that
petitioner failed to produce any document evidencing any contract of pledge or
guarantee agreement between it and Angel de la Cruz. 25 Consequently, the
mere delivery of the CTDs did not legally vest in petitioner any right effective
against and binding upon respondent bank. The requirement under Article
2096 aforementioned is not a mere rule of adjective law prescribing the mode
whereby proof may be made of the date of a pledge contract, but a rule of
substantive law prescribing a condition without which the execution of a pledge
contract cannot affect third persons adversely. 26
On the other hand, the assignment of the CTDs made by Angel de la Cruz in
favor of respondent bank was embodied in a public instrument. 27 With regard
to this other mode of transfer, the Civil Code specifically declares:
Art. 1625. An assignment of credit, right or action shall
produce no effect as against third persons, unless it appears
in a public instrument, or the instrument is recorded in the
Registry of Property in case the assignment involves real
property.
Respondent bank duly complied with this statutory requirement. Contrarily,
petitioner, whether as purchaser, assignee or lien holder of the CTDs, neither
proved the amount of its credit or the extent of its lien nor the execution of any
public instrument which could affect or bind private respondent. Necessarily,
therefore, as between petitioner and respondent bank, the latter has definitely
the better right over the CTDs in question.
Finally, petitioner faults respondent court for refusing to delve into the question
of whether or not private respondent observed the requirements of the law in
the case of lost negotiable instruments and the issuance of replacement
certificates therefor, on the ground that petitioner failed to raised that issue in
the lower court. 28
On this matter, we uphold respondent court's finding that the aspect of alleged
negligence of private respondent was not included in the stipulation of the
parties and in the statement of issues submitted by them to the trial
court. 29 The issues agreed upon by them for resolution in this case are:
11
 1. Whether or not the CTDs as worded are negotiable
instruments.
2. Whether or not defendant could legally apply the amount
covered by the CTDs against the depositor's loan by virtue of
the assignment (Annex "C").
3. Whether or not there was legal compensation or set off
involving the amount covered by the CTDs and the depositor's
outstanding account with defendant, if any.
4. Whether or not plaintiff could compel defendant to
preterminate the CTDs before the maturity date provided
therein.
5. Whether or not plaintiff is entitled to the proceeds of the
CTDs.
6. Whether or not the parties can recover damages, attorney's
fees and litigation expenses from each other.
As respondent court correctly observed, with appropriate citation of some
doctrinal authorities, the foregoing enumeration does not include the issue of
negligence on the part of respondent bank. An issue raised for the first time on
appeal and not raised timely in the proceedings in the lower court is barred by
estoppel. 30 Questions raised on appeal must be within the issues framed by
the parties and, consequently, issues not raised in the trial court cannot be
raised for the first time on appeal. 31
Pre-trial is primarily intended to make certain that all issues necessary to the
disposition of a case are properly raised. Thus, to obviate the element of
surprise, parties are expected to disclose at a pre-trial conference all issues of
law and fact which they intend to raise at the trial, except such as may involve
privileged or impeaching matters. The determination of issues at a pre-trial
conference bars the consideration of other questions on appeal. 32
To accept petitioner's suggestion that respondent bank's supposed negligence
may be considered encompassed by the issues on its right to preterminate and
receive the proceeds of the CTDs would be tantamount to saying that
petitioner could raise on appeal any issue. We agree with private respondent
that the broad ultimate issue of petitioner's entitlement to the proceeds of the
questioned certificates can be premised on a multitude of other legal reasons
and causes of action, of which respondent bank's supposed negligence is only
one. Hence, petitioner's submission, if accepted, would render a pre-trial
delimitation of issues a useless exercise. 33
Still, even assuming arguendo that said issue of negligence was raised in the
court below, petitioner still cannot have the odds in its favor. A close scrutiny of
the provisions of the Code of Commerce laying down the rules to be followed
in case of lost instruments payable to bearer, which it invokes, will reveal that
said provisions, even assuming their applicability to the CTDs in the case at
bar, are merely permissive and not mandatory. The very first article cited by
petitioner speaks for itself.
Art 548. The dispossessed owner, no matter for what cause it
may be, may apply to the judge or court of competent
jurisdiction, asking that the principal, interest or dividends due
or about to become due, be not paid a third person, as well as
in order to prevent the ownership of the instrument that a
duplicate be issued him. (Emphasis ours.)
xxx xxx xxx
The use of the word "may" in said provision shows that it is not mandatory but
discretionary on the part of the "dispossessed owner" to apply to the judge or
court of competent jurisdiction for the issuance of a duplicate of the lost
instrument. Where the provision reads "may," this word shows that it is not
mandatory but discretional. 34 The word "may" is usually permissive, not
mandatory. 35 It is an auxiliary verb indicating liberty, opportunity, permission
and possibility. 36
Moreover, as correctly analyzed by private respondent, 37 Articles 548 to 558
of the Code of Commerce, on which petitioner seeks to anchor respondent
bank's supposed negligence, merely established, on the one hand, a right of
recourse in favor of a dispossessed owner or holder of a bearer instrument so
that he may obtain a duplicate of the same, and, on the other, an option in
favor of the party liable thereon who, for some valid ground, may elect to
refuse to issue a replacement of the instrument. Significantly, none of the
provisions cited by petitioner categorically restricts or prohibits the issuance a
duplicate or replacement instrument sans compliance with the procedure
outlined therein, and none establishes a mandatory precedent requirement
therefor.
WHEREFORE, on the modified premises above set forth, the petition is
DENIED and the appealed decision is hereby AFFIRMED.
SO ORDERED.
12

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 107898 December 19, 1995
MANUEL LIM and ROSITA LIM, petitioners,
vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
BELLOSILLO, J.:
MANUEL LIM and ROSITA LIM, spouses, were charged before the Regional
Trial Court of Malabon with estafa on three (3) counts under Art. 315, par. 2
(d), of The Revised Penal Code, docketed as Crim. Cases Nos. 1696-MN to
1698-MN. The Informations substantially alleged that Manuel and Rosita,
conspiring together, purchased goods from Linton Commercial Company, Inc.
(LINTON), and with deceit issued seven Consolidated Bank and Trust
Company (SOLIDBANK) checks simultaneously with the delivery as payment
therefor. When presented to the drawee bank for payment the checks were
dishonored as payment on the checks had been stopped and/or for
insufficiency of funds to cover the amounts. Despite repeated notice and
demand the Lim spouses failed and refused to pay the checks or the value of
the goods.
On the basis of the same checks, Manuel and Rosita Lim were also charged
with seven (7) counts of violation of B.P. Blg. 22, otherwise known as
the Bouncing Checks Law, docketed as Crim. Cases Nos. 1699-MN to 1705-
MN. In substance, the Informations alleged that the Lims issued the checks
with knowledge that they did not have sufficient funds or credit with the drawee
bank for payment in full of such checks upon presentment. When presented for
payment within ninety (90) days from date thereof the checks were dishonored
by the drawee bank for insufficiency of funds. Despite receipt of notices of
such dishonor the Lims failed to pay the amounts of the checks or to make
arrangements for full payment within five (5) banking days.
Manuel Lim and Rosita Lim are the president and treasurer, respectively, of
Rigi Bilt Industries, Inc. (RIGI). RIGI had been transacting business with
LINTON for years, the latter supplying the former with steel plates, steel bars,
flat bars and purlin sticks which it uses in the fabrication, installation and
building of steel structures. As officers of RIGI the Lim spouses were allowed
30, 60 and sometimes even up to 90 days credit.
On 27 May 1983 the Lims ordered 100 pieces of mild steel plates worth
P51,815.00 from LINTON which were delivered on the same day at their place
of business at 666 7th Avenue, 8th Street, Kalookan City. To pay LINTON for
the delivery the Lims issued SOLIDBANK Check No. 027700 postdated 3
September 1983 in the amount of P51,800.00.1
On 30 May 1983 the Lims ordered another 65 pieces of mild steel plates worth
P63,455.00 from LINTON which were delivered at their place of business on
the same day. They issued as payment SOLIDBANK Check No. 027699 in the
amount of P63,455.00 postdated 20 August 1983.2
The Lim spouses also ordered 2,600 "Z" purlins worth P241,800.00 which
were delivered to them on various dates, to wit: 15 and 22 April 1983; 11, 14,
20, 23, 25, 28 and 30 May 1983; and, 2 and 9 June 1983. To pay for the
deliveries, they issued seven SOLIDBANK checks, five of which were —
Check No. Date of Issue Amount
027683 16 July 1983 P27,900.003
027684 23 July 1983 P27,900.004
027719 6 Aug. 1983 P32,550.005
027720 13 Aug. 1983 P27,900.006
027721 27 Aug. 1983 P37,200.007
William Yu Bin, Vice President and Sales Manager of LINTON, testified that
when those seven (7) checks were deposited with the Rizal Commercial
Banking Corporation they were dishonored for "insufficiency of funds" with the
additional notation "payment stopped" stamped thereon. Despite demand
Manuel and Rosita refused to make good the checks or pay the value of the
deliveries.
Salvador Alfonso, signature verifier of SOLIDBANK, Grace Park Branch,
Kalookan City, where the Lim spouses maintained an account, testified on the
following transactions with respect to the seven (7) checks:
CHECK NO. DATE PRESENTED REASON FOR DISHONOR
13
 027683 22 July 1983 Payment Stopped (PS)8
027684 23 July 1983 PS and Drawn Against
Insufficient Fund (DAIF)9
027699 24 Aug. 1983 PS and DAIF10
027700 5 Sept. 1983 PS and DAIF11
027719 9 Aug. 1983 DAIF 12
027720 16 Aug. 1983 PS and DAIF13
027721 30 Aug. 1983 PS and DAIF14
Manuel Lim admitted having issued the seven (7) checks in question to pay for
deliveries made by LINTON but denied that his company's account had
insufficient funds to cover the amounts of the checks. He presented the bank
ledger showing a balance of P65,752.75. Also, he claimed that he ordered
SOLIDBANK to stop payment because the supplies delivered by LINTON were
not in accordance with the specifications in the purchase orders.
Rosita Lim was not presented to testify because her statements would only be
corroborative.
On the basis of the evidence thus presented the trial court held both accused
guilty of estafa and violation of B.P. Blg. 22 in its decision dated 25 January
1989. In Crim. Case No. 1696-MN they were sentenced to an indeterminate
penalty of six (6) years and one (1) day of prision mayor as minimum to twelve
(12) years and one (1) day of reclusion temporal as maximum plus one (1)
year for each additional P10,000.00 with all the accessory penalties provided
for by law, and to pay the costs. They were also ordered to indemnify LINTON
in the amount of P241,800.00. Similarly sentences were imposed in Crim.
Cases Nos. 1697-MN and 1698-MN except as to the indemnities awarded,
which were P63,455.00 and P51,800.00, respectively.
In Crim. Case No. 1699-MN the trial court sentenced both accused to a
straight penalty of one (1) year imprisonment with all the accessory penalties
provided for by law and to pay the costs. In addition, they were ordered to
indemnify LINTON in the amount of P27,900.00. Again, similar sentences were
imposed in Crim. Cases Nos. 1700-MN to 1705-MN except for the indemnities
awarded, which were P32,550.00, P27,900.00, P27,900.00, P63,455.00,
P51,800.00 and P37,200.00 respectively.15
On appeal, the accused assailed the decision as they imputed error to the trial
court as follows: (a) the regional Trial Court of malabon had no jurisdiction over
the cases because the offenses charged ere committed outside its territory; (b)
they could not be held liable for estafa because the seven (7) checks were
issued by them several weeks after the deliveries of the goods; and, (c) neither
could they be held liable for violating B.P. Blg. 22 as they ordered payment of
the checks to be stopped because the goods delivered were not those
specified by them, besides they had sufficient funds to pay the checks.
In the decision of 18 September 199216 respondent Court of Appeals acquitted
accused-appellants of estafa on the ground that indeed the checks were not
made in payment of an obligation contracted at the time of their issuance.
However it affirmed the finding of the trial court that they were guilty of having
violated B.P. Blg. 22.17 On 6 November 1992 their motion for reconsideration
was denied.18
In the case at bench petitioners maintain that the prosecution failed to prove
that any of the essential elements of the crime punishable under B.P. Blg. 22
was committed within the jurisdiction of the Regional Trial Court of Malabon.
They claim that what was proved was that all the elements of the offense were
committed in Kalookan City. The checks were issued at their place of
business, received by a collector of LINTON, and dishonored by the drawee
bank, all in Kalookan City. Furthermore, no evidence whatsoever supports the
proposition that they knew that their checks were insufficiently funded. In fact,
some of the checks were funded at the time of presentment but dishonored
nonetheless upon their instruction to the bank to stop payment. In fine,
considering that the checks were all issued, delivered, and dishonored in
Kalookan City, the trial court of Malabon exceeded its jurisdiction when it tried
the case and rendered judgment thereon.
The petition has no merit. Section 1, par. 1, of B.P. Blg. 22 punishes "[a]ny
person who makes or draws and issues any check to apply on account or for
value, knowing at the time of issue that he does not have sufficient funds in or
credit with the drawee bank for the payment of such check in full upon its
presentment, which check is subsequently dishonored by the drawee bank for
insufficiency of funds or credit or would have been dishonored for the same
reason had not the drawer, without any valid reason, ordered the bank to stop
payment . . ." The gravamen of the offense is knowingly issuing a worthless
check.19 Thus, a fundamental element is knowledge on the part of the drawer
of the insufficiency of his funds in20 or credit with the drawee bank for the
payment of such check in full upon presentment. Another essential element is
subsequent dishonor of the check by the drawee bank for insufficiency of
funds or credit or would have been dishonored for the same reason had not
the drawer, without any valid reason, ordered the bank to stop payment.21
It is settled that venue in criminal cases is a vital ingredient of
jurisdiction.22 Section 14, par. (a), Rule 110, of the Revised Rules of Court,
which has been carried over in Sec. 15, par. (a), Rule 110 of the 1985 Rules
on Criminal Procedure, specifically provides:
14
 Sec. 14. Place where action is to be instituted. — (a) In all
criminal prosecutions the action shall be instituted and tried in
the court of the municipality or province wherein the offense
was committed or anyone of the essential ingredients thereof
took place.
If all the acts material and essential to the crime and requisite of its
consummation occurred in one municipality or territory, the court therein has
the sole jurisdiction to try the case.23 There are certain crimes in which some
acts material and essential to the crimes and requisite to their consummation
occur in one municipality or territory and some in another, in which event, the
court of either has jurisdiction to try the cases, it being understood that the first
court taking cognizance of the case excludes the other. 24 These are the so-
called transitory or continuing crimes under which violation of B.P. Blg. 22 is
categorized. In other words, a person charged with a transitory crime may be
validly tried in any municipality or territory where the offense was in part
committed.25
In determining proper venue in these cases, the following acts material and
essential to each crime and requisite to its consummation must be considered:
(a) the seven (7) checks were issued to LINTON at its place of business in
Balut, Navotas; b) they were delivered to LINTON at the same place; (c) they
were dishonored in Kalookan City; and, (d) petitioners had knowledge of the
insufficiency of their funds in SOLIDBANK at the time the checks were issued.
Since there is no dispute that the checks were dishonored in Kalookan City, it
is no longer necessary to discuss where the checks were dishonored.
Under Sec. 191 of the Negotiable Instruments Law the term "issue" means the
first delivery of the instrument complete in form to a person who takes it as a
holder. On the other hand, the term "holder" refers to the payee or indorsee of
a bill or note who is in possession of it or the bearer thereof. In People
v. Yabut26 this Court explained —
. . . The place where the bills were written, signed, or dated
does not necessarily fix or determine the place where they
were executed. What is of decisive importance is the delivery
thereof. The delivery of the instrument is the final
act essential to its consummation as an obligation. An
undelivered bill or note is inoperative. Until delivery, the
contract is revocable. And the issuance as well as the delivery
of the check must be to a person who takes it as a holder,
which means "(t)he payee or indorsee of a bill or note, who is
in possession of it, or the bearer thereof." Delivery of the
check signifies transfer of possession, whether actual or
constructive, from one person to another with intent to transfer
titlethereto . . .
Although LINTON sent a collector who received the checks from petitioners at
their place of business in Kalookan City, they were actually issued and
delivered to LINTON at its place of business in Balut, Navotas. The receipt of
the checks by the collector of LINTON is not the issuance and delivery to the
payee in contemplation of law. The collector was not the person who could
take the checks as a holder, i.e., as a payee or indorsee thereof, with the intent
to transfer title thereto. Neither could the collector be deemed an agent of
LINTON with respect to the checks because he was a mere employee. As this
Court further explained in People v. Yabut27 —
Modesto Yambao's receipt of the bad checks from Cecilia Que
Yabut or Geminiano Yabut, Jr., in Caloocan City cannot,
contrary to the holding of the respondent Judges, be licitly
taken as delivery of the checks to the complainant Alicia P.
Andan at Caloocan City to fix the venue there. He did not take
delivery of the checks as holder, i.e., as "payee" or "indorsee."
And there appears to be no contract of agency between
Yambao and Andan so as to bind the latter for the acts of the
former. Alicia P. Andan declared in that sworn testimony
before the investigating fiscal that Yambao is but her
"messenger" or "part-time employee." There was no special
fiduciary relationship that permeated their dealings. For a
contract of agency to exist, the consent of both parties is
essential. The principal consents that the other party, the
agent, shall act on his behalf, and the agent consents so as to
act. It must exist as afact. The law makes no presumption
thereof. The person alleging it has the burden of proof to
show, not only the fact of its existence, but also its nature and
extent . . .
Section 2 of B.P. Blg. 22 establishes a prima facie evidence of knowledge of
insufficient funds as follows —
The making, drawing and issuance of a check payment of
which is refused by the bank because of insufficient funds in or
credit with such bank, when presented within ninety (90) days
from the date of the check, shall be prima facie evidence of
knowledge of such insufficiency of funds or credit unless such
maker or drawer pays the holder thereof the amount due
thereon, or makes arrangement for payment in full by the
drawee of such check within five (5) banking days after
15
 receiving notice that such check has not been paid by the
drawee.
The prima facie evidence has not been overcome by petitioners in the cases
before us because they did not pay LINTON the amounts due on the checks;
neither did they make arrangements for payment in full by the drawee bank
within five (5) banking days after receiving notices that the checks had not
been paid by the drawee bank. In People v. Grospe28 citing People
v. Manzanilla29 we held that ". . . knowledge on the part of the maker or drawer
of the check of the insufficiency of his funds is by itself a continuing eventuality,
whether the accused be within one territory or another."
Consequently, venue or jurisdiction lies either in the Regional Trial Court of
Kalookan City or Malabon. Moreover, we ruled in the
same Grospe and Manzanilla cases as reiterated in Lim v. Rodrigo30 that
venue or jurisdiction is determined by the allegations in the Information. The
Informations in the cases under consideration allege that the offenses were
committed in the Municipality of Navotas which is controlling and sufficient to
vest jurisdiction upon the Regional Trial Court of Malabon.31
We therefore sustain likewise the conviction of petitioners by the Regional Trial
Court of Malabon for violation of B.P. Blg. 22 thus —
Accused-appellants claim that they ordered payment of the
checks to be stopped because the goods delivered were not
those specified by them. They maintain that they had sufficient
funds to cover the amount of the checks. The records of the
bank, however, reveal otherwise. The two letters (Exhs. 21
and 22) dated July 23, and August 10, 1983 which they claim
they sent to Linton Commercial, complaining against the
quality of the goods delivered by the latter, did not refer to the
delivery of mild steel plates (6mm x 4 x 8) and "Z" purlins (16 x
7 x 2-1/2 mts) for which the checks in question were issued.
Rather, the letters referred to B.1. Lally columns (Sch. #20),
which were the subject of other purchase orders.
It is true, as accused-appellants point out, that in a case
brought by them against the complainant in the Regional Trial
Court of Kalookan City (Civil Case No. C-10921) the
complainant was held liable for actual damages because of
the delivery of goods of inferior quality (Exh. 23). But the
supplies involved in that case were those of B.I. pipes, while
the purchases made by accused-appellants, for which they
issued the checks in question, were purchases of mild steel
plates and "Z" purlins.
Indeed, the only question here is whether accused-appellants
maintained funds sufficient to cover the amounts of their
checks at the time of issuance and presentment of such
checks. Section 3 of B.P. Blg. 22 provides that
"notwithstanding receipt of an order to stop payment, the
drawee bank shall state in the notice of dishonor that there
were no sufficient funds in or credit with such bank for the
payment in full of the check, if such be the fact."
The purpose of this provision is precisely to preclude the
maker or drawer of a worthless check from ordering the
payment of the check to be stopped as a pretext for the lack of
sufficient funds to cover the check.
In the case at bar, the notice of dishonor issued by the drawee
bank, indicates not only that payment of the check was
stopped but also that the reason for such order was that the
maker or drawer did not have sufficient funds with which to
cover the checks. . . . Moreover, the bank ledger of accused-
appellants' account in Consolidated Bank shows that at the
time the checks were presented for encashment, the balance
of accused-appellants' account was inadequate to cover the
amounts of the checks.32 . . .
WHEREFORE, the decision of the Court of Appeals dated 18 September 1992
affirming the conviction of petitioners Manuel Lim and Rosita Lim —
In CA-G.R. CR No. 07277 (RTC Crim. Case No. 1699-MN);
CA-G.R. CR No. 07278 (RTC Crim. Case No. 1700-MN); CA-
G.R. CR No. 07279 (RTC Crim. Case No. 1701-MN); CA-G.R.
CR No. 07280 (RTC Crim. Case No. 1702-MN); CA-G.R. CR
No. 07281 (RTC Crim. Case No. 1703-MN); CA-G.R. CA No.
07282 (RTC Crim. Case No. 1704-MN); and CA-G.R. CR No.
07283 (RTC Crim Case No. 1705-MN), the Court finds the
accused-appellants
MANUEL LIM and ROSITA LIM guilty beyond reasonable
doubt of violation of Batas Pambansa Bilang 22 and are
hereby sentenced to suffer a STRAIGHT PENALTY OF ONE
(1) YEAR IMPRISONMENT in each case, together with all the
accessory penalties provided by law, and to pay the costs.
In CA-G.R. CR No. 07277 (RTC Crim. Case No. 1699-MN),
both accused-appellants are hereby ordered to indemnify the
offended party in the sum of P27,900.00.
16
 In CA-G.R. CR No. 07278 (RTC Crim. Case No. 1700-MN)
both accused-appellants are hereby ordered to indemnify the
offended party in the sum of P32,550.00.

In CA-G.R. CR No. 07278 (RTC Crim. Case No. 1701-MN)

both accused-appellants are hereby ordered to indemnify the
offended party in the sum of P27,900.00.

In CA-G.R. CR No. 07280 (RTC Crim. Case No. 1702-MN)

both accused-appellants are hereby ordered to indemnify the
offended party in the sum of P27,900.00.

In CA-G.R. CR No. 07281 (RTC Crim. Case No. 1703-MN)

both accused are hereby ordered to indemnify the offended
party in the sum of P63,455.00.

In CA-G.R CR No. 07282 (RTC Crim. Case No. 1704-MN)

both accused-appellants are hereby ordered to indemnify the
offended party in the sum of P51,800.00, and

In CA-G.R. CR No. 07283 (RTC Crim. Case No. 1705-MN)

both accused-appellants are hereby ordered to indemnify the
offended party in the sum of P37,200.00 33 —

as well as its resolution of 6 November 1992 denying reconsideration

thereof, is AFFIRMED. Costs against petitioners.

SO ORDERED.

17
 understood that this policy or any renewal thereof, shall not be
FIRST DIVISION cancelled without prior notification and conformity by BA
FINANCE CORPORATION.[5] (emphasis and underscoring
supplied)
METROPOLITAN BANK AND TRUST G.R. No. 179952
COMPANY (formerly ASIANBANK
CORPORATION), Present: The car was stolen. On Bitangas claim, Malayan Insurance issued a check
Petitioner, payable to the order of B.A. Finance Corporation and Lamberto Bitanga for P224,500,
PUNO, C.J., Chairperson, drawn against China Banking Corporation (China Bank). The check was crossed with
CARPIO MORALES, the notation For Deposit Payees Account Only.[6]
LEONARDO-DE CASTRO,
BERSAMIN, and Without the indorsement or authority of his co-payee BA Finance, Bitanga
- versus - VILLARAMA, JR., JJ. deposited the check to his account with the Asianbank Corporation (Asianbank), now
merged with herein petitioner Metropolitan Bank and Trust Company
(Metrobank). Bitanga subsequently withdrew the entire proceeds of the check.
BA FINANCE CORPORATION and
MALAYAN INSURANCE CO., INC., In the meantime, Bitangas loan became past due, but despite demands, he
Respondents. Promulgated: failed to settle it.
December 4, 2009

x-------------------------------------------------x BA Finance eventually learned of the loss of the car and of Malayan
Insurances issuance of a crossed check payable to it and Bitanga, and of Bitangas
DECISION depositing it in his account at Asianbank and withdrawing the entire proceeds thereof.

CARPIO MORALES, J.:
Lamberto Bitanga (Bitanga) obtained from respondent BA Finance
Corporation (BA Finance) a P329,280[1] loan to secure which, he mortgaged his car to
respondent BA Finance.[2] The mortgage contained the following stipulation:
The MORTGAGOR covenants and agrees that he/it will
cause the property(ies) hereinabove mortgaged to be
insured against loss or damage by accident, theft and fire for a
period of one year from date hereof with an insurance company
or companies acceptable to the MORTGAGEE in an amount not
less than the outstanding balance of mortgage obligations and
that he/it will make all loss, if any, under such policy or
policies, payable to the MORTGAGEE or its assigns as its
interest may appear x x x.[3] (emphasis and underscoring
supplied)
Bitanga thus had the mortgaged car insured by respondent Malayan Insurance
Co., Inc. (Malayan Insurance)[4]which issued a policy stipulating that, inter alia,
BA Finance thereupon demanded the payment of the value of the check from
Asianbank[7] but to no avail, prompting it to file a complaint before the Regional Trial
Court (RTC) of Makati for sum of money and damages against Asianbank and
Bitanga,[8] alleging that, inter alia, it is entitled to the entire proceeds of the check.
In its Answer with Counterclaim,[9] Asianbank alleged that BA Finance
instituted [the] complaint in bad faith to coerce [it] into paying the whole amount of the
CHECK knowing fully well that its rightful claim, if any, is against Malayan
[Insurance].[10]
Asianbank thereafter filed a cross-claim against Bitanga,[11] alleging that he
fraudulently induced its personnel to release to him the full amount of the check; and
that on being later informed that the entire amount of the check did not belong to
Bitanga, it took steps to get in touch with him but he had changed residence without
leaving any forwarding address.[12]
And Asianbank filed a third-party complaint against
Malayan Insurance,[13] alleging that Malayan Insurance was grossly negligent in issuing
the check payable to both Bitanga and BA Finance and delivering it to Bitanga without
the consent of BA Finance.[14]

Loss, if any shall be payable to BA FINANCE Bitanga was declared in default in Asianbanks cross-claim.[15]
CORP. as its interest may appear. It is hereby expressly
18
 Branch 137 of the Makati RTC, finding that Malayan Insurance was not privy
to the contract between BA Finance and Bitanga, and noting the claim of Malayan
Insurance that it is its policy to issue checks to both the insured and the financing
company, held that Malayan Insurance cannot be faulted for negligence for issuing the
check payable to both BA Finance and Bitanga.
The trial court, holding that Asianbank was negligent in allowing Bitanga to
deposit the check to his account and to withdraw the proceeds thereof, without his co-
payee BA Finance having either indorsed it or authorized him to indorse it in its
behalf,[16] found Asianbank and Bitanga jointly and severally liable to BA
Finance following Section 41 of the Negotiable Instruments Law and Associated Bank
v. Court of Appeals.[17]
Thus the trial court disposed:
WHEREFORE, premises considered, judgment is
hereby rendered ordering defendants Asian Bank Corporation
and Lamberto Bitanga:
1) To pay plaintiff jointly and
severally the sum of P224,500.00 with
interest thereon at the rate of 12%
from September 25, 1992 until fully paid;
2) To pay plaintiff the sum of
P50,000.00 as exemplary damages;
P20,000.00 as actual damages; P30,000.00
as attorneys fee; and
3) To pay the costs of suit.
Asianbanks and Bitangas [sic] counterclaims are
dismissed.
The third party complaint of defendant/third party
plaintiff against third-party defendant Malayan Insurance, Co.,
Inc. is hereby dismissed. Asianbank is ordered to pay Malayan
attorneys fee of P50,000.00 and a per appearance fee of P500.00.
On the cross-claim of defendant Asianbank, co-
defendant Lamberto Bitanga is ordered to pay the former the
amounts the latter is ordered to pay the plaintiff in Nos. 1, 2
and 3 above-mentioned.
SO ORDERED.[18] (emphasis and underscoring
supplied)
Before the Court of Appeals, Asianbank, in its Appellants Brief, submitted
the following issues for consideration:
3.01.1.1 Whether BA Finance has a cause of
action against Asianbank.
3.01.1.2 Assuming that BA Finance has a valid
cause of action, may it claim from Asianbank more than one-
half of the value of the check considering that it is a mere co-
payee or joint payee of the check?
3.01.1.3 Whether BA Finance is liable to
Asianbank for actual and exemplary damages for wrongfully
bringing the case to court.
3.01.1.4 Whether Malayan is liable to Asianbank
for reimbursement of any sum of money which this Honorable
Court may award to BA Finance in this case.[19] (underscoring
supplied)
And it proffered the following arguments:
A. BA Finance has no cause of action against Asianbank as it has no legal
right and title to the check considering that the check was not
delivered to BA Finance. Hence, BA Finance is not a holder thereof
under the Negotiable Instruments Law.
B. Asianbank, as collecting bank, is not liable to BA Finance as there was no
privity of contract between them.
C. Asianbank, as collecting bank, is not liable to BA Finance, considering
that, as the intermediary between the payee and the drawee
Chinabank, it merely acted on the instructions of drawee Chinabank
to pay the amount of the check to Bitanga, hence, the consequent
damage to BA Finance was due to the negligence of Chinabank.
D. Malayans act of issuing and delivering the check solely to Bitanga in
violation of the loss payee clause in the Policy, is the proximate
cause of the alleged damage to BA Finance.
E. Assuming Asianbank is liable, BA Finance can claim only his
proportionate interest on the check as it is a joint payee thereof.
F. Bitanga alone is liable for the amount to BA Finance on the ground of
unjust enrichment or solutio indebiti.
19
G. BA Finance is liable to pay Asianbank actual and exemplary
damages.[20] (underscoring supplied)
The appellate court, summarizing the errors attributed to the trial court by
Asianbank to be whetherBA Finance has a cause of action against [it] even if the
subject check had not been delivered toBA Finance by the issuer itself, held in the
affirmative and accordingly affirmed the trial courts decision but deleted the award
of P20,000 as actual damages.[21]
Hence, the present Petition for Review on Certiorari[22] filed by Metrobank
(hereafter petitioner) to which Asianbank was, as earlier stated, merged, faulting the
appellate court
I. x x x in applying the case of
Associated Bank v. Court of Appeals, in the
absence of factual similarity and of the legal
relationships necessary for the application
of the desirable shortcut rule. x x x
II. x x x in not finding that x x x the
general rule that the payee has no cause of
action against the collecting bank absent
delivery to him must be applied.
III. x x x in finding that all the elements of
a cause of action by BA Finance
Corporation against Asianbank Corporation
are present.
IV. x x x in finding that Article 1208 of the
Civil Code is not applicable.
V. x x x in awarding of exemplary
damages even in the absence of moral,
temperate, liquidated or compensatory
damages and a finding of fact that
Asianbank acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.
xxxx
VII. x x x in dismissing Asianbanks counterclaim
and Third Party complaint [against Malayan
Insurance].[23](italics in the original;
underscoring supplied)
Petitioner proffers the following arguments against the application
of Associated Bank v. CA to the case:
x x x [T]he rule established in the Associated Bank case
has provided a speedier remedy for the payee to recover from
erring collecting banks despite the absence of delivery of the
negotiable instrument. However, the application of the rule
demands careful consideration of the factual settings and issues
raised in the case x x x.
One of the relevant circumstances raised in Associated
Bank is the existence of forgery or unauthorized indorsement. x x
x
xxxx
In the case at bar, Bitanga is authorized to indorse the
check as the drawer names him as one of the
payees.Moreover, his signature is not a forgery nor has he or
anyone forged the signature of the representative of BA Finance
Corporation. No unauthorized indorsement appears on the check.
xxxx
Absent the indispensable fact of forgery or unauthorized
indorsement, the desirable shortcut rule cannot be
applied,[24] (underscoring supplied)
The petition fails.
Section 41 of the Negotiable Instruments Law provides:
Where an instrument is payable to the order of two or
more payees or indorsees who are not partners, all must
indorse unless the one indorsing has authority to indorse for the
others. (emphasis and underscoring supplied)
Bitanga alone endorsed the crossed check, and petitioner allowed the deposit
and release of the proceeds thereof, despite the absence of authority of Bitangas co-
payee BA Finance to endorse it on its behalf.[25]
Denying any irregularity in accepting the check, petitioner maintains that it
followed normal banking procedure.The testimony of Imelda Cruz, Asianbanks then
accounting head, shows otherwise, however, viz:
Q Now, could you be familiar with a particular policy of
the bank with respect to checks with joined
(sic) payees?
A Yes, sir.
Q And what would be the particular policy of the bank
regarding this transaction?
20
 A The bank policy and procedure regarding the joint
checks. Once it is deposited to a single
account, we are not accepting joint checks
for single account, depositing to a single
account (sic).
Q What happened to the bank employee who allowed
this particular transaction to occur?
A Once the branch personnel, the bank personnel
(sic) accepted it, he is liable.
Q What do you mean by the branch personnel being
held liable?
A Because since (sic) the bank policy, we
are not supposed to accept joint checks to a
[single] account, so we mean that personnel
would be held liable in the sense that (sic)
once it is withdrawn or encashed, it will not
be allowed.
Q In your experience, have you encountered any bank
employee who was subjected to disciplinary
action by not following bank policies?
A The one that happened in that case, since I really dont
know who that personnel is, he is no longer
connected with the bank.
Q What about in general, do you know of any
disciplinary action, Madam witness?
A Since theres a negligence on the part of the bank
personnel, it will be a ground for his
separation [from] the bank.[26] (emphasis,
italics and underscoring supplied)
Admittedly, petitioner dismissed the employee who allowed the deposit of the check in
Bitangas account.
Petitioners argument that since there was neither forgery, nor unauthorized
indorsement because Bitanga was a co-payee in the subject check, the dictum
in Associated Bank v. CA does not apply in the present case fails. The payment of an
instrument over a missing indorsement is the equivalent of payment on a forged
indorsement[27] or an unauthorized indorsement in itself in the case of joint payees.[28]
Clearly, petitioner, through its employee, was negligent when it allowed the
deposit of the crossed check, despite the lone endorsement of Bitanga, ostensibly
ignoring the fact that the check did not, it bears repeating, carry the indorsement of BA
Finance.[29]
As has been repeatedly emphasized, the banking business is imbued with
public interest such that the highest degree of diligence and highest standards of
integrity and performance are expected of banks in order to maintain the trust and
confidence of the public in general in the banking sector.[30] Undoubtedly, BA Finance
has a cause of action against petitioner.
Is petitioner liable to BA Finance for the full value of the check?
Petitioner, at all events, argue that its liability to BA Finance should only be
one-half of the amount covered by the check as there is no indication in the check that
Bitanga and BA Finance are solidary creditors to thus make them presumptively joint
creditors under Articles 1207 and 1208 of the Civil Code which respectively provide:
Art. 1207. The concurrence of two or more creditors or
of two or more debtors in one and the same obligation does not
imply that each one of the former has a right to demand, or that
each one of the latter is bound to render, entire compliance with
the prestations. There is a solidary liability only when the
obligation expressly so states, or when the law or the nature of
the obligation requires solidarity.
Art. 1208. If from the law, or the nature or wording of
the obligations to which the preceding article refers to the
contrary does not appear, the credit or debt shall be presumed to
be divided into as many equal shares as there are creditors or
debtors, the debts or credits being considered distinct from one
another, subject to the Rules of Court governing the multiplicity
of suits.
Petitioners argument is flawed.
The provisions of the Negotiable Instruments Law and underlying
jurisprudential teachings on the black-letter law provide definitive justification for
petitioners full liability on the value of the check.
To be sure, a collecting bank, Asianbank in this case, where a check is
deposited and which indorses the check upon presentment with the drawee bank, is an
indorser.[31] This is because in indorsing a check to the drawee bank, a collecting bank
stamps the back of the check with the phrase all prior endorsements and/or lack of
endorsement guaranteed[32] and, for all intents and purposes, treats the check as a
negotiable instrument, hence, assumes the warranty of an indorser.[33] Without
Asianbanks warranty, the drawee bank (China Bank in this case) would not have paid
the value of the subject check.
21

Petitioner, as the collecting bank or last indorser, generally suffers the loss
because it has the duty to ascertain the genuineness of all prior indorsements
considering that the act of presenting the check for payment to the drawee is an
assertion that the party making the presentment has done its duty to ascertain the
genuineness of prior indorsements.[34]
Accordingly, one who credits the proceeds of a check to the account of the
indorsing payee is liable in conversion to the non-indorsing payee for
the entire amount of the check.[35]
It bears noting that in petitioners cross-claim against Bitanga, the trial court
ordered Bitanga to return to petitioner the entire value of the check ─ P224,500.00 ─
with interest as well as damages and cost of suit. Petitioner never questioned this
aspect of the trial courts disposition, yet it now prays for the modification of its
liability to BA Finance to only one-half of said amount. To pander to petitioners
supplication would certainly amount to unjust enrichment at BA Finances
expense. Petitioners remedywhich is the reimbursement for the full amount of the
check from the perpetrator of the irregularity lies with Bitanga.
Articles 1207 and 1208 of the Civil Code cannot be applied to the present
case as these are completely irrelevant.The drawer, Malayan Insurance in this case,
issued the check to answer for an underlying contractual obligation (payment of
insurance proceeds). The obligation is merely reflected in the instrument and whether
the payees would jointly share in the proceeds or not is beside the point.
Moreover, granting petitioners appeal for partial liability would run counter to
the existing principles on the liabilities of parties on negotiable instruments,
particularly on Section 68 of the Negotiable Instruments Law which instructs that joint
payees who indorse are deemed to indorse jointly and severally.[36] Recall that when
the maker dishonors the instrument, the holder thereof can turn to those secondarily
liable the indorser for recovery.[37] And since the law explicitly mandates a solidary
liability on the part of the joint payees who indorse the instrument, the holderthereof
(assuming the check was further negotiated) can turn to either Bitanga or BA Finance
for full recompense.
Respecting petitioners challenge to the award by the appellate court of
exemplary damages to BA Finance, the same fails. Contrary to petitioners claim that
no moral, temperate, liquidated or compensatory damages were awarded by the trial
court,[38] the RTC did in fact award compensatory or actual damages of P224,500, the
value of the check, plus interest thereon.
Petitioner argues, however, that assuming arguendo that compensatory
damages had been awarded, the same contravened Article 2232 of the Civil Code
which provides that in contracts or quasi-contracts, the court may award exemplary
damages only if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.Since, so petitioner concludes, there was no finding that it acted in
a wanton, fraudulent, reckless, oppressive, or malevolent manner, [39] it is not liable for
exemplary damages.
The argument fails. To reiterate, petitioners liability is based not on contract
or quasi-contract but on quasi-delictsince there is no pre-existing contractual relation
between the parties.[40] Article 2231 of the Civil Code, which provides that in quasi-
delict, exemplary damages may be granted if the defendant acted with gross
negligence, thus applies. For gross negligence implies a want or absence of or failure
to exercise even slight care or diligence, or the entire absence of care, [41] evincing a
thoughtless disregard of consequences without exerting any effort to avoid them. [42]
x x x The law allows the grant of exemplary damages to
set an example for the public good. The business of a bank is
affected with public interest; thus it makes a sworn profession of
diligence and meticulousness in giving irreproachable
service. For this reason, the bank should guard against in injury
attributable to negligence or bad faith on its part. The award
of exemplary damages is proper as a warning to [the petitioner]
and all concerned not to recklessly disregard their obligation to
exercise the highest and strictest diligence in serving their
depositors.[43] (Italics and underscoring supplied)
As for the dismissal by the appellate court of petitioners third-party complaint
against Malayan Insurance, the same is well-taken. Petitioner based its third-party
complaint on Malayan Insurances alleged gross negligence in issuing the check payable
to both BA Finance and Bitanga, despite the stipulation in the mortgage and in the
insurance policy that liability for loss shall be payable to BA Finance. [44] Malayan
Insurance countered, however, that it
x x x paid the amount of P224,500 to BA Finance Corporation
and Lamberto Bitanga in compliance with the decision in the
case of Lamberto Bitanga versus Malayan Insurance Co., Inc.,
Civil Case No. 88-2802, RTC-Makati Br. 132, and affirmed on
appeal by the Supreme Court [3rd Division], G.R. no. 101964,
April 8, 1992 x x x.[45] (underscoring supplied)
It is noted that Malayan Insurance, which stated that it was a matter of
company policy to issue checks in the name of the insured and the financing company,
presented a witness to rebut its supposed negligence. [46] Perforce, it thus wrote
a crossed check with joint payees so as to serve warning that the check was issued for
a definite purpose.[47]Petitioner never ever disputed these assertions.
22
 The Court takes exception, however, to the appellate courts affirmance of the
trial courts grant of legal interest of 12% per annum on the value of the check. For the
obligation in this case did not arise out of a loan or forbearance of money, goods or
credit. While Article 1980 of the Civil Code provides that:

Fixed savings, and current deposits of money in banks

and similar institutions shall be governed by the provisions
concerning simple loan,

said provision does not find application in this case since the nature of the relationship
between BA Finance and petitioner is one of agency whereby petitioner, as collecting
bank, is to collect for BA Finance the corresponding proceeds from the check. [48] Not
being a loan or forbearance of money, the interest should be 6% per annum computed
from the date of extrajudicial demand on September 25, 1992 until finality of
judgment; and 12% per annum from finality of judgment until payment, conformably
with Eastern Shipping Lines, Inc. v. Court of Appeals.[49]

WHEREFORE, the Decision of the Court of Appeals dated May 18, 2007
is AFFIRMED with MODIFICATION in that the rate of interest on the judgment
obligation of P224,500 should be 6% per annum, computed from the time of
extrajudicial demand on September 25, 1992 until its full payment before finality of
judgment; thereafter, if the amount adjudged remains unpaid, the interest rate shall
be 12% per annum computed from the time the judgment becomes final and executory
until fully satisfied.
Costs against petitioner.

SO ORDERED.

23
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-39641 February 28, 1983
METROPOL (BACOLOD) FINANCING & INVESTMENT
CORPORATION, plaintiff-appellee,
vs.
SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO.,
LTD., defendants-appellants.
Rizal Quimpo & Cornelio P. Revena for plaintiff-appellee.
Diosdado Garingalao for defendants-appellants.
DE CASTRO, J.:
The former Court of Appeals, by its resolution dated October 16, 1974 certified
this case to this Court the issue issued therein being one purely of law.
On April 15, 1969 Dr. Javier Villaruel executed a promissory note in favor of Ng
Sambok Sons Motors Co., Ltd., in the amount of P15,939.00 payable in twelve
(12) equal monthly installments, beginning May 18, 1969, with interest at the
rate of one percent per month. It is further provided that in case on non-
payment of any of the installments, the total principal sum then remaining
unpaid shall become due and payable with an additional interest equal to
twenty-five percent of the total amount due.
On the same date, Sambok Motors Company (hereinafter referred to as
Sambok), a sister company of Ng Sambok Sons Motors Co., Ltd., and under
the same management as the former, negotiated and indorsed the note in
favor of plaintiff Metropol Financing & Investment Corporation with the
following indorsement:
Pay to the order of Metropol Bacolod Financing & Investment
Corporation with recourse. Notice of Demand; Dishonor;
Protest; and Presentment are hereby waived.
SAMBOK
MOTORS
CO.
(BACOLOD)
By:
RODOLFO G. NONILLO Asst. General Manager
The maker, Dr. Villaruel defaulted in the payment of his installments when they
became due, so on October 30, 1969 plaintiff formally presented the
promissory note for payment to the maker. Dr. Villaruel failed to pay the
promissory note as demanded, hence plaintiff notified Sambok as indorsee of
said note of the fact that the same has been dishonored and demanded
payment.
Sambok failed to pay, so on November 26, 1969 plaintiff filed a complaint for
collection of a sum of money before the Court of First Instance of Iloilo, Branch
I. Sambok did not deny its liability but contended that it could not be obliged to
pay until after its co-defendant Dr. Villaruel has been declared insolvent.
During the pendency of the case in the trial court, defendant Dr. Villaruel died,
hence, on October 24, 1972 the lower court, on motion, dismissed the case
against Dr. Villaruel pursuant to Section 21, Rule 3 of the Rules of Court. 1
On plaintiff's motion for summary judgment, the trial court rendered its decision
dated September 12, 1973, the dispositive portion of which reads as follows:
WHEREFORE, judgment is rendered:
(a) Ordering Sambok Motors Company to pay to the plaintiff
the sum of P15,939.00 plus the legal rate of interest from
October 30, 1969;
(b) Ordering same defendant to pay to plaintiff the sum
equivalent to 25% of P15,939.00 plus interest thereon until
fully paid; and
(c) To pay the cost of suit.
Not satisfied with the decision, the present appeal was instituted, appellant
Sambok raising a lone assignment of error as follows:
24
 The trial court erred in not dismissing the complaint by finding obligor. 6 Consequently, the holder need not even proceed against the maker
defendant appellant Sambok Motors Company as assignor before suing the indorser.
and a qualified indorsee of the subject promissory note and in
not holding it as only secondarily liable thereof. WHEREFORE, the decision of the lower court is hereby affirmed. No costs.

Appellant Sambok argues that by adding the words "with recourse" in the SO ORDERED.
indorsement of the note, it becomes a qualified indorser that being a qualified
indorser, it does not warrant that if said note is dishonored by the maker on Makasiar (Chairman), Concepcion, Jr., Guerrero and Escolin, JJ., concur.
presentment, it will pay the amount to the holder; that it only warrants the
following pursuant to Section 65 of the Negotiable Instruments Law: (a) that
the instrument is genuine and in all respects what it purports to be; (b) that he Aquino, J., is on leave.
has a good title to it; (c) that all prior parties had capacity to contract; (d) that
he has no knowledge of any fact which would impair the validity of the
instrument or render it valueless.

The appeal is without merit.

Separate Opinions
A qualified indorsement constitutes the indorser a mere assignor of the title to
the instrument. It may be made by adding to the indorser's signature the words
"without recourse" or any words of similar import. 2 Such an indorsement
relieves the indorser of the general obligation to pay if the instrument is ABAD SANTOS, J., concurring:
dishonored but not of the liability arising from warranties on the instrument as
provided in Section 65 of the Negotiable Instruments Law already mentioned
I concur and wish to add the observation that the appeal could have been
herein. However, appellant Sambok indorsed the note "with recourse" and
treated as a petition for review under R.A. 5440 and dismissed by minute
even waived the notice of demand, dishonor, protest and presentment.
resolution.
"Recourse" means resort to a person who is secondarily liable after the default
of the person who is primarily liable. 3 Appellant, by indorsing the note "with
recourse" does not make itself a qualified indorser but a general indorser who
is secondarily liable, because by such indorsement, it agreed that if Dr.
Villaruel fails to pay the note, plaintiff-appellee can go after said appellant. The
effect of such indorsement is that the note was indorsed without qualification. A Separate Opinions
person who indorses without qualification engages that on due presentment,
the note shall be accepted or paid, or both as the case may be, and that if it be ABAD SANTOS, J., concurring:
dishonored, he will pay the amount thereof to the holder. 4 Appellant Sambok's
intention of indorsing the note without qualification is made even more I concur and wish to add the observation that the appeal could have been
apparent by the fact that the notice of demand, dishonor, protest and treated as a petition for review under R.A. 5440 and dismissed by minute
presentment were an waived. The words added by said appellant do not limit resolution.
his liability, but rather confirm his obligation as a general indorser.

Lastly, the lower court did not err in not declaring appellant as only secondarily
liable because after an instrument is dishonored by non-payment, the person
secondarily liable thereon ceases to be such and becomes a principal
debtor. 5 His liabiliy becomes the same as that of the original

25
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-1405 July 31, 1948
BENJAMIN ABUBAKAR, petitioner,
vs.
THE AUDITOR GENERAL, respondent.
Viray and Viola Viray for petitioner.
First Assistant Solicitor General Roberto A. Gianzon and Solicitor Manuel
Tomacruz for respondent.
BENGZON, J.:
We are asked to overrule the decision of the Auditor General refusing to
authorize the payment of Treasury warrant No. A-2867376 for P1,000 which
was issued in favor of Placido S. Urbanes on December 10, 1941, but is now
in the hands of herein petitioner Benjamin Abubakar.
For his refusal the respondent gave two reasons: first, because the money
available for the redemption of treasury warrants issued before January 2,
1942, is appropriated by Republic Act No. 80 (Item F-IV-8) and this warrant
does not come within the purview of said appropriation; and second, because
on of the requirements of his office had not been complied with, namely, that it
must be shown that the holders of warrants covering payment or
replenishment of cash advances for official expenditures (as this warrant is)
received them in payment of definite government obligations.
Finding the first reason to be sufficiently valid we shall not discuss, nor pass
upon the second.
There is no doubt as to the authenticity and date of the treasury warrant. There
is no question that it was regularly indorsed by the payee and is now in the
custody of the herein petitioner who is a private individual. On the other hand,
it is admitted that the warrant was originally made payable to Placido S.
Urbanes in his capacity as disbursing officer of the Food Administration for
"additional cash advance for Food Production Campaign in La Union" (Annex
A). It is thus apparent that this is a treasury warrant issued in favor of a public
officer or employee and held in possession by a private individual. Such being
the case, the Auditor General can hardly be blamed for not authorizing its
redemption out of an appropriation specifically for "treasury warrants issued
... in favor of and held in possession by private individuals." (Republic Act No.
80, Item F-IV-8.) This warrant was not issued in favor of aprivate individual. It
was issued in favor of a government employee.
The distinction is not without a difference. Outstanding treasury warrants
issued prior to January 2, 1942, amount to more than four million pesos. The
appropriation herein mentioned is only for P1,750,000. Obviously Congress
wished to provide for redemption of one class of warrants — those issued to
private individuals — as distinguished from those issued in favor of
government officials. Basis for the discrimination is not lacking. Probably the
Government is not so sure that those warrants to officials have all been
properly used by the latter during the Japanese occupation or maybe it wants
to conduct further inquiries as to the equities of the present holders thereof.
The petitioner argues that he is a holder in good faith and for value of a
negotiable instrument an dis entitled to the rights and privileges of a holder in
due course, free from defenses. But this treasury warrant is not within the
scope of the negotiable instruments law. For one thing, the document bearing
on its face the words "payable from the appropriation for food administration,"
is actually an order for payment out of "a particular fund," and is not
unconditional, and does not fulfill one of the essential requirements of a
negotiable instrument. (Section 3 last sentenced and section 1[b] of the
Negotiable Instruments Law.) In the United States, government warrants for
the payment of money are not negotiable instruments nor commercial proper 1
Anyway the question here is not whether the Government should eventually
pay this warrant, or is ultimately responsible for it, but whether the Auditor
General erred in refusing to permit payment out of the particular
appropriation in Item F-IV-8 of Republic Act No. 80. We think that he did not.
Petition dismissed, with costs.
Paras, Actg. C.J., Feria, Pablo, Perfecto, Briones, and Padilla, JJ., concur.
26
BPI EXPRESS CARD CORPORATION, petitioner, vs. COURT OF APPEALS
and RICARDO J. MARASIGAN, respondents.
DECISION
KAPUNAN, J.:
The question before this Court is whether private respondent can recover moral
damages arising from the cancellation of his credit card by petitioner credit card
corporation.
The facts of the case are as stated in the decision of the respondent court, [1] to wit:
The case arose from the dishonor of the credit card of the plaintiff Atty.
Ricardo J. Marasigan by Cafe Adriatico, a business establishment accredited
with the defendant-appellant BPI Express Card Corporation (BECC for
brevity) on December 8, 1989 when the plaintiff entertained some guests
thereat.
The records of this case show that plaintiff, who is a lawyer by profession
was a complimentary member of BECC from February 1988 to February
1989 and was issued Credit Card No. 100-012-5534 with a credit limit
of P3,000.00 and with a monthly billing every 27th of the month (Exh. N),
subject to the terms and conditions stipulated in the contract (Exh. 1-b). His
membership was renewed for another year or until February 1990 and the
credit limit was increased to P5,000.00 (Exh. A). The plaintiff oftentimes
exceeded his credit limits (Exhs. I, I-1 to I-12) but this was never taken
against him by the defendant and even his mode of paying his monthly bills
in check was tolerated. Their contractual relations went on smoothly until his
statement of account for October, 1989 amounting to P8,987.84 was not paid
in due time. The plaintiff admitted having inadvertently failed to pay his
account for the said month because he was in Quezon province attending to
some professional and personal commitments. He was informed by his
secretary that defendant was demanding immediate payment of his
outstanding account, was requiring him to issue a check for P15,000.00
which would include his future bills, and was threatening to suspend his
credit card. Plaintiff issued Far East Bank and Trust Co. Check No. 494675
in the amount of P15,000.00, postdated December 15, 1989 which was
received on November 23, 1989 by Tess Lorenzo, an employee of the
defendant (Exhs. J and J-1), who in turn gave the said check to Jeng
Angeles, a co-employee who handles the account of the plaintiff. The check
remained in the custody of Jeng Angeles. Mr. Roberto Maniquiz, head of the
collection department of defendant was formally informed of the postdated
check about a week later. On November 28, 1989, defendant served plaintiff
a letter by ordinary mail informing him of the temporary suspension of the
privileges of his credit card and the inclusion of his account number in their
Caution List. He was also told to refrain from further use of his credit card to
avoid any inconvenience/embarrassment and that unless he settles his
outstanding account with the defendant within 5 days from receipt of the
letter, his membership will be permanently cancelled (Exh. 3). There is no
showing that the plaintiff received this letter before December 8,
1989. Confident that he had settled his account with the issuance of the
postdated check, plaintiff invited some guests on December 8, 1989 and
entertained them at Caf Adriatico. When he presented his credit card to Caf
Adriatico for the bill amounting to P735.32, said card was dishonored. One
of his guests, Mary Ellen Ringler, paid the bill by using her own credit card,
a Unibankard (Exhs. M, M-1 and M-2).
In a letter addressed to the defendant dated December 12, 1989, plaintiff
requested that he be sent the exact billing due him as of December 15, 1989,
to withhold the deposit of his postdated check and that said check be
returned to him because he had already instructed his bank to stop the
payment thereof as the defendant violated their agreement that the plaintiff
issue the check to the defendant to cover his account amounting to
only P8,987.84 on the condition that the defendant will not suspend the
effectivity of the card (Exh. D). A letter dated December 16, 1989 was sent
by the plaintiff to the manager of FEBTC, Ramada Branch, Manila
requesting the bank to stop the payment of the check (Exhs. E, E-1). No
reply was received by plaintiff from the defendant to his letter dated
December 12, 1989. Plaintiff sent defendant another letter dated March 12,
1990 reminding the latter that he had long rescinded and cancelled whatever
arrangement he entered into with defendant and requesting for his correct
billing, less the improper charges and penalties, and for an explanation
within five (5) days from receipt thereof why his card was dishonored on
December 8, 1989 despite assurance to the contrary by defendant's
personnel-in-charge, otherwise the necessary court action shall be filed to
hold defendant responsible for the humiliation and embarrassment suffered
by him (Exh. F). Plaintiff alleged further that after a few days, a certain Atty.
Albano, representing himself to be working with office of Atty. Lopez,
called him inquiring as to how the matter can be threshed out extrajudicially
but the latter said that such is a serious matter which cannot be discussed
over the phone. The defendant served its final demand to the plaintiff dated
March 21, 1990 requiring him to pay in full his overdue account, including
stipulated fees and charges, within 5 days from receipt thereof or face court
action also to replace the postdated check with cash within the same period
or face criminal suit for violation of the Bouncing Check Law (Exh. G/Exh.
13). The plaintiff, in a reply letter dated April 5, 1990 (Exh. H), demanded
defendant's compliance with his request in his first letter dated March 12,
1990 within three (3) days from receipt, otherwise the plaintiff will file a
case against them, x x x.[2]
Thus, on May 7, 1990 private respondent filed a complaint for damages against
petitioner before the Regional Trial Court of Makati, Branch 150, docketed as Civil
Case No. 90-1174.
27
 After trial, the trial court ruled for private respondent, finding that herein
petitioner abused its right in contravention of Article 19 of the Civil Code.[3] The
dispositive portion of the decision reads:
Wherefore, judgment is hereby rendered ordering the defendant to pay plaintiff
the following:
1. P100,000.00 as moral damages;
2. P50,000.00 as exemplary damages; and
3. P20,000.00 by way of attorney's fees.
On the other hand, plaintiff is ordered to pay defendant its outstanding
obligation in the amount of P14,439.41, amount due as of December 15,
1989.[4]
The trial court's ruling was based on its findings and conclusions, to wit:
There is no question that plaintiff had been in default in the payment of his
billings for more than two months, prompting defendant to call him and
reminded him of his obligation. Unable to personally talk with him, this
Court is convinced that somehow one or another employee of defendant
called him up more than once.
However, while it is true that, as indicated in the terms and conditions of the
application for BPI credit card, upon failure of the cardholder to pay his
outstanding obligation for more than thirty (30) days, the defendant can
automatically suspend or cancel the credit card, that reserved right should
not have been abused, as it was in fact abused, in plaintiff's case. What is
more peculiar here is that there have been admitted communications between
plaintiff and defendant prior to the suspension or cancellation of plaintiff's
credit card and his inclusion in the caution list. However, nowhere in any of
these communications was there ever a hint given to plaintiff that his card
had already been suspended or cancelled. In fact, the Court observed that
while defendant was trying its best to persuade plaintiff to update its account
and pay its obligation, it had already taken steps to suspend/cancel plaintiff's
card and include him in the caution list. While the Court admires defendant's
diplomacy in dealing with its clients, it cannot help but frown upon the
backhanded way defendant dealt with plaintiff's case. For despite Tess
Lorenzo's denial, there is reason to believe that plaintiff was indeed assured
by defendant of the continued honoring of his credit card so long as he pays
his obligation of P15,000.00. Worst, upon receipt of the postdated check,
defendant kept the same until a few days before it became due and said
check was presented to the head of the collection department, Mr. Maniquiz,
to take steps thereon, resulting to the embarrassing situation plaintiff found
himself in on December 8, 1989. Moreover, Mr. Maniquiz himself admitted
that his request for plaintiff to replace the check with cash was not because it
was a postdated check but merely to tally the payment with the account due.
Likewise, the Court is not persuaded by the sweeping denials made by Tess
Lorenzo and her claim that her only participation was to receive the subject
check. Her immediate superior, Mr. Maniquiz testified that he had instructed
Lorenzo to communicate with plaintiff once or twice to request the latter to
replace the questioned check with cash, thus giving support to the testimony
of plaintiff's witness, Dolores Quizon, that it was one Tess Lorenzo who she
had talked over the phone regarding plaintiff's account and plaintiff's own
statement that it was this woman who assured him that his card has not yet
been and will not be cancelled/suspended if he would pay defendant the sum
of P15,000.00.
Now, on the issue of whether or not upon receipt of the subject check,
defendant had agreed that the card shall remain effective, the Court takes
note of the following:
1. An employee of defendant corporation unconditionally accepted the subject check
upon its delivery, despite its being a postdated one; and the amount did not tally with
plaintiff's obligation;
2. Defendant did not deny nor controvert plaintiff's claim that all his payments were
made in checks;
3. Defendant's main witness, Mr. Maniquiz, categorically stated that the request for
plaintiff to replace his postdated check with cash was merely for the purpose of
tallying plaintiff's outstanding obligation with his payment and not to question the
postdated check;
4. That the card was suspended almost a week after receipt of the postdated check;
5. That despite the many instances that defendant could have informed plaintiff over
the phone of the cancellation or suspension of his credit card, it did not do so, which
could have prevented the incident of December 8, 1989, the notice allegedly sent thru
ordinary mail is not only unreliable but takes a long time. Such action as suspension of
credit card must be immediately relayed to the person affected so as to avoid
embarrassing situations.
6. And that the postdated check was deposited on December 20, 1989.
In view of the foregoing observations, it is needless to say that there was
indeed an arrangement between plaintiff and the defendant, as can be
inferred from the acts of the defendant's employees, that the subject credit
card is still good and could still be used by the plaintiff as it would be
honored by the duly accredited establishment of defendant.[5]
28
 Not satisfied with the Regional Trial Court's decision, petitioner appealed to the
Court of Appeals, which, in a decision promulgated on March 9, 1995 ruled in its
dispositive portion:
WHEREFORE, premises considered, the decision appealed from is hereby
AFFIRMED with the MODIFICATION that the defendant-appellant shall
pay the plaintiff-appellee the following: P50,000.00 as moral
damages; P25,000.00 as exemplary damages; and P10,000.00 by way of
attorney's fees.
SO ORDERED.[6]
Hence, the present petition on the following assignment of errors:
I
THE LOWER COURT ERRED IN DECLARING THAT THERE WAS
INDEED AN AGREEMENT OR ARRANGEMENT ENTERED INTO
BETWEEN THE PARTIES WHEREIN THE DEFENDANT REQUIRED
THE PLAINTIFF TO ISSUE A POSTDATED CHECK IN ITS FAVOR IN
THE AMOUNT OF P15,000.00 AS PAYMENT FOR HIS OVERDUE
ACCOUNTS, WITH THE CONDITION THAT THE PLAINTIFF'S
CREDIT CARD WILL NOT BE SUSPENDED OR CANCELLED.
II
THE LOWER COURT ERRED IN HOLDING DEFENDANT LIABLE
FOR DAMAGES AND ATTORNEY'S FEES ARISING OUT FROM THE
DISHONOR OF THE PLAINTIFF'S CREDIT CARD.[7]
We find the petition meritorious.
The first issue to be resolved is whether petitioner had the right to suspend the
credit card of the private respondent.
Under the terms and conditions of the credit card, signed by the private
respondent, any card with outstanding balances after thirty (30) days from original
billing/statement shall automatically be suspended, thus:
PAYMENT OF CHARGES - BECC shall furnish the Cardholder a monthly
statement of account made through the use of the CARD and the Cardholder
agrees that all charges made through the use of the CARD shall be paid by
the Cardholder on or before the last day for payments, which is twenty (20)
days from the date of the said statement of account, and such payment due
date may be changed to an earlier date if the Cardholder's account is
considered overdue and/or with balances in excess of the approved credit
limit; or to such other date as may be deemed proper by the CARD issuer
with notice to the Cardholder on the same monthly statement of account. If
the last day for payment falls on a Saturday, Sunday or Holiday, the last day
for payment automatically becomes the last working day prior to said
payment date. However, notwithstanding the absence or lack of proof of
service of the statement of charges to the Cardholder, the latter shall pay
any or all charges made through the use of the CARD within thirty (30)
days from the date or dates thereof. Failure of Cardholder to pay any and all
charges made through the CARD within the payment period as stated in the
statement of charges or within thirty (30) days from actual date or dates
whichever occur earlier, shall render him in default without the necessity of
demand from BECC, which the Cardholder expressly waives. These charges
or balance thereof remaining unpaid after the payment due date indicated on
the monthly statement of account shall bear interest at the rate of 3% per
month and an additional penalty fee equivalent to another 3% of the amount
due for every month or a fraction of a month's delay. PROVIDED, that if
there occurs any change on the prevailing market rates. BECC shall have
the option to adjust the rate of interest and/or penalty fee due on the
outstanding obligation with prior notice to the Cardholder.
xxx xxx xxx
Any CARD with outstanding balances unpaid after thirty (30) days from
original billing/statement date shall automatically be suspended, and those
with accounts unpaid after sixty (60) days from said original
billing/statement date shall automatically be cancelled, without prejudice to
BECC's right to suspend or cancel any CARD any time and for whatever
reason. In case of default in his obligation as provided for in the preceding
paragraph, Cardholder shall surrender his CARD to BECC and shall in
addition to the interest and penalty charges aforementioned, pay the
following liquidated damages and/or fees (a) a collection fee of 25% of the
amount due if the account is referred to a collection agency or attorney; (b)
a service fee of P100 for every dishonored check issued by the Cardholder
in payment of his account, with prejudice, however, to BECC's right of
considering Cardholder's obligation unpaid, cable cost for demanding
payment or advising cancellation of membership shall also be for
Cardholder's account; and (c) a final fee equivalent to 25% of the unpaid
balance, exclusive of litigation expenses and judicial costs, if the payment
of the account is enforced through court action.[8]
The aforequoted provision of the credit card cannot be any clearer. By his own
admission, private respondent made no payment within thirty days for his original
billing/statement dated 27 September 1989. Neither did he make payment for his
original billing/statement dated 27 October 1989. Consequently, as early as 28 October
1989, thirty days from the non-payment of his billing dated 27 September 1989,
petitioner corporation could automatically suspend his credit card.
The next issue is whether prior to the suspension of private respondent's credit
card on 28 November 1989, the parties entered into an agreement whereby the card
could still be used and would be duly honored by duly accredited establisments.
29
 We agree with the findings of the respondent court, that there was an Q There is no written agreement which says that P8,987.84 should be paid
arrangement between the parties, wherein the petitioner required the private respondent for P15,000.00 in check, there is none?
to issue a check worth P15,000 as payment for the latter's billings. However, we find
that the private respondent was not able to comply with his obligation. A Yes, no written agreement, sir.

As the testimony of private respondent himself bears out, the agreement was for Q And you as a lawyer you know that a check is not considered as cash specially
the immediate payment of the outstanding account: when it is postdated sent to the defendant?

Q In said statement of account that you are supposed to pay the P8,974.84 the A That is correct, sir.
charge of interest and penalties, did you note that? Clearly, the purpose of the arrangement between the parties on November 22,
A Yes, sir. I noted the date. 1989, was for the immediate payment of the private respondent's outstanding account,
in order that his credit card would not be suspended.
Q When?
As agreed upon by the parties, on the following day, private respondent did issue
A When I returned from the Quezon province, sir. a check for P15,000. However, the check was postdated 15 December 1989. Settled is
the doctrine that a check is only a substitute for money and not money, the delivery of
Q When? such an instrument does not, by itself operate as payment. [9] This is especially true in
A I think November 22, sir. the case of a postdated check.

Q So that before you used again the credit card you were not able to pay Thus, the issuance by the private respondent of the postdated check was not
immediately this P8,987.84 in cash? effective payment. It did not comply with his obligation under the arrangement with
Miss Lorenzo. Petitioner corporation was therefore justified in suspending his credit
A I paid P15,000.00, sir. card.
Q My question Mr. Witness is, did you pay this P8,987.84 in charge of interest and Finally, we find no legal and factual basis for private respondent's assertion that
penalties immediately in cash? in canceling the credit card of the private respondent, petitioner abused its right under
the terms and conditions of the contract.
A In cash no, but in check, sir.
To find the existence of an abuse of right under Article 19 the following elements
Q You said that you noted the word "immediately" in bold letters in your statement
must be present: (1) There is a legal right or duty; (2) which is exercised in bad faith;
of account, why did you not pay immediately?
(3) for the sole intent of prejudicing or injuring another. [10]
A Because I received that late, sir.
Time and again this Court has held that good faith is presumed and the burden of
Q Yes, on November 22 when you received from the secretary of the defendant proving bad faith is on the party alleging it. [11] This private respondent failed to do. In
telling you to pay the principal amount of P8,987.84, why did you not pay? fact, the action of the petitioner belies the existence of bad faith. As early as 28
October 1989, petitioner could have suspended private respondent's card
A There was a communication between me and the defendant, I was required to outright. Instead, petitioner allowed private respondent to use his card for several
pay P8,000.00 but I paid in check for P15,000.00, sir. weeks.Petitioner had even notified private respondent of the impending suspension of
Q Do you have any evidence to show that the defendant required you to pay in his credit card and made special accommodations for him for settling his outstanding
check for P15,000.00? account. As such, petitioner cannot be said to have capriciously and arbitrarily
canceled the private respondent's credit card.
A Yes, sir.
We do not dispute the findings of the lower court that private respondent suffered
Q Where is it? damages as a result of the cancellation of his credit card. However, there is a material
distinction between damages and injury. Injury is the illegal invasion of a legal right;
A It was by telecommunication, sir. damage is the loss, hurt, or harm which results from the injury; and damages are the
Q So there is no written communication between you and the defendant? recompense or compensation awarded for the damage suffered. Thus, there can be
damage without injury in those instances in which the loss or harm was not the result
A There was none, sir. of a violation of a legal duty. In such cases, the consequences must be borne by the
30
injured person alone, the law affords no remedy for damages resulting from an act
which does not amount to a legal injury or wrong. These situations are often
called damnum absque injuria.[12]
In other words, in order that a plaintiff may maintain an action for the injuries of
which he complains, he must establish that such injuries resulted from a breach of duty
which the defendant owed to the plaintiff - a concurrence of injury to the plaintiff and
legal responsibility by the person causing it. The underlying basis for the award of tort
damages is the premise that an individual was injured in contemplation of law. Thus,
there must first be a breach of some duty and the imposition of liability for that breach
before damages may be awarded;[13] and the breach of such duty should be the
proximate cause of the injury.
As it was private respondent's own negligence which was the proximate cause of
his embarrassing and humiliating experience, we find the award of damages by the
respondent court clearly unjustified. We take note of the fact that private respondent
has not yet paid his outstanding account with petitioner.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals
ordering petitioner to pay private respondent P100,000.00 as moral
damages, P50,000.00 as exemplary damages and P20,000.00 as attorney's fees, is SET
ASIDE. Private respondent is DIRECTED to pay his outstanding obligation with the
petitioner in the amount of P14,439.41.
SO ORDERED.

We therefore disagree with the ruling of the respondent court that the dishonor of
the credit card of the private respondent by Caf Adriatico is attributable to petitioner
for its willful or gross neglect to inform the private respondent of the suspension of his
credit card, the unfortunate consequence of which brought social humiliation and
embarrassment to the private respondent.[14]
It was petitioner's failure to settle his obligation which caused the suspension of
his credit card and subsequent dishonor at Caf Adriatico.He can not now pass the
blame to the petitioner for not notifying him of the suspension of his card. As quoted
earlier, the application contained the stipulation that the petitioner could automatically
suspend a card whose billing has not been paid for more than thirty days.Nowhere is it
stated in the terms and conditions of the application that there is a need of notice
before suspension may be effected as private respondent claims. [15]
This notwithstanding, on November 28, 1989, the day of the suspension of
private respondent's card, petitioner sent a letter by ordinary mail notifying private
respondent that his card had been temporarily suspended. Under the Rules on
Evidence, there is a disputable presumption that letters duly directed and mailed were
received on the regular course of mail.[16] Aside from the private respondent's bare
denial, he failed to present evidence to rebut the presumption that he received said
notice. In fact upon cross examination, private respondent admitted that he did
received the letter notifying him of the cancellation:
Q Now you were saying that there was a first letter sent to you by the defendant?
A Your letter, sir.
Q Was that the first letter that you received?
A Yes, sir.
Q Is it that there was a communication first between you and the defendant?
A There was none, sir. I received a cancellation notice but that was after November
27.[17]

31
 [G.R. No. 96405. June 26, 1996]
BALDOMERO INCIONG, JR., petitioner, vs. COURT OF APPEALS and
PHILIPPINE BANK OF COMMUNICATIONS, respondents.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE RULE; DOES NOT
SPECIFY THAT THE WRITTEN AGREEMENT BE A PUBLIC
INSTRUMENT.- Clearly, the rule does not specify that the written
agreement be a public document. What is required is that the agreement
be in writing as the rule is in fact founded on "long experience that written
evidence is so much more certain and accurate than that which rests in
fleeting memory only, that it would be unsafe, when parties have
expressed the terms of their contract in writing, to admit weaker evidence
to control and vary the stronger and to show that the parties intended a
different contract from that expressed in the writing signed by them"
[FRANCISCO, THE RULES OF COURT OF THE PHILIPPINES, Vol. VII,
Part I, 1990 ed., p. 179] Thus, for the parol evidence rule to apply, a
written contract need not be in any particular form, or be signed by both
parties. As a general rule, bills, notes and other instruments of a similar
nature are not subject to be varied or contradicted by parol or extrinsic
evidence.
2. CIVIL LAW; OBLIGATIONS; SOLIDARY OR JOINT AND SEVERAL
OBLIGATION, DEFINED.- A solidary or joint and several obligation is one
in which each debtor is liable for the entire obligation, and each creditor is
entitled to demand the whole obligation. [TOLENTINO, CIVIL CODE OF
THE PHILIPPINES, Vol. IV, 1991 ed., p. 217] Section 4, Chapter 3, Title
1, Book IV of the Civil Code states the law on joint and several
obligations. Under Art. 1207 thereof, when there are two or more debtors
in one and the same obligation, the presumption is that the obligation is
joint so that each of the debtors is liable only for the proportionate part of
the debt. There is a solidary liability only when the obligation expressly so
states, when the law so provides or when the nature of the obligation so
requires. [Sesbreo v. Court of Appeals, G.R. No. 89252, May 24, 1993,
222 SCRA 466, 481.]
3. ID.; GUARANTY; GUARANTOR AS DISTINGUISHED FROM SOLIDARY
DEBTOR.- While a guarantor may bind himself solidarily with the principal
debtor, the liability of a guarantor is different from that of a solidary
debtor. Thus, Tolentino explains: "A guarantor who binds himself in
solidum with the principal debtor under the provisions of the second
paragraph does not become a solidary co-debtor to all intents and
purposes. There is a difference between a solidary co-debtor, and a fiador
in solidum (surety). The latter, outside of the liability he assumes to pay
the debt before the property of the principal debtor has been exhausted,
retains all the other rights, actions and benefits which pertain to him by
reason of the fiansa; while a solidary co-debtor has no other rights than
those bestowed upon him in Section 4, Chapter 3, Title 1, Book IV of the
Civil Code." [Tolentino, Civil Code of the Philippines, Vol. V, 1992 ed., p.
502]
APPEARANCES OF COUNSEL
Emilio G. Abrogena for petitioner.
Teogenes X. Velez for private respondent.
DECISION
ROMERO, J.:
This is a petition for review on certiorari of the decision of the Court of
Appeals affirming that of the Regional Trial Court of Misamis Oriental, Branch
18,[1] which disposed of Civil Case No. 10507 for collection of a sum of money
and damages, as follows:
"WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudged solidarily
liable and ordered to pay to the plaintiff Philippine Bank of Communications, Cagayan
de Oro City, the amount of FIFTY THOUSAND PESOS (P50,000.00),with interest
thereon from May 5, 1983 at 16% per annum until fully paid; and 6% per annum on
the total amount due, as liquidated damages or penalty from May 5, 1983 until fully
paid; plus 10% of the total amount due for expenses of litigation and attorney's fees;
and to pay the costs.
The counterclaim, as well as the cross claim, are dismissed for lack of merit.
SO ORDERED."
Petitioner's liability resulted from the promissory note in the amount of
P50,000.00 which he signed with Rene C. Naybe and Gregorio D. Pantanosas
on February 3, 1983, holding themselves jointly and severally liable to private
respondent Philippine Bank of Communications, Cagayan de Oro City
branch. The promissory note was due on May 5, 1983.
Said due date expired without the promissors having paid their
obligation. Consequently, on November 14, 1983 and on June 8, 1984, private
respondent sent petitioner telegrams demanding payment thereof.[2] On
December 11, 1984 private respondent also sent by registered mail a final
letter of demand to Rene C. Naybe. Since both obligors did not respond to the
demands made, private respondent filed on January 24, 1986 a complaint for
collection of the sum of P50,000.00 against the three obligors.
32
 On November 25, 1986, the complaint was dismissed for failure of the
plaintiff to prosecute the case. However, on January 9, 1987, the lower court
reconsidered the dismissal order and required the sheriff to serve the
summonses. On January 27, 1987, the lower court dismissed the case against
defendant Pantanosas as prayed for by the private respondent
herein. Meanwhile, only the summons addressed to petitioner was served as
the sheriff learned that defendant Naybe had gone to Saudi Arabia.
In his answer, petitioner alleged that sometime in January 1983, he was
approached by his friend, Rudy Campos, who told him that he was a partner of
Pio Tio, the branch manager of private respondent in Cagayan de Oro City, in
the falcata logs operation business. Campos also intimated to him that Rene
C. Naybe was interested in the business and would contribute a chainsaw to
the venture. He added that, although Naybe had no money to buy the
equipment Pio Tio had assured Naybe of the approval of a loan he would
make with private respondent. Campos then persuaded petitioner to act as a
"co-maker" in the said loan. Petitioner allegedly acceded but with the
understanding that he would only be a co-maker for the loan of P5,000.00.
Petitioner alleged further that five (5) copies of a blank promissory note
were brought to him by Campos at his office. He affixed his signature thereto
but in one copy, he indicated that he bound himself only for the amount of
P5,000.00. Thus, it was by trickery, fraud and misrepresentation that he was
made liable for the amount of P50,000.00.
In the aforementioned decision of the lower court, it noted that the
typewritten figure "P50,000-" clearly appears directly below the admitted
signature of the petitioner in the promissory note.[3] Hence, the latter's
uncorroborated testimony on his limited liability cannot prevail over the
presumed regularity and fairness of the transaction, under Sec. 5 (q) of Rule
131. The lower court added that it was "rather odd" for petitioner to have
indicated in a copy and not in the original, of the promissory note, his
supposed obligation in the amount of P5,000.00 only. Finally, the lower court
held that even granting that said limited amount had actually been agreed
upon, the same would have been merely collateral between him and Naybe
and, therefore, not binding upon the private respondent as creditor-bank.
The lower court also noted that petitioner was a holder of a Bachelor of
Laws degree and a labor consultant who was supposed to take due care of his
concerns, and that, on the witness stand, Pio Tio denied having participated in
the alleged business venture although he knew for a fact that the falcata logs
operation was encouraged by the bank for its export potential.
Petitioner appealed the said decision to the Court of Appeals which, in its
decision of August 31, 1990, affirmed that of the lower court. His motion for
reconsideration of the said decision having been denied, he filed the instant
petition for review on certiorari.
On February 6,1991, the Court denied the petition for failure of petitioner
to comply with the Rules of Court and paragraph 2 of Circular No. 1-88, and to
sufficiently show that respondent court had committed any reversible error in
its questioned decision.[4] His motion for the reconsideration of the denial of his
petition was likewise denied with finality in the Resolution of April 24,
1991.[5] Thereafter, petitioner filed a motion for leave to file a second motion for
reconsideration which, in the Resolution of May 27, 1991, the Court denied. In
the same Resolution, the Court ordered the entry of judgment in this case.[6]
Unfazed, petitioner filed a motion for leave to file a motion for
clarification. In the latter motion, he asserted that he had attached Registry
Receipt No. 3268 to page 14 of the petition in compliance with Circular No. 1-
88. Thus, on August 7,1991, the Court granted his prayer that his petition be
given due course and reinstated the same.[7]
Nonetheless, we find the petition unmeritorious.
Annexed to the petition is a copy of an affidavit executed on May 3, 1988,
or after the rendition of the decision of the lower court, by Gregorio
Pantanosas, Jr., an MTCC judge and petitioner's co-maker in the promissory
note. It supports petitioner's allegation that they were induced to sign the
promissory note on the belief that it was only for P5,000.00, adding that it was
Campos who caused the amount of the loan to be increased to P50,000.00.
The affidavit is clearly intended to buttress petitioner's contention in the
instant petition that the Court of Appeals should have declared the promissory
note null and void on the following grounds: (a) the promissory note was
signed in the office of Judge Pantanosas, outside the premises of the bank; (b)
the loan was incurred for the purpose of buying a second-hand chainsaw
which cost only P5,000.00; (c) even a new chainsaw would cost only
P27,500.00; (d) the loan was not approved by the board or credit committee
which was the practice, at it exceeded P5,000.00; (e) the loan had no
collateral; (f) petitioner and Judge Pantanosas were not present at the time the
loan was released in contravention of the bank practice, and (g) notices of
default are sent simultaneously and separately but no notice was validly sent
to him.[8] Finally, petitioner contends that in signing the promissory note, his
consent was vitiated by fraud as, contrary to their agreement that the loan was
only for the amount of P5,000. 00, the promissory note stated the amount of
P50,000.00.
The above-stated points are clearly factual. Petitioner is to be reminded of
the basic rule that this Court is not a trier of facts.Having lost the chance to
fully ventilate his factual claims below, petitioner may no longer be accorded
the same opportunity in the absence of grave abuse of discretion on the part of
the court below. Had he presented Judge Pantanosas' affidavit before the
lower court, it would have strengthened his claim that the promissory note did
not reflect the correct amount of the loan.
33
 Nor is there merit in petitioner's assertion that since the promissory note
"is not a public deed with the formalities prescribed by law but x x x a mere
commercial paper which does not bear the signature of x x x attesting
witnesses," parol evidence may "overcome" the contents of the promissory
note.[9] The first paragraph of the parol evidence rule[10] states:
"When the terms of an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon and there can be, between the parties and their
successors-in-interest, no evidence of such terms other than the contents of the written
agreement."
Clearly, the rule does not specify that the written agreement be a public
document.
What is required is that agreement be in writing as the rule is in fact
founded on "long experience that written evidence is so much more certain
and accurate than that which rests in fleeting memory only, that it would be
unsafe, when parties have expressed the terms of their contract in writing, to
admit weaker evidence to control and vary the stronger and to show that the
parties intended a different contract from that expressed in the writing signed
by them."[11] Thus, for the parol evidence rule to apply, a written contract need
not be in any particular form, or be signed by both parties.[12] As a general rule,
bills, notes and other instruments of a similar nature are not subject to be
varied or contradicted by parol or extrinsic evidence.[13]
By alleging fraud in his answer,[14] petitioner was actually in the right
direction towards proving that he and his co-makers agreed to a loan of
P5,000.00 only considering that, where a parol contemporaneous agreement
was the inducing and moving cause of the written contract, it may be shown by
parol evidence.[15] However, fraud must be established by clear and convincing
evidence, mere preponderance of evidence, not even being
adequate.[16] Petitioner's attempt to prove fraud must, therefore, fail as it was
evidenced only by his own uncorroborated and, expectedly, self-serving
testimony.
Petitioner also argues that the dismissal of the complaint against Naybe,
the principal debtor, and against Pantanosas, his co-maker, constituted a
release of his obligation, especially because the dismissal of the case against
Pantanosas was upon the motion of private respondent itself. He cites as basis
for his argument, Article 2080 of the Civil Code which provides that:
"The guarantors, even though they be solidary, are released from their obligation
whenever by some act of the creditor, they cannot be subrogated to the rights,
mortgages, and preferences of the latter."
It is to be noted, however, that petitioner signed the promissory note as a
solidary co-maker and not as a guarantor. This is patent even from the first
sentence of the promissory note which states as follows:
"Ninety one (91) days after date, for value received, I/we, JOINTLY and
SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS
at its office in the City of Cagayan de Oro, Philippines the sum of FIFTY
THOUSAND ONLY (P50,000. 00) Pesos, Philippine Currency, together with interest
x x x at the rate of SIXTEEN (16) per cent per annum until fully paid."
A solidary or joint and several obligation is one in which each debtor is
liable for the entire obligation, and each creditor is entitled to demand the
whole obligation.[17] On the other hand, Article 2047 of the Civil Code states:
"By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section
4, Chapter 3, Title I of this Book shall be observed, In such a case the contract is called
a suretyship." (Italics supplied.)
While a guarantor may bind himself solidarily with the principal debtor, the
liability of a guarantor is different from that of a solidary debtor. Thus, Tolentino
explains:
"A guarantor who binds himself in solidum with the principal debtor under the
provisions of the second paragraph does not become a solidary co-debtor to all intents
and purposes. There is a difference between a solidary co-debtor, and a fiador in
solidum (surety). The later, outside of the liability he assumes to pay the debt before
the property of the principal debtor has been exhausted, retains all the other rights,
actions and benefits which pertain to him by reason of the fiansa; while a solidary co-
debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, title
I, Book IV of the Civil Code."[18]
Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on
joint and several obligations. Under Art. 1207 thereof, when there are two or
more debtors in one and the same obligation, the presumption is that the
obligation is joint so that each of the debtors is liable only for a proportionate
part of the debt. There is a solidarity liability only when the obligation expressly
so states, when the law so provides or when the nature of the obligation so
requires.[19]
Because the promissory note involved in this case expressly states that
the three signatories therein are jointly and severally liable, any one, some or
all of them may be proceeded against for the entire obligation. [20] The choice is
34
left to the solidary creditor to determine against whom he will enforce
collection.[21] Consequently, the dismissal of the case against Judge
Pontanosas may not be deemed as having discharged petitioner from liability
as well. As regards Naybe, suffice it to say that the court never acquired
jurisdiction over him. Petitioner, therefore, may only have recourse against his
co-makers, as provided by law.
WHEREFORE, the instant petition for review on certiorari is hereby
DENIED and the questioned decision of the Court of Appeals is
AFFIRMED. Costs against petitioner.
SO ORDERED.

35
269 Phil. 437
SARMIENTO, J.:
This is a petition for review on certiorari which seeks the reversal and setting
aside of the decision[1] of the Court of Appeals,[2] the dispositive portion of
which reads:
WHEREFORE, the decision appealed from is hereby reversed and set aside
and another one entered for the plaintiff ordering the defendant-
appellee Roman Catholic Bishop of Malolos, Inc. to accept the balance of
P124,000.00 being paid by plaintiff-appellant and thereafter to execute in
favor of Robes-Francisco Realty Corporation a registerable Deed of Absolute
Sale over 20,655 square meters portion of that parcel of land situated in San
Jose del Monte, Bulacan described in OCT No. 575 (now Transfer Certificates
of Title Nos. T-169493, 169494, 169495 and 169496) of the Register of Deeds
of Bulacan. In case of refusal of the defendant to execute the Deed of Final
Sale, the clerk of court is directed to execute the said document. Without
pronouncement as to damages and attorney's fees. Costs against the
defendant-appellee.[3]
The case at bar arose from a complaint filed by the private respondent, then
plaintiff, against the petitioner, then defendant, in the Court of First Instance
(now Regional Trial Court) of Bulacan, at Sta. Maria, Bulacan,[4] for specific
performance with damages, based on a contract[5] executed on July 7, 1971.
The property subject matter of the contract consists of a 20,655 sq.m.-portion,
out of the 30,655 sq.m. total area, of a parcel of land covered by Original
Certificate of Title No. 575 of the Province of Bulacan, issued and registered in
the name of the petitioner which it sold to the private respondent for and in
consideration of P123,930.00.
The crux of the instant controversy lies in the compliance or non-compliance
by the private respondent with the provision for payment to the petitioner of
the principal balance of P100,000.00 and the accrued interest of P24,000.00
within the grace period.
A chronological narration of the antecedent facts is as follows:
On July 7, 1971, the subject contract over the land in question was executed
between the petitioner as vendor and the private respondent through its then
president, Mr. Carlos F. Robes, as vendee, stipulating for a downpayment of
P23,930.00 and the balance of P100,000.00 plus 12% interest per annum to be
paid within four (4) years from execution of the contract, that is, on or before
July 7, 1975. The contract likewise provides for cancellation, forfeiture of
previous payments, and reconveyance of the land in question in case the
private respondent would fail to complete payment within the said period.
On March 12, 1973, the private respondent, through its new president,
Atty. AdaliaFrancisco, addressed a letter[6] to Father Vasquez, parish priest of
San Jose Del Monte, Bulacan, requesting to be furnished with a copy of the
subject contract and the supporting documents.
On July 17, 1975, admittedly after the expiration of the stipulated period for
payment, the same Atty. Francisco wrote the petitioner a formal request [7] that
her company be allowed to pay the principal amount of P100,000.00 in three
(3) equal installments of six (6) months each with the first installment and the
accrued interest of P24,000.00 to be paid immediately upon approval of the
said request.
On July 29, 1975, the petitioner, through its counsel, Atty. Carmelo Fernandez,
formally denied the said request of the private respondent, but granted the
latter a grace period of five (5) days from the receipt of the denial [8] to pay the
total balance of P124,000.00, otherwise, the provisions of the contract
regarding cancellation, forfeiture, and reconveyance would be implemented.
On August 4, 1975, the private respondent, through its president, Atty.
Francisco, wrote[9] the counsel of the petitioner requesting an extension of 30
days from said date to fully settle its account. The counsel for the petitioner,
Atty. Fernandez, received the said letter on the same day. Upon consultation
with the petitioner in Malolos, Bulacan, Atty. Fernandez, as instructed, wrote
the private respondent a letter[10] dated August 7, 1975 informing the latter of
the denial of the request for an extension of the grace period.
Consequently, Atty. Francisco, the private respondent's president, wrote a
letter[11]dated August 22, 1975, directly addressed to the petitioner, protesting
the alleged refusal of the latter to accept tender of payment purportedly made
by the former on August 5, 1975, the last day of the grace period. In the same
letter of August 22, 1975, received on the following day by the petitioner, the
private respondent demanded the execution of a deed of absolute sale over the
land in question and after which it would pay its account in full, otherwise,
judicial action would be resorted to.
On August 27, 1975, the petitioner's counsel, Atty. Fernandez, wrote a
reply[12] to the private respondent stating the refusal of his client to execute the
deed of absolute sale due to its (private respondent's) failure to pay its full
obligation. Moreover, the petitioner denied that the private respondent had
made any tender of payment whatsoever within the grace period. In view of
this alleged breach of contract, the petitioner cancelled the contract and
considered all previous payments forfeited and the land as ipso
facto reconveyed.
From a perusal of the foregoing facts, we find that both the contending parties
have conflicting versions on the main question of tender of payment.
The trial court, in its ratiocination, preferred not to give credence to the
evidence presented by the private respondent. According to the trial court:
36
x x x What made Atty. Francisco suddenly decide to pay plaintiff's obligation
on August 5, 1975, go to defendant's office at Malolos, and there tender her
payment, when her request of August 4, 1975 had not yet been acted upon until
August 7 1975? If Atty. Francisco had decided to pay the obligation and had
available funds for the purpose on August 5, 1975, then there would have been
no need for her to write defendant on August 4, 1975 to request an extension of
time. Indeed, Atty. Francisco's claim that she made a tender of payment on
August 5, 1975 -- such alleged act, considered in relation to the circumstances
both antecedent and subsequent thereto, being not in accord with the normal
pattern of human conduct -- is not worthy of credence.[13]
The trial court likewise noted the inconsistency in the testimony of Atty.
Francisco, president of the private respondent, who earlier testified that a
certain Mila Policarpioaccompanied her on August 5, 1975 to the office of the
petitioner. Another person, however, named Aurora Oracion, was presented to
testify as the secretary-companion of Atty. Francisco on that same occasion.
Furthermore, the trial court considered as fatal the failure of Atty. Francisco to
present in court the certified personal check allegedly tendered as payment or,
at least, its xeroxcopy, or even bank records thereof. Finally, the trial court
found that the private respondent had insufficient funds available to fulfill the
entire obligation considering that the latter, through its president, Atty.
Francisco, only had a savings account deposit of P64,840.00, and although the
latter had a money-market placement of P300,000.00, the same was to mature
only after the expiration of the 5-day grace period.
Based on the above considerations, the trial court rendered a decision in favor
of the petitioner, the dispositive portion of which reads:
WHEREFORE, finding plaintiff to have failed to make out its case, the court
hereby declares the subject contract cancelled and plaintiff's down payment of
P23,930.00 forfeited in favor of defendant, and hereby dismisses the
complaint; and on the counterclaim, the Court orders plaintiff to pay
defendant.
(1) Attorney's fees of P10,000.00;
(2) Litigation expenses of P2,000.00; and
(3) Judicial costs.
SO ORDERED.[14]
Not satisfied with the said decision, the private respondent appealed to the
respondent Intermediate Appellate Court (now Court of Appeals) assigning as
reversible errors, among others, the findings of the trial court that the available
funds of the private respondent were insufficient and that the latter did not
effect a valid tender of payment and consignation.
The respondent court, in reversing the decision of the trial court, essentially
relies on the following findings:
x x x We are convinced from the testimony of Atty. Adalia Francisco and her
witnesses that in behalf of the plaintiff-appellant they have a total available
sum of P364,840.00 at her and at the plaintiff's disposal on or before August 4,
1975 to answer for the obligation of the plaintiff-appellant. It was not correct
for the trial court to conclude that the plaintiff-appellant had only about
P64,840.00 in savings deposit on or before August 5, 1975, a sum not enough
to pay the outstanding account of P124,000.00. The plaintiff-appellant,
through Atty. Francisco proved and the trial court even acknowledged that
Atty. Adalia Francisco had about P300,000.00 in money market
placement. The error of the trial court lies in concluding that the money
market placement of P300,000.00 was out of reach of Atty. Francisco. But as
testified to by Mr. Catalino Estrella, a representative of the Insular Bank of
Asia and America, Atty. Francisco could withdraw anytime her money market
placement and place it at her disposal, thus proving her financial capability of
meeting more than the whole of P124,000.00 then due per contract. This
situation, We believe, proves the truth that Atty. Francisco apprehensive that
her request for a 30-day grace period would be denied, she tendered payment
on August 4, 1975 which offer defendant through its representative and counsel
refused to receive. x x x[15] (Underscoring supplied)
In other words, the respondent court, finding that the private respondent had
sufficient available funds, ipso facto concluded that the latter had tendered
payment. Is such conclusion warranted by the facts proven? The petitioner
submits that it is not.
Hence, this petition.[16]
The petitioner presents the following issues for resolution:
xxx xxx xxx
A. Is a finding that private respondent had sufficient available funds on or
before the grace period for the payment of its obligation proof that it (private
respondent) did tender of (sic) payment for its said obligation within said
period?
xxx xxx xxx
B. Is it the legal obligation of the petitioner (as vendor) to execute a deed of
absolute sale in favor of the private respondent (as vendee) before the latter
has actually paid the complete consideration of the sale - where the contract
between and executed by the parties stipulates -
"That upon complete payment of the agreed consideration by the herein
VENDEE, the VENDOR shall cause the execution of a Deed of Absolute Sale in
favor of the VENDEE."
37
xxx xxx xxx
C. Is an offer of a check a valid tender of payment of an obligation under a
contract which stipulates that the consideration of the sale is in Philippine
Currency?[17]
We find the petition impressed with merit.
With respect to the first issue, we agree with the petitioner that a finding that
the private respondent had sufficient available funds on or before the grace
period for the payment of its obligation does not constitute proof of tender of
payment by the latter for its obligation within the said period. Tender of
payment involves a positive and unconditional act by the obligor of offering
legal tender currency as payment to the obligee for the former's obligation and
demanding that the latter accept the same. Thus, tender of payment cannot be
presumed by a mere inference from surrounding circumstances. At most,
sufficiency of available funds is only affirmative of the capacity or ability of the
obligor to fulfill his part of the bargain. But whether or not the obligor avails
himself of such funds to settle his outstanding account remains to be proven by
independent and credible evidence. Tender of payment presupposes not only
that the obligor is able, ready, and willing, but more so, in the act of performing
his obligation. Ab posse ad actu non vale illatio. "A proof that an act
could have been done is no proof that it was actually done."
The respondent court was therefore in error to have concluded from the sheer
proof of sufficient available funds on the part of the private respondent to meet
more than the total obligation within the grace period, the alleged truth of
tender of payment. The same is a classic case of non-sequitur.
On the contrary, the respondent court finds itself remiss in overlooking or
taking lightly the more important findings of fact made by the trial court which
we have earlier mentioned and which as a rule, are entitled to great weight on
appeal and should be accorded full consideration and respect and should not
be disturbed unless for strong and cogent reasons.[18]
While the Court is not a trier of facts, yet, when the findings of fact of the Court
of Appeals are at variance with those of the trial court, [19] or when the inference
of the Court of Appeals from its findings of fact is manifestly mistaken,[20] the
Court has to review the evidence in order to arrive at the correct findings based
on the record.
Apropos the second issue raised, although admittedly the documents for the
deed of absolute sale had not been prepared, the subject contract clearly
provides that the full payment by the private respondent is an a priori
condition for the execution of the said documents by the petitioner.
That upon complete payment of the agreed consideration by the herein
VENDEE, the VENDOR shall cause the execution of a Deed of Absolute Sale in
favor of the VENDEE.[21]
The private respondent is therefore in estoppel to claim otherwise as the latter
did in the testimony in cross-examination of its president, Atty. Francisco,
which reads:
Q Now, you mentioned, Atty. Francisco, that you wanted the defendant to
execute the final deed of sale before you would given (sic) the personal certified
check in payment of your balance, is that correct?
A Yes, sir.[22]
xxx xxx xxx
Art. 1159 of the Civil Code of the Philippines provides that "obligations arising
from contracts have the force of law between the contracting parties and
should be complied with in good faith." And unless the stipulations in said
contract are contrary to law, morals, good customs, public order, or public
policy, the same are binding as between the parties.[23]
What the private respondent should have done if it was indeed desirous of
complying with its obligations would have been to pay the petitioner within the
grace period and obtain a receipt of such payment duly issued by the
latter. Thereafter, or, allowing a reasonable time, the private respondent could
have demanded from the petitioner the execution of the necessary
documents. In case the petitioner refused, the private respondent could have
had always resorted to judicial action for the legitimate enforcement of its
right. For the failure of the private respondent to undertake this more
judicious course of action, it alone shall suffer the consequences.
With regard to the third issue, granting arguendo that we would rule
affirmatively on the two preceding issues, the case of the private respondent
still can not succeed in view of the fact that the latter used a certified personal
check which is not legal tender nor the currency stipulated, and therefore, can
not constitute valid tender of payment. The first paragraph of Art. 1249 of the
Civil Code provides that "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 Court en banc in the recent case of Philippine Airlines v. Court of
Appeals,[24] G.R. No. L-49188, stated thus:
Since a negotiable instrument is only a substitute for money and not money,
the delivery of such an instrument does not, by itself, operate as payment
(citing Sec. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan London
Co. v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L.
60, 61). A check, whether a manager's check or ordinary check, is not legal
tender, and an offer of a check in payment of a debt is not a valid tender of
payment and may be refused receipt by the obligee or creditor.
38
Hence, where the tender of payment by the private respondent was not valid
for failure to comply with the requisite payment in legal tender or currency
stipulated within the grace period and as such, was validly refused receipt by
the petitioner, the subsequent consignation did not operate to discharge the
former from its obligation to the latter.
In view of the foregoing, the petitioner in the legitimate exercise of its rights
pursuant to the subject contract, did validly order therefore the cancellation of
the said contract, the forfeiture of the previous payment, and
the reconveyance ipso facto of the land in question.
WHEREFORE, the petition for review on certiorari is GRANTED and the
DECISION of the respondent court promulgated on April 25, 1985 is hereby
SET ASIDE and ANNULLED and the DECISION of the trial court dated May
25, 1981 is hereby REINSTATED. Costs against the private respondent.
SO ORDERED.

39
On 26 March 1981, Philfinance delivered to petitioner the DCR No. 10805
issued by private respondent Pilipinas Bank ("Pilipinas"). It reads as
follows:

40