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G.R. No. 76788 January 22, 1990

JUANITA SALAS, petitioner,vs.HON. COURT OF APPALS an! FIRST FINANC " LASING CORPORATION, respondents.

Arsenio C. Villalon, Jr. for petitioner.

Labaguis, Loyola, Angara & Associates for private respondent.

FRNAN, C.J.:

Assailed in this petition for review on certiorariis the decision of the Court of Appeals in C.A.-G.R.CV No. 00757 entitled "ilinvest inance ! easin# Corporation v. $alas", which %odified thedecision of the Re#ional &rial Court of $an ernando, 'a%pan#a in Civil Case No. 5()5, a collectionsuit *etween the sa%e parties.

Records disclose that on e*ruar+ , )(0, uanita $alas/hereinafter referred to as petitioner*ou#ht a %otor vehicle fro%the Viola#o 1otor $ales Corporation /V1$for *revit+ for '5,)2.30as evidenced *+ a pro%issor+ note. &his note was su*se4uentl+ endorsed to ilinvest inance!easin# Corporation /hereinafter referred to as private respondent which financed the purchase.

'etitioner defaulted in her install%ents*e#innin# 1a+ 3), )(0 alle#edl+ due to a discrepanc+ in theen#ine and chassis nu%*ers of the vehicle delivered to her and those indicated in the sales invoice,certificate of re#istration and deed of chattel %ort#a#e, which fact she discovered when the vehiclefi#ured in an accident on ( 1a+ )(0.

&his failure to pa+ pro%pted private respondent to initiate Civil CaseNo. 5()5 for a su% of %one+

a#ainst petitioner *efore the Re#ional &rial Court of $an ernando, 'a%pan#a.

n its decision dated $epte%*er )0, )(3, the trial court held, thus6

89R9:R9, and in view of all the fore#oin#, ;ud#%ent is here*+ renderedorderin# the defendant to pa+ the plaintiff the su% of '3,


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&he alle#ations, state%ents, or ad%issions contained in a pleadin# are conclusive asa#ainst the pleader. A part+ cannot su*se4uentl+ tae a position contradictor+ of, orinconsistent with his pleadin#s /Cunanan vs. A%paro, 0 'hil. 337. Ad%issions%ade *+ the parties in the pleadin#s, or in the course of the trial or otherproceedin#s, do not re4uire proof and cannot *e contradicted unless previousl+shown to have *een %ade throu#h palpa*le %istae /$ec. 3, Rule )3(, Revised

Rules of Court> $ta. Ana vs. 1aliwat, -32032, Au#. 2), )(, 3< $CRA )0).

hen an action or defense is founded upon a written instru%ent, copied in orattached to the correspondin# pleadin# as provided in the precedin# section, the#enuineness and due eBecution of the instru%ent shall *e dee%ed ad%itted unlessthe adverse part+, under oath, specificall+ denied the%, and sets forth what heclai%s to *e the facts /$ec. , Rule , Revised Rules of Court> 8i**ered vs. Rohdeand 1c1illian, 23 'hil.


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'rivate respondent in its co%%ent, pra+s for the dis%issal of the petition and counters that theissues raised and the alle#ations adduced therein are a %ere rehash of those presented and alread+passed upon in the court *elow, and that the ;ud#%ent in the "*reach of contract" suit cannot *einvoed as an authorit+ as the sa%e is still pendin# deter%ination in the appellate court.

e see no co#ent reason to distur* the challen#ed decision.

&he pivotal issue in this case is whether the pro%issor+ note in 4uestion is a ne#otia*le instru%entwhich will *ar co%pletel+ all the availa*le defenses of the petitioner a#ainst private respondent.

'etitioner?s lia*ilit+ on the pro%issor+ note, the due eBecution and #enuineness of which she neverdenied under oath is, under the fore#oin# factual milieu, as inevita*le as it is clearl+ esta*lished.

&he records reveal that involved herein is not a si%ple case of assi#n%ent of credit as petitionerwould have it appear, where the assi#nee %erel+ steps into the shoes of, is open to all defensesavaila*le a#ainst and can enforce pa+%ent onl+ to the sa%e eBtent as, the assi#nor-vendor.

Recentl+, in the case of Consolidated Plywood Industries Inc.v.IC Leasing and Acceptance

Corp., 6this Court had the occasion to clearl+ distin#uish *etween a ne#otia*le and a non-ne#otia*leinstru%ent.

A%on# others, the instru%ent in order to *e considered ne#otia*le %ust contain the so-called "wordsof ne#otia*ilit+ F i.e., %ust *e pa+a*le to "order" or "*earer"". nder $ection of the Ne#otia*lenstru%ents aw, there are onl+ two wa+s *+ which an instru%ent %a+ *e %ade pa+a*le to order.&here %ust alwa+s *e a specified person na%ed in the instru%ent and the *ill or note is to *e paid tothe person desi#nated in the instru%ent or to an+ person to who% he has indorsed and delivered thesa%e. ithout the words "or order or "to the order of", the instru%ent is pa+a*le onl+ to the persondesi#nated therein and is therefore non-ne#otia*le. An+ su*se4uent purchaser thereof will not en;o+the advanta#es of *ein# a holder of a ne#otia*le instru%ent, *ut will %erel+ "step into the shoes" ofthe person desi#nated in the instru%ent and will thus *e open to all defenses availa*le a#ainst the

latter. $uch *ein# the situation in the a*ove-cited case, it was held that therein private respondent isnot a holder in due course *ut a %ere assi#nee a#ainst who% all defenses availa*le to the assi#nor%a+ *e raised. 7

n the case at *ar, however, the situation is different. ndu*ita*l+, the *asis of private respondent?sclai% a#ainst petitioner is a pro%issor+ note which *ears all the ear%ars of ne#otia*ilit+.

&he pertinent portion of the note reads6

'R:1$$:RH N:&9/1:N&8H

'5,)2.30$an ernando, 'a%pan#a, 'hilippinese*. )), )(0

or value received, Ie ;ointl+ and severall+, pro%ise to pa+ Violago !otor "alesCorporation or order,at its office in"an ernando,Pampanga,the su% ofI#$%I'# #'()"A*+ (*% ')*+%+ #'I#$ %I'# & -/0/ (*L$1P23,/43.-5'hilippine currenc+, which a%ount includes interest at )


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without need of notice or de%and, in install%ents of the a%ounts followin# and at thedates hereinafter set forth, to wit6 P/,6/7.82%onthl+ for "2" %onths due andpa+a*le on the 3)st da+ of each %onth startin# 1arch 3), )(0 thru and inclusive ofe*ruar+ 3), )(2. 'JJJJJJJJJ %onthl+ for JJJJJJ %onths due and pa+a*le on the

JJJJJJ da+ of each %onth startin# JJJJJ)(JJ thru and inclusive of JJJJJ,)(JJJJJJJJ provided that interest at ) Co-1aer6

/$GN9D AN&A $AA$ JJJJJJJJJJJJJJJJJ

Address6

JJJJJJJJJJJJJJJJJJJJ JJJJJJJJJJJJJJJJJJJJ

&N9$$9$

$GN9D6 9G@9 $GN9D6 9G@9&AN K &AN K

'AH &: &89 :RD9R :NV9$& NANC9 AND 9A$NG C:R':RA&:N

V:AG: 1:&:R $A9$ C:R':RA&:N@H6 /$GN9D G9N9V9VA V. @A&ALAR

Cash 1ana#er 8

A careful stud+ of the 4uestioned pro%issor+ note shows that it is a ne#otia*le instru%ent, havin#co%plied with the re4uisites under the law as follows6 Ma it is in writin# and si#ned *+ the %aeruanita $alas> M* it contains an unconditional pro%ise to pa+ the a%ount of '5,)2.30> Mc it ispa+a*le at a fiBed or deter%ina*le future ti%e which is "'),)"Md it is pa+a*le to Viola#o 1otor $ales Corporation, or orderand as such, Me the drawee is na%edor indicated with certaint+. 9

t was ne#otiated *+ indorse%ent in writin# on the instru%ent itself pa+a*le to the :rder of ilinvestinance and easin# Corporation 10and it is an indorse%ent of the entire instru%ent. 11

nder the circu%stances, there appears to *e no 4uestion that ilinvest is a holder in due course,

havin# taen the instru%ent under the followin# conditions6 Ma it is co%plete and re#ular upon itsface> M* it *eca%e the holder thereof *efore it was overdue, and without notice that it had previousl+*een dishonored> Mc it too the sa%e in #ood faith and for value> and Md when it was ne#otiated toilinvest, the latter had no notice of an+ infir%it+ in the instru%ent or defect in the title of V1$Corporation. 12

Accordin#l+, respondent corporation holds the instru%ent free fro% an+ defect of title of prior parties,and free fro% defenses availa*le to prior parties a%on# the%selves, and %a+ enforce pa+%ent of


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the instru%ent for the full a%ount thereof. 1#&his *ein# so, petitioner cannot set up a#ainstrespondent the defense of nullit+ of the contract of sale *etween her and V1$.

9ven assu%in# for the sae of ar#u%ent that there is an iota of truth in petitioner?s alle#ation thatthere was in fact deception %ade upon her in that the vehicle she purchased was different fro% thatactuall+ delivered to her, this %atter cannot *e passed upon in the case *efore us, where the V1$

was never i%pleaded as a part+.

hatever issue is raised or clai% presented a#ainst V1$ %ust *e resolved in the "*reach ofcontract" case.

8ence, we reach a si%ilar opinion as did respondent court when it held6

e can onl+ eBtend our s+%pathies to the defendant /herein petitioner in thisunfortunate incident. ndeed, there is nothin# e can do as far as the Viola#o 1otor$ales Corporation is concerned since it is not a part+ in this case. &o even discuss theissue as to whether or not the Viola#o 1otor $ales Corporation is lia*le in the transactionin 4uestion would a%ount, to denial of due process, hence, i%proper and

unconstitutional. $he should have i%pleaded Viola#o 1otor $ales.

1$

N V9 : &89 :R9G:NG, the assailed decision is here*+ AR19D. ith costs a#ainstpetitioner.

$: :RD9R9D.


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G.R. No. 977%# Au&u'( 10, 1992

CALT) *PHILIPPINS+, INC., petitioner,vs.COURT OF APPALS an! SCURIT -AN AN/ TRUST COPAN, respondents.

9ito, Lo:ada, (rtega & Castillo for petitioners.

*epomuceno, 'ofile;a & uingona for private.

RGALA/O, J.:

&his petition for review on certiorarii%pu#ns and sees the reversal of the decision pro%ul#ated *+respondent court on 1arch , )(() in CA-G.R. CV No. 32)5 1affir%in# with %odifications, theearlier decision of the Re#ional &rial Court of 1anila, @ranch E, 2which dis%issed the co%plaintfiled therein *+ herein petitioner a#ainst respondent *an.

&he undisputed *ac#round of this case, as found *+ the court a Defendant?s 9Bhi*its ) to 30>

C#+C#++ates"erial *os.=uantityAmount

33 e*. 3 (0)0) to (0)30 30 '0,0003 e*. 3 7


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2. $o%eti%e in 1arch )(3,An#el dela Cru infor%ed 1r. &i%oteo &ian#co, the$ucat @ranch 1an#er, that he lost all the certificates of ti%e depositin dispute. 1r.&ian#co advised said depositor to eBecute and su*%it a notaried Affidavit of oss,as re4uired *+ defendant *an?s procedure, if he desired replace%ent of said lostC&Ds /&$N, e*ruar+ (, )(7, pp.


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:n appeal, as earlier stated, respondent court affir%ed the lower court?s dis%issal of the co%plaint,hence this petition wherein petitioner faults respondent court in rulin# /) that the su*;ect certificatesof deposit are non-ne#otia*le despite *ein# clearl+ ne#otia*le instru%ents> /3 that petitioner did not*eco%e a holder in due course of the said certificates of deposit> and /2 in disre#ardin# thepertinent provisions of the Code of Co%%erce relatin# to lost instru%ents pa+a*le to *earer. $

&he instant petition is *ereft of %erit.

A sa%ple teBt of the certificates of ti%e deposit is reproduced *elow to provide a *etterunderstandin# of the issues involved in this recourse.

$9CR&H @ANPAND &R$& C:1'ANH77 A+ala Ave., 1aati No. (0)0)1etro 1anila, 'hilippines$CA& :C9'


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/* 1ust contain an unconditional pro%ise or order to pa+ a su% certain in %one+>

/c 1ust *e pa+a*le on de%and, or at a fiBed or deter%ina*le future ti%e>

/d 1ust *e pa+a*le to order or to *earer> and

/e here the instru%ent is addressed to a drawee, he %ust *e na%ed or otherwiseindicated therein with reasona*le certaint+.

&he C&Ds in 4uestion undou*tedl+ %eet the re4uire%ents of the law for ne#otia*ilit+. &he parties?*one of contention is with re#ard to re4uisite /d set forth a*ove. t is noted that 1r. &i%oteo '.&ian#co, $ecurit+ @an?s @ranch 1ana#er wa+ *ac in )(3, testified in open court that thedepositor reffered to in the C&Ds is no other than 1r. An#el de la Cru.

BBB BBB BBB

Att+. Calida6

4 n other words 1r. itness, +ou are sa+in# that per *oos of the*an, the depositor referred /sic in these certificates states that itwas An#el dela CruQ

witness6

a Hes, +our 8onor, and we have the record to show that An#el delaCru was the one who cause /sic the a%ount.

Att+. Calida6

4 And no other person or entit+ or co%pan+, 1r. itnessQ

witness6

a None, +our 8onor. 7

BBB BBB BBB

Att+. Calida6

4 1r. itness, who is the depositor identified in all of thesecertificates of ti%e deposit insofar as the *an is concernedQ

witness6

a An#el dela Cru is the depositor. 8

BBB BBB BBB

:n this score, the accepted rule is that the ne#otia*ilit+ or non-ne#otia*ilit+ of an instru%ent isdeter%ined fro% the writin#, that is, fro% the face of the instru%ent itself.9n the construction of a *ill


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or note, the intention of the parties is to control, if it can *e le#all+ ascertained. 10hile the writin#%a+ *e read in the li#ht of surroundin# circu%stances in order to %ore perfectl+ understand theintent and %eanin# of the parties, +et as the+ have constituted the writin# to *e the onl+ outward andvisi*le eBpression of their %eanin#, no other words are to *e added to it or su*stituted in its stead.&he dut+ of the court in such case is to ascertain, not what the parties %a+ have secretl+ intended ascontradistin#uished fro% what their words eBpress, *ut what is the %eanin# of the words the+ have

used. hat the parties %eant %ust *e deter%ined *+ what the+ said.11

Contrar+ to what respondent court held, the C&Ds are ne#otia*le instru%ents. &he docu%entsprovide that the a%ounts deposited shall *e repa+a*le to the depositor. And who, accordin# to thedocu%ent, is the depositorQ t is the "*earer." &he docu%ents do not sa+ that the depositor is An#elde la Cru and that the a%ounts deposited are repa+a*le specificall+ to hi%. Rather, the a%ountsare to *e repa+a*le to the *earer of the docu%ents or, for that %atter, whosoever %a+ *e the *earerat the ti%e of present%ent.

f it was reall+ the intention of respondent *an to pa+ the a%ount to An#el de la Cru onl+, it couldhave with facilit+ so eBpressed that fact in clear and cate#orical ter%s in the docu%ents, instead ofhavin# the word "@9AR9R" sta%ped on the space provided for the na%e of the depositor in each

C&D. :n the wordin#s of the docu%ents, therefore, the a%ounts deposited are repa+a*le towhoever %a+ *e the *earer thereof. &hus, petitioner?s aforesaid witness %erel+ declared that An#elde la Cru is the depositor "insofar as the *an is concerned," *ut o*viousl+ other parties not priv+ tothe transaction *etween the% would not *e in a position to now that the depositor is not the *earerstated in the C&Ds. 8ence, the situation would re4uire an+ part+ dealin# with the C&Ds to #o *ehindthe plain i%port of what is written thereon to unravel the a#ree%ent of the parties thereto throu#hfacts aliunde.&his need for resort to eBtrinsic evidence is what is sou#ht to *e avoided *+ theNe#otia*le nstru%ents aw and calls for the application of the ele%entar+ rule that the interpretationof o*scure words or stipulations in a contract shall not favor the part+ who caused the o*scurit+. 12

&he neBt 4uer+ is whether petitioner can ri#htfull+ recover on the C&Ds. &his ti%e, the answer is inthe ne#ative. &he records reveal that An#el de la Cru, who% petitioner chose not to i%plead in thissuit for reasons of its own, delivered the C&Ds a%ountin# to '),)30,000.00 to petitioner without

infor%in# respondent *an thereof at an+ ti%e. nfortunatel+ for petitioner, althou#h the C&Ds are*earer instru%ents, a valid ne#otiation thereof for the true purpose and a#ree%ent *etween it andDe la Cru, as ulti%atel+ ascertained, re4uires *oth deliver+ and indorse%ent. or, althou#hpetitioner sees to deflect this fact, the C&Ds were in realit+ delivered to it as a securit+ for De laCru? purchases of its fuel products. An+ dou*t as to whether the C&Ds were delivered as pa+%entfor the fuel products or as a securit+ has *een dissipated and resolved in favor of the latter *+petitioner?s own authoried and responsi*le representative hi%self.

n a letter dated Nove%*er 3, )(3 addressed to respondent $ecurit+ @an, .. Aranas, r.,CalteB Credit 1ana#er, wrote6 ". . . &hese certificates of deposit were ne#otiated to us *+ 1r. An#eldela Cru to guarantee >is purc>ases of fuel products" /9%phasis ours. 1#&his ad%ission isconclusive upon petitioner, its protestations notwithstandin#. nder the doctrine of estoppel, an

ad%ission or representation is rendered conclusive upon the person %ain# it, and cannot *e deniedor disproved as a#ainst the person rel+in# thereon. 1$A part+ %a+ not #o *ac on his own acts andrepresentations to the pre;udice of the other part+ who relied upon the%. 1%n the law of evidence,whenever a part+ has, *+ his own declaration, act, or o%ission, intentionall+ and deli*eratel+ ledanother to *elieve a particular thin# true, and to act upon such *elief, he cannot, in an+ liti#ationarisin# out of such declaration, act, or o%ission, *e per%itted to falsif+ it. 16

f it were true that the C&Ds were delivered as pa+%ent and not as securit+, petitioner?s credit%ana#er could have easil+ said so, instead of usin# the words "to #uarantee" in the letter


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afore4uoted. @esides, when respondent *an, as defendant in the court *elow, %oved for a *ill ofparticularit+ therein 17pra+in#, a%on# others, that petitioner, as plaintiff, *e re4uired to aver withsufficient definiteness or particularit+ /a the due date or dates ofpayment of the alle#edinde*tedness of An#el de la Cru to plaintiff and /* whether or not it issued a receipt showin# thatthe C&Ds were delivered to it *+ De la Cru aspayment of the latter?s alle#ed inde*tedness to it,plaintiff corporation opposed the %otion. 188ad it produced the receipt pra+ed for, it could have

proved, if such trul+ was the fact, that the C&Ds were delivered as pa+%ent and not as securit+.8avin# opposed the %otion, petitioner now la*ors under the presu%ption that evidence willfull+suppressed would *e adverse if produced. 19

nder the fore#oin# circu%stances, this dis4uisition in Intergrated ealty Corporation, et al. vs.P>ilippine *ational 9an?, et al.20is apropos6

. . . Advertin# a#ain to the Court?s pronounce%ents in Lope:, supra, we 4uotetherefro%6

&he character of the transaction *etween the parties is to *edeter%ined *+ their intention, re#ardless of what lan#ua#e was used

or what the for% of the transfer was. f it was intended to secure thepa+%ent of %one+, it %ust *e construed as a pled#e> *ut if there wasso%e other intention, it is not a pled#e. 8owever, even thou#h atransfer, if re#arded *+ itself, appears to have *een a*solute, itso*;ect and character %i#ht still *e 4ualified and eBplained *+conte%poraneous writin# declarin# it to have *een a deposit of thepropert+ as collateral securit+. t has *een said that a transfer ofpropert+ *+ the de*tor to a creditor, even if sufficient on its face to%ae an a*solute conve+ance, should *e treated as a pled#e if thede*t continues in ineBistence and is not dischar#ed *+ the transfer,and that accordin#l+ the use of the ter%s ordinaril+ i%portin#conve+ance of a*solute ownership will not *e #iven that effect insuch a transaction if the+ are also co%%onl+ used in pled#es and

%ort#a#es and therefore do not un4ualifiedl+ indicate a transfer ofa*solute ownership, in the a*sence of clear and una%*i#uouslan#ua#e or other circu%stances eBcludin# an intent to pled#e.

'etitioner?s insistence that the C&Ds were ne#otiated to it *e#s the 4uestion. nder the Ne#otia*lenstru%ents aw, an instru%ent is ne#otiated when it is transferred fro% one person to another insuch a %anner as to constitute the transferee the holder thereof,21and a holder %a+ *e the pa+ee orindorsee of a *ill or note, who is in possession of it, or the *earer thereof. 22n the present case,however, there was no ne#otiation in the sense of a transfer of the le#al title to the C&Ds in favor ofpetitioner in which situation, for o*vious reasons, %ere deliver+ of the *earer C&Ds would havesufficed. 8ere, the deliver+ thereof onl+ as securit+ for the purchases of An#el de la Cru /and weeven disre#ard the fact that the a%ount involved was not disclosed could at the %ost constitute

petitioner onl+ as a holder for value *+ reason of his lien. Accordin#l+, a ne#otiation for such purposecannot *e effected *+ %ere deliver+ of the instru%ent since, necessaril+, the ter%s thereof and thesu*se4uent disposition of such securit+, in the event of non-pa+%ent of the principal o*li#ation, %ust*e contractuall+ provided for.

&he pertinent law on this point is that where the holder has a lien on the instru%ent arisin# fro%contract, he is dee%ed a holder for value to the eBtent of his lien.2#As such holder of collateralsecurit+, he would *e a pled#ee *ut the re4uire%ents therefor and the effects thereof, not *ein#


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provided for *+ the Ne#otia*le nstru%ents aw, shall *e #overned *+ the Civil Code provisions onpled#e of incorporeal ri#hts, 2$which inceptivel+ provide6

Art. 30(5. ncorporeal ri#hts, evidenced *+ ne#otia*le instru%ents, . . . %a+ also *epled#ed. &he instru%ent provin# the ri#ht pled#ed shall *e delivered to the creditor,and if ne#otia*le, %ust *e indorsed.

Art. 30(. A pled#e shall not tae effect a#ainst third persons if a description of thethin# pled#ed and the date of the pled#e do not appear in a pu*lic instru%ent.

Aside fro% the fact that the C&Ds were onl+ delivered *ut not indorsed, the factual findin#s ofrespondent court 4uoted at the start of this opinion show that petitioner failed to produce an+docu%ent evidencin# an+ contract of pled#e or #uarantee a#ree%ent *etween it and An#el de laCru. 2%Conse4uentl+, the %ere deliver+ of the C&Ds did not le#all+ vest in petitioner an+ ri#hteffective a#ainst and *indin# upon respondent *an. &he re4uire%ent under Article 30(afore%entioned is not a %ere rule of ad;ective law prescri*in# the %ode where*+ proof %a+ *e%ade of the date of a pled#e contract, *ut a rule of su*stantive law prescri*in# a condition withoutwhich the eBecution of a pled#e contract cannot affect third persons adversel+. 26

:n the other hand, the assi#n%ent of the C&Ds %ade *+ An#el de la Cru in favor of respondent*an was e%*odied in a pu*lic instru%ent. 27ith re#ard to this other %ode of transfer, the CivilCode specificall+ declares6

Art. )35. An assi#n%ent of credit, ri#ht or action shall produce no effect as a#ainstthird persons, unless it appears in a pu*lic instru%ent, or the instru%ent is recordedin the Re#istr+ of 'ropert+ in case the assi#n%ent involves real propert+.

Respondent *an dul+ co%plied with this statutor+ re4uire%ent. Contraril+, petitioner, whether aspurchaser, assi#nee or lien holder of the C&Ds, neither proved the a%ount of its credit or the eBtentof its lien nor the eBecution of an+ pu*lic instru%ent which could affect or *ind private respondent.

Necessaril+, therefore, as *etween petitioner and respondent *an, the latter has definitel+ the *etterri#ht over the C&Ds in 4uestion.

inall+, petitioner faults respondent court for refusin# to delve into the 4uestion of whether or notprivate respondent o*served the re4uire%ents of the law in the case of lost ne#otia*le instru%entsand the issuance of replace%ent certificates therefor, on the #round that petitioner failed to raisedthat issue in the lower court. 28

:n this %atter, we uphold respondent court?s findin# that the aspect of alle#ed ne#li#ence of privaterespondent was not included in the stipulation of the parties and in the state%ent of issues su*%itted*+ the% to the trial court.29&he issues a#reed upon *+ the% for resolution in this case are6

). hether or not the C&Ds as worded are ne#otia*le instru%ents.

3. hether or not defendant could le#all+ appl+ the a%ount covered *+ the C&Dsa#ainst the depositor?s loan *+ virtue of the assi#n%ent /AnneB "C".

2. hether or not there was le#al co%pensation or set off involvin# the a%ountcovered *+ the C&Ds and the depositor?s outstandin# account with defendant, if an+.


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*earer instru%ent so that he %a+ o*tain a duplicate of the sa%e, and, on the other, an option infavor of the part+ lia*le thereon who, for so%e valid #round, %a+ elect to refuse to issue areplace%ent of the instru%ent. $i#nificantl+, none of the provisions cited *+ petitioner cate#oricall+restricts or prohi*its the issuance a duplicate or replace%ent instru%ent sans co%pliance with theprocedure outlined therein, and none esta*lishes a %andator+ precedent re4uire%ent therefor.

89R9:R9, on the %odified pre%ises a*ove set forth, the petition is D9N9Dand the appealeddecision is here*+ AR19D.

$: :RD9R9D.

*arvasa, C.J., Padilla and *ocon, JJ., concur.


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ASTRO LCTRONICS CORP. an! PTR RO)AS,petitioner,vs.PHILIPPIN )PORT AN/ FORIGN LOAN GUARANTCORPORATION,respondent.

/ C I S I O N

AUSTRIAARTIN, J.3

Assailed in this petition for review on certiorariunder Rule


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WHEREFORE, in view of all the foregoing, the Court hereby renders judgment infavor or (sic the !laintiff and against the defendants "stro Electronics Cor!orationand #eter $% Ro&as, ordering the then (sic to !ay, jointly and severally, the !laintiffthe sum of #',)*%*+%-) re!resenting the total obligation of defendants in favor of

!laintiff #hilguarantee as of .ecember '*, */+0 with interest at the sti!ulated rate of*1 !er annum and sti!ulated !enalty charges of *1 !er annum com!uted from2anuary *, */+- until the amount is fully !aid% With costs%

3O OR.ERE.%45

&he trial court o*served that if RoBas reall+ intended to si#n theinstru%ents %erel+ in his capacit+ as 'resident of Astro, then he should havesi#ned onl+ once in the pro%issor+ note.M

:n appeal, the Court of Appeals affir%ed the R&C decision a#reein# with

the trial court that RoBas failed to eBplain satisfactoril+ wh+ he had to si#ntwice in the contract and therefore the presu%ption that private transactionshave *een fair and re#ular %ust *e sustained. M(

n the present petition, the principal issue to *e resolved is whether or notRoBas should *e ;ointl+ and severall+ lia*le /solidar+ with Astro for the su%awarded *+ the R&C.

&he answer is in the affir%ative.

AstroSs loan with 'hiltrust @an is secured *+ three pro%issor+notes. &hese pro%issor+ notes are valid and *indin# a#ainst Astro andRoBas. As it appears on the notes, RoBas si#ned twice6 first, as president of

Astro and second, in his personal capacit+. n si#nin# his na%e aside fro%*ein# the 'resident of Asro, RoBas *eca%e a co-%aer of the pro%issor+notes and cannot escape an+ lia*ilit+ arisin# fro% it. nder the Ne#otia*lenstru%ents aw, persons who write their na%es on the face of pro%issor+notes are %aers,M)0pro%isin# that the+ will pa+ to the order of the pa+ee oran+ holder accordin# to its tenor.M))&hus, even without the phrase Tpersonalcapacit+,U RoBas will still *e pri%aril+ lia*le as a ;oint and several de*tor underthe notes considerin# that his intention to *e lia*le as such is %anifested *+the fact that he affiBed his si#nature on each of the pro%issor+ notes twicewhich necessaril+ would i%pl+ that he is undertain# the o*li#ation in twodifferent capacities, official and personal.

nnoticed *+ *oth the trial court and the Court of Appeals, a closereBa%ination of the si#natures affiBed *+ RoBas on the pro%issor+ notes,9Bhi*its TA-


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indicatin# with certaint+ that the t+pewritten words were alread+ eBistin# at theti%e RoBas affiBed his si#natures thus de%olishin# his clai% that thet+pewritten words were ;ust inserted after he si#ned the pro%issor+ notes. fwhat he clai%s is true, then portions of the t+pewritten words would havecovered portions of his si#natures, and not vice versa.

As to the third pro%issor+ note, 9Bhi*it TC-


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wherein he #uaranteed, ;ointl+ and severall+ with Astro the repa+%ent of'2,000,000.00 due to 'hiltrust. $uch continuin# suret+ship a#ree%ent evenre-enforced his solidar+ lia*ilit+ 'hiltrust *ecause as a suret+, he *oundhi%self ;ointl+ and severall+ with AstroSs o*li#ation. M)RoBas cannot now avoidlia*ilit+ *+ hidin# under the convenient eBcuse that he %erel+ si#ned the notesin *lan and the phrases Tin personal capacit+U and Tin his official capacit+Uwere fraudulentl+ inserted without his nowled#e.

astl+, 'hil#uarantee has all the ri#ht to proceed a#ainst petitioner, it issu*ro#ated to the ri#hts of 'hiltrust to de%and for and collect pa+%ent fro%*oth RoBas and Astro since it alread+ paid the value of 70= of roBas and

Astro 9lectronics Corp.Ss loan o*li#ation. n co%pliance with its contract ofTGuaranteeU in favor of 'hiltrust.

$u*ro#ation is the transfer of all the ri#hts of the creditor to a third person,who su*stitutes hi% in all his ri#hts.M)(t %a+ either *e le#al orconventional. e#al su*ro#ation is that which taes place without a#ree%ent*ut *+ operation of law *ecause of certain acts.M30nstances of le#alsu*ro#ation are those provided in Article )203 of the CivilCode. Conventional su*ro#ation, on the other hand, is that which taes place*+ a#ree%ent of the parties.M3)

RoBasS ac4uiescence is not necessar+ for su*ro#ation to tae place*ecause the instant case is one of the le#al su*ro#ation that occurs *+operation of law, and without need of the de*torSs nowled#e. M33urther,'hil#uarantee, as #uarantor, *eca%e the transferee of all the ri#hts of

'hiltrust as a#ainst RoBas and Astro *ecause the T#uarantor who pa+s issu*ro#ated *+ virtue thereof to all the ri#hts which the creditor had a#ainst thede*tor.UM32

4HRFOR, findin# no error with the decision of the Court of Appealsdated Dece%*er )0, )((, the sa%e is here*+ AR19D in toto.

SO OR/R/.
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5G.R. No. 1%$127. /r 8, 200#:

ROO C. GARCIA,petitioner, vs./IONISIO ;. LLAAS, respondent.

/ C I S I O N

PANGANI-AN, J.:

Novation cannot *e presu%ed. t %ust *e clearl+ shown either *+ theeBpress assent of the parties or *+ the co%plete inco%pati*ilit+ *etween theold and the new a#ree%ents. 'etitioner herein fails to show either re4uire%entconvincin#l+> hence, the su%%ar+ ;ud#%ent holdin# hi% lia*le as a ;ointand solidar+ de*tor stands.

T


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Eduardo de 2esus% .oc;eted as Civil Case ')>+', the com!laint allegedthat on )' .ecember *//4,5 46arcia (!etitioner and de 2esus5

borrowed #0??,???%?? from 4res!ondent5@ that, on the same day, 4they5 e&ecuted a!romissory note wherein they bound themselves jointly and severally to !ay the loanon or before )' 2anuary *// with a -1 interest !er month@ that the loan has long

been overdue and, des!ite re!eated demands, 4!etitioner and de 2esus5 have failed andrefused to !ay it@ and that, by reason of the4ir5 unjustified refusal, 4res!ondent5 wascom!elled to engage the services of counsel to whom he agreed to !ay )-1 of thesum to be recovered from 4!etitioner and de 2esus5, !lus #),???%?? for everya!!earance in court% "nne&ed to the com!laint were the !romissory note above>mentioned and a demand letter, dated ?) Aay *//, by 4res!ondent5 addressed to4!etitioner and de 2esus5%

:Resisting the com!laint, 4#etitioner 6arcia,5 in his 4"nswer,5 averred that heassumed no liability under the !romissory note because he signed it merely as anaccommodation !arty for & & & de 2esus@ and, alternatively, that he is relieved fromany liability arising from the note inasmuch as the loan had been !aid by & & & de2esus by means of a chec; dated * "!ril *//@ and that, in any event, the issuance ofthe chec; and 4res!ondent7s5 acce!tance thereof novated or su!erseded the note%

:4Res!ondent5 tendered a re!ly to 4#etitioner5 6arcia7s answer, thereunder assertingthat the loan remained un!aid for the reason that the chec; issued by & & & de 2esus

bounced, and that 4#etitioner5 6arcia7s answer was not even accom!anied by acertificate of non>forum sho!!ing% "nne&ed to the re!ly were the face of the chec;and the reverse side thereof%

:For his !art, & & & de 2esus asserted in his 4"5nswer with 4C5ounterclaim that out ofthe su!!osed #0??,???%?? loan, he received only #'?,???%??, the #0?,???%?? having

been advance interest thereon for two months, that is, for 2anuary and February *//@that4,5 in fact4,5 he !aid the sum of #*)?,???%?? by way of interests@ that this wasmade when 4res!ondent7s5 daughter, one =uijencio, received from theCentral #olice .istrict Command at Bicutan, $aguig, Aetro Aanila (where & & & de2esus wor;ed, the sum of #0?,???%??, re!resenting the !eso euivalent of hisaccumulated leave credits, another #0?,???%?? as advance interest, and still

another #0?,???%?? as interest for the months of Aarch and "!ril *//@ that he haddifficulty in !aying the loan and had as;ed 4res!ondent5 for an e&tension of time@ that4res!ondent5 acted in bad faith in instituting the case, 4res!ondent5 having agreed toacce!t the benefits he (de 2esus would receive for his retirement, but 4res!ondent5nonetheless filed the instant case while his retirement was being !rocessed@ and that,in defense of his rights, he agreed to !ay his counsel #)?,???%?? 4as5 attorney7s fees,

!lus #*,???%?? for every court a!!earance%


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:.uring the !re>trial conference, & & & de 2esus and his lawyer did not a!!ear, nor didthey file any !re>trial brief% trial brief, andhis counsel even manifested that he would no 4longer5 !resent evidence% 6iven thisdevelo!ment, the trial court gave 4res!ondent5 !ermission to !resent hisevidence ex parteagainst & & & de 2esus@ and, as regards 4#etitioner5 6arcia, the trialcourt directed 4res!ondent5 to file a motion for judgment on the !leadings, and for4#etitioner5 6arcia to file his comment or o!!osition thereto%

:Dnstead, 4res!ondent5 filed a 4A5otion to declare 4#etitioner5 6arcia in default and toallow him to !resent his evidence ex parte% Aeanwhile, 4#etitioner5 6arcia filed a4A5anifestation submitting his defense to a judgment on the !leadings% 3ubseuently,4res!ondent5 filed a 4A5anifestation4A5otion to submit the case for judgement on the

!leadings, withdrawing in the !rocess his !revious motion% $hereunder, he assertedthat 4!etitioner7s and de 2esus75 solidary liability under the !romissory note cannot beany clearer, and that the chec; issued by de 2esus did not discharge the loan since thechec; bounced%9M5

:n ul+ 7, )((, the Re#ional &rial Court /R&C of ueon Cit+ /@ranch333 disposed of the case as follows6

:WHEREFORE, !remises considered, judgment on the !leadings is hereby renderedin favor of 4res!ondent5 and against 4!etitioner and .e 2esus5, who are hereby orderedto !ay, jointly and severally, the 4res!ondent5 the following sums, to wit

G* #0??,???%?? re!resenting the !rinci!al amount !lus -1 interest thereon !er

month from 2anuary )', *// until the same shall have been fully !aid, less theamount of #*)?,???%?? re!resenting interests already !aid by & & & de 2esus@

G) #*??,???%?? as attorney7s fees !lus a!!earance fee of #),???%?? for eachday of 4c5ourt a!!earance, and@

G' Cost of this suit%79M

Ru=>n& o? (


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case a#ainst the latter was therefore re%anded *+ the CA to the trial court forthe e@ partereception of the for%erSs evidence.

As to petitioner, the CA treated his case as a su%%ar+ ;ud#%ent, *ecausehis Answer had failed to raise even a sin#le #enuine issue re#ardin# an+

%aterial fact.&he appellate court ruled that no novation -- eBpress or i%plied -- had

taen place when respondent accepted the chec fro% De esus. Accordin#to the CA, the chec was issued precisel+ to pa+ for the loan that was covered*+ the pro%issor+ note ;ointl+ and severall+ undertaen *+ petitioner and Deesus. RespondentSs acceptance of the chec did not serve to %ae De esusthe sole de*tor *ecause, first, the o*li#ation incurred *+ hi% and petitionerwas ;oint and several> and, second, the chec -- which had *een intended toeBtin#uish the o*li#ation -- *ounced upon its present%ent.

8ence, this 'etition.M7

I''u'

'etitioner su*%its the followin# issues for our consideration6

T

Whether or not the Honorable Court of "!!eals gravely erred in not holdingthat novation a!!lies in the instant case as & & & Eduardo de 2esus had e&!resslyassumed sole and e&clusive liability for the loan obligation he obtained from& & & Res!ondent .ionisio 8lamas, as clearly evidenced by

a Dssuance by & & & de 2esus of a chec; in !ayment of the fullamount of the loan of #0??,???%?? in favor of Res!ondent8lamas, although the chec; subseuently bounced4@5

b "cce!tance of the chec; by the & & & res!ondent & & & whichresulted in 4the5 substitution by & & & de 2esus or 4the su!ersedingof5 the !romissory note@

c & & & de 2esus having !aid interests on the loan in the totalamount of #*)?,???%??@

d $he fact that Res!ondent 8lamas agreed to the !ro!osalof & & & de 2esus that due to financial difficulties, he be given ane&tension of time to !ay his loan obligation and that his retirement
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benefits from the #hili!!ine blown trial%9M

$i%pl+ put, the issues are the followin#6 ) whether there was novation ofthe o*li#ation> 3 whether the defense that petitioner was onl+ anacco%%odation part+ had an+ *asis> and 2 whether the ;ud#%ent a#ainsthi% -- *e it a ;ud#%ent on the pleadin#s or a su%%ar+ ;ud#%ent -- wasproper.

Tr'( I''u3Novation

'etitioner sees to eBtricate hi%self fro% his o*li#ation as ;ointand solidar+ de*tor *+ insistin# that novation too place, either throu#h thesu*stitution of De esus as sole de*tor or the replace%ent of the pro%issor+note *+ the chec. Alternativel+, the for%er ar#ues that the ori#inal o*li#ationwas eBtin#uished when the latter, who was his co-o*li#or, TpaidU the loan withthe chec.
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&he fallac+ of the second /alternative ar#u%ent is all too apparent. &hechec could not have eBtin#uished the o*li#ation, *ecause it *ounced uponpresent%ent. @+ law,M(the deliver+ of a chec produces the effect of pa+%entonl+ when it is encashed.

e now co%e to the %ain issue of whether novation too place.Novation is a %ode of eBtin#uishin# an o*li#ation *+ chan#in# its o*;ects

or principal o*li#ations, *+ su*stitutin# a new de*tor in place of the old one, or*+ su*ro#atin# a third person to the ri#hts of the creditor. M)0 Article )3(2 of theCivil Code defines novation as follows6

:"rt% *)/'% thus, theconsent of these three persons are necessar+.M))@oth %odes of su*stitution *+the de*tor re4uire the consent of the creditor.M)3

Novation %a+ also *e eBtinctive or %odificator+. t is eBtinctive when anold o*li#ation is ter%inated *+ the creation of a new one that taes the placeof the for%er. t is %erel+ %odificator+when the old o*li#ation su*sists to theeBtent that it re%ains co%pati*le with the a%endator+ a#ree%ent. M)2hethereBtinctive or %odificator+, novation is %ade either *+ chan#in# the o*;ect orthe principal conditions, referred to as o*;ective or real novation> or *+su*stitutin# the person of the de*tor or su*ro#atin# a third person to the ri#htsof the creditor, an act nown as su*;ective or personal novation.M)


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0 $here must be a valid new contract%M)5

Novation %a+ also *e eBpress or i%plied. t is eBpress when the newo*li#ation declares in une4uivocal ter%s that the old o*li#ation iseBtin#uished. t is i%plied when the new o*li#ation is inco%pati*le with the

old one on ever+ point.M)&he test of inco%pati*ilit+ is whether the twoo*li#ations can stand to#ether, each one with its own independent eBistence. M)7

Appl+in# the fore#oin# to the instant case, we hold that no novation tooplace.

&he parties did not une4uivocall+ declare that the old o*li#ation had *eeneBtin#uished *+ the issuance and the acceptance of the chec, or that thechec would tae the place of the note. &here is no inco%pati*ilit+ *etweenthe pro%issor+ note and the chec. As the CA correctl+ o*served, the chechad *een issued precisel+ to answer for the o*li#ation. :n the one hand, thenote evidences the loan o*li#ation> and on the other, the chec answers forit. Veril+, the two can stand to#ether.

Neither could the pa+%ent of interests -- which, in petitionerSs view, alsoconstitutes novationM)-- chan#e the ter%s and conditions of theo*li#ation. $uch pa+%ent was alread+ provided for in the pro%issor+ noteand, lie the chec, was totall+ in accord with the ter%s thereof.

Also un%eritorious is petitionerSs ar#u%ent that the o*li#ationwas novated *+ the su*stitution of de*tors. n order to chan#e the person ofthe de*tor, the old one %ust *e eBpressl+ released fro% the o*li#ation, andthe third person or new de*tor %ust assu%e the for%erSs place in the relation.M)(ell-settled is the rule that novation is never presu%ed.M30Conse4uentl+, thatwhich arises fro% a purported chan#e in the person of the de*tor %ust *eclear and eBpress.M3) t is thus incu%*ent on petitioner to show clearl+ andune4uivocall+ that novation has indeed taen place.

n the present case, petitioner has not shown that he was eBpressl+released fro% the o*li#ation, that a third person was su*stituted in his place,or that the ;oint and solidar+ o*li#ation was cancelled and su*stituted *+ thesolitar+ undertain# of De esus. &he CA aptl+ held6

:& & &% #laintiff7s acce!tance of the bum chec; did not result in substitution by de2esus either, the nature of the obligation being solidary due to the fact that the

!romissory note e&!ressly declared that the liability of a!!ellants thereunder is jointand 4solidary%5 Reason under the law, a creditor may demand !ayment or

!erformance from one of the solidary debtors or some or all of them simultaneously,and !ayment made by one of them e&tinguishes the obligation% Dt therefore follows
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that in case the creditor fails to collect from one of the solidary debtors, he may still!roceed against the other or others% & & & 9M33

1oreover, it %ust *e noted that for novation to *e valid and le#al, the lawre4uires that the creditor eBpressl+ consent to the su*stitution of a new

de*tor.M32 $ince novation i%plies a waiver of the ri#ht the creditor had *eforethe novation, such waiver %ust *e eBpress. M3 and that, as such, he was released as o*li#or whenrespondent a#reed to eBtend the ter% of the o*li#ation.

&his reasonin# is %isplaced, *ecause the note herein is not a ne#otia*leinstru%ent. &he note reads6

:#ROAD33OR


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:.one at =ueLon City, Aetro Aanila this )'rdday of .ecember, *//%9 M20

@+ its ter%s, the note was %ade pa+a*le to a specific person rather thanto *earer or to orderM2) -- a re4uisite for ne#otia*ilit+ under Act 302), theNe#otia*le nstru%ents aw /N. 8ence, petitioner cannot avail hi%self of

the NSs provisions on the lia*ilities and defenses of an acco%%odationpart+. @esides, a non-ne#otia*le note is %erel+ a si%ple contract in writin#and is evidence of such intan#i*le ri#hts as %a+ have *een created *+ theassent of the parties.M23 &he pro%issor+ note is thus covered *+ the #eneralprovisions of the Civil Code, not *+ the N.

9ven #rantin# arguendothat the N was applica*le, still, petitioner would*e lia*le for the pro%issor+ note. nder Article 3( of Act 302), anacco%%odation part+ is lia*le for the instru%ent to a holder for value even if,at the ti%e of its tain#, the latter new the for%er to *e onl+ an

acco%%odation part+. &he relation *etween an acco%%odation part+ and thepart+ acco%%odated is, in effect, one of principal and suret+ -- theacco%%odation part+ *ein# the suret+. M22t is a settled rule that a suret+ is*ound e4uall+ and a*solutel+ with the principal and is dee%ed anori#inalpro%issor and de*tor fro% the *e#innin#. &he lia*ilit+ is i%%ediateand direct.M2 and /3 the %ovin# part+ is entitled to a ;ud#%entas a %atter of law.

A su%%ar+ ;ud#%ent is a procedural device desi#ned for the pro%ptdisposition of actions in which the pleadin#s raise onl+ a le#al, not a #enuine,issue re#ardin# an+ %aterial fact. M25Conse4uentl+, facts are asserted in theco%plaint re#ardin# which there is +et no ad%ission, disavowal or4ualification> or specific denials or affir%ative defenses are set forth in theanswer, *ut the issues are fictitious as shown *+ the pleadin#s, depositions or
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ad%issions.M2A su%%ar+ ;ud#%ent %a+ *e applied for *+ either a clai%ant ora defendin# part+.M27

:n the other hand, under $ection ) of Rule 2< of the Rules of Court, a;ud#%ent on the pleadin#s is proper when an answer fails to render an issue

or otherwise ad%its the %aterial alle#ations of the adverse part+Sspleadin#. &he essential 4uestion is whether there are issues #enerated *+ thepleadin#s.M2 A ;ud#%ent on the pleadin#s %a+ *e sou#ht onl+ *+ a clai%ant,who is the part+ seein# to recover upon a clai%, counterclai% or cross-clai%>or to o*tain a declarator+ relief.M2(

Apropos thereto, it %ust *e stressed that the trial courtSs ;ud#%ent a#ainstpetitioner was correctl+ treated *+ the appellate court as a su%%ar+

;ud#%ent, rather than as a ;ud#%ent on the pleadin#s. 8isAnswerM


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5G.R. No. 12901%. Au&u'( 1#, 200$:

SASUNG CONSTRUCTION COPAN PHILIPPINS,

INC.,petitioner, vs. FAR AST -AN AN/ TRUST COPANAN/ COURT OF APPALS,respondents.

/ C I S I O N

TINGA, J.:

Called to fore in the present petition is a classic teBt*oo 4uestion if a*an pa+s out on a for#ed chec, is it lia*le to rei%*urse the drawer fro%whose account the funds were paid outQ &he Court of Appeals, in reversin# atrial court decision adverse to the *an, invoed tenuous reasonin# to ac4uit

the *an of lia*ilit+. e reverse, appl+in# ti%e-honored principles of law.

&he salient facts follow.

'laintiff $a%sun# Construction Co%pan+ 'hilippines, nc. /T$a%sun#ConstructionU, while *ased in @iWan, a#una, %aintained a current accountwith defendant ar 9ast @an and &rust Co%pan+ M)/T9@&CUat the latterSs@el-Air, 1aati *ranch.M3&he sole si#nator+ to $a%sun# ConstructionSsaccount was on# P+u ee /Ton#U, its 'ro;ect 1ana#er, M2while the checsre%ained in the custod+ of the co%pan+Ss accountant, P+u Hon# ee /TP+uU. M


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was indeed si#ned *+ on#. Vele then forwarded the chec and si#naturecard to $hirle+ $+fu, another *an officer, for approval. $+fu then noticed thatose $e%pio /T$e%pioU, the assistant accountant of $a%sun#Construction, was also in the *an. $e%pio was well-nown to $+fu and theother *an officers, he *ein# the assistant accountant of $a%sun#Construction. $+fu showed the chec to $e%pio, who vouched for the#enuineness of on#Ss si#nature. Confir%in# the identit+ of Gona#a, $e%piosaid that the chec was for the purchase of e4uip%ent for $a%sun#Construction. $atisfied with the #enuineness of the si#nature of on#, $+fuauthoried the *anSs encash%ent of the chec to Gona#a.

&he followin# da+, the accountant of $a%sun# Construction, P+u,eBa%ined the *alance of the *an account and discovered that a chec in thea%ount of Nine 8undred Ninet+ Nine &housand ive 8undred 'esos/'(((,500.00 had *een encashed. Aware that he had not prepared such a

chec for on#Ss si#nature, P+u perused the chec*oo and found that thelast *lan chec was %issin#. M78e reported the %atter to on#, who thenproceeded to the *an. on# learned of the encash%ent of the chec, andrealied that his si#nature had *een for#ed. &he @an 1ana#er reputedl+ toldon# that he would *e rei%*ursed for the a%ount of the chec.Mon#proceeded to the police station and consulted with his law+ers.M($u*se4uentl+, a cri%inal case for 4ualified theft was filed a#ainst $e%pio*efore the a#una court.M)0

n a letter dated 1a+ )((3, $a%sun# Construction, throu#h counsel,

de%anded that 9@&C credit to it the a%ount of Nine 8undred Ninet+ Nine&housand ive 8undred 'esos /'(((,500.00, with interest.M))n response,9@&C said that it was still conductin# an investi#ation on the %atter.nsatisfied, $a%sun# Construction filed a Complainton )0 une )((3 forviolation of $ection 32 of the Ne#otia*le nstru%ents aw, and pra+ed for thepa+%ent of the a%ount de*ited as a result of the 4uestioned chec plusinterest, and attorne+Ss fees.M)3&he case was doceted as Civil Case No. (3-)50 *efore the Re#ional &rial Court /TR&CU of 1anila, @ranch (. M)2

Durin# the trial, *oth sides presented their respective eBpert witnesses totestif+ on the clai% that on#Ss si#nature was for#ed. $a%sun# Corporation,

which had referred the chec for investi#ation to the N@, presented $eniorN@ Docu%ent 9Ba%iner Roda @. lores. $he testified that *ased on hereBa%ination, she concluded that on#Ss si#nature had *een for#ed on thechec. :n the other hand, 9@&C, which had sou#ht the assistance of the'hilippine National 'olice /'N', M)


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Confronted with conflictin# eBpert testi%on+, the R&C chose to *elieve thefindin#s of the N@ eBpert. n a +ecisiondated 35 April )((


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ineffectual or does not dischar#e the instru%ent.M3) f pa+%ent is %ade, thedrawee cannot char#e it to the drawerSs account. &he traditional ;ustificationfor the result is that the drawee is in a superior position to detect a for#er+*ecause he has the %aerSs si#nature and is eBpected to now and co%pareit.M33&he rule has a health+ cautionar+ effect on *ans *+ encoura#in# care inthe co%parison of the si#natures a#ainst those on the si#nature cards the+have on file. 1oreover, the ver+ opportunit+ of the drawee to insure and todistri*ute the cost a%on# its custo%ers who use checs %aes the drawee anideal part+ to spread the ris to insurance.M32

@rad+, in his treatise #>e Law of orged and Altered C>ec?s, elucidates6

When a !erson de!osits money in a general account in a ban;, against which he hasthe !rivilege of drawing chec;s in the ordinary course of business, the relationshi!

between the ban; and the de!ositor is that of debtor and creditor% 3o far as the legal

relationshi! between the two is concerned, the situation is the same as though theban; had borrowed money from the de!ositor, agreeing to re!ay it on demand, or hadbought goods from the de!ositor, agreeing to !ay for them on demand% $he ban; owesthe de!ositor money in the same sense that any debtor owes money to hiscreditor% "dded to this, in the case of ban; and de!ositor, there is, of course, the

ban;7s obligation to !ay chec;s drawn by the de!ositor in !ro!er form and !resentedin due course% When the ban; receives the de!osit, it im!liedly agrees to !ay onlyu!on the de!ositor7s order% When the ban; !ays a chec;, on which the de!ositor7ssignature is a forgery, it has failed to com!ly with its contract in thisres!ect% $herefore, the ban; is held liable%

$he fact that the forgery is a clever one is immaterial% $he forged signature may soclosely resemble the genuine as to defy detection by the de!ositor himself% "nd yet, ifa ban; !ays the chec;, it is !aying out its own money and not the de!ositor7s%

$he forgery may be committed by a trusted em!loyee or confidential agent% $he ban;still must bear the loss% Even in a case where the forged chec; was drawn by thede!ositor7s !artner, the loss was !laced u!on the ban;% $he case referred to isRobinson v% 3ecurity Ban;, "r;%, )* 3% W% Re!% *% Dn this case, the !laintiff

brought suit against the defendant ban; for money which had been de!osited to the

!laintiff7s credit and which the ban; had !aid out on chec;s bearing forgeries of the!laintiff7s signature%

&&&

Dt was held that the ban; was liable% Dt was further held that the fact that the !laintiffwaited eight or nine months after discovering the forgery, before notifying the ban;,
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did not, as a matter of law, constitute a ratification of the !ayment, so as to !recludethe !laintiff from holding the ban; liable% &&&

$his rule of liability can be stated briefly in these words :" ban; is bound to ;nowits de!ositors7 signature%9 $he rule is variously e&!ressed in the many decisions in

which the uestion has been considered% But they all sum u! to the !ro!osition that aban; must ;now the signatures of those whose general de!osits it carries%M3er elatedCommercial Paper wrote, thus6

$he de!osit contract between a !ayor ban; and its customer determines who can drawagainst the customer7s account by s!ecifying whose signature is necessary on chec;s

that are chargeable against the customer7s account% $herefore, a chec; drawn againstthe account of an individual customer that is signed by someone other than thecustomer, and without authority from her, is not !ro!erly !ayable and is notchargeable to the customer7s account, inasmuch as any :unauthoriLed signature on aninstrument is ineffective9 as the signature of the !erson whose name is signed% M35

nder $ection 32 of the Ne#otia*le nstru%ents aw, for#er+ is a real ora*solute defense *+ the part+ whose si#nature is for#ed. M3:n the pre%isethat on#Ss si#nature was indeed for#ed, 9@&C is lia*le for the loss since itauthoried the dischar#e of the for#ed chec. $uch lia*ilit+ attaches even if

the *an eBerts due dili#ence and care in preventin# such fault+dischar#e. or#eries often deceive the e+e of the %ost cautious eBperts> andwhen a *an has *een so deceived, it is a harsh rule which co%pels it tosuffer althou#h no one has suffered *+ its *ein# deceived. M37&he for#er+ %a+*e so near lie the #enuine as to def+ detection *+ the depositor hi%self, and+et the *an is lia*le to the depositor if it pa+s the chec. M3

&hus, the first %atter of in4uir+ is into whether the chec was indeedfor#ed. A docu%ent for%all+ presented is presu%ed to *e #enuine until it isproved to *e fraudulent. n a for#er+ trial, this presu%ption %ust *e overco%e

*ut this can onl+ *e done *+ convincin# testi%on+ and effective illustrations.M3(

n rulin# that for#er+ was not dul+ proven, the Court of Appeals held6

4$here5 is ground to doubt the findings of the trial court sustaining the alleged forgeryin view of the conflicting conclusions made by handwriting e&!erts from the


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&&&

$hese contradictory findings create doubt on whether there was indeed a forgery% Dnthe case of Tenio-Obsequio v. Court of Appeals, )'? 3CR" --?, the 3u!reme Courtheld that forgery cannot be !resumed@ it must be !roved by clear, !ositive and

convincing evidence%

&his reasonin# is pure sophistr+. An+ liti#ator worth his or her salt wouldnever allow an opponentSs eBpert witness to stand uncontradicted, thus thespectacle of co%petin# eBpert witnesses is not unusual. &he trier of fact willhave to decide which version to *elieve, and eBplain wh+ or wh+ not suchversion is %ore credi*le than the other. Reliance therefore cannot *e placed%erel+ on the fact that there are collidin# opinions of two eBperts, *oth clothedwith the presu%ption of official dut+, in order to draw a conclusion, especiall+one which is eBtre%el+ crucial. Doin# so is tanta%ount to a ;urisprudential

cop-out.

1uch is eBpected fro% the Court of Appeals as it occupies the penulti%atetier in the ;udicial hierarch+. &his Court has lon# deferred to the appellatecourt as to its findin#s of fact in the understandin# that it has the appropriatesill and co%petence to plou#h throu#h the minutiaethat scatters the factualfield. n failin# to thorou#hl+ evaluate the evidence *efore it, and rel+in#instead on presu%ptions haphaardl+ drawn, the Court of Appeals was sadl+re%iss. :f course, courts, lie hu%ans, are falli*le, and not ever+ errordeserves a stern re*ue. Het, the appellate courtSs error in this case warrants

special attention, as it is a*surd and even dan#erous as a precedent. f thisrationale were adopted as a #overnin# standard *+ ever+ court in the land,*arel+ an+ actiona*le clai% would prosper, defeated as it would *e *+ the%ere invocation of the eBistence of a contrar+ TeBpertU opinion.

:n the other hand, the R&C did ad;ud#e the testi%on+ of the N@ eBpertas %ore credi*le than that of the 'N', and eBplained its reason *ehind theconclusion6

"fter subjecting the evidence of both !arties to a crucible of analysis, the court arrivedat the conclusion that the testimony of the


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uestioned signature is a hesitating slow drawn e&ecution stro;e% Clearly, the !ersonwho e&ecuted the uestioned signature was hesitant when the signature was made% M20

Durin# the testi%on+ of 'N' eBpert Rosario 'ere, the R&C *luntl+ notedthat Tapparentl+, there Mare differences on that 4uestioned si#nature and the

standard si#natures.UM2)&his Court, in eBa%inin# the si#natures, %aes asi%ilar findin#. &he 'N' eBpert eBcused the noted TdifferencesU *+ assertin#that the+ were %ere Tvariations,U which are nor%al deviations found in writin#.M23Het the R&C, which had the opportunit+ to eBa%ine the relevant docu%entsand to personall+ o*serve the eBpert witness, clearl+ dis*elieved the 'N'eBpert. &he Court si%ilarl+ finds the testi%on+ of the 'N' eBpert asunconvincin#. Durin# the trial, she was confronted several ti%es withapparent differences *etween stroes in the 4uestioned si#nature and the#enuine sa%ples. 9ach ti%e, she would ;ust *landl+ assert that thesedifferences were ;ust Tvariations,UM22as if the %ere con;uration of the wordwould sufficientl+ dis4uiet whatever dou*ts a*out the deviations. $uchconclusion, standin# alone, would *e of little or no value unless supported *+sufficientl+ co#ent reasons which %i#ht a%ount al%ost to a de%onstration. M2


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&here is no reason to dou*t wh+ the R&C #ave credence to the testi%on+of the N@ eBa%iner, and not the 'N' eBpertSs. &he N@ eBpert, Rhodalores, clearl+ 4ualifies as an eBpert witness. A docu%ent eBa%iner for fifteen+ears, she had *een pro%oted to the ran of $enior Docu%ent 9Ba%iner withthe N@, and had held that ran for twelve +ears prior to her testi%on+. $hehad placed a%on# the top five eBa%inees in the Co%petitive $e%inar inuestion Docu%ent 9Ba%ination, conducted *+ the N@ Acade%+, which4ualified her as a docu%ent eBa%iner.M


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ru>a= ?a( >n Bu'(>on >'


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e reco#nie that $ection 32 of the Ne#otia*le nstru%ents aw *ars apart+ fro% settin# up the defense of for#er+ if it is #uilt+ of ne#li#ence. M53Het,we are una*le to conclude that $a%sun# Construction was #uilt+ ofne#li#ence in this case. &he appellate court failed to eBplain precisel+ howthe Porean accountant was ne#li#ent or how %ore care and prudence on hispart would have prevented the for#er+. e cannot sustain this Ttar andfeatherin#U resorted to without an+ *asis.

&he *are fact that the for#er+ was co%%itted *+ an e%plo+ee of the part+whose si#nature was for#ed cannot necessaril+ i%pl+ that such part+Ssne#li#ence was the cause for the for#er+. 9%plo+ers do not possess thepreternatural #ift of co#nition as to the evil that %a+ lur within the hearts and%inds of their e%plo+ees. &he CourtSs pronounce%ent in PCI 9an? v. Court of

AppealsM52 applies in this case, to wit6

4$5he mere fact that the forgery was committed by a drawer>!ayor7s confidentialem!loyee or agent, who by virtue of his !osition had unusual facilities for !er!etratingthe fraud and im!osing the forged !a!er u!on the ban;, does not entitle the ban; toshift the loss to the drawer>!ayor, in the absence of some circumstance raisingesto!!el against the drawer%M5


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re#ularit+. 'rovin# a ne#ative fact %a+ *e Ta difficult office,U M5(*ut necessaril+so, as it sees to overco%e a presu%ption in law. 9@&C was una*le todispute the presu%ption of ordinar+ care eBercised *+ $a%sun# Construction,hence we cannot a#ree with the Court of AppealsS findin# of ne#li#ence.

&he assailed +ecision replicated the eBtensive efforts which 9@&Cdevoted to esta*lish that there was no ne#li#ence on the part of the *an in itsacceptance and pa+%ent of the for#ed chec. 8owever, the de#ree ofdili#ence eBercised *+ the *an would *e irrelevant if the drawer is notprecluded fro% settin# up the defense of for#er+ under $ection 32 *+ his ownne#li#ence. &he rule of e4uit+ enunciated in P*9 v. *ational City 9an? of*ew $or?,M0as relied upon *+ the Court of Appeals, deserves carefuleBa%ination.

$he !oint in issue has sometimes been said to be that of negligence% Th! %"#w!!

who h#s #i% *on th! +o"&!% si&n#t*"! is h!l% to '!#" th! loss, '!(#*s! h! h#s'!!n n!&li&!nt in +#ilin& to "!(o&ni! th#t th! h#n%w"itin& is not th#t o+ his

(*sto-!"% But it follows obviously that if the !ayee, holder, or !resenter of theforged !a!er has himself been in default, if he has himself been guilty of a negligence

!rior to that of the ban;er, or if by any act of his own he has at all contributed toinduce the ban;erMs negligence, then he may lose his right to cast the loss u!on the

ban;er%M)(Em!hasis su!!lied

uite palpa*l+, the #eneral rule re%ains that the drawee who has paidupon the for#ed si#nature *ears the loss. &he eBception to this rule arises

onl+ when ne#li#ence can *e traced on the part of the drawer whosesi#nature was for#ed, and the need arises to wei#h the co%parativene#li#ence *etween the drawer and the drawee to deter%ine who should *earthe *urden of loss. &he Court finds no *asis to conclude that $a%sun#Construction was ne#li#ent in the safeeepin# of its checs. or one, thesettled rule is that the %ere fact that the depositor leaves his chec *oo l+in#around does not constitute such ne#li#ence as will free the *an fro% lia*ilit+to hi%, where a cler of the depositor or other persons, tain# advanta#e ofthe opportunit+, a*stract so%e of the chec *lans, for#es the depositorSssi#nature and collect on the checs fro% the *an. M3And for another, in point

of fact $a%sun# Construction was not ne#li#ent at all since it reported thefor#er+ al%ost i%%ediatel+ upon discover+.M2

t is also worth notin# that the for#ed si#natures in P*9 v. *ational City9an? of *ew $or? were not of the drawer, *ut of indorsers. &he sa%ecircu%stance attends P*9 v. Court of Appeals,M


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Court of Appeals. t is accepted that a for#ed si#nature of the drawer differs intreat%ent than a for#ed si#nature of the indorser.

$he justification for the distinction between forgery of the signature of the drawer andforgery of an indorsement is that the drawee is in a !osition to verify the drawer7s

signature by com!arison with one in his hands, but has ordinarily no o!!ortunity toverify an indorsement%M5

$hus, a drawee ban; is generally liable to its de!ositor in !aying a chec; which bearseither a forgery of the drawer7s signature or a forged indorsement% But the ban; may,as a general rule, recover bac; the money which it has !aid on a chec; bearing aforged indorsement, whereas it has not this right to the same e&tent with reference to achec; bearing a forgery of the drawer7s signature% M

&he #eneral rule i%putin# lia*ilit+ on the drawee who paid out on the

for#er+ holds in this case.

$ince 9@&C puts into issue the de#ree of care it eBercised *efore pa+in#out on the for#ed chec, we %i#ht as well co%%ent on the *anSsperfor%ance of its dut+. t %i#ht *e so that the *an co%plied with its owninternal rules prior to pa+in# out on the 4uestiona*le chec. Het, there areseveral trou*lin# circu%stances that lead us to *elieve that the *an itself wasre%iss in its dut+.

&he fact that the chec was %ade out in the a%ount of nearl+ one %illionpesos is unusual enou#h to re4uire a hi#her de#ree of caution on the part of

the *an. ndeed, 9@&C confir%s this throu#h its own internalprocedures. Checs *elow twent+-five thousand pesos re4uire onl+ theapproval of the teller> those *etween twent+-five thousand to one hundredthousand pesos necessitate the approval of one *an officer> and should thea%ount eBceed one hundred thousand pesos, the concurrence of two *anofficers is re4uired.M7

n this case, not onl+ did the a%ount in the chec nearl+ total one %illionpesos, it was also pa+a*le to cash. &hat latter circu%stance should havearoused the suspicion of the *an, as it is not ordinar+ *usiness practice for a

chec for such lar#e a%ount to *e %ade pa+a*le to cash or to *earer, insteadof to the order of a specified person.M1oreover, the chec was presented forpa+%ent *+ one Ro*erto Gona#a, who was not desi#nated as the pa+ee ofthe chec, and who did not carr+ with hi% an+ written proof that he wasauthoried *+ $a%sun# Construction to encash the chec. Gona#a, astran#er to 9@&C, was not even an e%plo+ee of $a%sun# Construction.M(&hese circu%stances are alread+ suspicious if taen independentl+, %uch
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%ore so if the+ are evaluated in concurrence. Given the shadiness attendin#Gona#aSs present%ent of the chec, it was not sufficient for 9@&C to have%erel+ co%plied with its internal procedures, *ut %andator+ that all earnestefforts *e undertaen to ensure the validit+ of the chec, and of the authorit+of Gona#a to collect pa+%ent therefor.

Accordin# to 9@&C $enior Assistant Cashier Ge%%a Vele, the *antried, *ut failed, to contact on# over the phone to verif+ the chec. M70 $headded that callin# the issuer or drawer of the chec to verif+ the sa%e was notpart of the standard procedure of the *an, *ut an TeBtra effort.U M7)9venassu%in# that such personal verification is tanta%ount to eBtraordinar+dili#ence, it cannot *e denied that 9@&C still paid out the chec despite thea*sence of an+ proof of verification fro% the drawer. nstead, the *an see%sto have relied heavil+ on the sa+-so of $e%pio, who was present at the *anat the ti%e the chec was presented.

9@&C alle#es that $e%pio was well-nown to the *an officers, as hehad re#ularl+ transacted with the *an in *ehalf of $a%sun# Construction. twas even clai%ed that ever+ti%e 9@&C would contact on# a*out pro*le%swith his account, on# would hand the phone over to $e%pio. M738owever, theonl+ proof of such alle#ations is the testi%on+ of Ge%%a Vele, who alsotestified that she did not now $e%pio personall+,M72and had %et $e%pio forthe first ti%e onl+ on the da+ the chec was encashed.M7


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Given the circu%stances, eBtraordinar+ dili#ence dictates that 9@&Cshould have ascertained fro% on# personall+ that the si#nature in the4uestiona*le chec was his.

$till, even if the *an perfor%ed with ut%ost dili#ence, the drawer whose

si#nature was for#ed %a+ still recover fro% the *an as lon# as he or she isnot precluded fro% settin# up the defense of for#er+. After all, $ection 32 ofthe Ne#otia*le nstru%ents aw plainl+ states that no ri#ht to enforce thepa+%ent of a chec can arise out of a for#ed si#nature. $ince the drawer,$a%sun# Construction, is not precluded *+ ne#li#ence fro% settin# up thefor#er+, the #eneral rule should appl+. Conse4uentl+, if a *an pa+s a for#edchec, it %ust *e considered as pa+in# out of its funds and cannot char#e thea%ount so paid to the account of the depositor. M77 A *an is lia*le, irrespectiveof its #ood faith, in pa+in# a for#ed chec. M7

4HRFOR,the Petition is GRAN&9D. &he +ecisionof the Court ofAppeals dated 3 Nove%*er )(( is R9V9R$9D, and the +ecisionof theRe#ional &rial Court of 1anila, @ranch (, dated 35 April )((< isR9N$&A&9D. Costs a#ainst respondent.

SO OR/R/.

Puno, 1C>airman5, Austria!artine:, CalleBo, "r., andC>ico*a:ario,JJ., concur.
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5G.R. No. 1$9$%$. ay 28, 200$:

-AN OF TH PHILIPPIN ISLAN/S,petitioner, vs. CASAONTSSORI INTRNATIONAL an! LONAR/O T.

A-UT, respondents.

5G.R. No. 1$9%07. ay 28, 200$:

CASA ONTSSORI INTRNATIONAL,petitioner, vs. -AN OF THPHILIPPIN ISLAN/S, respondent.

/ C I S I O N

PANGANI-AN, J.:

@+ the nature of its functions, a *an is re4uired to tae %eticulous care of

the deposits of its clients, who have the ri#ht to eBpect hi#h standards ofinte#rit+ and perfor%ance fro% it. A%on# its o*li#ations in furtherance thereofis nowin# the si#natures of its clients. Depositors are not estopped fro%4uestionin# wron#ful withdrawals, even if the+ have failed to 4uestion thoseerrors in the state%ents sent *+ the *an to the% for verification.

T


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of #-0,**-%?? after deductions subject to REDABJR3EAE> # +),??%??M
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Tt turned out that X$onn+ D. $antosS with account at @'Ss Green*elt @ranchMwas a fictitious na%e used *+ third part+ defendant eonardo &. Ha*ut whowored as eBternal auditor of CA$A. &hird part+ defendant voluntaril+ad%itted that he for#ed the si#nature of 1s. e*ron and encashed the checs.

T&he 'N' Cri%e a*orator+ conducted an eBa%ination of the nine /(checs and concluded that the handwritin#s thereon co%pared to thestandard si#nature of 1s. e*ron were not written *+ the latter.

T:n 1arch and CA$A, the other half. t also disallowed attorne+Ss feesand %oral and eBe%plar+ da%a#es.

8ence, these 'etitions.M(

I''u'

n GR No. )


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C"3", on account of its own negligence, from asserting its forgery claim against B#D,s!ecially ta;ing into account the absence of any negligence on the !art of B#D%9 M)0

n GR No. )n&

&he 'etition in GR No. )> When a signature is forged or made

without the authority of the !erson whose signature it !ur!orts to be, it is whollyino!erative, and no right & & & to enforce !ayment thereof against any !arty thereto,can be acuired through or under such signature, unless the !arty against whom it issought to enforce such right is !recluded from setting u! the forgery or want ofauthority%9M)3
http://sc.judiciary.gov.ph/jurisprudence/2004/may2004/149454.htm#_ftn10http://sc.judiciary.gov.ph/jurisprudence/2004/may2004/149454.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2004/may2004/149454.htm#_ftn12http://sc.judiciary.gov.ph/jurisprudence/2004/may2004/149454.htm#_ftn10http://sc.judiciary.gov.ph/jurisprudence/2004/may2004/149454.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2004/may2004/149454.htm#_ftn12


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nder this provision, a for#ed si#nature is a realM)2or a*solute defense,M)


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*+ the police authorities for the purpose of elicitin# ad%issions, confessions,or an+ infor%ation.UM20&he said constitutional provision does Tnot appl+ tospontaneous state%ents %ade in a voluntar+ %annerU M2)where*+ an individualorall+ ad%its to authorship of a cri%e. M23That the Constitution proscri*es isthe co%pulsor+ or coercive disclosure of incri%inatin# facts.U M22

1oreover, the ri#ht a#ainst self-incri%inationM2 une4uivocal> and intelli#entl+,understandin#l+ and willin#l+ %ade.M2(

f in these #overn%ent proceedin#s waiver is allowed, all the %ore is it soin private investi#ations. t is of no %o%ent that no cri%inal case has +et *eenfiled a#ainst Ha*ut. &he filin# thereof is entirel+ up to the appropriateauthorities or to the private individuals upon who% da%a#e has *eencaused. As we shall also eBplain later, it is not %andator+ for CA$A -- theplaintiff *elow -- to i%plead Ha*ut in the civil case *efore the lower court.

nder these two constitutional provisions, TMthe @ill of Ri#hts M


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&he eBa%ination *+ the 'N', thou#h inconclusive, was neverthelessclear, positive and convincin#.

or#er+ Tcannot *e presu%ed.U M


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si#natures with which those on the checs were co%pared. M


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and confidence of the pu*lic in #eneral. Conse4uentl+, the hi#hest de#ree ofdili#enceM72is eBpected,M7


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plannin#>Mand two, the infor%ation o*tained fro% such a su*stantive test is%erel+ presu%ptive and cannot *e the *asis of a valid waiver. M(@' has nori#ht to i%pose a condition unilaterall+ and thereafter consider failure to %eetsuch condition a waiver. Neither %a+ CA$A renounce a ri#htM(0it has neverpossessed.M()

9ver+ ri#ht has su*;ects -- active and passive. hile the active su*;ect isentitled to de%and its enforce%ent, the passive one is dut+-*ound to suffersuch enforce%ent.M(3

:n the one hand, @' could not have *een an active su*;ect, *ecause itcould not have de%anded fro% CA$A a response to its notice. @esides, thenotice was a %easl+ re4uest worded as follows6 T'lease eBa%ine B B B andreport B B B.UM(2CA$A, on the other hand, could not have *een a passivesu*;ect, either, *ecause it had no o*li#ation to respond. t could -- as it did --choose not to respond.

9stoppel precludes individuals fro% den+in# or assertin#, *+ their owndeed or representation, an+thin# contrar+ to that esta*lished as the truth, inle#al conte%plation.M(


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lia*le for rei%*urse%ent.M)03t T%a+ not de*it the drawerSs account M)02and is notentitled to inde%nification fro% the drawer.U M)0ird, despite the eBa%ination procedures it conducted, the CentralVerification nitM)))of the *an even passed off these evidentl+ differentsi#natures as #enuine. ithout eBercisin# the re4uired prudence on its part,

@' accepted and encashed the ei#ht checs presented to it. As a result, itproBi%atel+ contri*uted to the fraud and should *e held pri%aril+ lia*le M))3forthe Tne#li#ence of its officers or a#ents when actin# within the course andscope of their e%plo+%ent.UM))2t %ust *ear the loss.

CASA Not Negligentin ts Financial Affairs

n this ;urisdiction, the ne#li#ence of the part+ invoin# for#er+ isreco#nied as an eBception M))


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&he %a;or purpose of an independent audit is to investi#ate and deter%ineo*;ectivel+ if the financial state%ents su*%itted for audit *+ a corporation have*een prepared in accordance with the appropriate financial reportin#practicesM))of private entities. &he relationship that arises therefro% is *othle#al and %oral.M))7t *e#ins with the eBecution of the en#a#e%ent letterM))thate%*odies the ter%s and conditions of the audit and ends with the fulfilledeBpectation of the auditorSs ethical M))(and co%petent perfor%ance in allaspects of the audit. M)30

&he financial state%ents are representations of the client> *ut it is theauditor who has the responsi*ilit+ for the accurac+ in the recordin# of data thatunderlies their preparation, their for% of presentation, and theopinionM)3)eBpressed therein.M)33&he auditor does not assu%e the role ofe%plo+ee or of %ana#e%ent in the clientSs conduct of operations M)32and isnever under the control or supervisionM)3


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1oreover, there was a ti%e #ap *etween the period covered *+ the *anstate%ent and the date of its actual receipt. e*ron personall+ received theDece%*er )((0 *an state%ent onl+ in anuar+ )(() M)2


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Clearl+ then, Ha*ut was a*le to perpetrate the wron#ful act throu#h nofault of CA$A. f auditors %a+ *e held lia*le for *reach of contract andne#li#ence,M)


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e%*arrass%ent to, the for%er. CA$ASs %ere alle#ation or suppositionthereof, without an+ sufficient evidence on record,M)


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o*li#ation consists in the pa+%ent of a su% of %one+, and the de*tor incurs indela+, the inde%nit+ for da%a#es, there *ein# no stipulation to the contrar+,shall *e the pa+%ent of B B B le#al interest, which is siB percentperannum.UM)7&he actual *ase for its co%putation shall *e Ton the a%ount finall+ad;ud#ed,UM)7(co%poundedM)0annuall+ to %ae up for the cost of%one+M))alread+ lost to CA$A.

1oreover, the failure of the CA to award interest does not prevent us fro%#rantin# it upon da%a#es awarded for *reach of contract. M)3@ecause @'evidentl+ *reached its contract of deposit with CA$A, we award interest inaddition to the total a%ount ad;ud#ed. nder $ection )( of the N, an+case not provided for shall *e T#overned *+ the provisions of eBistin#le#islation or, in default thereof, *+ the rules of the law %erchant.U M)2Da%a#esare not provided for in the N. &hus, we resort to the Code of Co%%erce andthe Civil Code. nder Article 3 of the Code of Co%%erce, acts of co%%erce

shall *e #overned *+ its provisions and, Tin their a*sence, *+ the usa#es ofco%%erce #enerall+ o*served in each place> and in the a*sence of *oth rules,*+ those of the civil law.U M)


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RN S. ONG, AG/ALNO -. AL-ARRACIN, JR., PTRONIO C.

AALI4IN an! J. O. NRIT,petitioners, vs. POPL OF THPHILIPPINS an! COURT OF APPALS, respondents.

/ C I S I O N

LO, J.3

@efore us is a petition for certiorariand prohi*ition with pra+er for issuanceof a writ of preli%inar+ in;unction, wherein petitioners, accused *efore the1etropolitan &rial Court /1e&C of 1aati Cit+, char#e said court with havin#co%%itted #rave a*use of discretion when it denied their de%urrer to

evidence.&he facts of the case are as follows6

:n e*ruar+ , )((2, Len+ Alfonso purchased a paper *a#-%ain#%achine for '23,000.00 fro% the $olid Ce%ent Corporation. hen she wentto the corporation?s Antipolo plant, however, no %achine could *e #iven toher, it appearin# that the %achine sold had *een earlier %ort#a#ed to acreditor, who, unfortunatel+, refused to release the %ort#a#e. 8ereinpetitioners offered to return the %one+ paid *+ 1rs. Alfonso *ut she refusedand instead filed a cri%inal co%plaint with the Cit+ 'rosecutor of 1aati.

&he Cit+ 'rosecutor dis%issed the co%plaint on the #round that lia*ilit+, ifan+, would *e civil and not cri%inal in nature. &his dis%issal was, however,reversed *+ the Depart%ent of ustice.

:n :cto*er ), )(( /2 a plant #ate pass fro% one .'. Valencia dated e*ruar+ ),)((2 for entr+ into the Antipolo co%pound and pull-out of the %achine> /


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the co%plainant> /5 a letter of $olid Ce%ent?s Rene $. :n# offerin# to return'23,000.00 plus interest> / a letter fro% Att+. Ro*les infor%in# $olidCe%ent of co%plainant?s refusal to accept the refund of the '23,000.00> /7a %e%orandu% fro% five officers or e%plo+ees of $olid Ce%ent Corporationreco%%endin# the sale of the paper *a#-%ain#-%achine> / another #ate-pass dated Dece%*er 2, )((3 fro% one Ra%on 9nri4ue allowin# the pull outof the %achine> /( a letter fro% one oreno '. i#ot thanin# $olid Ce%ent,throu#h one 'eter Aaliwin, for the for%er?s #rant of a ri#ht of first refusal> and/)0 a cop+ of the resolution dated ul+ 3, )((2 of the 'rovincial 'rosecutor?s:ffice of Rial. &he defense o*;ected to the ad%ission of these pieces ofevidence, clai%in# that the sa%e were onl+ unauthenticated photocopies ofthe ori#inals.

:n ul+ )3, )((, petitioners filed a %otion for leave to file de%urrer toevidence, attachin# thereto their de%urrer. n their pleadin#, petitioners

stressed that all the a*ove-%entioned docu%ents *ein# uncertifiedphotocopies *earin# unidentified or unauthenticated si#natures areinad%issi*le in evidence. ithout rulin# on the %otion for leave to filede%urrer, the 1e&C, on Au#ust )(, )((, held6

WHEREFORE, the instant demurrer is hereby denied and the motion to holdde!arture order of all accused 6ranted% 8et a co!y of this Order be sent to theCommissioner of Bureau of Dmmigration and .e!ortation for !ro!er dis!osition andim!lementation against the accused RE


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who informed her to go bac; to the !lant site for final arrangement regarding theshi!ment of the !a!er bag machine so she !roceeded to the !lant only to be told thatthe machine cannot be released on order of Ar% Ong@ that u!on the demand of herlawyer to the 3olid Cor!oration for its com!liance with their obligation under thetransaction, Ar% Ong offered a com!romise which was turned down by her%

(!!% **)>**', Rollo%

&he 1e&C, in fact, found that there was aprima faciecase a#ainstpetitioners on the *asis of the docu%ents su*%itted *+ the prosecution,statin#6

$he Court noted from the documentary evidence on record that the machine subject ofthe transaction between the com!lainant and the accused is mortgaged to anothercreditor, who, incidentally, refused to release the mortgage on said subject

machine% Dndeed, this strongly suggest (sic the e&istence of aprima faciecase thatwould warrant a trial on the merits% "ccordingly, the motion for hold de!arture orderis hereby 6ranted%

(!% **', Rollo%

Actin# on a petition for certiorariand prohi*ition filed *+ the accused, theRe#ional &rial Court of 1aati, per ud#e &eofilo Guadi, r., reversed thea*ove rulin# in its order dated 1a+ )(, )((7, disposin#6

WHEREFORE, in view of the foregoing, the !etition is hereby granted% $he Or

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