Caltex Philippines vs. Court of Appeals 212 SCRA 448 G.R. No. 97753 || Negotiability FACTS: 280 Certificates of Time Deposit (CTDs) were issued by the Security Bank and Trust Company in favor of Angel Dela Cruz, who deposited a collective amount of Php 1,120,000. Such CTDs were then delivered by Dela Cruz to Caltex Phils. for the purchase of fuel products. Dela Cruz lost all the CTDs in March 1982 and informed the manager of Security Bank. The manager arranged for the replacement of the lost CTDs upon compliance of Dela Cruz to their bank procedure which entails execution of a notarized Affidavit of Loss. Upon replacement of the allegedly lost CTDs, Dela Cruz obtained a loan of P875,000 from same bank. He then executed a notarized Deed of Assignment of Time Deposit, surrendering to the bank full control of the time deposit account, allowing the latter to apply the said time deposits to the payment of whatever amounts may be due on the loan upon maturity. On the other hand, in November 1982, Mr. Aranas, the credit manager of Caltex, presented to Security Bank for verification the CTDs declared lost by Dela Cruz. Aranas claimed that the same were delivered to Caltex as security for purchases made. Accordingly, Security Bank rejected Caltexs demand for the payment of the value of the CTDs. In April 1983, the loan of Dela Cruz with the Security Bank matured and the latter applied the time deposits in question as payment of the matured loan. Caltex then filed a complaint demanding payment of the value of the CTDs plus accrued interest and compounded interest. The Regional Trial Court dismissed the case. The Court of Appeals also dismissed the case. ISSUE(S): 1. Whether or not the subject Certificates of Time Deposit are negotiable instruments

2. Whether or not Caltex can recover the value of the CTDs HELD: 1. YES. A sample text of the CTD states: 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. Section 1 of the NIL requires among others, that for an instrument to be negotiable, it must be payable to the order or to bearer (par. D). 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. The documents provide that the amounts deposited shall be repayable to the depositor. The court ruled that the depositor indicated is actually the bearer. The documents do not say that the depositor is Angel Dela Cruz and that the amounts deposited are payable only to him. If it was really the intention of the bank to pay the amount to Dela Cruz only, then it could have so expressed in clear and categorical terms instead of having the word bearer stamped on the space provided for the name of the depositor in each CTD. The Security Bank, through its manager, testified that the depositor referred to is Angel Dela Cruz. However, the court ruled that the manager merely declared that Dela Cruz is the depositor, insofar as the bank is concerned, but obviously other parties not privy to the transaction between them would not 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. This need for resort to extrinsic evidence is what is sought to be avoided by the NIL and calls for 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. 2. NO. Unfortunately for Caltex, although the CTDs are bearer instruments, a valid negotiation thereof for the purpose and agreement between it and Dela Cruz, requires both delivery and indorsement. As stated by Mr. Aranas in a letter addressed to

the bank, these certificates of deposit were

negotiated to us by Mr. Dela Cruz to guarantee

his purchases of fuel products. This admission

is conclusive upon Caltex. Under the doctrine of

Estoppel, an admission is rendered conclusive

upon the person making it and cannot be

denied against the person relying thereon. If it

were true that the CTDs were delivered as

payment and not as security, Aranas could have

easily said so, instead of using the words to

guarantee. Under the NIL, 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,

and a holder may be the payee or indorsee of a

bill or note, who is in possession of it, or the

bearer thereof. In the present case, however,

there was no negotiation in the sense of a

transfer of a legal title, in which case delivery

would have sufficed. Here, the delivery of the

CTDs was only as security for the purchases of

Dela Cruz. Therefore, Caltex could only have

been a holder for value by reason of lien.

Accordingly, a negotiation for such purpose

cannot be effected by mere delivery of the

instrument because 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.

Philippine Bank of Commerce vs. Aruego GR L-25836-37 || Liability of persons signing as agent. (Section 20)

FACTS;

On December 1, 1959, the Philippine Bank of Commerce instituted against Jose M. Aruego Civil Case No. 42066 for the recovery of the total sum of about P35,000.00 with daily interest thereon from November 17, 1959 until fully paid and commission equivalent to 3/8% for every thirty (30) days or fraction thereof plus attorney's fees equivalent to 10% of the total amount due and costs. The complaint filed by the Philippine Bank of Commerce contains twenty-two (22) causes of action referring to twenty-two (22) transactions entered into by the said Bank and Aruego on different dates covering the period from August 28, 1950 to March 14, 1951. The sum sought to be recovered represents the cost of the printing of "World Current Events," a periodical published by the defendant. To facilitate the payment of the printing the defendant obtained a credit accommodation from the plaintiff. Thus, for every printing of the "World Current Events," the printer, Encal Press and Photo Engraving, collected the cost of printing by drawing a draft against the plaintiff, said draft being sent later to the defendant for acceptance. As an added security for the payment of the amounts advanced to Encal Press and Photo-Engraving, the plaintiff bank also required defendant Aruego to execute a trust receipt in favor of said bank wherein said defendant undertook to hold in trust for plaintiff the periodicals and to sell the same with the promise to turn over to the plaintiff the proceeds of the sale of said publication to answer for the payment of all obligations arising from the draft. Defendant filed an answer interposing for his defense that he signed the drafts in a representative capacity; that he signed only as accommodation party and that the drafts signed by him were not really bills of exchange but mere pieces of

evidence of indebtedness because payments were made before acceptance. ISSUE: 1. WHether the drafts Aruego signed were bills of exchange? 2. Whether Aruego can be held liable by the petitioner although he signed the supposed bills of exchange only as an agent of Philippine Education Foundation Company.

RULING: 1. YES. Under the Negotiable

Instruments Law, a bill of exchange is an

unconditional order in writting addressed by

one person to another, signed by the person

giving it, requiring the person to whom it is

addressed to pay on demand or at a fixed or

determinable future time a sum certain in

money to order or to bearer. As long as a

commercial paper conforms with the definition

of a bill of exchange, that paper is considered a

bill of exchange. The nature of acceptance is

important only in the determination of the kind

of liabilities of the parties involved, but not in

the determination of whether a commercial

paper is a bill of exchange or not. 2. Yes. Section

20 of the Negotiable Instruments Law provides

that "Where the instrument contains or a

person adds to his signature words indicating

that he signs for or on behalf of a principal or in

a representative capacity, he is not liable on the

instrument if he was duly authorized; but the

mere addition of words describing him as an

agent or as filing a representative character,

without disclosing his principal, does not

exempt him from personal liability."An

inspection of the drafts accepted by the

defendant shows that nowhere has he disclosed

that he was signing as a representative of the

Philippine Education Foundation Company. He

merely signed as follows: JOSE ARUEGO

(Acceptor) (SGD) JOSE ARGUEGO For failure to

disclose his principal, Aruego is personally liable

for the drafts he accepted.

Banco de Oro Savings and Mortgage Bank vs

Equitable Banking Corporation

No. L-7491

20 Jan 1988

Facts:

Equitable Banking Corp. drew 6 crossed

Managers Check payable to certain member of

its establishment. Subsequently, the Checks

were deposited with Banco de Oro to the credit

of its depositor, a certain Aida Trencio.

Following the normal procedures, and after

stamping at the back of the of the Checks the

usual endorsements: All prior and/or lack of

endorsement guaranteed, Banco de Oro sent

the checks for clearing through PCHC.

Accordingly, Equitable Banking Corp. paid the

Checks. Its clearing account was debited for the

value of the Checks and Banco de Oros clearing

account was credited for the same amount.

Thereafter, Equitable Banking Corp. discovered

that the endorsements at the back of the

Checks were forged or otherwise belong to the

persons other than the payees. Pursuant to the

PCHC Clearing Rules and Regulations, Equitable

Bank presented the checks directly to the Banco

de Oro to claim reimbursement. However, the

latter refused.

Issue:

1.) Were the subject Checks non-negotiable?

2.) Is the Negotiable Instruments Law applicable

in deciding controversies of this nature by the

PCHC?

3.) Was Banco de Oro negligent and thus

responsible for any undue payment?

Ratio decidendi:

1.) Banco de Oro by its own acts, stamped its

guarantee is now estopped from claiming that

the checks under consideration are not

negotiable instruments.

The Checks were accepted for deposit by Banco

de Oro stamping thereon its guarantee, in order

that it can clear said Checks with Equitable

Banking Corp

By such deliberate and positive attitude of

Banco de Oro, it has for all legal intents and

purposes treated the said Checks as negotiable

instruments and accordingly assumed the

warranty of the endorser when it stamped its

guarantee of prior endorsement at the back

2.) The participation of the two banks in the

clearing operation of PCHC is a manifestation of

their submission to its jurisdiction.

3.) Although the subject Checks are non-

negotiable, the responsibility of petitioner as

endorser thereof remains. While the drawer

generally owes no duty of diligence to the

collecting banks, the law imposes a duty of

diligence in the collecting bank to scrutinize

Checks deposited with it for the purpose of

determining their genuineness and regularity.

The collecting bank being primarily engaged in

banking holds itself out to the public as the

expert and the law holds it to a high standard of

conduct.

Case: Garcia vs. Llamas

Citation: 417 SCRA 292; G.R. No. 154127 Dec.

8, 2003

FACTS:

Petitioner Romeo Garcia and Eduardo de Jesus

borrowed P 400,000 from respondent Dionisio

Llamas on Dec. 23, 1996. Garcia and de

Jesus executed a promissory note for that

purpose binding themselves

jointly and severally the loan on or before Jan.

23, 1997 with 5% interest per month. When the

debt was due, they failed to pay. Despite

repeated demands, they still failed to pay

prompting Llamas

to institute a collection suit against the two.

Petitioner Garcia in his answer averred that he

assumed no responsibility under the promissory

not, for he merely signed it as an

accommodation party for de Jesus.

Furthermore, that since de Jesus already made

a payment through the delivery of a check

which was also accepted by Llamas, the

obligation was already novated

and superseded. However, the check delivered

bounced upon presentment.

De Jesus, on the other hand, averred that

Llamas had been in bad faith in instituting the

case against him for there had been a previous

agreement between he and Llamas that the

latter would take as payment de Jesus'

retirement benefits which was still on

process while the suit was instituted. De Jesus

further averred that he had already paid a total

of P 120,000 by way of interests, the

breakdown as follows: (1) P40,000 collected as

advance interest from the principal of P400,000

because he only in fact received P 360,000

from that loan; (2) P 40,000 collected from him

by Llamas daughter which was derived from the

peso equivalent of his accumulated leave

credits from his employment in the Central

Police District Bicutan; (3) P 40,000 collected

from him as payment of the interests for the

months of March and April 1997.

RTC rendered a judgment based on the

pleadings, ordering Garcia and de Jesus to pay

jointly and severally the amount of P 400,000

plus 5% interest per month from Jan 23, 1997

less the P120,000 paid by de Jesus, P 100,000 as

atty's fees + P2,000 appearance fee per day

in court, and the cost of suit.

CA said that the RTC erred in rendering a

decision based on the pleadings because de

Jesus answer raised some genuinely

contentious issues, therefore, Llamas could not

be ipso facto entitled to the RTC

judgment. The case of de Jesus must be

remanded to the RTC for receipt of evidence.

On the part of Garcia, CA held that

Garcia's answer failed to raise a single genuine

issue, that there could be no

novation, express or implied, and that Llamas

acceptance of the for the reason that the

obligation incurred was joint and solidary in the

first place and that the check issued bounced

upon presentment.

Hence, an appeal to review was filed by

petitioner Garcia with the Supreme Court.

ISSUE:

Whether or not the original obligation as

evidenced by a promissory note was

subsequently novated when Llamas accepted

the payment of de Jesus through a check which

also subsequently bounced upon presentment?

HELD:

The check could not have extinguished the

obligation because it bounced upon

presentment. By law, the delivery of a

check produces the effect of payment only

when it is cashed. No novation took place

because:

1. The parties did not unequivocally declare that

the old obligation had been extinguished by the

issuance and the acceptance of the check, or

that the check would take the place of the note.

2. There is no incompatibility between the

promissory note and the check. The check had

been issued precisely to answer the obligation.

The note evidences the loan obligation, while

the check answers it. Verily, the 2 can stand

together.

There is also no novation by substitution of

debtors. In order to change the person of the

debtor, the old debtor must be expressly

released from the obligation and the new

debtor to assume the former's place. In the

present case, petitioner Garcia has not shown

that he was expressly released from the

obligation, that a third person was substituted

in his place and that the joint and solidary

obligation was cancelled by the solitary

undertaking of de Jesus

Pacifica Jimenez vs Bucoy

103 Phil. 40 Mercantile Law Negotiable

Instruments Law Negotiable Instruments in

General Unconditional Promise To Pay

During the Japanese occupation, Pacita Young

issued three promissory notes to Pacifica

Jimenez. The total sum of the notes was P21k.

All three promissory notes were couched in this

manner:

Received from Miss Pacifica Jimenez the total

amount of ___________ payable six months

after the war, without interest.

When the promissory notes became due,

Jimenez presented the notes for payment.

Pacita and her husband died and so the notes

were presented to the administrator of the

estate of the spouses (Dr. Jose Bucoy). Bucoy

manifested his willingness to pay but he said

that since the loan was contracted during the

Japanee occupation the amount should be

deducted and the Ballantyne Schedule should

be used, that is peso-for-yen (which would

lower the amount due from P21k). Bucoy also

pointed out that nowhere in the not can be

seen an express promise to pay because of

the absence of the words I promise to pay

ISSUE: Whether or not Bucoy is correct.

HELD: No. The Ballantyne schedule may not be

used here because the debt is not payable

during the Japanese occupation. It is expressly

stated in the notes that the amounts stated

therein are payable six months after the war.

Therefore, no reduction could be effected, and

peso-for-peso payment shall be ordered in

Philippine currency.

The notes also amounted in effect to a promise

to pay the amounts indicated therein. An

acknowledgment may become a promise by the

addition of words by which a promise of

payment is naturally implied, such as,

payable, payable on a given day, payable

on demand, paid . . . when called for, . . . To

constitute a good promissory note, no precise

words of contract are necessary, provided they

amount, in legal effect, to a promise to pay. In

other words, if over and above the mere

acknowledgment of the debt there may be

collected from the words used a promise to pay

it, the instrument may be regarded as a

promissory note.

[G.R. No. 157943. September 4, 2013.]

PEOPLE OF THE

PHILIPPINES, plaintiff-

appellee, vs. GILBERT

REYES WAGAS, accused-

appellant.

DECISION

BERSAMIN, J p:

The Bill of Rights guarantees the right of an

accused to be presumed innocent until the

contrary is proved. In order to overcome the

presumption of innocence, the Prosecution is

required to adduce against him nothing less

than proof beyond reasonable doubt. Such

proof is not only in relation to the elements of

the offense, but also in relation to the identity

of the offender. If the Prosecution fails to

discharge its heavy burden, then it is not only

the right of the accused to be freed, it becomes

the Court's constitutional duty to acquit him.

The Case

Gilbert R. Wagas appeals his conviction

for estafa under the decision rendered on July

11, 2002 by the Regional Trial Court, Branch 58,

in Cebu City (RTC), meting on him the

indeterminate penalty of 12 years of prision

mayor, as minimum, to 30 years of reclusion

perpetua, as maximum.

Antecedents

Wagas was charged with estafa under the

information that reads:

That on or about the 30th day

of April, 1997, and for

sometime prior and

subsequent thereto, in the

City of Cebu, Philippines, and

within the jurisdiction of this

Honorable Court, the said

accused, with deliberate

intent, with intent to gain and

by means of false pretenses

or fraudulent acts executed

prior to or simultaneously

with the commission of the

fraud, to wit: knowing that he

did not have sufficient funds

deposited with the Bank of

Philippine Islands, and

without informing Alberto

Ligaray of that circumstance,

with intent to defraud the

latter, did then and there

issue Bank of the Philippine

Islands Check No. 0011003,

dated May 08, 1997 in the

amount of P200,000.00,

which check was issued in

payment of an obligation, but

which check when presented

for encashment with the

bank, was dishonored for the

reason "drawn against

insufficient funds" and inspite

of notice and several

demands made upon said

accused to make good said

check or replace the same

with cash, he had failed and

refused and up to the present

time still fails and refuses to

do so, to the damage and

prejudice of Alberto Ligaray in

the amount aforestated.

CONTRARY TO LAW.1

After Wagas entered a plea of not guilty, 2 the

pre-trial was held, during which the Defense

admitted that the check alleged in the

information had been dishonored due to

insufficient funds. 3 On its part, the Prosecution

made no admission. 4

At the trial, the Prosecution presented

complainant Alberto Ligaray as its lone witness.

Ligaray testified that on April 30,

1997, Wagas placed an order for 200 bags of

rice over the telephone; that he and his wife

would not agree at first to the proposed

payment of the order by postdated check, but

because of Wagas' assurance that he would not

disappoint them and that he had the means to

pay them because he had a lending business

and money in the bank, they relented and

accepted the order; that he released the goods

to Wagas on April 30, 1997 and at the same

time received Bank of the Philippine Islands

(BPI) Check No. 0011003 for P200,000.00

payable to cash and postdated May 8, 1997;

that he later deposited the check with Solid

Bank, his depository bank, but the check was

dishonored due to insufficiency of funds; 5 that

he called Wagas about the matter, and the

latter told him that he would pay upon his

return to Cebu; and that despite repeated

demands, Wagas did not pay him. 6 cTEICD

On cross-examination, Ligaray admitted that he

did not personally meet Wagas because they

transacted through telephone only; that he

released the 200 bags of rice directly to Robert

Caada, the brother-in-law of Wagas, who

signed the delivery receipt upon receiving the

rice. 7

After Ligaray testified, the Prosecution formally

offered the following: (a) BPI Check No.

0011003 in the amount of P200,000.00 payable

to "cash;" (b) the return slip dated May 13,

1997 issued by Solid Bank; (c) Ligaray's affidavit;

and (d) the delivery receipt signed by Caada.

After the RTC admitted the exhibits, the

Prosecution then rested its case. 8

In his defense, Wagas himself testified. He

admitted having issued BPI Check No. 0011003

to Caada, his brother-in-law, not to Ligaray. He

denied having any telephone conversation or

any dealings with Ligaray. He explained that the

check was intended as payment for a portion of

Caada's property that he wanted to buy, but

when the sale did not push through, he did not

anymore fund the check. 9

On cross-examination, the Prosecution

confronted Wagas with a letter dated July 3,

1997 apparently signed by him and addressed

to Ligaray's counsel, wherein he admitted owing

Ligaray P200,000.00 for goods received, to wit:

This is to acknowledge receipt

of your letter dated June 23,

1997 which is self-

explanatory. It is worthy also

to discuss with you the

environmental facts of the

case for your consideration,

to wit:

1.It is true that I

obtained goods from

your client worth

P200,000.00 and I

promised to settle

the same last May 10,

1997, but to no avail.

On this point, let me

inform you that I sold

my real property to a

buyer in Manila, and

promised to pay the

consideration on the

same date as I

promised with your

client. Unfortunately,

said buyer likewise

failed to make good

with such obligation.

Hence, I failed to

fulfill my promise

resultant

thereof. (sic)

2. Again, I made

another promise to

settle said obligation

on or before June 15,

1997, but still to no

avail attributable to

the same reason as

aforementioned.(sic)

3.To arrest this

problem, we decided

to source some funds

using the subject

property as collateral.

This other means is

resorted to for the

purpose of settling

the herein obligation.

And as to its status,

said funds will be

rele[a]sed within

thirty (30) days from

today.

In view of the foregoing, it is

my sincere request and

promise to settle said

obligation on or before

August 15, 1997.

Lastly, I would like to

manifest that it is not my

intention to shy away from

any financial

obligation. SaDICE

xxx xxx xxx

Respectfully yours,

(SGD.) GILBERT R. WAGAS 10

Wagas admitted the letter, but insisted that it

was Caada who had transacted with Ligaray,

and that he had signed the letter only because

his sister and her husband (Caada) had begged

him to assume the responsibility. 11 On redirect

examination, Wagas declared that Caada, a

seafarer, was then out of the country; that he

signed the letter only to accommodate the

pleas of his sister and Caada, and to avoid

jeopardizing Caada's application for overseas

employment. 12 The Prosecution subsequently

offered and the RTC admitted the letter as

rebuttal evidence. 13

Decision of the RTC

As stated, the RTC convicted Wagas of estafa on

July 11, 2002, viz.:

WHEREFORE, premises

considered, the Court finds

the accused GUILTY beyond

reasonable doubt as charged

and he is hereby sentenced as

follows:

1.To suffer an

indeterminate

penalty of from

twelve (12) years

of pris[i]on mayor, as

minimum, to thirty

(30) years of reclusion

perpetua as

maximum;

2.To indemnify the

complainant,

Albert[o] Ligaray in

the sum of

P200,000.00; CAHaST

3.To pay said

complainant the sum

of P30,000.00 by way

of attorney's fees;

and

4.the costs of suit.

SO ORDERED. 14

The RTC held that the Prosecution had proved

beyond reasonable doubt all the elements

constituting the crime of estafa,

namely: (a) that Wagas issued the postdated

check as payment for an obligation contracted

at the time the check was issued; (b) that he

failed to deposit an amount sufficient to cover

the check despite having been informed that

the check had been dishonored; and (c) that

Ligaray released the goods upon receipt of the

postdated check and upon Wagas' assurance

that the check would be funded on its date.

Wagas filed a motion for new trial and/or

reconsideration, 15 arguing that the

Prosecution did not establish that it was he who

had transacted with Ligaray and who had

negotiated the check to the latter; that the

records showed that Ligaray did not meet him

at any time; and that Ligaray's testimony on

their alleged telephone conversation was not

reliable because it was not shown that Ligaray

had been familiar with his voice. Wagas also

sought the reopening of the case based on

newly discovered evidence, specifically: (a) the

testimony of Caada who could not testify

during the trial because he was then out of the

country, and (b) Ligaray's testimony given

against Wagas in another criminal case for

violation of Batas Pambansa Blg. 22.

On October 21, 2002, the RTC denied the

motion for new trial and/or reconsideration,

opining that the evidence Wagas desired to

present at a new trial did not qualify as newly

discovered, and that there was no compelling

ground to reverse its decision. 16 DSAEIT

Wagas appealed directly to this Court by notice

of appeal. 17

Prior to the elevation of the records to the

Court, Wagas filed a petition for admission to

bail pending appeal. The RTC granted the

petition and fixed Wagas' bond at

P40,000.00. 18 Wagas then posted bail for his

provisional liberty pending appeal. 19

The resolution of this appeal was delayed by

incidents bearing on the grant of Wagas'

application for bail. On November 17, 2003, the

Court required the RTC Judge to explain

why Wagas was out on bail. 20 On January 15,

2004, the RTC Judge submitted to the Court a

so-called manifestation and compliance which

the Court referred to the Office of the Court

Administrator (OCA) for evaluation, report, and

recommendation. 21 On July 5, 2005, the Court,

upon the OCA's recommendation, directed the

filing of an administrative complaint for simple

ignorance of the law against the RTC

Judge. 22 On September 12, 2006, the Court

directed the OCA to comply with its July 5, 2005

directive, and to cause the filing of the

administrative complaint against the RTC Judge.

The Court also directed Wagas to explain why

his bail should not be cancelled for having been

erroneously granted. 23 Finally, in its

memorandum dated September 27, 2006, the

OCA manifested to the Court that it had

meanwhile filed the administrative complaint

against the RTC Judge. 24

Issues

In this appeal, Wagas insists that he and Ligaray

were neither friends nor personally known to

one other; that it was highly incredible that

Ligaray, a businessman, would have entered

into a transaction with him involving a huge

amount of money only over the telephone; that

on the contrary, the evidence pointed to

Caada as the person with whom Ligaray had

transacted, considering that the delivery

receipt, which had been signed by Caada,

indicated that the goods had been "Ordered by

ROBERT CAADA," that the goods had been

received by Caada in good order and

condition, and that there was no showing that

Caada had been acting on behalf ofWagas;

that he had issued the check to Caada upon a

different transaction; that Caada had

negotiated the check to Ligaray; and that the

element of deceit had not been established

because it had not been proved with certainty

that it was him who had transacted with Ligaray

over the telephone. AcHSEa

The circumstances beg the question: did the

Prosecution establish beyond reasonable doubt

the existence of all the elements of the crime

of estafa as charged, as well as the identity of

the perpetrator of the crime?

Ruling

The appeal is meritorious.

Article 315, paragraph 2 (d) of the Revised Penal

Code, as amended, provides:

Article 315.Swindling (estafa). Any

person who shall defraud another by

any of the means mentioned

hereinbelow shall be punished by:

xxx xxx xxx

2.By means of any of the following false

pretenses or fraudulent acts executed

prior to or simultaneously with the

commission of the fraud:

xxx xxx xxx

(d)By postdating a check, or issuing a

check in payment of an obligation when

the offender had no funds in the bank,

or his funds deposited therein were not

sufficient to cover the amount of the

check. The failure of the drawer of the

check to deposit the amount necessary

to cover his check within three (3) days

from receipt of notice from the bank

and/or the payee or holder that said

check has been dishonored for lack or

insufficiency of funds shall be prima

facie evidence of deceit constituting

false pretense or fraudulent act. ICaDHT

In order to constitute estafa under this

statutory provision, the act of postdating or

issuing a check in payment of an obligation

must be the efficient cause of the defraudation.

This means that the offender must be able to

obtain money or property from the offended

party by reason of the issuance of the check,

whether dated or postdated. In other words,

the Prosecution must show that the person to

whom the check was delivered would not have

parted with his money or property were it not

for the issuance of the check by the

offender. 25

The essential elements of the crime charged are

that: (a) a check is postdated or issued in

payment of an obligation contracted at the time

the check is issued; (b) lack or insufficiency of

funds to cover the check; and (c) damage to the

payee thereof. 26 It is the criminal fraud or

deceit in the issuance of a check that is

punishable, not the non-payment of a

debt. 27 Prima facie evidence of deceit exists by

law upon proof that the drawer of the check

failed to deposit the amount necessary to cover

his check within three days from receipt of the

notice of dishonor.

The Prosecution established that Ligaray had

released the goods to Caada because of the

postdated check the latter had given to him;

and that the check was dishonored when

presented for payment because of the

insufficiency of funds.

In every criminal prosecution, however, the

identity of the offender, like the crime itself,

must be established by proof beyond

reasonable doubt. 28 In that regard, the

Prosecution did not establish beyond

reasonable doubt that it was Wagas who had

defrauded Ligaray by issuing the check.

Firstly, Ligaray expressly admitted that he did

not personally meet the person with whom he

was transacting over the telephone, thus:

Q:On April 30, 1997, do you remember

having a transaction with the accused in

this case?

A:Yes, sir. He purchased two hundred

bags of rice from me.

Q:How did this purchase of rice

transaction started? (sic)

A:He talked with me over the phone

and told me that he would like to

purchase two hundred bags of rice and

he will just issue a check. 29

Even after the dishonor of the check, Ligaray did

not personally see and meet whoever he had

dealt with and to whom he had made the

demand for payment, and that he had talked

with him only over the telephone, to wit:

Q:After the check was (sic) bounced,

what did you do next? STcaDI

A:I made a demand on them.

Q:How did you make a demand?

A:I called him over the phone.

Q:Who is that "him" that you are

referring to?

A:Gilbert Wagas. 30

Secondly, the check delivered to Ligaray was

made payable to cash. Under the Negotiable

Instruments Law, this type of check was payable

to the bearer and could be negotiated by mere

delivery without the need of an

indorsement. 31 This rendered it highly

probable that Wagas had issued the check not

to Ligaray, but to somebody else like Caada,

his brother-in-law, who then negotiated it to

Ligaray. Relevantly, Ligaray confirmed that he

did not himself see or meet Wagas at the time

of the transaction and thereafter, and expressly

stated that the person who signed for and

received the stocks of rice was Caada.

It bears stressing that the accused, to be guilty

of estafa as charged, must have used the check

in order to defraud the complainant. What the

law punishes is the fraud or deceit, not the

mere issuance of the worthless

check. Wagas could not be held guilty

of estafa simply because he had issued the

check used to defraud Ligaray. The proof of

guilt must still clearly show that it had

been Wagas as the drawer who had defrauded

Ligaray by means of the check.

Thirdly, Ligaray admitted that it was Caada

who received the rice from him and who

delivered the check to him. Considering that the

records are bereft of any showing that Caada

was then acting on behalf of Wagas, the RTC

had no factual and legal bases to conclude and

find that Caada had been acting for Wagas.

This lack of factual and legal bases for the RTC

to infer so obtained despite Wagas being

Caada's brother-in-law.

Finally, Ligaray's declaration that it

was Wagas who had transacted with him over

the telephone was not reliable because he did

not explain how he determined that the person

with whom he had the telephone conversation

was really Wagas whom he had not yet met or

known before then. We deem it essential for

purposes of reliability and trustworthiness that

a telephone conversation like that one Ligaray

supposedly had with the buyer of rice to be first

authenticated before it could be received in

evidence. Among others, the person with whom

the witness conversed by telephone should be

first satisfactorily identified by voice recognition

or any other means. 32 Without the

authentication, incriminating another person

just by adverting to the telephone conversation

with him would be all too easy. In this respect,

an identification based on familiarity with the

voice of the caller, or because of clearly

recognizable peculiarities of the caller would

have sufficed. 33 The identity of the caller could

also be established by the caller's self-

identification, coupled with additional evidence,

like the context and timing of the telephone

call, the contents of the statement challenged,

internal patterns, and other distinctive

characteristics, and disclosure of knowledge of

facts known peculiarly to the caller. 34

Verily, it is only fair that the caller be reliably

identified first before a telephone

communication is accorded probative weight.

The identity of the caller may be established by

direct or circumstantial evidence. According to

one ruling of the Kansas Supreme Court:

Communications by telephone are

admissible in evidence where they are

relevant to the fact or facts in issue, and

admissibility is governed by the same

rules of evidence concerning face-to-

face conversations except the party

against whom the conversations are

sought to be used must ordinarily be

identified. It is not necessary that the

witness be able, at the time of the

conversation, to identify the person

with whom the conversation was had,

provided subsequent identification is

proved by direct or circumstantial

evidence somewhere in the

development of the case. The mere

statement of his identity by the party

calling is not in itself sufficient proof of

such identity, in the absence of

corroborating circumstances so as to

render the conversation admissible.

However, circumstances preceding or

following the conversation may serve

to sufficiently identify the caller. The

completeness of the identification goes

to the weight of the evidence rather

than its admissibility, and the

responsibility lies in the first instance

with the district court to determine

within its sound discretion whether the

threshold of admissibility has been

met. 35 (Bold emphasis

supplied) CHTcSE

Yet, the Prosecution did not tender any

plausible explanation or offer any proof to

definitely establish that it had

been Wagas whom Ligaray had conversed with

on the telephone. The Prosecution did not show

through Ligaray during the trial as to how he

had determined that his caller was Wagas. All

that the Prosecution sought to elicit from him

was whether he had known and why he had

known Wagas, and he answered as follows:

Q:Do you know the accused in this

case?

A:Yes, sir.

Q:If he is present inside the courtroom

[. . .]

A:No, sir. He is not around.

Q:Why do you know him?

A:I know him as a resident of

Compostela because he is an ex-mayor

of Compostela. 36

During cross-examination, Ligaray was allowed

another opportunity to show how he had

determined that his caller was Wagas, but he

still failed to provide a satisfactory showing, to

wit:

Q:Mr. Witness, you mentioned that you

and the accused entered into [a]

transaction of rice selling, particularly

with these 200 sacks of rice subject of

this case, through telephone

conversation? SIcCEA

A:Yes, sir.

Q:But you cannot really ascertain that

it was the accused whom you are

talking with?

A:I know it was him because I know

him.

Q:Am I right to say [that] that was the

first time that you had a transaction

with the accused through telephone

conversation, and as a consequence of

that alleged conversation with the

accused through telephone he issued a

check in your favor?

A:No. Before that call I had a talk[ ]

with the accused.

Q:But still through the telephone?

A:Yes, sir.

Q:There was no instant (sic) that the

accused went to see you personally

regarding the 200 bags rice

transaction?

A:No. It was through telephone only.

Q:In fact[,] you did not cause the

delivery of these 200 bags of rice

through the accused himself?

A:Yes. It was through Robert.

Q:So, after that phone call[,] you

deliver[ed] th[ose] 200 sacks of rice

through somebody other than the

accused?

A:Yes, sir. 37

Ligaray's statement that he could tell that it

was Wagas who had ordered the rice because

he "know[s]" him was still vague and unreliable

for not assuring the certainty of the

identification, and should not support a finding

of Ligaray's familiarity with Wagas as the caller

by his voice. It was evident from Ligaray's

answers that Wagas was not even an

acquaintance of Ligaray's prior to the

transaction. Thus, the RTC's conclusion that

Ligaray had transacted with Wagas had no

factual basis. Without that factual basis, the RTC

was speculating on a matter as decisive as the

identification of the buyer to be Wagas. DIESHT

The letter of Wagas did not competently

establish that he was the person who had

conversed with Ligaray by telephone to place

the order for the rice. The letter was admitted

exclusively as the State's rebuttal evidence to

controvert or impeach the denial of Wagas of

entering into any transaction with Ligaray on

the rice; hence, it could be considered and

appreciated only for that purpose. Under the

law of evidence, the court shall consider

evidence solely for the purpose for which it is

offered, 38not for any other

purpose. 39 Fairness to the adverse party

demands such exclusivity. Moreover, the high

plausibility of the explanation of Wagas that he

had signed the letter only because his sister and

her husband had pleaded with him to do so

could not be taken for granted.

It is a fundamental rule in criminal procedure

that the State carries the onus probandi in

establishing the guilt of the accused beyond a

reasonable doubt, as a consequence of the

tenet ei incumbit probation, qui dicit, non qui

negat, which means that he who asserts, not he

who denies, must prove, 40 and as a means of

respecting the presumption of innocence in

favor of the man or woman on the dock for a

crime. Accordingly, the State has the burden of

proof to show: (1) the correct identification of

the author of a crime, and (2) the actuality of

the commission of the offense with the

participation of the accused. All these facts

must be proved by the State beyond reasonable

doubt on the strength of its evidence and

without solace from the weakness of the

defense. That the defense the accused puts up

may be weak is inconsequential if, in the first

place, the State has failed to discharge

the onus of his identity and culpability. The

presumption of innocence dictates that it is for

the Prosecution to demonstrate the guilt and

not for the accused to establish

innocence. 41 Indeed, the accused, being

presumed innocent, carries no burden of proof

on his or her shoulders. For this reason, the first

duty of the Prosecution is not to prove the

crime but to prove the identity of the criminal.

For even if the commission of the crime can be

established, without competent proof of the

identity of the accused beyond reasonable

doubt, there can be no conviction. 42

There is no question that an identification that

does not preclude a reasonable possibility of

mistake cannot be accorded any evidentiary

force. 43 Thus, considering that the

circumstances of the identification of Wagas as

the person who transacted on the rice did not

preclude a reasonable possibility of mistake, the

proof of guilt did not measure up to the

standard of proof beyond reasonable doubt

demanded in criminal cases. Perforce, the

accused's constitutional right of presumption of

innocence until the contrary is proved is not

overcome, and he is entitled to an

acquittal, 44 even though his innocence may be

doubted. 45

Nevertheless, an accused, though acquitted

of estafa, may still be held civilly liable where

the preponderance of the established facts so

warrants. 46 Wagas as the admitted drawer of

the check was legally liable to pay the amount

of it to Ligaray, a holder in due

course. 47 Consequently, we pronounce and

hold him fully liable to pay the amount of the

dishonored check, plus legal interest of 6% per

annum from the finality of this decision.

WHEREFORE, the Court REVERSES and SETS

ASIDE the decision rendered on July 11, 2002 by

the Regional Trial Court, Branch 58, in Cebu

City; and ACQUITS Gilbert R.Wagas of the crime

of estafa on the ground of reasonable doubt,

but ORDERS him to pay Alberto Ligaray the

amount of P200,000.00 as actual damages, plus

interest of 6% per annum from the finality of

this decision. LLpr

No pronouncement on costs of suit.

SO ORDERED.

PNB vs Erlando Rodriguez

G.R. No. 170325 September 26, 2008

Lessons Applicable: Fictitious Persons

(Negotiable Instruments Law)

FACTS:

Spouses Erlando and Norma Rodriguez were

engaged in the informal lending business and

had a discounting arrangement with the

Philnabank Employees Savings and Loan

Association (PEMSLA), an association of PNB

employees

The association maintained current and savings

accounts with Philippine National Bank (PNB)

PEMSLA regularly granted loans to its members.

Spouses Rodriguez would rediscount the

postdated checks issued to members whenever

the association was short of funds.

As was customary, the spouses would replace

the postdated checks with their own checks

issued in the name of the members.

It was PEMSLAs policy not to approve

applications for loans of members with

outstanding debts.

To subvert this policy, some PEMSLA officers

devised a scheme to obtain additional loans

despite their outstanding loan accounts.

They took out loans in the names of unknowing

members, without the knowledge or consent of

the latter.

The officers carried this out by forging the

indorsement of the named payees in the checks

Rodriguez checks were deposited directly by

PEMSLA to its savings account without any

indorsement from the named payees.

This was an irregular procedure made possible

through the facilitation of Edmundo Palermo,

Jr., treasurer of PEMSLA and bank teller in the

PNB Branch.

this became the usual practice for the parties.

November 1998-February 1999: spouses issued

69 checks totalling to P2,345,804. These were

payable to 47 individual payees who were all

members of PEMSLA

PNB eventually found out about these

fraudulent acts

To put a stop to this scheme, PNB closed the

current account of PEMSLA.

As a result, the PEMSLA checks deposited by the

spouses were returned or dishonored for the

reason Account Closed.

The amounts were duly debited from the

Rodriguez account

Spouses filed a civil complaint for damages

against PEMSLA, the Multi-Purpose Cooperative

of Philnabankers (MCP), and PNB.

PNB credited the checks to the PEMSLA account

even without indorsements = PNB violated its

contractual obligation to them as depositors -

so PNB should bear the losses

RTC: favored Rodriguez

makers, actually did not intend for the named

payees to receive the proceeds of the checks =

fictitious payees (under the Negotiable

Instruments Law) = negotiable by mere delivery

CA: Affirmed - checks were obviously meant by

the spouses to be really paid to PEMSLA =

payable to order

ISSUE: W/N the 69 checks are payable to order

for not being issued to fictitious persons

thereby dismissing PNB from liability

HELD: NO. CA Affirmed

GR: when the payee is fictitious or not intended

to be the true recipient of the proceeds, the

check is considered as a bearer instrument

(Sections 8 and 9 of the NIL)

EX: However, there is a commercial bad faith

exception to the fictitious-payee rule. A

showing of commercial bad faith on the part of

the drawee bank, or any transferee of the check

for that matter, will work to strip it of this

defense. The exception will cause it to bear the

loss.

The distinction between bearer and order

instruments lies in their manner of negotiation

order instrument - requires an indorsement

from the payee or holder before it may be

validly negotiated

bearer instrument - mere delivery

US jurisprudence: fictitious if the maker of the

check did not intend for the payee to in fact

receive the proceeds of the check

In a fictitious-payee situation, the drawee bank

is absolved from liability and the drawer bears

the loss

When faced with a check payable to a fictitious

payee, it is treated as a bearer instrument that

can be negotiated by delivery

underlying theory: one cannot expect a

fictitious payee to negotiate the check by

placing his indorsement thereon

lack of knowledge on the part of the payees,

however, was not tantamount to a lack of

intention on the part of respondents-spouses

that the payees would not receive the checks

proceeds

PNB did not obey the instructions of the

drawers when it accepted absent indorsement,

forged or otherwise. It was negligent in the

selection and supervision of its employees

Consolidated Plywood Industries vs IFC Leasing

& Acceptance Corp.

G.R. No. 72593 April 30, 1987

Lessons Applicable: Requisites of negotiability

to antedated and postdated instruments

(Negotiable Instruments Law)

FACTS: Consolidated (buyer pays promossor

note) > IPM (seller-assignor who violated

warranty) > IFC (holder in due course or merely

an assignee?)

Consolidated Plywood Industries, Inc

(Consolidated) is a corporation engaged in the

logging business

For the purpose of opening of additional roads

and simultaneous logging operations along the

route of roads, it needed 2 additional units of

tractors

Atlantic Gulf & Pacific Company of Manila,

through its sister company and marketing arm,

Industrial Products Marketing (IPM) (seller-

assignor) offered to sell 2 "Used" Allis Crawler

Tractors

IPM inspected the job site and assured that the

tractors were fit for the job and gave a 90-days

performance warranty of the machines and

availability of parts.

Consolidated purchased on installment.

It paid the down payment of P210,000

April 5, 1978: IPM issued the sales invoice and

the deed of sale with chattel mortgage with

promissory note was executed

IPM, by means of a deed of assignment,

assigned its rights and interest in the chattel

mortgage in favor of IFC Leasing and

Acceptance Corp. (IFC)

After 14 days, one of the tractors broke down

and after another 9 days, the other tractor too

Because of the breaking down of the tractors,

the road building and simultaneous logging

operations were delayed

Consolidated unilaterally rescinded the contract

w/ IPM

April 7, 1979: Wee of Consolidated asked IPM

to pull out the units and have them

reconditioned, and thereafter to offer them for

sale.

The proceeds were to be given to IFC and the

excess will be divided between:

IPM

Consolidated which offered to bear one-half 1/2

of the reconditioning cost

IPM didn't do anything

IFC filed against Consolidated for the recovery

of the principal sum P1,093,789.71, interest and

attorney's fees

RTC and CA: favored IFC

breach of warranty if any, is not a defense

available to Consolidated either to withdraw

from the contract and/or demand a

proportionate reduction of the price with

damages in either case

ISSUE: W/N IFC is a holder in due course of the

negotiable promissory note so as to bar

completely all the available defenses of the

Consolidated against IPM

HELD: CA reversed and set aside

Consolidated is a victim of warranrty

The Civil Code provides that:

ART. 1561. The vendor shall be responsible for

warranty against the hidden defects which the

thing sold may have, should they render it unfit

for the use for which it is intended, or should

they diminish its fitness for such use to such an

extent that, had the vendee been aware

thereof, he would not have acquired it or would

have given a lower price for it; but said vendor

shall not be answerable for patent defects or

those which may be visible, or for those which

are not visible if the vendee is an expert who,

by reason of his trade or profession, should

have known them.

ART. 1562. In a sale of goods, there is an

implied warranty or condition as to the quality

or fitness of the goods, as follows:

(1) Where the buyer, expressly or by implication

makes known to the seller the particular

purpose for which the goods are acquired, and

it appears that the buyer relies on the sellers

skill or judge judgment (whether he be the

grower or manufacturer or not), there is an

implied warranty that the goods shall be

reasonably fit for such purpose;

ART. 1564. An implied warranty or condition as

to the quality or fitness for a particular purpose

may be annexed by the usage of trade.

ART. 1566. The vendor is responsible to the

vendee for any hidden faults or defects in the

thing sold even though he was not aware

thereof.

This provision shall not apply if the contrary has

been stipulated, and the vendor was not aware

of the hidden faults or defects in the thing sold.

(Emphasis supplied).

GR: extends to the corporation to whom it

assigned its rights and interests

EX: assignee is a holder in due course of the

promissory note

assuming the note is negotiable

Consolidated's defenses may not prevail against

it.

Articles 1191 and 1567 of the Civil Code provide

that:

ART. 1191. The power to rescind obligations is

implied in reciprocal ones, in case one of the

obligors should not comply with what is

incumbent upon him.

The injured party may choose between the

fulfillment and the rescission of the obligation

with the payment of damages in either case. He

may also seek rescission, even after he has

chosen fulfillment, if the latter should become

impossible.

ART. 1567. In the cases of articles 1561, 1562,

1564, 1565 and 1566, the vendee may elect

between withdrawing from the contract and

demanding a proportionate reduction of the

price, with damages in either case. (Emphasis

supplied)

Consolidated, having unilaterally and

extrajudicially rescinded its contract with the

seller-assignor, can no longer sue IPM except by

way of counterclaim if IPM sues it because of

the rescission

Considering that paragraph (d), Section 1 of the

Negotiable Instruments Law requires that a

promissory note "must be payable to order or

bearer" - in this case it is non-negotiable

= expression of consent that the instrument

may be transferred

consent is indispensable since a maker assumes

greater risk under a negotiable instrument than

under a non-negotiable one

When instrument is payable to order

SEC. 8. WHEN PAYABLE TO ORDER. - The

instrument is payable to order where it is drawn

payable to the order of a specified person or to

him or his order. . . .

Without the words "or order" or"to the order

of, "the instrument is payable only to the

person designated therein and is therefore non-

negotiable.

Any subsequent purchaser thereof will not

enjoy the advantages of being a holder of a

negotiable instrument but will merely "step into

the shoes" of the person designated in the

instrument and will thus be open to all defenses

available against the latter

Even conceding for purposes of discussion that

the promissory note in question is a negotiable

instrument, the IFC cannot be a holder in due

course due to absence of GF for knowing that

the tractors were defective

SEC. 52. WHAT CONSTITUTES A HOLDER IN DUE

COURSE. - A holder in due course is a holder

who has taken the instrument under the

following conditions:

(c) That he took it in good faith and for value

(d) That the time it was negotiated by him he

had no notice of any infirmity in the instrument

of defect in the title of the person negotiating it

SEC. 56. WHAT CONSTITUTES NOTICE OF

DEFFECT. - To constitute notice of an infirmity in

the instrument or defect in the title of the

person negotiating the same, the person to

whom it is negotiated must have had actual

knowledge of the infirmity or defect, or

knowledge of such facts that his action in taking

the instrument amounts to bad faith. (Emphasis

supplied)

We believe the finance company is better able

to bear the risk of the dealer's insolvency than

the buyer and in a far better position to protect

his interests against unscrupulous and insolvent

dealers. . .

Ponce de Leon vs Rehabilitation Finance

36 SCRA 289 Commercial Law Negotiable

Instruments Law Payable on Demand

On October 8, 1951, Jose Ponce De Leon and

Francisco Soriano took out a loan from the

Rehabilitation Finance Corporation or RFC (now

Development Bank of the Philippines) for

P495,000.00. The loan was secured by a parcel

of land owned by Soriano. A deed of mortgage

was then executed in view of the loan. Soriano

and Ponce de Leon also executed a promissory

note in the amount of P495k, payable in

monthly installments of P28,831.64.

Part of the P495k was used to pay off the

previous encumbrances amounting to P135k on

the property of Soriano. The rest were released

to Ponce de Leon in various amounts from

December 1951 to July 1952, still pursuant to

the deed of mortgage.

The loan went unpaid and so RFC initiated a

foreclosure proceeding on the mortgaged

property. According to RFC, the monthly

payments were supposed to be due in October

1952.

In his defense, Ponce de Leon insists that the

amortizations never became due because

allegedly, RFC did not complete the

disbursement of the loan to him (allegedly,

P19k was withheld). He also invokes that on the

face of the promissory note it was written that

the installments have no fixed or determined

dates of payment. Hence, the monthly

payments were never due therefore the

foreclosure is void. He insists that the court

should first determine the date of maturity

of the loan.

ISSUE: Whether or not Ponce de Leon is right.

HELD: No. During trial and based on the

records, Ponce de Leons lawyer admitted that

all the remainder of the loan was released to

Ponce de Leon so he cannot invoke that not all

of the P495k was released by RFC.

Anent the issue of the loans maturity date,

under Secs. 13 and 14 of the Negotiable

Instruments Law, when a promissory note

expresses no time for payment, it is deemed

payable on demand. Therefore, when RFC

demanded payment on October 24, 1952, the

installments become due.

Buencamino v. Hernandez

Facts:

The Land Tenure Administration (LTA)

purchased from Buencamino et. Al their

Hacienda for a total price of Php.2, 746,000.00.

For the purpose, a Memorandum Agreement

was executed which declared that the

LTA was purchasing the hacienda upon petition

of the tenants and in accordance with R.A 1400

or the Land Reform Act of 1955. The parties

agreed that 50% of the full price or

Php.1,373,000.00 was to be paid in cash and the

balance in negotiable land certificates. The

condition in the certificate regarding its

encashment only after the lapse of five years

from the date of the execution of the Deed of

Sale. The

Beuncaminos later on presented the

instruments to the City Treasurer in payment of

their tax obligations. The treasurer rejected the

certificates on the ground that the certificates

were payable to bearer not on demand, but,

only upon the expiration of the five year period

specified in the certificates.

Issue: Are the instruments "payable on

demand"?

Court Ruling:

An instrument, to be "payable on demand" is

one which (a) is expressed to be payable on

demand, or at sight, or on presentation; or (b)

expresses no time for payment.

The 5-year period within which the certificates

could be encashed was an expression of time

for payment contrary to paragraph "b", sec.7 of

the Negotiable Instruments Law.

Pacheco vs CA

G.R. No. 126670 December 2, 1999 Lessons Applicable: Requisites of negotiability to antedated and postdated instruments (negotiable instruments)

May 17, 1989: Due to financial difficulties

arising from the repeated delays in the

payment of their receivables for

the construction projects from the DPWH,

the spouses Pacheco obtain a loan of P10K

from Mrs. Luz Vicencio who owns a

pawnshop in Samar.

Despite being informed by petitioners that

their bank account no longer had any funds,

Mrs. Vicencio insisted that they issue the

check, as evidence of the loan and only a

formality

Virginia Pacheco issued an undated

RCBC check for P10K

she received P9,000.00 - 10% interest

already deducted

Ernesto Pacheco was also required to sign

the check o

June 14, 1989: Virginia obtained

another loan of P50,000.00 from Mrs.

Vicencio.

She received only P35,000.00 - deduct the

previous loan of P10K as well as the 10%

interest of P5,000.00

Virginia asked for the return of the 1st

check but Mrs. Vicencio told her that her

filing clerk was absent. Despite several

demands for the return of the first check,

but was told that it could no longer locate it

For the new loan, they required the same

requirements in the issuance of the 3 more

checks:

2 checks of P20K

1 check of P10K

June 20 and July 21, 1989: Virginia obtained

2 more loans:

P10K

P15K

Issuing 2 checks of P15k

All the checks were undated at the time

given to Mrs. Vicencio

July 1989: The Pachecos were able to settle

and pay in cash P60K out of P75K

August 3, 1992: Because the loan was

unpaid when due, Mrs. Vicencio with her

husband and daughter went to the

Pachecos residence to persuade Virginia to

place the date August 15, 1992 on the

checks

Despite being informed by petitioner

Virginia that their account with RCBC had

been closed as early as August 17, 1989

August 29, 1992: The Pachecos were

surprised to receive a demand letter from

Mrs. Vicencios spouse informing them that

the checks were dishonored due to

Account Closed.

RTC and CA: charged the Pachecos of estafa

relying on the allegation of the Vicencios

that it is a payment for the jewelry

ISSUE: W/N the Pachecos should be charged

with Estafa

HELD: NO. CA reversed

Estafa elements:

1. that the offender postdated or issued a

check in payment of an obligation contracted at

the time the check was issued - not present

2. that such postdating or issuing a check was

done when the offender had no funds in the

bank, or his funds deposited therein were not

sufficient to cover the amount of the check -

present

3. deceit or damage to the payee thereof - not

preset

drawer who issues a check as security or

evidence of investment is not liable

for estafa

Mrs. Vicencio could not have been deceived

nor defrauded by petitioners in order to

obtain the loans because she was informed

that they no longer have funds in their

RCBC accounts

Moreover, a check must be presented

within a reasonable time from issue.

By current banking practice, a check

becomes stale after more than 6 months -

here 3 years

Pacheco still have an outstanding obligation

of P15K in favor of Mrs. Vicencio

||| (Gonzales v. Pe, G.R. No. 167398, [August 8,

2011], 670 PHIL 597-615)

DECISION

PERALTA, J p:

Before the Court is a petition for review

on certiorari seeking to set aside the

Decision 1 dated June 23, 2004 and

Resolution 2 dated February 23, 2005 of the

Court of Appeals (CA), Twentieth Division, in

CA-G.R. SP No. 73171, entitled Quirico Pe v.

Honorable Judge Rene Hortillo, in his capacity as

Presiding Judge of the Regional Trial Court of

Iloilo City, Branch 31, Augustus Gonzales and

Spouses Engr. Nestor Victor and Dr. Ma. Lourdes

Rodriguez, which granted the petition of

respondent Quirico Pe. The CA Decision

reversed and set aside the Order 3 dated

September 23, 2002 of the Regional Trial Court

(RTC) of Iloilo City, Branch 31, which dismissed

respondent's appeal for non-payment of docket

and other lawful fees, and directing the

issuance of the writ of execution for the

implementation of its Decision 4 dated June 28,

2002 in favor of the petitioners and against the

respondent. The CA Decision also directed the

RTC to assess the appellate docket fees to be

paid by the respondent, if it has not done so,

and allow him to pay such fees and give due

course to his appeal.

The antecedents are as follows:

Respondent Quirico Pe was engaged in the

business of construction materials, and had

been transacting business with petitioner

Spouses Nestor Victor Rodriguez and Ma.

Lourdes Rodriguez. The Department of Public

Works and Highways (DPWH) awarded two

contracts in favor of petitioner Nestor

Rodriguez for the following projects, namely,

construction of "Lanot-Banga Road (Kalibo

Highway) km. 39 + 200 to km. 40 + 275 Section

IV (Aklan side)" and concreting of "Laua-an

Pandan Road (Tibial-Culasi Section), Province of

Antique." In 1998, respondent agreed to supply

cement for the construction projects of

petitioner Spouses Rodriguez. Petitioner Nestor

Rodriguez availed of the DPWH's pre-payment

program for cement requirement regarding the

Lanot-Banga Road, Kalibo Highway project

(Kalibo project), wherein the DPWH would give

an advance payment even before project

completion upon his presentment, among

others, of an official receipt for the amount

advanced. Petitioner Nestor Rodriguez gave

Land Bank of the Philippines (LBP) Check No.

6563066 to respondent, which was signed by

co-petitioners (his wife Ma. Lourdes Rodriguez

and his business partner Augustus Gonzales),

but leaving the amount and date in blank. The

blank LBP check was delivered to respondent to

guarantee the payment of 15,698 bags of

Portland cement valued at P1,507,008.00,

covered by Official Receipt No. 1175, 5 issued

by respondent (as owner of Antique

Commercial), in favor of petitioner Nestor

Rodriguez (as owner of Greenland Builders).

However, a year later, respondent filled up

blank LBP Check No. 6563066, by placing

P2,062,000.00 and June 30, 1999,

corresponding to the amount and date. DHECac

On December 9, 1999, petitioners filed an

Amended Complaint 6 for Declaration of

Payment, Cancellation of Documents and

Damages against respondent with the RTC,

Branch 31, Iloilo City, docketed as Civil Case No.

25945. The amended complaint alleged that

they entrusted blank LBP Check No. 6563066 to

respondent so as to facilitate the approval of

the pre-payment application of petitioner

Nestor Rodriguez with the DPWH. They stated

that the blank LBP check would "serve as

collateral" to guarantee the payment for 15,698

bags to be used for the Kalibo project,

amounting to P1,507,008.00, and that after

payment of the said amount, respondent would

return the LBP check. According to them, after

having paid respondent the amount of

P2,306,500.00, which is P139,160.00 more than

the amount of P2,167,340.00 (representing the

value for 23,360 bags of cement taken for the

Kalibo project), they were cleared of any

liability.

On January 6, 2000, respondent filed an Answer

to Amended Complaint, 7 averring that he had

so far delivered 40,360 bags of cement to

petitioners who remitted P2,306,500.00,

thereby leaving an outstanding amount of

P2,062,000.00. He countered that when

petitioners stopped the bank-to-bank online

payments to him, he filled up the amount of

P2,062,000.00 and made the LBP check payable

on June 30, 1999. The LBP check was

dishonored for being "drawn against insufficient

funds (DAIF)." By way of compulsory

counterclaim, he sought recovery of the

balance of P2,062,000.00, with interest at 24%

from January 29, 1999 until fully paid as actual

damages.

In the Pre-trial Order 8 dated January 28, 2000,

the trial court determined the following to be

the delimited issues, to wit: ECSaAc

(1)whether plaintiffs' [herein

petitioners] liability to defendant

[herein respondent] for 15,698 bags

priced at P1,507,008.00 subject of the

earlier-mentioned pre-payment

program and covered by the "blank"

LBP Check No. 6563066 has already

been paid, hence, plaintiffs are no

longer liable to the defendant for this

amount;

(2)whether this LBP Check No. 6563066

should not be returned by defendant to

plaintiffs, or failing in which, should

now be declared as cancelled, null and

void;

(3)whether plaintiffs have completely

paid to the defendant the price of the

cement used for the Kalibo project

which specifically is the amount of

23,360 bags of cement valued in the

total amount of P2,167,340.00;

(4)whether plaintiffs are entitled to

damages and attorney's fees; and

(5)whether this case be dismissed and

with the dismissal of the complaint to

proceed with the counterclaim. 9

In a Decision dated June 28, 2002, the trial

court, applying Section 14 10 of the Negotiable

Instruments Law, found that respondent's

subsequent filling up of LBP Check No. 6563066

in the amount of P2,062,000.00 was not made

strictly in accordance with the authority given

to him by petitioner Nestor Rodriguez, and that

since one year had already lapsed, the same

was not done within a reasonable time. As to

the 23,360 bags of cement for the Kalibo

project, valued at P2,167,340.00 which was

subject of previous transactions, the trial court

ruled that the same had been fully paid and

considered a settled issue. Consequently, the

RTC rendered judgment in favor of the

petitioners and against the respondent, the

dispositive portion of which reads: DIESaC

WHEREFORE, judgment is hereby

rendered in favor of the plaintiffs and

against the defendant, as follows:

1.Declaring plaintiffs' obligation to the

defendant for the cement supplied for

the Kalibo (Lanot-Banga) Road

Construction Project in the amount of

P2,167,340.00 as already and fully paid,

hence, plaintiffs are no longer liable to

the defendant;

2.Declaring Land Bank Check No.

6563066 dated June 30, 1999 for

P2,062,000.00 as null and void and

without any legal effect;

3.Ordering defendant to pay each

plaintiff the sums of P100,000.00 as

actual damages; P500,000.00 as moral

damages; P200,000.00 as attorney's

fees and P2,000.00 per hearing as

appearance fee; P50,000.00 as

miscellaneous actual and necessary

litigation expenses; and

4.To pay the costs.

Defendant's counterclaim is hereby

DISMISSED.

SO ORDERED. 11

After receipt of a copy of the said RTC Decision

on July 26, 2002, respondent filed a Notice of

Appeal on July 30, 2002.

In an Order 12 dated August 5, 2002, the trial

court gave due course to respondent's appeal,

and directed the Branch Clerk of Court to

transmit the entire records of the case to the

CA.

On August 26, 2002, petitioners filed a Motion

for Reconsideration, to Dismiss Appeal, and for

Issuance of Writ of Execution, 13 stating that

respondent's appeal should be dismissed as the

same was not perfected due to non-payment of

docket and other lawful fees as required under

Section 4, Rule 41 of the Rules of Court.

Claiming that since the respondent's appeal was

not perfected and, as a consequence, the RTC

Decision dated June 28, 2002 became final and

executory, petitioners sought the issuance of a

writ of execution for the implementation of the

said RTC Decision. To buttress their motion,

petitioners also appended a

Certification 14 dated August 19, 2002, issued

by the Clerk of Court of the Office of the Clerk

of Court (OCC) of the RTC, Iloilo City, certifying

that no appeal fees in the case had been paid

and received by the OCC. CDAHIT

In the Order dated September 23, 2002, the

trial court dismissed respondent's appeal and

directed the issuance of a writ of execution to

implement the RTC Decision dated June 28,

2002.

On October 2, 2002, the Clerk of Court and Ex-

officio Provincial Sheriff of Iloilo issued the Writ

of Execution 15 directing the execution of the

RTC Decision dated June 28, 2002.

On October 7, 2002, respondent filed a Petition

for Certiorari and Prohibition with Application

for Writ of Preliminary Injunction and Prayer for

Temporary Restraining Order, 16 seeking to set

aside the RTC Order dated September 23, 2002

(which dismissed his appeal and directed the

issuance of a writ of execution to implement

the RTC Decision dated June 28, 2002), and to

enjoin the implementation of the Writ of

Execution dated October 2, 2002.

In a Resolution 17 dated October 9, 2002, the

CA granted the respondents' prayer for

Temporary Restraining Order and, in the

Resolution 18 dated August 20, 2003, approved

the respondent's injunction bond and directed

the Division Clerk of Court to issue the writ of

preliminary injunction.

On August 20, 2003, the Division Clerk of Court

issued the Writ of Preliminary

Injunction, 19 thereby enjoining the

implementation of the Writ of Execution dated

October 2, 2002.

On June 23, 2004, the CA rendered a Decision in

favor of the respondent, the dispositive portion

of which reads:

WHEREFORE, the petition is granted.

The assailed order and writ of execution

of the Regional Trial Court must be, as it

is hereby, SET ASIDE. The trial court is

hereby ordered to assess the appellate

docket fees, if it has not done so, and

allow the petitioner to pay such fees

and give due course to the petitioner's

appeal. No costs.

SO ORDERED. 20

Aggrieved, petitioners filed a Motion for

Reconsideration 21 on August 24, 2004, which,

however, was denied by the CA in a

Resolution 22 dated February 23, 2005. cAISTC

Hence, petitioner filed this present petition

raising the sole issue that:

THE COURT OF APPEALS PATENTLY

ERRED IN REVERSING THE DECISION OF

THE LOWER COURT AND ALLOWING

RESPONDENT TO BELATEDLY PAY THE

REQUIRED APPELLATE DOCKET AND

OTHER LEGAL FEES.

Petitioners allege that since respondent failed

to pay the docket and other legal fees at the

time he filed the Notice of Appeal, his appeal

was deemed not perfected in contemplation of

the law. Thus, petitioners pray that the CA

decision be set aside and a new one be

rendered dismissing the respondent's appeal

and ordering the execution of the RTC Decision

dated June 28, 2002.

On the other hand, respondent, citing Section 9,

Rule 41 of the Rules of Court, maintains that his

appeal has been perfected by the mere filing of

the notice of appeal. Respondent theorizes that

with the perfection of his appeal, the trial court

is now divested of jurisdiction to dismiss his

appeal and, therefore, only the CA has

jurisdiction to determine and rule on the

propriety of his appeal. He raises the defense

that his failure to pay the required docket and

other legal fees was because the RTC Branch

Clerk of Court did not make an assessment of

the appeal fees to be paid when he filed the

notice of appeal.

The petition is meritorious.

In cases of ordinary appeal, Section 2, Rule 41

of the Rules of Court provides that the appeal

to the CA in cases decided by the RTC in the

exercise of its original jurisdiction shall be taken

by filing a notice of appeal with the RTC (the

court which rendered the judgment or final

order appealed from) and serving a copy

thereof upon the adverse party. Section 3

thereof states that the appeal shall be taken

within fifteen (15) days from notice of the

judgment or final order appealed from.

Concomitant with the filing of a notice of appeal

is the payment of the required appeal fees

within the 15-day reglementary period set forth

in Section 4 of the said Rule. Thus, TIaCcD

SEC. 4.Appellate court docket and other

lawful fees. Within the period for

taking an appeal, the appellant shall pay

to the clerk of the court which rendered

the judgment or final order appealed

from, the full amount of the appellate

court docket and other lawful fees.

Proof of payment of said fees shall be

transmitted to the appellate court

together with the original record or the

record on appeal.

In reversing the ruling of the trial court, the CA

cited Yambao v. Court of Appeals 23 as

justification for giving due course to

respondent's petition and ordering the belated

payment of docket and other legal fees.

In Yambao, the CA dismissed therein

petitioners' appeal from the RTC decision for

failure to pay the full amount of the required

docket fee. Upon elevation of the case, the

Court, however, ordered the CA to give due

course to their appeal, and ruled that their

subsequent payment of the P20.00 deficiency,

even before the CA had passed upon their

motion for reconsideration, was indicative of

their good faith and willingness to comply with

the Rules.

The ruling in Yambaois not applicable to the

present case as herein respondent never made

any payment of the docket and other lawful

fees, not even an attempt to do so,

simultaneous with his filing of the Notice of

Appeal. Although respondent was able to file a

timely Notice of Appeal, however, he failed to

pay the docket and other legal fees, claiming

that the Branch Clerk of Court did not issue any

assessment. This procedural lapse on the part

of the respondent rendered his appeal with the

CA to be dismissible and, therefore, the RTC

Decision, dated June 28, 2002, to be final and

executory.

In Far Corporation v. Magdaluyo, 24 as with

other subsequent cases 25 of the same ruling,

the Court explained that the procedural

requirement under Section 4 of Rule 41 is not

merely directory, as the payment of the docket

and other legal fees within the prescribed

period is both mandatory and jurisdictional. It

bears stressing that an appeal is not a right, but

a mere statutory privilege. An ordinary appeal

from a decision or final order of the RTC to the

CA must be made within 15 days from notice.

And within this period, the full amount of the

appellate court docket and other lawful fees

must be paid to the clerk of the court which

rendered the judgment or final order appealed

from. The requirement of paying the full

amount of the appellate docket fees within the

prescribed period is not a mere technicality of

law or procedure. The payment of docket fees

within the prescribed period is mandatory for

the perfection of an appeal. Without such

payment, the appeal is not perfected. The

appellate court does not acquire jurisdiction

over the subject matter of the action and the

Decision sought to be appealed from becomes

final and executory. Further, under Section 1

(c), Rule 50, an appeal may be dismissed by the

CA, on its own motion or on that of the

appellee, on the ground of the non-payment of

the docket and other lawful fees within the

reglementary period as provided under Section

4 of Rule 41. The payment of the full amount of

the docket fee is an indispensable step for the

perfection of an appeal. In both original and

appellate cases, the court acquires jurisdiction

over the case only upon the payment of the

prescribed docket fees. cECaHA

Respondent's claim that his non-payment of

docket and other lawful fees should be treated

as mistake and excusable negligence,

attributable to the RTC Branch Clerk of Court, is

too superficial to warrant consideration. This is

clearly negligence of respondent's counsel,

which is not excusable. Negligence to be

excusable must be one wh