Nego Cases

Republic of the PhilippinesSupreme CourtManila

THIRD DIVISION AUGUSTUS GONZALES andSPOUSES NESTOR VICTOR andMA. LOURDES RODRIGUEZ, Petitioners, -versus- QUIRICO PE, Respondent.

G.R. No. 167398

Present: CARPIO,* J., VELASCO, JR., J., Chairperson, BRION,**

PERALTA, and SERENO,*** JJ.

Promulgated:

August 9, 2011

x-----------------------------------------------------------------------------------------x DECISION PERALTA, J.:

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, entitledQuirico 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.

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:

(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:

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.

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.

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,

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 Yambao is 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.

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 which ordinary diligence and prudence could not have guarded against.[26] Respondent's counsel filed a notice of appeal within the reglementary period for

filing the same without, however, paying the appellate docket fees. He simply ignored

the basic procedure of taking an appeal by filing a notice of appeal, coupled with the

payment of the full amount of docket and other lawful fees. Respondent’s counsel

should keep abreast of procedural laws and his ignorance of the procedural

requirements shall bind the respondent. In National Power Corporation v. Laohoo,[27] we ruled that therein counsel’s failure to file the appeal in due time does not amount

to excusable negligence. The non-perfection of the appeal on time is not a mere

technicality. Besides, to grant therein petitioner’s plea for the relaxation of the rules on

technicality would disturb a well-entrenched ruling that could make uncertain when a

judgment attains finality, leaving the same to depend upon the resourcefulness of a

party in concocting implausible excuses to justify an unwarranted departure from the

time-honored policy of the law that the period for the perfection of an appeal is

mandatory and jurisdictional.

The CA took cognizance over the case, based on the wrong premise that when

the RTC issued the Order dated August 5, 2002 giving due course to respondent’s

Notice of Appeal and directing the Branch Clerk of Court to transmit the entire records

of the case to the CA, it ipso facto lost jurisdiction over the case. Section 9,[28] Rule 41

of the Rules explains that the court of origin loses jurisdiction over the case only upon

the perfection of the appeal filed in due time by the appellant and the expiration of the

time to appeal of the other parties. Withal, prior to the transmittal of the original records

of the case to the CA, the RTC may issue orders for the protection and preservation of

the rights of the prevailing party, as in this case, the issuance of the writ of execution

because the respondent’s appeal was not perfected.

Moreover, Section 13, Rule 41 of the Rules states that the CA may dismiss an

appeal taken from the RTC on the ground of non-payment of the docket and other

lawful fees within the 15-day reglementary period:

SEC 13. Dismissal of appeal. — Prior to the transmittal of the original record or the record on appeal to the appellate court, the trial court may motu proprio or on motion dismiss the appeal for having been taken out of time, or for non-payment of the docket and other lawful fees within the reglementary period. (As amended by A.M. No. 00-2-10-SC, May 1, 2000.)

Since respondent’s appeal was not perfected within the 15-day reglementary

period, it was as if no appeal was actually taken. Therefore, the RTC retains jurisdiction

to rule on pending incidents lodged before it, such as the petitioner’s Motion for

Reconsideration, to Dismiss Appeal, and for Issuance of Writ of Execution, filed on

August 26, 2002, which sought to set aside its Order dated August 5, 2002 that gave

due course to respondent’s Notice of Appeal, and directed the issuance of a writ of

execution. Having no jurisdiction over the case, the prudent thing that the CA should

have done was to dismiss the respondent’s appeal for failure to pay the appeal fees,

and declare that the RTC Decision dated June 28, 2002 has now become final and

executory.

As an incidental matter on the propriety of petitioners’ petition for review

on certiorari under Rule 45 of the Rules, respondent raises the argument that since the

subject of the present petition is the writ of preliminary injunction granted by the CA (in

favor of the respondent enjoining the execution of the RTC Decision dated June 28,

2002), in CA-G.R. SP No. 73171, which is interlocutory in nature, petitioners’ petition

should be denied for being the wrong remedy. In other words, respondent advances

the theory that since the assailed CA Decision dated June 23, 2004 partakes of an

interlocutory order, i.e., enjoining the finality of the RTC Decision dated June 28, 2002,

petitioners should have availed of the remedy of a petition for certiorariunder Rule 65,

not a petition for review on certiorari under Rule 45.

Respondent’s argument is unfounded. The proper remedy of a party aggrieved

by a decision of the CA is a petition for review on certiorari under Rule 45, which is not

identical to a petition for certiorari under Rule 65. Rule 45 provides that decisions, final

orders or resolutions of the CA in any case, i.e., regardless of the nature of the action or

proceedings involved, may be appealed to Us by filing a petition for review on certiorari,

which would be but a continuation of the appellate process over the original case.[29] Therefore, petitioners’ filing of the present petition for review on certiorari under Rule

45 is the proper and adequate remedy to challenge the Decision dated June 24, 2004

and Resolution dated February 23, 2005 of the CA.

To recapitulate, one who seeks to avail of the right to appeal must strictly comply

with the requirements of the rules, and failure to do so leads to the loss of the right to

appeal.[30] The rules require that from the date of receipt of the assailed RTC order

denying one’s motion for reconsideration, an appellant may take an appeal to the CA by

filing a notice of appeal with the RTC and paying the required docket and other lawful

fees with the RTC Branch Clerk of Court, within the 15-day reglementary period for the

perfection of an appeal. Otherwise, the appellant's appeal is not perfected, and the CA

may dismiss the appeal on the ground of non-payment of docket and other lawful

fees. As a consequence, the assailed RTC decision shall become final and executory

and, therefore, the prevailing parties can move for the issuance of a writ of execution.

Since the CA erroneously took cognizance over the case, its Decision dated

June 23, 2004 and Resolution dated February 23, 2005 should be overturned, and the

Writ of Preliminary Injunction issued on August 20, 2003 should likewise be

lifted. Thus, the RTC Decision dated June 28, 2002 is reinstated and, as the said

decision having become final and executory, the case is remanded for its prompt

execution.

While every litigant must be given the amplest opportunity for the proper and just

determination of his cause, free from the constraints of technicalities, the failure to

perfect an appeal within the reglementary period is not a mere technicality. It raises

jurisdictional problem, as it deprives the appellate court of its jurisdiction over the

appeal. After a decision is declared final and executory, vested rights are acquired by

the winning party. Just as a losing party has the right to appeal within the prescribed

period, the winning party has the correlative right to enjoy the finality of the decision on

the case.[31]

WHEREFORE, the petition is GRANTED. The Decision dated June 23, 2004

and Resolution dated February 23, 2005 of the Court of Appeals, in CA-G.R. SP No.

73171, are REVERSED and SET ASIDE. The Writ of Preliminary Injunction, issued by

the Court of Appeals on August 20, 2003, is LIFTED.

The Decision dated June 28, 2002 of the Regional Trial Court, Branch 31, Iloilo

City is REINSTATED and, in view of its finality, the case is REMANDED for its prompt

execution.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 93048 March 3, 1994

BATAAN CIGAR AND CIGARETTE FACTORY, INC., petitioner, vs.THE COURT OF APPEALS and STATE INVESTMENT HOUSE, INC., respondents.

Teresita Gandiongco Oledan for petitioner.

Acaban & Sabado for private respondent.

NOCON, J.:

For our review is the decision of the Court of Appeals in the case entitled "State Investment House, Inc. v. Bataan Cigar & Cigarette Factory Inc.," 1affirming the decision of the Regional Trial Court 2 in a complaint filed by the State Investment House, Inc. (hereinafter referred to as SIHI) for collection on three unpaid checks issued by Bataan Cigar & Cigarette Factory, Inc. (hereinafter referred to as BCCFI). The foregoing decisions unanimously ruled in favor of SIHI, the private respondent in this case.

Emanating from the records are the following facts. Petitioner, Bataan Cigar & Cigarette Factory, Inc. (BCCFI), a corporation involved in the manufacturing of cigarettes, engaged one of its suppliers, King Tim Pua George (herein after referred to as George King), to deliver 2,000 bales of tobacco leaf starting October 1978. In consideration

thereof, BCCFI, on July 13, 1978 issued crossed checks post dated sometime in March 1979 in the total amount of P820,000.00. 3

Relying on the supplier's representation that he would complete delivery within three months from December 5, 1978, petitioner agreed to purchase additional 2,500 bales of tobacco leaves, despite the supplier's failure to deliver in accordance with their earlier agreement. Again petitioner issued post dated crossed checks in the total amount of P1,100,000.00, payable sometime in September 1979. 4

During these times, George King was simultaneously dealing with private respondent SIHI. On July 19, 1978, he sold at a discount check TCBT 551826 5 bearing an amount of P164,000.00, post dated March 31, 1979, drawn by petitioner, naming George King as payee to SIHI. On December 19 and 26, 1978, he again sold to respondent checks TCBT Nos. 608967 & 608968, 6 both in the amount of P100,000.00, post dated September 15 & 30, 1979 respectively, drawn by petitioner in favor of George King.

In as much as George King failed to deliver the bales of tobacco leaf as agreed despite petitioner's demand, BCCFI issued on March 30, 1979, a stop payment order on all checks payable to George King, including check TCBT 551826. Subsequently, stop payment was also ordered on checks TCBT Nos. 608967 & 608968 on September 14 & 28, 1979, respectively, due to George King's failure to deliver the tobacco leaves.

Efforts of SIHI to collect from BCCFI having failed, it instituted the present case, naming only BCCFI as party defendant. The trial court pronounced SIHI as having a valid claim being a holder in due course. It further said that the non-inclusion of King Tim Pua George as party defendant is immaterial in this case, since he, as payee, is not an indispensable party.

The main issue then is whether SIHI, a second indorser, a holder of crossed checks, is a holder in due course, to be able to collect from the drawer, BCCFI.

The Negotiable Instruments Law states what constitutes a holder in due course, thus:

Sec. 52 — A holder in due course is a holder who has taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;

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

(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

Section 59 of the NIL further states that every holder is deemed prima facie a holder in due course. However, when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims, acquired the title as holder in due course.

The facts in this present case are on all fours to the case of State Investment House, Inc. (the very respondent in this case)v. Intermediate Appellate Court 7 wherein we made a discourse on the effects of crossing of checks.

As preliminary, a check is defined by law as a bill of exchange drawn on a bank payable on demand. 8 There are a variety of checks, the more popular of which are the memorandum check, cashier's check, traveler's check and crossed check. Crossed check is one where two parallel lines are drawn across its face or across a corner thereof. It may be crossed generally or specially.

A check is crossed specially when the name of a particular banker or a company is written between the parallel lines drawn. It is crossed generally when only the words "and company" are written or nothing is written at all between the parallel lines. It may be issued so that the presentment can be made only by a bank. Veritably the Negotiable Instruments Law (NIL) does not mention "crossed checks," although Article 541 9 of the Code of Commerce refers to such instruments.

According to commentators, the negotiability of a check is not affected by its being crossed, whether specially or generally. It may legally be negotiated from one person to another as long as the one who encashes the check with the drawee bank is another bank, or if it is specially crossed, by the bank mentioned between the parallel lines. 10 This is specially true in England where the Negotiable Instrument Law originated.

In the Philippine business setting, however, we used to be beset with bouncing checks, forging of checks, and so forth that banks have become quite guarded in encashing checks, particularly those which name a specific payee. Unless one is a valued client, a bank will not even accept second indorsements on checks.

In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a check should have the following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once — to one who has an account with a bank; (c) and the act of crossing the check serves as warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course. 11

The foregoing was adopted in the case of SIHI v. IAC, supra. In that case, New Sikatuna Wood Industries, Inc. also sold at a discount to SIHI three post dated crossed checks, issued by Anita Peña Chua naming as payee New Sikatuna Wood Industries, Inc. Ruling that SIHI was not a holder in due course, we then said:

The three checks in the case at bar had been crossed generally and issued payable to New Sikatuna Wood Industries, Inc. which could only mean that the drawer had intended the same for deposit only by the rightful person, i.e. the payee named therein. Apparently, it was not the payee who presented the same for payment and therefore, there was no proper presentment, and the liability did not attach to the drawer. Thus, in the absence of due presentment, the drawer did not become liable. Consequently, no right of recourse is available to petitioner (SIHI) against the drawer of the subject checks, private respondent wife (Anita), considering that petitioner is not the proper party authorized to make presentment of the checks in question.

xxx xxx xxx

That the subject checks had been issued subject to the condition that private respondents (Anita and her husband) on due date would make the back up deposit for said checks but which condition apparently was not made, thus resulting in the non-consummation of the loan intended to be granted by private respondents to New Sikatuna Wood Industries, Inc., constitutes a good defense against petitioner who is not a holder in due course. 12

It is then settled that crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain the indorser's title to the check or the nature of his possession. Failing in this respect, the holder is declared guilty of gross negligence amounting to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable Instruments Law, 13 and as such the consensus of authority is to the effect that the holder of the check is not a holder in due course.

In the present case, BCCFI's defense in stopping payment is as good to SIHI as it is to George King. Because, really, the checks were issued with the intention that George King would supply BCCFI with the bales of tobacco leaf. There being failure of consideration, SIHI is not a holder in due course. Consequently, BCCFI cannot be obliged to pay the checks.

The foregoing does not mean, however, that respondent could not recover from the checks. The only disadvantage of a holder who is not a holder in due course is that the instrument is subject to defenses as if it werenon-negotiable. 14 Hence, respondent can collect from the immediate indorser, in this case, George King.

WHEREFORE, finding that the court a quo erred in the application of law, the instant petition is hereby GRANTED. The decision of the Regional Trial Court as affirmed by the Court of Appeals is hereby REVERSED. Cost against private respondent.

SO ORDERED.

Narvasa, C.J., Regalado and Puno, JJ., concur.

SECOND DIVISION ROBERT DINO, G.R. No. 170912 Petitioner, Present: CARPIO, J., Chairperson, - versus - BRION, DEL CASTILLO, ABAD, andMARIA LUISA JUDAL-LOOT, PEREZ, JJ.joined by her husbandVICENTE LOOT, Promulgated: Respondents. April 19, 2010x-----------------------------------------------------------------------------------------x D E C I S I O N CARPIO, J.: The Case

This is a petition for review[1] of the 16 August 2005 Decision[2] and 30 November

2005 Resolution[3] of the Court of Appeals in CA-G.R. CV No. 57994. The Court of

Appeals affirmed the decision of the Regional Trial Court, 7th Judicial Region, Branch

56, Mandaue City (trial court), with the deletion of the award of interest, moral damages,

attorney’s fees and litigation expenses. The trial court ruled that respondents Maria

Luisa Judal-Loot and Vicente Loot are holders in due course of Metrobank Check No.

C-MA 142119406 CA and ordered petitioner Robert Dino as drawer, together with co-

defendant Fe Lobitana as indorser, to solidarily pay respondents the face value of the

check, among others. The Facts

Sometime in December 1992, a syndicate, one of whose members posed as an

owner of several parcels of land situated in Canjulao, Lapu-lapu City, approached

petitioner and induced him to lend the group P3,000,000.00 to be secured by a real

estate mortgage on the properties. A member of the group, particularly a woman

pretending to be a certain Vivencia Ompok Consing, even offered to execute a Deed of

Absolute Sale covering the properties, instead of the usual mortgage contract. [4]Enticed

and convinced by the syndicate’s offer, petitioner issued three Metrobank checks

totaling P3,000,000.00, one of which is Check No. C-MA-142119406-CA postdated 13

February 1993 in the amount of P1,000,000.00 payable to Vivencia Ompok Consing

and/or Fe Lobitana.[5]

Upon scrutinizing the documents involving the properties, petitioner discovered

that the documents covered rights over government properties. Realizing he had been

deceived, petitioner advised Metrobank to stop payment of his checks. However, only

the payment of Check No. C-MA- 142119406-CA was ordered stopped. The other two

checks were already encashed by the payees.

Meanwhile, Lobitana negotiated and indorsed Check No. C-MA- 142119406-CA to

respondents in exchange for cash in the sum of P948,000.00, which respondents

borrowed from Metrobank and charged against their credit line. Before respondents

accepted the check, they first inquired from the drawee bank, Metrobank, Cebu-Mabolo

Branch which is also their depositary bank, if the subject check was sufficiently funded,

to which Metrobank answered in the positive. However, when respondents deposited

the check with Metrobank, Cebu-Mabolo Branch, the same was dishonored by the

drawee bank for reason “PAYMENT STOPPED.”

Respondents filed a collection suit[6] against petitioner and Lobitana before the trial

court. In their Complaint, respondents alleged, among other things, that they are holders

in due course and for value of Metrobank Check No. C-MA-142119406-CA and that

they had no prior information concerning the transaction between defendants.

In his Answer, petitioner denied respondents’ allegations that “on the face of the

subject check, no condition or limitation was imposed” and that respondents are holders

in due course and for value of the check. For her part, Lobitana denied the allegations

in the complaint and basically claimed that the transaction leading to the issuance of the

subject check is a sale of a parcel of land by Vivencia Ompok Consing to petitioner and

that she was made a payee of the check only to facilitate its discounting.

The trial court ruled in favor of respondents and declared them due course holders

of the subject check, since there was no privity between respondents and

defendants. The dispositive portion of the 14 March 1996 Decision of the trial court

reads:

In summation, this Court rules for the Plaintiff and against the Defendants and hereby orders:

1.) defendants to pay to Plaintiff, and severally, the amount of P1,000,000.00 representing the face value of subject Metrobank check;

2.) to pay to Plaintiff herein, jointly and severally, the sum of P101,748.00 for accrued and paid interest;

3.) to pay to Plaintiff, jointly and severally, moral damages in the amount of P100,000.00;

4.) to pay to Plaintiff, jointly and severally, the sum

of P200,000.00 for attorney’s fees; and5.) to pay to Plaintiff, jointly and severally, litigation

expenses in the sum of P10,000.00 and costs of the suit. SO ORDERED.[7]

Only petitioner filed an appeal. Lobitana did not appeal the trial court’s judgment.

The Ruling of the Court of Appeals

The Court of Appeals affirmed the trial court’s finding that respondents are holders

in due course of Metrobank Check No. C-MA- 142119406-CA. The Court of Appeals

pointed out that petitioner’s own admission that respondents were never parties to the

transaction among petitioner, Lobitana, Concordio Toring, Cecilia Villacarlos, and

Consing, proved respondents’ lack of knowledge of any infirmity in the instrument or

defect in the title of the person negotiating it. Moreover, respondents verified from

Metrobank whether the check was sufficiently funded before they accepted it.

Therefore, respondents must be excluded from the ambit of petitioner’s stop payment

order.

The Court of Appeals modified the trial court’s decision by deleting the award of

interest, moral damages, attorney’s fees and litigation expenses. The Court of Appeals

opined that petitioner “was only exercising (although incorrectly), what he perceived to

be his right to stop the payment of the check which he rediscounted.” The Court of

Appeals ruled that petitioner acted in good faith in ordering the stoppage of payment of

the subject check and thus, he must not be made liable for those amounts.

In its 16 August 2005 Decision, the Court of Appeals affirmed the trial court’s

decision with modifications, thus:

WHEREFORE, premises considered, finding no reversible error in the decision of the lower court, WE hereby DISMISS the appeal and AFFIRM the decision of the court a quo with modifications that the award of interest, moral damages, attorney’s fees and litigation expenses be deleted. No pronouncement as to costs.

SO ORDERED.[8]

In its 30 November 2005 Resolution, the Court of Appeals denied petitioner’s

motion for reconsideration.

In denying the petitioner’s motion for reconsideration, the Court of Appeals noted

that petitioner raised the defense that the check is a crossed check for the first time on

appeal (particularly in the motion for reconsideration). The Court of Appeals rejected

such defense considering that to entertain the same would be offensive to the basic

rules of fair play, justice, and due process.

Hence, this petition.

The Issues Petitioner raises the following issues:

I. THE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENTS WERE HOLDERS IN DUE COURSE. THE FACT THAT METROBANK CHECK NO. 142119406 IS A CROSSED CHECK CONSTITUTES SUFFICIENT WARNING TO THE RESPONDENTS TO EXERCISE EXTRAORDINARY DILIGENCE TO DETERMINE THE TITLE OF THE INDORSER. II. THE COURT OF APPEALS ERRED IN DENYING PETITIONER’S MOTION FOR RECONSIDERATION UPON THE GROUND THAT THE ARGUMENTS RELIED UPON HAVE ONLY BEEN RAISED FOR THE FIRST TIME. EQUITY DEMANDS THAT THE COURT OF APPEALS SHOULD HAVE MADE AN EXCEPTION TO PREVENT THE COMMISSION OF MANIFEST WRONG AND INJUSTICE UPON THE PETITIONER.[9]

The Ruling of this Court

The petition is meritorious.

Respondents point out that petitioner raised the defense that Metrobank Check

No. C-MA-142119406-CA is a crossed check for the first time in his motion for

reconsideration before the Court of Appeals. Respondents insist that issues not raised

during the trial cannot be raised for the first time on appeal as it would be offensive to

the elementary rules of fair play, justice and due process. Respondents further assert

that a change of theory on appeal is improper.

In his Answer, petitioner specifically denied, among others, (1) Paragraph

4 of the Complaint, concerning the allegation that on the face of the subject check, no

condition or limitation was imposed, and (2) Paragraph 8 of the Complaint,

regarding the allegation that respondents were holders in due course and for value of

the subject check. In his “Special Affirmative Defenses,” petitioner claimed that “for

want or lack of the prestation,” he could validly stop the payment of his check, and that

by rediscounting petitioner’s check, respondents “took the risk of what might happen on

the check.” Essentially, petitioner maintained that respondents are not holders in due

course of the subject check, and as such, respondents could not recover any liability on

the check from petitioner.

Indeed, petitioner did not expressly state in his Answer or raise during the trial that

Metrobank Check No. C-MA-142119406-CA is a crossed check. It must be stressed,

however, that petitioner consistently argues that respondents are not holders in due

course of the subject check, which is one of the possible effects of crossing a

check. The act of crossing a check serves as a warning to the holder that the check

has been issued for a definite purpose so that the holder thereof must inquire if he has

received the check pursuant to that purpose; otherwise, he is not a holder in due

course.[10] Contrary to respondents’ view, petitioner never changed his theory, that

respondents are not holders in due course of the subject check, as would violate

fundamental rules of justice, fair play, and due process. Besides, the subject check

was presented and admitted as evidence during the trial and respondents did not and in

fact cannot deny that it is a crossed check.

In any event, the Court is clothed with ample authority to entertain issues or

matters not raised in the lower courts in the interest of substantial justice. [11] In Casa

Filipina Realty v. Office of the President,[12] the Court held:

[T]he trend in modern-day procedure is to accord the courts broad discretionary power such that the appellate court may consider matters bearing on the issues submitted for resolution which the parties failed to raise or which the lower court ignored. Since rules of procedure are mere tools designed to facilitate the attainment of justice, their strict and rigid application which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be avoided. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.[13]

Having disposed of the procedural issue, the Court shall now proceed to the

merits of the case. The main issue is whether respondents are holders in due course of

Metrobank Check No. C-MA 142119406 CA as to entitle them to collect the face value

of the check from its drawer or petitioner herein.

Section 52 of the Negotiable Instruments Law defines a holder in due course,

thus:

A holder in due course is a holder who has taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;(b) That he became the holder of it before it was overdue,

and without notice that it has been previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;(d) That at the time it was negotiated to him, he had no

notice of any infirmity in the instrument or defect in the title of the person negotiating it.

In the case of a crossed check, as in this case, the following principles must

additionally be considered: A crossed check (a) may not be encashed but only

deposited in the bank; (b) may be negotiated only once — to one who has an account

with a bank; and (c) warns the holder that it has been issued for a definite purpose so

that the holder thereof must inquire if he has received the check pursuant to that

purpose; otherwise, he is not a holder in due course.[14]

Based on the foregoing, respondents had the duty to ascertain the indorser’s, in

this case Lobitana’s, title to the check or the nature of her possession. This respondents

failed to do. Respondents’ verification from Metrobank on the funding of the check does

not amount to determination of Lobitana’s title to the check. Failing in this respect,

respondents are guilty of gross negligence amounting to legal absence of good faith,[15] contrary to Section 52(c) of the Negotiable Instruments Law. Hence, respondents

are not deemed holders in due course of the subject check.[16]

State Investment House v. Intermediate Appellate Court[17] squarely applies to this

case. There, New Sikatuna Wood Industries, Inc. sold at a discount to State

Investment House three post-dated crossed checks, issued by Anita Peña Chua

naming as payee New Sikatuna Wood Industries, Inc. The Court found State

Investment House not a holder in due course of the checks. The Court also expounded

on the effect of crossing a check, thus: Under usual practice, crossing a check is done by placing two parallel lines diagonally on the left top portion of the check. The crossing may be special wherein between the two parallel lines is written the name of a bank or a business institution, in which case the drawee should pay only with the intervention of that bank or company, or crossing may be general wherein between two parallel diagonal lines are written the words “and Co.” or none at all as in the case at bar, in which case the drawee should not encash the same but merely accept the same for deposit.

The effect therefore of crossing a check relates to the mode of its presentment for payment. Under Section 72 of the Negotiable Instruments Law, presentment for payment to be sufficient must be made (a) by the holder, or by some person authorized to receive payment on his

behalf x x x As to who the holder or authorized person will be depends on the instructions stated on the face of the check. The three subject checks in the case at bar had been crossed generally and issued payable to New Sikatuna Wood Industries, Inc. which could only mean that the drawer had intended the same for deposit only by the rightful person, i.e., the payee named therein. Apparently, it was not the payee who presented the same for payment and therefore, there was no proper presentment, and the liability did not attach to the drawer. Thus, in the absence of due presentment, the drawer did not become liable. Consequently, no right of recourse is available to petitioner against the drawer of the subject checks, private respondent wife, considering that petitioner is not the proper party authorized to make presentment of the checks in question.

In this case, there is no question that the payees of the check, Lobitana or

Consing, were not the ones who presented the check for payment. Lobitana negotiated

and indorsed the check to respondents in exchange for P948,000.00. It was

respondents who presented the subject check for payment; however, the check was

dishonored for reason “PAYMENT STOPPED.” In other words, it was not the payee

who presented the check for payment; and thus, there was no proper presentment. As

a result, liability did not attach to the drawer. Accordingly, no right of recourse is

available to respondents against the drawer of the check, petitioner herein, since

respondents are not the proper party authorized to make presentment of the subject

check.

However, the fact that respondents are not holders in due course does not

automatically mean that they cannot recover on the check.[18] The Negotiable

Instruments Law does not provide that a holder who is not a holder in due course may

not in any case recover on the instrument. The only disadvantage of a holder who is not

in due course is that the negotiable instrument is subject to defenses as if it were non-

negotiable.[19] Among such defenses is the absence or failure of consideration, [20]which

petitioner sufficiently established in this case. Petitioner issued the subject check

supposedly for a loan in favor of Consing’s group, who turned out to be a syndicate

defrauding gullible individuals. Since there is in fact no valid loan to speak of, there is

no consideration for the issuance of the check. Consequently, petitioner cannot be

obliged to pay the face value of the check.

Respondents can collect from the immediate indorser,[21] in this case

Lobitana. Significantly, Lobitana did not appeal the trial court’s decision, finding her

solidarily liable to pay, among others, the face value of the subject check. Therefore,

the trial court’s judgment has long become final and executory as to Lobitana.

WHEREFORE, we GRANT the petition. We SET ASIDE the 16 August 2005

Decision and 30 November 2005 Resolution of the Court of Appeals in CA-G.R. CV No.

57994.

SO ORDERED.

Republic of the Philippines

Supreme CourtManila

FIRST DIVISION

PEOPLE OF THE PHILIPPINES,

Plaintiff-Appellee,

- versus -

VIRGINIA BABY P. MONTANER,

Accused-Appellant.

G.R. No. 184053 Present:

CORONA, C.J.,

Chairperson,

LEONARDO-DE CASTRO,

BERSAMIN,

DEL CASTILLO, and

VILLARAMA, JR., JJ.

Promulgated:

August 31, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

D E C I S I O N

LEONARDO-DE CASTRO, J.:

This is an appeal of the Decision[1] dated February 12, 2008 of the Court of Appeals in CA-G.R. CR.-H.C. No. 01162, entitled People of the Philippines v. Virginia Baby P. Montaner, which affirmed the Decision[2] dated April 8, 2003 of the Regional Trial Court (RTC) of San Pedro, Laguna, Branch 93, in Criminal Case No. 0748-SPL. The RTC found appellant Virginia Baby P. Montaner guilty beyond reasonable doubt of the crime of estafa as defined and penalized under paragraph 2(d), Article 315 of the Revised Penal Code.

In an Information[3] dated April 21, 1998, appellant was charged as follows:

That on or about May 17, 1996 in the Municipality of San Pedro, Province of Laguna and within the jurisdiction of this Honorable Court accused Virginia (Baby) P. Montaner did then and there willfully, unlawfully and feloniously defraud one Reynaldo Solis in the following manner: said accused by means of false pretenses and fraudulent acts that her checks are fully funded draw, make and issue in favor of one Reynaldo Solis the following Prudential Bank Checks Nos.:

1. 0002284 P5,000.002. 0002285 P5,000.003. 0002286 P5,000.004. 0002287 P5,000.005. 0002288 P5,000.006. 0002289 P5,000.007. 0002290 P5,000.00

http://sc.judiciary.gov.ph/jurisprudence/2011/august2011/184053.htm#_ftn3



8. 0002291 P5,000.009. 0002292 P5,000.0010. 0002293 P5,000.00

all having a total value of FIFTY THOUSAND PESOS (P50,000.00) and all aforesaid checks are postdated June 17, 1996 in exchange for cash knowing fully well that she has no funds in the drawee bank and when the said checks were presented for payment the same were dishonored by the drawee bank on reason of “ACCOUNT CLOSED” and despite demand accused failed and refused to pay the value thereof to the damage and prejudice of Reynaldo Solis in the aforementioned total amount of P50,000.00.

Appellant pleaded “not guilty” to the charge leveled against her during her arraignment on June 10, 1998.[4] Thereafter, trial ensued.

The parties’ evidence was summarized by the trial court, as follows:

The evidence for the prosecution disclose that on May 17, 1996, accused Virginia Baby P. Montaner, in exchange for cash, issued to private complainant Reynaldo Solis in his house at Caliraya Street, Holiday Homes, San Pedro, Laguna, ten (10) Prudential Bank checks, specifically, check nos. 0002284, 0002285, 0002286, 0002287, 0002288, 0002289, 0002290, 0002291, 0002292, and 0002293 all postdated June 17, 1996, each in the amount of P5,000.00 all in the total amount of P50,000.00. Accused represented to complainant Solis that the checks were fully funded. When private complainant deposited the checks for encashment however, they were dishonored for the reason “account closed”. Private complainant verbally and thereafter, thru demand letter (Exhibit “A”) formally demanded that accused settle her accounts. Despite receipt of the demand letter, accused Montaner failed to pay the value of the ten (10) checks, thus private complainant Reynaldo Solis filed the instant complaint for estafa. In connection with this complaint, private complainant Solis executed a sworn statement (Exhibit “D”).

Ruel Allan Pajarito, Branch Cashier O-I-C of Prudential Bank testified that they placed the mark “account closed” on the ten (10) checks issued in the account of


accused Montaner considering that at the time the same were presented to them, the account of accused Montaner was already closed. Witness Pajarito further testified that as per their records, the account of accused Montaner, account no. 00099-000050-4 was closed on July 11, 1996. The checks were returned on October 4, 1996 for the reason account closed.

Accused, thru counsel initially manifested that she is intending to file a demurrer to evidence. However, her right to file the same was considered waived in view of her failure to file the demurrer despite due notice.

To exculpate herself from criminal liability, accused Virginia Baby P. Montaner denied the allegations that she issued ten (10) checks in private complainant’s favor claiming that the ten (10) checks were borrowed from her by one Marlyn Galope because the latter needed money. She gave the ten checks to Galope, signed the same albeit the space for the date, amount and payee were left blank so that the checks cannot be used for any negotiation. She further told Galope that the checks were not funded. When she learned that a case was filed against her for estafa, she confronted Marlyn Galope and the latter told her that money will not be given to her if she will not issue the said checks. She has no knowledge of the notice of dishonor sent to her by private complainant and claimed that her husband, who supposedly received the notice of dishonor left for abroad in July 1996 and returned only after a year, that is, in 1997.[5]

In a Decision dated April 8, 2003, the trial court convicted appellant for the crime of estafa as defined and penalized under paragraph 2(d), Article 315 of the Revised Penal Code. The dispositive portion of said Decision reads:

WHEREFORE, this Court hereby sentences accused Virginia Baby P. Montaner to suffer an indeterminate penalty of imprisonment from twelve (12) years of prision mayor as minimum to twenty-two (22) years of reclusion perpetua as maximum and to indemnify complainant Reynaldo Solis in the amount of P50,000.00.[6]



Appellant elevated the case to the Court of Appeals but the adverse ruling was merely affirmed by the appellate court in its Decision dated February 12, 2008, the dispositive portion of which states:

WHEREFORE, premises considered, the instant petition is DENIED. Accordingly, the challenged Decision is hereby AFFIRMED intoto.[7]

Hence, appellant interposed this appeal before this Court and adopted her Appellant’s Brief with the Court of Appeals, wherein she put forth a single assignment of error:

THE TRIAL COURT GRAVELY ERRED IN FINDING THE ACCUSED–APPELLANT GUILTY BEYOND REASONABLE DOUBT OF THE CRIME OF ESTAFA UNDER ARTICLE 315, PAR. 2 (D) OF THE REVISED PENAL CODE.[8]

Appellant maintains that she entrusted the subject checks, purportedly signed in blank, to Marilyn Galope (Galope) out of pity in order for the latter to secure a loan. Thus, there is purportedly no certainty beyond reasonable doubt that she issued the checks purposely to defraud Reynaldo Solis (Solis) into lending her money. She further claims that no transaction had ever transpired between her and Solis. Admitting that she may have been imprudent, she nonetheless insists that her simple imprudence does not translate to criminal liability.

We are not persuaded.

Paragraph 2(d), Article 315 of the Revised Penal Code provides:



ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the means mentioned hereinbelow x x x:

x x x x

2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud:

x x x x

(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.

The elements of estafa under paragraph 2(d), Article 315 of the Revised Penal Code are: (1) the postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) lack of sufficiency of funds to cover the check; and (3) damage to the payee.[9]

In the case at bar, the prosecution sufficiently established appellant’s guilt beyond reasonable doubt for estafa under paragraph 2(d), Article 315 of the Revised Penal Code. According to Solis’s clear and categorical testimony, appellant issued to him the 10 postdated Prudential Bank checks, each in the amount of P5,000.00 or a total of P50,000.00, in his house in exchange for their cash equivalent. We quote the pertinent portions of the transcript:


[On Direct Examination]

Q: Mr. Witness, why did you file this complaint against the accused?

A: She issued me checks in exchange for cash, ten postdated checks, ma’am.

Q: When did Mrs. Montaner issue to you these checks?

A: In May 1996, ma’am.

Q: What was the purpose of issuing to you these checks?

A: Because she needed cash, ma’am.

Q: And how many checks did she issue to you?

A: Ten checks, ma’am.

Q: And what is the date of the checks that were issued to you?

A: June 17, 1996, ma’am.

Q: What is the total value of these ten checks?

A: Fifty Thousand Pesos.

Q: At the time these checks were issued to you, what if any, was her representation about them?

A: To deposit those checks on their due date, ma’am.

Q: And aside from telling you to deposit those checks on their due date, what else did she represent to you regarding these checks?

A: None, ma’am.

Q: Did you deposit these checks?

A: Yes, ma’am.

Q: Where?

A: At the Premier Bank, San Pedro, Laguna.

Q: What happened to these checks after depositing the same?

A: The checks bounced, ma’am.

Q: All these checks?

A: Yes, ma’am, all checks bounced for reason account closed.

Q: After these checks were dishonored what did you do?

A: I informed her about that.

Q: Thru what, verbal or written?

A: Initially it was verbal, then I informed her thru a demand letter, ma’am.

x x x x

Fiscal (continuing):

Q: You said that the accused issued to you ten checks in exchange for cash, where are those checks?

A. The original checks are with me here, ma’am.

Q. Handed to this representation are checks, Prudential Bank checks Nos. 002284, 002285, 002286, 002287, 002288, 002289, 002290, 002291, 002292, 002293 all dated June 17, 1996 and all in the amount of P50,000 [should be P5,000.00] each. Mr. Witness, there appears from these checks a signature at the bottom portion whose signature is this?

A. The signature of Mrs. Montaner, ma’am.

Q. Why do you say it is her signature?

A. She signed those in my presence, ma’am.

Q. I am showing these checks to the opposing counsel for comparison…

Atty. Peñala

The checks are admitted, your Honor.

x x x x

[On Cross-Examination]

Atty. Peñala (continuing):

Q: When Mrs. Montaner issued those checks, ten checks were they issued in your house or in her house?

A: In my house, sir.

Q: Mrs. Montaner brought the checks in your house?

A: Yes, sir.

Q: Can you tell us the time of the day when she brought the checks to you?

A: May 17, 1996 at 1:00 o’clock in the afternoon, sir.

Q: Was she alone or including her husband?

A: She was alone, sir.[10]

From the circumstances narrated above, it was evident that Solis would not have given P50,000.00 cash to appellant had it not been for her issuance of the 10 Prudential Bank checks. These postdated checks were undoubtedly issued by appellant to induce Solis to part with his cash. However, when Solis attempted to encash them, they were all dishonored by the bank because the account was already closed.

Solis wrote appellant a demand letter dated October 13, 1996[11] which was received by appellant’s husband to inform appellant that her postdated checks had bounced and that she must settle her obligation or else face legal action from Solis. Appellant did not comply with the demand nor did she deposit the amount necessary to cover the checks within three days from receipt of notice. This gave rise to a prima facie evidence of deceit, which is an element of the crime of estafa, constituting false pretense or fraudulent act as stated in the second sentence of paragraph 2(d), Article 315 of the Revised Penal Code.

As for appellant’s claims that she merely entrusted to Galope the blank but signed checks imprudently, without knowing that Galope would give them as a guarantee for a loan, the Court views such statements with the same incredulity as the lower courts.



Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in itself – such as the common experience and observation of mankind can approve as probable under the circumstances. The Court has no test of the truth of human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous and is outside judicial cognizance.[12]

Appellant wishes to impress upon the Court that she voluntarily parted with her blank but signed checks not knowing or even having any hint of suspicion that the same may be used to defraud anyone who may rely on them. Verily, appellant’s assertion defies ordinary common sense and human experience.

Moreover, it is elementary that denial, if unsubstantiated by clear and convincing evidence, is negative and self-serving evidence which has far less evidentiary value than the testimony of credible witnesses who testify on affirmative matters.[13] We agree with the lower courts that appellant’s bare denial cannot be accorded credence for lack of evidentiary support. As aptly noted by the trial court, appellant’s failure to produce Galope as a witness to corroborate her story is fatal to her cause.[14] In all, the Court of Appeals committed no error in upholding the conviction of appellant for estafa.

WHEREFORE, premises considered, the Decision dated February 12, 2008 of the Court of Appeals in CA-G.R. CR.-H.C. No. 01162 is hereby AFFIRMED.

SO ORDERED.




Republic of the PhilippinesSupreme Court

Manila

SECOND DIVISION

EUMELIA R. MITRA, Petitioner,

- versus -

PEOPLE OF THE PHILIPPINESand FELICISIMO S. TARCELO,

Respondents.

G.R. NO. 191404 Present: CARPIO, J., Chairperson,NACHURA,PERALTA,ABAD, andMENDOZA, JJ. Promulgated: July 5, 2010

X --------------------------------------------------------------------------------------X

D E C I S I O N

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court

assailing the July 31, 2009 Decision[1] and the February 11, 2010 Resolution of the

Court of Appeals (CA) in CA-G.R. CR No. 31740. The subject decision and

resolution affirmed the August 22, 2007 Decision of the Regional Trial Court,

Branch 2, Batangas City (RTC) which, in turn, affirmed the May 21, 2007

Decision of the Municipal Trial Court in Cities, Branch 2, Batangas City (MTCC).

THE FACTS:

Petitioner Eumelia R. Mitra (Mitra) was the Treasurer, and Florencio L.

Cabrera, Jr. (now deceased) was the President, of Lucky Nine Credit

Corporation (LNCC), a corporation engaged in money lending activities.

Between 1996 and 1999, private respondent Felicisimo S.

Tarcelo (Tarcelo) invested money in LNCC. As the usual practice in money

placement transactions, Tarcelo was issued checks equivalent to the amounts he

invested plus the interest on his investments. The following checks, signed by

Mitra and Cabrera, were issued by LNCC to Tarcelo.[2]

Bank Date Issued Date of Check Amount Check No.

Security Bank September 15, 1998 January 15, 1999 P 3,125.00 0000045804

-do- September 15, 1998 January 15, 1999 125,000.00 0000045805





-do- October 3, 1998 February 3, 1999 2,500.00 0000045875

-do- October 3, 1998 February 3, 1999 100,000.00 0000045876

-do- November 17, 1998 February17, 1999 5,000.00 0000046061

-do- November 17, 1998 March 17, 1999 5,000.00 0000046062


-do- November 19, 1998 January 19, 1999 2,500.00 0000046065

-do- November 19, 1998 February19, 1999 2,500.00 0000046066




-do- November 20, 1998 February 20, 1999 10,000.00 0000046071




-do- November 30, 1998 February 28, 1999 2,500.00 0000046076



When Tarcelo presented these checks for payment, they were dishonored for

the reason “account closed.” Tarcelo made several oral demands on LNCC for the

payment of these checks but he was frustrated. Constrained, in 2002, he caused the

filing of seven informations for violation of Batas Pambansa Blg. 22 (BP 22) in the

total amount of P925,000.00 with the MTCC in Batangas City.[3]

After trial on the merits, the MTCC found Mitra and Cabrera guilty of the

charges. The fallo of the May 21, 2007 MTCC Decision[4] reads:

WHEREFORE, foregoing premises considered, the

accused FLORENCIO I. CABRERA, JR., and EUMELIA R. MITRA are hereby found guilty of the offense of violation of Batas Pambansa Bilang 22 and are hereby ORDERED to respectively pay the following fines for each violation and with subsidiary imprisonment in all cases, in case of insolvency:

1. Criminal Case No. 43637 - P200,000.002. Criminal Case No. 43640 - P100,000.003. Criminal Case No. 43648 - P100,000.004. Criminal Case No. 43700 - P125,000.005. Criminal Case No. 43702 - P200,000.006. Criminal Case No. 43704 - P100,000.007. Criminal Case No. 43706 - P100,000.00

Said accused, nevertheless, are adjudged civilly

liable and are ordered to pay, in solidum, private complainant Felicisimo S. Tarcelo the amount of NINE HUNDRED TWENTY FIVE THOUSAND PESOS (P925,000.000). SO ORDERED.

Mitra and Cabrera appealed to the Batangas RTC contending that: they

signed the seven checks in blank with no name of the payee, no amount stated and

no date of maturity; they did not know when and to whom those checks would be

issued; the seven checks were only among those in one or two booklets of checks

they were made to sign at that time; and that they signed the checks so as not to

delay the transactions of LNCC because they did not regularly hold office there.[5]

The RTC affirmed the MTCC decision and later denied their motion for

reconsideration. Meanwhile, Cabrera died. Mitra alone filed this petition for

review[6] claiming, among others, that there was no proper service of the notice of

dishonor on her. The Court of Appeals dismissed her petition for lack of merit.

Mitra is now before this Court on a petition for review and submits these

issues:

1. WHETHER OR NOT THE ELEMENTS OF

VIOLATION OF BATAS PAMBANSA BILANG 22 MUST BE PROVED BEYOND REASONABLE DOUBT AS AGAINST THE CORPORATION WHO OWNS THE CURRENT ACCOUNT WHERE THE SUBJECT CHECKS WERE DRAWN BEFORE LIABILITY ATTACHES TO THE SIGNATORIES.

2. WHETHER OR NOT THERE IS PROPER SERVICE OF NOTICE OF DISHONOR AND DEMAND TO PAY TO THE PETITIONER AND THE LATE FLORENCIO CABRERA, JR.

The Court denies the petition.

A check is a negotiable instrument that serves as a substitute for money and

as a convenient form of payment in financial transactions and obligations. The use

of checks as payment allows commercial and banking transactions to proceed

without the actual handling of money, thus, doing away with the need to physically

count bills and coins whenever payment is made. It permits commercial and

banking transactions to be carried out quickly and efficiently. But the convenience

afforded by checks is damaged by unfunded checks that adversely affect

confidence in our commercial and banking activities, and ultimately injure public

interest.

BP 22 or the Bouncing Checks Law was enacted for the specific purpose of

addressing the problem of the continued issuance and circulation of unfunded

checks by irresponsible persons. To stem the harm caused by these bouncing

checks to the community, BP 22 considers the mere act of issuing an unfunded

check as an offense not only against property but also against public order. [7] The

purpose of BP 22 in declaring the mere issuance of a bouncing check as malum

prohibitum is to punish the offender in order to deter him and others from

committing the offense, to isolate him from society, to reform and rehabilitate him,

and to maintain social order.[8] The penalty is stiff. BP 22 imposes the penalty of

imprisonment for at least 30 days or a fine of up to double the amount of the check

or both imprisonment and fine.

Specifically, BP 22 provides:

SECTION 1. Checks Without Sufficient Funds. — Any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred Thousand Pesos, or both such fine and imprisonment at the discretion of the court.

The same penalty shall be imposed upon any person

who, having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check, shall fail to keep sufficient funds or to maintain a credit to cover the full amount of the check if presented within a

period of ninety (90) days from the date appearing thereon, for which reason it is dishonored by the drawee bank.

Where the check is drawn by a corporation,

company or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act.

SECTION 2. Evidence of Knowledge of Insufficient

Funds. — The making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank, when presented within ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee.

Mitra posits in this petition that before the signatory to a bouncing corporate

check can be held liable, all the elements of the crime of violation of BP 22 must

first be proven against the corporation. The corporation must first be declared to

have committed the violation before the liability attaches to the signatories of the

checks.[9]

The Court finds Itself unable to agree with Mitra’s posture. The third

paragraph of Section 1 of BP 22 reads: "Where the check is drawn by a

corporation, company or entity, the person or persons who actually signed the

check in behalf of such drawer shall be liable under this Act." This provision

recognizes the reality that a corporation can only act through its officers. Hence, its

wording is unequivocal and mandatory – that the person who actually

signed the corporate check shall be held liable for a violation of BP 22. This

provision does not contain any condition, qualification or limitation.

In the case of Llamado v. Court of Appeals,[10] the Court ruled that the

accused was liable on the unfunded corporate check which he signed as treasurer

of the corporation. He could not invoke his lack of involvement in the negotiation

for the transaction as a defense because BP 22 punishes the mere issuance of a

bouncing check, not the purpose for which the check was issued or in

consideration of the terms and conditions relating to its issuance. In this case, Mitra

signed the LNCC checks as treasurer. Following Llamado, she must then be held

liable for violating BP 22.

Another essential element of a violation of BP 22 is the drawer’s knowledge

that he has insufficient funds or credit with the drawee bank to cover his check.

Because this involves a state of mind that is difficult to establish, BP 22 creates

the prima facie presumption that once the check is dishonored, the drawer of the

check gains knowledge of the insufficiency, unless within five banking days from

receipt of the notice of dishonor, the drawer pays the holder of the check or makes

arrangements with the drawee bank for the payment of the check. The service of

the notice of dishonor gives the drawer the opportunity to make good the check

within those five days to avert his prosecution for violating BP 22.

Mitra alleges that there was no proper service on her of the notice of

dishonor and, so, an essential element of the offense is missing. This contention

raises a factual issue that is not proper for review. It is not the function of the Court

to re-examine the finding of facts of the Court of Appeals. Our review is limited to

errors of law and cannot touch errors of facts unless the petitioner shows that the

trial court overlooked facts or circumstances that warrant a different disposition of

the case[11] or that the findings of fact have no basis on record. Hence, with respect

to the issue of the propriety of service on Mitra of the notice of dishonor, the Court

gives full faith and credit to the consistent findings of the MTCC, the RTC and the

CA.

The defense postulated that there was no demand served upon the accused, said denial deserves scant consideration. Positive allegation of the prosecution that a demand letter was served upon the accused prevails over the denial made by the accused. Though, having denied that there was no demand letter served on April 10, 2000, however,the prosecution positively alleged and proved that the questioned demand letter was served upon the accused on April 10, 2000, that was at the time they were attending Court hearing before Branch I of this Court. In fact, the prosecution had submitted a Certification issued by the other Branch of this Court certifying the fact that the accused were present during the April 10, 2010 hearing. With such straightforward and categorical testimony of the witness, the Court believes that the prosecution has achieved what was dismally lacking in the three (3) cases of Betty King, Victor Ting and Caras – evidence of the receipt by the accused of the demand letter sent to her. The Court accepts the prosecution’s narrative that the accused refused to sign the same to evidence their receipt thereof. To require the prosecution to produce the signature of the accused on said demand letter would be imposing an undue hardship on it. As well, actual receipt acknowledgment is not and has never been required of the prosecution either by law or jurisprudence.[12] [emphasis supplied]

With the notice of dishonor duly served and disregarded, there arose the

presumption that Mitra and Cabrera knew that there were insufficient funds to

cover the checks upon their presentment for payment. In fact, the account was

already closed.

To reiterate the elements of a violation of BP 22 as contained in the above-

quoted provision, a violation exists where:

1. a person makes or draws and issues a check to apply on

account or for value;

2. the person who makes or draws and issues the check

knows at the time of issue that he does not have

sufficient funds in or credit with the drawee bank for the

full payment of the check upon its presentment; and

3. the check is subsequently dishonored by the drawee

bank for insufficiency of funds or credit, or would have

been dishonored for the same reason had not the

drawer, without any valid reason, ordered the bank to

stop payment. [13]

There is no dispute that Mitra signed the checks and that the bank

dishonored the checks because the account had been closed. Notice of dishonor

was properly given, but Mitra failed to pay the checks or make arrangements for

their payment within five days from notice. With all the above elements duly

proven, Mitra cannot escape the civil and criminal liabilities that BP 22 imposes

for its breach.[14]

WHEREFORE, the July 31, 2009 Decision and the February 11, 2010

Resolution of the Court of Appeals in CA-G.R. CR No. 31740 are

hereby AFFIRMED.

SO ORDERED.