Professional Documents
Culture Documents
On April 23, 1958 one of the above-mentioned money orders numbered 124688 was
received by appellant as part of its sales receipts. The following day it deposited the
same with the Bank of America, and one day thereafter the latter cleared it with the
Bureau of Posts and received from the latter its face value of P200.00.
On September 27, 1961, appellee Mauricio A. Soriano, Chief of the Money Order
Division of the Manila Post Office, acting for and in behalf of his co-appellee,
Postmaster Enrico Palomar, notified the Bank of America that money order No.
124688 attached to his letter had been found to have been irregularly issued and that,
in view thereof, the amount it represented had been deducted from the banks
clearing account. For its part, on August 2 of the same year, the Bank of America
debited appellants account with the same amount and gave it advice thereof by
means of a debit memo.
DECISION
DIZON, J.:
An appeal from a decision of the Court of First Instance of Manila dismissing the
complaint filed by the Philippine Education Co., Inc. against Mauricio A. Soriano,
Enrico Palomar and Rafael Contreras.
On October 12, 1961 appellant requested the Postmaster General to reconsider the
action taken by his office deducting the sum of P200.00 from the clearing account of
the Bank of America, but his request was denied. So was appellants subsequent
request that the matter be referred to the Secretary of Justice for advice. Thereafter,
appellant elevated the matter to the Secretary of Public Works and Communications,
but the latter sustained the actions taken by the postal officers.
On April 18, 1958 Enrique Montinola sought to purchase from the Manila Post
Office ten (10) money orders of P200.00 each payable to E.P. Montinola with
address at Lucena, Quezon. After the postal teller had made out money orders
numbered 124685, 124687-124695, Montinola offered to pay for them with a private
check As private checks were not generally accepted in payment of money orders,
the teller advised him to see the Chief of the Money Order Division, but instead of
doing so, Montinola managed to leave building with his own check and the ten(10)
money orders without the knowledge of the teller.
In connection with the events set forth above, Montinola was charged with theft in
the Court of First Instance of Manila (Criminal Case No. 43866) but after trial he
was acquitted on the ground of reasonable doubt.
On the same date, April 18, 1958, upon discovery of the disappearance of the unpaid
money orders, an urgent message was sent to all postmasters, and the following day
notice was likewise served upon all banks, instructing them not to pay anyone of the
money orders aforesaid if presented for payment. The Bank of America received a
copy of said notice three days later.
(a) To countermand the notice given to the Bank of America on September 27, 1961,
deducting from the said Banks clearing account the sum of P200.00 represented by
postal money order No. 124688, or in the alternative indemnify the plaintiff in the
same amount with interest at 8-% per annum from September 27, 1961, which is
the rate of interest being paid by plaintiff on its overdraft account;
On January 8, 1962 appellant filed an action against appellees in the Municipal Court
of Manila praying for judgment as follows:
WHEREFORE, plaintiff prays that after hearing defendants be ordered:
any special reason justifying a departure from this policy or practice. The weight of
authority in the United States is that postal money orders are not negotiable
instruments (Bolognesi vs. U.S. 189 Fed. 395; U.S. vs. Stock Drawers National
Bank, 30 Fed. 912), the reason behind this rule being that, in establishing and
operating a postal money order system, the government is not engaging in
commercial transactions but merely exercises a governmental power for the public
benefit.
It is to be noted in this connection that some of the restrictions imposed upon money
orders by postal laws and regulations are inconsistent with the character of
negotiable instruments. For instance, such laws and regulations usually provide for
not more than one endorsement; payment of money orders may be withheld under a
variety of circumstances (49 C.J. 1153).
Of particular application to the postal money order in question are the conditions laid
down in the letter of the Director of Posts of October 26, 1948 (Exhibit 3) to the
Bank of America for the redemption of postal money orders received by it from its
depositors. Among others, the condition is imposed that in cases of adverse claim,
the money order or money orders involved will be returned to you (the bank) and
the, corresponding amount will have to be refunded to the Postmaster, Manila, who
reserves the right to deduct the value thereof from any amount due you if such step is
deemed necessary. The conditions thus imposed in order to enable the bank to
continue enjoying the facilities theretofore enjoyed by its depositors, were accepted
by the Bank of America. The latter is therefore bound by them. That it is so is clearly
referred from the fact that, upon receiving advice that the amount represented by the
money order in question had been deducted from its clearing account with the
Manila Post Office, it did not file any protest against such action.
Moreover, not being a party to the understanding existing between the postal
officers, on the one hand, and the Bank of America, on the other, appellant has no
right to assail the terms and conditions thereof on the ground that the letter setting
forth the terms and conditions aforesaid is void because it was not issued by a
Department Head in accordance with Sec. 79 (B) of the Revised Administrative
Code. In reality, however, said legal provision does not apply to the letter in question
because it does not provide for a department regulation but merely sets down certain
conditions upon the privilege granted to the Bank of America to accept and pay
postal money orders presented for payment at the Manila Post Office. Such being the
WHEREFORE, the appealed decision being in accordance with law, the same is
hereby affirmed with costs.
are subject to a lot of restrictions limiting their negotiability. Particularly in this case,
as far back as 1948, there was already an agreement between Bank of America and
the Manila Post Office, that in case the post office would have an adverse claim
against any Bank of America depositor involving postal money orders issued by the
post office, all amounts cleared in relation thereto shall be refunded back to the post
offices account with the bank this in itself is already a limitation in the
negotiability and nature of the postal money orders issued by the post office because
of the special conditions attached.
In view of the foregoing, We do not find it necessary to resolve the issues raised in
the third and fourth assignments of error.
Total
===== ========
82
82
82
82
82
82
82
82
82
82
82
90101
74602
74701
90127
74797
89965
70147
90001
90023
89991
90251
280
to
to
to
to
to
to
to
to
to
to
to
90120
74691
74740
90146
94800
89986
90150
90020
90050
90000
90272
20
90
40
20
4
22
4
20
28
10
22
P80,000
360,000
160,000
80,000
16,000
88,000
16,000
80,000
112,000
40,000
88,000
P1,120,000
2. Angel dela Cruz delivered the said certificates of time (CTDs) to herein plaintiff in
connection with his purchased of fuel products from the latter (Original Record, p.
208).
Cruz) surrenders to defendant bank full control of the indicated time deposits from
and after date of the assignment and further authorizes said bank to pre-terminate,
set-off and apply the said time deposits to the payment of whatever amount or
amounts may be due on the loan upon its maturity (TSN, February 9, 1987, pp. 6062).
6. Sometime in November, 1982, Mr. Aranas, Credit Manager of plaintiff Caltex
(Phils.) Inc., went to the defendant banks Sucat branch and presented for verification
the CTDs declared lost by Angel dela Cruz alleging that the same were delivered to
herein plaintiff as security for purchases made with Caltex Philippines, Inc. by said
depositor (TSN, February 9, 1987, pp. 54-68).
7. On November 26, 1982, defendant received a letter (Defendants Exhibit 563)
from herein plaintiff formally informing it of its possession of the CTDs in question
and of its decision to pre-terminate the same.
8. On December 8, 1982, plaintiff was requested by herein defendant to furnish the
former a copy of the document evidencing the guarantee agreement with Mr. Angel
dela Cruz as well as the details of Mr. Angel dela Cruz obligation against which
plaintiff proposed to apply the time deposits (Defendants Exhibit 564).
9. No copy of the requested documents was furnished herein defendant.
3. Sometime in March 1982, Angel dela Cruz informed Mr. Timoteo Tiangco, the
Sucat Branch Manager, that he lost all the certificates of time deposit in dispute. Mr.
Tiangco advised said depositor to execute and submit a notarized Affidavit of Loss,
as required by defendant banks procedure, if he desired replacement of said lost
CTDs (TSN, February 9, 1987, pp. 48-50).
4. On March 18, 1982, Angel dela Cruz executed and delivered to defendant bank the
required Affidavit of Loss (Defendants Exhibit 281). On the basis of said affidavit of
loss, 280 replacement CTDs were issued in favor of said depositor (Defendants
Exhibits 282-561).
5. On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from
defendant bank in the amount of Eight Hundred Seventy Five Thousand Pesos
(P875,000.00). On the same date, said depositor executed a notarized Deed of
Assignment of Time Deposit (Exhibit 562) which stated, among others, that he (de la
10. Accordingly, defendant bank rejected the plaintiffs demand and claim for
payment of the value of the CTDs in a letter dated February 7, 1983 (Defendants
Exhibit 566).
11. In April 1983, the loan of Angel dela Cruz with the defendant bank matured and
fell due and on August 5, 1983, the latter set-off and applied the time deposits in
question to the payment of the matured loan (TSN, February 9, 1987, pp. 130-131).
12. In view of the foregoing, plaintiff filed the instant complaint, praying that
defendant bank be ordered to pay it the aggregate value of the certificates of time
deposit of P1,120,000.00 plus accrued interest and compounded interest therein at
16% per annum, moral and exemplary damages as well as attorneys fees.
After trial, the court a quo rendered its decision dismissing the instant complaint. 3
. . . While it may be true that the word bearer appears rather boldly in the CTDs
issued, it is important to note that after the word BEARER stamped on the space
provided supposedly for the name of the depositor, the words has deposited a
certain amount follows. The document further provides that the amount deposited
shall be repayable to said depositor on the period indicated. Therefore, the text of
the instrument(s) themselves manifest with clarity that they are payable, not to
whoever purports to be the bearer but only to the specified person indicated
therein, the depositor. In effect, the appellee bank acknowledges its depositor Angel
dela Cruz as the person who made the deposit and further engages itself to pay said
depositor the amount indicated thereon at the stipulated date. 6
We disagree with these findings and conclusions, and hereby hold that the CTDs in
question are negotiable instruments. Section 1 Act No. 2031, otherwise known as the
Negotiable Instruments Law, enumerates the requisites for an instrument to become
negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
The CTDs in question undoubtedly meet the requirements of the law for
negotiability. The parties bone of contention is with regard to requisite (d) set forth
above. It is noted that Mr. Timoteo P. Tiangco, Security Banks Branch Manager way
back in 1982, testified in open court that the depositor referred to in the CTDs is no
other than Mr. Angel de la Cruz.
AUTHORIZED SIGNATURES 5
xxx xxx xxx
Respondent court ruled that the CTDs in question are non-negotiable instruments,
rationalizing as follows:
Atty. Calida:
the parties may have secretly intended as contradistinguished from what their words
express, but what is the meaning of the words they have used. What the parties
meant must be determined by what they said. 11
witness:
a Yes, your Honor, and we have the record to show that Angel dela Cruz was the one
who cause (sic) the amount.
Atty. Calida:
q And no other person or entity or company, Mr. Witness?
witness:
a None, your Honor. 7
xxx xxx xxx
Atty. Calida:
q Mr. Witness, who is the depositor identified in all of these certificates of time
deposit insofar as the bank is concerned?
witness:
a Angel dela Cruz is the depositor. 8
xxx xxx xxx
On this score, the accepted rule is that the negotiability or non-negotiability of an
instrument is determined from the writing, that is, from the face of the instrument
itself. 9 In the construction of a bill or note, the intention of the parties is to control, if
it can be legally ascertained. 10 While the writing may be read in the light of
surrounding circumstances in order to more perfectly understand the intent and
meaning of the parties, yet as they have constituted the writing to be the only
outward and visible expression of their meaning, no other words are to be added to it
or substituted in its stead. The duty of the court in such case is to ascertain, not what
Contrary to what respondent court held, the CTDs are negotiable instruments. The
documents provide that the amounts deposited shall be repayable to the depositor.
And who, according to the document, is the depositor? It is the bearer. The
documents do not say that the depositor is Angel de la Cruz and that the amounts
deposited are repayable specifically to him. Rather, the amounts are to be repayable
to the bearer of the documents or, for that matter, whosoever may be the bearer at the
time of presentment.
If it was really the intention of respondent bank to pay the amount to Angel de la
Cruz only, it could have with facility so expressed that fact in clear and categorical
terms in the documents, instead of having the word BEARER stamped on the
space provided for the name of the depositor in each CTD. On the wordings of the
documents, therefore, the amounts deposited are repayable to whoever may be the
bearer thereof. Thus, petitioners aforesaid witness merely declared that Angel de la
Cruz is the depositor insofar as the bank is concerned, but obviously other parties
not privy to the transaction between them would not be in a position to know that the
depositor is not the bearer stated in the CTDs. Hence, the situation would require any
party dealing with the CTDs to go behind the plain import of what is written thereon
to unravel the agreement of the parties thereto through facts aliunde. This need for
resort to extrinsic evidence is what is sought to be avoided by the Negotiable
Instruments Law and calls for the application of the elementary rule that the
interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity. 12
The next query is whether petitioner can rightfully recover on the CTDs. This time,
the answer is in the negative. The records reveal that Angel de la Cruz, whom
petitioner chose not to implead in this suit for reasons of its own, delivered the CTDs
amounting to P1,120,000.00 to petitioner without informing respondent bank thereof
at any time. Unfortunately for petitioner, although the CTDs are bearer instruments,
a valid negotiation thereof for the true purpose and agreement between it and De la
Cruz, as ultimately ascertained, requires both delivery and indorsement. For,
although petitioner seeks to deflect this fact, the CTDs were in reality delivered to it
as a security for De la Cruz purchases of its fuel products. Any doubt as to whether
rgrated
On this matter, we uphold respondent courts finding that the aspect of alleged
negligence of private respondent was not included in the stipulation of the parties
and in the statement of issues submitted by them to the trial court. 29 The issues
agreed upon by them for resolution in this case are:
1. Whether or not the CTDs as worded are negotiable instruments.
2. Whether or not defendant could legally apply the amount covered by the CTDs
against the depositors loan by virtue of the assignment (Annex C).
3. Whether or not there was legal compensation or set off involving the amount
covered by the CTDs and the depositors outstanding account with defendant, if any.
4. Whether or not plaintiff could compel defendant to preterminate the CTDs before
the maturity date provided therein.
5. Whether or not plaintiff is entitled to the proceeds of the CTDs.
On the other hand, the assignment of the CTDs made by Angel de la Cruz in favor of
respondent bank was embodied in a public instrument. 27 With regard to this other
mode of transfer, the Civil Code specifically declares:
Art. 1625. An assignment of credit, right or action shall produce no effect as against
third persons, unless it appears in a public instrument, or the instrument is recorded
in the Registry of Property in case the assignment involves real property.
Respondent bank duly complied with this statutory requirement. Contrarily,
petitioner, whether as purchaser, assignee or lien holder of the CTDs, neither proved
the amount of its credit or the extent of its lien nor the execution of any public
instrument which could affect or bind private respondent. Necessarily, therefore, as
between petitioner and respondent bank, the latter has definitely the better right over
the CTDs in question.
Finally, petitioner faults respondent court for refusing to delve into the question of
whether or not private respondent observed the requirements of the law in the case of
lost negotiable instruments and the issuance of replacement certificates therefor, on
the ground that petitioner failed to raised that issue in the lower court. 28
6. Whether or not the parties can recover damages, attorneys fees and litigation
expenses from each other.
As respondent court correctly observed, with appropriate citation of some doctrinal
authorities, the foregoing enumeration does not include the issue of negligence on
the part of respondent bank. An issue raised for the first time on appeal and not
raised timely in the proceedings in the lower court is barred by estoppel. 30 Questions
raised on appeal must be within the issues framed by the parties and, consequently,
issues not raised in the trial court cannot be raised for the first time on appeal. 31
Pre-trial is primarily intended to make certain that all issues necessary to the
disposition of a case are properly raised. Thus, to obviate the element of surprise,
parties are expected to disclose at a pre-trial conference all issues of law and fact
which they intend to raise at the trial, except such as may involve privileged or
impeaching matters. The determination of issues at a pre-trial conference bars the
consideration of other questions on appeal.32
To accept petitioners suggestion that respondent banks supposed negligence may be
considered encompassed by the issues on its right to preterminate and receive the
restricts
or
prohibits
the
issuance
a
duplicate
or
replacement
instrument sans compliance with the procedure outlined therein, and none establishes
a mandatory precedent requirement therefor.
Still, even assuming arguendo that said issue of negligence was raised in the court
below, petitioner still cannot have the odds in its favor. A close scrutiny of the
provisions of the Code of Commerce laying down the rules to be followed in case of
lost instruments payable to bearer, which it invokes, will reveal that said provisions,
even assuming their applicability to the CTDs in the case at bar, are merely
permissive and not mandatory. The very first article cited by petitioner speaks for
itself.
SO ORDERED.
Art 548. The dispossessed owner, no matter for what cause it may be, may apply to
the judge or court of competent jurisdiction, asking that the principal, interest or
dividends due or about to become due, be not paid a third person, as well as in order
to prevent the ownership of the instrument that a duplicate be issued him. (Emphasis
ours.)
xxx xxx xxx
The use of the word may in said provision shows that it is not mandatory but
discretionary on the part of the dispossessed owner to apply to the judge or court
of competent jurisdiction for the issuance of a duplicate of the lost instrument. Where
the provision reads may, this word shows that it is not mandatory but
discretional. 34 The word may is usually permissive, not mandatory. 35 It is an
auxiliary verb indicating liberty, opportunity, permission and possibility. 36
Moreover, as correctly analyzed by private respondent, 37 Articles 548 to 558 of the
Code of Commerce, on which petitioner seeks to anchor respondent banks supposed
negligence, merely established, on the one hand, a right of recourse in favor of a
dispossessed owner or holder of a bearer instrument so that he may obtain a
duplicate of the same, and, on the other, an option in favor of the party liable thereon
who, for some valid ground, may elect to refuse to issue a replacement of the
instrument. Significantly, none of the provisions cited by petitioner categorically
In April 1983, de la Cruz loan with Security bank matured and no payment was
made by de la Cruz. Security Bank eventually set-off the time deposit to pay off the
loan.
Caltex sued Security Bank to compel the bank to pay off the CTDs. Security Bank
argued that the CTDs are not negotiable instruments even though the word bearer
is written on their face because the word bearer contained therein refer to depositor
and only the depositor can encash the CTDs and no one else.
ISSUE: Whether or not the certificates of time deposit are negotiable.
HELD: Yes. The CTDs indicate that they are payable to the bearer; that there is an
implication that the depositor is the bearer but as to who the depositor is, no one
knows. It does not say on its face that the depositor is Angel de la Cruz. If it was
really the intention of respondent bank to pay the amount to Angel de la Cruz only, it
could have with facility so expressed that fact in clear and categorical terms in the
documents, instead of having the word BEARER stamped on the space provided
for the name of the depositor in each CTD. On the wordings of the documents,
therefore, the amounts deposited are repayable to whoever may be the bearer thereof.
Thus, de la Cruz is the depositor insofar as the bank is concerned, but obviously
other parties not privy to the transaction between them would not be in a position to
know that the depositor is not the bearer stated in the CTDs.
However, Caltex may not encash the CTDs because although the CTDs are bearer
instruments, a valid negotiation thereof for the true purpose and agreement between
Caltex and De la Cruz, requires both delivery and indorsement. As discerned from
the testimony of Caltex representative, the CTDs were delivered to them by de la
Cruz merely for guarantee or security and not as payment.
G.R. No. 88866 February 18, 1991
Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Magno and Lucia
Castillo.
Agapito S. Fajardo and Jaime M. Cabiles for respondent Golden Savings & Loan
Association, Inc.
CRUZ, J.:p
This case, for all its seeming complexity, turns on a simple question of negligence.
The facts, pruned of all non-essentials, are easily told.
The Metropolitan Bank and Trust Co. is a commercial bank with branches
throughout the Philippines and even abroad. Golden Savings and Loan Association
was, at the time these events happened, operating in Calapan, Mindoro, with the
other private respondents as its principal officers.
In January 1979, a certain Eduardo Gomez opened an account with Golden Savings
and deposited over a period of two months 38 treasury warrants with a total value of
P1,755,228.37. They were all drawn by the Philippine Fish Marketing Authority and
purportedly signed by its General Manager and countersigned by its Auditor. Six of
these were directly payable to Gomez while the others appeared to have been
indorsed by their respective payees, followed by Gomez as second indorser. 1
On various dates between June 25 and July 16, 1979, all these warrants were
subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited
to its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They
were then sent for clearing by the branch office to the principal office of Metrobank,
which forwarded them to the Bureau of Treasury for special clearing. 2
10
and credit to such account such amount existing before the debit
was made including the amount of P812,033.37 in favor of
defendant Golden Savings and Loan Association, Inc. and
thereafter, to allow defendant Golden Savings and Loan
Association, Inc. to withdraw the amount outstanding thereon
before the debit;
In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his
own account, eventually collecting the total amount of P1,167,500.00 from the
proceeds of the apparently cleared warrants. The last withdrawal was made on July
16, 1979.
SO ORDERED.
On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had
been dishonored by the Bureau of Treasury on July 19, 1979, and demanded the
refund by Golden Savings of the amount it had previously withdrawn, to make up the
deficit in its account.
The demand was rejected. Metrobank then sued Golden Savings in the Regional
Trial Court of Mindoro. 5 After trial, judgment was rendered in favor of Golden
Savings, which, however, filed a motion for reconsideration even as Metrobank filed
its notice of appeal. On November 4, 1986, the lower court modified its decision
thus:
On appeal to the respondent court, 6 the decision was affirmed, prompting Metrobank
to file this petition for review on the following grounds:
1. Respondent Court of Appeals erred in disregarding and failing to
apply the clear contractual terms and conditions on the deposit
slips allowing Metrobank to charge back any amount erroneously
credited.
(a) Metrobank's right to charge back is not limited to instances
where the checks or treasury warrants are forged or unauthorized.
11
12
it is considered that the supposed dishonor of the warrants was not communicated to
Golden Savings before it made its own payment to Gomez.
The belated notification aggravated the petitioner's earlier negligence in giving
express or at least implied clearance to the treasury warrants and allowing payments
therefrom to Golden Savings. But that is not all. On top of this, the supposed reason
for the dishonor, to wit, the forgery of the signatures of the general manager and the
auditor of the drawer corporation, has not been established. 9 This was the finding of
the lower courts which we see no reason to disturb. And as we said in MWSS v.
Court of Appeals: 10
Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA
238). It must be established by clear, positive and convincing
evidence. This was not done in the present case.
A no less important consideration is the circumstance that the treasury warrants in
question are not negotiable instruments. Clearly stamped on their face is the word
"non-negotiable." Moreover, and this is of equal significance, it is indicated that they
are payable from a particular fund, to wit, Fund 501.
The following sections of the Negotiable Instruments Law, especially the
underscored parts, are pertinent:
Sec. 1. Form of negotiable instruments. An instrument to be
negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum
certain in money;
(c) Must be payable on demand, or at a fixed or determinable
future time;
(d) Must be payable to order or to bearer; and
13
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings
assumed that they were "genuine and in all respects what they purport to be," in
accordance with Section 66 of the Negotiable Instruments Law. The simple reason is
that this law is not applicable to the non-negotiable treasury warrants. The
indorsement was made by Gloria Castillo not for the purpose of guaranteeing the
genuineness of the warrants but merely to deposit them with Metrobank for clearing.
It was in fact Metrobank that made the guarantee when it stamped on the back of the
warrants: "All prior indorsement and/or lack of endorsements guaranteed,
Metropolitan Bank & Trust Co., Calapan Branch."
The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine
Islands, 12 but we feel this case is inapplicable to the present controversy. That case
involved checks whereas this case involves treasury warrants. Golden Savings never
represented that the warrants were negotiable but signed them only for the purpose of
depositing them for clearance. Also, the fact of forgery was proved in that case but
not in the case before us. Finally, the Court found the Jai Alai Corporation negligent
in accepting the checks without question from one Antonio Ramirez notwithstanding
that the payee was the Inter-Island Gas Services, Inc. and it did not appear that he
was authorized to indorse it. No similar negligence can be imputed to Golden
Savings.
We find the challenged decision to be basically correct. However, we will have to
amend it insofar as it directs the petitioner to credit Golden Savings with the full
amount of the treasury checks deposited to its account.
The total value of the 32 treasury warrants dishonored was P1,754,089.00, from
which Gomez was allowed to withdraw P1,167,500.00 before Golden Savings was
notified of the dishonor. The amount he has withdrawn must be charged not to
Golden Savings but to Metrobank, which must bear the consequences of its own
negligence. But the balance of P586,589.00 should be debited to Golden Savings, as
obviously Gomez can no longer be permitted to withdraw this amount from his
deposit because of the dishonor of the warrants. Gomez has in fact disappeared. To
also credit the balance to Golden Savings would unduly enrich it at the expense of
Metrobank, let alone the fact that it has already been informed of the dishonor of the
treasury warrants.
14
February 9, 1981
VALUE DATE
FELICIANO, J.:
On 9 February 1981, petitioner Raul Sesbreo made a money market placement in
the amount of P300,000.00 with the Philippine Underwriters Finance Corporation
("Philfinance"), Cebu Branch; the placement, with a term of thirty-two (32) days,
would mature on 13 March 1981, Philfinance, also on 9 February 1981, issued the
following documents to petitioner:
(a) the Certificate of Confirmation of Sale, "without recourse," No.
20496 of one (1) Delta Motors Corporation Promissory Note
("DMC PN") No. 2731 for a term of 32 days at 17.0% per annum;
TO Raul Sesbreo
April 6, 1981
MATURITY DATE
NO. 10805
DENOMINATED CUSTODIAN RECEIPT
15
delivery of the underlying promissory note. Petitioner then examined the original of
the DMC PN No. 2731 and found: that the security had been issued on 10 April
1980; that it would mature on 6 April 1981; that it had a face value of P2,300,833.33,
with the Philfinance as "payee" and private respondent Delta Motors Corporation
("Delta") as "maker;" and that on face of the promissory note was stamped "NON
NEGOTIABLE." Pilipinas did not deliver the Note, nor any certificate of
participation in respect thereof, to petitioner.
Petitioner later made similar demand letters, dated 3 July 1981 and 3 August
1981, 2 again asking private respondent Pilipinas for physical delivery of the original
of DMC PN No. 2731. Pilipinas allegedly referred all of petitioner's demand letters
to Philfinance for written instructions, as has been supposedly agreed upon in
"Securities Custodianship Agreement" between Pilipinas and Philfinance.
Philfinance did not provide the appropriate instructions; Pilipinas never released
DMC PN No. 2731, nor any other instrument in respect thereof, to petitioner.
Petitioner also made a written demand on 14 July 1981 3 upon private respondent
Delta for the partial satisfaction of DMC PN No. 2731, explaining that Philfinance,
as payee thereof, had assigned to him said Note to the extent of P307,933.33. Delta,
however, denied any liability to petitioner on the promissory note, and explained in
turn that it had previously agreed with Philfinance to offset its DMC PN No. 2731
(along with DMC PN No. 2730) against Philfinance PN No. 143-A issued in favor of
Delta.
In the meantime, Philfinance, on 18 June 1981, was placed under the joint
management of the Securities and exchange commission ("SEC") and the Central
Bank. Pilipinas delivered to the SEC DMC PN No. 2731, which to date apparently
remains in the custody of the SEC. 4
PILIPINAS BANK
(By Elizabeth De Villa
Illegible Signature)
On 2 April 1981, petitioner approached Ms. Elizabeth de Villa of private respondent
Pilipinas, Makati Branch, and handed her a demand letter informing the bank that his
placement with Philfinance in the amount reflected in the DCR No. 10805 had
remained unpaid and outstanding, and that he in effect was asking for the physical
As petitioner had failed to collect his investment and interest thereon, he filed on 28
September 1982 an action for damages with the Regional Trial Court ("RTC") of
Cebu City, Branch 21, against private respondents Delta and Pilipinas. 5 The trial
court, in a decision dated 5 August 1987, dismissed the complaint and counterclaims
for lack of merit and for lack of cause of action, with costs against petitioner.
Petitioner appealed to respondent Court of Appeals in C.A.-G.R. CV No. 15195. In a
Decision dated 21 March 1989, the Court of Appeals denied the appeal and held: 6
16
Philfinance, and private respondents Delta and Pilipinas, considering that the three
(3) entities belong to the "Silverio Group of Companies" under the leadership of Mr.
Ricardo Silverio, Sr. 8
There are at least two (2) sets of relationships which we need to address: firstly, the
relationship of petitioner vis-a-visDelta; secondly, the relationship of petitioner in
respect of Pilipinas. Actually, of course, there is a third relationship that is of critical
importance: the relationship of petitioner and Philfinance. However, since
Philfinance has not been impleaded in this case, neither the trial court nor the Court
of Appeals acquired jurisdiction over the person of Philfinance. It is, consequently,
not necessary for present purposes to deal with this third relationship, except to the
extent it necessarily impinges upon or intersects the first and second relationships.
I.
We consider first the relationship between petitioner and Delta.
The Court of appeals in effect held that petitioner acquired no rights vis-a-vis Delta
in respect of the Delta promissory note (DMC PN No. 2731) which Philfinance sold
"without recourse" to petitioner, to the extent of P304,533.33. The Court of Appeals
said on this point:
Nor could plaintiff-appellant have acquired any right over DMC
PN No. 2731 as the same is "non-negotiable" as stamped on its
face (Exhibit "6"), negotiation being defined as the transfer of an
instrument from one person to another so as to constitute the
transferee the holder of the instrument (Sec. 30, Negotiable
Instruments Law). A person not a holder cannot sue on the
instrument in his own name and cannot demand or receive
payment (Section 51, id.) 9
Petitioner admits that DMC PN No. 2731 was non-negotiable but contends that the
Note had been validly transferred, in part to him by assignment and that as a result of
such transfer, Delta as debtor-maker of the Note, was obligated to pay petitioner the
portion of that Note assigned to him by the payee Philfinance.
Delta, however, disputes petitioner's contention and argues:
17
DMC PN No. 2731, while marked "non-negotiable," was not at the same time
stamped "non-transferable" or "non-assignable." It contained no stipulation which
prohibited Philfinance from assigning or transferring, in whole or in part, that Note.
Delta adduced the "Letter of Agreement" which it had entered into with Philfinance
and which should be quoted in full:
18
19
offsetting instruments had both reached maturity. It is a firmly settled doctrine that
the rights of an assignee are not any greater that the rights of the assignor, since the
assignee is merely substituted in the place of the assignor 20 and that the assignee
acquires his rights subject to the equities i.e., the defenses which the debtor
could have set up against the original assignor before notice of the assignment was
given to the debtor. Article 1285 of the Civil Code provides that:
Art. 1285. The debtor who has consented to the assignment of
rights made by a creditor in favor of a third person, cannot set up
against the assignee the compensation which would pertain to him
against the assignor, unless the assignor was notified by the debtor
at the time he gave his consent, that he reserved his right to the
compensation.
If the creditor communicated the cession to him but the debtor did
not consent thereto, the latter may set up the compensation of
debts previous to the cession, but not of subsequent ones.
If the assignment is made without the knowledge of the debtor, he
may set up the compensation of all credits prior to the same and
also later ones until he had knowledge of the assignment.
(Emphasis supplied)
Article 1626 of the same code states that: "the debtor who, before having knowledge
of the assignment, pays his creditor shall be released from the obligation." In Sison
v. Yap-Tico, 21 the Court explained that:
[n]o man is bound to remain a debtor; he may pay to him with
whom he contacted to pay; and if he pay before notice that his debt
has been assigned, the law holds him exonerated, for the reason
that it is the duty of the person who has acquired a title by transfer
to demand payment of the debt, to give his debt or notice. 22
At the time that Delta was first put to notice of the assignment in petitioner's favor on
14 July 1981, DMC PN No. 2731 had already been discharged by compensation.
Since the assignor Philfinance could not have then compelled payment anew by
20
(2) Pilipinas was, from and after said date of the assignment by
Philfinance to petitioner (9 February 1981),holding that Note on
behalf and for the benefit of petitioner, at least to the extent it had
been assigned to petitioner by payee Philfinance; 24
(3) petitioner may inspect the Note either "personally or by
authorized representative", at any time during regular bank hours;
and
(4) upon written instructions of petitioner, Pilipinas would
physically deliver the DMC PN No. 2731 (or a participation
therein to the extent of P307,933.33) "should this Denominated
Custodianship receipt remain outstanding in [petitioner's] favor
thirty (30) days after its maturity."
Thus, we find nothing written in printers ink on the DCR which could reasonably be
read as converting Pilipinas into an obligor under the terms of DMC PN No. 2731
assigned to petitioner, either upon maturity thereof or any other time. We note that
both in his complaint and in his testimony before the trial court, petitioner referred
merely to the obligation of private respondent Pilipinas to effect the physical delivery
to him of DMC PN No. 2731. 25 Accordingly, petitioner's theory that Pilipinas had
assumed a solidary obligation to pay the amount represented by a portion of the Note
assigned to him by Philfinance, appears to be a new theory constructed only after the
trial court had ruled against him. The solidary liability that petitioner seeks to impute
Pilipinas cannot, however, be lightly inferred. Under article 1207 of the Civil Code,
"there is a solidary liability only when the law or the nature of the obligation requires
solidarity," The record here exhibits no express assumption of solidary liability vis-avis petitioner, on the part of Pilipinas. Petitioner has not pointed to us to any law
which imposed such liability upon Pilipinas nor has petitioner argued that the very
nature of the custodianship assumed by private respondent Pilipinas necessarily
implies solidary liability under the securities, custody of which was taken by
Pilipinas. Accordingly, we are unable to hold Pilipinas solidarily liable with
Philfinance and private respondent Delta under DMC PN No. 2731.
We do not, however, mean to suggest that Pilipinas has no responsibility and liability
in respect of petitioner under the terms of the DCR. To the contrary, we find, after
21
the impact of stipulations privately made between the borrowers or dealers and the
custodian banks, and disclosed to fund-providers only after trouble has erupted.
We believe and so hold that a contract of deposit was constituted by the act of
Philfinance in designating Pilipinas as custodian or depositary bank. The depositor
was initially Philfinance; the obligation of the depository was owed, however, to
petitioner Sesbreo as beneficiary of the custodianship or depository agreement. We
do not consider that this is a simple case of a stipulation pour autri. The
custodianship or depositary agreement was established as an integral part of the
money market transaction entered into by petitioner with Philfinance. Petitioner
bought a portion of DMC PN No. 2731; Philfinance as assignor-vendor deposited
that Note with Pilipinas in order that the thing sold would be placed outside the
control of the vendor. Indeed, the constituting of the depositary or custodianship
agreement was equivalent to constructive delivery of the Note (to the extent it had
been sold or assigned to petitioner) to petitioner. It will be seen that custodianship
agreements are designed to facilitate transactions in the money market by providing
a basis for confidence on the part of the investors or placers that the instruments
bought by them are effectively taken out of the pocket, as it were, of the vendors and
placed safely beyond their reach, that those instruments will be there available to the
placers of funds should they have need of them. The depositary in a contract of
deposit is obliged to return the security or the thing deposited upon demand of the
depositor (or, in the presented case, of the beneficiary) of the contract, even though a
term for such return may have been established in the said contract. 26 Accordingly,
any stipulation in the contract of deposit or custodianship that runs counter to the
fundamental purpose of that agreement or which was not brought to the notice of and
accepted by the placer-beneficiary, cannot be enforced as against such beneficiaryplacer.
In the case at bar, the custodian-depositary bank Pilipinas refused to deliver the
security deposited with it when petitioner first demanded physical delivery thereof
on 2 April 1981. We must again note, in this connection, that on 2 April 1981, DMC
PN No. 2731 had not yet matured and therefore, compensation or offsetting against
Philfinance PN No. 143-A had not yet taken place. Instead of complying with the
demand of the petitioner, Pilipinas purported to require and await the instructions of
Philfinance, in obvious contravention of its undertaking under the DCR to effect
physical delivery of the Note upon receipt of "written instructions" from petitioner
Sesbreo. The ostensible term written into the DCR (i.e., "should this [DCR] remain
outstanding in your favor thirty [30] days after its maturity") was not a defense
against petitioner's demand for physical surrender of the Note on at least three
grounds: firstly, such term was never brought to the attention of petitioner Sesbreo
at the time the money market placement with Philfinance was made; secondly, such
term runs counter to the very purpose of the custodianship or depositary agreement
as an integral part of a money market transaction; and thirdly, it is inconsistent with
the provisions of Article 1988 of the Civil Code noted above. Indeed, in principle,
petitioner became entitled to demand physical delivery of the Note held by Pilipinas
as soon as petitioner's money market placement matured on 13 March 1981 without
payment from Philfinance.
22
March 5, 2001
23
42127
P1,198,092.80
42128
940,190.00
42129
880,000.00
42130
981,500.00
The facts of this case, adopted by the CA and based on findings by the trial court, are
as follows:
. . . [D]efendant is a banking corporation. It operates under a certificate of
authority issued by the Central Bank of the Philippines, and among its
activities, accepts savings and time deposits. Said defendant had as one of
its client-depositors the Fojas-Arca Enterprises Company ("Fojas-Arca" for
brevity). Fojas-Arca maintaining a special savings account with the
defendant, the latter authorized and allowed withdrawals of funds therefrom
through the medium of special withdrawal slips. These are supplied by the
defendant to Fojas-Arca.
In January 1978, plaintiff and Fojas-Arca entered into a "Franchised
Dealership Agreement" (Exh. B) whereby Fojas-Arca has the privilege to
purchase on credit and sell plaintiff's products.
On January 14, 1978 up to May 15, 1978. Pursuant to the aforesaid
Agreement, Fojas-Arca purchased on credit Firestone products from
plaintiff with a total amount of P4,896,000.00. In payment of these
purchases, Fojas-Arca delivered to plaintiff six (6) special withdrawal slips
drawn upon the defendant. In turn, these were deposited by the plaintiff
with its current account with the Citibank. All of them were honored and
paid by the defendant. This singular circumstance made plaintiff believe
[sic] and relied [sic] on the fact that the succeeding special withdrawal slips
drawn upon the defendant would be equally sufficiently funded. Relying on
such confidence and belief and as a direct consequence thereof, plaintiff
extended to Fojas-Arca other purchases on credit of its products.
On the following dates Fojas-Arca purchased Firestone products on credit
(Exh. M, I, J, K) and delivered to plaintiff the corresponding special
withdrawal slips in payment thereof drawn upon the defendant, to wit:
DATE
WITHDRAWAL
SLIP NO.
AMOUNT
24
whenever it received a collection note from another bank, belying petitioner's claim
that respondent bank was negligent in not requiring a passbook under the subject
transaction. The appellate court also found that the special withdrawal slips in
question were not purposely given the appearance of checks, contrary to petitioner's
assertions, and thus should not have been mistaken for checks. Lastly, the appellate
court ruled that the respondent bank was under no obligation to inform petitioner of
the dishonor of the special withdrawal slips, for to do so would have been a violation
of the law on the secrecy of bank deposits.
Hence, the instant petition, alleging the following assignment of error:
25. The CA grievously erred in holding that the [Luzon Development] Bank
was free from any fault or negligence regarding the dishonor, or in failing to
give fair and timely advice of the dishonor, of the twointermediate LDB
Slips and in failing to award damages to Firestone pursuant to Article 2176
of the New Civil Code.8
The issue for our consideration is whether or not respondent bank should be held
liable for damages suffered by petitioner, due to its allegedly belated notice of nonpayment of the subject withdrawal slips.
The initial transaction in this case was between petitioner and Fojas-Arca, whereby
the latter purchased tires from the former with special withdrawal slips drawn upon
Fojas-Arca's special savings account with respondent bank. Petitioner in turn
deposited these withdrawal slips with Citibank. The latter credited the same to
petitioner's current account, then presented the slips for payment to respondent bank.
It was at this point that the bone of contention arose.
On December 14, 1978, Citibank informed petitioner that special withdrawal slips
Nos. 42127 and 42129 dated June 15, 1978 and August 15, 1978, respectively, were
refused payment by respondent bank due to insufficiency of Fojas-Arca's funds on
deposit. That information came about six months from the time Fojas-Arca
purchased tires from petitioner using the subject withdrawal slips. Citibank then
debited the amount of these withdrawal slips from petitioner's account, causing the
alleged pecuniary damage subject of petitioner's cause of action.
At the outset, we note that petitioner admits that the withdrawal slips in question
were non-negotiable.9 Hence, the rules governing the giving of immediate notice of
dishonor of negotiable instruments do not apply in this case.10Petitioner itself
concedes this point.11 Thus, respondent bank was under no obligation to give
immediate notice that it would not make payment on the subject withdrawal slips.
Citibank should have known that withdrawal slips were not negotiable instruments.
25
Firestone Tire & Rubber Co. of the Phils. vs. Court of Appeals
[G.R. No. 113236. March 5, 2001]
FACTS:
Fojas-Arca Enterprises Company maintained a special account with respondent
Luzon Development Bank which authorized and allowed the former to withdraw
funds from its account through the medium of special withdrawal slips. Fojas-Arca
purchased on credit products from Firestone with a total amount of
P4,896,000.00. In payment of these purchases, Fojas-Arca delivered to plaintiff six
special withdrawal slips drawn upon the respondent bank. In turn, these were
deposited by the plaintiff with its current account with the Citibank. All of them
were honored and paid by the defendant. However, in a subsequent transaction
involving the payment of withdrawal slips by Fojas-Arca for purchases on credit
from petitioner, two withdrawal slips for the total sum of P2,078,092.80 were
dishonored and not paid by respondent bank for the reason "NO ARRANGEMENT".
ISSUE:
Whether respondent bank should be held liable for damages suffered by petitioner,
due to its allegedly belated notice of non-payment of the subject withdrawal slips.
RULING:
The essence of negotiability which characterizes a negotiable paper as a credit
instrument lies in its freedom to circulate freely as a substitute for money. The
withdrawal slips in question lacked this character. As the withdrawal slips in
question were non-negotiable, the rules governing the giving of immediate notice of
dishonor of negotiable instruments do not apply. The respondent bank was under no
obligation to give immediate notice that it would not make payment on the subject
withdrawal slips. Citibank should have known that withdrawal slips were not
negotiable instruments. It could not expect these slips to be treated as checks by
other entities. Payment or notice of dishonor from respondent bank could not be
expected immediately, in contrast to the situation involving checks. Citibank was not
bound to accept the withdrawal slips as a valid mode of deposit. But having
erroneously accepted them as such, Citibank and petitioner as account-holder
must bear the risks attendant to the acceptance of these instruments.
SO ORDERED.
G.R. No. L-2516
26
Article 315, paragraph (d), subsection 2 of the Revised Penal Code, punishes
swindling committed "By post dating a check, or issuing such check in payment of
an obligation the offender knowing that at the time he had no funds in the bank, or
the funds deposited by him in the bank were not sufficient to cover the amount of the
check, and without informing the payee of such circumstances".
We believe that under this provision of law Ang Tek Lian was properly held liable. In
this connection, it must be stated that, as explained in People vs. Fernandez (59 Phil.,
615), estafa is committed by issuing either a postdated check or an ordinary check to
accomplish the deceit.
It is argued, however, that as the check had been made payable to "cash" and had not
been endorsed by Ang Tek Lian, the defendant is not guilty of the offense charged.
Based on the proposition that "by uniform practice of all banks in the Philippines a
check so drawn is invariably dishonored," the following line of reasoning is
advanced in support of the argument:
. . . When, therefore, he (the offended party ) accepted the check (Exhibit A)
from the appellant, he did so with full knowledge that it would be
dishonored upon presentment. In that sense, the appellant could not be said
to have acted fraudulently because the complainant, in so accepting the
check as it was drawn, must be considered, by every rational consideration,
to have done so fully aware of the risk he was running thereby." (Brief for
the appellant, p. 11.)
We are not aware of the uniformity of such practice. Instances have undoubtedly
occurred wherein the Bank required the indorsement of the drawer before honoring a
check payable to "cash." But cases there are too, where no such requirement had
been made . It depends upon the circumstances of each transaction.
Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the
order of "cash" is a check payable to bearer, and the bank may pay it to the person
presenting it for payment without the drawer's indorsement.
A check payable to the order of cash is a bearer instrument.
Bacal vs. National City Bank of New York (1933), 146 Misc., 732; 262 N.
Y. S., 839; Cleary vs. De Beck Plate Glass Co. (1907), 54 Misc., 537; 104
27
Anyway, it is significant, and conclusive, that the form of the check Exhibit A was
totally unconnected with its dishonor. The Court of Appeals declared that it was
returned unsatisfied because the drawer had insufficient funds not because the
drawer's indorsement was lacking.
Wherefore, there being no question as to the correctness of the penalty imposed on
the appellant, the writ ofcertiorari is denied and the decision of the Court of Appeals
is hereby affirmed, with costs.
Moran, C. J., Ozaeta, Paras, Pablo, Tuason, and Reyes, JJ., concur.
Ang Tek Lian vs. Court of Appeals
L-2516
September, 1950
Bengzon, J.:
Facts:
Ang Tek Lian knowing that he had no funds therefor, drew a check upon
China Banking Corporation payable to the order of cash. He delivered it toLee
Hua Hong in exchange for money. The check was presented by Lee Hua hong to the
drawee bank for payment, but it w3as dishonored for insufficiency of funds. With
this, Ang Tek Lian was convicted of estafa.
Issue:
Whether or not the check issued by Ang Tek Lian that is payable to the order
to cash and not have been indorsed by Ang Tek Lian, making him not guilty for the
crime of estafa.
Held:
No.Under Sec. 9 of NIL a check drawn payable to the order of cash is a
check payable to bearer and the bank may pay it to the person presenting it for
payment without the drawers indorsement. However, if the bank is not sure of the
bearers identity or financial solvency, it has the right to demand identification or
assurance against possible complication, such as forgery of drawers signature, loss
of the check by the rightful owner, raising of the amount payable, etc. But where the
bank is satisfied of the identity or economic standing of the bearer who tenders the
28
NBANK
(By Eliza
Illegible S
29