G.R. No.
85419 March 9, 1993 Producers Bank, relying on the assurance of
DEVELOPMENT BANK OF RIZAL, plaintiff-
petitioner,
vs.
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG
UY, SAMSON TUNG, ASIAN INDUSTRIAL PLASTIC
CORPORATION and PRODUCERS BANK OF THE
PHILIPPINES, defendants-respondents.
Facts:
On July 6, 1986, the Development Bank of Rizal
(petitioner Bank for brevity) filed a complaint for a
sum of money against respondents Sima Wei and/or
Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian
Industrial Plastic Corporation (Plastic Corporation for
short) and the Producers Bank of the Philippines, on
two causes of action:
(1) To enforce payment of the balance of
P1,032,450.02 on a promissory note executed by
respondent Sima Wei on June 9, 1983; and
(2) To enforce payment of two checks executed by
Sima Wei, payable to petitioner, and drawn against the
China Banking Corporation, to pay the balance due on
the promissory note.
In consideration for a loan extended by petitioner
Bank to respondent Sima Wei, the latter executed and
delivered to the former a promissory note, engaging to
pay the petitioner Bank or order the amount of
P1,820,000.00 on or before June 24, 1983 with
interest at 32% per annum.
Sima Wei made partial payments on the note, leaving
a balance of P1,032,450.02. On November 18, 1983,
Sima Wei issued two crossed checks payable to
petitioner Bank drawn against China Banking
Corporation, bearing respectively the serial numbers
384934, for the amount of P550,000.00 and 384935,
for the amount of P500,000.00. The said checks were
allegedly issued in full settlement of the drawer's
account evidenced by the promissory note.
These two checks were not delivered to the petitioner-
payee or to any of its authorized representatives. For
reasons not shown, these checks came into the
possession of respondent Lee Kian Huat, who
deposited the checks without the petitioner-payee's
indorsement (forged or otherwise) to the account of
respondent Plastic Corporation, at the Balintawak
branch, Caloocan City, of the Producers Bank. Cheng
Uy, Branch Manager of the Balintawak branch of
respondent Samson Tung, President of Plastic
Corporation, that the transaction was legal and
regular, instructed the cashier of Producers Bank to
accept the checks for deposit and to credit them to the
account of said Plastic Corporation, inspite of the fact
that the checks were crossed and payable to petitioner
Bank and bore no indorsement of the latter. Hence,
petitioner filed the complaint as aforestated.
Issue: WON the undelivered checks in the instant case
may be enforce against any person who became a
party thereto prior to its completion?
Held:
The normal parties to a check are the drawer, the
payee and the drawee bank. Courts have long
recognized the business custom of using printed
checks where blanks are provided for the date of
issuance, the name of the payee, the amount payable
and the drawer's signature. All the drawer has to do
when he wishes to issue a check is to properly fill up
the blanks and sign it. However, the mere fact that he
has done these does not give rise to any liability on his
part, until and unless the check is delivered to the
payee or his representative. A negotiable instrument,
of which a check is, is not only a written evidence of a
contract right but is also a species of property. Just as
a deed to a piece of land must be delivered in order to
convey title to the grantee, so must a negotiable
instrument be delivered to the payee in order to
evidence its existence as a binding contract. Section 16
of the Negotiable Instruments Law, which governs
checks, provides in part:
Every contract on a negotiable instrument is
incomplete and revocable until delivery of the
instrument for the purpose of giving effect thereto.
...
Thus, the payee of a negotiable instrument acquires no
interest with respect thereto until its delivery to
him.3Delivery of an instrument means transfer of
possession, actual or constructive, from one person to
another.4 Without the initial delivery of the
instrument from the drawer to the payee, there can be
no liability on the instrument. Moreover, such delivery
must be intended to give effect to the instrument.
Without the delivery of said checks to petitioner-
payee, the former did not acquire any right or interest
therein and cannot therefore assert any cause of
action, founded on said checks, whether against the
drawer Sima Wei or against the Producers Bank or any
of the other respondents.
Notwithstanding the above, it does not necessarily
follow that the drawer Sima Wei is freed from liability
to petitioner Bank under the loan evidenced by the
promissory note agreed to by her. Her allegation that
she has paid the balance of her loan with the two
checks payable to petitioner Bank has no merit for, as
We have earlier explained, these checks were never
delivered to petitioner Bank. And even granting,
without admitting, that there was delivery to
petitioner Bank, the delivery of checks in payment of
an obligation does not constitute payment unless they
are cashed or their value is impaired through the fault
of the creditor.6 None of these exceptions were alleged
by respondent Sima Wei.
G.R. Nos. L-25836-37 January 31, 1981
THE PHILIPPINE BANK OF COMMERCE, plaintiff-
appellee,
vs.
JOSE M. ARUEGO, defendant-appellant.
Facts:
On December 1, 1959, the Philippine Bank of
Commerce instituted against Jose M. Aruego Civil Case
No. 42066 for the recovery of the total sum of about
P35,000.00 with daily interest thereon from
November 17, 1959 until fully paid and commission
equivalent to 3/8% for every thirty (30) days or
fraction thereof plus attorney's fees equivalent to 10%
of the total amount due and costs. 6 The complaint
filed by the Philippine Bank of Commerce contains
twenty-two (22) causes of action referring to twenty-
two (22) transactions entered into by the said Bank
and Aruego on different dates covering the period
from August 28, 1950 to March 14, 1951. 7 The sum
sought to be recovered represents the cost of the
printing of "World Current Events," a periodical
published by the defendant. To facilitate the payment
of the printing the defendant obtained a credit
accommodation from the plaintiff. Thus, for every
printing of the "World Current Events," the printer,
Encal Press and Photo Engraving, collected the cost of
printing by drawing a draft against the plaintiff, said
draft being sent later to the defendant for acceptance.
As an added security for the payment of the amounts
advanced to Encal Press and Photo-Engraving, the
plaintiff bank also required defendant Aruego to
execute a trust receipt in favor of said bank wherein
said defendant undertook to hold in trust for plaintiff
the periodicals and to sell the same with the promise
to turn over to the plaintiff the proceeds of the sale of
said publication to answer for the payment of all
obligations arising from the draft.
Defendant Aruego's defenses consist of the following:
a) The defendant signed the bills of exchange referred
to in the plaintiff's complaint in a representative
capacity, as the then President of the Philippine
Education Foundation Company, publisher of "World
Current Events and Decision Law Journal," printed by
Encal Press and Photo-Engraving, drawer of the said
bills of exchange in favor of the plaintiff bank;
b) The defendant signed these bills of exchange not as
principal obligor, but as accommodation or additional
party obligor, to add to the security of said plaintiff
bank. The reason for this statement is that unlike real
bills of exchange, where payment of the face value is
advanced to the drawer only upon acceptance of the
same by the drawee, in the case in question, payment
for the supposed bills of exchange were made before
acceptance; so that in effect, although these
documents are labelled bills of exchange, legally they
are not bills of exchange but mere instruments
evidencing indebtedness of the drawee who received
the face value thereof, with the defendant as only
additional security of the same.
Issue: WON defendant Aruego is liable for the drafts
he accepted
Held:
The first defense of the defendant is that he signed the
supposed bills of exchange as an agent of the
Philippine Education Foundation Company where he
is president. Section 20 of the Negotiable Instruments
Law provides that "Where the instrument contains or
a person adds to his signature words indicating that
he signs for or on behalf of a principal or in a
representative capacity, he is not liable on the
instrument if he was duly authorized; but the mere
addition of words describing him as an agent or as
filing a representative character, without
disclosing his principal, does not exempt him from
personal liability."
An inspection of the drafts accepted by the defendant
shows that nowhere has he disclosed that he was
signing as a representative of the Philippine Education
Foundation Company. 34 He merely signed as follows:
"JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO For
failure to disclose his principal, Aruego is
personally liable for the drafts he accepted.
The defendant also contends that he signed the drafts
only as an accommodation party and as such, should
be made liable only after a showing that the drawer is
incapable of paying. This contention is also without
merit.
An accommodation party is one who has signed the
instrument as maker, drawer, indorser, without
receiving value therefor and for the purpose of
lending his name to some other person. Such
person is liable on the instrument to a holder for
value, notwithstanding such holder, at the time of
the taking of the instrument knew him to be only
an accommodation party.35 In lending his name to
the accommodated party, the accommodation party is
in effect a surety for the latter. He lends his name to
enable the accommodated party to obtain credit or to
raise money. He receives no part of the consideration
for the instrument but assumes liability to the other
parties thereto because he wants to accommodate
another. In the instant case, the defendant signed
as a drawee/acceptor. Under the Negotiable
Instrument Law, a drawee is primarily liable.
Thus, if the defendant who is a lawyer, he should
not have signed as an acceptor/drawee. In doing
so, he became primarily and personally liable for
the drafts.
The defendant also contends that the drafts signed by
him were not really bills of exchange but mere pieces
of evidence of indebtedness because payments were
made before acceptance. This is also without merit.
Under the Negotiable Instruments Law, a bill of
exchange is an unconditional order in writing
addressed by one person to another, signed by the
person giving it, requiring the person to whom it is
addressed to pay on demand or at a fixed or
determinable future time a sum certain in money to
order or to bearer. 36 As long as a commercial paper
conforms with the definition of a bill of exchange,
that paper is considered a bill of exchange. The
nature of acceptance is important only in the
determination of the kind of liabilities of the
parties involved, but not in the determination of
whether a commercial paper is a bill of exchange
or not.
G.R. No. 116320 November 29, 1999
ADALIA FRANCISCO, petitioner,
vs.
COURT OF APPEALS, HERBY COMMERCIAL &
CONSTRUCTION CORPORATION AND JAIME C.
ONG, respondents.
[G.R. No. 116320. November 29, 1999.]
ADALIA FRANCISCO, petitioner, vs. COURT OF
APPEALS, HERBY COMMERCIAL & CONSTRUCTION
CORPORATION AND JAIME C. ONG, respondents.
FACTS:
A Land Development and Construction Contract was
entered into on June 23, 1977 by A. Francisco Realty &
Development Corporation (AFRDC), represented by
its president, herein petitioner, and respondent
HERBY Commercial & Construction Corporation
(HCCC), represented by its President and General
Manager respondent Jaime C. Ong, pursuant to a
housing project at San Jose del Monte, financed by the
GSIS. Under the contract, HCCC agreed to undertake
the construction of 35 housing units and the
development of 35 hectares of land. The GSIS and
AFRDC put up an Executive Committee Account with
the Insular Bank of Asia in America (IBAA) from which
checks would be issued and co-signed by petitioner
and GSIS Vice-President, Armando Diaz.
After examination of the records of the GSIS, Ong
discovered that Diaz and petitioner had executed and
signed seven checks of various dates and amounts,
drawn against IBAA and payable to HCCC for
completed and delivered work under the contract.
Petitioner forged the signature of Ong without his
knowledge or consent, to make it appear as if he had
indorsed said checks and that, after indorsing the
checks for a second time by signing her name at the
back of the checks, she deposited said checks in her
savings account with the IBAA.
Ong filed a complaint charging petitioner with estafa
thru falsification of commercial documents.
Petitioner, on the other hand, denied having forged
respondent Ong's signature on the checks, claiming
that Ong himself indorsed the checks and delivered
the same to her in payment of the loans which he
extended to respondent HCCC. As a means of
repayment, respondent Ong allegedly issued a
Certification authorizing petitioner to collect
respondent HCCC's receivables from the GSIS.
Petitioner's claim was given credence, hence, the
complaint was dismissed. Thereafter, private
respondents filed a case against petitioner and IBAA
for the recovery of the total value of the seven checks
and for damages, attorney's fees, expenses of litigation
and costs. After trial on the merits, the trial court
rendered its decision in favor of private respondents.
On appeal, the Court of Appeals affirmed the trial
court's ruling. Hence, this petition for review on
certiorari.
ISSUE:
WON the signature of Ong on the checks as an agent
will exempt him from personal liability?
Whether or not Francisco forged the signature of Ong
on the seven checks?
HELD: The court ruled in negative. The Supreme Court
affirmed the decision of the trial court with
modification as to award of damages. The Court
concurred with the lower court's finding that
petitioner forged the signature of private respondent
on the checks. Petitioner's defense must fail. The
Negotiable Instruments Law provides that where any
person is under obligation to indorse in a
representative capacity, he may indorse in such terms
as to negative personal liability. An agent, when so
signing, should indicate that he is merely signing in
behalf of the principal and must disclose the name of
his principal; otherwise he shall be held personally
liable. Even assuming that petitioner was authorized
by HCCC to sign private respondent's name, still, she
did not indorse the instrument in accordance with
law. Instead of signing private respondent's name,
petitioner should have signed her own name and
expressly indicated that she was signing as an agent of
HCCC. Thus, the certification cannot be used by
petitioner to validate her act of forgery.
Based upon the findings of handwriting experts from
the National Bureau of Investigation (NBI), the trial
court held that Francisco had indeed forged the
signature of Ong to make it appear that he had
indorsed the checks. Also, the court ruled that there
were no loans extended, reasoning that it was
unbelievable that HCCC was experiencing financial
difficulties so as to compel it to obtain the loans from
AFRDC in view of the fact that the GSIS had issued
checks in favor of HCCC at about the same time that
the alleged advances were made. The trial court stated
that it was plausible that Francisco concealed the fact
of issuance of the checks from private respondents in
order to make it appear as if she were accommodating
private respondents, when in truth she was lending
HCCC its own money.
IBAA was held liable to private respondents for having
honored the checks despite such obvious
irregularities as the lack of initials to validate the
alterations made on the check, the absence of the
signature of a co-signatory in the corporate checks of
HCCC and the deposit of the checks on a second
indorsement in the savings accountof Francisco.
However, the trial court allowed IBAA recourse
against Francisco, who was ordered to reimburse the
IBAA for any sums it shall have to pay to private
respondents.
As regards the forgery, we concur with the lower
courts' finding that Francisco forged the signature of
Ong on the checks to make it appear as if Ong had
indorsed said checks and that, after indorsing the
checks for a second time by signing her name at the
back of the checks, Francisco deposited said checks in
her savings account with IBAA. The forgery was
satisfactorily established in the trial court upon the
strength of the findings of the NBI handwriting expert.
10 Other than petitioner's self-serving denials, there is
nothing in the records to rebut the NBI's findings.
Well-entrenched is the rule that findings of trial courts
which are factual in nature, especially when affirmed
by the Court of Appeals, deserve to be respected and
affirmed by the Supreme Court, provided it is
supported by substantial evidence on record, 11 as it
is in the case at bench.
WHEREFORE, we AFFIRM the respondent court's
decision promulgated on June 29, 1992, upholding the
February 16, 1988 decision of the trial court in favor
of private respondents, with the modification that the
interest upon the actual damages awarded shall be at
six percent (6%) per annum, which interest rate shall
be computed from the time of the filing of the
complaint on November 19, 1979. However, the
interest rate shall be twelve percent (12%) per annum
from the time the judgment in this case becomes final
and executory and until such amount is fully paid. The
basis for computation of the six percent and twelve
percent rates of interest shall be the amount of
P370,475.00. No pronouncement as to costs.
CASE DOCTRINE:
COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS
LAW; TO NEGATIVE PERSONAL LIABILITY, AN
AGENT, WHEN SIGNING IN A REPRESENTATIVE
CAPACITY, MUST DISCLOSE THE NAME OF HIS
PRINCIPAL. Petitioner claims that she was, in any
event, authorized to sign Ong's name on the checks by
virtue of the Certification executed by Ong in her favor
giving her the authority to collect all the receivables of
HCCC from the GSIS, including the questioned checks.
Petitioner's alternative defense must similarly fail.
The Negotiable Instruments Law provides that where
any person is under obligation to indorse in a
representative capacity, he may indorse in such terms
as to negative personal liability. An agent, when so
signing, should indicate that he is merely signing in
behalf of the principal and must disclose the nameof
his principal; otherwise he shall be held personally
liable. Even assuming that Francisco was authorized
by HCCC to sign Ong's name, still, Francisco did not
indorse the instrument in accordance with law.
Instead of signing Ong's name, Francisco should have
signed her own name and expressly indicated that she
was signing as an agent of HCCC. Thus, the
Certification cannot be used by Francisco to validate
her act of forgery.