Republic of the Philippines released through petitioner by the Department of Justice duly signed by the officer concerned.
SUPREME COURT Upon service of the writ of garnishment, petitioner as custodian of the checks was under obliga-
Manila
FIRST DIVISION
G.R. No. 111190 June 27, 1995
LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City and in his personal capacity
as garnishee,petitioner,
vs.
HON. JOSE P. BURGOS, Presiding Judge, RTC, Br. XVII, Cebu City, and RAUL H.
SESBREO, respondents.
BELLOSILLO, J.:
RAUL H. SESBREO filed a complaint for damages against Assistant City Fiscals Bienvenido N.
Mabanto, Jr., and Dario D. Rama, Jr., before the Regional Trial Court of Cebu City. After trial
judgment was rendered ordering the defendants to pay P11,000.00 to the plaintiff, private re-
spondent herein. The decision having become final and executory, on motion of the latter, the trial
court ordered its execution. This order was questioned by the defendants before the Court of Ap-
peals. However, on 15 January 1992 a writ of execution was issued.
On 4 February 1992 a notice of garnishment was served on petitioner Loreto D. de la Victoria as
City Fiscal of Mandaue City where defendant Mabanto, Jr., was then detailed. The notice directed
petitioner not to disburse, transfer, release or convey to any other person except to the deputy
sheriff concerned the salary checks or other checks, monies, or cash due or belonging to
1
Mabanto, Jr., under penalty of law. On 10 March 1992 private respondent filed a motion before
the trial court for examination of the garnishees.
On 25 May 1992 the petition pending before the Court of Appeals was dismissed. Thus the trial
court, finding no more legal obstacle to act on the motion for examination of the garnishees, di-
rected petitioner on 4 November 1992 to submit his report showing the amount of the garnished
2
salaries of Mabanto, Jr., within fifteen (15) days from receipt taking into consideration the provi-
sions of Sec. 12, pars. (f) and (i), Rule 39 of the Rules of Court.
On 24 November 1992 private respondent filed a motion to require petitioner to explain why he
should not be cited in contempt of court for failing to comply with the order of 4 November 1992.
On the other hand, on 19 January 1993 petitioner moved to quash the notice of garnishment
claiming that he was not in possession of any money, funds, credit, property or anything of value
belonging to Mabanto, Jr., except his salary and RATA checks, but that said checks were not yet
properties of Mabanto, Jr., until delivered to him. He further claimed that, as such, they were still
public funds which could not be subject to garnishment.
On 9 March 1993 the trial court denied both motions and ordered petitioner to immediately comply
3
with its order of 4 November 1992. It opined that the checks of Mabanto, Jr., had already been
tion to hold them for the judgment creditor. Petitioner became a virtual party to, or a forced
intervenor in, the case and the trial court thereby acquired jurisdiction to bind him to its orders and
processes with a view to the complete satisfaction of the judgment. Additionally, there was no suf-
ficient reason for petitioner to hold the checks because they were no longer government funds and
presumably delivered to the payee, conformably with the last sentence of Sec. 16 of the Negotia-
ble Instruments Law.
With regard to the contempt charge, the trial court was not morally convinced of petitioner's guilt.
For, while his explanation suffered from procedural infirmities nevertheless he took pains in en-
lightening the court by sending a written explanation dated 22 July 1992 requesting for the lifting
of the notice of garnishment on the ground that the notice should have been sent to the Finance
Officer of the Department of Justice. Petitioner insists that he had no authority to segregate a por-
tion of the salary of Mabanto, Jr. The explanation however was not submitted to the trial court for
action since the stenographic reporter failed to attach it to the record.
4
On 20 April 1993 the motion for reconsideration was denied. The trial court explained that it was
not the duty of the garnishee to inquire or judge for himself whether the issuance of the order of
execution, writ of execution and notice of garnishment was justified. His only duty was to turn over
the garnished checks to the trial court which issued the order of execution.
5
Petitioner raises the following relevant issues: (1) whether a check still in the hands of the maker
or its duly authorized representative is owned by the payee before physical delivery to the latter:
and, (2) whether the salary check of a government official or employee funded with public funds
can be subject to garnishment.
Petitioner reiterates his position that the salary checks were not owned by Mabanto, Jr., because
they were not yet delivered to him, and that petitioner as garnishee has no legal obligation to hold
and deliver them to the trial court to be applied to Mabanto, Jr.'s judgment debt. The thesis of peti-
tioner is that the salary checks still formed part of public funds and therefore beyond the reach of
garnishment proceedings.
Petitioner has well argued his case.
Garnishment is considered as a species of attachment for reaching credits belonging to the judg-
6
ment debtor owing to him from a stranger to the litigation. Emphasis is laid on the phrase "be-
longing to the judgment debtor" since it is the focal point in resolving the issues raised.
As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He receives his
compensation in the form of checks from the Department of Justice through petitioner as City Fis-
cal of Mandaue City and head of office. Under Sec. 16 of the Negotiable Instruments Law, every
contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for
the purpose of giving effect thereto. As ordinarily understood, delivery means the transfer of the
possession of the instrument by the maker or drawer with intent to transfer title to the payee and
7
recognize him as the holder thereof.
According to the trial court, the checks of Mabanto, Jr., were already released by the Department
of Justice duly signed by the officer concerned through petitioner and upon service of the writ of
garnishment by the sheriff petitioner was under obligation to hold them for the judgment creditor. It
recognized the role of petitioner ascustodian of the checks. At the same time however it consid-
ered the checks as no longer government funds and presumed delivered to the payee based on
the last sentence of Sec. 16 of the Negotiable Instruments Law which states: "And where the in-
strument is no longer in the possession of a party whose signature appears thereon, a valid and
intentional delivery by him is presumed." Yet, the presumption is not conclusive because the last
portion of the provision says "until the contrary is proved." However this phrase was deleted by the
trial court for no apparent reason. Proof to the contrary is its own finding that the checks were in
the custody of petitioner. Inasmuch as said checks had not yet been delivered to Mabanto, Jr.,
8
they did not belong to him and still had the character of public funds. In Tiro v. Hontanosas we
ruled that
The salary check of a government officer or employee such as a teacher does not
belong to him before it is physically delivered to him. Until that time the check be-
longs to the government. Accordingly, before there is actual delivery of the check,
the payee has no power over it; he cannot assign it without the consent of the
Government.
As a necessary consequence of being public fund, the checks may not be garnished to satisfy the
9
judgment. The rationale behind this doctrine is obvious consideration of public policy. The Court
10
succinctly stated in Commissioner of Public Highways v. San Diego that
The functions and public services rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of public funds from their legitimate and
specific objects, as appropriated by law.
In denying petitioner's motion for reconsideration, the trial court expressed the additional ratiocina-
tion that it was not the duty of the garnishee to inquire or judge for himself whether the issuance of
the order of execution, the writ of execution, and the notice of garnishment was justified, citing our
11
ruling in Philippine Commercial Industrial Bank v. Court of Appeals. Our precise ruling in that
case was that "[I]t is not incumbent upon the garnishee to inquire or to judge for itself whether or
not the order for the advance execution of a judgment is valid." But that is invoking only the gen-
eral rule. We have also established therein the compelling reasons, as exceptions thereto, which
were not taken into account by the trial court, e.g., a defect on the face of the writ or actual
knowledge by the garnishee of lack of entitlement on the part of the garnisher. It is worth to note
that the ruling referred to the validity of advance execution of judgments, but a careful scrutiny of
that case and similar cases reveals that it was applicable to a notice of garnishment as well. In the
case at bench, it was incumbent upon petitioner to inquire into the validity of the notice of gar-
nishment as he had actual knowledge of the non-entitlement of private respondent to the checks
in question. Consequently, we find no difficulty concluding that the trial court exceeded its jurisdic-
tion in issuing the notice of garnishment concerning the salary checks of Mabanto, Jr., in the pos-
session of petitioner.
WHEREFORE, the petition is GRANTED. The orders of 9 March 1993 and 20 April 1993 of the
Regional Trial Court of Cebu City, Br. 17, subject of the petition are SET ASIDE. The notice of
garnishment served on petitioner dated 3 February 1992 is ordered DISCHARGED.
SO ORDERED.
Quiason and Kapunan, JJ., concur.
Separate Opinions
DAVIDE, JR., J., concurring and dissenting:
This Court may take judicial notice of the fact that checks for salaries of employees of various De-
partments all over the country are prepared in Manila not at the end of the payroll period, but days
before it to ensure that they reach the employees concerned not later than the end of the payroll
period. As to the employees in the provinces or cities, the checks are sent through the heads of
the corresponding offices of the Departments. Thus, in the case of Prosecutors and Assistant
Prosecutors of the Department of Justice, the checks are sent through the Provincial Prosecutors
or City Prosecutors, as the case may be, who shall then deliver the checks to the payees.
Involved in the instant case are the salary and RATA checks of then Assistant City Fiscal
Bienvenido Mabanto, Jr., who was detailed in the Office of the City Fiscal (now Prosecutor) of
Mandaue City. Conformably with the aforesaid practice, these checks were sent to Mabanto thru
the petitioner who was then the City Fiscal of Mandaue City.
The ponencia failed to indicate the payroll period covered by the salary check and the month to
which the RATA check corresponds.
I respectfully submit that if these salary and RATA checks corresponded, respectively, to a payroll
period and to a month which had already lapsed at the time the notice of garnishment was served,
the garnishment would be valid, as the checks would then cease to be property of the Govern-
ment and would become property of Mabanto. Upon the expiration of such period and month, the
sums indicated therein were deemed automatically segregated from the budgetary allocations for
the Department of Justice under the General Appropriations Act.
It must be recalled that the public policy against execution, attachment, or garnishment is directed
to public funds.
1
Thus, in the case of Director of the Bureau of Commerce and Industry vs. Concepcion where the
core issue was whether or not the salary due from the Government to a public officer or employee
can, by garnishment, be seized before being paid to him and appropriated to the payment of his
judgment debts, this Court held:
A rule, which has never been seriously questioned, is that money in the hands of
public officers, although it may be due government employees, is not liable to the
creditors of these employees in the process of garnishment. One reason is, that
the State, by virtue of its sovereignty, may not be sued in its own courts except by
express authorization by the Legislature, and to subject its officers to garnishment
 would be to permit indirectly what is prohibited directly. Another reason is that
moneys sought to be garnished, as long as they remain in the hands of the dis-
bursing officer of the Government, belong to the latter, although the defendant in
garnishment may be entitled to a specific portion thereof. And still another reason
which covers both of the foregoing is that every consideration of public policy for-
bids it.
The United States Supreme Court, in the leading case of Buchanan vs. Alexander
([1846], 4 How., 19), in speaking of the right of creditors of seamen, by process of
attachment, to divert the public money from its legitimate and appropriate object,
said:
To state such a principle is to refute it. No government can sanc-
tion it. At all times it would be found embarrassing, and under
some circumstances it might be fatal to the public service. . . . So
long as money remains in the hands of a disbursing officer, it is
as much the money of the United States, as if it had not been
drawn from the treasury. Until paid over by the agent of the gov-
ernment to the person entitled to it, the fund cannot, in any legal
sense, be considered a part of his effects." (See, further, 12
R.C.L., p. 841; Keene vs. Smith [1904], 44 Ore., 525; Wild vs.
Ferguson [1871], 23 La. Ann., 752; Bank of Tennessee vs. Dibrell
[1855], 3 Sneed [Tenn.], 379). (emphasis supplied)
The authorities cited in the ponencia are inapplicable. Garnished or levied on therein were public
funds, to wit: (a) the pump irrigation trust fund deposited with the Philippine National Bank (PNB)
2
in the account of the Irrigation Service Unit in Republic vs. Palacio; (b) the deposits of the Na-
3
tional Media Production Center in Traders Royal Bank vs. Intermediate Appellate Court; and (c)
the deposits of the Bureau of Public Highways with the PNB under a current account, which may
be expended only for their legitimate object as authorized by the corresponding legislative appro-
4
priation in Commissioner of Public Highways vs. Diego.
5
Neither is Tiro vs. Hontanosas squarely in point. The said case involved the validity of Circular
No. 21, series of 1969, issued by the Director of Public Schools which directed that "henceforth no
cashier or disbursing officer shall pay to attorneys-in-fact or other persons who may be authorized
under a power of attorney or other forms of authority to collect the salary of an employee, except
when the persons so designated and authorized is an immediate member of the family of the em-
ployee concerned, and in all other cases except upon proper authorization of the Assistant Execu-
tive Secretary for Legal and Administrative Matters, with the recommendation of the Financial As-
sistant." Private respondent Zafra Financing Enterprise, which had extended loans to public
school teachers in Cebu City and obtained from the latter promissory notes and special powers of
attorney authorizing it to take and collect their salary checks from the Division Office in Cebu City
of the Bureau of Public Schools, sought, inter alia, to nullify the Circular. It is clear that the teach-
ers had in fact assigned to or waived in favor of Zafra their future salaries which were still public
funds. That assignment or waiver was contrary to public policy.
I would therefore vote to grant the petition only if the salary and RATA checks garnished corre-
sponds to an unexpired payroll period and RATA month, respectively.
Padilla, J., concurs.
Separate Opinions
DAVIDE, JR., J., concurring and dissenting:
This Court may take judicial notice of the fact that checks for salaries of employees of various De-
partments all over the country are prepared in Manila not at the end of the payroll period, but days
before it to ensure that they reach the employees concerned not later than the end of the payroll
period. As to the employees in the provinces or cities, the checks are sent through the heads of
the corresponding offices of the Departments. Thus, in the case of Prosecutors and Assistant
Prosecutors of the Department of Justice, the checks are sent through the Provincial Prosecutors
or City Prosecutors, as the case may be, who shall then deliver the checks to the payees.
Involved in the instant case are the salary and RATA checks of then Assistant City Fiscal
Bienvenido Mabanto, Jr., who was detailed in the Office of the City Fiscal (now Prosecutor) of
Mandaue City. Conformably with the aforesaid practice, these checks were sent to Mabanto thru
the petitioner who was then the City Fiscal of Mandaue City.
The ponencia failed to indicate the payroll period covered by the salary check and the month to
which the RATA check corresponds.
I respectfully submit that if these salary and RATA checks corresponded, respectively, to a payroll
period and to a month which had already lapsed at the time the notice of garnishment was served,
the garnishment would be valid, as the checks would then cease to be property of the Govern-
ment and would become property of Mabanto. Upon the expiration of such period and month, the
sums indicated therein were deemed automatically segregated from the budgetary allocations for
the Department of Justice under the General Appropriations Act.
It must be recalled that the public policy against execution, attachment, or garnishment is directed
to public funds.
1
Thus, in the case of Director of the Bureau of Commerce and Industry vs. Concepcion where the
core issue was whether or not the salary due from the Government to a public officer or employee
can, by garnishment, be seized before being paid to him and appropriated to the payment of his
judgment debts, this Court held:
A rule, which has never been seriously questioned, is that money in the hands of
public officers, although it may be due government employees, is not liable to the
creditors of these employees in the process of garnishment. One reason is, that
the State, by virtue of its sovereignty, may not be sued in its own courts except by
express authorization by the Legislature, and to subject its officers to garnishment
would be to permit indirectly what is prohibited directly. Another reason is that
moneys sought to be garnished, as long as they remain in the hands of the dis-
bursing officer of the Government, belong to the latter, although the defendant in
 garnishment may be entitled to a specific portion thereof. And still another reason
which covers both of the foregoing is that every consideration of public policy for-
bids it.

The United States Supreme Court, in the leading case of Buchanan vs. Alexander
([1846], 4 How., 19), in speaking of the right of creditors of seamen, by process of
attachment, to divert the public money from its legitimate and appropriate object,
said:

To state such a principle is to refute it. No government can sanc-

tion it. At all times it would be found embarrassing, and under
some circumstances it might be fatal to the public service. . . . So
long as money remains in the hands of a disbursing officer, it is
as much the money of the United States, as if it had not been
drawn from the treasury. Until paid over by the agent of the gov-
ernment to the person entitled to it, the fund cannot, in any legal
sense, be considered a part of his effects." (See, further, 12
R.C.L., p. 841; Keene vs. Smith [1904], 44 Ore., 525; Wild vs.
Ferguson [1871], 23 La. Ann., 752; Bank of Tennessee vs. Dibrell
[1855], 3 Sneed [Tenn.], 379). (emphasis supplied)

The authorities cited in the ponencia are inapplicable. Garnished or levied on therein were public
funds, to wit: (a) the pump irrigation trust fund deposited with the Philippine National Bank (PNB)
2
in the account of the Irrigation Service Unit in Republic vs. Palacio; (b) the deposits of the Na-
3
tional Media Production Center in Traders Royal Bank vs. Intermediate Appellate Court; and (c)
the deposits of the Bureau of Public Highways with the PNB under a current account, which may
be expended only for their legitimate object as authorized by the corresponding legislative appro-
4
priation in Commissioner of Public Highways vs. Diego.

5
Neither is Tiro vs. Hontanosas squarely in point. The said case involved the validity of Circular
No. 21, series of 1969, issued by the Director of Public Schools which directed that "henceforth no
cashier or disbursing officer shall pay to attorneys-in-fact or other persons who may be authorized
under a power of attorney or other forms of authority to collect the salary of an employee, except
when the persons so designated and authorized is an immediate member of the family of the em-
ployee concerned, and in all other cases except upon proper authorization of the Assistant Execu-
tive Secretary for Legal and Administrative Matters, with the recommendation of the Financial As-
sistant." Private respondent Zafra Financing Enterprise, which had extended loans to public
school teachers in Cebu City and obtained from the latter promissory notes and special powers of
attorney authorizing it to take and collect their salary checks from the Division Office in Cebu City
of the Bureau of Public Schools, sought, inter alia, to nullify the Circular. It is clear that the teach-
ers had in fact assigned to or waived in favor of Zafra their future salaries which were still public
funds. That assignment or waiver was contrary to public policy.

I would therefore vote to grant the petition only if the salary and RATA checks garnished corre-
sponds to an unexpired payroll period and RATA month, respectively.

Padilla, J., concurs.

 Republic of the Philippines (1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE PLAINTIFF-
SUPREME COURT PETITIONER HAS NO CAUSE OF ACTION AGAINST DEFENDANTS-
Manila RESPONDENTS HEREIN.

SECOND DIVISION (2) THE COURT OF APPEALS ERRED IN HOLDING THAT SECTION 13, RULE
3 OF THE REVISED RULES OF COURT ON ALTERNATIVE DEFENDANTS IS
G.R. No. 85419 March 9, 1993 NOT APPLICABLE TO HEREIN DEFENDANTS-RESPONDENTS.

DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner, The antecedent facts of this case are as follows:
vs.
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN INDUSTRIAL In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the latter execut-
PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES, defendants- ed and delivered to the former a promissory note, engaging to pay the petitioner Bank or order the
respondents. 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,
Yngson & Associates for petitioner. 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
Henry A. Reyes & Associates for Samso Tung & Asian Industrial Plastic Corporation. 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
Eduardo G. Castelo for Sima Wei. 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 Cor-
Monsod, Tamargo & Associates for Producers Bank. poration, at the Balintawak branch, Caloocan City, of the Producers Bank. Cheng Uy, Branch
Manager of the Balintawak branch of Producers Bank, relying on the assurance of respondent
Rafael S. Santayana for Mary Cheng Uy. Samson Tung, President of Plastic Corporation, that the transaction was legal and regular, in-
structed the cashier of Producers Bank to accept the checks for deposit and to credit them to the
CAMPOS, JR., J.: 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.
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 The main issue before Us is whether petitioner Bank has a cause of action against any or all of
of the Philippines, on two causes of action: the defendants, in the alternative or otherwise.

(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 petition-
er, and drawn against the China Banking Corporation, to pay the balance due on
the promissory note.
Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging a common
ground that the complaint states no cause of action. The trial court granted the defendants' Mo-
tions to Dismiss. The Court of Appeals affirmed this decision, * to which the petitioner Bank, rep-
resented by its Legal Liquidator, filed this Petition for Review by Certiorari, assigning the following
1 a deed to a piece of land must be delivered in order to convey title to the grantee, so must a nego-
as the alleged errors of the Court of Appeals:
A cause of action is defined as an act or omission of one party in violation of the legal right or
rights of another. The essential elements are: (1) legal right of the plaintiff; (2) correlative obliga-
2
tion of the defendant; and (3) an act or omission of the defendant in violation of said legal right.
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
tiable 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 deliv- With respect to the second assignment of error raised by petitioner Bank regarding the applicabil-
ery of the instrument for the purpose of giving effect thereto. . . . ity of Section 13, Rule 3 of the Rules of Court, We find it unnecessary to discuss the same in view
of Our finding that the petitioner Bank did not acquire any right or interest in the checks due to lack
Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its deliv- of delivery. It therefore has no cause of action against the respondents, in the alternative or oth-
3 erwise.
ery to him. Delivery of an instrument means transfer of possession, actual or constructive, from
4
one person to another. 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 In the light of the foregoing, the judgment of the Court of Appeals dismissing the petitioner's com-
to the instrument. plaint is AFFIRMED insofar as the second cause of action is concerned. On the first cause of ac-
tion, the case is REMANDED to the trial court for a trial on the merits, consistent with this deci-
The allegations of the petitioner in the original complaint show that the two (2) China Bank checks, sion, in order to determine whether respondent Sima Wei is liable to the Development Bank of
numbered 384934 and 384935, were not delivered to the payee, the petitioner herein. Without the Rizal for any amount under the promissory note allegedly signed by her.
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 SO ORDERED.
drawer Sima Wei or against the Producers Bank or any of the other respondents.
Narvasa, C.J., Padilla, Regalado and Nocon, JJ., concur.
In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei on the promisso-
ry note, and the alternative defendants, including Sima Wei, on the two checks. On appeal from
the orders of dismissal of the Regional Trial Court, petitioner Bank alleged that its cause of action
was not based on collecting the sum of money evidenced by the negotiable instruments stated but
on quasi-delict a claim for damages on the ground of fraudulent acts and evident bad faith of
the alternative respondents. This was clearly an attempt by the petitioner Bank to change not only
the theory of its case but the basis of his cause of action. It is well-settled that a party cannot
5
change his theory on appeal, as this would in effect deprive the other party of his day in court.

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
6
value is impaired through the fault of the creditor. None of these exceptions were alleged by re-
spondent Sima Wei.

Therefore, unless respondent Sima Wei proves that she has been relieved from liability on the
promissory note by some other cause, petitioner Bank has a right of action against her for the bal-
ance due thereon.

However, insofar as the other respondents are concerned, petitioner Bank has no privity with
them. Since petitioner Bank never received the checks on which it based its action against said
respondents, it never owned them (the checks) nor did it acquire any interest therein. Thus, any-
thing which the respondents may have done with respect to said checks could not have prejudiced
petitioner Bank. It had no right or interest in the checks which could have been violated by said
respondents. Petitioner Bank has therefore no cause of action against said respondents, in the
alternative or otherwise. If at all, it is Sima Wei, the drawer, who would have a cause of action
against her
co-respondents, if the allegations in the complaint are found to be true.
 Republic of the Philippines The maker, Dr. Villaruel defaulted in the payment of his installments when they became due, so
SUPREME COURT on October 30, 1969 plaintiff formally presented the promissory note for payment to the maker. Dr.
Manila Villaruel failed to pay the promissory note as demanded, hence plaintiff notified Sambok as
indorsee of said note of the fact that the same has been dishonored and demanded payment.
SECOND DIVISION
Sambok failed to pay, so on November 26, 1969 plaintiff filed a complaint for collection of a sum of
G.R. No. L-39641 February 28, 1983 money before the Court of First Instance of Iloilo, Branch I. Sambok did not deny its liability but
contended that it could not be obliged to pay until after its co-defendant Dr. Villaruel has been de-
METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION, plaintiff-appellee, clared insolvent.
vs.
SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO., LTD., defendants- During the pendency of the case in the trial court, defendant Dr. Villaruel died, hence, on October
appellants. 24, 1972 the lower court, on motion, dismissed the case against Dr. Villaruel pursuant to Section
1
21, Rule 3 of the Rules of Court.
Rizal Quimpo & Cornelio P. Revena for plaintiff-appellee.
On plaintiff's motion for summary judgment, the trial court rendered its decision dated September
Diosdado Garingalao for defendants-appellants. 12, 1973, the dispositive portion of which reads as follows:

DE CASTRO, J.: WHEREFORE, judgment is rendered:

The former Court of Appeals, by its resolution dated October 16, 1974 certified this case to this (a) Ordering Sambok Motors Company to pay to the plaintiff the sum of
P15,939.00 plus the legal rate of interest from October 30, 1969;
Court the issue issued therein being one purely of law.

On April 15, 1969 Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons
Motors Co., Ltd., in the amount of P15,939.00 payable in twelve (12) equal monthly installments,
beginning May 18, 1969, with interest at the rate of one percent per month. It is further provided
that in case on non-payment of any of the installments, the total principal sum then remaining un-
paid shall become due and payable with an additional interest equal to twenty-five percent of the
total amount due.
On the same date, Sambok Motors Company (hereinafter referred to as Sambok), a sister com-
pany of Ng Sambok Sons Motors Co., Ltd., and under the same management as the former, ne-
gotiated and indorsed the note in favor of plaintiff Metropol Financing & Investment Corporation
with the following indorsement:
(b) Ordering same defendant to pay to plaintiff the sum equivalent to 25% of
P15,939.00 plus interest thereon until fully paid; and
(c) To pay the cost of suit.
Not satisfied with the decision, the present appeal was instituted, appellant Sambok raising a lone
assignment of error as follows:
The trial court erred in not dismissing the complaint by finding defendant appellant
Sambok Motors Company as assignor and a qualified indorsee of the subject
promissory note and in not holding it as only secondarily liable thereof.

Pay to the order of Metropol Bacolod Financing & Investment Corporation with re- Appellant Sambok argues that by adding the words "with recourse" in the indorsement of the note,
course. Notice of Demand; Dishonor; Protest; and Presentment are hereby it becomes a qualified indorser that being a qualified indorser, it does not warrant that if said note
waived. is dishonored by the maker on presentment, it will pay the amount to the holder; that it only war-
rants the following pursuant to Section 65 of the Negotiable Instruments Law: (a) that the instru-
SAMBOK MOTORS CO. ment is genuine and in all respects what it purports to be; (b) that he has a good title to it; (c) that
(BACOLOD) all prior parties had capacity to contract; (d) that he has no knowledge of any fact which would
impair the validity of the instrument or render it valueless.
By:
The appeal is without merit.
RODOLFO G. NONILLO Asst. General Manager
A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It
may be made by adding to the indorser's signature the words "without recourse" or any words of
 2
similar import. Such an indorsement relieves the indorser of the general obligation to pay if the Separate Opinions
instrument is dishonored but not of the liability arising from warranties on the instrument as pro-
vided in Section 65 of the Negotiable Instruments Law already mentioned herein. However, appel- ABAD SANTOS, J., concurring:
lant Sambok indorsed the note "with recourse" and even waived the notice of demand, dishonor,
protest and presentment.
I concur and wish to add the observation that the appeal could have been treated as a petition for
review under R.A. 5440 and dismissed by minute resolution.
"Recourse" means resort to a person who is secondarily liable after the default of the person who
3
is primarily liable. Appellant, by indorsing the note "with recourse" does not make itself a quali-
Separate Opinions
fied indorser but a general indorser who is secondarily liable, because by such indorsement, it
agreed that if Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said appellant. The
effect of such indorsement is that the note was indorsed without qualification. A person who in- ABAD SANTOS, J., concurring:
dorses without qualification engages that on due presentment, the note shall be accepted or paid,
or both as the case may be, and that if it be dishonored, he will pay the amount thereof to the I concur and wish to add the observation that the appeal could have been treated as a petition for
4
holder. Appellant Sambok's intention of indorsing the note without qualification is made even review under R.A. 5440 and dismissed by minute resolution.
more apparent by the fact that the notice of demand, dishonor, protest and presentment were an
waived. The words added by said appellant do not limit his liability, but rather confirm his obliga-
tion as a general indorser.

Lastly, the lower court did not err in not declaring appellant as only secondarily liable because af-
ter an instrument is dishonored by non-payment, the person secondarily liable thereon ceases to
5
be such and becomes a principal debtor. His liabiliy becomes the same as that of the original
6
obligor. Consequently, the holder need not even proceed against the maker before suing the
indorser.

WHEREFORE, the decision of the lower court is hereby affirmed. No costs.

SO ORDERED.

Makasiar (Chairman), Concepcion, Jr., Guerrero and Escolin, JJ., concur.

Aquino, J., is on leave.