G.R. No.

86250 February 26, 1990

ALBERTO F. LACSON, EDITHA F. LACSON, ROMEO F. LACSON and ZENA F. VELASCO, petitioners,
vs.
HON. LUIS R. REYES, in his capacity as presiding judge of Branch 22 of the Regional Trial Court of Cavite, Branch 22,
and/or Multiple Sala, Imus, Cavite, and EPHRAIM J. SERQUINA, respondents.

Victor H. Volfango for petitioners.

Ephraim J. Serquina for and his own behalf as respondent.

SARMIENTO, J.:

On August 26, 1987, the private respondent, Ephraim Serquina, petitioned the respondent court for the probate of the
last will and testament of Carmelita Farlin. His petition was docketed as Sp. Proc. No. 127-87 of the respondent court,
entitled "In Re Testate Estate of Carmelita S. Farlin, Ephraim J. Serquina, Petitioner." He also petitioned the court in his
capacity as counsel for the heirs, the herein petitioners, and as executor under the will.

The petition was not opposed and hence, on November 17, 1987, the respondent court issued a "certificate of
allowance," 1 the dispositive part of which reads as follows:

WHEREFORE, upon the foregoing, the Court hereby renders certification that subject will and testament is accordingly
allowed in accordance with Sec. 13 of Rule 76 of the Rules of Court.

SO ORDERED. 2

On March 14, 1988, Atty. Ephraim Serquina filed a "motion for attorney's fees" 3 against the petitioners, alleging that
the heirs had agreed to pay, as and for his legal services rendered, the sum of P68,000.00.

Thereafter summonses were served upon the heirs "as if it were a complaint against said heirs" 4 directing them to
answer the motion.

Thereafter, the heirs filed their answer and denied the claim for P68,000.00 alleging that the sum agreed upon was only
P7,000.00, a sum they had allegedly already paid.

After pre-trial, the respondent court rendered judgment and disposed as follows:

In the light of the foregoing, considering the extent of the legal services rendered to the clients, the value of the
properties gained by the clients out of said services, the petition for attorney's fees is granted. Judgment is hereby
rendered directing the respondent heirs to pay their lawyer the sum of P65,000.00 as true and reasonable attorney's
fees which shall be a lien on the subject properties. Cost against the respondent.

SO ORDERED. 5

On October 21, 1988, eleven days after the heirs received a copy of the decision, 6 the latter filed a notice of appeal.

On November 7, 1988, the respondent court issued an order directing the heirs to amend their notice of appeal. 7

On October 27, 1988, the respondent court issued an order "noting" the notice on appeal "appellants [the heirs] having
failed to correct or complete the same within the reglementary period to effect an appeal." 8

On November 24, 1988, the respondent court issued yet another order denying the notice of appeal for failure of the
heirs to file a record on appeal. 9
Thereafter, Atty. Serquina moved for execution.

On December 5, 1988, the respondent court issued an order granting execution. 10

The petitioners submit that the decision, dated October 26, 1988, and the orders, dated October 27, 1988, November
24, 1988, and December 5, 1988, respectively, are nun and void for the following reasons: (1) the respondent court
never acquired jurisdiction over the "motion for attorney's fees" for failure on the part of the movant, Ephraim Serquina,
to pay docket fees; (2) the respondent court gravely abused its discretion in denying the heirs' notice of appeal for their
failure to file a record on appeal; and (3) the respondent court also gravely abused its discretion in awarding attorney's
fees contrary to the provisions of Section 7, of Rule 85, of the Rules of Court.

Atty. Serquina now defends the challenged acts of the respondent court: (1) his motion was a mere incident to the main
proceedings; (2) the respondent court rightly denied the notice of appeal in question for failure of the heirs to submit a
record on appeal; and (3) in collecting attorney's fees, he was not acting as executor of Carmelita Farlin's last will and
testament because no letters testamentary had in fact been issued.

We take these up seriatim.

I.

Anent docket fees, it has been held 11 that the court acquires jurisdiction over any case only upon payment of the
prescribed docket fee.

Although the rule has since been tempered, 12 that is, there must be a clear showing that the party had intended to
evade payment and to cheat the courts, it does not excuse him from paying docket fees as soon as it becomes apparent
that docket fees are indeed payable.

In the case at bar, the "motion for attorney's fees" was clearly in the nature of an action commenced by a lawyer against
his clients for attorney's fees. The very decision of the court states:

This case is an out-growth from Sp. Proc. No. 127-87 of same Court which was long decided (sic). It resulted from the
filing of a petition for attorney's fees by the lawyer of the petitioner's heirs in the case against the latter.

Upon the filing of the petition for attorney's fees, the heir- respondents (sic) were accordingly summoned to answer the
petition as if it were a complaint against said heirs who retained the petitioner as their lawyer in the said case.13

In that event, the parties should have known, the respondent court in particular, that docket fees should have been
priorly paid before the court could lawfully act on the case, and decide it.

It may be true that the claim for attorney's fees was but an incident in the main case, still, it is not an escape valve from
the payment of docket fees because as in all actions, whether separate or as an offshoot of a pending proceeding, the
payment of docket fees is mandatory.

Assuming, therefore, ex gratia argumenti, that Atty. Serquina's demand for attorney's fees in the sum of P68,000.00 is
valid, he, Atty. Serquina, should have paid the fees in question before the respondent court could validly try his
"motion".

II.

With respect to the second issue, it has been held that in appeals arising from an incident in a special proceeding, a
record on appeal is necessary, otherwise, the appeal faces a dismissal. 14 It has likewise been held, however, that in the
interest of justice, an appeal, brought without a record on appeal, may be reinstated under exceptional circumstances.
Thus:

xxx xxx xxx

It is noted, however, that the question presented in this case is one of first impression; that the petitioner acted in
honest, if mistaken, interpretation of the applicable law; that the probate court itself believed that the record on appeal
was unnecessary; and that the private respondent herself apparently thought so, too, for she did not move to dismiss
the appeal and instead impliedly recognized its validity by filing the appellee's brief.

In view of these circumstances, and in the interest of justice, the Court feels that the petitioner should be given an
opportunity to comply with the above-discussed rules by submitting the required record on appeal as a condition for the
revival of the appeal. The issue raised in his appeal may then be fully discussed and, in the light of the briefs already filed
by the parties, resolved on the merits by the respondent court. 15

In the instant case, the Court notes the apparent impression by the parties at the outset, that a record on appeal was
unnecessary, as evidenced by: (1) the very holding of the respondent court that "[i]t is now easy to appeal as there is no
more need for a record on appeal . . . [b]y merely filing a notice of appeal, the appellant can already institute his appeal .
. . ;" 16 (2) in its order to amend notice of appeal, it did not require the appellants to submit a record on appeal; and (3)
Atty. Serquina interposed no objection to the appeal on that ground.

In any event, since we are annulling the decision appealed from, the matter is a dead issue.

III.

As we have indicated, we are granting certiorari and are annulling the decision appealed from, but there seems to be no
reason why we can not dispose of the heirs' appeal in a single proceeding.

It is pointed out that an attorney who is concurrently an executor of a will is barred from recovering attorney's fees from
the estate. The Rule is specifically as follows:

SEC. 7. What expenses and fees allowed executor or administrator. Not to charge for services as attorney. Compensation
provided by will controls unless renounced. — An executor or administrator shall be allowed the necessary expenses in
the care, management and settlement of the estate, and for his services, four pesos per day for the time actually and
necessarily employed, or a commission upon the value of so much of the estate as comes into his possession and is
finally disposed of by him in the payment of debts, expenses, legacies, or distributive shares, or by delivery to heirs or
devisees, of two per centum of the first five thousand pesos of such value, one per centum of so much of such value as
exceeds five thousand pesos and does not exceed thirty thousand pesos, one-half per centum of so much of such value
as exceeds thirty thousand pesos and does not exceed one hundred thousand pesos, and one-quarter per centum of so
much of such value as exceeds one hundred thousand pesos. But in any special case, where the estate is large, and the
settlement has been attended with great difficulty, and has required a high degree of capacity on the part of the
executor or administrator, a greater sum may be allowed. If objection to the fees allowed be taken, the allowance may
be reexamined on appeal.

If there are two or more executors or administrators, the compensation shall be apportioned among them by the court
according to the services actually rendered by them respectively.

When the executor or administrator is an attorney, he shall not charge against the estate any professional fees for legal
services rendered by him.

When the deceased by will makes some other provision for the compensation of his executor, that provision shall be a
full satisfaction for his services unless by a written instrument filed in the court he renounces all claim to the
compensation provided by the will. 17
The rule is therefore clear that an administrator or executor may be allowed fees for the necessary expenses he has
incurred as such, but he may not recover attorney's fees from the estate. His compensation is fixed by the rule but such
a compensation is in the nature of executor's or administrator's commissions, and never as attorney's fees. In one case,
18 we held that "a greater sum [other than that established by the rule] may be allowed 'in any special case, where the
estate is large, and the settlement has been attended with great difficulty, and has required a high degree of capacity on
the part of the executor or administrator.'" 19 It is also left to the sound discretion of the court. 20 With respect to
attorney's fees, the rule, as we have seen, disallows them. Accordingly, to the extent that the trial court set aside the
sum of P65,000.00 as and for Mr. Serquina's attorney's fees, to operate as a "lien on the subject properties," 21 the trial
judge must be said to have gravely abused its discretion (apart from the fact that it never acquired jurisdiction, in the
first place, to act on said Mr. Serquina's "motion for attorney's fees").

The next question is quite obvious: Who shoulders attorney's fees? We have held that a lawyer of an administrator or
executor may not charge the estate for his fees, but rather, his client. 22 Mutatis mutandis, where the administrator is
himself the counsel for the heirs, it is the latter who must pay therefor.

In that connection, attorney's fees are in the nature of actual damages, which must be duly proved. 23 They are also
subject to certain standards, to wit: (1) they must be reasonable, that is to say, they must have a bearing on the
importance of the subject matter in controversy; (2) the extent of the services rendered; and (3) the professional
standing of the lawyer. 24 In all cases, they must be addressed in a full-blown trial and not on the bare word of the
parties. 25 And always, they are subject to the moderating hand of the courts.

The records show that Atty. Ephraim Serquina, as counsel for the heirs, performed the following:

xxx xxx xxx

5. That after the order of allowance for probate of the will, the undersigned counsel assisted the heirs to transfer
immediately the above-mentioned real estate in their respective names, from (sic) the payment of estate taxes in the
Bureau of Internal Revenue to the issuance by the Registry of Deeds of the titles, in order for the heirs to sell the
foregoing real estate of 10,683 sq. cm (which was also the subject of sale prior to the death of the testator) to settle
testator's obligations and day-to-day subsistence being (sic) that the heirs, except Zena F. Velasco, are not employed
neither doing any business; 26

The Court is not persuaded from the facts above that Atty. Serquina is entitled to the sum claimed by him (P68,000.00)
or that awarded by the lower court (P65,000.00). The Court observes that these are acts performed routinely since they
form part of what any lawyer worth his salt is expected to do. The will was furthermore not contested. They are not, so
Justice Pedro Tuason wrote, "a case [where] the administrator was able to stop what appeared to be an improvident
disbursement of a substantial amount without having to employ outside legal help at an additional expense to the
estate," 27 to entitle him to a bigger compensation. He did not exactly achieve anything out of the ordinary.

The records also reveal that Atty. Serquina has already been paid the sum of P6,000.00. 28 It is our considered opinion
that he should be entitled to P15,000.00 for his efforts on a quantum meruit basis. Hence, we hold the heirs liable for
P9,000.00 more.

WHEREFORE, premises considered, judgment is hereby rendered: (1) GRANTING the petition and making the temporary
restraining order issued on January 16, 1989 PERMANENT; and (2) ORDERING the petitioners to PAY the private
respondent, Atty. Ephraim Serquina, attorney's fees in the sum of P9,000.00. The said fees shall not be recovered from
the estate of Carmelita Farlin.

No costs.

SO ORDERED.
RADIOWEALTH FINANCE COMPANY, petitioner, vs. Spouses VICENTE and MA. SUMILANG DEL
ROSARIO, respondents.

DECISION

PANGANIBAN, J.:

When a demurrer to evidence granted by a trial court is reversed on appeal, the reviewing court
cannot remand the case for further proceedings. Rather, it should render judgment on the basis of the
evidence proffered by the plaintiff. Inasmuch as defendants in the present case admitted the due
execution of the Promissory Note both in their Answer and during the pretrial, the appellate court
should have rendered judgment on the bases of that Note and on the other pieces of evidence
adduced during the trial.
The Case

Before us is a Petition for Review on Certiorari of the December 9, 1997 Decisioni[1] and the May 3,
1999 Resolutionii[2] of the Court of Appeals in CA-GR CV No. 47737. The assailed Decision
disposed as follows:

WHEREFORE, premises considered, the appealed order (dated November 4, 1994) of the Regional
Trial Court (Branch XIV) in the City of Manila in Civil Case No. 93-66507 is hereby REVERSED and
SET ASIDE. Let the records of this case be remanded to the court a quo for further proceedings. No
pronouncement as to costs.iii[3]

The assailed Resolution denied the petitioners Partial Motion for Reconsideration.iv[4]
The Facts

The facts of this case are undisputed. On March 2, 1991, Spouses Vicente and Maria Sumilang del
Rosario (herein respondents), jointly and severally executed, signed and delivered in favor of
Radiowealth Finance Company (herein petitioner), a Promissory Notev[5] for P138,948. Pertinent
provisions of the Promissory Note read:

FOR VALUE RECEIVED, on or before the date listed below, I/We promise to pay jointly and severally
Radiowealth Finance Co. or order the sum of ONE HUNDRED THIRTY EIGHT THOUSAND NINE
HUNDRED FORTY EIGHT Pesos (P138,948.00) without need of notice or demand, in installments as
follows:

P11,579.00 payable for 12 consecutive months starting on ________ 19__ until the amount
of P11,579.00 is fully paid. Each installment shall be due every ____ day of each month. A
late payment penalty charge of two and a half (2.5%) percent per month shall be added to
each unpaid installment from due date thereof until fully paid.

xxx xxx xxx

It is hereby agreed that if default be made in the payment of any of the installments or late payment
charges thereon as and when the same becomes due and payable as specified above, the total
principal sum then remaining unpaid, together with the agreed late payment charges thereon, shall at
once become due and payable without need of notice or demand.
 xxx xxx xxx

If any amount due on this Note is not paid at its maturity and this Note is placed in the hands of an
attorney or collection agency for collection, I/We jointly and severally agree to pay, in addition to the
aggregate of the principal amount and interest due, a sum equivalent to ten (10%) per cent thereof as
attorneys and/or collection fees, in case no legal action is filed, otherwise, the sum will be equivalent
to twenty-five (25%) percent of the amount due which shall not in any case be less than FIVE
HUNDRED PESOS (P500.00) plus the cost of suit and other litigation expenses and, in addition, a
further sum of ten per cent (10%) of said amount which in no case shall be less than FIVE HUNDRED
PESOS (P500.00), as and for liquidated damages. vi[6]

Thereafter, respondents defaulted on the monthly installments. Despite repeated demands, they
failed to pay their obligations under their Promissory Note.

On June 7, 1993, petitioner filed a Complaintvii[7] for the collection of a sum of money before the
Regional Trial Court of Manila, Branch 14.viii[8] During the trial, Jasmer Famatico, the credit and
collection officer of petitioner, presented in evidence the respondents check payments, the demand
letter dated July 12, 1991, the customers ledger card for the respondents, another demand letter and
Metropolitan Bank dishonor slips. Famatico admitted that he did not have personal knowledge of the
transaction or the execution of any of these pieces of documentary evidence, which had merely been
endorsed to him.

On July 4, 1994, the trial court issued an Order terminating the presentation of evidence for the
petitioner.ix[9] Thus, the latter formally offered its evidence and exhibits and rested its case on July 5,
1994.

Respondents filed on July 29, 1994 a Demurrer to Evidencex[10] for alleged lack of cause of action.
On November 4, 1994, the trial court dismissedxi[11] the complaint for failure of petitioner to
substantiate its claims, the evidence it had presented being merely hearsay.

On appeal, the Court of Appeals (CA) reversed the trial court and remanded the case for further
proceedings.

Hence, this recourse.xii[12]

Ruling of the Court of Appeals

According to the appellate court, the judicial admissions of respondents established their
indebtedness to the petitioner, on the grounds that they admitted the due execution of the Promissory
Note, and that their only defense was the absence of an agreement on when the installment
payments were to begin. Indeed, during the pretrial, they admitted the genuineness not only of the
Promissory Note, but also of the demand letter dated July 12, 1991. Even if the petitioners witness
had no personal knowledge of these documents, they would still be admissible if the purpose for
which [they are] produced is merely to establish the fact that the statement or document was in fact
made or to show its tenor[,] and such fact or tenor is of independent relevance.

Besides, Articles 19 and 22 of the Civil Code require that every person must -- in the exercise of
rights and in the performance of duties -- act with justice, give all else their due, and observe honesty
and good faith. Further, the rules on evidence are to be liberally construed in order to promote their
objective and to assist the parties in obtaining just, speedy and inexpensive determination of an
action.
Issue

The petitioner raises this lone issue:

The Honorable Court of Appeals patently erred in ordering the remand of this case to the trial court
instead of rendering judgment on the basis of petitioners evidence. xiii[13]

For an orderly discussion, we shall divide the issue into two parts: (a) legal effect of the Demurrer to
Evidence, and (b) the date when the obligation became due and demandable.
The Courts Ruling

The Petition has merit. While the CA correctly reversed the trial court, it erred in remanding the case
"for further proceedings."
Consequences of a Reversal, on Appeal, of a Demurrer to Evidence

Petitioner contends that if a demurrer to evidence is reversed on appeal, the defendant should be
deemed to have waived the right to present evidence, and the appellate court should render judgment
on the basis of the evidence submitted by the plaintiff. A remand to the trial court "for further
proceedings" would be an outright defiance of Rule 33, Section 1 of the 1997 Rules of Court.

On the other hand, respondents argue that the petitioner was not necessarily entitled to its claim,
simply on the ground that they lost their right to present evidence in support of their defense when the
Demurrer to Evidence was reversed on appeal. They stress that the CA merely found them indebted
to petitioner, but was silent on when their obligation became due and demandable.

The old Rule 35 of the Rules of Court was reworded under Rule 33 of the 1997 Rules, but the
consequence on appeal of a demurrer to evidence was not changed. As amended, the pertinent
provision of Rule 33 reads as follows:

SECTION 1. Demurrer to evidence.After the plaintiff has completed the presentation of his evidence,
the defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has
shown no right to relief. If his motion is denied, he shall have the right to present evidence. If the
motion is granted but on appeal the order of dismissal is reversed he shall be deemed to have waived
the right to present evidence. xiv[14]

Explaining the consequence of a demurrer to evidence, the Court in Villanueva Transit v.

Javellanaxv[15] pronounced:

The rationale behind the rule and doctrine is simple and logical. The defendant is permitted, without
waiving his right to offer evidence in the event that his motion is not granted, to move for a dismissal
(i.e., demur to the plaintiffs evidence) on the ground that upon the facts as thus established and the
applicable law, the plaintiff has shown no right to relief. If the trial court denies the dismissal motion,
i.e., finds that plaintiffs evidence is sufficient for an award of judgment in the absence of contrary
evidence, the case still remains before the trial court which should then proceed to hear and receive
the defendants evidence so that all the facts and evidence of the contending parties may be properly
placed before it for adjudication as well as before the appellate courts, in case of appeal. Nothing is
lost. The doctrine is but in line with the established procedural precepts in the conduct of trials that
the trial court liberally receive all proffered evidence at the trial to enable it to render its decision with
all possibly relevant proofs in the record, thus assuring that the appellate courts upon appeal have all
the material before them necessary to make a correct judgment, and avoiding the need of remanding
the case for retrial or reception of improperly excluded evidence, with the possibility thereafter of still
another appeal, with all the concomitant delays. The rule, however, imposes the condition by the
same token that if his demurrer is granted by the trial court, and the order of dismissal is reversed on
appeal, the movant losses his right to present evidence in his behalf and he shall have been deemed
to have elected to stand on the insufficiency of plaintiffs case and evidence. In such event, the
appellate court which reverses the order of dismissal shall proceed to render judgment on the merits
on the basis of plaintiffs evidence. (Underscoring supplied)

In other words, defendants who present a demurrer to the plaintiffs evidence retain the right to
present their own evidence, if the trial court disagrees with them; if the trial court agrees with them,
but on appeal, the appellate court disagrees with both of them and reverses the dismissal order, the
defendants lose the right to present their own evidence.xvi[16] The appellate court shall, in addition,
resolve the case and render judgment on the merits, inasmuch as a demurrer aims to discourage
prolonged litigations.xvii[17]

In the case at bar, the trial court, acting on respondents demurrer to evidence, dismissed the
Complaint on the ground that the plaintiff had adduced mere hearsay evidence. However, on appeal,
the appellate court reversed the trial court because the genuineness and the due execution of the
disputed pieces of evidence had in fact been admitted by defendants.

Applying Rule 33, Section 1 of the 1997 Rules of Court, the CA should have rendered judgment on
the basis of the evidence submitted by the petitioner. While the appellate court correctly ruled that the
documentary evidence submitted by the [petitioner] should have been allowed and appreciated xxx,
and that the petitioner presented quite a number of documentary exhibits xxx enumerated in the
appealed order,xviii[18] we agree with petitioner that the CA had sufficient evidence on record to
decide the collection suit. A remand is not only frowned upon by the Rules, it is also logically
unnecessary on the basis of the facts on record.
Due and Demandable Obligation

Petitioner claims that respondents are liable for the whole amount of their debt and the interest
thereon, after they defaulted on the monthly installments.

Respondents, on the other hand, counter that the installments were not yet due and demandable.
Petitioner had allegedly allowed them to apply their promotion services for its financing business as
payment of the Promissory Note. This was supposedly evidenced by the blank space left for the date
on which the installments should have commenced.xix[19] In other words, respondents theorize that
the action for immediate enforcement of their obligation is premature because its fulfillment is
dependent on the sole will of the debtor. Hence, they consider that the proper court should first fix a
period for payment, pursuant to Articles 1180 and 1197 of the Civil Code.

This contention is untenable. The act of leaving blank the due date of the first installment did not
necessarily mean that the debtors were allowed to pay as and when they could. If this was the
intention of the parties, they should have so indicated in the Promissory Note. However, it did not
reflect any such intention.

On the contrary, the Note expressly stipulated that the debt should be amortized monthly in
installments of P11,579 for twelve consecutive months. While the specific date on which each
installment would be due was left blank, the Note clearly provided that each installment should be
payable each month.
Furthermore, it also provided for an acceleration clause and a late payment penalty, both of which
showed the intention of the parties that the installments should be paid at a definite date. Had they
intended that the debtors could pay as and when they could, there would have been no need for
these two clauses.

Verily, the contemporaneous and subsequent acts of the parties manifest their intention and
knowledge that the monthly installments would be due and demandable each month.xx[20] In this
case, the conclusion that the installments had already became due and demandable is bolstered by
the fact that respondents started paying installments on the Promissory Note, even if the checks were
dishonored by their drawee bank. We are convinced neither by their avowals that the obligation had
not yet matured nor by their claim that a period for payment should be fixed by a court.

Convincingly, petitioner has established not only a cause of action against the respondents, but also
a due and demandable obligation. The obligation of the respondents had matured and they clearly
defaulted when their checks bounced. Per the acceleration clause, the whole debt became due one
month (April 2, 1991) after the date of the Note because the check representing their first installment
bounced.

As for the disputed documents submitted by the petitioner, the CA ruling in favor of their admissibility,
which was not challenged by the respondents, stands. A party who did not appeal cannot obtain
affirmative relief other than that granted in the appealed decision.xxi[21]

It should be stressed that respondents do not contest the amount of the principal obligation. Their
liability as expressly stated in the Promissory Note and found by the CA is P13[8],948.00xxii[22]
which is payable in twelve (12) installments at P11,579.00 a month for twelve (12) consecutive
months. As correctly found by the CA, the "ambiguity" in the Promissory Note is clearly attributable to
human error.xxiii[23]

Petitioner, in its Complaint, prayed for 14% interest per annum from May 6, 1993 until fully paid. We
disagree. The Note already stipulated a late payment penalty of 2.5 percent monthly to be added to
each unpaid installment until fully paid. Payment of interest was not expressly stipulated in the Note.
Thus, it should be deemed included in such penalty.

In addition, the Note also provided that the debtors would be liable for attorneys fees equivalent to 25
percent of the amount due in case a legal action was instituted and 10 percent of the same amount
as liquidated damages. Liquidated damages, however, should no longer be imposed for being
unconscionable.xxiv[24] Such damages should also be deemed included in the 2.5 percent monthly
penalty. Furthermore, we hold that petitioner is entitled to attorneys fees, but only in a sum equal to
10 percent of the amount due which we deem reasonable under the proven facts.xxv[25]

The Court deems it improper to discuss respondents' claim for moral and other damages. Not having
appealed the CA Decision, they are not entitled to affirmative relief, as already explained
earlier.xxvi[26]

WHEREFORE, the Petition is GRANTED. The appealed Decision is MODIFIED in that the remand is
SET ASIDE and respondents are ordered TO PAY P138,948, plus 2.5 percent penalty charge per
month beginning April 2, 1991 until fully paid, and 10 percent of the amount due as attorneys fees. No
costs.

SO ORDERED.
G.R. No. 88866 February 18, 1991

METROPOLITAN BANK & TRUST COMPANY, petitioner,

vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO,
MAGNO CASTILLO and GLORIA CASTILLO, respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

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.:

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

More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask whether
the warrants had been cleared. She was told to wait. Accordingly, Gomez was meanwhile not allowed to
withdraw from his account. Later, however, "exasperated" over Gloria's repeated inquiries and also as an
accommodation for a "valued client," the petitioner says it finally decided to allow Golden Savings to withdraw
from the proceeds of the
warrants.3

The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the second on July 13, 1979, in
the amount of P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The total withdrawal
was P968.000.00.4

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.

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:

ACCORDINGLY, judgment is hereby rendered:

1. Dismissing the complaint with costs against the plaintiff;

2. Dissolving and lifting the writ of attachment of the properties of defendant Golden Savings and Loan
Association, Inc. and defendant Spouses Magno Castillo and Lucia Castillo;

3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the sum of
P1,754,089.00 and to reinstate 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;

4. Ordering the plaintiff to pay the defendant Golden Savings and Loan Association, Inc. attorney's fees
and expenses of litigation in the amount of P200,000.00.

5. Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia Castillo attorney's fees
and expenses of litigation in the amount of P100,000.00.

SO ORDERED.

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.

(b) Until such time as Metrobank is actually paid, its obligation is that of a mere collecting agent
which cannot be held liable for its failure to collect on the warrants.

2. Under the lower court's decision, affirmed by respondent Court of Appeals, Metrobank is made to pay
for warrants already dishonored, thereby perpetuating the fraud committed by Eduardo Gomez.

3. Respondent Court of Appeals erred in not finding that as between Metrobank and Golden Savings, the
latter should bear the loss.

4. Respondent Court of Appeals erred in holding that the treasury warrants involved in this case are not
negotiable instruments.

The petition has no merit.

From the above undisputed facts, it would appear to the Court that Metrobank was indeed negligent in giving
Golden Savings the impression that the treasury warrants had been cleared and that, consequently, it was safe to
allow Gomez to withdraw the proceeds thereof from his account with it. Without such assurance, Golden
Savings would not have allowed the withdrawals; with such assurance, there was no reason not to allow the
withdrawal. Indeed, Golden Savings might even have incurred liability for its refusal to return the money that to
all appearances belonged to the depositor, who could therefore withdraw it any time and for any reason he saw
fit.

It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to its
account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to
determine the validity of the warrants through its own services. The proceeds of the warrants were withheld
from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit.7 It was
only when Metrobank gave the go-signal that Gomez was finally allowed by Golden Savings to withdraw them
from his own account.

The argument of Metrobank that Golden Savings should have exercised more care in checking the personal
circumstances of Gomez before accepting his deposit does not hold water. It was Gomez who was entrusting the
warrants, not Golden Savings that was extending him a loan; and moreover, the treasury warrants were subject
to clearing, pending which the depositor could not withdraw its proceeds. There was no question of Gomez's
identity or of the genuineness of his signature as checked by Golden Savings. In fact, the treasury warrants were
dishonored allegedly because of the forgery of the signatures of the drawers, not of Gomez as payee or indorser.
Under the circumstances, it is clear that Golden Savings acted with due care and diligence and cannot be faulted
for the withdrawals it allowed Gomez to make.

By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling — more
than one and a half million pesos (and this was 1979). There was no reason why it should not have waited until
the treasury warrants had been cleared; it would not have lost a single centavo by waiting. Yet, despite the lack
of such clearance — and notwithstanding that it had not received a single centavo from the proceeds of the
treasury warrants, as it now repeatedly stresses — it allowed Golden Savings to withdraw — not once, not
twice, but thrice — from the uncleared treasury warrants in the total amount of P968,000.00

Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and it also
wanted to "accommodate" a valued client. It "presumed" that the warrants had been cleared simply because of
"the lapse of one week."8 For a bank with its long experience, this explanation is unbelievably naive.

And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal side of
the deposit slips through which the treasury warrants were deposited by Golden Savings with its Calapan
branch. The conditions read as follows:

Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's collecting
agent, assuming no responsibility beyond care in selecting correspondents, and until such time as actual
payment shall have come into possession of this bank, the right is reserved to charge back to the
depositor's account any amount previously credited, whether or not such item is returned. This also
applies to checks drawn on local banks and bankers and their branches as well as on this bank, which are
unpaid due to insufficiency of funds, forgery, unauthorized overdraft or any other reason. (Emphasis
supplied.)

According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent for
Golden Savings and give it the right to "charge back to the depositor's account any amount previously credited,
whether or not such item is returned. This also applies to checks ". . . which are unpaid due to insufficiency of
funds, forgery, unauthorized overdraft of any other reason." It is claimed that the said conditions are in the
nature of contractual stipulations and became binding on Golden Savings when Gloria Castillo, as its Cashier,
signed the deposit slips.
Doubt may be expressed about the binding force of the conditions, considering that they have apparently been
imposed by the bank unilaterally, without the consent of the depositor. Indeed, it could be argued that the
depositor, in signing the deposit slip, does so only to identify himself and not to agree to the conditions set forth
in the given permit at the back of the deposit slip. We do not have to rule on this matter at this time. At any rate,
the Court feels that even if the deposit slip were considered a contract, the petitioner could still not validly
disclaim responsibility thereunder in the light of the circumstances of this case.

In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to be suggesting
that as a mere agent it cannot be liable to the principal. This is not exactly true. On the contrary, Article 1909 of
the Civil Code clearly provides that —

Art. 1909. — The agent is responsible not only for fraud, but also for negligence, which shall be judged
'with more or less rigor by the courts, according to whether the agency was or was not for a
compensation.

The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the clearance
given by it that assured Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the
treasury warrants he had deposited Metrobank misled Golden Savings. There may have been no express
clearance, as Metrobank insists (although this is refuted by Golden Savings) but in any case that clearance could
be implied from its allowing Golden Savings to withdraw from its account not only once or even twice but three
times. The total withdrawal was in excess of its original balance before the treasury warrants were deposited,
which only added to its belief that the treasury warrants had indeed been cleared.

Metrobank's argument that it may recover the disputed amount if the warrants are not paid for any reason is not
acceptable. Any reason does not mean no reason at all. Otherwise, there would have been no need at all for
Golden Savings to deposit the treasury warrants with it for clearance. There would have been no need for it to
wait until the warrants had been cleared before paying the proceeds thereof to Gomez. Such a condition, if
interpreted in the way the petitioner suggests, is not binding for being arbitrary and unconscionable. And it
becomes more so in the case at bar when 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

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty.

xxx xxx xxx

Sec. 3. When promise is unconditional. — An unqualified order or promise to pay is unconditional

within the meaning of this Act though coupled with —

(a) An indication of a particular fund out of which reimbursement is to be made or a particular account
to be debited with the amount; or

(b) A statement of the transaction which gives rise to the instrument judgment.

But an order or promise to pay out of a particular fund is not unconditional.

The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or
promise to pay "not unconditional" and the warrants themselves non-negotiable. There should be no question
that the exception on Section 3 of the Negotiable Instruments Law is applicable in the case at bar. This
conclusion conforms to Abubakar vs. Auditor General11 where the Court held:

The petitioner argues that he is a holder in good faith and for value of a negotiable instrument and is
entitled to the rights and privileges of a holder in due course, free from defenses. But this treasury
warrant is not within the scope of the negotiable instrument law. For one thing, the document bearing on
its face the words "payable from the appropriation for food administration, is actually an Order for
payment out of "a particular fund," and is not unconditional and does not fulfill one of the essential
requirements of a negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable
Instruments Law).

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.1âwphi1 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.

WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the
dispositive portion of the judgment of the lower court shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing
defendant Golden Savings & Loan Association, Inc. to withdraw the amount outstanding thereon, if any,
after the debit.

SO ORDERED.