RAMON K. ILUSORIO, petitioner, vs. HON.

COURT OF APPEALS, and THE MANILA BANKING CORPORATION,

respondents.

DECISION

QUISUMBING, J.:

This petition for review seeks to reverse the decision[1] promulgated on January 28, 1999 by the Court of Appeals
in CA-G.R. CV No. 47942, affirming the decision of the then Court of First Instance of Rizal, Branch XV (now the
Regional Trial Court of Makati, Branch 138) dismissing Civil Case No. 43907, for damages.

The facts as summarized by the Court of Appeals are as follows:

Petitioner is a prominent businessman who, at the time material to this case, was the Managing Director of
Multinational Investment Bancorporation and the Chairman and/or President of several other corporations. He
was a depositor in good standing of respondent bank, the Manila Banking Corporation, under current Checking
Account No. 06-09037-0. As he was then running about 20 corporations, and was going out of the country a
number of times, petitioner entrusted to his secretary, Katherine[2] E. Eugenio, his credit cards and his checkbook
with blank checks. It was also Eugenio who verified and reconciled the statements of said checking account.[3]

Between the dates September 5, 1980 and January 23, 1981, Eugenio was able to encash and deposit to her
personal account about seventeen (17) checks drawn against the account of the petitioner at the respondent bank,
with an aggregate amount of P119,634.34. Petitioner did not bother to check his statement of account until a
business partner apprised him that he saw Eugenio use his credit cards. Petitioner fired Eugenio immediately, and
instituted a criminal action against her for estafa thru falsification before the Office of the Provincial Fiscal of Rizal.
Private respondent, through an affidavit executed by its employee, Mr. Dante Razon, also lodged a complaint for
estafa thru falsification of commercial documents against Eugenio on the basis of petitioners statement that his
signatures in the checks were forged.[4] Mr. Razons affidavit states:

That I have examined and scrutinized the following checks in accordance with prescribed verification procedures
with utmost care and diligence by comparing the signatures affixed thereat against the specimen signatures of Mr.
Ramon K. Ilusorio which we have on file at our said office on such dates,

xxx

That the aforementioned checks were among those issued by Manilabank in favor of its client MR. RAMON K.
ILUSORIO,

That the same were personally encashed by KATHERINE E. ESTEBAN, an executive secretary of MR. RAMON K.
ILUSORIO in said Investment Corporation;

That I have met and known her as KATHERINE E. ESTEBAN the attending verifier when she personally encashed the
above-mentioned checks at our said office;

That MR. RAMON K. ILUSORIO executed an affidavit expressly disowning his signature appearing on the checks
further alleged to have not authorized the issuance and encashment of the same.[5]

Petitioner then requested the respondent bank to credit back and restore to its account the value of the checks
which were wrongfully encashed but respondent bank refused. Hence, petitioner filed the instant case.[6]

At the trial, petitioner testified on his own behalf, attesting to the truth of the circumstances as narrated above,
and how he discovered the alleged forgeries. Several employees of Manila Bank were also called to the witness
stand as hostile witnesses. They testified that it is the banks standard operating procedure that whenever a check
is presented for encashment or clearing, the signature on the check is first verified against the specimen signature
cards on file with the bank.

Manila Bank also sought the expertise of the National Bureau of Investigation (NBI) in determining the genuineness
of the signatures appearing on the checks. However, in a letter dated March 25, 1987, the NBI informed the trial
court that they could not conduct the desired examination for the reason that the standard specimens submitted
were not sufficient for purposes of rendering a definitive opinion. The NBI then suggested that petitioner be asked
to submit seven (7) or more additional standard signatures executed before or about, and immediately after the
dates of the questioned checks. Petitioner, however, failed to comply with this request.

After evaluating the evidence on both sides, the court a quo rendered judgment on May 12, 1994 with the
following dispositive portion:

WHEREFORE, finding no sufficient basis for plaintiff's cause herein against defendant bank, in the light of the
foregoing considerations and established facts, this case would have to be, as it is hereby DISMISSED.

Defendants counterclaim is likewise DISMISSED for lack of sufficient basis.

SO ORDERED.[7]

Aggrieved, petitioner elevated the case to the Court of Appeals by way of a petition for review but without
success. The appellate court held that petitioners own negligence was the proximate cause of his loss. The
appellate court disposed as follows:

WHEREFORE, the judgment appealed from is AFFIRMED. Costs against the appellant.

SO ORDERED.[8]

Before us, petitioner ascribes the following errors to the Court of Appeals:

A. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE RESPONDENT BANK IS ESTOPPED FROM RAISING
THE DEFENSE THAT THERE WAS NO FORGERY OF THE SIGNATURES OF THE PETITIONER IN THE CHECK BECAUSE
THE RESPONDENT FILED A CRIMINAL COMPLAINT FOR ESTAFA THRU FALSIFICATION OF COMMERCIAL
DOCUMENTS AGAINST KATHERINE EUGENIO USING THE AFFIDAVIT OF PETITIONER STATING THAT HIS
SIGNATURES WERE FORGED AS PART OF THE AFFIDAVIT-COMPLAINT.[9]

B. THE COURT OF APPEALS ERRED IN NOT APPLYING SEC. 23, NEGOTIABLE INSTRUMENTS LAW.[10]

C. THE COURT OF APPEALS ERRED IN NOT HOLDING THE BURDEN OF PROOF IS WITH THE RESPONDENT BANK TO
PROVE THE DUE DILIGENCE TO PREVENT DAMAGE, TO THE PETITIONER, AND THAT IT WAS NOT NEGLIGENT IN THE
SELECTION AND SUPERVISION OF ITS EMPLOYEES.[11]

D. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT BANK SHOULD BEAR THE LOSS, AND
SHOULD BE MADE TO PAY PETITIONER, WITH RECOURSE AGAINST KATHERINE EUGENIO ESTEBAN.[12]

Essentially the issues in this case are: (1) whether or not petitioner has a cause of action against private
respondent; and (2) whether or not private respondent, in filing an estafa case against petitioners secretary, is
barred from raising the defense that the fact of forgery was not established.

Petitioner contends that Manila Bank is liable for damages for its negligence in failing to detect the discrepant
checks. He adds that as a general rule a bank which has obtained possession of a check upon an unauthorized or
forged endorsement of the payees signature and which collects the amount of the check from the drawee is liable
for the proceeds thereof to the payee. Petitioner invokes the doctrine of estoppel, saying that having itself
instituted a forgery case against Eugenio, Manila Bank is now estopped from asserting that the fact of forgery was
never proven.

For its part, Manila Bank contends that respondent appellate court did not depart from the accepted and usual
course of judicial proceedings, hence there is no reason for the reversal of its ruling. Manila Bank additionally
points out that Section 23[13] of the Negotiable Instruments Law is inapplicable, considering that the fact of
forgery was never proven. Lastly, the bank negates petitioners claim of estoppel.[14]

On the first issue, we find that petitioner has no cause of action against Manila Bank. To be entitled to damages,
petitioner has the burden of proving negligence on the part of the bank for failure to detect the discrepancy in the
signatures on the checks. It is incumbent upon petitioner to establish the fact of forgery, i.e., by submitting his
specimen signatures and comparing them with those on the questioned checks. Curiously though, petitioner failed
to submit additional specimen signatures as requested by the National Bureau of Investigation from which to draw
a conclusive finding regarding forgery. The Court of Appeals found that petitioner, by his own inaction, was
precluded from setting up forgery. Said the appellate court:

We cannot fault the court a quo for such declaration, considering that the plaintiffs evidence on the alleged
forgery is not convincing enough. The burden to prove forgery was upon the plaintiff, which burden he failed to
discharge. Aside from his own testimony, the appellant presented no other evidence to prove the fact of forgery.
He did not even submit his own specimen signatures, taken on or about the date of the questioned checks, for
examination and comparison with those of the subject checks. On the other hand, the appellee presented
specimen signature cards of the appellant, taken at various years, namely, in 1976, 1979 and 1981 (Exhibits 1, 2, 3
and 7), showing variances in the appellants unquestioned signatures. The evidence further shows that the
appellee, as soon as it was informed by the appellant about his questioned signatures, sought to borrow the
questioned checks from the appellant for purposes of analysis and examination (Exhibit 9), but the same was
denied by the appellant. It was also the former which sought the assistance of the NBI for an expert analysis of the
signatures on the questioned checks, but the same was unsuccessful for lack of sufficient specimen signatures.[15]

Moreover, petitioners contention that Manila Bank was remiss in the exercise of its duty as drawee lacks factual
basis. Consistently, the CA and the RTC found that Manila Bank employees exercised due diligence in cashing the
checks. The banks employees in the present case did not have a hint as to Eugenios modus operandi because she
was a regular customer of the bank, having been designated by petitioner himself to transact in his behalf.
According to the appellate court, the employees of the bank exercised due diligence in the performance of their
duties. Thus, it found that:

The evidence on both sides indicates that TMBCs employees exercised due diligence before encashing the checks.
Its verifiers first verified the drawers signatures thereon as against his specimen signature cards, and when in
doubt, the verifier went further, such as by referring to a more experienced verifier for further verification. In
some instances the verifier made a confirmation by calling the depositor by phone. It is only after taking such
precautionary measures that the subject checks were given to the teller for payment.

Of course it is possible that the verifiers of TMBC might have made a mistake in failing to detect any forgery -- if
indeed there was. However, a mistake is not equivalent to negligence if they were honest mistakes. In the instant
case, we believe and so hold that if there were mistakes, the same were not deliberate, since the bank took all the
precautions.[16]

As borne by the records, it was petitioner, not the bank, who was negligent. Negligence is the omission to do
something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which a prudent and reasonable man would do.[17] In the
present case, it appears that petitioner accorded his secretary unusual degree of trust and unrestricted access to
his credit cards, passbooks, check books, bank statements, including custody and possession of cancelled checks
and reconciliation of accounts. Said the Court of Appeals on this matter:
Moreover, the appellant had introduced his secretary to the bank for purposes of reconciliation of his account,
through a letter dated July 14, 1980 (Exhibit 8). Thus, the said secretary became a familiar figure in the bank. What
is worse, whenever the bank verifiers call the office of the appellant, it is the same secretary who answers and
confirms the checks.

The trouble is, the appellant had put so much trust and confidence in the said secretary, by entrusting not only his
credit cards with her but also his checkbook with blank checks. He also entrusted to her the verification and
reconciliation of his account. Further adding to his injury was the fact that while the bank was sending him the
monthly Statements of Accounts, he was not personally checking the same. His testimony did not indicate that he
was out of the country during the period covered by the checks. Thus, he had all the opportunities to verify his
account as well as the cancelled checks issued thereunder -- month after month. But he did not, until his partner
asked him whether he had entrusted his credit card to his secretary because the said partner had seen her use the
same. It was only then that he was minded to verify the records of his account. [18]

The abovecited findings are binding upon the reviewing court. We stress the rule that the factual findings of a trial
court, especially when affirmed by the appellate court, are binding upon us[19] and entitled to utmost respect[20]
and even finality. We find no palpable error that would warrant a reversal of the appellate courts assessment of
facts anchored upon the evidence on record.

Petitioners failure to examine his bank statements appears as the proximate cause of his own damage. Proximate
cause is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause,
produces the injury, and without which the result would not have occurred.[21] In the instant case, the bank was
not shown to be remiss in its duty of sending monthly bank statements to petitioner so that any error or
discrepancy in the entries therein could be brought to the banks attention at the earliest opportunity. But,
petitioner failed to examine these bank statements not because he was prevented by some cause in not doing so,
but because he did not pay sufficient attention to the matter. Had he done so, he could have been alerted to any
anomaly committed against him. In other words, petitioner had sufficient opportunity to prevent or detect any
misappropriation by his secretary had he only reviewed the status of his accounts based on the bank statements
sent to him regularly. In view of Article 2179 of the New Civil Code,[22] when the plaintiffs own negligence was the
immediate and proximate cause of his injury, no recovery could be had for damages.

Petitioner further contends that under Section 23 of the Negotiable Instruments Law a forged check is inoperative,
and that Manila Bank had no authority to pay the forged checks. True, it is a rule that when a signature is forged or
made without the authority of the person whose signature it purports to be, the check is wholly inoperative. No
right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party, can
be acquired through or under such signature. However, the rule does provide for an exception, namely: unless the
party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
In the instant case, it is the exception that applies. In our view, petitioner is precluded from setting up the forgery,
assuming there is forgery, due to his own negligence in entrusting to his secretary his credit cards and checkbook
including the verification of his statements of account.

Petitioners reliance on Associated Bank vs. Court of Appeals[23] and Philippine Bank of Commerce vs. CA[24] to
buttress his contention that respondent Manila Bank as the collecting or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all prior endorsements is misplaced. In the cited cases, the
fact of forgery was not in issue. In the present case, the fact of forgery was not established with certainty. In those
cited cases, the collecting banks were held to be negligent for failing to observe precautionary measures to detect
the forgery. In the case before us, both courts below uniformly found that Manila Banks personnel diligently
performed their duties, having compared the signature in the checks from the specimen signatures on record and
satisfied themselves that it was petitioners.

On the second issue, the fact that Manila Bank had filed a case for estafa against Eugenio would not estop it from
asserting the fact that forgery has not been clearly established. Petitioner cannot hold private respondent in
estoppel for the latter is not the actual party to the criminal action. In a criminal action, the State is the plaintiff,
for the commission of a felony is an offense against the State.[25] Thus, under Section 2, Rule 110 of the Rules of
Court the complaint or information filed in court is required to be brought in the name of the People of the
Philippines. [26]

Further, as petitioner himself stated in his petition, respondent bank filed the estafa case against Eugenio on the
basis of petitioners own affidavit,[27] but without admitting that he had any personal knowledge of the alleged
forgery. It is, therefore, easy to understand that the filing of the estafa case by respondent bank was a last ditch
effort to salvage its ties with the petitioner as a valuable client, by bolstering the estafa case which he filed against
his secretary.

All told, we find no reversible error that can be ascribed to the Court of Appeals.

WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of the Court of Appeals dated
January 28, 1999 in CA-G.R. CV No. 47942, is AFFIRMED.

Costs against petitioner.

SO ORDERED.

MYRON C. PAPA, Administrator of the Testate Estate of Angela M. Butte, petitioner, vs. A. U. VALENCIA and CO.
INC., FELIX PEARROYO, SPS. ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO, respondents.

DECISION

KAPUNAN, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Myron C. Papa seeks to
reverse and set aside 1) the Decision dated 27 January 1992 of the Court of Appeals which affirmed with
modification the decision of the trial court; and, 2) the Resolution dated 22 April 1992 of the same court, which
denied petitioners motion for reconsideration of the above decision.

The antecedent facts of this case are as follows:

Sometime in June 1982, herein private respondents A.U. Valencia and Co., Inc. (hereinafter referred to as
respondent Valencia, for brevity) and Felix Pearroyo (hereinafter called respondent Pearroyo), filed with the
Regional Trial Court of Pasig, Branch 151, a complaint for specific performance against herein petitioner Myron C.
Papa, in his capacity as administrator of the Testate Estate of one Angela M. Butte.

The complaint alleged that on 15 June 1973, petitioner Myron C. Papa, acting as attorney-in-fact of Angela M.
Butte, sold to respondent Pearroyo, through respondent Valencia, a parcel of land, consisting of 286.60 square
meters, located at corner Retiro and Cadiz Streets, La Loma, Quezon City, and covered by Transfer Certificate of
Title No. 28993 of the Register of Deeds of Quezon City; that prior to the alleged sale, the said property, together
with several other parcels of land likewise owned by Angela M. Butte, had been mortgaged by her to the
Associated Banking Corporation (now Associated Citizens Bank); that after the alleged sale, but before the title to
the subject property had been released, Angela M. Butte passed away; that despite representations made by
herein respondents to the bank to release the title to the property sold to respondent Pearroyo, the bank refused
to release it unless and until all the mortgaged properties of the late Angela M. Butte were also redeemed; that in
order to protect his rights and interests over the property, respondent Pearroyo caused the annotation on the title
of an adverse claim as evidenced by Entry No. P.E. - 6118/T-28993, inscribed on 18 January 1977.

The complaint further alleged that it was only upon the release of the title to the property, sometime in April 1977,
that respondents Valencia and Pearroyo discovered that the mortgage rights of the bank had been assigned to one
Tomas L. Parpana (now deceased), as special administrator of the Estate of Ramon Papa, Jr., on 12 April 1977; that
since then, herein petitioner had been collecting monthly rentals in the amount of P800.00 from the tenants of the
property, knowing that said property had already been sold to private respondents on 15 June 1973; that despite
repeated demands from said respondents, petitioner refused and failed to deliver the title to the property.
Thereupon, respondents Valencia and Pearroyo filed a complaint for specific performance, praying that petitioner
be ordered to deliver to respondent Pearroyo the title to the subject property (TCT 28993); to turn over to the
latter the sum of P72,000.00 as accrued rentals as of April 1982, and the monthly rental of P800.00 until the
property is delivered to respondent Pearroyo; to pay respondents the sum of P20,000.00 as attorneys fees; and to
pay the costs of the suit.

In his Answer, petitioner admitted that the lot had been mortgaged to the Associated Banking Corporation (now
Associated Citizens Bank). He contended, however, that the complaint did not state a cause of action; that the real
property in interest was the Testate Estate of Angela M. Butte, which should have been joined as a party
defendant; that the case amounted to a claim against the Estate of Angela M. Butte and should have been filed in
Special Proceedings No. A-17910 before the Probate Court in Quezon City; and that, if as alleged in the complaint,
the property had been assigned to Tomas L. Parpana, as special administrator of the Estate of Ramon Papa, Jr., said
estate should be impleaded. Petitioner, likewise, claimed that he could not recall in detail the transaction which
allegedly occurred in 1973; that he did not have TCT No. 28993 in his possession; that he could not be held
personally liable as he signed the deed merely as attorney-in-fact of said Angela M. Butte. Finally, petitioner
asseverated that as a result of the filing of the case, he was compelled to hire the services of counsel for a fee of
P20,000.00, for which respondents should be held liable.

Upon his motion, herein private respondent Delfin Jao was allowed to intervene in the case. Making common
cause with respondents Valencia and Pearroyo, respondent Jao alleged that the subject lot which had been sold to
respondent Pearroyo through respondent Valencia was in turn sold to him on 20 August 1973 for the sum of
P71,500.00, upon his paying earnest money in the amount of P5,000.00. He, therefore, prayed that judgment be
rendered in favor of respondents Valencia and Pearroyo; and, that after the delivery of the title to said
respondents, the latter in turn be ordered to execute in his favor the appropriate deed of conveyance covering the
property in question and to turn over to him the rentals which aforesaid respondents sought to collect from
petitioner Myron C. Papa.

Respondent Jao, likewise, averred that as a result of petitioners refusal to deliver the title to the property to
respondents Valencia and Pearroyo, who in turn failed to deliver the said title to him, he suffered mental anguish
and serious anxiety for which he sought payment of moral damages; and, additionally, the payment of attorneys
fees and costs.

For his part, petitioner, as administrator of the Testate Estate of Angela M. Butte, filed a third-party complaint
against herein private respondents, spouses Arsenio B. Reyes and Amanda Santos (respondent Reyes spouses, for
short). He averred, among others, that the late Angela M. Butte was the owner of the subject property; that due to
non-payment of real estate tax said property was sold at public auction by the City Treasurer of Quezon City to the
respondent Reyes spouses on 21 January 1980 for the sum of P14,000.00; that the one-year period of redemption
had expired; that respondents Valencia and Pearroyo had sued petitioner Papa as administrator of the estate of
Angela M. Butte, for the delivery of the title to the property; that the same aforenamed respondents had
acknowledged that the price paid by them was insufficient, and that they were willing to add a reasonable amount
or a minimum of P55,000.00 to the price upon delivery of the property, considering that the same was estimated
to be worth P143,000.00; that petitioner was willing to reimburse respondent Reyes spouses whatever amount
they might have paid for taxes and other charges, since the subject property was still registered in the name of the
late Angela M. Butte; that it was inequitable to allow respondent Reyes spouses to acquire property estimated to
be worth P143,000.00, for a measly sum of P14,000.00. Petitioner prayed that judgment be rendered cancelling
the tax sale to respondent Reyes spouses; restoring the subject property to him upon payment by him to said
respondent Reyes spouses of the amount of P14,000.00, plus legal interest; and, ordering respondents Valencia
and Pearroyo to pay him at least P55,000.00 plus everything they might have to pay the Reyes spouses in
recovering the property.
Respondent Reyes spouses in their Answer raised the defense of prescription of petitioners right to redeem the
property.

At the trial, only respondent Pearroyo testified. All the other parties only submitted documentary proof.

On 29 June 1987, the trial court rendered a decision, the dispositive portion of which reads:

WHEREUPON, judgment is hereby rendered as follows:

1) Allowing defendant to redeem from third-party defendants and ordering the latter to allow the former to
redeem the property in question, by paying the sum of P14,000.00 plus legal interest of 12% thereon from January
21, 1980;

2) Ordering defendant to execute a Deed of Absolute Sale in favor of plaintiff Felix Pearroyo covering the property
in question and to deliver peaceful possession and enjoyment of the said property to the said plaintiff, free from
any liens and encumbrances;

Should this not be possible, for any reason not attributable to defendant, said defendant is ordered to pay to
plaintiff Felix Pearroyo the sum of P45,000.00 plus legal interest of 12% from June 15, 1973;

3) Ordering plaintiff Felix Pearroyo to execute and deliver to intervenor a deed of absolute sale over the same
property, upon the latters payment to the former of the balance of the purchase price of P71,500.00;

Should this not be possible, plaintiff Felix Pearroyo is ordered to pay intervenor the sum of P5,000.00 plus legal
interest of 12% from August 23, 1973; and

4) Ordering defendant to pay plaintiffs the amount of P5,000.00 for and as attorneys fees and litigation expenses.

SO ORDERED.[1]

Petitioner appealed the aforesaid decision of the trial court to the Court of Appeals, alleging among others that the
sale was never consummated as he did not encash the check (in the amount of P40,000.00) given by respondents
Valencia and Pearroyo in payment of the full purchase price of the subject lot. He maintained that what said
respondents had actually paid was only the amount of P5,000.00 (in cash) as earnest money.

Respondent Reyes spouses, likewise, appealed the above decision. However, their appeal was dismissed because
of failure to file their appellants brief.

On 27 January 1992, the Court of Appeals rendered a decision, affirming with modification the trial courts decision,
thus:

WHEREFORE, the second paragraph of the dispositive portion of the appealed decision is MODIFIED, by ordering
the defendant-appellant to deliver to plaintiff-appellees the owners duplicate of TCT No. 28993 of Angela M. Butte
and the peaceful possession and enjoyment of the lot in question or, if the owners duplicate certificate cannot be
produced, to authorize the Register of Deeds to cancel it and issue a certificate of title in the name of Felix
Pearroyo. In all other respects, the decision appealed from is AFFIRMED. Costs against defendant-appellant Myron
C. Papa.

SO ORDERED.[2]

In affirming the trial courts decision, respondent court held that contrary to petitioners claim that he did not
encash the aforesaid check, and therefore, the sale was not consummated, there was no evidence at all that
petitioner did not, in fact, encash said check. On the other hand, respondent Pearroyo testified in court that
petitioner Papa had received the amount of P45,000.00 and issued receipts therefor. According to respondent
court, the presumption is that the check was encashed, especially since the payment by check was not denied by
defendant-appellant (herein petitioner) who, in his Answer, merely alleged that he can no longer recall the
transaction which is supposed to have happened 10 years ago.[3]

On petitioners claim that he cannot be held personally liable as he had acted merely as attorney-in-fact of the
owner, Angela M. Butte, respondent court held that such contention is without merit. This action was not brought
against him in his personal capacity, but in his capacity as the administrator of the Testate Estate of Angela M.
Butte.[4]

On petitioners contention that the estate of Angela M. Butte should have been joined in the action as the real
party in interest, respondent court held that pursuant to Rule 3, Section 3 of the Rules of Court, the estate of
Angela M. Butte does not have to be joined in the action. Likewise, the estate of Ramon Papa, Jr., is not an
indispensable party under Rule 3, Section 7 of the same Rules. For the fact is that Ramon Papa, Jr., or his estate,
was not a party to the Deed of Absolute Sale, and it is basic law that contracts bind only those who are parties
thereto.[5]

Respondent court observed that the conditions under which the mortgage rights of the bank were assigned are
not clear. In any case, any obligation which the estate of Angela M. Butte might have to the estate of Ramon Papa,
Jr. is strictly between them. Respondents Valencia and Pearroyo are not bound by any such obligation.

Petitioner filed a motion for reconsideration of the above decision, which motion was denied by respondent Court
of Appeals.

Hence, this petition wherein petitioner raises the following issues:

I. THE CONCLUSION OR FINDING OF THE COURT OF APPEALS THAT THE SALE IN QUESTION WAS CONSUMMATED IS
GROUNDED ON SPECULATION OR CONJECTURE, AND IS CONTRARY TO THE APPLICABLE LEGAL PRINCIPLE.

II. THE COURT OF APPEALS, IN MODIFYING THE DECISION OF THE TRIAL COURT, ERRED BECAUSE IT, IN EFFECT,
CANCELLED OR NULLIFIED AN ASSIGNMENT OF THE SUBJECT PROPERTY IN FAVOR OF THE ESTATE OF RAMON
PAPA, JR. WHICH IS NOT A PARTY IN THIS CASE.

III. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE ESTATE OF ANGELA M. BUTTE AND THE ESTATE OF
RAMON PAPA, JR. ARE INDISPENSABLE PARTIES IN THIS CASE.[6]

Petitioner argues that respondent Court of Appeals erred in concluding that the alleged sale of the subject
property had been consummated. He contends that such a conclusion is based on the erroneous presumption that
the check (in the amount of P40,000.00) had been cashed, citing Art. 1249 of the Civil Code, which provides, in
part, that payment by checks shall produce the effect of payment only when they have been cashed or when
through the fault of the creditor they have been impaired.[7] Petitioner insists that he never cashed said check;
and, such being the case, its delivery never produced the effect of payment. Petitioner, while admitting that he
had issued receipts for the payments, asserts that said receipts, particularly the receipt of PCIB Check No. 761025
in the amount of P40,000.00, do not prove payment. He avers that there must be a showing that said check had
been encashed. If, according to petitioner, the check had been encashed, respondent Pearroyo should have
presented PCIB Check No. 761025 duly stamped received by the payee, or at least its microfilm copy.

Petitioner finally avers that, in fact, the consideration for the sale was still in the hands of respondents Valencia
and Pearroyo, as evidenced by a letter addressed to him in which said respondents wrote, in part:

x x x. Please be informed that I had been authorized by Dr. Ramon Papa, Jr., heir of Mrs. Angela M. Butte to pay
you the aforementioned amount of P75,000.00 for the release and cancellation of subject propertys mortgage. The
money is with me and if it is alright with you, I would like to tender the payment as soon as possible. x x x.[8]
We find no merit in petitioners arguments.

It is an undisputed fact that respondents Valencia and Pearroyo had given petitioner Myron C. Papa the amounts
of Five Thousand Pesos (P5,000.00) in cash on 24 May 1973, and Forty Thousand Pesos (P40,000.00) in check on 15
June 1973, in payment of the purchase price of the subject lot. Petitioner himself admits having received said
amounts,[9] and having issued receipts therefor.[10] Petitioners assertion that he never encashed the aforesaid
check is not subtantiated and is at odds with his statement in his answer that he can no longer recall the
transaction which is supposed to have happened 10 years ago. After more than ten (10) years from the payment in
part by cash and in part by check, the presumption is that the check had been encashed. As already stated, he
even waived the presentation of oral evidence.

Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years
undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay.

While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art.
1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditors unreasonable delay in
presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and
if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment
of the debt or obligation for which it was given.[11] It has, likewise, been held that if no presentment is made at
all, the drawer cannot be held liable irrespective of loss or injury[12] unless presentment is otherwise excused. This
is in harmony with Article 1249 of the Civil Code under which payment by way of check or other negotiable
instrument is conditioned on its being cashed, except when through the fault of the creditor, the instrument is
impaired. The payee of a check would be a creditor under this provision and if its non-payment is caused by his
negligence, payment will be deemed effected and the obligation for which the check was given as conditional
payment will be discharged.[13]

Considering that respondents Valencia and Pearroyo had fulfilled their part of the contract of sale by delivering the
payment of the purchase price, said respondents, therefore, had the right to compel petitioner to deliver to them
the owners duplicate of TCT No. 28993 of Angela M. Butte and the peaceful possession and enjoyment of the lot in
question.

With regard to the alleged assignment of mortgage rights, respondent Court of Appeals has found that the
conditions under which said mortgage rights of the bank were assigned are not clear. Indeed, a perusal of the
original records of the case would show that there is nothing there that could shed light on the transactions
leading to the said assignment of rights; nor is there any evidence on record of the conditions under which said
mortgage rights were assigned. What is certain is that despite the said assignment of mortgage rights, the title to
the subject property has remained in the name of the late Angela M. Butte.[14] This much is admitted by
petitioner himself in his answer to respondents complaint as well as in the third-party complaint that petitioner
filed against respondent-spouses Arsenio B. Reyes and Amanda Santos.[15] Assuming arquendo that the mortgage
rights of the Associated Citizens Bank had been assigned to the estate of Ramon Papa, Jr., and granting that the
assigned mortgage rights validly exist and constitute a lien on the property, the estate may file the appropriate
action to enforce such lien. The cause of action for specific performance which respondents Valencia and Pearroyo
have against petitioner is different from the cause of action which the estate of Ramon Papa, Jr. may have to
enforce whatever rights or liens it has on the property by reason of its being an alleged assignee of the banks rights
of mortgage.

Finally, the estate of Angela M. Butte is not an indispensable party. Under Section 3 of Rule 3 of the Rules of Court,
an executor or administrator may sue or be sued without joining the party for whose benefit the action is
presented or defended, thus:

Sec. 3. Representative parties. - A trustee of an express trust, a guardian, executor or administrator, or a party
authorized by statute, may sue or be sued without joining the party for whose benefit the action is presented or
defended; but the court may, at any stage of the proceedings, order such beneficiary to be made a party. An agent
acting in his own name and for the benefit of an undisclosed principal may sue or be sued without joining the
principal except when the contract involves things belonging to the principal.[16]

Neither is the estate of Ramon Papa, Jr. an indispensable party without whom, no final determination of the action
can be had. Whatever prior and subsisting mortgage rights the estate of Ramon Papa, Jr. has over the property
may still be enforced regardless of the change in ownership thereof.

WHEREFORE, the petition for review is hereby DENIED and the Decision of the Court of Appeals, dated 27 January
1992 is AFFIRMED.

SO ORDERED.
HSBC INTERNATIONAL TRUSTEE LIMITED, petitioner, vs. CECILIA DIEZ CATALAN, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us are two petitions for review on certiorari under Rule 45 of the Rules of Court separately filed by the
Hongkong and Shanghai Banking Corporation Limited (HSBANK) and HSBC International Trustee Limited (HSBC
TRUSTEE). They seek the reversal of the consolidated Decision,[1] dated August 14, 2003, of the Court of Appeals
(CA) in CA-G.R. SP Nos. 75756 and 75757, which dismissed the petitions for certiorari of herein petitioners assailing
the Order, dated May 15, 2002, of the Regional Trial Court, Branch 44, Bacolod City (RTC) in Civil Case No. 01-
11372 that denied their respective motions to dismiss the amended complaint of respondent Cecilia Diez Catalan.

The factual antecedents are as follows:

On January 29, 2001, respondent filed before the RTC, a complaint for a sum of money with damages against
petitioner HSBANK, docketed as Civil Case No. 01-11372, due to HSBANKs alleged wanton refusal to pay her the
value of five HSBANK checks issued by Frederick Arthur Thomson (Thomson) amounting to HK$3,200,000.00.[2]

On February 7, 2001, summons was served on HSBANK at the Enterprise Center, Tower I, Ayala Avenue corner
Paseo de Roxas St., Makati City.[3] HSBANK filed a Motion for Extension of Time to File Answer or Motion to
Dismiss dated February 21, 2001.[4] Then, it filed a Motion to Dismiss, dated March 8, 2001, on the grounds that
(a) the RTC has no jurisdiction over the subject matter of the complaint; (b) the RTC has not acquired jurisdiction
for failure of the plaintiff to pay the correct filing or docket fees; (c) the RTC has no jurisdiction over the person of
HSBANK; (d) the complaint does not state a cause of action against HSBANK; and (e) plaintiff engages in forum-
shopping.[5]

On September 10, 2001, Catalan filed an Amended Complaint impleading petitioner HSBC TRUSTEE as co-
defendant and invoking Article 19 of the Civil Code as basis for her cause of action.[6]

The Amended Complaint alleges:

Defendants HSBANK and HSBC TRUSTEE, doing business in the Philippines, are corporations duly organized under
the laws of the British Virgin Islands with head office at 1 Grenville Street, St. Helier Jersey, Channel Islands and
with branch offices at Level 12, 1 Queens Road Central, Hongkong and may be served with summons and other
court processes through their main office in Manila with address at HSBC, the Enterprise Center, Tower 1, Ayala
Avenue corner Paseo de Roxas Street, Makati City.

Sometime in March 1997, Thomson issued five HSBANK checks payable to Catalan, to wit:

CHECK NO. DATE AMOUNT

807852 Mar. 15, 1997 $600,000.00
807853 Mar. 17, 1997 800,000.00
807854 Mar. 17, 1997 600,000.00
807855 Mar. 22, 1997 600,000.00
807856 Mar. 23, 1997 600,000.00
TOTAL $3,200,000.00

The checks when deposited were returned by HSBANK purportedly for reason of payment stopped pending
confirmation, despite the fact that the checks were duly funded. On March 18, 1997, Thomson wrote a letter to a
certain Ricky Sousa[7] of HSBANK confirming the checks he issued to Catalan and requesting that all his checks be
cleared. On March 20, 1997, Thomson wrote another letter to Sousa of HSBANK requesting an advice in writing to
be sent to the Philippine National Bank, through the fastest means, that the checks he previously issued to Catalan
were already cleared. Thereafter, Catalan demanded that HSBANK make good the checks issued by Thomson. On
May 16, 1997, Marilou A. Lozada, personal secretary and attorney-in-fact of Thomson, wrote a letter to Sousa of
HSBANK informing him that HSBANKs failure to clear all the checks had saddened Thomson and requesting that
the clearing of the checks be facilitated. Subsequently, Thomson died and Catalan forwarded her demand to HSBC
TRUSTEE. Catalan sent photocopies of the returned checks to HSBC TRUSTEE. Not satisfied, HSBC TRUSTEE through
deceit and trickery, required Catalan, as a condition for the acceptance of the checks, to submit the original copies
of the returned checks, purportedly, to hasten payment of her claim. HSBC TRUSTEE succeeded in its calculated
deception because on April 21, 1999, Catalan and her former counsel went to Hongkong at their own expense to
personally deliver the originals of the returned checks to the officers of HSBC TRUSTEE, anxious of receiving the
money value of the checks but HSBC TRUSTEE despite receipt of the original checks, refused to pay Catalans claim.
Having seen and received the original of the checks, upon its request, HSBC TRUSTEE is deemed to have impliedly
accepted the checks. Moreover, the refusal of HSBANK and HSBC TRUSTEE to pay the checks is equivalent to illegal
freezing of ones deposit. On the assurance of HSBC TRUSTEE that her claim will soon be paid, as she was made to
believe that payments of the checks shall be made by HSBC TRUSTEE upon sight, the unsuspecting Catalan left the
originals of the checks with HSBC TRUSTEE and was given only an acknowledgment receipt. Catalan made several
demands and after several more follow ups, on August 16, 1999, Phoenix Lam, Senior Vice President of HSBC
TRUSTEE, in obvious disregard of her valid claim, informed Catalan that her claim is disapproved. No reason or
explanation whatsoever was made why her claim was disapproved, neither were the checks returned to her.
Catalan appealed for fairness and understanding, in the hope that HSBC TRUSTEE would act fairly and justly on her
claim but these demands were met by a stonewall of silence. On June 9, 2000, Catalan through counsel sent a last
and final demand to HSBC TRUSTEE to remit the amount covered by the checks but despite receipt of said letter,
no payment was made. Clearly, the act of the HSBANK and HSBC TRUSTEE in refusing to honor and pay the checks
validly issued by Thomson violates the abuse of rights principle under Article 19 of the Civil Code which requires
that everyone must act with justice, give everyone his due and observe honesty and good faith. The refusal of
HSBANK and HSBC TRUSTEE to pay the checks without any valid reason is intended solely to prejudice and injure
Catalan. When they declined payment of the checks despite instructions of the drawer, Thomson, to honor them,
coupled with the fact that the checks were duly funded, they acted in bad faith, thus causing damage to Catalan. A
person may not exercise his right unjustly or in a manner that is not in keeping with honesty or good faith,
otherwise he opens himself to liability for abuse of right.[8]

Catalan prays that HSBANK and HSBC TRUSTEE be ordered to pay P20,864,000.00 representing the value of the five
checks at the rate of P6.52 per HK$1 as of January 29, 2001 for the acts of HSBANK and HSBC TRUSTEE in refusing
to pay the amount justly due her, in addition to moral and exemplary damages, attorneys fees and litigation
expenses.[9]

On October 2, 2001, HSBANK filed a Motion to Dismiss Amended Complaint on the grounds that: (a) the RTC has
no jurisdiction over the subject matter of the complaint since the action is a money claim for a debt contracted by
Thomson before his death which should have been filed in the estate or intestate proceedings of Thomson; (b)
Catalan engages in forum shopping by filing the suit and at the same time filing a claim in the probate proceeding
filed with another branch of the RTC; (c) the amended complaint states no cause of action against HSBANK since it
has no obligation to pay the checks as it has not accepted the checks and Catalan did not re-deposit the checks or
make a formal protest; (d) the RTC has not acquired jurisdiction over the person of HSBANK for improper service of
summons; and, (e) it did not submit to the jurisdiction of the RTC by filing a motion for extension of time to file a
motion to dismiss.[10]

Meanwhile, on October 17, 2001, summons for HSBC TRUSTEE was tendered to the In House Counsel of HSBANK
(Makati Branch) at the Enterprise Center, Tower 1, Ayala Avenue corner Paseo de Roxas, Makati. Without
submitting itself to the jurisdiction of the RTC, HSBC TRUSTEE filed a Special Appearance for Motion to Dismiss
Amended Complaint, dated October 29, 2001, questioning the jurisdiction of the RTC over it.[11] HSBC TRUSTEE
alleges that tender of summons through HSBANK Makati did not confer upon the RTC jurisdiction over it because:
(a) it is a corporation separate and distinct from HSBANK; (b) it does not hold office at the HSBANK Makati or in any
other place in the Philippines; (c) it has not authorized HSBANK Makati to receive summons for it; and, (d) it has no
resident agent upon whom summons may be served because it does not transact business in the Philippines.

Subsequently, HSBC TRUSTEE filed a Submission, dated November 15, 2001, attaching the Affidavit executed in
Hongkong by Phoenix Lam, Senior Vice-President of HSBC TRUSTEE, attesting to the fact that: 1) HSBC TRUSTEE has
not done nor is it doing business in the Philippines; 2) it does not maintain any office in Makati or anywhere in the
Philippines; 3) it has not appointed any agent in Philippines; and 4) HSBANK Makati has no authority to receive any
summons or court processes for HSBC TRUSTEE.[12]

On May 15, 2002, the RTC issued an Order denying the two motions to dismiss.[13] The RTC held that it has
jurisdiction over the subject matter of the action because it is an action for damages under Article 19 of the Civil
Code for the acts of unjustly refusing to honor the checks issued by Thomson and not a money claim against the
estate of Thomson; that Catalan did not engage in forum-shopping because the elements thereof are not
attendant in the case; that the question of cause of action should be threshed out or ventilated during the
proceedings in the main action and after the plaintiff and defendants have adduced evidence in their favor; that it
acquired jurisdiction over the person of defendants because the question of whether a foreign corporation is doing
business or not in the Philippines cannot be a subject of a Motion to Dismiss but should be ventilated in the trial on
the merits; and defendants voluntarily submitted to the jurisdiction of the RTC setting up in their Motions to
Dismiss other grounds aside from lack of jurisdiction.

HSBANK and HSBC TRUSTEE filed separate motions for reconsideration[14] but both proved futile as they were
denied by the RTC in an Order dated December 20, 2002.[15]

On February 21, 2003, Catalan moved to declare HSBANK and HSBC TRUSTEE in default for failure to file their
answer to the amended complaint.

On March 5, 2003, HSBANK and HSBC TRUSTEE filed separate petitions for certiorari and/or prohibition with the
CA, docketed as CA-G.R. SP Nos. 75756[16] and 75757,[17] respectively.

Subsequently, HSBANK and HSBC TRUSTEE filed before the RTC separate Answers ad cautelam, both dated March
18, 2003, as a precaution against being declared in default and without prejudice to the separate petitions for
certiorari and/or prohibition then pending with the CA.[18]

Meanwhile, the two petitions for certiorari before the CA were consolidated and after responsive pleadings were
filed, the cases were deemed submitted for decision.

In a consolidated Decision dated August 14, 2003, the CA dismissed the two petitions for certiorari.[19] The CA
held that the filing of petitioners answers before the RTC rendered moot and academic the issue of the RTCs lack
of jurisdiction over the person of the petitioners; that the RTC has jurisdiction over the subject matter since it is
one for damages under Article 19 of the Civil Code for the alleged unjust acts of petitioners and not a money claim
against the estate of Thomson; and, that the amended complaint states a cause of action under Article 19 of the
Civil Code which could merit a favorable judgment if found to be true. The CA noted that Catalan may have prayed
for payment of the value of the checks but ratiocinated that she merely used the value as basis for the
computation of the damages.

Hence, the present petitions.

In G.R. No. 159590, HSBANK submits the following assigned errors:

I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT THE COURT A QUO, ACTING AS AN (SIC)
REGULAR COURT, HAS JURISDICTION OVER THE AMENDED COMPLAINT SEEKING TO ORDER HSBC TRUSTEE, THE
EXECUTOR OF THE DECEASED FREDERICK ARTHUR THOMSON, TO PAY SUBJECT CHECKS ISSUED BY THE LATE
FREDERICK ARTHUR THOMSON, ADMITTEDLY IN PAYMENT OF HIS INDEBTEDNESS TO CATALAN.

II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT THE AMENDED COMPLAINT DOES NOT
SEEK TO ORDER HSBANK AND HSBC INTERNATIONAL TRUSTEE LIMITED TO PAY THE OBLIGATION OF THE (SIC)
FREDERICK ARTHUR THOMSON AS EVIDENCED BY THE CHECKS, BUT PRAYS FOR DAMAGES EQUIVALENT OR
COMPUTED ON THE BASIS OF THE VALUE OF THE CHECKS BECAUSE THE DEFENDANTS FAILED TO COMPLY WITH
THE MANDATES OF ARTICLE 19 OF THE NEW CIVIL CODE.

III.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT ALLEGATIONS IN THE AMENDED
COMPLAINT MAKE OUT A CAUSE OF ACTION WHICH COULD MERIT A FAVORABLE JUDGMENT IF FOUND TO BE
TRUE, OR IN NOT HOLDING THAT THE AMENDED COMPLAINT STATES NO CAUSE OF ACTION AGAINST HSBANK, AS
DRAWEE BANK.

IV.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN DISREGARDING THE FACT THAT CATALAN ENGAGED IN
FORUM SHOPPING BY FILING THE AMENDED COMPLAINT WHILE HER PETITION FOR THE PROBATE OF THE
SUPPOSED WILL OF THE DECEASED FREDERICK ARTHUR THOMSON IS PENDING WITH ANOTHER BRANCH OF THE
COURT A QUO.

V.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT HSBANK HAD SUBMITTED TO THE
JURISDICTION OF THE COURT A QUO BY SUBMITTING AN ANSWER TO THE AMENDED COMPLAINT.[20]

In G.R. No. 159591, HSBC TRUSTEE also assigns the foregoing first, second and fifth errors as its own.[21] In
addition, it claims that:

THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT ORDERING THE DISMISSAL OF THE AMENDED
COMPLAINT AGAINST HSBC TRUSTEE DESPITE THE FACT IT HAS NOT BEEN DULY SERVED WITH SUMMONS. [22]

HSBANK and HSBC TRUSTEE contend in common that Catalan has no cause of action for abuse of rights under
Article 19 of the Civil Code; that her complaint, under the guise of a claim for damages, is actually a money claim
against the estate of Thomson arising from checks issued by the latter in her favor in payment of indebtedness.

HSBANK claims that the money claim should be dismissed on the ground of forum-shopping since Catalan also filed
a petition for probate of the alleged last will of Thomson before RTC, Branch 48, Bacolod City, docketed as Spec.
Proc No. 00-892. In addition, HSBANK imputes error upon the CA in holding that by filing an answer to the
amended complaint, petitioners are estopped from questioning the jurisdiction of the RTC.

HSBC TRUSTEE maintains that the RTC did not acquire jurisdiction over it for improper service of summons.
In her Comment, Catalan insists that her complaint is one for damages under Article 19 of the Civil Code for the
wanton refusal to honor and pay the value of five checks issued by the Thomson amounting to HK$3,200,000.00.
She argues that the issue of jurisdiction has been rendered moot by petitioners participation in the proceedings
before the RTC.

Succinctly, the issues boil down to the following:

1) Does the complaint state a cause of action?

2) Did Catalan engage in forum-shopping by filing the complaint for damages when she also filed a petition for
probate of the alleged last will of Thomson with another branch of the RTC? and,

3) Did the RTC acquire jurisdiction over HSBANK and HSBC TRUSTEE? Corollary thereto, did the filing of the answer
before the RTC render the issue of lack of jurisdiction moot and academic?

We shall resolve the issue in seriatim.

Does the complaint state a cause of action against HSBANK and HSBC TRUSTEE?

The elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would
justify the relief demanded. Stated otherwise, may the court render a valid judgment upon the facts alleged
therein?[23] The inquiry is into the sufficiency, not the veracity of the material allegations.[24] If the allegations in
the complaint furnish sufficient basis on which it can be maintained, it should not be dismissed regardless of the
defense that may be presented by the defendants.[25]

Catalan anchors her complaint for damages on Article 19 of the Civil Code. It speaks of the fundamental principle
of law and human conduct that a person "must, in the exercise of his rights and in the performance of his duties,
act with justice, give every one his due, and observe honesty and good faith." It sets the standards which may be
observed not only in the exercise of ones rights but also in the performance of ones duties. When a right is
exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to
another, a legal wrong is thereby committed for which the wrongdoer must be held responsible.[26] But a right,
though by itself legal because recognized or granted by law as such, may nevertheless become the source of some
illegality. A person should be protected only when he acts in the legitimate exercise of his right, that is, when he
acts with prudence and in good faith; but not when he acts with negligence or abuse.[27] There is an abuse of right
when it is exercised for the only purpose of prejudicing or injuring another. The exercise of a right must be in
accordance with the purpose for which it was established, and must not be excessive or unduly harsh; there must
be no intention to injure another.[28]

Thus, in order to be liable under the abuse of rights principle, three elements must concur, to wit: (a) that there is
a legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring
another.[29]

In this instance, after carefully examining the amended complaint, we are convinced that the allegations therein
are in the nature of an action based on tort under Article 19 of the Civil Code. It is evident that Catalan is suing
HSBANK and HSBC TRUSTEE for unjustified and willful refusal to pay the value of the checks.

HSBANK is being sued for unwarranted failure to pay the checks notwithstanding the repeated assurance of the
drawer Thomson as to the authenticity of the checks and frequent directives to pay the value thereof to Catalan.
Her allegations in the complaint that the gross inaction of HSBANK on Thomsons instructions, as well as its evident
failure to inform Catalan of the reason for its continued inaction and non-payment of the checks, smack of
insouciance on its part, are sufficient statements of clear abuse of right for which it may be held liable to Catalan
for any damages she incurred resulting therefrom. HSBANKs actions, or lack thereof, prevented Catalan from
seeking further redress with Thomson for the recovery of her claim while the latter was alive.
HSBANK claims that Catalan has no cause of action because under Section 189 of the Negotiable Instruments Law,
a check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the
bank, and the bank is not liable to the holder unless and until it accepts or certifies it. However, HSBANK is not
being sued on the value of the check itself but for how it acted in relation to Catalans claim for payment despite
the repeated directives of the drawer Thomson to recognize the check the latter issued. Catalan may have prayed
that she be paid the value of the checks but it is axiomatic that what determines the nature of an action, as well as
which court has jurisdiction over it, are the allegations of the complaint, irrespective of whether or not the plaintiff
is entitled to recover upon all or some of the claims asserted therein.[30]

Anent HSBC TRUSTEE, it is being sued for the baseless rejection of Catalans claim. When Catalan parted with the
checks as a requirement for the processing of her claim, even going to the extent of traveling to Hongkong to
deliver personally the checks, HSBC TRUSTEE summarily disapproved her claim with nary a reason. HSBC TRUSTEE
gave no heed to Catalans incessant appeals for an explanation. Her pleas fell on deaf and uncaring corporate ears.
Clearly, HSBC TRUSTEEs acts are anathema to the prescription for human conduct enshrined in Article 19 of the
Civil Code.

Did Catalan engage in forum-shopping?

It has been held that forum-shopping exists where a litigant sues the same party against whom another action or
actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the
defense of litis pendentia in one case is a bar to the others; and, a final judgment in one would constitute res
judicata and thus would cause the dismissal of the rest.[31]

Thus, there is forum-shopping when there exist: a) identity of parties, or at least such parties as represent the
same interests in both actions, b) identity of rights asserted and relief prayed for, the relief being founded on the
same facts, and c) the identity of the two preceding particulars is such that any judgment rendered in the pending
case, regardless of which party is successful would amount to res judicata in the other.[32]

Applying the foregoing requisites to the case before us in relation to Spec. Proc No. 00-892, the probate
proceeding brought by Catalan before RTC, Branch 48, Bacolod City, it is obvious that forum-shopping does not
exist.

There is no identity of parties. HSBANK is not a party in the probate proceeding. HSBC TRUSTEE is only a party in
the probate proceeding because it is the executor and trustee named in the Hongkong will of Thomson. HSBC
TRUSTEE is representing the interest of the estate of Thomson and not its own corporate interest.

With respect to the second and third requisites, a scrutiny of the entirety of the allegations of the amended
complaint in this case reveals that the rights asserted and reliefs prayed for therein are different from those
pleaded in the probate proceeding, such that a judgment in one case would not bar the prosecution of the other
case. Verily, there can be no forum-shopping where in one proceeding a party raises a claim for damages based on
tort and, in another proceeding a party seeks the allowance of an alleged last will based on ones claim as an heir.
After all, the merits of the action for damages is not to be determined in the probate proceeding and vice versa.
Undeniably, the facts or evidence as would support and establish the two causes of action are not the same.[33]
Consequently, HSBANKs reliance on the principle of forum-shopping is clearly misplaced.

Did the RTC acquire jurisdiction over HSBANK and HSBC TRUSTEE?

The Rules of Court provides that a court generally acquires jurisdiction over a person through either a valid service
of summons in the manner required by law or the persons voluntary appearance in court.[34]

In holding that it acquired jurisdiction over HSBANK and HSBC TRUSTEE, the RTC held that both voluntarily
submitted to the jurisdiction of the court by setting up in their Motions to Dismiss other grounds aside from lack of
jurisdiction. On the other hand, the CA ruled that HSBANK and HSBC TRUSTEE are estopped from challenging the
jurisdiction of the RTC because they filed their respective answers before the RTC.

We find that both lower courts overlooked Section 20 of Rule 14 of the 1997 Rules of Civil Procedure which
provides that the inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person
of the defendant shall not be deemed a voluntary appearance. Nonetheless, such omission does not aid HSBANKs
case.

It must be noted that HSBANK initially filed a Motion for Extension of Time to File Answer or Motion to
Dismiss.[35] HSBANK already invoked the RTCs jurisdiction over it by praying that its motion for extension of time
to file answer or a motion to dismiss be granted. The Court has held that the filing of motions seeking affirmative
relief, such as, to admit answer, for additional time to file answer, for reconsideration of a default judgment, and
to lift order of default with motion for reconsideration, are considered voluntary submission to the jurisdiction of
the court.[36] Consequently, HSBANKs expressed reservation in its Answer ad cautelam that it filed the same as a
mere precaution against being declared in default, and without prejudice to the Petition for Certiorari and/or
Prohibition xxx now pending before the Court of Appeals[37] to assail the jurisdiction of the RTC over it is of no
moment. Having earlier invoked the jurisdiction of the RTC to secure affirmative relief in its motion for additional
time to file answer or motion to dismiss, HSBANK, effectively submitted voluntarily to the jurisdiction of the RTC
and is thereby estopped from asserting otherwise, even before this Court.

In contrast, the filing by HSBC TRUSTEE of a motion to dismiss cannot be considered a voluntary submission to the
jurisdiction of the RTC. It was a conditional appearance, entered precisely to question the regularity of the service
of summons. It is settled that a party who makes a special appearance in court challenging the jurisdiction of said
court, e.g., invalidity of the service of summons, cannot be considered to have submitted himself to the jurisdiction
of the court.[38] HSBC TRUSTEE has been consistent in all its pleadings in assailing the service of summons and the
jurisdiction of the RTC over it. Thus, HSBC TRUSTEE cannot be declared in estoppel when it filed an Answer ad
cautelam before the RTC while its petition for certiorari was pending before the CA. Such answer did not render
the petition for certiorari before the CA moot and academic. The Answer of HSBC TRUSTEE was only filed to
prevent any declaration that it had by its inaction waived the right to file responsive pleadings.

Admittedly, HSBC TRUSTEE is a foreign corporation, organized and existing under the laws of the British Virgin
Islands. For proper service of summons on foreign corporations, Section 12 of Rule 14 of the Revised Rules of Court
provides:

SEC. 12. Service upon foreign private juridical entity. When the defendant is a foreign private juridical entity which
has transacted business in the Philippines, service may be made on its resident agent designated in accordance
with law for that purpose, or if there be no such agent, on the government official designated by law to that effect,
or on any of its officers or agents within the Philippines.

In French Oil Mill Machinery Co., Inc. vs. Court of Appeals,[39] we had occasion to rule that it is not enough to
merely allege in the complaint that a defendant foreign corporation is doing business. For purposes of the rule on
summons, the fact of doing business must first be "established by appropriate allegations in the complaint" and
the court in determining such fact need not go beyond the allegations therein.[40]

The allegations in the amended complaint subject of the present cases did not sufficiently show the fact of HSBC
TRUSTEEs doing business in the Philippines. It does not appear at all that HSBC TRUSTEE had performed any act
which would give the general public the impression that it had been engaging, or intends to engage in its ordinary
and usual business undertakings in the country. Absent from the amended complaint is an allegation that HSBC
TRUSTEE had performed any act in the country that would place it within the sphere of the courts jurisdiction.

We have held that a general allegation, standing alone, that a party is doing business in the Philippines does not
make it so; a conclusion of fact or law cannot be derived from the unsubstantiated assertions of parties
notwithstanding the demands of convenience or dispatch in legal actions, otherwise, the Court would be guilty of
sorcery; extracting substance out of nothingness.[41]

Besides, there is no allegation in the amended complaint that HSBANK is the domestic agent of HSBC TRUSTEE to
warrant service of summons upon it. Thus, the summons tendered to the In House Counsel of HSBANK (Makati
Branch) for HSBC TRUSTEE was clearly improper.

There being no proper service of summons, the RTC cannot take cognizance of the case against HSBC TRUSTEE for
lack of jurisdiction over it. Any proceeding undertaken by the RTC is therefore null and void.[42] Accordingly, the
complaint against HSBC TRUSTEE should have been dismissed for lack of jurisdiction over it.

WHEREFORE, the petition in G.R. No. 159590 is DENIED. The Decision of the Court of Appeals, dated August 14,
2003, in CA-G.R. SP No. 75757 dismissing the petition for certiorari of the Hongkong and Shanghai Banking
Corporation Limited is AFFIRMED.

The petition in G.R. No. 159591 is GRANTED. The Decision of the Court of Appeals, dated August 14, 2003, in CA-
G.R. SP No. 75756 dismissing the petition for certiorari of the HSBC International Trustee Limited is REVERSED and
SET ASIDE. The Regional Trial Court, Branch 44, Bacolod City is declared without jurisdiction to take cognizance of
Civil Case No. 01-11372 against the HSBC International Trustee Limited, and all its orders and issuances with
respect to the latter are hereby ANNULLED and SET ASIDE. The said Regional Trial Court is hereby ORDERED to
DESIST from maintaining further proceedings against the HSBC International Trustee Limited in the case
aforestated.

SO ORDERED.

PEOPLE OF THE PHILIPPINES, petitioner, vs.HON. DAVID G. NITAFAN, Presiding Judge, Regional Trial Court,
Branch 52, Manila, and K.T. LIM alias MARIANO LIM, respondents.

BELLOSILLO, J.:
Failing in his argument that B.P. 22, otherwise known as the "Bouncing Check Law", is unconstitutional, 1 private
respondent now argues that the check he issued, a memorandum check, is in the nature of a promissory note,
hence, outside the purview of the statute. Here, his argument must also fail.
The facts are simple. Private respondent K.T. Lim was charged before respondent court with violation of B.P. 22 in
an Information alleging ––
That on . . . January 10, 1985, in the City of Manila . . . the said accused did then and there
wilfully, unlawfully and feloniously make or draw and issue to Fatima Cortez Sasaki . . . Philippine
Trust Company Check No. 117383 dated February 9, 1985 . . . in the amount of P143,000.00, . . .
well knowing that at the time of issue he . . . did not have sufficient funds in or credit with the
drawee bank . . . which check . . . was subsequently dishonored by the drawee bank for
insufficiency of funds, and despite receipt of notice of such dishonor, said accused failed to pay
said Fatima Cortez Sasaki the amount of said check or to make arrangement for full payment of
the same within five (5) banking days after receiving said notice. 2
On 18 July 1986, private respondent moved to quash the Information of the ground that the facts charged did not
constitute a felony as B.P. 22 was unconstitutional and that the check he issued was a memorandum check which
was in the nature of a promissory note, perforce, civil in nature. On 1 September 1986, respondent judge, ruling
that B.P. 22 on which the Information was based was unconstitutional, issued the questioned Order quashing the
Information. Hence, this petition for review on certiorari filed by the Solicitor General in behalf of the government.
Since the constitutionality of the "Bouncing Check Law" has already been sustained by this Court in Lozano v.
Martinez 3 and the seven (7) other cases decided jointly with it, 4 the remaining issue, as aptly stated by private
respondent in his Memorandum, is whether a memorandum check issued postdated in partial payment of a pre-
existing obligation is within the coverage of B.P. 22.
Citing U.S. v. Isham, 5 private respondent contends that although a memorandum check may not differ in form and
appearance from an ordinary check, such a check is given by the drawer to the payee more in the nature of
memorandum of indebtedness and, should be sued upon in a civil action.
We are not persuaded.
A memorandum check is in the form of an ordinary check, with the word "memorandum", "memo" or "mem"
written across its face, signifying that the maker or drawer engages to pay the bona fide holder absolutely, without
any condition concerning its presentment. 6 Such a check is an evidence of debt against the drawer, and although
may not be intended to be presented, 7 has the same effect as an ordinary check, 8 and if passed to the third
person, will be valid in his hands like any other check. 9
From the above definition, it is clear that a memorandum check, which is in the form of an ordinary check, is still
drawn on a bank and should therefore be distinguished from a promissory note, which is but a mere promise to
pay. If private respondent seeks to equate memorandum check with promissory note, as he does to skirt the
provisions of B.P. 22, he could very well have issued a promissory note, and this would be have exempted him
form the coverage of the law. In the business community a promissory note, certainly, has less impact and
persuadability than a check.
Verily, a memorandum check comes within the meaning of Sec. 185 of the Negotiable Instruments Law which
defines a check as "a bill of exchange drawn on a bank payable on demand." A check is also defined as " [a] written
order or request to a bank or persons carrying on the business of banking, by a party having money in their hands,
desiring them to pay, on presentment, to a person therein named or bearer, or to such person or order, a named
sum of money," citing 2 Dan. Neg. Inst. 528; Blair v. Wilson, 28 Gratt. (Va.) 170; Deener v. Brown, 1 MacArth. (D.C.)
350; In re Brown, 2 Sto. 502, Fed. Cas. No. 1,985. See Chapman v. White, 6 N.Y. 412, 57 Am. Dec 464. 10 Another
definition of check is that is "[a] draft drawn upon a bank and payable on demand, signed by the maker or drawer,
containing an unconditional promise to pay a sum certain in money to the order of the payee," citing State v.
Perrigoue, 81 Wash, 2d 640, 503 p. 2d 1063, 1066. 11
A memorandum check must therefore fall within the ambit of B.P. 22 which does not distinguish but merely
provides that "[a]ny person who makes or draws and issues any check knowing at the time of issue that he does
not have sufficient funds in or credit with the drawee bank . . . which check is subsequently dishonored . . . shall be
punished by imprisonment . . ." (Emphasis supplied ). 12 Ubi lex no distinguit nec nos distinguere debemus.
But even if We retrace the enactment of the "Bouncing Check Law" to determine the parameters of the concept of
"check", We can easily glean that the members of the then Batasang Pambansa intended it to be comprehensive
as to include all checks drawn against banks. This was particularly the ratiocination of Mar. Estelito P. Mendoza, co-
sponsor of Cabinet Bill No. 9 which later became B.P. 22, when in response to the interpellation of Mr. Januario T.
Seño, Mr. Mendoza explained that the draft or order must be addressed to a bank or depository, 13 and accepted
the proposed amendment of Messrs. Antonio P. Roman and Arturo M. Tolentino that the words "draft or order",
and certain terms which technically meant promissory notes, wherever they were found in the text of the bill,
should be deleted since the bill was mainly directed against the pernicious practice of issuing checks with
insufficient or no funds, and not to drafts which were not drawn against banks. 14
A memorandum check, upon presentment, is generally accepted by the bank. Hence it does not matter whether
the check issued is in the nature of a memorandum as evidence of indebtedness or whether it was issued is partial
fulfillment of a pre-existing obligation, for what the law punishes is the issuance itself of a bouncing check 15 and
not the purpose for which it was issuance. The mere act of issuing a worthless check, whether as a deposit, as a
guarantee, or even as an evidence of a pre-existing debt, is malum prohibitum. 16
We are not unaware that a memorandum check may carry with it the understanding that it is not be presented at
the bank but will be redeemed by the maker himself when the loan fall due. This understanding may be
manifested by writing across the check "Memorandum", "Memo" or "Mem." However, with the promulgation of
B.P. 22, such understanding or private arrangement may no longer prevail to exempt it from penal sanction
imposed by the law. To require that the agreement surrounding the issuance of check be first looked into and
thereafter exempt such issuance from the punitive provision of B.P. 22 on the basis of such agreement or
understanding would frustrate the very purpose for which the law was enacted — to stem the proliferation of
unfunded checks. After having effectively reduced the incidence of worthless checks changing hands, the country
will once again experience the limitless circulation of bouncing checks in the guise of memorandum checks if such
checks will be considered exempt from the operation of B.P. 22. It is common practice in commercial transactions
to require debtors to issue checks on which creditors must rely as guarantee of payment. To determine the
reasons for which checks are issued, or the terms and conditions for their issuance, will greatly erode the faith the
public responses in the stability and commercial value of checks as currency substitutes, and bring about havoc in
trade and in banking communities. 17
WHEREFORE, the petition is GRANTED and the Order of respondent Judge of 1 September 1986 is SET ASIDE.
Consequently, respondent Judge, or whoever presides over the Regional Trial Court of Manila, Branch 52, is hereby
directed forthwith to proceed with the hearing of the case until terminated.
SO ORDERED.