[G.R. No. 146211. August 6, 2002] MANUEL NAGRAMPA, Petitioner, vs. PEOPLE OF THE PHILIPPINES, Respondent.

DECISION DAVIDE, JR., C.J.: In this petition for review on certiorari, petitioner assails his conviction for estafa in Criminal Case No. Q-90-15797 and for two counts of violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) in Criminal Cases Nos. Q-90-15798 and Q-90-15799. The accusatory portion of the information in Criminal Case No. Q-90-15797 for estafa reads as follows: That on or about the 28th day of July 1989 in Quezon City, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, with intent to gain by means of false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud, did then and there, wilfully, unlawfully and feloniously defraud FEDCOR TRADING CORPORATION represented by FEDERICO A. SANTANDER by then and there making, drawing and issuing in favor of the latter the following checks, to wit: CHECK NOS. AMOUNT POSTDATED 473477 P75,000.00 August 31, 1989 473478 P75,000.00 September 30, 1989 drawn against the SECURITY BANK AND TRUST COMPANY in payment of an obligation, knowing fully well at the time of issue that he did not have any funds in the bank or his funds deposited therein was not sufficient to cover the amount of the checks that upon presentation of said checks to the said bank for payment, the same were dishonored for the reason that the drawer thereof, accused MANUEL NAGRAMPA did not have any funds therein and despite notice of dishonor thereof, accused failed and refused and still fails and refuses to redeem or make good said checks, to the damage and prejudice of the said FEDCOR TRADING CORPORATION in such amount as may be awarded under the provisions of the Civil Code. CONTRARY TO LAW.[1 The accusatory portion of the information in Criminal Case No. Q-90-15798 for violation of B.P. Blg. 22 reads as follows: That on or about the 28th day of July, 1989 in Quezon City, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, did then and there, willfully, unlawfully and feloniously make, draw and issue in favor of FEDCOR TRADING CORPORATION represented by FEDERICO A. SANTANDER a check numbered 473478 drawn against the SECURITY BANK AND TRUST COMPANY, Escolta Branch, a duly established domestic banking institution, in the amount of P75,000.00, Philippine Currency, postdated September 30, 1989 in payment of an obligation, knowing fully well that at the time of issue that she/he did not have ANY funds in the drawee bank for the payment of such check; that upon presentation of said check to said bank for payment, the same was dishonored for the reason that the drawee bank of accused MANUEL NAGRAMPA did not have ANY funds therein

and despite notice of dishonor thereof, accused failed and refused and still fails and refuses to redeem or make good said check, to the damage and prejudice of the said FEDCOR TRADING CORPORATION in the amount aforementioned and in such other amount as may be awarded under the provisions of the Civil Code. Contrary to law.[2 The information in Criminal Case No. Q-90-15799 is similarly worded as in Criminal Case No. Q-90-15798 except as to the date and number of the check. Upon his arraignment, petitioner entered a plea of not guilty in each case. At the trial on the merits, the prosecution presented Federico Santander, President of Fedcor Trading Corporation (hereafter FEDCOR), and Felix Mirano, signature verifier of the Escolta Branch of the Security Bank and Trust Company. Federico Santander testified that on 28 July 1989, Corseno Bote, FEDCORs Sales Manager, brought to FEDCOR petitioner Manuel Nagrampa (hereafter NAGRAMPA), General Manager of the Nagrampa Asphalt Plant in Montalban, Rizal. NAGRAMPA purchased a Yutani Poclain Backhoe Excavator Equipment for P200,000 from FEDCOR and paid in cash the down payment of P50,000. To cover the balance of P150,000, he issued Check No. 473477[3 postdated 31 August 1989 and Check No. 473478[4 postdated 30 September 1989 in the amount of P75,000 each. The checks were drawn against the Security Bank and Trust Company. Upon the assurance of FEDCORs salesman that the checks were good, FEDCOR delivered to petitioner the equipment.[5 Santander further testified that FEDCOR presented the checks for payment on 22 February 1990; however, they were dishonored on the ground that petitioners account with the drawee bank, Security Bank, had already been closed. In a letter[6 dated 19 March 1990, sent through registered mail, FEDCOR demanded payment from petitioner; but the latter failed to pay. Hence, the above cases were filed against petitioner with the trial court. [7 During his cross-examination, Santander denied that the equipment was returned to FEDCOR. Ronnie Bote, son of Corseno Bote, was not an employee of FEDCOR but was merely its sales agent with no authority to receive returned equipment.[8 Felix Mirano, the second prosecution witness, testified that he had been a signature verifier of Security Bank for twelve years. His duty was to verify the signatures of the clients of the bank. He brought with him the signature card for Account No. 0110-4048-19, petitioners account against which the subject checks were drawn. He identified the signatures appearing on Checks Nos. 473477 and 473478 to be those of the petitioner. When asked about the status of said account, he answered that the account had been closed in May 1985 yet.[9 For his part, petitioner testified that on 28 July 1989, he bought from Corseno Bote a backhoe and paid P50,000 cash, as evidenced by an acknowledgment receipt[10 signed by Corseno Bote. In addition, he issued and handed to Corseno Bote two checks in the amount of P75,000 each, dated 31 August 1989[11 and 30 September 1989.[12 The agreement with Corseno Bote was that petitioner would replace the two checks with cash if the backhoe would be in good running condition. The backhoe was delivered at petitioners jobsite on 29 July 1989. After five to seven days of use, the backhoe broke down. Such fact was reported to Ronnie Bote, and the backhoe was thus repaired. After one day of using it, the backhoe broke down again. Petitioner again reported the matter to Ronnie Bote, who told him that the equipment should be brought to the latters office for repair. As evidence of the return of the equipment, petitioner presented a letter dated 3 October 1989[13addressed to

Electrobus Consolidated, Inc., requesting the release of the backhoe to Ronnie Bote for repair, with the alleged signature[14 of Ronnie Bote appearing at the bottom thereof to attest to his receipt of the equipment. After a week, petitioner demanded from Ronnie Bote the return of the backhoe, the P50,000 cash and the two postdated checks, but to no avail. [15 On cross-examination, he admitted that during the pendency of the case he paid, upon the advice of his counsel, the amount of P15,000, which he handed to FEDCORs counsel Atty. Orlando Paray.[16 On 30 September 1993, the trial court rendered a decision[17 finding petitioner guilty of two counts of violation of the Bouncing Checks Law and sentencing him to suffer imprisonment for two years and pay FEDCOR P150,000, with legal interest thereon from 9 October 1990 up to the time of full payment. Petitioner appealed the decision to the Court of Appeals. The appeal was docketed as CAG.R. CR. No. 18082. Upon noticing that the 30 September 1993 Decision of the trial court did not resolve the issue of petitioners liability for estafa, the Court of Appeals issued on 19 May 1998 a resolution[18 ordering the return of the entire records of the case to the trial court for the latter to decide the estafa case against petitioner. On 8 February 1999, the trial court rendered a decision[19 finding petitioner guilty beyond reasonable doubt of estafa and sentencing him to suffer imprisonment of seven years and four months ofprision mayor as minimum to twelve years and six months of reclusion temporal as maximum. As might be expected, petitioner also appealed said decision to the Court of Appeals. On 21 July 2000, the Court of Appeals rendered a decision[20 affirming in toto the decision of the trial court finding petitioner guilty of estafa and violations of the Bouncing Checks Law. It also denied petitioners motion for reconsideration of the decision.[21 Hence, this petition. Petitioner claims that he is not guilty of estafa because no damage was caused to FEDCOR, considering that the backhoe became unserviceable a few days after delivery and was eventually returned to FEDCOR through the latters sales agent Ronnie Bote. He also asserts that he did not violate B.P. Blg. 22 either. The two checks issued by him were presented for payment only on 22 February 1990, or after more than five months from the date of the checks. Under Sections 1 and 2 of B.P. Blg. 22 FEDCOR, as payee, had the duty or obligation to encash or deposit the checks issued in its favor within ninety days from the date of issue. Since FEDCOR deposited the checks after this period, he cannot be faulted for their subsequent dishonor. Alternatively, petitioner prays that in the event that his conviction for violations of B.P. Blg. 22 is sustained, the rulings in Vaca v. Court of Appeals[22 and Lim v. People[23 should be given retroactive effect in his favor so that only a fine may be imposed on him as penalty. In arguing that petitioners conviction for two counts of violation of B.P. Blg. 22 is correct, the Office of the Solicitor General relies heavily on the testimony of Felix Mirano that the account of petitioner had been closed way back in May 1985, or four years prior to the issuance of the subject checks to FEDCOR. The date when the checks were encashed or deposited is immaterial because there was no more existing bank account against which they were drawn, and their dishonor was therefore certain even if the checks were presented for payment within the 90-day period from their issuance. With respect to petitioners plea to impose on him the penalty of fine in the event that his conviction is affirmed, the OSG maintains that the penalty of imprisonment is appropriate considering

petitioners act of issuing worthless checks which showed his culpable violation of B.P. Blg. 22. Petitioners argument that the element of damage to private complainant FEDCOR is lacking is disputed by the OSG by pointing out petitioners failure to prove the return of the backhoe to FEDCOR. Ronnie Bote, the person to whom the backhoe was allegedly returned, was not presented as a witness to corroborate petitioners testimony. But even granting arguendo that the backhoe was indeed received by Ronnie Bote, there is no showing that he acted for, and on behalf of, FEDCOR in doing so considering that he was not an employee of FEDCOR. The petition is without merit. Section 1 of B.P. Blg. 22 provides: SECTION 1. Checks without sufficient funds. -- Any person who makes or draws and issues any check to apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment, shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred Thousand Pesos, or both such fine and imprisonment at the discretion of the court. The same penalty shall be imposed upon any person who, having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check, shall fail to keep sufficient funds or to maintain a credit or to cover the full amount of the check if presented within a period of ninety (90) days from the date appearing thereon, for which reason it is dishonored by the drawee bank. Two distinct acts are punished under the above-quoted provision: (1)The making or drawing and issuance of any check to apply on account or for value, knowing at the time of issue that the drawer does not have sufficient funds in, or credit with, the drawee bank; and (2)The failure to keep sufficient funds or to maintain a credit to cover the full amount of the check if presented within a period of ninety days from the date appearing thereon, for which reason it is dishonored by the drawee bank.[24 In the first situation, the drawer knows of the insufficiency of funds to cover the check at the time of its issuance; while in the second situation, the drawer has sufficient funds at the time of issuance but fails to keep sufficient funds or maintain credit within ninety days from the date appearing on the check. The check involved in the first offense is worthless at the time of issuance, since the drawer has neither sufficient funds in, nor credit with, the drawee bank at the time; while that involved in the second offense is good when issued, as the drawer has sufficient funds in, or credit with, the drawee bank when issued. In both instances, the offense is consummated by the dishonor of the check for insufficiency of funds or credit.[25

It can be gleaned from the allegations in the information that petitioner is charged with the first type of offense under B.P. Blg. 22. The elements of the first type of offense are as follows: (1) The making, drawing and issuance of any check to apply for account or for value; (2) The knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment; and (3) The subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment.[26 Petitioner admitted that he issued the two postdated checks worth P75,000 each. He did not deny that the same were dishonored on the ground that the account from which they were to be drawn was already closed at the time the checks were presented for payment. Neither did he rebut the prosecutions evidence that the account against which he drew his two postdated checks had been closed in May 1985 yet, or more than four years prior to the drawing and delivery of the checks. The fact that the checks were presented beyond the 90-day period provided in Section 2 of B.P. Blg. 22 is of no moment. We held in Wong v. Court of Appeals[27 that the 90-day period is not an element of the offense but merely a condition for the prima facie presumption of knowledge of the insufficiency of funds; thus: That the check must be deposited within ninety (90) days is simply one of the conditions for the prima facie presumption of knowledge of lack of funds to arise. It is not an element of the offense. Neither does it discharge petitioner from his duty to maintain sufficient funds in the account within a reasonable time thereof. Under Section 186 of the Negotiable Instruments Law, a check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay. By current banking practice, a check becomes stale after more than six (6) months, or 180 days. In Bautista v. Court of Appeals,[28 we ruled that such prima facie presumption is intended to facilitate proof of knowledge, and not to foreclose admissibility of other evidence that may also prove such knowledge; thus, the only consequence of the failure to present the check for payment within the 90-day period is that there arises no prima facie presumption of knowledge of insufficiency of funds.[29 The prosecution may still prove such knowledge through other evidence. In this case, FEDCOR presented the checks for encashment on 22 February 1990, or within the six-month period from the date of issuance of the checks, and would not therefore have been considered stale had petitioners account been existing. Although the presumption of knowledge of insufficiency of funds did not arise, such knowledge was sufficiently proved by the unrebutted testimony of Mirano to the effect that petitioners account with the Security Bank was closed as early as May 1985, or more than four years prior to the issuance of the two checks in question. Thus, we find no error in the Court of Appeals affirmation of the trial courts decision convicting petitioner of violations of B.P. Blg. 22.

Petitioners alternative prayer for the modification of penalty by retroactively applying Vaca v. Court of Appeals[30 and Lim v. People[31 must likewise be denied. We quote Administrative Circular No. 13-2001 clarifying Administrative Circular No. 12-2000; thus: The clear tenor and intention of Administrative Circular No. 12-2000 is not to remove imprisonment as an alternative penalty, but to lay down a rule of preference in the application of the penalties provided for in B.P. Blg. 22. The pursuit of this purpose clearly does not foreclose the possibility of imprisonment for violators of B.P. Blg. 22. Neither does it defeat the legislative intent behind the law. Thus, Administrative Circular No. 12-2000 establishes a rule of preference in the application of the penal provisions of B.P. Blg. 22 such that where the circumstances of both the offense and the offender clearly indicate good faith or a clear mistake of fact without taint of negligence, the imposition of a fine alone should be considered as the more appropriate penalty. Needless to say, the determination of whether the circumstances warrant the imposition of a fine alone rests solely upon the Judge. Should the Judge decide that imprisonment is the more appropriate penalty, Administrative Circular No. 12-2000 ought not be deemed a hindrance. In this case, when petitioner issued the subject postdated checks even though he had no more account with the drawee bank, having closed it more than four years before he drew and delivered the checks, he manifested utter lack of good faith or wanton bad faith. Hence, he cannot avail himself of the benefits under Administrative Circular No. 12-2000. We likewise sustain petitioners conviction for the crime of estafa. The crime of estafa under paragraph 2(d) of Article 315 of the Revised Penal Code, as amended, has the following elements: (1) postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) lack or insufficiency of funds to cover the check; and (3) damage to the payee thereof.[32 Settled is the rule that, to constitute estafa, the act of postdating or issuing a check in payment of an obligation must be the efficient cause of defraudation and, as such, it should be either prior to, or simultaneous with, the act of fraud. The offender must be able to obtain money or property from the offended party because of the issuance of the check, or the person to whom the check was delivered would not have parted with his money or property had there been no check issued to him. Stated otherwise, the check should have been issued as an inducement for the surrender by the party deceived of his money or property, and not in payment of a pre-existing obligation.[33 The existence of the first two elements in the case at bar is not disputed. Petitioner maintains that the third element is not present. Damage as an element of estafa may consist in (1) the offended party being deprived of his money or property as a result of the defraudation; (2) disturbance in property right; or (3) temporary prejudice.[34 In this case, the deprivation of the property of FEDCOR is apparent. Undoubtedly, the reason why FEDCOR delivered the backhoe to petitioner was that the latter paid the P50,000 down payment and issued two postdated checks in the amount of P75,000 each.

Petitioners claim that he returned the equipment was not duly proved; he never presented as witness the agent who allegedly received the equipment from him. Moreover, he admitted that he never wrote FEDCOR about the return of the allegedly defective backhoe to Ronnie Bote; neither did he go to FEDCOR to claim the return of the equipment or of the cash down payment and the two checks.[35 Such admissions belie his allegation that he returned the equipment to FEDCOR. Besides, on cross-examination he admitted that during the pendency of the case, he paid Santander, through FEDCORs lawyer, on two separate occasions in the total amount of P15,000 upon the advice of his own lawyer that he had to pay because he was guilty; thus: Q During the pendency of this case you paid Engr. Santander cash, is that correct? A I paid the amount of P10,000.00 and then another P5,000.00 because according to my first lawyer I have to pay this because I am guilty and this is B.P. case [sic]. Q You delivered the money to Engr. Federico Santander? A To you Atty. Paray. Q And I was the lawyer of Engr. Federico Santander? A Yes, sir.[36 If indeed petitioner returned the backhoe to Ronnie Bote and yet the latter did not heed his demands for the return of his cash payment and the checks, he (petitioner) should have, at the very least, gone to or written FEDCOR itself about the matter. Instead, he again paid FEDCOR the amount of P15,000 during the pendency of the case. Such payment to FEDCOR negates his claim that he returned the backhoe; it may even be tantamount to an offer of compromise. Under Section 27 of Rule 130 of the Rules on Evidence, an offer of compromise in criminal cases is an implied admission of guilt. Finally, by appealing his conviction, petitioner has thrown the whole case open for review. It becomes the duty of this Court to correct any error as may be found in the appealed judgment, even though it was not made the subject of assignment of errors.[37 This Court finds to be erroneous the penalty imposed by the trial court for the crime of estafa, as affirmed by the Court of Appeals, which is seven years and four months of prision mayor as minimum to twelve years and six months of reclusion temporal as maximum. The penalty for estafa committed by means of bouncing checks has been increased by Presidential Decree No. 818, which took effect on 22 October 1975. Section 1 thereof provides in part as follows: SECTION 1. Any person who shall defraud another by means of false pretenses or fraudulent acts as defined in paragraph 2(d) of Article 315 of the Revised Penal Code, as amended by Republic Act No. 4885, shall be punished by: 1st. The penalty of reclusion temporal if the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos, and if such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in its maximum period, adding one year for each additional 10,000 pesos but the total penalty which may be imposed shall in no case exceed thirty years. In such cases, and in connection with the accessory penalties which may be imposed under the Revised Penal Code, the penalty shall be termed reclusion perpetua.

Petitioner NAGRAMPA defrauded FEDCOR in the amount of P135,000 (P150,000 [value of the checks] minus P15,000 [payment made by petitioner during the pendency of these cases]). Applying P.D. No. 818 and the Indeterminate Sentence Law, the maximum penalty shall be reclusion temporal in its maximum period, plus one year for each additional P10,000 of the amount of the fraud; and the minimum shall be prision mayor, which is the penalty next lower to that prescribed for the offense without first considering any modifying circumstances or the incremental penalty for the amount of fraud in excess of P22,000.[38 WHEREFORE, the instant petition is DENIED. The decision of the Court of Appeals upholding the decisions of the Regional Trial Court of Quezon City, Branch 80, in Criminal Cases Nos. Q-90-15797, Q-90-15798 and Q-90-15799 is hereby AFFIRMED, with the modification that petitioner Manuel Nagrampa is hereby sentenced to suffer (1) an imprisonment of one year for each of the two counts of violation of B. P. Blg. 22, and (2) an indeterminate penalty of eight years and one day of prision mayor as minimum to twenty-eight years, four months and one day of reclusion perpetua as maximum for the crime of estafa; and to pay private complainant Fedcor Trading Corporation the amount of P135,000, plus legal interest thereon from 9 October 1990 up to the time of full payment. SO ORDERED.

G.R. No. 148557. August 7, 2003] FELICITO ABARQUEZ, Petitioner, v. COURT OF APPEALS (Special Former Seventh Division) and the PEOPLE OF THE PHILIPPINES,respondents. DECISION YNARES-SANTIAGO, J.: This is an appeal from the decision of the Court of Appeals1 which affirmed with modification the decision of the Regional Trial Court of Dagupan City, Branch 41,[2 finding petitioner Felicito Abarquez guilty beyond reasonable doubt of five (5) counts of violations of Batas Pambansa Blg. 22 or the Bouncing Checks Law. There is no dispute that petitioner issued in favor of Fertiphil Corporation five (5) checks drawn against Republic Planters Bank, Dagupan Branch. The checks issued are as follows: Check No. Date Amount 2956654 June 5, 1986 P372,000.00 2956655 June 5, 1986 P340,000.00 2954047 June 13, 1986 P 27,600.00 2956660 June 27, 1986 P 58,500.00 2956662 July 1, 1986 P 52,200.00 Likewise, it is undisputed that the checks were dishonored for having been drawn against insufficient funds. Fertiphil demanded that petitioner make good the checks but to no avail, prompting the former to file criminal complaints against him. Consequently, five informations for violation of BP Blg. 22 were filed with the RTC of Dagupan City, Branch 41. The information in Criminal Case No. D-8135[3 reads: That on or about the 14th day of June, 1986, in the City of Dagupan, Philippines, and within the territorial jurisdiction of this Honorable Court, the above-named accused FELICITO ABARQUEZ, did then and there willfully, unlawfully and criminally, draw, issue and deliver to FERTIPHIL CORPORATION, Makati, Metro Manila, a Republic Planters Bank check No. 2956660, Dagupan City Branch, postdated June 27, 1986, in the amount of FIFTY-EIGHT THOUSAND FIVE HUNDRED PESOS (P58,500.00) Philippine currency, in payment of several bags of fertilizer purchased from said corporation, although the said accused knew fully well that his funds deposited in the said bank, if any, were not sufficient to cover its face value, such that when the said check was presented to the drawee bank for payment, the same was dishonored for reason DRAWN AGAINST INSUFFICIENT FUNDS and returned to the complainant and despite notice of dishonor and to make good said check, accused failed and/or refused to pay and/or make good the amount of said check despite the lapse of more than five (5) banking days, to the damage and prejudice of the herein complainant, Fertiphil CORPORATION, represented by NOEL DE LA ROSA, Chief Accountant, in the aforesaid amount of P58,500.00 and other consequential damages.

Contrary to Batas Pambansa Bilang 22. Except for the dates of commission, the check numbers, the dates and the amounts of said checks, the following informations were similarly worded. In Criminal Case No. D-8136, [4 petitioner issued Check No. 2954047 on May 10, 1986 postdated June 13, 1986 in the amount of P27,600.00. In Criminal Case No. D-8137,[5 petitioner issued Check No. 2956662 on June 16, 1986 postdated July 1, 1986 in the amount of P52,200.00. In Criminal Case No. D-8176,[6 petitioner issued Check No. 2956665 on June 5, 1986 in the amount of P340,000.00 and, in Criminal Case No. D-8177,[7 petitioner issued Check No. 2956654 on June 5, 1986 in the amount of P372,000.00. After trial on the merits, the court a quo rendered its decision disposing as follows: WHEREFORE, the accused Felicito Abarquez is found guilty beyond reasonable doubt of violation of Batas Pambansa Bilang 22 as charged in Criminal Case Nos. D-8135, D-8136, D8137, D-8176 and D-8177 and hereby imposes upon him for each case, the penalty of One (1) year imprisonment and to indemnify Fertiphil Corporation the total amount of P844,500.00 and to pay the costs. SO ORDERED.[8 Petitioner appealed to the Court of Appeals, which affirmed with modification the decision of the trial court, thus: IN VIEW OF THE FOREGOING, the judgment appealed from is AFFIRMED with MODIFICATION. In line with Administrative Circular No. 12-2000 issued by the Supreme Court En Banc on November 12, 2000, judgment is hereby rendered ordering appellant to pay a fine of ONE MILLION SEVEN HUNDRED THOUSAND SIX HUNDRED PESOS (P1,700,600.00) which is double the total amount of the five checks issued by appellant. The penalty of imprisonment is deleted. SO ORDERED.[9 Not satisfied with the decision, petitioner is now before us and submits the following issues: 1. Whether the trial court and the Court of Appeals erred in convicting petitioner in Criminal Case No. D-8137 though the check subject thereof was dishonored for being drawn against uncollected deposit (DAUD) and not for being drawn against insufficient funds (DAIF) or closed account (CA) which are the only punishable acts under BP 22; 2. Whether the trial court and the Court of Appeals erred in convicting petitioner in Criminal Case Nos. D-8135 and D-8136 despite the unrebutted evidence showing payment thereof after the dishonor by the drawee bank; 3. Whether the trial court and the Court of Appeals erred in convicting the accused in Criminal Case Nos. D-8176 and D-8177; and 4. Whether the Court of Appeals erred in imposing the penalty of fine in the amount of One Million Seven Hundred Thousand Six Hundred pesos (P1,700,600.00) which is double the total amount of the five checks despite the express provision of BP 22 that the fine imposed shall in no case exceed Two Hundred Thousand pesos (Sec. 1, BP 22).10

Petitioner admits having issued the subject checks but insists that he is not liable under BP Blg. 22. Thus, in Criminal Case No. D-8135, Abarquez alleges that although Check No. 2956660 dated June 27, 1986 in the amount of P58,500.00 was dishonored by the bank on July 3, 1986 for insufficiency of funds, the same however was paid on July 28, 1986 via telegraphic transfer through Republic Planters Bank, Dagupan Branch as evidenced by O.R. No. 902575 before any notice of dishonor or demand to pay the same was made. In Criminal Case No. D-8136, petitioner submits that Check No. 2954047 dated June 13, 1986 in the amount of P27,600.00 was likewise dishonored for insufficiency of funds. He avers however that even before any notice of dishonor or demand to pay the same was made, he already made the corresponding payments by means of a demand draft and telegraphic transfer through Republic Planters Bank, Dagupan Branch on July 17, 1986 and August 19, 1986, as evidenced by O.R. Nos. 902868 and 902672. As regards Check No. 2956662 in the amount of P52,500.00 which is the subject of Criminal Case No. D-8137, petitioner admits that the same was dishonored, but alleges that he could not be made liable under BP Blg. 22, as the same was dishonored for having been drawn against uncollected deposits and not against insufficiency of funds. As to Check No. 2956655 issued in the amount of P340,000.00 and Check No. 2956654 for P372,000.00, the subject of Criminal Case Nos. D-8176 and D-8177 respectively, which were dishonored for insufficiency of funds, petitioner argues that he could not be made liable under the Bouncing Checks Law, considering that both checks were not issued for account or for value as they were merely intended to secure the payment of his debt to Fertiphil after reconciliation of their books of account. In Meriz v. People,[11 it was held that the essential elements of the offense penalized under BP Blg. 22 are: 1. The making, drawing and issuance of any check to apply to account or for value; 2. The knowledge of the maker, drawer or issuer that at the time of issue he does not have sufficient funds or credit with the drawee bank for the payment of such check in full upon its presentment; and 3. Subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. Both the spirit and letter of the Bouncing Checks Law require, for the act to be punished under said law, not only that the accused issued a check that was dishonored, but that likewise the accused was actually notified in writing of the fact of dishonor. The consistent rule is that penal statutes have to be construed strictly against the State and liberally in favor of the accused.12 The prima facie presumption that the drawer has knowledge of the insufficiency of funds or credit at the time of the issuance, or on the presentment for payment, of the check may be rebutted by payment of the value of the check either by the drawer or by the drawee bank within five banking days from notice of the dishonor given to the drawer. The payment thus becomes a complete defense regardless of the strength of the evidence offered by the prosecution. It must be presupposed, then, that the issuer received a notice of dishonor and that, within five days from receipt thereof, he failed to pay the amount of the check or to make arrangement for its payment.13

In Caras v. Court of Appeals,14 we note that the law provides for a prima facie rule of evidence. Knowledge of insufficiency of funds in or credit with the bank is presumed from the act of making, drawing, and issuing a check payment of which is refused by the drawee bank for insufficiency of funds when presented within 90 days from the date of issue. However, this presumption is rebutted when it is shown that the maker or drawer pays or makes arrangements for the payment of the check within five banking days after receiving notice that such check had been dishonored. Thus, it is essential for the maker or drawer to be notified of the dishonor of her check, so he could pay the value thereof or make arrangements for its payment within the period prescribed by law. In Criminal Case No. D-8135, petitioner paid the face value of the subject check in the amount of P58,500.00 even before Fertiphil made any formal written demand to pay the face value of the dishonored check.15 In fact, petitioner paid the face value of the check on July 28, 1986, a little over three weeks from the time the check was presented for payment on July 3, 1986. Petitioner was only informed through a demand letter dated September 27, 1986, or two months after petitioner paid the face value of the dishonored check.16 Petitioner, therefore, cannot be held liable under B.P. 22 in Criminal Case No. D8135. In Criminal Case No. D-8136, petitioner paid the face value of Check No. 2954047 in the amount of P27,000.00 by means of Demand Draft and Telegraphic Transfer on July 17, 1986. [17 In fact, petitioner paid the face value of the dishonored check on the same day the subject check was presented for payment, on July 17, 1986, and before the formal written demand letter was sent to petitioner on September 27, 1986. Petitioner, therefore, cannot also be held liable under B.P. 22 in Criminal Case No. D-8136. In Griffith v. Court of Appeals,[18 we held that: While we agree with the private respondent that the gravamen of violation of B.P. 22 is the issuance of worthless checks that are dishonored upon their presentment for payment, we should not apply penal laws mechanically. We must find if the application of the law is consistent with the purpose of and reason for the law. Ratione cessat lex, et cessat lex. (When the reason for the law ceases, the law ceases.) It is not the letter alone but the spirit of the law also that gives it life. This is especially so in this case where a debtors criminalization would not serve the ends of justice but in fact subvert it. The creditor having collected already more than a sufficient amount to cover the value of the checks for payment of rentals, via auction sale, we find that holding the debtors president to answer for a criminal offense under B.P. 22 two years after said collection, is no longer tenable nor justified by law or equitable considerations. In Criminal Case No. D-8137, Check No. 2956662 dated July 1, 1986 with a face value of P52,200.00 was dishonored for being drawn against uncollected deposit (DAUD) and not for being drawn against insufficient funds (DAIF). According to petitioner, B.P. 22 punishes the drawer of a check if it is drawn against insufficient funds but not when it is drawn against uncollected deposit. He ratiocinated that at the time the check was presented for payment on July 8, 1986, the balance as shown in the ledger of petitioners account was more than the face value of the subject check. Even then, he claims that he is not liable since he paid the value of the check within five (5) banking days from knowledge of dishonor. Petitioner was not being entirely forthright when he claims that Check No. 2956662 was dishonored for being drawn against uncollected deposit (DAUD). On the contrary, the records show that the stated reason for the dishonor of said check was insufficient funds (DAIF).19 Indeed, the ledger of the Republic Planters Bank, Dagupan Branch showed that the subject check had insufficient funds at the time it was drawn on July 1, 1986 as petitioners

account had only a balance of P48,166.196 as of June 30, 1986.20 Subsequently, when the check was presented for payment on July 8, 1986, the check still had insufficient funds because the check deposit made by petitioner which was supposedly more than enough to cover the face value of the subject check had not been credited by the bank. In Tan v. People,21 we held that even with uncollected deposits, the bank may honor the check at its discretion in favor of clients, in which case there would be no violation of B.P. Blg. 22. Corollarily, if the bank so desires, it could likewise dishonor the check if drawn against uncollected deposits, in which case the drawer could be held liable for violation of BP Blg. 22. In Criminal Case Nos. D-8176 and D-8177, petitioner claims that Fertiphil had no right to encash Check No. 2956655 in the amount of P340,000.00 and Check No. 2956654 for P372,000.00 as they were not issued for account or for value. Petitioner avers that he only issued those checks as advance payment to Fertiphil but only after reconciliation of their books of account. We do not agree. In Ong v. People,22 we held that what the law punishes is the issuance of a bouncing check, not the purpose for which it was issued nor the terms and conditions relating to its issuance. The mere act of issuing a worthless check is malum prohibitum, provided the other elements of the offense are properly proved.23 The fact that petitioner issued the subject checks knowing the inadequacy of his funds in the bank to cover said checks makes him liable under B.P. 22. As elaborated in Meriz v. People: [24 The Court has consistently declared that the cause or reason for the issuance of the check is inconsequential in determining criminal culpability under BP 22. The Court has since said that a check issued as an evidence of debt, although not intended for encashment, has the same effect like any other check and must thus be held to be within the contemplation of BP 22. Once a check is presented for payment, the drawee bank gives it the usual course whether issued in payment of an obligation or just as a guaranty of an obligation. BP 22 does not concern itself with what might actually be envisioned by the parties, its primordial intention being to instead ensure the stability and commercial value of checks as being virtual substitutes for currency. It is a policy that can easily be eroded if one has yet to determine the reason for which checks are issued, or the terms and conditions for their issuance, before an appropriate application of legislative enactment can be made. The gravamen of the offense under BP 22 is the act of making or issuing a worthless check or a check that is dishonored upon presentment for payment. The act effectively declares the offense to be one of malum prohibitum. The only valid query then is whether the law has been breached,i.e., by the mere act of issuing a bad check, without so much regard as to the criminal intent of the issuer. Therefore, in Criminal Cases Nos. D-8137, D-8176 and D-8177, both the trial court and the Court of Appeals correctly found petitioner guilty beyond reasonable doubt of violation of B.P. 22. The trial court sentenced petitioner to suffer imprisonment of one (1) year for each count, but the Court of Appeals deleted the penalty of imprisonment. The appellate court based its decision on Administrative Circular No. 12-2000, where this Court, adopting the rulings in Vaca v. Court of Appeals[25 and Lim v. People,[26 authorized the non-imposition of the penalty of imprisonment in B.P. 22 cases subject to certain conditions. However, the Court of Appeals failed to explain the basis for the deletion of the prison sentence imposed by the trial court.

It should be clarified that the non-imposition of the penalty of imprisonment in B.P. 22 cases should be based on the peculiar circumstances set forth in the Vaca case, which were cited in Lim, more particularly: Petitioners are first-time offenders. They are Filipino entrepreneurs who presumably contribute to the national economy. Apparently, they brought this appeal, believing in all good faith, although mistakenly, that they had not committed a violation of B.P. Blg. 22. Otherwise, they could simply have accepted the judgment of the trial court and applied for probation to evade prison term. It would beset serve the ends of criminal justice if in fixing the penalty within the range of discretion allowed by 1, par. 1, the same philosophy underlying the Indeterminate Sentence Law is observed, namely, that of redeeming valuable human material and preventing unnecessary deprivation of personal liberty and economic usefulness with due regard to the protection of social order.[27 In other words, Administrative Circular No. 12-2000 does not authorize the non-imposition of imprisonment in each and every case of B.P. 22. Having this in mind, the Court issued on February 14, 2001 Administrative Circular 13-2001 which modified Administrative Circular No. 12-2000 by stressing that the clear tenor of Administrative Circular No. 12-2000 is not to remove imprisonment as an alternative penalty, but to lay down a rule of preference in the application of the penalties provided for in B.P. 22. It is further stated therein: Thus, Administrative Circular 12-2000 establishes a rule of preference in the application of the penal provisions of B.P. 22 such that where the circumstances of both the offense and the offender clearly indicate good faith or a clear mistake of fact without taint of negligence, the imposition of a fine alone should be considered as the more appropriate penalty. Needless to say, the determination of whether the circumstances warrant the imposition of a fine alone rests solely upon the Judge. Should the Judge decide that imprisonment is the more appropriate penalty, Administrative Circular 12-2000 ought not be deemed a hindrance. It is, therefore, understood that: 1. Administrative Circular 12-2000 does not remove imprisonment as an alternative penalty for violations of B.P. 22; 2. The Judges concerned may, in the exercise of sound discretion, and taking into consideration the peculiar circumstances of each case, determine whether the imposition of a fine alone would best serve the interests of justice, or whether forbearing to impose imprisonment would depreciate the seriousness of the offense, work violence on the social order, or otherwise be contrary to the imperatives of justice; 3. Should only a fine be imposed and the accused be unable to pay the fine, there is no legal obstacle to the application of the Revised Penal Code provisions on subsidiary imprisonment.[28 The foregoing notwithstanding, we note that the Court of Appeals rendered the assailed judgment on January 12, 2001, prior to the issuance of Administrative Circular No. 13-2001. Consequently, it was justified in relying merely on Administrative Circular No. 12-2000 in imposing on petitioner the penalty of fine in lieu of imprisonment. However, the Court of Appeals erred in fixing the amounts of the fine insofar as Criminal Cases Nos. D-8176 and D-8177 are concerned. Section 1 of B.P. 22 explicitly provides that

while the violation thereof shall be punished by a fine of not less than but not more than double the amount of the check, such fine shall in no case exceed P200,000.00. Therefore, the appealed decision of the Court of Appeals should be modified. Petitioner should be sentenced to pay a fine in the amount of P104,400.00 in Criminal Case No. D-8137; P200,000.00 in Criminal Case No. D-8176; and P200,000.00 in Criminal Case No. D-8177; with subsidiary imprisonment in case of insolvency in accordance with Article 39 of the Revised Penal Code. WHEREFORE, in view of the foregoing, the assailed decision of the Court of Appeals in CAG.R. CR No. 18632 is AFFIRMED with MODIFICATIONS.

G.R. No. 154469 December 6, 2006 METROPOLITAN BANK AND TRUST COMPANY, petitioners, vs. RENATO D. CABILZO, respondent. DECISION CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari, filed by petitioner Metropolitan Bank and Trust Company (Metrobank) seeking to reverse and set aside the Decision1 of the Court of Appeals dated 8 March 2002 and its Resolution dated 26 July 2002 affirming the Decision of the Regional Trial Court (RTC) of Manila, Branch 13 dated 4 September 1998. The dispositive portion of the Court of Appeals Decision reads: WHEREFORE, the assailed decision dated September 4, 1998 is AFFIRMED with modifications (sic) that the awards for exemplary damages and attorneys fees are hereby deleted. Petitioner Metrobank is a banking institution duly organized and existing as such under Philippine laws.2 Respondent Renato D. Cabilzo (Cabilzo) was one of Metrobanks clients who maintained a current account with Metrobank Pasong Tamo Branch.3 On 12 November 1994, Cabilzo issued a Metrobank Check No. 985988, payable to "CASH" and postdated on 24 November 1994 in the amount of One Thousand Pesos (P1,000.00). The check was drawn against Cabilzos Account with Metrobank Pasong Tamo Branch under Current Account No. 618044873-3 and was paid by Cabilzo to a certain Mr. Marquez, as his sales commission.4 Subsequently, the check was presented to Westmont Bank for payment. Westmont Bank, in turn, indorsed the check to Metrobank for appropriate clearing. After the entries thereon were examined, including the availability of funds and the authenticity of the signature of the drawer, Metrobank cleared the check for encashment in accordance with the Philippine Clearing House Corporation (PCHC) Rules. On 16 November 1994, Cabilzos representative was at Metrobank Pasong Tamo Branch to make some transaction when he was asked by a bank personnel if Cabilzo had issued a check in the amount of P91,000.00 to which the former replied in the negative. On the afternoon of the same date, Cabilzo himself called Metrobank to reiterate that he did not issue a check in the amount of P91,000.00 and requested that the questioned check be returned to him for verification, to which Metrobank complied.5 Upon receipt of the check, Cabilzo discovered that Metrobank Check No. 985988 which he issued on 12 November 1994 in the amount of P1,000.00 was altered to P91,000.00 and the date 24 November 1994 was changed to 14 November 1994.6 Hence, Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to his account. Metrobank, however, refused reasoning that it has to refer the matter first to its Legal Division for appropriate action. Repeated verbal demands followed but Metrobank still failed to re-credit the amount of P91,000.00 to Cabilzos account.7

On 30 June 1995, Cabilzo, thru counsel, finally sent a letter-demand8 to Metrobank for the payment ofP90,000.00, after deducting the original value of the check in the amount of P1,000.00. Such written demand notwithstanding, Metrobank still failed or refused to comply with its obligation. Consequently, Cabilzo instituted a civil action for damages against Metrobank before the RTC of Manila, Branch 13. In his Complaint docketed as Civil Case No. 95-75651, Renato D. Cabilzo v. Metropolitan Bank and Trust Company, Cabilzo prayed that in addition to his claim for reimbursement, actual and moral damages plus costs of the suit be awarded in his favor.9 For its part, Metrobank countered that upon the receipt of the said check through the PCHC on 14 November 1994, it examined the genuineness and the authenticity of the drawers signature appearing thereon and the technical entries on the check including the amount in figures and in words to determine if there were alterations, erasures, superimpositions or intercalations thereon, but none was noted. After verifying the authenticity and propriety of the aforesaid entries, including the indorsement of the collecting bank located at the dorsal side of the check which stated that, "all prior indorsements and lack of indorsement guaranteed," Metrobank cleared the check.10 Anent thereto, Metrobank claimed that as a collecting bank and the last indorser, Westmont Bank should be held liable for the value of the check. Westmont Bank indorsed the check as the an unqualified indorser, by virtue of which it assumed the liability of a general indorser, and thus, among others, warranted that the instrument is genuine and in all respect what it purports to be. In addition, Metrobank, in turn, claimed that Cabilzo was partly responsible in leaving spaces on the check, which, made the fraudulent insertion of the amount and figures thereon, possible. On account of his negligence in the preparation and issuance of the check, which according to Metrobank, was the proximate cause of the loss, Cabilzo cannot thereafter claim indemnity by virtue of the doctrine of equitable estoppel. Thus, Metrobank demanded from Cabilzo, for payment in the amount of P100,000.00 which represents the cost of litigation and attorneys fees, for allegedly bringing a frivolous and baseless suit. 11 On 19 April 1996, Metrobank filed a Third-Party Complaint12 against Westmont Bank on account of its unqualified indorsement stamped at the dorsal side of the check which the former relied upon in clearing what turned out to be a materially altered check. Subsequently, a Motion to Dismiss13 the Third-Party Complaint was then filed by Westmont bank because another case involving the same cause of action was pending before a different court. The said case arose from an action for reimbursement filed by Metrobank before the Arbitration Committee of the PCHC against Westmont Bank, and now the subject of a Petition for Review before the RTC of Manila, Branch 19. In an Order14 dated 4 February 1997, the trial court granted the Motion to Dismiss the ThirdParty Complaint on the ground of litis pendentia. On 4 September 1998, the RTC rendered a Decision15 in favor of Cabilzo and thereby ordered Metrobank to pay the sum of P90,000.00, the amount of the check. In stressing the fiduciary nature of the relationship between the bank and its clients and the negligence of the drawee bank in failing to detect an apparent alteration on the check, the trial court

ordered for the payment of exemplary damages, attorneys fees and cost of litigation. The dispositive portion of the Decision reads: WHEREFORE, judgment is rendered ordering defendant Metropolitan Bank and Trust Company to pay plaintiff Renato Cabilzo the sum of P90,000 with legal interest of 6 percent per annum from November 16, 1994 until payment is made plus P20,000 attorneys fees, exemplary damages of P50,000, and costs of the suit.16 Aggrieved, Metrobank appealed the adverse decision to the Court of Appeals reiterating its previous argument that as the last indorser, Westmont Bank shall bear the loss occasioned by the fraudulent alteration of the check. Elaborating, Metrobank maintained that by reason of its unqualified indorsement, Westmont Bank warranted that the check in question is genuine, valid and subsisting and that upon presentment the check shall be accepted according to its tenor. Even more, Metrobank argued that in clearing the check, it was not remiss in the performance of its duty as the drawee bank, but rather, it exercised the highest degree of diligence in accordance with the generally accepted banking practice. It further insisted that the entries in the check were regular and authentic and alteration could not be determined even upon close examination. In a Decision17 dated 8 March 2002, the Court of Appeals affirmed with modification the Decision of the court a quo, similarly finding Metrobank liable for the amount of the check, without prejudice, however, to the outcome of the case between Metrobank and Westmont Bank which was pending before another tribunal. The decretal portion of the Decision reads: WHEREFORE, the assailed decision dated September 4, 1998 is AFFIRMED with the modifications (sic) that the awards for exemplary damages and attorneys fees are hereby deleted.18 Similarly ill-fated was Metrobanks Motion for Reconsideration which was also denied by the appellate court in its Resolution19 issued on 26 July 2002, for lack of merit. Metrobank now poses before this Court this sole issue: THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING METROBANK, AS DRAWEE BANK, LIABLE FOR THE ALTERATIONS ON THE SUBJECT CHECK BEARING THE AUTHENTIC SIGNATURE OF THE DRAWER THEREOF. We resolve to deny the petition. An alteration is said to be material if it changes the effect of the instrument. It means that an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.20 In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law. Section 1 of the Negotiable Instruments Law provides: Section 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 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. Also pertinent is the following provision in the Negotiable Instrument Law which states: Section 125. What constitutes material alteration. Any alteration which changes: (a) The date; (b) The sum payable, either for principal or interest; (c) The time or place of payment; (d) The number or the relation of the parties; (e) The medium or currency in which payment is to be made; Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect is a material alteration. In the case at bar, the check was altered so that the amount was increased from P1,000.00 to P91,000.00 and the date was changed from 24 November 1994 to 14 November 1994. Apparently, since the entries altered were among those enumerated under Section 1 and 125, namely, the sum of money payable and the date of the check, the instant controversy therefore squarely falls within the purview of material alteration. Now, having laid the premise that the present petition is a case of material alteration, it is now necessary for us to determine the effect of a materially altered instrument, as well as the rights and obligations of the parties thereunder. The following provision of the Negotiable Instrument Law will shed us some light in threshing out this issue: Section 124. Alteration of instrument; effect of. Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made,authorized, and assented to the alteration and subsequent indorsers. But when the instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he may enforce the payment thereof according to its original tenor. (Emphasis ours.) Indubitably, Cabilzo was not the one who made nor authorized the alteration. Neither did he assent to the alteration by his express or implied acts. There is no showing that he failed to exercise such reasonable degree of diligence required of a prudent man which could have otherwise prevented the loss. As correctly ruled by the appellate court, Cabilzo was never remiss in the preparation and issuance of the check, and there were no indicia of evidence that would prove otherwise. Indeed, Cabilzo placed asterisks before and after the amount in words and figures in order to forewarn the subsequent holders that nothing follows before and after the amount indicated other than the one specified between the asterisks. The degree of diligence required of a reasonable man in the exercise of his tasks and the performance of his duties has been faithfully complied with by Cabilzo. In fact, he was wary enough that he filled with asterisks the spaces between and after the amounts, not only those stated in words, but also those in numerical figures, in order to prevent any fraudulent insertion, but unfortunately, the check was still successfully altered, indorsed by the

collecting bank, and cleared by the drawee bank, and encashed by the perpetrator of the fraud, to the damage and prejudice of Cabilzo. Verily, Metrobank cannot lightly impute that Cabilzo was negligent and is therefore prevented from asserting his rights under the doctrine of equitable estoppel when the facts on record are bare of evidence to support such conclusion. The doctrine of equitable estoppel states that when one of the two innocent persons, each guiltless of any intentional or moral wrong, must suffer a loss, it must be borne by the one whose erroneous conduct, either by omission or commission, was the cause of injury.21 Metrobanks reliance on this dictum, is misplaced. For one, Metrobanks representation that it is an innocent party is flimsy and evidently, misleading. At the same time, Metrobank cannot asseverate that Cabilzo was negligent and this negligence was the proximate cause22 of the loss in the absence of even a scintilla proof to buttress such claim. Negligence is not presumed but must be proven by the one who alleges it.23 Undoubtedly, Cabilzo was an innocent party in this instant controversy. He was just an ordinary businessman who, in order to facilitate his business transactions, entrusted his money with a bank, not knowing that the latter would yield a substantial amount of his deposit to fraud, for which Cabilzo can never be faulted. We never fail to stress the remarkable significance of a banking institution to commercial transactions, in particular, and to the countrys economy in general. The banking system is an indispensable institution in the modern world and plays a vital role in the economic life of every civilized nation. Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce, banks have become an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, most of all, confidence.24 Thus, even the humble wage-earner does not hesitate to entrust his life's savings to the bank of his choice, knowing that they will be safe in its custody and will even earn some interest for him. The ordinary person, with equal faith, usually maintains a modest checking account for security and convenience in the settling of his monthly bills and the payment of ordinary expenses. As for a businessman like the respondent, the bank is a trusted and active associate that can help in the running of his affairs, not only in the form of loans when needed but more often in the conduct of their day-to-day transactions like the issuance or encashment of checks.25 In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs.26 The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. The appropriate degree of diligence required of a bank must be a high degree of diligence, if not the utmost diligence.27 In the present case, it is obvious that Metrobank was remiss in that duty and violated that relationship. As observed by the Court of Appeals, there are material alterations on the check that are visible to the naked eye. Thus:

x x x The number "1" in the date is clearly imposed on a white figure in the shape of the number "2". The appellants employees who examined the said check should have likewise been put on guard as to why at the end of the amount in words, i.e., after the word "ONLY", there are 4 asterisks, while at the beginning of the line or before said phrase, there is none, even as 4 asterisks have been placed before and after the word "CASH" in the space for payee. In addition, the 4 asterisks before the words "ONE THOUSAND PESOS ONLY" have noticeably been erased with typing correction paper, leaving white marks, over which the word "NINETY" was superimposed. The same can be said of the numeral "9" in the amount "91,000", which is superimposed over a whitish mark, obviously an erasure, in lieu of the asterisk which was deleted to insert the said figure. The appellants employees should have again noticed why only 2 asterisks were placed before the amount in figures, while 3 asterisks were placed after such amount. The word "NINETY" is also typed differently and with a lighter ink, when compared with the words "ONE THOUSAND PESOS ONLY." The letters of the word "NINETY" are likewise a little bigger when compared with the letters of the words "ONE THOUSAND PESOS ONLY".28 Surprisingly, however, Metrobank failed to detect the above alterations which could not escape the attention of even an ordinary person. This negligence was exacerbated by the fact that, as found by the trial court, the check in question was examined by the cash custodian whose functions do not include the examinations of checks indorsed for payment against drawers accounts.29 Obviously, the employee allowed by Metrobank to examine the check was not verse and competent to handle such duty. These factual findings of the trial court is conclusive upon this court especially when such findings was affirmed the appellate court.30 Apropos thereto, we need to reiterate that by the very nature of their work the degree of responsibility, care and trustworthiness expected of their employees and officials is far better than those of ordinary clerks and employees. Banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees.31 In addition, the bank on which the check is drawn, known as the drawee bank, is under strict liability to pay to the order of the payee in accordance with the drawers instructions as reflected on the face and by the terms of the check. Payment made under materially altered instrument is not payment done in accordance with the instruction of the drawer. When the drawee bank pays a materially altered check, it violates the terms of the check, as well as its duty to charge its clients account only for bona fide disbursements he had made. Since the drawee bank, in the instant case, did not pay according to the original tenor of the instrument, as directed by the drawer, then it has no right to claim reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from the drawers account which it was expected to treat with utmost fidelity. Metrobank vigorously asserts that the entries in the check were carefully examined: The date of the instrument, the amount in words and figures, as well as the drawers signature, which after verification, were found to be proper and authentic and was thus cleared. We are not persuaded. Metrobanks negligence consisted in the omission of that degree of diligence required of a bank owing to the fiduciary nature of its relationship with its client. Article 1173 of the Civil Code provides: The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. x x x.

Beyond question, Metrobank failed to comply with the degree required by the nature of its business as provided by law and jurisprudence. If indeed it was not remiss in its obligation, then it would be inconceivable for it not to detect an evident alteration considering its vast knowledge and technical expertise in the intricacies of the banking business. This Court is not completely unaware of banks practices of employing devices and techniques in order to detect forgeries, insertions, intercalations, superimpositions and alterations in checks and other negotiable instruments so as to safeguard their authenticity and negotiability. Metrobank cannot now feign ignorance nor claim diligence; neither can it point its finger at the collecting bank, in order to evade liability. Metrobank argues that Westmont Bank, as the collecting bank and the last indorser, shall bear the loss. Without ruling on the matter between the drawee bank and the collecting bank, which is already under the jurisdiction of another tribunal, we find that Metrobank cannot rely on such indorsement, in clearing the questioned check. The corollary liability of such indorsement, if any, is separate and independent from the liability of Metrobank to Cabilzo. The reliance made by Metrobank on Westmont Banks indorsement is clearly inconsistent, if not totally offensive to the dictum that being impressed with public interest, banks should exercise the highest degree of diligence, if not utmost diligence in dealing with the accounts of its own clients. It owes the highest degree fidelity to its clients and should not therefore lightly rely on the judgment of other banks on occasions where its clients money were involve, no matter how small or substantial the amount at stake. Metrobanks contention that it relied on the strength of collecting banks indorsement may be merely a lame excuse to evade liability, or may be indeed an actual banking practice. In either case, such act constitutes a deplorable banking practice and could not be allowed by this Court bearing in mind that the confidence of public in general is of paramount importance in banking business. What is even more deplorable is that, having been informed of the alteration, Metrobank did not immediately re-credit the amount that was erroneously debited from Cabilzos account but permitted a full blown litigation to push through, to the prejudice of its client. Anyway, Metrobank is not left with no recourse for it can still run after the one who made the alteration or with the collecting bank, which it had already done. It bears repeating that the records are bare of evidence to prove that Cabilzo was negligent. We find no justifiable reason therefore why Metrobank did not immediately reimburse his account. Such ineptness comes within the concept of wanton manner contemplated under the Civil Code which warrants the imposition of exemplary damages, "by way of example or correction for the public good," in the words of the law. It is expected that this ruling will serve as a stern warning in order to deter the repetition of similar acts of negligence, lest the confidence of the public in the banking system be further eroded. 32 WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 8 March 2002 and the Resolution dated 26 July 2002 of the Court of Appeals are AFFIRMED with modification that exemplary damages in the amount of P50,000.00 be awarded. Costs against the petitioner. SO ORDERED.

G.R. No. 157309

March 28, 2008

MARLOU L. VELASQUEZ, Petitioner, vs. SOLIDBANK CORPORATION, Respondent. DECISION REYES, R.T., J.: PARTIES may not impugn the effectivity of a contract, after much benefit has been gained to the prejudice of another. They are bound by the obligations they expressly set out to do. Before Us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) which affirmed with modification that of the Regional Trial Court (RTC) in Cebu City,2 holding petitioner Marlou Velasquez liable under his letter of undertaking to respondent Solidbank Corporation. The Facts Petitioner is engaged in the export business operating under the name Wilderness Trading. Respondent is a domestic banking corporation organized under Philippine laws. The case arose out of a business transaction for the sale of dried sea cucumber for export to South Korea between Wilderness Trading, as seller, and Goldwell Trading of Pusan, South Korea, as buyer. To facilitate payment of the products, Goldwell Trading opened a letter of credit in favor of Wilderness Trading in the amount of US$87,500.003 with the Bank of Seoul, Pusan, Korea. On November 12, 1992, petitioner applied for credit accommodation with respondent bank for pre-shipment financing. The credit accommodation was granted. Petitioner was successful in his first two export transactions both drawn on the letter of credit. The third export shipment, however, yielded a different result. On February 22, 1993, petitioner submitted to respondent the necessary documents for his third shipment. Wanting to be paid the value of the shipment in advance, petitioner negotiated for a documentary sight draft to be drawn on the letter of credit, chargeable to the account of Bank of Seoul. The sight draft represented the value of the shipment in the amount of US$59,640.00.4 As a condition for the issuance of the sight draft, petitioner executed a letter of undertaking in favor of respondent. Under the terms of the letter of undertaking, petitioner promised that the draft will be accepted and paid by Bank of Seoul according to its tenor. Petitioner also held himself liable if the sight draft was not accepted. The letter of undertaking provided: SOLIDBANK CORPORATION Feb. 22, 1993 32 Borromeo Street Cebu City Gentlemen: Re: PURCHASE OF ONE DOC. SIGHT DRAFT DRAWN UNDER LC#M2073210NS00040 FOR US$59,640.00 UNDER OUR CEBP93/102.

In consideration of your negotiating the above described draft(s), we hereby warrant that the above referred to draft(s) and accompanying documents are genuine and accurately represent the facts stated therein and that the draft(s) will be accepted and paid in accordance with its/their tenor. We further undertake and agree, jointly and severally, to hold you free and harmless from and to defend all actions, claims and demands whatsoever, and to pay on demand all damages, actual or compensatory, including attorneys fees, in case of suit, at least equal to __% of the amount due, which you may suffer arising by reason of or on account of your negotiating the above draft(s) because of the following discrepancies or reasons or any other discrepancy or reason whatever: 1) 2) 3) 4) B/L MARKED "SAID TO CONTAIN" & "SHIPPERS LOAD, STOWAGE & COUNT." LATE SHIPMENT. QUANTITY SHIPPED @ US$14.00 OVERDRAWN BY 0.06 TON. NO INSPECTION CERTIFICATE PRESENTED.

We hereby undertake to pay on demand the full amount of the draft(s) or any unpaid balance of the draft(s), with interest at the prevailing rate of today from the date of negotiation, plus all charges and expenses whatsoever incurred in connection therewith. You shall neither be obligated to contest or dispute any refusal to accept or to pay the whole or any part of the above draft(s) nor to proceed in anyway against the drawee thereof, the issuing bank, or against any indorser thereof before making a demand on us for the payment of the whole or any unpaid balance of the draft(s).5 (Emphasis added) By virtue of the letter of undertaking, respondent advanced the value of the shipment which, at the current rate of exchange at that time was P1,495,115.16, less bank charges, to petitioner. Respondent then sent all the documents pertinent to the export transaction to the Bank of Seoul. Respondent failed to collect on the sight draft as it was dishonored by non-acceptance by the Bank of Seoul. The reasons given for the dishonor were late shipment, forged inspection certificate, and absence of countersignature of the negotiating bank on the inspection certificate.6 Goldwell Trading likewise issued a stop payment order on the sight draft because most of the bags of dried sea cucumber exported by petitioner contained soil. Due to the dishonor of the sight draft and the stop payment order, respondent demanded restitution of the sum advanced.7 Petitioner failed to heed the demand. On June 3, 1993, respondent filed a complaint for recovery of sum of money8 with the RTC in Cebu City. In his answer, petitioner alleged that his liability under the sight draft was extinguished when respondent failed to protest its non-acceptance, as required under the Negotiable Instruments Law (NIL). He also alleged that the letter of undertaking is not binding because it is a superfluous document, and that he did not violate any of the provisions of the letter of credit.9 RTC rendered judgment10 in favor of respondent. CA affirmed with modification the RTC decision ISSUE main issue is whether or not petitioner should be held liable to respondent under the sight draft or the letter of undertaking. There is no dispute that petitioner duly signed and executed these documents. It is likewise admitted that the sight draft was dishonored by non acceptance by the Bank of Seoul.

HELD Section 152 of the NIL is explicit: Section 152. In what cases protest necessary. Where a foreign bill appearing on its face to be such is dishonored by non-acceptance, it must be duly protested for non-acceptance, and where such a bill which has not been previously dishonored by non-acceptance, is dishonored by non-payment, it must be duly protested for non-payment. If it is not so protested, the drawer and indorsers are discharged. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dishonor is unnecessary. (Emphasis added) Petitioner, however, can still be made liable under the letter of undertaking. It bears stressing that it is a separate contract from the sight draft. The liability of petitioner under the letter of undertaking is direct and primary. It is independent from his liability under the sight draft. Liability subsists on it even if the sight draft was dishonored for non-acceptance or non-payment. Respondent agreed to purchase the draft and credit petitioner its value upon the undertaking that he will reimburse the amount in case the sight draft is dishonored. The bank would certainly not have agreed to grant petitioner an advance export payment were it not for the letter of undertaking. The consideration for the letter of undertaking was petitioners promise to pay respondent the value of the sight draft if it was dishonored for any reason by the Bank of Seoul. We cannot accept petitioners thesis that he is only a mere guarantor under the letter of credit.1avvphi1 Petitioner cannot be both the primary debtor and the guarantor of his own debt. This is inconsistent with the very purpose of a guarantee which is for the creditor to proceed against a third person if the debtor defaults in his obligation. Certainly, to accept such an argument would make a mockery of commercial transactions. Petitioner bound himself liable to respondent under the letter of undertaking if the sight draft is not accepted. He also warranted that the sight draft is genuine; will be paid by the issuing bank in accordance with its tenor; and that he will be held liable for the full amount of the draft upon demand, without necessity of proceeding against the drawee bank.20 Petitioner breached his undertaking when the Bank of Seoul dishonored the sight draft and Goldwell Trading ordered a stop payment order on it for discrepancies in the export documents. Petitioner is liable without need for respondent to establish collateral facts such as violations of the letter of credit.

G.R. No. 158262

July 21, 2008

SPS. PEDRO AND FLORENCIA VIOLAGO, Petitioners, vs. BA FINANCE CORPORATION and AVELINO VIOLAGO, Respondents. The Facts Sometime in 1983, Avelino Violago, President of Violago Motor Sales Corporation (VMSC), offered to sell a car to his cousin, Pedro F. Violago, and the latters wife, Florencia. Avelino explained that he needed to sell a vehicle to increase the sales quota of VMSC, and that the spouses would just have to pay a down payment of PhP 60,500 while the balance would be financed by respondent BA Finance. The spouses would pay the monthly installments to BA Finance while Avelino would take care of the documentation and approval of financing of the car. Under these terms, the spouses then agreed to purchase a Toyota Cressida Model 1983 from VMSC.3 On August 4, 1983, the spouses and Avelino signed a promissory note under which they bound themselves to pay jointly and severally to the order of VMSC the amount of PhP 209,601 in 36 monthly installments of PhP 5,822.25 a month, the first installment to be due and payable on September 16, 1983. Avelino prepared a Disclosure Statement of Loan/Credit Transportation which showed the net purchase price of the vehicle, down payment, balance, and finance charges. VMSC then issued a sales invoice in favor of the spouses with a detailed description of the Toyota Cressida car. In turn, the spouses executed a chattel mortgage over the car in favor of VMSC as security for the amount of PhP 209,601. VMSC, through Avelino, endorsed the promissory note to BA Finance without recourse. After receiving the amount of PhP 209,601, VMSC executed a Deed of Assignment of its rights and interests under the promissory note and chattel mortgage in favor of BA Finance. Meanwhile, the spouses remitted the amount of PhP 60,500 to VMSC through Avelino.4 The sales invoice was filed with the Land Transportation Office (LTO)-Baliwag Branch, which issued Certificate of Registration No. 0137032 in the name of Pedro on August 8, 1983. The spouses were unaware that the same car had already been sold in 1982 to Esmeraldo Violago, another cousin of Avelino, and registered in Esmeraldos name by the LTO-San Rafael Branch. Despite the spouses demand for the car and Avelinos repeated assurances, there was no delivery of the vehicle. Since VMSC failed to deliver the car, Pedro did not pay any monthly amortization to BA Finance. 5 On March 1, 1984, BA Finance filed with the Regional Trial Court (RTC), Branch 116 in Pasay City a complaint for Replevin with Damages against the spouses. The complaint, docketed as Civil Case No. 1628-P, prayed for the delivery of the vehicle in favor of BA Finance or, if delivery cannot be effected, for the payment of PhP 199,049.41 plus penalty at the rate of 3% per month from February 15, 1984 until fully paid. BA Finance also asked for the payment of attorneys fees, liquidated damages, replevin bond premium, expenses in the seizure of the vehicle, and costs of suit. The RTC issued an Order of Replevin on March 28, 1984. The Violago spouses, as defendants a quo, were declared in default for failing to file an answer. Eventually, the RTC rendered on December 3, 1984 a decision in favor of BA Finance. A writ of execution was thereafter issued on January 11, 1985, followed by an alias writ of execution.6 In the meantime, Esmeraldo conveyed the vehicle to Jose V. Olvido who was then issued Certificate of Registration No. 0014830-4 by the LTO-Cebu City Branch on April 29, 1985. On May 8, 1987, Jose executed a Chattel Mortgage over the vehicle in favor of Generoso Lopez

as security for a loan covered by a promissory note in the amount of PhP 260,664. This promissory note was later endorsed to BA Finance, Cebu City branch.7 On August 21, 1989, the spouses Violago filed a Motion for Reconsideration and Motion to Quash Writ of Execution on the basis of lack of a valid service of summons on them, among other reasons. The RTC denied the motions; hence, the spouses filed a petition for certiorari under Rule 65 before the CA, docketed as CA G.R. No. 2002-SP. On May 31, 1991, the CA nullified the RTCs order. This CA decision became final and executory. On January 28, 1992, the spouses filed their Answer before the RTC, alleging the following: they never received the vehicle from VMSC; the vehicle was previously sold to Esmeraldo; BA Finance was not a holder in due course under Section 59 of the Negotiable Instruments Law (NIL); and the recourse of BA Finance should be against VMSC. On February 25, 1995, the Violago spouses, with prior leave of court, filed a Third Party Complaint against Avelino praying that he be held liable to them in the event that they be held liable to BA Finance, as well as for damages. VMSC was not impleaded as third party defendant. In his Motion to Dismiss and Answer, Avelino contended that he was not a party to the transaction personally, but VMSC. Avelinos motion was denied and the third party complaint against him was entertained by the trial court. Subsequently, the spouses belabored to prove that they affixed their signatures on the promissory note and chattel mortgage in favor of VMSC in blank.8 The RTC rendered a Decision on March 5, 1994, finding for BA Finance but against the Violago spouses. CA: the appeal of the Plaintiffs-Appellants is DISMISSED. The Issues Petitioners raise the following issues: WHETHER OR NOT THE HOLDER OF AN INVALID NEGOTIABLE PROMISSORY NOTE MAY BE CONSIDERED A HOLDER IN DUE COURSE WHETHER OR NOT A CHATTEL MORTGAGE SHOULD BE CONSIDERED VALID DESPITE VITIATION OF CONSENT OF, AND THE FRAUD COMMITTED ON, THE MORTGAGORS BY AVELINO, AND THE CLEAR ABSENCE OF OBJECT CERTAIN WHETHER OR NOT THE VEIL OF CORPORATE ENTITY MAY BE INVOKED AND SUSTAINED DESPITE THE FRAUD AND DECEPTION OF AVELINO HELD egotiable instrument present. The NIL provides: Section 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. The promissory note clearly satisfies the requirements of a negotiable instrument under the NIL. It is in writing; signed by the Violago spouses; has an unconditional promise to pay a certain amount, i.e., PhP 209,601, on specific dates in the future which could be determined from the terms of the note; made payable to the order of VMSC; and names the drawees with certainty. The indorsement by VMSC to BA Finance appears likewise to be valid and regular. The more important issue now is whether or not BA Finance is a holder in due course. The resolution of this issue will determine whether petitioners defense of fraud and nullity of the sale could validly be raised against respondent corporation. Sec. 52 of the NIL provides: Section 52. What constitutes a holder in due course.A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. The law presumes that a holder of a negotiable instrument is a holder thereof in due course. 16 In this case, the CA is correct in finding that BA Finance meets all the foregoing requisites In the hands of one other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable.18 A holder in due course, however, holds the instrument free from any defect of title of prior parties and from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof.19 Since BA Finance is a holder in due course, petitioners cannot raise the defense of non-delivery of the object and nullity of the sale against the corporation. The NIL considers every negotiable instrument prima facie to have been issued for a valuable consideration.20 In Salas, we held that a party holding an instrument may enforce payment of the instrument for the full amount thereof. As such, the maker cannot set up the defense of nullity of the contract of sale.21 Thus, petitioners are liable to respondent corporation for the payment of the amount stated in the instrument.

G.R. No. 154721 March 22, 2007 ALFONSO FIRAZA, Petitioner, vs. PEOPLE OF THE PHILIPPINES, Respondent. DECISION CARPIO, J.: The Antecedent Facts Henry Samar, Jr. (private complainant) was the owner of a parcel of land with an area of 15,066 square meters covered by Transfer Certificate of Title No. 90243 and located in Peafrancia, Daraga, Albay. In an Agreement dated 13 May 1994, private complainant sold the land to Alfonso Firaza (petitioner) under the following terms of payment:4 1) Down payment of P85,000.00 upon signing of [the] contract; and 2) Balance of P665,000.00 payable with postdated checks dated as follows: a) P15,000.00 dated May 30, 1994, PNB Check No. 3955-30 b) P100,000.00 dated July 30, 1994, PNB Check No. 3955-31 c) P100,000.00 dated August 30, 1994, PNB Check No. 3955-325 d) P450,000.00 dated Nov. 30, 1994, PNB Check No. 3955-33.6 (Emphasis in the original) When private complainant presented PNB Check No. 395532-S for payment, the Philippine National Bank (PNB) dishonored the check by reason of "account closed." Meanwhile, petitioner subdivided the land, sold the subdivided lots, and retained the unsold lots. Despite verbal and written demands for the payment of the value of the check, petitioner failed to pay the amount of the dishonored check. Thus, private complainant charged petitioner with estafa for violation of paragraph 2(d), Article 315 of the Revised Penal Code. trial court convicted petitioner. The Court of Appeals affirmed the trial courts decision with modification. ISSUE whether petitioner is guilty of estafa under paragraph 2(d), Article 315 of the Revised Penal Code. HELD Paragraph 2(d), Article 315 of the Revised Penal Code provides: ART. 315. Swindling (estafa). any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by: xxx 2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud:

xxx (d) By postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check. The failure of the drawer of the check to deposit the amount necessary to cover his check within three (3) days from receipt of notice from the bank and/or the payee or holder that said check has been dishonored for lack or insufficiency of funds shall be prima facie evidence of deceit constituting false pretense or fraudulent act. The elements of estafa under paragraph 2(d), Article 315 of the Revised Penal Code are the following: 1. postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; 2. lack of sufficiency of funds to cover the check; and 3.damage to the payee.11 All the elements are present in this case. Petitioner issued PNB Check No. 395532-S to obtain the title of the land from private complainant. As found by the Court of Appeals, petitioner issued the check to induce private complainant to execute a deed of sale in his favor. Mediavillo, a defense witness, confirmed that the Deed of Absolute Sale was signed after petitioner gave the checks to private complainant.

G.R. No. 156132

October 12, 2006 CHICO-NAZARIO, J.:

CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS' FINANCE CORPORATION, doing business under the name and style of FNCB Finance, petitioners, vs. MODESTA R. SABENIANO, respondent.

FACTS
Petitioner Investor's Finance Corporation, which did business under the name and style of FNCB Finance, was an affiliate company of petitioner Citibank, specifically handling money market placements for its clients. It is now, by virtue of a merger, doing business as part of its successor-in-interest, BPI Card Finance Corporation. However, so as to consistently establish its identity in the Petition at bar, the said petitioner shall still be referred to herein as FNCB Finance.4 Respondent Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB Finance. Regrettably, the business relations among the parties subsequently went awry. On 8 August 1985, respondent filed a Complaint5 against petitioners, docketed as Civil Case No. 11336, before the Regional Trial Court (RTC) of Makati City. Respondent claimed to have substantial deposits and money market placements with the petitioners, as well as money market placements with the Ayala Investment and Development Corporation (AIDC), the proceeds of which were supposedly deposited automatically and directly to respondent's accounts with petitioner Citibank. Respondent alleged that petitioners refused to return her deposits and the proceeds of her money market placements despite her repeated demands, thus, compelling respondent to file Civil Case No. 11336 against petitioners for "Accounting, Sum of Money and Damages." Respondent eventually filed an Amended Complaint6 on 9 October 1985 to include additional claims to deposits and money market placements inadvertently left out from her original Complaint.

RTC: ruled in favor of citibank

Court of Appeals rendered its Decision12 affirming with modification the RTC Decision Issue The liquidation of respondent's outstanding loans were valid in so far as petitioner Citibank used respondent's savings account with the bank and her money market placements with petitioner FNCB Finance; but illegal and void in so far as petitioner Citibank used respondent's dollar accounts with Citibank-Geneva. Savings Account with petitioner Citibank Compensation is a recognized mode of extinguishing obligations. Relevant provisions of the Civil Code provides Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Art. 1279. In order that compensation may be proper, it is necessary; (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. There is little controversy when it comes to the right of petitioner Citibank to compensate respondent's outstanding loans with her deposit account. As already found by this Court, petitioner Citibank was the creditor of respondent for her outstanding loans. At the same time, respondent was the creditor of petitioner Citibank, as far as her deposit account was concerned, since bank deposits, whether fixed, savings, or current, should be considered as simple loan or mutuum by the depositor to the banking institution.122 Both debts consist in sums of money. By June 1979, all of respondent's PNs in the second set had matured and became demandable, while respondent's savings account was demandable anytime. Neither was there any retention or controversy over the PNs and the deposit account commenced by a third person and communicated in due time to the debtor concerned. Compensation takes place by operation of law,123 therefore, even in the absence of an expressed authority from respondent, petitioner Citibank had the right to effect, on 25 June 1979, the partial compensation or off-set of respondent's outstanding loans with her deposit account, amounting to P31,079.14.

G.R. No. 156207 September 15, 2006 EQUITABLE PCI BANK (the Banking Entity into which Philippine Commercial International Bank was merged), petitioner, vs. ROWENA ONG, respondent. DECISION CHICO-NAZARIO, J.:

FACTS
On 29 November 1991, Warliza Sarande deposited in her account at Philippine Commercial International (PCI) Bank Magsaysay Avenue, Santa Ana District, Davao City Branch, under Account No. 8502-00347-6, a PCI Bank General Santos City Branch, TCBT1 Check No. 0249188 in the amount of P225,000.00. Upon inquiry by Serande at PCI Bank on 5 December 1991 on whether TCBT Check No. 0249188 had been cleared, she received an affirmative answer. Relying on this assurance, she issued two checks drawn against the proceeds of TCBT Check No. 0249188. One of these was PCI Bank Check No. 073661 dated 5 December 1991 for P132,000.00 which Sarande issued to respondent Rowena Ong Owing to a business transaction. On the same day, Ong presented to PCI Bank Magsaysay Avenue Branch said Check No. 073661, and instead of encashing it, requested PCI Bank to convert the proceeds thereof into a manager's check, which the PCI Bank obliged. Whereupon, Ong was issued PCI Bank Manager's Check No. 10983 dated 5 December 1991 for the sum of P132,000.00, the value of Check No. 073661. The next day, 6 December 1991, Ong deposited PCI Bank Manager's Check No. 10983 in her account with Equitable Banking Corporation Davao City Branch. On 9 December 1991, she received a check return-slip informing her that PCI Bank had stopped the payment of the said check on the ground of irregular issuance. Despite several demands made by her to PCI Bank for the payment of the amount in PCI Bank Manager's Check No. 10983, the same was met with refusal; thus, Ong was constrained to file a Complaint for sum of money, damages and attorney's fees against PCI Bank.2 From PCI Bank's version, TCBT-General Santos City Check No. 0249188 was returned on 5 December 1991 at 5:00 pm on the ground that the account against which it was drawn was already closed. According to PCI Bank, it immediately gave notice to Sarande and Ong about the return of Check No. 0249188 and requested Ong to return PCI Bank Manager's Check No. 10983 inasmuch as the return of Check No. 0249188 on the ground that the account from which it was drawn had already been closed resulted in a failure or want of consideration for the issuance of PCI Bank Manager's Check No. 10983.3 Ong filed a motion for summary judgment. PCI Bank failed to file any comment or objection within the period given to it despite receipt of the same order.7 The trial court then granted the motion for summary judgment . judgment in hereby rendered for the plaintiff. appellate court denied the appeal of PCI Bank and affirmed the orders and decision of the trial court. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT AFFIRMED THE LOWER COURT'S FACTUAL FINDING IN ITS DECISION DATED 3 MAY 1999 HOLDING RESPONDENT ONG A "HOLDER IN DUE COURSE" INSPITE OF THE FACT THAT THE REQUISITE OF "GOOD FAITH" AND FOR VALUE IS LACKING AND DESPITE THE ABSENCE OF A PROPER TRIAL TO DETERMINE SUCH FACTUAL ISSUE. SECTION 52. What constitutes a holder in due course. A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice it had been previously dishonored, if such was the fact; (c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. The same law provides further: Sec. 24. Presumption of consideration. Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. Sec. 26. What constitutes holder for value. Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who become such prior to that time. Sec. 28. Effect of want of consideration. Absence or failure of consideration is a matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise. Easily discernible is that what Ong obtained from PCI Bank was not just any ordinary check but a manager's check. A manager's check is an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and honor behind its issuance. By its peculiar character and general use in commerce, a manager's check is regarded substantially to be as good as the money it represents.24 A manager's check stands on the same footing as a certified check.25 The effect of certification is found in Section 187, Negotiable Instruments Law. Sec. 187. Certification of check; effect of. Where a check is certified by the bank on which it is drawn, the certification is equivalent to an acceptance. By accepting PCI Bank Check No. 073661 issued by Sarande to Ong and issuing in turn a manager's check in exchange thereof, PCI Bank assumed the liabilities of an acceptor under Section 62 of the Negotiable Instruments Law. With the above jurisprudential basis, the issues on Ong being not a holder in due course and failure or want of consideration for PCI Bank's issuance of the manager's check is out of sync.

G.R. No. 96132 June 26, 1992 ORIEL MAGNO, petitioner, vs. HONORABLE COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents. PARAS, J.: FACTS: Petitioner was in the process of putting up a car repair shop sometime in April 1983, but a did not have complete equipment that could make his venture workable. He also had another problem, and that while he was going into this entrepreneurship, he lacked funds with which to purchase the necessary equipment to make such business operational. Thus, petitioner, representing Ultra Sources International Corporation, approached Corazon Teng, (private complainant) Vice President of Mancor Industries (hereinafter referred to as Mancor) for his needed car repair service equipment of which Mancor was a distributor (Corazon Teng) referred Magno to LS Finance and Management Corporation (LB Finance for brevity) advising its Vice-President, Joey Gomez, that Mancor was willing and able to supply the pieces of equipment needed if LS Finance could accommodate petitioner and provide him credit facilities. The arrangement went through on condition that petitioner has to put up a warranty deposit equivalent to thirty per centum (30%) of the total value of the pieces of equipment to be purchased, amounting to P29,790.00. Since petitioner could not come up with such amount, he requested Joey Gomez on a personal level to look for a third party who could lend him the equivalent amount of the warranty deposit, however, unknown to petitioner, it was Corazon Teng who advanced the deposit in question, on condition that the same would be paid as a short term loan at 3% interest petitioner and LS Finance entered into a leasing agreement. fter the documentation was completed, the equipment were delivered to petitioner who in turn issued a postdated check and gave it to Joey Gomez who, unknown to the petitioner, delivered the same to Corazon Teng. When the check matured, Petitioner requested through Joey Gomez not to deposit the check as he (Magno) was no longer banking with Pacific Bank.

To replace the first check issued, petitioner issued another set of six (6) postdated checks. The two checks were already cleared leaving the four checks. petitioner could not pay LS Finance the monthly
rentals, thus it pulled out the garage equipments. It was then on this occasion that petitioner became aware that Corazon Teng was the one who advanced the warranty deposit. Petitioner with his wife went to see Corazon Teng and promised to pay the latter but the payment never came and when the four (4) checks were deposited they were returned for the reason "account closed." Regional Trial Court of Quezon City, Branch 104, the accused-petitioner was convicted for violations of BP Blg. 22. Court of Appeals affirmed the decision of the lower court. ISSUE whether they were drawn or issued "to apply on account or for value", as required under Section 1 of B.P. Blg, 22. HELD the fact that since the petitioner or lessee referred to above in the lease agreement knew that the amount of P29,790.00 subject of the cases, were mere accommodation-arrangements with somebody thru Joey Gomez, petitioner did not even attempt to secure the refund of said amount from LS Finance, notwithstanding the agreement provision to the contrary. To argue that after the termination of the lease agreement, the warranty deposit should be refundable in full to Mrs. Teng by petitioner when he did not cash out the "warranty deposit" for his official or personal use, is to stretch the nicety of the alleged law (B.P. No, 22) violated. For all intents and purposes, the law was devised to safeguard the interest of the banking system and the legitimate public checking account user. It did not intend to shelter or favor nor encourage users of the system

to enrich themselves through manipulations and circumvention of the noble purpose and objective of the law. Least should it be used also as a means of jeopardizing honest-to-goodness transactions with some color of "get-rich" scheme to the prejudice of well-meaning businessmen who are the pillars of society. When viewed against the following definitions of the catch-terms "warranty" and "deposit", for which the postdated checks were issued or drawn, all the more, the alleged crime could not have been committed by petitioner: a) Warranty A promise that a proposition of fact is true. A promise that certain facts are truly as they are represented to be and that they will remain so: . . . (Black's Law Dictionary, Fifth Edition, (1979) p. 1423) the element of "knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason . . . is inversely applied in this case. From the very beginning, petitioner never hid the fact that he did not have the funds with which to put up the warranty deposit and as a matter of fact, he openly intimated this to the vital conduit of the transaction, Joey Gomez, to whom petitioner was introduced by Mrs. Teng. It would have been different if this predicament was not communicated to all the parties he dealt with regarding the lease agreement the financing of which was covered by L.S. Finance Management. accused-petitioner is hereby ACQUITTED of the crime charged.