Nego Cases1

8/13/2019 Nego Cases1

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GAKO, VICCA LORAINE B.

Republic of the Philippines

SUPREME COURTManila

SECOND DIVISION

G.R. No. 72593 April 30, 9!7

CONSOLI"ATE" PL#$OO" IN"USTRIES, INC., %ENR# $EE, &'(RO"OL)O T. VERGARA, petitioners,vs.

I)C LEASING AN" ACCEPTANCE CORPORATION, respondent.

Carpio, Villaraza & Cruz Law Offices for petitioners.

Europa, Dacanay & Tolentino for respondent.

GUTIERRE*, +R., J.:

his is a petition for certiorari under Rule !" of the Rules of Court #hich

assails on $uestions of la# a decision of the Inter%ediate &ppellate

Court in &C'(.R. CV No. )*)+ dated -ul /0, /*", as #ell as its

resolution dated October /0, /*", denin1 the %otion for

reconsideration.

he antecedent facts culled fro% the petition are as follo#s2

he petitioner is a corporation en1a1ed in the lo11in1 business. It had

for its pro1ra% of lo11in1 activities for the ear /0* the openin1 of

additional roads, and si%ultaneous lo11in1 operations alon1 the route of

said roads, in its lo11in1 concession area at 3a1an1a, Mana, and

Cara1a, Davao Oriental. 4or this purpose, it needed t#o 567 additional

units of tractors.

Co1ni8ant of petitioner'corporation9s need and purpose, &tlantic (ulf :

Pacific Co%pan of Manila, throu1h its sister co%pan and %ar;etin1

ar%, Industrial Products Mar;etin1 5the DD'/)'3.

In order to ascertain the e?tent of #or; to #hich the tractors #ere to be

e?posed, 5t.s.n., Ma 6*, /*+, p. !!7 and to deter%ine the capabilit of

the


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undred Ei1ht Nine Pesos : 0//++ 5P/,+B,0*.0/7, accrued

interest of One >undred 4ift One housand Si? >undred Ei1hteen

Pesos : *)/++ 5P/"/,)/*.*)7 as of &u1ust /", /0, accruin1 interest

thereafter at the rate of t#elve 5/67 percent per annu%, attorne9s fees

of #o >undred 4ort Nine housand Ei1ht One Pesos : 0//++5P6!,+*/.0 /7 and costs of suit.

he petitioners filed their a%ended ans#er prain1 for the dis%issal of

the co%plaint and as;in1 the trial court to order the respondent to pa

the petitioners da%a1es in an a%ount at the sound discretion of the

court, #ent housand Pesos 5P6+,+++.++7 as and for attorne9s fees,

and 4ive housand Pesos 5P",+++.++7 for e?penses of liti1ation. he

petitioners li;e#ise praed for such other and further relief as #ould be

@ust under the pre%ises.

In a decision dated &pril 6+, /*/, the trial court rendered the follo#in1

@ud1%ent2

A>ERE4ORE, @ud1%ent is hereb rendered2

/. orderin1 defendants to pa @ointl and severall in their official and

personal capacities the principal su% of ONE MIION NINEF >REE

>O=S&ND SEVEN >=NDRED NINEF EI(> PESOS : 0//++5P/,+B,0*.0/7 #ith accrued interest of ONE >=NDRED 4I4F ONE

>O=S&ND SIG >=NDRED EI(>EEN PESOS : *)/++

5P/"/,)/*.,*)7 as of &u1ust /", /0 and accruin1 interest thereafter at

the rate of /6 per annu%H

6. orderin1 defendants to pa @ointl and severall attorne9s fees

e$uivalent to ten percent 5/+7 of the principal and to pa the costs of

the suit.

Defendants9 counterclai% is disallo#ed. 5pp. !"'!), Rollo7

On -une *, /*/, the trial court issued an order denin1 the %otion forreconsideration filed b the petitioners.

hus, the petitioners appealed to the Inter%ediate &ppellate Court and

assi1ned therein the follo#in1 errors2

I

>& >E OAER CO=R ERRED IN 4INDIN( >& >E SEER

&&NIC (=4 &ND P&CI4IC COMP&NF O4 M&NI& DID NO

&PPROVE DE4END&NS'&PPE&NS C&IM O4 A&RR&NF.

II

>& >E OAER CO=R ERRED IN 4INDIN( >& P&INI44'

&PPEEE IS & >ODER IN D=E CO=RSE O4 >E PROMISSORF

NOE &ND S=ED =NDER S&ID NOE &S >ODER >EREO4 IN

D=E CO=RSE.

On -ul /0, /*", the Inter%ediate &ppellate Court issued the

challen1ed decision affir%in1 in totothe decision of the trial court. he

pertinent portions of the decision are as follo#s2

??? ??? ???


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4ro% the evidence presented b the parties on the issue of #arrant,

Ae are of the considered opinion that aside fro% the fact that no

provision of #arrant appears or is provided in the Deed of Sale of the

tractors and even ad%ittin1 that in a contract of sale unless a contrar

intention appears, there is an i%plied #arrant, the defense of breach of

#arrant, if there is an, as in this case, does not lie in favor of the

appellants and a1ainst the plaintiff'appellee #ho is the assi1nee of thepro%issor note and a holder of the sa%e in due course. Aarrant lies

in this case onl bet#een Industrial Products Mar;etin1 and

Consolidated Pl#ood Industries, Inc. he plaintiff'appellant herein

upon application b appellant corporation 1ranted financin1 for the

purchase of the $uestioned units of 4iat'&llis Cra#ler,ractors.

??? ??? ???

>oldin1 that breach of #arrant if an, is not a defense available to

appellants either to #ithdra# fro% the contract andor de%and a

proportionate reduction of the price #ith da%a1es in either case 5&rt.

/")0, Ne# Civil Code7. Ae no# co%e to the issue as to #hether theplaintiff'appellee is a holder in due course of the pro%issor note.

o be1in #ith, it is beond ar1u%ents that the plaintiff'appellee is a

financin1 corporation en1a1ed in financin1 and receivable discountin1

e?tendin1 credit facilities to consu%ers and industrial, co%%ercial or

a1ricultural enterprises b discountin1 or factorin1 co%%ercial papers or

accounts receivable dul authori8ed pursuant to R.&. "*+ other#ise

;no#n as the 4inancin1 &ct.

& stud of the $uestioned pro%issor note reveals that it is a ne1otiable

instru%ent #hich #as discounted or sold to the I4C easin1 and

&cceptance Corporation for P*++,+++.++ 5E?h.


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>E PEIIONERS &RE NO I&3E 4OR >E P&FMEN O4 >E

PROMISSORF NOE 3EC&=SE2

&7 >E SEER'&SSI(NOR IS (=IF O4 3RE&C> O4 A&RR&NF

=NDER >E &AH

37 I4 & &, >E RESPONDEN M&F RECOVER ONF 4ROM >E

SEER'&SSI(NOR O4 >E PROMISSORF NOE.

V.

>E &SSI(NMEN O4 >E C>&E MOR(&(E 3F >E

SEER' &SSI(NOR IN 4&VOR O4 >E RESPONDEN DOES NO

C>&N(E >E N&=RE O4 >E R&NS&CION 4ROM 3EIN( &

S&E ON INS&MENS O & P=RE O&N.

VI.

>E PROMISSORF NOE C&NNO 3E &DMIED OR =SED IN

EVIDENCE IN &NF CO=R 3EC&=SE >E REJ=ISIE

DOC=MEN&RF S&MPS >&VE NO 3EEN &44IGED >EREON

OR C&NCEED.

he petitioners praed that @ud1%ent be rendered settin1 aside the

decision dated -ul /0, /*", as #ell as the resolution dated October

/0, /*" and dis%issin1 the co%plaint but 1rantin1 petitioners9

counterclai%s before the court of ori1in.

On the other hand, the respondent corporation in its co%%ent to the

petition filed on 4ebruar 6+, /*), contended that the petition #as filed

out of ti%eH that the pro%issor note is a ne1otiable instru%ent and

respondent a holder in due courseH that respondent is not liable for an

breach of #arrantH and finall, that the pro%issor note is ad%issible in

evidence.

he core issue herein is #hether or not the pro%issor note in $uestion

is a ne1otiable instru%ent so as to bar co%pletel all the available

defenses of the petitioner a1ainst the respondent'assi1nee.

Preli%inaril, it %ust be established at the outset that #e consider the

instant petition to have been filed on ti%e because the petitioners9

%otion for reconsideration actuall raised ne# issues. It cannot,

therefore, be considered pro' for%al.

he petition is i%pressed #ith %erit.

4irst, there is no $uestion that the seller'assi1nor breached its e?press

+'da #arrant because the findin1s of the trial court, adopted b the

respondent appellate court, that


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It is patent then, that the seller'assi1nor is liable for its breach of

#arrant a1ainst the petitioner. his liabilit as a 1eneral rule, e?tends to

the corporation to #ho% it assi1ned its ri1hts and interests unless the

assi1nee is a holder in due course of the pro%issor note in $uestion,

assu%in1 the note is ne1otiable, in #hich case the latter9s ri1hts are

based on the ne1otiable instru%ent and assu%in1 further that the

petitioner9s defenses %a not prevail a1ainst it.

Secondl, it li;e#ise cannot be denied that as soon as the tractors bro;e

do#n, the petitioner'corporation notified the seller'assi1nor9s sister

co%pan, &( : P, about the brea;do#n based on the seller'assi1nor9s

e?press +'da #arrant, #ith #hich the latter co%plied b sendin1 its

%echanics. >o#ever, due to the seller'assi1nor9s dela and its failure to

co%pl #ith its #arrant, the tractors beca%e totall unserviceable and

useless for the purpose for #hich the #ere purchased.

hirdl, the petitioner'corporation, thereafter, unilaterall rescinded its

contract #ith the seller'assi1nor.

&rticles /// and /")0 of the Civil Code provide that2

&R. ///. The power to rescind obliations is i!plied in reciprocal

ones,in case one of the obli1ors should not co%pl #ith #hat is

incu%bent upon hi%.

The in(ured party !ay choose between the fulfill!ent and the rescission

of the obliation with the pay!ent of da!aes in either case . >e %a

also see; rescission, even after he has chosen fulfill%ent, if the latter

should beco%e i%possible.

??? ??? ???

&R. /")0. In the cases of articles /")/, /")6, /")!, /")" and

/")), the vendee !ay elect between withdrawin fro! the contract and

de!andin a proportionate reduction of the price, with da!aes in

either case.5E%phasis supplied7

Petitioner, havin1 unilaterall and e?tra@udiciall rescinded its contract

#ith the seller'assi1nor, necessaril can no lon1er sue the seller'

assi1nor e?cept b #a of counterclai% if the seller'assi1nor sues it

because of the rescission.

In the case of the =niversit of the hilippines v. De los -neles 5B"

SCR& /+67 #e held2

In other #ords, the part #ho dee%s the contract violated %a consider

it resolved or rescinded, and act accordin1l, without previous court

action, but it proceeds at its own ris'. 4or it is onl the final @ud1%ent of

the correspondin1 court that #ill conclusivel and finall settle #hether

the action ta;en #as or #as not correct in la#. 3ut the law definitely

does not re#uire that the contractin party who believes itself in(ured

!ust first file suit and wait for ad(ude!ent before ta'in etra(udicial

steps to protect its interest. Otherwise, the party in(ured by the others

breach will have to passively sit and watch its da!aes accu!ulate

durin the pendency of the suit until the final (ud!ent of rescission is

rendered when the law itself re#uires that he should eercise due

dilience to !ini!ize its own da!aes )Civil Code, -rticle

//01*.5E%phasis supplied7

(oin1 bac; to the core issue, #e rule that the pro%issor note in

$uestion is not a ne1otiable instru%ent.

he pertinent portion of the note is as follo#s2

4OR V&=E RECEIVED, I#e @ointl and severall pro%ise to pa to

the IND=SRI& PROD=CS M&REIN(, the su% of ONE MIION

NINEF >REE >O=S&ND SEVEN >=NDRED EI(>F NINE

PESOS : 0//++ onl 5P /,+B,0*.0/7, Philippine Currenc, the said

principal su%, to be paable in 6! %onthl install%ents startin1 -ul /",

/0* and ever /"th of the %onth thereafter until full paid. ...

Considerin1 that para1raph 5d7, Section / of the Ne1otiable Instru%ents

a# re$uires that a pro%issor note


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Ahen instru%ent is paable to order.

SEC. *. A>EN P&F&3E O ORDER. K he instru%ent is paable to

order #here it is dra#n paable to the order of a specified person or to

hi% or his order. . . .

??? ??? ???

hese are the onl t#o #as b #hich an instru%ent %a be %ade

paable to order. here %ust al#as be a specified person na%ed in the

instru%ent. It %eans that the bill or note is to be paid to the person

desi1nated in the instru%ent or to an person to #ho% he has indorsed

and delivered the sa%e. %ithout the words 2or order2 or2to the order of,

2the instru!ent is payable only to the person desinated therein and is

therefore non3neotiable. -ny subse#uent purchaser thereof will not

en(oy the advantaes of bein a holder of a neotiable instru!ent but

will !erely


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that the seller'assi1nor9s ri1ht to collect the purchase price #as not

unconditional, and that it #as sub@ect to the condition that the tractors

'sold #ere not defective. he respondent ;ne# that #hen the tractors

turned out to be defective, it #ould be sub@ect to the defense of failure of

consideration and cannot recover the purchase price fro% the

petitioners. Even assu%in1 for the sa;e of ar1u%ent that the pro%issor

note is ne1otiable, the respondent, #hich too; the sa%e #ith actual;no#led1e of the fore1oin1 facts so that its action in ta;in1 the

instru%ent a%ounted to bad faith, is not a holder in due course. &s

such, the respondent is sub@ect to all defenses #hich the petitioners

%a raise a1ainst the seller'assi1nor. &n other interpretation #ould be

%ost ine$uitous to the unfortunate buer #ho is not onl saddled #ith

t#o useless tractors but %ust also face a la#suit fro% the assi1nee for

the entire purchase price and all its incidents #ithout bein1 able to raise

valid defenses available as a1ainst the assi1nor.

astl, the respondent failed to present an evidence to prove that it had

no ;no#led1e of an fact, #hich #ould @ustif its act of ta;in1 the

pro%issor note as not a%ountin1 to bad faith.

Sections "6 and ") of the Ne1otiable Instru%ents a# provide that2

ne1otiatin1 it.

??? ??? ???

SEC. "6. A>& CONSI=ES & >ODER IN D=E CO=RSE. K &

holder in due course is a holder #ho has ta;en the instru%ent under the

follo#in1 conditions2

??? ??? ???

??? ??? ???

5c7 That he too' it in ood faith and for value

5d7 That the ti!e it was neotiated by hi! he had no notice of any

infir!ity in the instru!ent of deffect in the title of the person neotiatin

it

??? ??? ???

SEC. "). %4-T CO56T"T7TE6 5OT"CE O8 DE88ECT. 9 To

constitute notice of an infir!ity in the instru!ent or defect in the title of

the person neotiatin the sa!e, the person to who! it is neotiated

!ust have had actual 'nowlede of the infir!ity or defect, or 'nowlede

of such facts that his action in ta'in the instru!ent a!ounts to bad

faith. 5E%phasis supplied7

Ae subscribe to the vie# of Ca!pos and Ca!pos that a financin1

co%pan is not a holder in 1ood faith as to the buer, to #it2

In install%ent sales, the buer usuall issues a note paable to the seller

to cover the purchase price. Man ti%es, in pursuance of a previous

arran1e%ent #ith the seller, a finance co%pan pas the full price and

the note is indorsed to it, subro1atin1 it to the ri1ht to collect the price

fro% the buer, #ith interest. Aith the increasin1 fre$uenc of

install%ent buin1 in this countr, it is %ost probable that the tendenc

of the courts in the =nited States to protect the buer a1ainst the

finance co%pan #ill , the finance co%pan #ill be sub@ect to the

defense of failure of consideration and cannot recover the purchase

price fro% the buer. &s a1ainst the ar1u%ent that such a rule #ould

seriousl affect


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its inception, it cannot be re1arded as a holder in due course of the note

1iven in the transaction.

In li;e %anner, therefore, even assu%in1 that the sub@ect pro%issor

note is ne1otiable, the respondent, a financin1 co%pan #hich activel

participated in the sale on install%ent of the sub@ect t#o &llis Cra#ler

tractors, cannot be re1arded as a holder in due course of said note. It

follo#s that the respondent9s ri1hts under the pro%issor note involved

in this case are sub@ect to all defenses that the petitioners have a1ainst

the seller'assi1nor, Industrial Products Mar;etin1. 4or Section "* of the

Ne1otiable Instru%ents a# provides that ?'for P)++,+++.++2

Due Dece%ber 6,/0) No. /6+6'0)

4or value received, I#e @ointl and severall pro%ise to pa to the

Philippine 3an;in1 Corporation at its office at &ala &venue, Ma;ati,

Metro Manila the su% of SIG >=NDRED >O=S&ND ONF ... pesos

5P)++,+++.++7 #ith interest at the rate of 4O=REEN percent /! per

annu%, fro% OD&F until paid. In case this note is not paid at %aturit

the interest rate shall auto%aticall be increased to per annu%.

??? ??? ???

E?ecuted at Ma;ati, Philippines on Nove%ber /0,/0).

P.3. DE -ES=S : CO., INC.

5S1d.7 &lfredo Salon1a 5S1d.7 Mi1uel de -esus

IN O=R PERSON& C&P&CIF



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3. ro!issory 5ote ;C 5o. =/@@3>?'for PB++,+++.++2

Due -anuar B, /00 No. /6""'0)

4or valued received, I#e @ointl and severall pro%ise to pa to the

Philippine 3an;in1 Corporation at its office at &ala &venue, Ma;ati,

Metro Manila the su% of >REE >=NDRED >O=S&ND ONF ...

pesos 5PB++,+++.++7, #ith interest at the rate of 4O=REEN per cent5/!7 per annu%, fro% OD&F until paid. In case this note is not paid

at %aturit the interest rate shall auto%aticall be increased to

57 per annu%.

??? ??? ???

E?ecuted at Ma;ati, Philippines on Dece%ber 6,/0).

P.3. DE -ES=S : CO., INC.


IN O=R PERSON& C&P&CIIES

5S1d,7 &lfredo Salon1a 5S1d.7 Mi1uel de -esus

On " March /0*, P.D. De -esus and Co%pan, Inc., b vote of its

stoc;holders, chan1ed its corporate na%e to alilid Aood Industries

Corporation 5hereafter


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6. the a%ount e$uivalent to /+ of the total a%ount due as attorne9s

feesH and

B. the costs of suit.

SO ORDERED.

he trial -ud1e based his decision pri%aril on t#o factors2 5/7 thefailure of petitioner alilid to verif its ans#er, #hich failure the trial

-ud1e considered as a%ountin1 to an ad%ission b petitioner alilid of

the 1enuineness and due e?ecution of pro%issor notes P3C No. /6+6'

0) and P3C No. /6""'0), #hich #ere anne?ed to respondent 3an;9s

co%plaintH and 567 the fact that the t#o disputed pro%issor notes #ere

si1ned b Messrs. de -esus and Salon1a both for and in behalf of the

for%er P.3. de -esus and Co%pan, Inc. 5no# petitioner alilid7 and in

their o#n personal capacities.

he @ud1%ent of the lo#er court #as affir%ed in totoon appeal. In its

disputed Decision dated * Nove%ber /*", the then Inter%ediate

&ppellate Court 5hird Civil Cases Division7 held2

Defendant'appellant faults the lo#er court in holdin1 it liable to pa the

a%ount of Pl,0*+,6"B.+* inas%uch as the pro%issor notes covered

onl P++,+++.++ clai%in1 that plaintiff'appellee failed to adduce

evidence as to ho# said a%ounts increased to the a%ount of

Pl,0*+,6"B.+*. Defendant'appellant ar1u%ent is reall f li%s, because it

overloo;ed the fact that the pro%issor notes in $uestion #hich #ere

due and de%andable since Dece%ber 6, /0) and -anuar B, /00

bear interest at the rate of /! and further stipulates for the pa%ent of

attorne9s fees of /+ of the a%ount due includin1 interest in case of

collection of the pro%issor notes is done throu1h a la#er.

Moreover, the state%ents of account &nne?es & and 3 are also

attached to the sa%e co%plaint as inte1ral part thereof. &nne? &

pertains to the pro%issor note No. /6+6'0) #ith the principal of

P)++,+++.++ #hile &nne? 3 pertains to the pro%issor note No. /6""0)

#ith the principal of PB++,+++.++. E?plained in said state%ents of

account are the char1es for past due interest and penalt char1es and

the total of said obli1ation as of &pril B+, /*/ sho#ed a total of

principal, interest and penalt char1es of P/,0*+,6"B.+*. The

enuineness and due eecution of said pro!issory notes and

state!ents of account are dee!ed ad!itted by the failure to deny under

oath said docu!ents. ... 6

Petitioner alilid9s Motion for Reconsideration #as denied b the hird

Civil Cases Division on 6 -ul /*).

In the present Petition for Revie#, petitioner alilid no lon1er denies its

liabilities and obli1ations under the t#o pro%issor notes e?ecuted infavor of respondent 3an;. It #ould, ho#ever, contest the correctness of

the a11re1ate a%ount of its indebtedness, as clai%ed b respondent

3an;. In this respect, petitioner alilid contends that althou1h it %a

have i%pliedl ad%itted the 1enuineness and due e?ecution of

pro%issor notes P3C No. /6+6'0) and P3C No. /6""0)K&nne?es


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b petitioner alilid re1ardin1 theeistenceand validityof its liabilities

under pro%issor notes P3C No. /6+6'0) and P3C No. /6""'0),

su%%ar @ud1%ent #as properl and appropriatel rendered in the case

at bar. 9

In respect, ho#ever, of the a!ount of petitioner alilid9s total

indebtedness to respondent 3an; under the t#o pro%issor notes, it

#as error for the appellate court 5as for the trial -ud1e7 to have

e?panded the scope of petitioner alilid9s i%plied ad%ission of

1enuineness and due e?ecution so as to include the t#o State%ents of

&ccount anne?ed to the co%plaint. On this point, Rule *, Section * of

the Revised Rules of Court is $uite specific.

Section *. 4ow to contest enuineness of such docu!ents .KAhen an

action or defense is founded upon a #ritten instru%ent, copied in or

attached to the correspondin1 pleadin1 as provided in the precedin1

section, the 1enuineness and due e?ecution of the instru%ent shall be

dee%ed ad%itted unless the adverse part, under oath, specificall

denies the%, and sets forth #hat he clai%s to be the factsH but thisprovision does not apply when the adverse party does not appear to be

a party to the instru!ent or #hen co%pliance #ith an order for an

inspection of the ori1inal instru%ent is refused. 5E%phasis supplied.7

&n e?a%ination of the t#o disputed State%ents of &ccount reveals that

both docu%ents 5/7 #ere printed under the official letterhead of

respondent 3an;, 567 #ere prepared b the oans and Discountin1

Depart%ent of respondent 3an;, and 5B7 bore the si1nature of approval

of respondent 3an;9s authori8ed officer. No other si1nature appears on

the face of either docu%ent. In other #ords, both State%ents of &ccount

#ere prepared eclusivelyb respondent 3an;. It follo#s that petitioner

alilid, not havin1 been priv thereto, did not ad%it the 1enuineness anddue e?ecution of the State%ents in spite of its failure to verif its ans#er

to the co%plaint, and that petitioner is not conclusivel bound b the

char1es nor b the co%putations of a%ounts set out therein. 0

he a11re1ate a%ount of petitioner alilid9s %onetar obli1ations to

respondent 3an; is deter%inable fro% the co%%on stipulations and

conditions contained in pro%issor notes P3C No. /6+6'0) and P3C

No. /6""'0), under #hich petitioner alilid bound itself to pa

respondent 3an;, aside fro% the principal loan totallin1 P++,+++.++2

5/7 interest at the rate of fourteen percent 5/!7 per annu%, paable

%onthl and co%pounded %onthl if unpaid,and 567 attorne9s feese$uivalent to ten percent 5/+7 of the entire a%ount due, includin1

interest. 2it does not, ho#ever, appear fro% the face of eitherpro%issor note that petitioner alilid a1reed to pa servicechar1es

andpenalty charesin case of late pa%ent of its obli1ations to

respondent 3an;. Since an underta;in1 to pa service char1es and

penalt char1es on top of interest and interest on past due interestcannot be presu%ed, it is necessar that evidence be adduced b both

parties to prove or disprove their respective clai%s re1ardin1 the basis

and propriet of includin1 such char1es and in such a%ounts as part of

petitioner alilid9s liabilities under the t#o pro%issor notes. Evidence

relatin1 to the co%putation of interest on past due interest, that is due

and paable %a also be sub%itted.

A>ERE4ORE, the decision of 3ranch 6B of the then Court of 4irst

Instance of Ri8al 5Seventh -udicial District7 in Civil Case No. !/6)* and

the decision of the then Inter%ediate &ppellate Court dated * Nove%ber

/*" are &44IRMED to the e?tent that the refer to the principal

a%ounts and stipulated interest due under Pro%issor Notes P3C No./6+6'0) and P3C No. /6""'0) and to attorne9s fees e$uivalent to ten

percent 5/+7 of the entire a%ount due. his case is REM&NDED to the

trial court for deter%ination of #hether or not service char1es and

penalt char1es in case of late pa%ent are due fro% petitioner alilid to

respondent 3an;, and if so, the a%ount thereof, as #ell as for

deter%ination of the a%ount of interest on past due interest, due and

paable b petitioner alilid to respondent 3an;. No pronounce%ent as

to costs.

SO ORDERED.

8ernan )Chair!an*, Autierrez,


12/42

PEOPLE O) T%E P%ILIPPINES P%ILIPPINES &'( COURT O)APPEALS, respondents.

Law 8ir! of Bay!undo -. -r!ovit for petitioner.

The 6olicitor Aeneral for respondent.

MELENCIO%ERRERA,J.:

Convicted of Estafa under &rticle B/", Para1raph /5b7 of the Revised

Penal Code b three 5B7 Courts, na%el, the Metropolitan rial Court,

Caloocan Cit, 3ranch "6H the Re1ional rial Court of the sa%e Cit,3ranch /6 H 2and respondent Court of &ppeals, petitioner no# see;s to

brea; the chain of convictions.

he indict%ent a1ainst petitioner'accused, filed on /* &u1ust /*),

reads2

hat on or about and durin1 the %onth of -anuar /*) in CaloocanCit, Metro Manila and #ithin the @urisdiction of this >onorable Court, the

above' na%ed accused received fro% the Pana%a Sa#%ill Inc.,

represented in this case b E PEN( MEN, P3C Chec; No. 6/)/)

dated -anuar /", /*) for P),+++.++ #hich chec; #as subse$uentl

encashed b said accused for the purpose of and under the e?press

obli1ation on his part to use the said a%ount in securin1 a Marine

Insurance covera1e for PB,+++,+++.++ on a ship%ent of lo1s o#ned b

Pana%a Sa#%ill, Inc. but said accused #ith abuse of trust and

confidence reposed upon hi% far fro% co%plin1 #ith his obli1ation and

#ith intent to deceive and defraud said corporation, did then and there

#illfull, unla#full and feloniousl receive a Marine Insurance covera1efor onl Pl,+++,+++.++ to cover said ship%ent of lo1s, pain1 therefor

onl the a%ount of P6,0/6."+ as insurance pre%iu% #ithout the

;no#led1e and consent of said Pana%a Sa#%ill, Inc., and thereafter,

said accused %isappropriated and converted to his o#n personal use

and benefit the balance of PB,6*0."+, and despite repeated de%ands

upon hi%, said accused refused and failed to account for said su% of

PB,6*0."+ to the da%a1e and pre@udice of said Pana%a Sa#%ill Inc., in

the aforestated a%ount of PB,6*0."+. 5p. B, Ori1inal Record7

&fter trial on the %erits, the Metropolitan rial Court of Caloocan Cit

convicted petitioner in a Decision, dated /0 Dece%ber /*), the

dispositive portion of #hich reads2

A>ERE4ORE, b proof beond reasonable doubt, the accused

3ENIO SF is found (=IF of violatin1 &rt. B/", Par. B of the Revised

Penal Code, he is sentenced to a strai1ht penalt of 4O=R 5!7

MON>S i%prison%ent, to rei%burse or 1ive restitution in the a%ount

of >REE >O=S&ND AO >=NDRED EI(>F SEVEN 5B,6*0."+7

PESOS &ND "+/++ CEN&VOS and to pa costs. 5p. B0, Ori1inal

Record.7

On appeal before it, the Re1ional rial Court of Caloocan Cit, affir%ed

the @ud1%ent of conviction on B -une /*0, but increased the penalt,

as follo#s2

IN VIEA O4 >E 4ORE(OIN(, this Court finds the accused 3enito S

On1 1uilt beond reasonable doubt of the cri%e of estafa, thru

%isappropriation, as defined under par. /5b7 and penali8ed under the

Brd par. of &rt B/" of the Revised Penal Code and there bein1 no

attendant %iti1atin1 nor a11ravatin1 circu%stance, he is hereb

sentenced to suffer an indeter%inate penalt of >REE 5B7 MON>S

O4 &RRESO M&FOR O ONE 5/7 FE&R &ND ONE 5/7 D&F

O4 B"6"O5 COBBECC"O5-LH to suffer the accessor penalties

provided for b la#H and to pa co%plainant Pana%a Sa#%ill Co., b

#a of reparation, the a%ount of PB,6*0."+. Costs a1ainst appellant. 5p.

B+!, Ori1inal Record7

On B+ -une /** respondent Court of &ppeals affir%ed the Re1ional

rial Court Decision 3not#ithstandin1 t#o 567 Manifestations in lieu of

Co%%ent sub%itted b the Office of the Solicitor (eneral, dated BMarch /** and B October /**, respectivel, reco%%endin1 ac$uittal

of petitioner'accused.

3efore us no#, petitioner re'asserts his innocence. he Solicitor

(eneral has also reiterated his reco%%endation for ac$uittal.

&ccordin1 to e Pen1 Men Mana1er of Pana%a Sa#%ill, Inc.

5henceforth, si%pl


13/42

/. So%eti%e in -anuar /*)


14/42

/. hat %one, 1oods or other personal propert is received b the

offender in trust, or on co%%ission, or for ad%inistration, or under an

other obli1ation involvin1 the dut to %a;e deliver of, or to return, the

sa%eH

6. hat there be %isappropriation or conversion of such %one or

propert b the offender, or denial on his part of such receiptH

B. hat such %isappropriation or conversion or denial is to the pre@udice

of anotherH and

!. hat there is a de%and %ade b the offended part to the offender. 5II

Cri%inal a#, uis 3. Rees, /6th Edition, p. 0/07

>ave the fore1oin1 ele%ents been %et in respect of petitioner'accusedL

Petitioner, supported b the Solicitor (eneral, avers that the have not

because no conversion or %isappropriation has been co%%itted and

that there #as no de%and for the return of the P),+++.++ 1iven to

petitioner. In other #ords, ele%ents 6, B, and ! of the cri%e are lac;in1.

he totalit of the evidence ields the follo#in1 incontrovertible data in

chronolo1ical order2

-an. /!, /*) ' Issuance of Oriental Marine Insurance Polic No. O&C'

M'*)++6 for P BM, #ith a total pre%iu% of P*,/B0."+.


15/42

Ae find ourselves in disa1ree%ent.

o aco vs. Court of &ppeals, '!)+0'/B : ""00"'*), &u1ust 6),

/*", /B* SCR& 6607.

&s to the fourth essential ele%ent, that of de%and %ade b the offended

part to the offender, #hich petitioner clai%s is #antin1 in this case,

suffice it to state that de%and is not necessar #hen there is evidence

of %isappropriation as in this case.

It so happens onl that failure to account, upon de%and, for funds or

propert held in trust, is circu%stantial evidence of %isappropriation.

he sa%e %a, ho#ever, be established b other proof, such as that

introduced in the case at bar. 5ubb vs. People, et al., /+/ Phil. //!

/"07

&ll the essential ele%ents of Estafa throu1h %isappropriation or

conversion bein1 present, #e do not see our #a clear to brea;in1 the


16/42

chain of convictions b the other Courts before us. he 1uilt of

petitioner'accused has been proven beond reasonable doubt.

A>ERE4ORE, the @ud1%ent under revie# is hereb &44IRMED. Aith

costs a1ainst petitioner'accused, 3enito S On1.

SO ORDERED.

aras, adilla, 6ar!iento and Bealado,


17/42

Notice of @ud1%ent #as sent b the Court of &ppeals to the trial court

and on dates subse$uent thereto, a %otion for reconsideration #as filed

b respondent &%elia an, dul opposed b petitioner P&.

On Ma 6B,/00, the Court of &ppeals rendered its resolution denin1

the respondent9s %otion for reconsideration for lac; of %erit.

No further appeal havin1 been ta;en b the parties, the @ud1%entbeca%e final and e?ecutor and on Ma B/, /00, @ud1%ent #as

correspondin1l entered in the case.

he case #as re%anded to the trial court for e?ecution and on

Septe%ber 6,/00, respondent &%elia an filed a %otion prain1 for the

issuance of a #rit of e?ecution of the @ud1%ent rendered b the Court of

&ppeals. On October //, /00, the trial court, presided over b -ud1e

(alano, issued its order of e?ecution #ith the correspondin1 #rit in favor

of the respondent. he #rit #as dul referred to Deput Sheriff E%ilio .

Rees of 3ranch /B of the Court of 4irst Instance of Manila for

enforce%ent.

4our %onths later, on 4ebruar //, /0*, respondent &%elia an

%oved for the issuance of an alias #rit of e?ecution statin1 that the

@ud1%ent rendered b the lo#er court, and affir%ed #ith %odification b

the Court of &ppeals, re%ained unsatisfied.

On March /, /0*, the petitioner filed an opposition to the %otion for the

issuance of an alias #rit of e?ecution statin1 that it had alread full paid

its obli1ation to plaintiff throu1h the deput sheriff of the respondent

court, E%ilio . Rees, as evidenced b cash vouchers properl si1ned

and receipted b said E%ilio . Rees.

On March B,/0*, the Court of &ppeals denied the issuance of the alias#rit for bein1 pre%ature, orderin1 the e?ecutin1 sheriff E%ilio . Rees

to appear #ith his return and e?plain the reason for his failure to

surrender the a%ounts paid to hi% b petitioner P&. >o#ever, the

order could not be served upon Deput Sheriff Rees #ho had

absconded or disappeared.

On March 6*, /0*, %otion for the issuance of a partial alias #rit of

e?ecution #as filed b respondent &%elia an.

On &pril /, /0*, respondent &%elia an filed a %otion to #ithdra#

ence, this petition for

certiorari filed b the Philippine &irlines, Inc., on the 1rounds that2

I

&N &I&S ARI O4 EGEC=ION C&NNO 3E ISS=ED AI>O=

PRIOR RE=RN O4 >E ORI(IN& ARI 3F >E IMPEMENIN(

O44ICER.

II


18/42

P&FMEN O4 -=D(MEN O >E IMPEMENIN( O44ICER &S

DIRECED IN >E ARI O4 EGEC=ION CONSI=ES

S&IS4&CION O4 -=D(MEN.

III

INERES IS NO P&F&3E A>EN >E DECISION IS SIEN &S

O >E P&FMEN >EREO4.

IV

SECION ", R=E B, P&RIC=&RF RE4ERS O EVF O4

PROPERF O4 -=D(MEN DE3OR &ND DISPOS& OR S&E

>EREO4 O S&IS4F -=D(MEN.

Can an alias #rit of e?ecution be issued #ithout a prior return of the

ori1inal #rit b the i%ple%entin1 officerL

Ae rule in the affir%ative and #e $uote the respondent court9s decision

#ith approval2

he issuance of the $uestioned alias #rit of e?ecution under the

circu%stances here obtainin1 is @ustified because even #ith the absence

of a Sheriffs return on the ori1inal #rit, the unalterable fact re%ains that

such a return is incapable of bein1 obtained 5sic7 because the officer

#ho is to %a;e the said return has absconded and cannot be brou1ht to

the Court despite the earlier order of the court for hi% to appear for this

purpose. 5Order of 4eb. 6/, /0*, &nne? C, Petition7. Obviousl, ta;in1

co1ni8ance of this circu%stance, the order of Ma //, /0* directin1 the

issuance of an alias #rit #as therefore issued. 5&nne? D. Petition7. he

need for such a return as a condition precedent for the issuance of an

alias #rit #as @ustifiabl dispensed #ith b the court belo# and its actionin this re1ard %eets #ith our concurrence. & contrar vie# #ill produce

an abhorent situation #hereb the %ischief of an errin1 officer of the

court could be utili8ed to i%pede indefinitel the undisputed and

a#arded ri1hts #hich a prevailin1 part ri1htfull deserves to obtain and

#ith dispatch. he final @ud1%ent in this case should not indeed be

per%itted to beco%e illusor or incapable of e?ecution for an indefinite

and over e?tended period, as had alread transpired. 5Rollo, pp. B"'B)7


19/42

&l%ost t#ent't#o 5667 ears later, Ms. an has not seen a centavo of

#hat the courts have sole%nl declared as ri1htfull hers. hrou1h

absolutel no fault of her o#n, Ms. an has been deprived of #hat,

technicall, she should have been paid fro% the start, before =?>,

#ithout need of her 1oin1 to court to enforce her ri1hts. &nd all because

P& did not issue the chec;s intended for her, in her na%e.

=nder the peculiar circu%stances of this case, the pa%ent to theabscondin1 sheriff b chec; in his na%e did not operate as a

satisfaction of the @ud1%ent debt.

In 1eneral, a pa%ent, in order to be effective to dischar1e an

obli1ation, %ust be %ade to the proper person. &rticle /6!+ of the Civil

Code provides2

Pa%ent shall be %ade to the person in #hose favor the obli1ation has

been constituted, or his successor in interest, or an person authorized

to receive it. 5E%phasis supplied7

hus, pa%ent %ust be %ade to the obli1ee hi%self or to an a1enthavin1 authorit, e?press or i%plied, to receive the particular pa%ent

5=len v. necttle "+ Ao !, "* 6d !!), /// &R )"7. Pa%ent %ade

to one havin1 apparent authorit to receive the %one #ill, as a rule, be

treated as thou1h actual authorit had been 1iven for its receipt.

i;e#ise, if pa%ent is %ade to one #ho b la# is authori8ed to act for

the creditor, it #ill #or; a dischar1e 5>endr v. 3enlisa B0 4la. )+, 6+

SO *++,B! R& 6*B7. he receipt of %one due on a@ud1%ent b an

officer authori8ed b la# to accept it #ill, therefore, satisf the debt 5See

!+ &% -% 06, 6"H >endr v. 3enlisa supraH Seattle v. Stirrat "" Aash.

/+! p. *B!,6! R& NS /60"7.

he theor is #here pa%ent is %ade to a person authori8ed andreco1ni8ed b the creditor, the pa%ent to such a person so authori8ed

is dee%ed pa%ent to the creditor. =nder ordinar circu%stances,

pa%ent b the @ud1%ent debtor in the case at bar, to the sheriff should

be valid pa%ent to e?tin1uish the @ud1%ent debt.

here are circu%stances in this case, ho#ever, #hich co%pel a different

conclusion.

he pa%ent %ade b the petitioner to the abscondin1 sheriff #as not in

cash or le1al tender but in chec;s. he chec;s #ere not paable to

&%elia an or &ble Printin1 Press but to the abscondin1 sheriff.

Did such pa%ents e?tin1uish the @ud1%ent debtL

&rticle /6! of the Civil Code provides2

he pa%ent of debts in %one shall be %ade in the currenc

stipulated, and if it is not possible to deliver such currenc, then in the

currenc #hich is le1al tender in the Philippines.

he deliver of pro%issor notes paable to order, or bills of e?chan1e

or other %ercantile docu%ents shall produce the effect of pa%ent onl

#hen the have been cashed, or #hen throu1h the fault of the creditor

the have been i%paired.

In the %eanti%e, the action derived fro% the ori1inal obli1ation shall be

held in abeance.

In the absence of an a1ree%ent, either e?press or i%plied, pa%ent%eans the dischar1e of a debt or obli1ation in %one 5=S v. Robertson,

" Pet. =S )!/, * . ed. 6"07 and unless the parties so a1ree, a debtor

has no ri1hts, e?cept at his o#n peril, to substitute so%ethin1 in lieu of

cash as %ediu% of pa%ent of his debt 5&nderson v. (ill, 0 Md.. B/6,

6 & "60, 6" R& 6++,!0 &%. St. Rep. !+67. Conse$uentl, unless

authori8ed to do so b la# or b consent of the obli1ee a public officer

has no authorit to accept anthin1 other than %one in pa%ent of an

obli1ation under a @ud1%ent bein1 e?ecuted. Strictl spea;in1, the

acceptance b the sheriff of the petitioner9s chec;s, in the case at bar,

does not,per se, operate as a dischar1e of the @ud1%ent debt.

Since a ne1otiable instru%ent is onl a substitute for %one and not

%one, the deliver of such an instru%ent does not, b itself, operate as

pa%ent 5See. /*, &ct 6+B/ on Ne1s. Insts.H &rt. /6!, Civil CodeH

3ran andon Co. v. &%erican 3an;, 0 Phil. 6""H an Sunco v. Santos,

Phil. !!H 6/ R.C.. )+, )/7. & chec;, #hether a %ana1er9s chec; or

ordinar chee;, is not le1al tender, and an offer of a chec; in pa%ent of

a debt is not a valid tender of pa%ent and %a be refused receipt b

the obli1ee or creditor. Mere deliver of chec;s does not dischar1e the

obli1ation under a @ud1%ent. he obli1ation is not e?tin1uished and


20/42

re%ains suspended until the pa%ent b co%%ercial docu%ent is

actuall reali8ed 5&rt. /6!, Civil Code, par. B7.

If bouncin1 chec;s had been issued in the na%e of &%elia an and not

the Sheriff9s, there #ould have been no pa%ent. &fter dishonor of the

chec;s, Ms. an could have run after other properties of P&. he

theor is that she has received no value for #hat had been a#arded her.

3ecause the chec;s #ere dra#n in the na%e of E%ilio . Rees, neitherhas she received anthin1. he sa%e rule should appl.

It is ar1ued that if P& had paid in cash to Sheriff Rees, there #ould

have been pa%ent in full le1al conte%plation. he reasonin1 is lo1ical

but is it valid and properL o1ic has its li%its in decision %a;in1. Ae

should not follo# rulin1s to their lo1ical e?tre%es if in doin1 so #e arrive

at un@ust or absurd results.

In the first place, P& did not pay in cash. It paid in chee;s.

&nd second, pa%ent in cash al#as carries #ith it certain cautions.

Nobod hands over bi1 a%ounts of cash in a careless and inane%anner. Mature thou1ht is 1iven to the possibilit of the cash bein1 lost,

of the bearer bein1 #alaid or runnin1 off #ith #hat he is carrin1 for

another. Pa%ent in chec;s is precisel intended to avoid the possibilit

of the %one 1oin1 to the #ron1 part. he situation is entirel different

#here a Sheriff sei8es a car, a tractor, or a piece of land. o1ic often

has to 1ive #a to e?perience and to realit. >avin1 paid #ith chec;s,

P& should have done so properl.

Pa%ent in %one or cash to the i%ple%entin1 officer %a be dee%ed

absolute pa%ent of the @ud1%ent debt but the Court has never, in the

least bit, su11ested that @ud1%ent debtors should settle their obli1ations

b turnin1 over hu1e a%ounts of cash or le1al tender to sheriffs andother e?ecutin1 officers. Pa%ent in cash #ould result in da%a1e or

inter%inable liti1ations each ti%e a sheriff #ith hu1e a%ounts of cash in

his hands decides to abscond.

&s a protective %easure, therefore, the courts encoura1e the practice of

pa%ents b chee; provided ade$uate controls are instituted to prevent

#ron1ful pa%ent and ille1al #ithdra#al or disburse%ent of funds. If

particularl bi1 a%ounts are involved, escro# arran1e%ents #ith a ban;

and carefull supervised b the court #ould be the safer procedure.

&ctual transfer of funds ta;es place #ithin the safet of ban; pre%ises.

hese practices are perfectl le1al. he ob@ect is al#as the safe and

incorrupt e?ecution of the @ud1%ent.

It is, indeed, out of the ordinar that chec;s intended for a particular

paee are %ade out in the na%e of another. Ma;in1 the chec;s paable

to the @ud1%ent creditor #ould have prevented the encash%ent or the

ta;in1 of undue advanta1e b the sheriff, or an person into #hose

hands the chec;s %a have fallen, #hether #ron1full or in behalf of thecreditor. he issuance of the chec;s in the na%e of the sheriff clearl

%ade possible the %isappropriation of the funds that #ere #ithdra#n.

&s e?plained and held b the respondent court2

... no#in1 as it does that the intended pa%ent #as for the private

part respondent &%elia an, the petitioner corporation, utili8in1 the

services of its personnel #ho are or should be ;no#led1eable about the

accepted procedures and resultin1 conse$uences of the chec;s dra#n,

nevertheless, in this instance, #ithout prudence, departed fro% #hat is

1enerall observed and done, and placed as paee in the chec;s the

na%e of the errant Sheriff and not the na%e of the ri1htful paee.Petitioner thereb created a situation #hich per%itted the said Sheriff to

personall encash said chec;s and %isappropriate the proceeds thereof

to his e?clusive personal benefit. 4or the pre@udice that resulted, the

petitioner hi%self %ust bear the fault. he @udicial 1uideline #hich #e

ta;e note of states as follo#s2

&s bet#een t#o innocent persons, one of #ho% %ust suffer the

conse$uence of a breach of trust, the one #ho %ade it possible b his

act of confidence %ust bear the loss. 53londeau, et al. v. Nano, et al., '

!/B00, -ul 6), /B", )/ Phil. )6"7

>avin1 failed to e%plo the proper safe1uards to protect itself, the@ud1%ent debtor #hose act %ade possible the loss had but itself to

bla%e.

he attention of this Court has been called to the bad practice of a

nu%ber of e?ecutin1 officers, of re$uirin1 chec;s in satisfaction of

@ud1%ent debts to be %ade out in their o#n na%es. If a sheriff directs a

@ud1%ent debtor to issue the chec;s in the sheriff9s na%e, clai%in1 he

%ust 1et his co%%ission or fees, the debtor %ust report the sheriff

i%%ediatel to the court #hich ordered the e?ecution or to the Supre%e

Court for appropriate disciplinar action. 4ees, co%%issions, and


21/42

salaries are paid throu1h re1ular channels. his i%proper procedure

also allo#s such officers, #ho have si?t 5)+7 das #ithin #hich to %a;e

a return, to treat the %ones as their personal finds and to deposit the

sa%e in their private accounts to earn si?t 5)+7 das interest, before

said finds are turned over to the court or @ud1%ent creditor 5See 3al1os

v. Velasco, /+* SCR& "6" /*/7. Juite as easil, such officers could

put up the defense that said chec;s had been issued to the% in theirprivate or personal capacit. Aithout a receipt evidencin1 pa%ent of

the @ud1%ent debt, the %isappropriation of finds b such officers

beco%es clean and co%plete. he practice is in1enious but evil as it

un@ustl enriches court personnel at the e?pense of liti1ants and the

proper ad%inistration of @ustice. he te%ptation could be far 1reater, as

proved to be in this case of the abscondin1 sheriff. he correct and

prudent thin1 for the petitioner #as to have issued the chec;s in the

intended paee9s na%e.

he pernicious effects of issuin1 chec;s in the na%e of a person other

than the intended paee, #ithout the latter9s a1ree%ent or consent, are

as %an as the #as that an artful %ind could concoct to 1et around thesafe1uards provided b the la# on ne1otiable instru%ents. &n an1r

liti1ant #ho loses a case, as a rule, #ould not #ant the #innin1 part to

1et #hat he #on in the @ud1%ent. >e #ould thin; of #as to dela the

#innin1 part9s 1ettin1 #hat has been ad@ud1ed in his favor. Ae cannot

condone that practice especiall in cases #here the courts and their

officers are involved. Ae rule a1ainst the petitioner.

&nent the applicabilit of Section /", Rule B, as follo#s2

Section /".Eecution of !oney (ud!ents. K he officer %ust enforce

an e?ecution of a %one @ud1%ent b levin1 on all the propert, real

and personal of ever na%e and nature #hatsoever, and #hich %a bedisposed of for value, of the @ud1%ent debtor not e?e%pt fro%

e?ecution, or on a sufficient a%ount of such propert, if the be

sufficient, and sellin1 the sa%e, and payin to the (ud!ent creditor, or

his attorne, so %uch of the proceeds as #ill satisf the @ud1%ent. ...

the respondent court held2

Ae are obli1ed to rule that the @ud1%ent debt cannot be considered

satisfied and therefore the orders of the respondent @ud1e 1rantin1 the

alias #rit of e?ecution %a not be pronounced as a nullit.

??? ??? ???

It is clear and %anifest that after lev or 1arnish%ent, for a @ud1%ent to

be e?ecuted there is the re$uisite of pa%ent b the officer to the

@ud1%ent creditor, or his attorne, so %uch of the proceeds as #ill

satisf the @ud1%ent and none such pa%ent had been concededl

%ade et b the abscondin1 Sheriff to the private respondent &%elia

an. he ulti%ate and essential step to co%plete the e?ecution of the@ud1%ent not havin1 been perfor%ed b the Cit Sheriff, the @ud1%ent

debt le1all and factuall re%ains unsatisfied.

Strictl spea;in1 e?ecution cannot be e$uated #ith satisfaction of a

@ud1%ent. =nder unusual circu%stances as those obtainin1 in this

petition, the distinction co%es out clearl.

E?ecution is the process #hich carries into effect a decree or @ud1%ent

5Painter v. 3er1lund, B/ Cal. &pp. 6d. )B, *0 P 6d B)+, B)BH Miller v.

ondon, 6! Mass B++, / NE 6d /*, 6++H 3lac;9s a# Dictionar7,

#hereas the satisfaction of a @ud1%ent is the pa%ent of the a%ount of

the #rit, or a la#ful tender thereof, or the conversion b sale of thedebtor9s propert into an a%ount e$ual to that due, and, it %a be done

other#ise than upon an e?ecution 5Section !0, Rule B7. ev and

deliver b an e?ecution officer are not prere$uisites to the satisfaction

of a @ud1%ent #hen the sa%e has alread been reali8ed in fact 5Section

!0, Rule B7. E?ecution is for the sheriff to acco%plish #hile satisfaction

of the @ud1%ent is for the creditor to achieve. Section /", Rule B %erel

provides the sheriff #ith his duties as e?ecutin1 officer includin1 deliver

of the proceeds of his lev on the debtor9s propert to satisf the

@ud1%ent debt. It is but to stress that the i%ple%entin1 officer9s dut

should not stop at his receipt of pa%ents but %ust continue until

pa%ent is delivered to the obli1or or creditor.

4inall, #e find no error in the respondent court9s pronounce%ent on the

inclusion of interests to be recovered under the alias #rit of e?ecution.

his lo1icall follo#s fro% our rulin1 that P& is liable for both the lost

chec;s and interest. he respondent court9s decision in C&'(.R. No.

"/+0'R does not totall supersede the trial court9s @ud1%ent in Civil

Case No. 0/B+0. It %erel %odified the sa%e as to the principal a%ount

a#arded as actual da%a1es.

A>ERE4ORE, IN VIEA O4 >E 4ORE(OIN(, the petition is hereb

DISMISSED. he @ud1%ent of the respondent Court of &ppeals is


22/42

&44IRMED and the trial court9s issuance of the alias #rit of e?ecution

a1ainst the petitioner is upheld #ithout pre@udice to an action it should

ta;e a1ainst the errant sheriff E%ilio . Rees. he Court &d%inistrator

is ordered to follo# up the actions ta;en a1ainst E%ilio . Rees.

SO ORDERED.

8ernan, C.ence, this petition.

he petitioners raise the follo#in1 issues in their assi1n%ent of errors, to #it2

&. he conclusion in la# of respondent Court that respondent insurer has the

ri1ht to rescind the polic contract #hen insured is alread dead is not in

accordance #ith e?istin1 la# and applicable @urisprudence.

3. he conclusion in la# of respondent Court that respondent insurer %a be

allo#ed to avoid the polic on 1rounds of conceal%ent b the deceased

assured, is contrar to the provisions of the polic contract itself, as #ell as, of

applicable le1al provisions and established @urisprudence.

C. he inference of respondent Court that respondent insurer #as %isled in

issuin1 the polic are %anifestl %ista;en and contrar to ad%itted evidence.

5Rollo, p. 07

he petitioners contend that the respondent co%pan no lon1er had the ri1ht to

rescind the contract of insurance as rescission %ust alle1edl be done durin1

the lifeti%e of the insured #ithin t#o ears and prior to the co%%ence%ent of

action.

he contention is #ithout %erit.

he pertinent section in the Insurance Code provides2


23/42

Section !*. Ahenever a ri1ht to rescind a contract of insurance is 1iven to the

insurer b an provision of this chapter, such ri1ht %ust be e?ercised previous to

the co%%ence%ent of an action on the contract.

&fter a polic of life insurance %ade paable on the death of the insured shall

have been in force durin1 the lifeti%e of the insured for a period of t#o ears

fro% the date of its issue or of its last reinstate%ent, the insurer cannot prove

that the polic is void ab initioor is rescindable b reason of the fraudulent

conceal%ent or %isrepresentation of the insured or his a1ent.

&ccordin1 to the petitioners, the Insurance a# #as a%ended and the second

para1raph of Section !* added to prevent the insurance co%pan fro%

e?ercisin1 a ri1ht to rescind after the death of the insured.

he so'called


24/42

In the face of all the above, it #ould be un@ust if, havin1 been sub@ected to the

#hirl#ind pressure of insurance sales%anship this Court itself has lon1

denounced, the assured #ho dies #ithin the t#o'ear period, should stand

char1ed of fraudulent conceal%ent and %isrepresentation.< 5p. /!6, Rollo7

he le1islative ans#er to the ar1u%ents posed b the petitioners is the

ERE4ORE, the petition is hereb DENIED for lac; of %erit. he $uestioned

decision of the Court of &ppeals is &44IRMED.

SO ORDERED.

8ernan, )C.


25/42

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 00290 +4'- 1, 993

NORBERTO TIBA+IA, +R. &'( CARMEN TIBA+IA, petitioners,vs.

T%E %ONORABLE COURT O) APPEALS &'( E"EN TAN, respondents.

PA"ILLA, J.:

Petitioners, spouses Norberto iba@ia, -r. and Car%en iba@ia, are before this

Court assailin1 the decision ; of respondent appellate court dated 6! &pril //in C&'(.R. SP No. 6!/)! denin1 their petition for certiorariprohibition, and

in@unction #hich sou1ht to annul the order of -ud1e Eutropio Mi1riQo of the

Re1ional rial Court, 3ranch /"/, Pasi1, Metro Manila in Civil Case No. "!*)Bentitled undred housand Pesos 5PB++,+++.++7. On appeal, the Court of &ppeals

%odified the decision b reducin1 the a#ard of %oral and e?e%plar da%a1es.

he decision havin1 beco%e final, Eden an filed the correspondin1 %otion for

e?ecution and thereafter, the 1arnished funds #hich b then #ere on deposit

#ith the cashier of the Re1ional rial Court of Pasi1, Metro Manila, #ere levied

upon.

On /! Dece%ber /+, the iba@ia spouses delivered to Deput Sheriff Eduardo

3oli%a the total %one @ud1%ent in the follo#in1 for%2

Cashier9s Chec; P6)6,0"+.++

Cash /B",0BB.0+

KKKK

otal PB*,!*B.0+

Private respondent, Eden an, refused to accept the pa%ent %ade b the

iba@ia spouses and instead insisted that the 1arnished funds deposited #ith the

cashier of the Re1ional rial Court of Pasi1, Metro Manila be #ithdra#n to

satisf the @ud1%ent obli1ation. On /" -anuar //, defendant spouses

5petitioners7 filed a %otion to lift the #rit of e?ecution on the 1round that the

@ud1%ent debt had alread been paid. On 6 -anuar //, the %otion #as

denied b the trial court on the 1round that pa%ent in cashier9s chec; is not

pa%ent in le1al tender and that pa%ent #as %ade b a third part other than

the defendant. & %otion for reconsideration #as denied on * 4ebruar //.

hereafter, the spouses iba@ia filed a petition for certiorari, prohibition and

in@unction in the Court of &ppeals. he appellate court dis%issed the petition on

6! &pril // holdin1 that pa%ent b cashier9s chec; is not pa%ent in le1al

tender as re$uired b Republic &ct No. "6. he %otion for reconsideration #as

denied on 60 Ma //.

In this petition for revie#, the iba@ia spouses raise the follo#in1 issues2

I A>E>ER OR NO >E 3PI C&S>IER9S C>EC NO. +/!+6/ IN >E

&MO=N O4 P6)6,0"+.++ ENDERED 3F PEIIONERS 4OR P&FMEN O4

>E -=D(MEN DE3, IS ER OR NO >E PRIV&E RESPONDEN M&F V&IDF RE4=SE

>E ENDER O4 P&FMEN P&RF IN C>EC &ND P&RF IN C&S>

M&DE 3F PEIIONERS, >R= &=ROR& VIO &ND CO=NSE, 4OR >E

S&IS4&CION O4 >E MONE&RF O3I(&ION O4 PEIIONERS'

SPO=SES.

he onl issue to be resolved in this case is #hether or not pa%ent b %eans

of chec; 5even b cashier9s chec;7 is considered pa%ent in le1al tender as

re$uired b the Civil Code, Republic &ct No. "6, and the Central 3an; &ct.

It is contended b the petitioners that the chec;, #hich #as a cashier9s chec; ofthe 3an; of the Philippine Islands, undoubtedl a ban; of 1ood standin1 and

reputation, and #hich #as a crossed chec; %ar;ed


26/42

&rt. /6!. he pa%ent of debts in %one shall be %ade in the currenc

stipulated, and if it is not possible to deliver such currenc, then in the currenc

#hich is le1al tender in the Philippines.

he deliver of pro%issor notes paable to order, or bills of e?chan1e or other

%ercantile docu%ents shall produce the effect of pa%ent onl #hen the have

been cashed, or #hen throu1h the fault of the creditor the have been i%paired.

In the %eanti%e, the action derived fro% the ori1inal obli1ation shall be held inabeance.H

b. Section / of Republic &ct No. "6, as a%ended, #hich provides2

Sec. /. Ever provision contained in, or %ade #ith respect to, an obli1ation

#hich purports to 1ive the obli1ee the ri1ht to re$uire pa%ent in 1old or in an

particular ;ind of coin or currenc other than Philippine currenc or in an a%ount

of %one of the Philippines %easured thereb, shall be as it is hereb declared

a1ainst public polic null and void, and of no effect, and no such provision shall

be contained in, or %ade #ith respect to, an obli1ation thereafter incurred.

Ever obli1ation heretofore and hereafter incurred, #hether or not an such

provision as to pa%ent is contained therein or %ade #ith respect thereto, shall

be dischar1ed upon pa%ent in an coin or currenc #hich at the ti%e ofpa%ent is le1al tender for public and private debts.

c. Section )B of Republic &ct No. 6)", as a%ended 5Central 3an; &ct7 #hich

provides2

Sec. )B. Leal characterK Chec;s representin1 deposit %one do not have

le1al tender po#er and their acceptance in the pa%ent of debts, both public

and private, is at the option of the creditor2 Provided, ho#ever, that a chec;

#hich has been cleared and credited to the account of the creditor shall be

e$uivalent to a deliver to the creditor of cash in an a%ount e$ual to the a%ount

credited to his account.

4ro% the afore$uoted provisions of la#, it is clear that this petition %ust fail.

In the recent cases of hilippine -irlines, "nc. vs. Court of -ppeals1and Bo!anCatholic ;ishop of :alolos, "nc. vs. "nter!ediate -ppellate Court,5this Courtheld that K

& chec;, #hether a %ana1er9s chec; or ordinar chec;, is not le1al tender, and

an offer of a chec; in pa%ent of a debt is not a valid tender of pa%ent and

%a be refused receipt b the obli1ee or creditor.

he rulin1 in these t#o 567 cases %erel applies the statutor provisions #hich

la do#n the rule that a chec; is not le1al tender and that a creditor %a validl

refuse pa%ent b chec;, #hether it be a %ana1er9s, cashier9s or personal

chec;.

Petitioners erroneousl rel on one of the dissentin1 opinions in the hilippine

-irlines case


27/42

his petition for certiorariassails the Court of &ppeals9 decision dated &pril 6,

/*0 in C&'(.R. SP No. +B"B, entitled on.

&ntonio R. Manabat, et al.7, the SEC declared that it had assu%ed @urisdiction

over petitioner &lfredo Chin1 pursuant to Section ), Rule B of the ne# Rules of

Procedure of the SEC providin1 that


28/42

/. in holdin1 that @urisdiction over respondent &lfredo Chin1 #as assu%ed b the

SEC because he #as a co'si1ner or suret of P3M and that the lo#er court %a

not assu%e @urisdiction over hi% so as to avoid %ultiplicit of suitsH and

6. in holdin1 that the @urisdiction assu%ed b the SEC over Chin1 #as to the

e?clusion of courts or tribunals of coordinate ran;.

he petition for revie# is %eritorious.

&lthou1h Chin1 #as i%pleaded in SEC Case No. 66"+, as a co'petitioner of

P3M, the SEC could not assu%e @urisdiction over his person and properties.

he Securities and E?chan1e Co%%ission #as e%po#ered, as rehabilitation

receiver, to ta;e custod and control of the assets and properties of P3M onl,

for the SEC has @urisdiction over corporations onl not over private individuals,

e?cept stoc;holders in an intra'corporate dispute 5Sec. ", P.D. +6'& and Sec. 6

of P.D. /0"*7. 3ein1 a no%inal part in SEC Case No. 66"+, Chin19s properties

#ere not included in the rehabilitation receivership that the SEC constituted to

ta;e custod of P3M9s assets. herefore, the petitioner ban; #as not barred

fro% filin1 a suit a1ainst Chin1, as a suret for P3M. &n ano%alous situation

#ould arise if individual sureties for debtor corporations %a escape liabilit b

si%pl co' filin1 #ith the corporation a petition for suspension of pa%ents in the

SEC #hose @urisdiction is li%ited onl to corporations and their corporate assets.

he ter%


29/42

5c7 post'dated chec;s paable on /B March /*/ 5i.e., the %aturit date of

petitioner9s invest%ent7, #ith petitioner as paee, Philfinance as dra#er, and

Insular 3an; of &sia and &%erica as dra#ee, in the total a%ount of

PB+!,"BB.BB.

On /B March /*/, petitioner sou1ht to encash the postdated chec;s issued b

Philfinance. >o#ever, the chec;s #ere dishonored for havin1 been dra#n

a1ainst insufficient funds.

On 6) March /*/, Philfinance delivered to petitioner the DCR No. /+*+"

issued b private respondent Pilipinas 3an; 5


30/42

Petitioner appealed to respondent Court of &ppeals in C.&.'(.R. CV No. /"/".

In a Decision dated 6/ March /*, the Court of &ppeals denied the appeal and

held2ERE4ORE, findin1 no reversible error in the decision appealed fro%, the

sa%e is hereb affir%ed in toto. Cost a1ainst plaintiff'appellant.

Petitioner %oved for reconsideration of the above Decision, #ithout success.

>ence, this Petition for Revie# on Certiorari.

&fter consideration of the alle1ations contained and issues raised in the

pleadin1s, the Court resolved to 1ive due course to the petition and re$uired the

parties to file their respective %e%oranda.7

Petitioner reiterates the assi1n%ent of errors he directed at the trial court

decision, and contends that respondent court of &ppeals 1ravel erred2 5i7 in

concludin1 that he cannot recover fro% private respondent Delta his assi1ned

portion of DMC PN No. 60B/H 5ii7 in failin1 to hold private respondent Pilipinas

solidaril liable on the DMC PN No. 60B/ in vie# of the provisions stipulated in

DCR No. /+*+" issued in favor r of petitioner, and 5iii7 in refusin1 to pierce theveil of corporate entit bet#een Philfinance, and private respondents Delta and

Pilipinas, considerin1 that the three 5B7 entities belon1 to the o#ever, since Philfinance has not been i%pleaded in this case, neither the trial

court nor the Court of &ppeals ac$uired @urisdiction over the person of

Philfinance. It is, conse$uentl, not necessar for present purposes to deal #ith

this third relationship, e?cept to the e?tent it necessaril i%pin1es upon or

intersects the first and second relationships.

I.

Ae consider first the relationship bet#een petitioner and Delta.

he Court of appeals in effect held that petitioner ac$uired no ri1hts vis3a3

vis Delta in respect of the Delta pro%issor note 5DMC PN No. 60B/7 #hichPhilfinance sold


31/42

%a, ho#ever, instead of bein1 ne1otiated, also be assinedortransferred. he

le1al conse$uences of ne1otiation as distin1uished fro% assi1n%ent of a

ne1otiable instru%ent are, of course, different. & non'ne1otiable instru%ent

%a, obviousl, not be ne1otiatedH but it %a be assi1ned or transferred, absent

an e?press prohibition a1ainst assi1n%ent or transfer #ritten in the face of the

instru%ent2

he #ords 2not neotiable,2sta%ped on the face of the bill of ladin1, did not

destroy its assinability, but the sole effect #as to e?e%pt the bill fro% the

statutor provisions relative thereto, and a bill, thou1h not neotiable, !ay be

transferred by assin!entH the assi1nee ta;in1 sub@ect to the e$uities bet#een

the ori1inal parties.25E%phasis added7

DMC PN No. 60B/, #hile %ar;ed


32/42

!ar'et !echanis! is intended to provide #uic' !obility of !oney and

securities.2

he i%personal character of the %one %ar;et device overloo;s the individuals

or entities concerned. The issuer of a co!!ercial paper in the !oney !ar'et

necessarily 'nows in advance that it would be ependitiously transacted and

transferred to any investorlender without need of notice to said issuer. "n

practice, no notification is iven to the borrower or issuer of co!!ercial paper of

the sale or transfer to the investor.

??? ??? ???

here is need to individuate a %one %ar;et transaction, a relativel novel

institution in the Philippine co%%ercial scene. "t has been intended to facilitate

the flow and ac#uisition of capital on an i!personal basis.&nd as specificall

re$uired b Presidential Decree No. )0*, the investin public !ust be iven

ade#uate and effective protection in availin of the credit of a borrower in the

co!!ercial paper !ar'et.!5Citations o%ittedH e%phasis supplied7

Ae turn to Delta9s ar1u%ents concernin1 alle1ed co%pensation or offsettin1

bet#een DMC PN No. 60B/ and Philfinance PN No. /!B'&. It is i%portant to

note that at the ti!e hilfinance sold part of its rihts under D:C 5 5o. />1=to petitioner on 8ebruary =F=, no co!pensation had as yet ta'en place and

indeed none could have ta'en place.he essential re$uire%ents of

co%pensation are listed in the Civil Code as follo#s2

&rt. /60. In order that co%pensation %a be proper, it is necessar2

5/7 hat each one of the obliors be bound principally, and that he be at the

sa!e ti!e a principal creditor of the other+

567 hat both debts consists in a su% of %one, or if the thin1s due are

consu%able, the be of the sa%e ;ind, and also of the sa%e $ualit if the latter

has been statedH

5B7 That the two debts are due+

5!7 hat the be li$uidated and de%andableH

5"7 hat over neither of the% there be an retention or controvers, co%%enced

b third persons and co%%unicated in due ti%e to the debtor. 5E%phasis

supplied7

On 4ebruar /*/, neither DMC PN No. 60B/ nor Philfinance PN No. /!B'&

#as due. his #as e?plicitl reco1ni8ed b Delta in its /+ &pril /*+


33/42

has ac$uired a title b transfer to de%and pa%ent of the debt, to 1ive his debt

or notice.22

&t the ti%e that Delta #as first put to notice of the assi1n%ent in petitioner9s

favor on /! -ul /*/, DMC PN No. 60B/ had alread been dischar1ed b

co%pensation. Since the assi1nor Philfinance could not have then co%pelled

pa%ent ane# b Delta of DMC PN No. 60B/, petitioner, as assi1nee of

Philfinance, is si%ilarl disabled fro% collectin1 fro% Delta the portion of the

Note assi1ned to hi%.

It bears so%e e%phasis that petitioner could have notified Delta of the

assi1n%ent or sale #as effected on 4ebruar /*/. >e could have notified

Delta as soon as his %one %ar;et place%ent %atured on /B March /*/

#ithout pa%ent thereof bein1 %ade b PhilfinanceH at that ti%e, co%pensation

had et to set in and dischar1e DMC PN No. 60B/. &1ain petitioner could have

notified Delta on 6) March /*/ #hen petitioner received fro% Philfinance the

Deno%inated Custodianship Receipt 5


34/42

the thin1 sold #ould be placed outside the control of the vendor. Indeed, the

constitutin1 of the depositar or custodianship a1ree%ent #as e$uivalent to

constructive deliver of the Note 5to the e?tent it had been sold or assi1ned to

petitioner7 to petitioner. It #ill be seen that custodianship a1ree%ents are

desi1ned to facilitate transactions in the %one %ar;et b providin1 a basis for

confidence on the part of the investors or placers that the instru%ents bou1ht b

the% are effectivel ta;en out of the poc;et, as it #ere, of the vendors and

placed safel beond their reach, that those instru%ents #ill be there availableto the placers of funds should the have need of the%. he depositar in a

contract of deposit is obli1ed to return the securit or the thin1 deposited upon

de%and of the depositor 5or, in the presented case, of the beneficiar7 of the

contract, even thou1h a ter% for such return %a have been established in the

said contract.2


35/42

Decision and Resolution had dis%issed petitioner9s co%plaint a1ainst Pilipinas

3an;. Private respondent Pilipinas ban; is hereb ORDERED to inde%nif

petitioner for da%a1es in the a%ount of PB+!,"BB.BB, plus le1al interest thereon

at the rate of si? percent 5)7per annu! counted fro% 6 &pril /*/. &s so

%odified, the Decision and Resolution of the Court of &ppeals are hereb

&44IRMED. No pronounce%ent as to costs.

SO ORDERED.

;idin, Davide,


36/42

posted pursuant to Sec B of &ct B/B" is not the notice to #hich the %ort1a1or is

entitled upon the application bein1 %ade for an e?tra@udicial foreclosure. ... 0

On the fore1oin1 findin1s, the respondent court conse$uentl decreed that'

In vie# of all the fore1oin1, the @ud1%ent appealed fro% is hereb reversed, and

another one entered 5/7 declarin1 the foreclosure of the %ort1a1e void insofar

as it affects the share of the appellantsH 567 directin1 the (SIS to reconve to

appellants their share of the %ort1a1ed propert, or the value thereof if alreadsold to third part, in the su% of P B",+++.++, and 5B7 orderin1 the appellees

4laviano a1asca and Esther a1asca to pa the appellants the su% of P

/+,++.++ as %oral da%a1es, P ",+++.++ as attorne9s fees, and costs.

he case is no# before us in this petition for revie#.

In sub%ittin1 their case to this Court, both parties relied on the provisions of

Section 6 of &ct No. 6+B/, other#ise ;no#n as the Ne1otiable Instru%ents

a#, #hich provide that an acco%%odation part is one #ho has si1ned an

instru%ent as %a;er, dra#er, acceptor of indorser #ithout receivin1 value

therefor, but is held liable on the instru%ent to a holder for value althou1h the

latter ;ne# hi% to be onl an acco%%odation part.

his approach of both parties appears to be %isdirected and their reliance

%isplaced. he pro%issor note hereinbefore $uoted, as #ell as the %ort1a1e

deeds sub@ect of this case, are clearl not ne1otiable instru%ents. hese

docu%ents do not co%pl #ith the fourth re$uisite to be considered as such

under Section / of &ct No. 6+B/ because the are neither paable to order nor

to bearer. he note is paable to a specified part, the (SIS. &bsent the

aforesaid re$uisite, the provisions of &ct No. 6+B/ #ould not applH 1overnance

shall be afforded, instead, b the provisions of the Civil Code and special la#s

on %ort1a1es.

&s earlier indicated, the factual findin1s of respondent court are that private

respondents si1ned the docu%ents o#ever, contrar to the holdin1 of the respondent court, it cannot be said that

private respondents are #ithout liabilit under the aforesaid %ort1a1e contracts.

he factual conte?t of this case is precisel #hat is conte%plated in the last

para1raph of &rticle 6+*" of the Civil Code to the effect that third persons #ho

are not parties to the principal obli1ation %a secure the latter b pled1in1 or

%ort1a1in1 their o#n propert

So lon1 as valid consent #as 1iven, the fact that the loans #ere solel for the

benefit of the a1asca spouses #ould not invalidate the %ort1a1e #ith respect

to private respondents9 share in the propert. In consentin1 thereto, even

assu%in1 that private respondents %a not be assu%in1 personal liabilit for the

debt, their share in the propert shall nevertheless secure and respond for the

perfor%ance of the principal obli1ation. he parties to the %ort1a1e could not

have intended that the sa%e #ould appl onl to the ali$uot portion of the

a1asca spouses in the propert, other#ise the consent of the private

respondents #ould not have been re$uired.

he supposed re$uire%ent of prior de%and on the private respondents #ould

not be in point here since the %ort1a1e contracts created obli1ations #ith

specific ter%s for the co%pliance thereof. he facts further sho# that the private

respondents e?pressl bound the%selves as solidar debtors in the pro%issor

note hereinbefore $uoted.

Co%in1 no# to the e?tra@udicial foreclosure effected b (SIS, Ae cannot a1ree

#ith the rulin1 of respondent court that lac; of notice to the private respondents

of the e?tra@udicial foreclosure sale i%pairs the validit thereof. In;onnevie, et

al. vs. Court of appeals, et al., 5the Court ruled that &ct No. B/B", as a%ended,

does not re$uire personal notice on the %ort1a1or, $uotin1 the re$uire%ent on

notice in such cases as follo#s2

Section B. Notice shall be 1iven b postin1 notices of sale for not less than

t#ent das in at least three public places of the %unicipalit #here the propert

is situated, and if such propert is #orth %ore than four hundred pesos, such

notice shall also be published once a #ee; for at least three consecutive #ee;s

in a ne#spaper of 1eneral circulation in the %unicipalit or cit.


37/42

here is no sho#in1 that the fore1oin1 re$uire%ent on notice #as not co%plied

#ith in the foreclosure sale co%plained of .

he respondent court, therefore, erred in annullin1 the %ort1a1e insofar as it

affected the share of private respondents or in directin1 reconveance of their

propert or the pa%ent of the value thereof Indubitabl, #hether or not private

respondents herein benefited fro% the loan, the %ort1a1e and the e?tra@udicial

foreclosure proceedin1s #ere valid.

A>ERE4ORE, @ud1%ent is hereb rendered REVERSIN( the decision of the

respondent Court of &ppeals and REINS&IN( the decision of the court a

#uoin Civil Case No. J'!/* thereof.

SO ORDERED.

Melencio'>errera 5Chairperson7, Paras, Padilla and Sar%iento, --., concur.

Republic of the Philippines

SUPREME COURTManila

SECOND DIVISION

G.R. No. 97753 A4=4 0, 992

CALTE: @P%ILIPPINES, INC., petitioner,vs.

COURT O) APPEALS &'( SECURIT# BANK AN" TRUSTCOMPAN#, respondents.

;ito, Lozada, Ortea & Castillo for petitioners.

5epo!uceno, 4ofilea & Auinona for private.

REGALA"O, J.:

his petition for revie# on certiorarii%pu1ns and see;s the reversal of the

decision pro%ul1ated b respondent court on March *, // in C&'(.R. CV No.

6B)/" affir%in1 #ith %odifications, the earlier decision of the Re1ional rialCourt of Manila, 3ranch GII, 2#hich dis%issed the co%plaint filed therein bherein petitioner a1ainst respondent ban;.

he undisputed bac;1round of this case, as found b the court a #uo and

adopted b respondent court, appears of record2

/. On various dates, defendant, a co%%ercial ban;in1 institution, throu1h its

Sucat 3ranch issued 6*+ certificates of ti%e deposit 5CDs7 in favor of one

&n1el dela Cru8 #ho deposited #ith herein defendant the a11re1ate a%ount of

P/,/6+,+++.++, as follo#s2 5-oint Partial Stipulation of 4acts and State%ent of

Issues, Ori1inal Records, p. 6+0H Defendant9s E?hibits / to 6*+7H

CTD CTD

Dates6erial 5os.Huantity-!ount

66 4eb. *6 +/+/ to +/6+ 6+ P*+,+++

6) 4eb. *6 0!)+6 to 0!)/ + B)+,+++

6 Mar. *6 0!0+/ to 0!0!+ !+ /)+,+++

! Mar. *6 +/60 to +/!) 6+ *+,+++

" Mar. *6 0!00 to !*++ ! /),+++

" Mar. *6 *)" to **) 66 **,+++

" Mar. *6 0+/!0 to +/"+ ! /),+++

* Mar. *6 +++/ to ++6+ 6+ *+,+++

Mar. *6 ++6B to ++"+ 6* //6,+++

Mar. *6 */ to ++++ /+ !+,+++

Mar. *6 +6"/ to +606 66 **,+++

KKK KKKK

otal 6*+ P/,/6+,+++

6. &n1el dela Cru8 delivered the said certificates of ti%e 5CDs7 to herein

plaintiff in connection #ith his purchased of fuel products fro% the latter 5Ori1inal

Record, p. 6+*7.

B. So%eti%e in March /*6, &n1el dela Cru8 infor%ed Mr. i%oteo ian1co, the

Sucat 3ranch Man1er, that he lost all the certificates of ti%e deposit in dispute.

Mr. ian1co advised said depositor to e?ecute and sub%it a notari8ed &ffidavit

of oss, as re$uired b defendant ban;9s procedure, if he desired replace%ent

of said lost CDs 5SN, 4ebruar , /*0, pp. !*'"+7.

!. On March /*, /*6, &n1el dela Cru8 e?ecuted and delivered to defendantban; the re$uired &ffidavit of oss 5Defendant9s E?hibit 6*/7. On the basis of

said affidavit of loss, 6*+ replace%ent CDs #ere issued in favor of said

depositor 5Defendant9s E?hibits 6*6'")/7.

". On March 6", /*6, &n1el dela Cru8 ne1otiated and obtained a loan fro%

defendant ban; in the a%ount of Ei1ht >undred Sevent 4ive housand Pesos

5P*0",+++.++7. On the sa%e date, said depositor e?ecuted a notari8ed Deed of

&ssi1n%ent of i%e Deposit 5E?hibit ")67 #hich stated, a%on1 others, that he

5de la Cru87 surrenders to defendant ban;


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#hatever a%ount or a%ounts %a be due< on the loan upon its %aturit 5SN,

4ebruar , /*0, pp. )+')67.

). So%eti%e in Nove%ber, /*6, Mr. &ranas, Credit Mana1er of plaintiff Calte?

5Phils.7 Inc., #ent to the defendant ban;9s Sucat branch and presented for

verification the CDs declared lost b &n1el dela Cru8 alle1in1 that the sa%e

#ere delivered to herein plaintiff O=S&ND ONF, SEC=RIF 3&N S=C& O44ICE

P!,+++ : ++ CS Pesos, Philippine Currenc, repaable to said depositor 0B/

das. after date, upon presentation and surrender of this certificate, #ith interest

at the rate of /) per centper annu!.

5S1d. Ille1ible7 5S1d. Ille1ible7

KKKKKKKKKK KKKKKKKKKKK

&=>ORIED SI(N&=RES5

Respondent court ruled that the CDs in $uestion are non'ne1otiable

instru%ents, nationali8in1 as follo#s2

. . . Ahile it %a be true that the #ord


39/42

5b7 Must contain an unconditional pro%ise or order to pa a su% certain in

%oneH

5c7 Must be paable on de%and, or at a fi?ed or deter%inable future ti%eH

5d7 Must be paable to order or to bearerH and

5e7 Ahere the instru%ent is addressed to a dra#ee, he %ust be na%ed or

other#ise indicated therein #ith reasonable certaint.

he CDs in $uestion undoubtedl %eet the re$uire%ents of the la# for

ne1otiabilit. he parties9 bone of contention is #ith re1ard to re$uisite 5d7 set

forth above. It is noted that Mr. i%oteo P. ian1co, Securit 3an;9s 3ranch

Mana1er #a bac; in /*6, testified in open court that the depositor reffered to

in the CDs is no other than Mr. &n1el de la Cru8.

??? ??? ???

&tt. Calida2

$ In other #ords Mr. Aitness, ou are sain1 that per boo;s of the ban;, the

depositor referred 5sic7 in these certificates states that it #as &n1el dela Cru8L

#itness2

a Fes, our >onor, and #e have the record to sho# that &n1el dela Cru8 #as

the one #ho cause 5sic7 the a%ount.

&tt. Calida2

$ &nd no other person or entit or co%pan, Mr. AitnessL

#itness2

a None, our >onor. 7

??? ??? ???

&tt. Calida2

$ Mr. Aitness, #ho is the depositor identified in all of these certificates of ti%e

deposit insofar as the ban; is concernedL

#itness2

a &n1el dela Cru8 is the depositor. !

??? ??? ???

On this score, the accepted rule is that the ne1otiabilit or non'ne1otiabilit of an

instru%ent is deter%ined fro% the #ritin1, that is, fro% the face of the instru%ent

itself.9In the construction of a bill or note, the intention of the parties is tocontrol, if it can be le1all ascertained. 0Ahile the #ritin1 %a be read in theli1ht of surroundin1 circu%stances in order to %ore perfectl understand the

intent and %eanin1 of the parties, et as the have constituted the #ritin1 to be

the onl out#ard and visible e?pression of their %eanin1, no other #ords are to

be added to it or substituted in its stead. he dut of the court in such case is to

ascertain, not #hat the parties %a have secretl intended as

contradistin1uished fro% #hat their #ords e?press, but #hat is the %eanin1 of

the #ords the have used. Ahat the parties %eant %ust be deter%ined b #hat

the said.

Contrar to #hat respondent court held, the CDs are ne1otiable instru%ents.

he docu%ents provide that the a%ounts deposited shall be repaable to the

depositor. &nd #ho, accordin1 to the docu%ent, is the depositorL It is the


40/42

both deliver and indorse%ent. 4or, althou1h petitioner see;s to deflect this fact,

the CDs #ere in realit delivered to it as a securit for De la Cru89 purchases of

its fuel products. &n doubt as to #hether the CDs #ere delivered as pa%ent

for the fuel products or as a securit has been dissipated and resolved in favor

of the latter b petitioner9s o#n authori8ed and responsible representative

hi%self.

In a letter dated Nove%ber 6), /*6 addressed to respondent Securit 3an;,

-.J. &ranas, -r., Calte? Credit Mana1er, #rote2 avin1 opposed the %otion, petitioner no# labors under the presu%ption that

evidence #illfull suppressed #ould be adverse if produced. 9

=nder the fore1oin1 circu%stances, this dis$uisition in "nterrated Bealty

Corporation, et al. vs. hilippine 5ational ;an', et al.20is apropos2

. . . &dvertin1 a1ain to the Court9s pronounce%ents in Lopez, supra, #e $uote

therefro%2

he character of the transaction bet#een the parties is to be deter%ined b their

intention, re1ardless of #hat lan1ua1e #as used or #hat the for% of the transfer

#as. If it #as intended to secure the pa%ent of %one, it %ust be construed as

a pled1eH but if there #as so%e other intention, it is not a pled1e. >o#ever, even

thou1h a transfer, if re1arded b itself, appears to have been absolute, its ob@ect

and character %i1ht still be $ualified and e?plained b conte%poraneous #ritin1

declarin1 it to have been a deposit of the propert as collateral securit. It has

been said that a transfer of propert b the debtor to a creditor, even if sufficient

on its face to %a;e an absolute conveance, should be treated as a pled1e if

the debt continues in ine?istence and is not dischar1ed b the transfer, and that

accordin1l the use of the ter%s ordinaril i%portin1 conveance of absolute

o#nership #ill not be 1iven that effect in such a transaction if the are also

co%%onl used in pled1es and %ort1a1es and therefore do not un$ualifiedl

indicate a transfer of absolute o#nership, in the absence of clear and

una%bi1uous lan1ua1e or other circu%stances e?cludin1 an intent to pled1e.

Petitioner9s insistence that the CDs #ere ne1otiated to it be1s the $uestion.

=nder the Ne1otiable Instru%ents a#, an instru%ent is ne1otiated #hen it is

transferred fro% one person to another in such a %anner as to constitute the

transferee the holder thereof, 2and a holder %a be the paee or indorsee of a

bill or note, #ho is in possession of it, or the bearer thereof. 22In the presentcase, ho#ever, there #as no ne1otiation in the sense of a transfer of the le1al

title to the CDs in favor of petitioner in #hich situation, for obvious reasons,

%ere deliver of the bearer CDs #ould have sufficed. >ere, the deliver

thereof onl as securit for the purchases of &n1el de la Cru8 5and #e even

disre1ard the fact that the a%ount involved #as not disclosed7 could at the %ost

constitute petitioner onl as a holder for value b reason of his lien. &ccordin1l,a ne1otiation for such purpose cannot be effected b %ere deliver of the

instru%ent since, necessaril, the ter%s thereof and the subse$uent disposition

of such securit, in the event of non'pa%ent of the principal obli1ation, %ust be

contractuall provided for.

he pertinent la# on this point is that #here the holder has a lien on the

instru%ent arisin1 fro% contract, he is dee%ed a holder for value to the e?tent of

his lien. 23&s such holder of collateral securit, he #ould be a pled1ee but there$uire%ents therefor and the effects thereof, not bein1 provided for b the

Ne1otiable I

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