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Bank of the Philippine Islands vs. Casa Montessori Internationale, 430SCRA 26, Ma! 2", 2004

1. Negotiable Instruments Law; A forged signature is a real or absolute defense,and a person whose signature on a negotiable instrument is forged is deemed tohave never become a party thereto and to have never consented to the contract

that allegedly gave rise to it.-

ection !" of the NIL provides# $ection !". %orged signature; e&ect of.'(hen asignature is forged or made without the authority of the person whose signatureit purports to be, it is wholly inoperative, and no right ) ) ) to enforce paymentthereof against any party thereto, can be ac*uired through or under suchsignature, unless the party against whom it is sought to enforce such right isprecluded from setting up the forgery or want of authority.+ nder this provision,a forged signature is a real or absolute defense, and a person whose signatureon a negotiable instrument is forged is deemed to have never become a partythereto and to have never consented to the contract that allegedly gave rise toit. he counterfeiting of any writing, consisting in the signing of anothers name

with intent to defraud, is forgery.

!. Negotiable Instruments Law; /hec0s; vidence; 2est vidence 3ule; nder thebest evidence rule as applied to documentary evidence, li0e the chec0s in*uestion, no secondary evidence or substitutionary evidence may inceptively beintroduced, as the original writing itself must be produced in court, but when,without bad faith on the part of the o&eror, the original chec0s have alreadybeen destroyed or cannot be produced in court, secondary evidence, li0emicro4lm copies, may be produced.-

%orgery $cannot be presumed.+ It must be established by clear, positive andconvincing evidence. nder the best evidence rule as applied to documentaryevidence li0e the chec0s in *uestion, no secondary or substitutionary evidencemay inceptively be introduced, as the original writing itself must be produced incourt. 2ut when, without bad faith on the part of the o&eror, the original chec0shave already been destroyed or cannot be produced in court, secondaryevidence may be produced. (ithout bad faith on its part, /AA proved the lossor destruction of the original chec0s through the A5davit of the one person who0new of that fact'6abut. 7e clearly admitted to discarding the paid chec0s tocover up his misdeed. In such a situation, secondary evidence li0e micro4lmcopies may be introduced in court.

". Negotiable Instruments Law; /hec0s; vidence; 2est vidence 3ule; ven withrespect to documentary evidence, the best evidence rule applies only when thecontents of the document'such as the drawers signature on a chec0'is thesub8ect of in*uiry.-

ven with respect to documentary evidence, the best evidence rule applies onlywhen the contents of a document'such as the drawers signature on a chec0'isthe sub8ect of in*uiry. As to whether the document has been actually e)ecuted,this rule does not apply; and testimonial as well as any other secondaryevidence is admissible. /arina Lebron herself, the drawers authori9ed signatory,

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testi4ed many times that she had never signed those chec0s. 7er testimonialevidence is admissible; the chec0s have not been actually e)ecuted. hegenuineness of her handwriting is proved, not only through the courtscomparison of the *uestioned hand-writings and admittedly genuine specimensthereof, but above all by her.

:. Negotiable Instruments Law; /hec0s; vidence; 2est vidence 3ule; f noconse*uence is the fact that the depositor did not present the signature cardcontaining the signatures with which those on the chec0s were compared'specimens of standard signatures are not limited to such a card.-

he failure of /AA to produce the original chec0s neither gives rise to thepresumption of suppression of evidence nor creates an unfavorable inferenceagainst it. uch failure merely authori9es the introduction of secondary evidencein the form of micro4lm copies. f no conse*uence is the fact that /AA did notpresent the signature card containing the signatures with which those on thechec0s were compared. pecimens of standard signatures are not limited to sucha card. /onsidering that it was not produced in evidence, other documents that

bear the drawers authentic signature may be resorted to. 2esides, that card wasin the possession of 2

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account will be correct cannot be considered a waiver, even if the depositorfailed to report the error, and neither is it estopped from *uestioning the mista0eafter the lapse of the ten-day period'such notice is a simple con4rmation or$circulari9ation,+'in accounting parlance, that re*uests client-depositors toa5rm the accuracy of items recorded by the ban0s.-

he monthly statements issued by 2

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anything contrary to that established as the truth, in legal contemplation;stoppel will not arise from a conduct due to ignorance founded upon aninnocent mista0e.-

stoppel precludes individuals from denying or asserting, by their own deed orrepresentation, anything contrary to that established as the truth, in legal

contemplation. ur rules on evidence even ma0e a 8uris et de 8ure presumptionthat whenever one has, by ones own act or omission, intentionally anddeliberately led another to believe a particular thing to be true and to act uponthat belief, one cannot'in any litigation arising from such act or omission'bepermitted to falsify that supposed truth. In the instant case, /AA never madeany deed or representation that misled 2

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In this 8urisdiction, the negligence of the party invo0ing forgery is recogni9ed asan e)ception to the general rule that a forged signature is wholly inoperative./ontrary to 2

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credit is a 4nancial device developed by merchants as a convenient andrelatively safe mode of dealing with sales of goods to satisfy the seeminglyirreconcilable interests of a seller, who refuses to part with his goods before he ispaid, and a buyer, who wants to have control of the goods before paying. heuse of credits in commercial transactions serves to reduce the ris0 ofnonpayment of the purchase price under the contract for the sale of goods.

7owever, credits are also used in non-sale settings where they serve to reducethe ris0 of nonperfor- mance. Generally, credits in the non-sale settings havecome to be 0nown as standby credits.

!. /ommercial Law; 2an0s and 2an0ing; Letters of /redit; tandby /redits;/ommercial /redits and tandby /redits, Eistinguished.-

here are three signi4cant di&erences between commercial and standby credits.%irst, commercial credits involve the payment of money under a contract of sale.uch credits become payable upon the presentation by the seller-bene4ciary ofdocuments that show he has ta0en a5rmative steps to comply with the salesagreement. In the standby type, the credit is payable upon certi4cation of a

partys nonperformance of the agreement. he documents that accompany thebene4ciarys draft tend to show that the applicant has not performed. hebene4ciary of a commercial credit must demonstrate by documents that he hasperformed his contract. he bene4ciary of the standby credit must certify thathis obligor has not performed the contract.

". /ommercial Law; 2an0s and 2an0ing; Letters of /redit; A letter of credit changesits nature as di&erent transactions occur and if carried through to completionends up as a binding contract between the issuing and honoring ban0s withoutany regard or relation to the underlying contract or disputes between the partiesthereto.-

2y de4nition, a letter of credit is a written instrument whereby the writerre*uests or authori9es the addressee to pay money or deliver goods to a thirdperson and assumes responsibility for payment of debt therefor to theaddressee. A letter of credit, however, changes its nature as di&erenttransactions occur and if carried through to completion ends up as a bindingcontract between the issuing and honoring ban0s without any regard or relationto the underlying contract or disputes between the parties thereto.

:. /ommercial Law; 2an0s and 2an0ing; Letters of /redit; niform /ustoms and

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/ustoms and

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>. /ommercial Law; 2an0s and 2an0ing; Letters of /redit; $Independence

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words, the argument is incompatible with the very nature of the letter of credit.If a letter of credit is drawable only after settlement of the dispute on thecontract entered into by the applicant and the bene4ciary, there would be nopractical and bene4cial use for letters of credit in commercial transactions.

D. /ommercial Law; 2an0s and 2an0ing; Letters of /redit; $Independence

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purpose of the letter of credit and not only fraud under the main agreement; and?c irreparable in8ury might follow if in8unction is not granted or the recovery ofdamages would be seriously damaged.

1!./ommercial Law; 2an0s and 2an0ing; Letters of /redit; $Independence

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8ustify the issuance of an in8unction. (hat petitioner did assert before the courtsbelow was the fact that L7/s draws on the ecurities would be premature andwithout basis in view of the pending disputes between them.

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!. /ommercial Law; Negotiable Instruments Law; ssential 3e*uisites of aNegotiable Instrument; A trust receipt is a document of security pursuant towhich a ban0 ac*uires a $security interest+ in the goods under trust receipt.-

A trust receipt is considered as a security transaction intended to aid in 4nancingimporters and retail dealers who do not have su5cient funds or resources to

4nance the importation or purchase of merchandise, and who may not be able toac*uire credit e)cept through utili9ation, as collateral of the merchandiseimported or purchased. A trust receipt, therefor, is a document of securitypursuant to which a ban0 ac*uires a $security interest+ in the goods under trustreceipt. nder a letter of credit-trust receipt arrangement, a ban0 e)tends a loancovered by a letter of credit, with the trust receipt as a security for the loan. hetransaction involves a loan feature represented by a letter of credit, a securityfeature which is in the covering trust receipt which secures an indebtedness.

eati Bank 1 #r'st Copan! vs. Co'rt of Appeals, /6 SCRA *6, April 30,//

1. /ommercial Law; Letters of /redit; /ommercial transactions involving letters ofcredit are governed by the rule of strict compliance.-

It is settled rule in commercial transactions involving letters of credit that thedocuments tendered must strictly conform to the terms of the letter of credit.

he tender of documents by the bene4ciary ?seller must include all documents

re*uired by the letter. A correspondent ban0 which departs from what has beenstipulated under the letter of credit, as when it accepts a faulty tender, acts onits own ris0s and it may not thereafter be able to recover from the buyer or theissuing ban0, as the case may be, the money thus paid to the bene4ciary. husthe rule of strict compliance. In the nited tates, commercial transactionsinvolving letters of credit are governed by the rule of strict compliance. In the

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bene4ciary that it will underta0e the issuing ban0s obligation as its ownaccording to the terms and conditions of the credit.-

he trial court appears to have overloo0ed the fact that an irrevocable credit isnot synonymous with a con4rmed credit. hese types of letters have di&erentmeanings and the legal relations arising from there varies. A credit may be an

irrevocable credit and at the same time a con4rmed credit or vice-versa. Anirrevocable credit refers to the duration of the letter of credit. (hat it simplymeans is that the issuing ban0 may not without the consent of the bene4ciary?seller and the applicant ?buyer revo0e his underta0ing under the letter. heissuing ban0 does not reserve the right to revo0e the credit. n the other hand, acon4rmed letter of credit pertains to the 0ind of obligation assumed by thecorrespondent ban0. In this case, the correspondent ban0 gives an absoluteassurance to the bene4ciary that it will underta0e the issuing ban0s obligationas its own according to the terms and conditions of the credit.

". /ommercial Law; Letters of /redit; Fere opening of a letter of credit does notinvolve a speci4c appropriation of a sum of money in favor of the bene4ciary.-

he mere opening of a letter of credit, it is to be noted, does not involve aspeci4c appropriation of a sum of money in favor of the bene4ciary. It onlysigni4es that the bene4ciary may be able to draw funds upon the letter of creditup to the designated amount speci4ed in the letter. It does not convey the notionthat a particular sum of money has been speci4cally reserved or has been heldin trust. (hat actually transpires in an irrevocable credit is that thecorrespondent ban0 does not receive in advance the sum of money from thebuyer or the issuing ban0. n the contrary, when the correspondent ban0accepts the tender and pays the amount stated in the letter, the money that itdoles out comes not from any particular fund that has been advanced by theissuing ban0, rather it gets the money from its own funds and then later see0s

reimbursement from the issuing ban0.

:. /ommercial Law; Letters of /redit; he concept of guarantee vis-a-vis theconcept of an irrevocable credit are inconsistent with each other.-

he theory of guarantee relied upon by the /ourt of Appeals has to necessarilyfail. he concept of guarantee vis-a-vis the concept of an irrevocable credit areinconsistent with each other. In the 4rst place, the guarantee theory destroys theindependence of the ban0s responsibility from the contract upon which it wasopened. In the second place, the nature of both contracts is mutually in conictwith each other. In contracts of guarantee, the guarantors obligation is merelycollateral and it arises only upon the default of the person primarily liable. nthe other hand, in an irrevocable credit the ban0 underta0es a primaryobligation.

Philippine +ational Bank vs. Sa!o, r., 2/2 SCRA 202 , 'l! 0/, //"

1. (arehouse 3eceipts Law; (arehousemans Lien; 3emedies Available to(arehouseman to nforce 7is (arehousemans Lien. M

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he remedies available to a warehouseman, such as private respondents, toenforce his warehousemans lien are# ?1o refuse to deliver the goods until hislien is satis4ed, pursuant to ection "1 of the (arehouse 3eceipt Law; ?! o sellthe goods and apply the proceeds thereof to the value of the lien pursuant toections "" and ": of the (arehouse 3eceipts Law; and ?" 2y other meansallowed by law to a creditor against his debtor, for the collection from the

depositor of all charges and advances which the depositor e)pressly or impliedlycontracted with the warehouseman to pay under ection "! of the (arehouse3eceipt Law; or such other remedies allowed by law for the enforcement of a lienagainst personal property under ection "= of said law. he third remedy issought 8udicially by suing for the unpaid charges.

!. ame;

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?! hat the warehouseman has legal title in himself on the goods, such title orright being derived directly or indirectly from a transfer made by the depositor atthe time of or subse*uent to the deposit for storage, or from the warehousemanslien. ?ec. 1>, Act No. !1"B?" hat the warehouseman has legally set up the title or right of third personsas lawful defense for non-delivery of the goods as follows#

?a (here the warehouseman has been re*uested, by or on behalf of theperson lawfully entitled to a right of property of or possession in the goods,not to ma0e such delivery ?ec. 1@, Act No. !1"B, in which case, thewarehouseman may, either as a defense to an action brought against him fornondelivery of the goods, or as an original suit, whichever is appropriate,re*uire all 0nown claimants to interplead ?ec. 1B, Act No. !1"B;

?b (here the warehouseman had information that the delivery about to bemade was to one not lawfully entitled to the possession of the goods ?ec. 1@,Act No. !1"B, in which case, the warehouseman shall be e)cused fromliability for refusing to deliver the goods, either to the depositor or personclaiming under him or to the adverse claimant, until the warehouseman has

had a reasonable time to ascertain the validity of the adverse claims or tobring legal proceedings to compel all claimants to interplead ?ec. 1C, Act No.!1"B; and

?c (here the goods have already been lawfully sold to third persons tosatisfy a warehousemans lien, or have been lawfully sold or disposed ofbecause of their perishable or ha9ardous nature. ?ec. ">, Act No. !1"B.

?: hat the warehouseman having a lien valid against the person demandingthe goods refuses to deliver the goods to him until the lien is satis4ed. ?ec."1, Act No. !1"B

?= hat the failure was not due to any fault on the part of thewarehouseman, as by showing that, prior to demand for delivery and refusal,the goods were stolen or destroyed by 4re, ood, etc., without any negligenceon his part, unless he has contracted so as to be liable in such case, or thatthe goods have been ta0en by the mista0e of a third person without the0nowledge or implied assent of the warehouseman, or some other 8usti4ableground for non-delivery.

=. ame; ame; Adverse claim of ownership as a basis by a warehouseman forrefusing to deliver the goods covered by warehouse receipts is not a valid, legale)cuse.-

3egrettably, the factual settings do not su5ciently indicate whether the demandto obtain possession of the goods complied with ection C of the law. hepresumption, nevertheless, would be that the law was complied with, rather thanbreached, by petitioner. pon the other hand, it would appear that the refusal ofprivate respondents to deliver the goods was not anchored on a valid e)cuse,i.e., non-satisfaction of the warehousemans lien over the goods, but on anadverse claim of ownership.

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/omplaint in /ivil /ase No. D@-="@!", by claiming that they are still the legalowners of the sub8ect *uedans and the *uantity of sugar represented therein.nder the circumstances, this hardly *uali4ed as a valid, legal e)cuse. he lossof the warehousemans lien, however, does not necessarily mean thee)tinguishment of the obligation to pay the warehousing fees and charges whichcontinues to be a personal liability of the owners, i.e., the pledgors, not the

pledgee, in this case. 2ut even as to the owners-pledgors, the warehousemanfees and charges have ceased to accrue from the date of the re8ection by NoahsAr0 to heed the lawful demand by petitioner for the release of the goods.

>. ame; ame; %oreclosures; A warehousemans lien should in no event go beyondthe value of the credit in favor of the pledgee M the foreclosure of the thingpledged results in the full satisfaction of the loan liabilities to the pledgee of thepledgers; It is basic in foreclosures that the buyer does not assume theobligations of the pledger to his other creditors even while such buyer ac*uirestitle over the goods less any e)isting preferred lien thereover. M

he 4nality of our denial in G.3. No. 11D!"1 of petitioners petition to nullify the

trial courts order of @1 Farch 1DD= con4rms the warehousemans lien; however,such lien, nevertheless, should be con4ned to the fees and charges as of thedate in Farch 1DD@ when Noahs Ar0 refused to heed

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here are two possible situations in a trust receipt transaction. he 4rst iscovered by the provision which refers to money received under the obligationinvolving the duty to deliver it ?entregarla to the owner of the merchandise sold.

he second is covered by the provision which refers to merchandise receivedunder the obligation to return it ?devolvera to the owner. %ailure of the entrustee

to turn over the proceeds of the sale of the goods, covered by the trust receipt tothe entruster or to return said goods if they were not disposed of in accordancewith the terms of the trust receipt shall be punishable as estafa under Article "1=?1 of the 3evised

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=. ame; ame; 2an0s and 2an0ing; /ontracts; /ontracts of Adhesion; he practiceof ban0s of ma0ing borrowers sign trust receipts to facilitate collection of loansand place them under the threats of criminal prosecution should they be unableto pay it may be un8ust and ine*uitable, if not reprehensible.

he practice of ban0s of ma0ing borrowers sign trust receipts to facilitate

collection of loans and place them under the threats of criminal prosecutionshould they be unable to pay it may be un8ust and ine*uitable, if notreprehensible. uch agreements are contracts of adhesion which borrowers haveno option but to sign lest their loan be disapproved. he resort to this schemeleaves poor and hapless borrowers at the mercy of ban0s, and is prone tomisinterpretation, as had happened in this case. ventually,

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Article !@C= ?! of the /ivil /ode re*uires that, in a contract of pledge ormortgage, it is essential that the pledgor or mortgagor should be the absoluteowner of the things pledged or mortgaged. Article !@C= ?" further mandatesthat the person constituting the pledge or mortgage must have the free disposalof his property, and in the absence thereof, that he be legally authori9ed for the

purpose. Lite) had neither absolute ownership, free disposal nor the authority tofreely dispose of the articles. Lite) could not have sub8ected them to a chattelmortgage. heir inclusion in the mortgage was void and had no legal e&ect.

here being no valid mortgage, there could also be no valid foreclosure or validauction sale. hus, E2< could not be considered either as a mortgagee or as apurchaser in good faith.

". /redit ransactions; rust 3eceipts;

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1. rust 3eceipt Law; An entrustee is one having or ta0ing possession of goods,documents or instruments under a trust receipt transaction, and any successorin interest of such person for the purpose of payment speci4ed in the trustreceipt agreement; bligations of an ntrustee.-

An entrustee is one having or ta0ing possession of goods, documents orinstruments under a trust receipt transaction, and any successor in interest ofsuch person for the purpose of payment speci4ed in the trust receipt agreement.

he entrustee is obliged to# ?1 hold the goods, documents or instruments intrust for the entruster and shall dispose of them strictly in accordance with theterms and conditions of the trust receipt; ?! receive the proceeds in trust for theentruster and turn over the same to the entruster to the e)tent of the amountowing to the entruster or as appears on the trust receipt; ?" insure the goods fortheir total value against loss from 4re, theft, pilferage or other casualties; ?:0eep said goods or proceeds thereof whether in money or whatever form,separate and capable of identi4cation as property of the entruster; ?= return thegoods, documents or instruments in the event of non-sale or upon demand of

the entruster; and ?> observe all other terms and conditions of the trust receiptnot contrary to the provisions of the decree.

!. rust 3eceipt Law; he transaction between petitioner and respondent ban0 fallsunder the trust receipt transactions envisaged in

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or otherwise not disposed of, violate the entrustees obligation to pay theamount or to return the goods to the entruster.

=. rust 3eceipt Law; %ailure of the entrustee to turn over the proceeds of the saleof the goods covered by the trust receipts to the entruster or to return saidgoods if they were not disposed of in accordance with the terms of the trust

receipt is a crime under

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corporation may be charged and prosecuted for a crime if the imposable penaltyis 4ne.-

If the crime is committed by a corporation or other 8uridical entity, the directors,o5cers, employees or other o5cers thereof responsible for the o&ense shall becharged and penali9ed for the crime, precisely because of the nature of the

crime and the penalty therefor. A corporation cannot be arrested andimprisoned; hence, cannot be penali9ed for a crime punishable by imprisonment.7owever, a corporation may be charged and prosecuted for a crime if theimposable penalty is 4ne. ven if the statute prescribes both 4ne andimprisonment as penalty, a corporation may be prosecuted and, if found guilty,may be 4ned.

D. rust 3eceipt Law; /orporation Law; (hen a penal statute does not e)presslyapply to corporations, it does not create an o&ense for which a corporation maybe punished; /orporate o5cers or employees, through whose act, default oromission the corporation commits a crime, are themselves individually guilty ofthe crime.-

(hen a criminal statute designates an act of a corporation or a crime andprescribes punishment therefor, it creates a criminal o&ense which, otherwise,would not e)ist and such can be committed only by the corporation. 2ut when apenal statute does not e)pressly apply to corporations, it does not create ano&ense for which a corporation may be punished. n the other hand, if thetate, by statute, de4nes a crime that may be committed by a corporation butprescribes the penalty therefor to be su&ered by the o5cers, directors, oremployees of such corporation or other persons responsible for the o&ense, onlysuch individuals will su&er such penalty. /orporate o5cers or employees,through whose act, default or omission the corporation commits a crime, arethemselves individually guilty of the crime.

Sariento, r. vs. Co'rt of Appeals, 3/4 SCRA 3 , e%e-er 2*, 20021.