De La Victoria v. Judge Burgos [G.R. No. 111190. June 27,
1995]
20APRFACTS
Private respondent filed a complaint for damages against certain
Fiscal Mabanto, Jr., whose judgment is favorable to the former. The
decision became final and executory and notice of garnishment was
served on petitioner to withhold Mabantos salary checks.
ISSUES
(a) Whether or not a check in the hands of the drawer is already
owned by the payee.
(b) Whether or not an undelivered salary check may already
transfer title to the payee.
RULING
(a) NO. Section 16 of the Negotiable Instruments Law is clear
that where the instrument is no longer in the possession of a party
whose signature appears thereon, a valid and intentional delivery
by him is presumed until the contrary is proved. Proof to the
contrary is its own finding that the checks were in the custody of
petitioner. In this case, as said checks had not yet been delivered
to Mabanto, Jr., they did not belong to him and still had the
character of public funds.
(b) NO. Under Section 16 of the Negotiable Instruments Law,
every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of
giving effect thereto. As ordinarily understood, delivery means the
transfer of the possession of the instrument by the maker or drawer
with intent to transfer title to the payee and recognize him as the
holder thereof. Here, there is no delivery to speak of as the
salary check is not yet in the hands of Mabanto Jr. as the
holder.De La Victoria vs. BurgosG.R. No. 111190. June 27,
1995Bellosillo, J.AssistantCityFiscal Bienvenido N. Mabanto was
ordered to pay herein private respondent Raul Sesbreo P11,000.00 as
damages. A notice of garnishment was served on herein petitioner
Loreto D. de la Victoria as City Fiscal of Mandaue City where
Mabanto was detailed. V was directed not to disburse,transfer,
release or convey to any other person except to the deputy sheriff
concerned the salary checks or other checks, monies, or cash due or
belonging to Mabanto, Jr., under penalty of law. Later, V was
directed to submit his report showing the amount of the garnished
salaries. V moved to quash the notice of garnishment claiming that
he was not in possession of any money, funds, credit, property or
anything of value belonging to Mabanto, Jr., except his salary and
RATA checks, but that said checks were not yet properties of
Mabanto, Jr., until delivered to him. He further claimed that, as
such, they were still public funds which could not be subject to
garnishment.ISSUE: W/N a check still in the hands of the maker or
its duly authorized representative is owned by the payee before
physical delivery to the latter.RULING:As Assistant City Fiscal,
the source of the salary of Mabanto, Jr., is public funds. He
receives his compensation in the form of checks from the DOJ
through V as City Fiscal of Mandaue City and head of office. Under
Sec. 16 of the Negotiable Instruments Law, every contract on a
negotiable instrument is incomplete and revocable untildeliveryof
the instrument for the purpose of giving effect thereto. As
ordinarily understood, delivery means the transfer of the
possession of the instrument by the maker or drawerwith intent to
transfer title to the payee and recognize him as the holder
thereof.Inasmuch as said checks had not yet been delivered to
Mabanto, Jr., theydid not belong to himand still had the character
of public funds. The salary check of a government officer or
employee does not belong to him before it is physically delivered
to him. Until that time the check belongs to the government.
Accordingly, before there is actual delivery of the check, the
payee has no power over it; he cannot assign it without the consent
of the Government. Being public fund, the checks may not be
garnished to satisfy the judgment in consideration of public
policy.Casabuena v. Court of Appeals [G.R. No. 115410. February
27,1988]20APRFACTSTo secure debt, spouses Urdaneta ceded their
rights over the land through a deed of assignment.ISSUEWhether or
not a deed of assignment transfer ownership of property to
assignee.RULINGNO. The act of assignment could not have operated to
efface liens or restrictions burdening the right assigned,because
an assignee cannot acquire a greater right than that pertaining to
the assignor.At most, an assignee can only acquire rights
duplicating those which his assignor is entitled by law to
exercise. In the case at bar, the Casabuenas merely stepped into
Benins shoes, who was not so much an owner as a mere assignee of
the rights of her debtors. Not having acquired any right over the
land in question, it follows that Benin conveyed nothing to
defendants with respect to the property.JUAN CASABUENA,petitioner,
vs.HON. COURT OF APPEALS and SPOUSES CIRIACO URDANETA AND OFELIA
IPIL-URDANETA,respondents.D E C I S I O NROMERO,J.:A one hundred
square meter (100 sq.m.) lot located at the NDC Compound in Santa
Mesa, Manila is coveted by two hopeful parties in this Petition for
Review onCertiorari.The rivals are the spouses Ciriaco and
Ofelia-Ipil Urdaneta, beneficiaries of the Land of the Landless
Program of the City of Manila, and Juan Casabuena, transferee of
the right, title and interest of Ciriacos assignee, Arsenia
Benin.Urdaneta is one of the fortunate grantees of a parcel of land
purchased by the City of Manila and conveyed to its less privileged
inhabitants, through its land reform program.[1]On August 12, 1965,
Urdaneta assigned his rights and interests in one-half (1/2) of the
lot to Arsenia Benin covering full payment of his indebtedness in
the amount of five hundred pesos (P500.00).[2]A deed of sale with
mortgage[3]was executed, with Urdaneta undertaking to pay the City
the amount of five thousand five hundred pesos (P5,500.00) for a
period of forty years in 480 equal installments. On February 16,
1967, after having incurred additional indebtedness in the amount
of two thousand pesos (P2,000.00), Ciriaco executed another deed of
assignment[4]involving the wholelot, with assignee Benin agreeing
to shoulder all obligations including the payment of amortization
to the City, in accordance with the contract between it and
Urdaneta.[5]The parties verbally agreed that Urdaneta could redeem
the property upon payment of the loan within three (3) years from
the date of assignment; failure to pay would transfer physical
possession of the lot to Benin for a period of fifteen (15) years,
without actual transfer of title and ownership thereto.[6]A
Transfer Certificate of Title was issued in the name of Urdaneta,
married to Ofelia Ipil.[7]Meanwhile, the administration of the
property was assigned to brothers Candido and Juan Casabuena,[8]to
whom Benin had transferred her right, title and interest for a
consideration of seven thousand five hundred pesos (P7,500.00).
Notwithstanding this assignment, Benin constructed a two-door
apartment on the lot separately occupied by Jose Abejero and Juan
Casabuena, who collected rentals from the former.After the lot was
fully paid for by the Urdanetas, a Release of Mortgage was executed
on February 7, 1984, under which deed the period of non-alienation
of the land was extended from five (5) years to twenty (20)
years.[9]From 1973 to 1976, Juan Casabuena was Benins rental
collector.[10]Their relationship soured, however, compelling the
latter to name as administrator Angel Tanjuakio, who filed a
complaint for ejectment against petitioner, alleging that the
latter stopped paying rentals on June 15, 1980 and ignored a demand
letter to him. For his part, petitioner asserted that he did not
receive copies of the receipts issued by Tanjuakio because the
tenor of the writings therein made him appear as a tenant of the
premises paying rentals and not paying for monthly amortizations
for the construction cost of the building.[11]Finding that the
receipts issued by Tanjuakio were insufficient to prove his
ownership over the property, thereby depriving him of a better
right of possession over the premises than the defendant
(petitioner herein), the city court[12]dismissed the
complaint.Affirmed by the Regional Trial Court of Manila,[13]the
decision was again affirmed by the appellate court.[14]His motion
for reconsideration having been denied,[15]Tanjuakio appealed to
this Court armed with a petition for review oncertiorariwhich, to
his disappointment, was denied.Upon learning of the litigation
between petitioner and Benin, Urdaneta asked them to vacate the
property and surrender to him possession thereof within fifteen
(15) days from notice.Petitioners adamant refusal to comply with
such demand resulted in a complaint for ejectment and recovery of
possession of property filed by Urdaneta against him (Casabuena),
Benin and Tanjuakio.[16]For lack of jurisdiction, the complaint was
dismissed by the city court. The Urdaneta spouses then entered into
an agreement with Benin whereby the latter would surrender to them
the property with the duplex constructed thereon.On November 3,
1987, they filed a complaint for recovery of possession of the
property with damages against petitioner and Thelma Casabuena,
representing the heirs of Candido Casabuena.Amid the sprouting
controversies involving the lot, the Urdaneta spouses succeeded in
having the Court declare them as its true and lawful owners with
the deed of assignment to Benin merely serving as evidence of
Ciriacos indebtedness to her in view of the prohibition against the
sale of the land imposed by the City government.On appeal, the
appellate court affirmed[17]the findings of the lower court.A
motion for reconsideration was denied.Unfazed by the protracted
litigious process, petitioner files this petition for review on
certiorari, arguing that the assignment by Benin was made in her
capacity as creditor of the spouses, thus allowing her to transfer
ownership of the property to her assignees.Can a deed of assignment
transfer ownership of the property to the assignee?At the bottom of
this controversy is the undisputed fact that Ciriaco Urdaneta was
indebted to Benin, to secure which debt the spouses ceded their
rights over the land through a deed of assignment.An assignment of
credit is an agreement by virtue of which the owner of a credit,
known as the assignor, by a legal cause, transfers his credit and
its accessory rights to another, known as the assignee, who
acquires the power to enforce it to the same extent as the assignor
could have enforced it against the debtor.[18]Stated simply, it is
the process of transferring the right of the assignor to the
assignee, who would then be allowed to proceed against the
debtor.[19]The assignment involves no transfer of ownership but
merely effects the transfer of rights which the assignor has at the
time, to the assignee.Benin having been deemed subrogated to the
rights and obligations of the spouses, she was bound by exactly the
same conditions to which the latter were bound.[20]This being so,
she and the Casabuenas were bound to respect the prohibition
against selling the property within the five-year period imposed by
the City government.The act of assignment could not have operated
to efface liens or restrictions burdening the right
assigned,[21]because an assignee cannot acquire a greater right
than that pertaining to the assignor.[22]At most, an assignee can
only acquire rights duplicating those which his assignor is
entitled by law to exercise.In the case at bar, the Casabuenas
merely stepped into Benins shoes, who was not so much an owner as a
mere assignee of the rights of her debtors.Not having acquired any
right over the land in question, it follows that Benin conveyed
nothing to defendants with respect to the property.While it is true
that theduplexis owned by Benin, the Casabuenas mistakenly believed
that the deed included cession of rights of ownership over the
landas well.The encumbrance of the property may be deemed as an
exercise of their right of ownership over the property considering
that, under the law, only owners of certain properties may mortgage
the same.[23]By mortgaging a piece of property, a debtor merely
subjects it to a lien but ownership thereof is not parted
with.[24]As a result, notwithstanding the encumbrance of the
Bulacan lot through a deed of assignment in favor of Benin, the
spouses Urdaneta remain its owners, to the exclusion of
petitioner.WHEREFORE,considering the foregoing, the decision
isAFFIRMED.No costs.SO ORDERED.
SESBRENO VS CAFACTS:Fifty-two employees sued the Province of
Cebu and Governor Rene Espina for reinstatement and backwages
imploring Atty. Pacquiao as counsel who was later replaced by Atty.
Sesbreno. The employees and Atty. Sesbreno agreed that he is to be
paid 30% as attorneys fees and 20% as expenses taken from their
back salaries. Trial court decided in favor of the employees and
ordered the Province of Cebu to reinstate them and pay them back
salaries. The same was affirmed in toto by the Court of Appeals and
ultimately the Supreme Court. A compromise agreement was entered
into by the parties in April 1979. The former employees waived
their right to reinstatement among others. The Province of Cebu
released P2,300,000.00 to the petitioning employees through Atty.
Sesbreno as Partial Satisfaction of Judgment. The amount
represented back salaries, terminal leave pay and gratuity pay due
to the employees. Ten employees filed manifestations before the
trial court asserting that they agreed to pay Atty. Sesbreno 40% to
be taken only from their back salaries. The lower court issued two
orders, with which petitioner complied, requiring him to release
P10,000.00 to each of the ten private respondents and to retain 40%
of the back salaries pertaining to the latter out of the
P2,300,000.00 released to him. On March 28, 1980, the trial court
fixed the attorneys fees a total of 60% of all monies paid to the
employees. However, trial court modified the award after noting
that petitioners attorneys lien was inadvertently placed as 60%
when it should have been only 50%. Atty. Sesbreno appealed to the
Court of Appeals claiming additional fees for legal services but
was even further reduced to 20%.ISSUE:Whether the Court of Appeals
had the authority to reduce the amount of attorneys fees awarded to
petitioner Atty. Raul H. Sesbreo, notwithstanding the contract for
professional services signed by private respondentsHELD: Yes. The
Supreme Court noted that the contract of professional services
entered into by the parties 6 authorized petitioner to take a total
of 50% from the employees back salaries only. The trial court,
however, fixed the lawyers fee on the basis of all monies to be
awarded to private respondents. Fifty per cent of all monies which
private respondents may receive from the provincial government,
according to the Court of Appeals, is excessive and unconscionable,
not to say, contrary to the contract of professional services. What
a lawyer may charge and receive as attorneys fees is always subject
to judicial control. A stipulation on a lawyers compensation in a
written contract for professional services ordinarily controls the
amount of fees that the contracting lawyer may be allowed, unless
the court finds such stipulated amount unreasonable unconscionable.
A contingent fee arrangement is valid in this jurisdiction and is
generally recognized as valid and binding but must be laid down in
an express contract. if the attorneys fees are found to be
excessive, what is reasonable under the circumstances. Quantum
meruit, meaning as much as he deserves, is used as the basis for
determining the lawyers professional fees in the absence of a
contract. The Supreme Court averred that in balancing the
allocation of the monetary award, 50% of all monies to the lawyer
and the other 50% to be allocated among all his 52 clients, is too
lop-sided in favor of the lawyer. The ratio makes the practice of
law a commercial venture, rather than a noble profession. It would,
verily be ironic if the counsel whom they had hired to help would
appropriate for himself 50% or even 60% of the total amount
collectible by these employees. 20% is a fair settlement.Traders
Royal Bank v CA (Negotiable Instruments Law)TRADERS ROYAL BANK V CA
G.R. No. 93397 March 3, 1997
FACTS:
Filriters registered owner of Central Bank Certificate of
Indebtedness (CBCI). Filriters transferred it to Philfinance by one
of its officers without authorization from the company.
Subsequently, Philfinance transferred same CBCI to Traders Royal
Bank (TRB) under a repurchase agreement. When Philfinance failed to
do so, The TRB tried to register in its name in the CBCI. The
Central Bank did not want to recognize the transfer.
Docketed as Civil Case No.83-17966in the Regional Trial Court of
Manila, Branch 32, the action was originally filed as a Petition
for Mandamus 5 under Rule 65 of the Rules of Court, to compel the
Central Bank of the Philippines to register the transfer of the
subject CBCI to petitioner Traders Royal Bank (TRB).
DECISION OF LOWER COURTS: * RTC: transfer is null and void. *
CA: The appellate court ruled that the subject CBCI is not a
negotiable instrument. Philfinance acquired no title or rights
under CBCI No. D891 which it could assign or transfer to Traders
Royal Bank and which the latter can register with the Central Bank.
Thus, the transfer of the instrument from Philfinance to TRB was
merely an assignment, and is not governed by the negotiable
instruments law.
APPLICABLE LAWS:
Under section 1 of Act no. 2031 an instrument to be negotiable
must conform to the following requirements: (a) It must be in
writing and signed by the maker or drawer; (b) Must contain an
unconditional promise or order to pay a sum certain in money; (c)
Must be payable on demand, or at a fixed or determinable future
time; (d) Must be payable to order or to bearer; and (e) Where the
instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
Under section 3, Article V of Rules and Regulations Governing
Central Bank Certificates of Indebtedness states that the
assignment of registered certificates shall not be valid unless
made at the office where the same have been issued and registered
or at the Securities Servicing Department, Central Bank of the
Philippines, and by the registered owner thereof, in person or by
his representative, duly authorized in writing. For this purpose,
the transferee may be designated as the representative of the
registered owner. ISSUES & RULING: 1. Whether the CBCI is
negotiable instrument or not.
The pertinent portions of the subject CBCI read:
xxx xxx xxx
The Central Bank of the Philippines (the Bank) for value
received, hereby promises to pay bearer, of if this Certificate of
indebtedness be registered, to FILRITERS GUARANTY ASSURANCE
CORPORATION, the registered owner hereof, the principal sum of FIVE
HUNDRED THOUSAND PESOS.
NO. The CBCI is not a negotiable instrument, since the
instrument clearly stated that it was payable to Filriters, and the
certificate lacked the words of negotiability which serve as an
expression of consent that the instrument may be transferred by
negotiation.
Before the instruments become negotiable instruments, the
instrument must conform to the requirements under the Negotiable
Instrument Law. Otherwise instrument shall not bind the
parties.
2. Whether the Assignment of registered certificate is valid or
null and void.
IT'S NULL AND VOID. Obviously the Assignment of certificate from
Filriters to Philfinance was null and void. One of officers who
signed the deed of assignment in behalf of Filriters did not have
the necessary written authorization from the Board of Directors of
Filriters. For lack of such authority the assignment is considered
null and void.
Clearly shown in the record is the fact that Philfinance's title
over CBCI is defective since it acquired the instrument from
Filriters fictitiously. Under 1409 of the Civil Code those
contracts which are absolutely simulated or fictitious are
considered void and inexistent from the beginning.
Petitioner knew that Philfinance is not registered owner of the
CBCI No. D891. The fact that a non-owner was disposing of the
registered CBCI owned by another entity was a good reason for
petitioner to verify of inquire as to the title Philfinance to
dispose to the CBCI.
OTHER NOTES:1. the mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding
the fiction of separate corporate personalities.FACTSFilriters
Guaranty Assurance Corporation (Filriters) executed a Detached
Assignment . . ., unto Philippine Underwriters Finance Corporation
(Philfinance) all its rights and title to Central Bank Certificates
of Indebtedness.ISSUEWhether or not the Certificates of
Indebtedness may be negotiated.RULINGNO. The instrument is not
negotiable but assignable. The language of negotiability which
characterize a negotiable paper as a credit instrument is its
freedom to circulate as a substitute for money. Hence, freedom of
negotiability is the touchtone relating to the protection of
holders in due course, and the freedom of negotiability is the
foundation for the protection which the law throws around a holder
in due course.Manuel Lim v CAFacts:Manuel Lim and Rosita Lim are
the officers of the Rigi Bilt Industries, Inc. (RIGI). RIGI had
been transacting business with Linton Commercial Company, Inc. The
Lims ordered 100 pieces of mild steel plates from Linton and were
delivered to the Lims place of business which was in Caloocan. To
pay Linton, the Lims issued a postdated check for P51,800.00. On a
different date, the Lims also ordered another 65 pcs of mild steel
plates and were delivered in the place of business. They again
issued another postdated check. On that same day, they also ordered
purlins worth P241,800 which were delivered to them on various
dates. The Lims issued 7 checks for this.When the 7 checks were
presented to the drawee bank (Solidbank), it was dishonored because
payment for the checks had been stopped and/or insufficiency of
funds. So the Lims were charged with 7 counts of violation of
Bouncing Checks Law.The Malabon trial court held that the Lims were
guilty of estafa and violation of BP 22. They went to CA on
appeal.The CA acquitted the Lims of estafa, on the ground that the
checks were not made in payment of an obligation contracted at the
time of their issuance. However, the CA affirmed the finding that
they were guilty of violation for BP 22. Motion for Reconsideration
to SC.
Issue:Whether or not the issue was within the jurisdiction of
the Malabon Trial Court
Held:Yes. The venue of jurisdiction lies either in the RTC
Caloocan or Malabon Trial Court.BP 22 is a continuing crime. A
person charged with a transitory crime may be validly tried in any
municipality or territory where the offense was partly committed.
In determining the proper venue, the ff. must be considered. 1) 7
checks were issued to Linton in its place of business in Navotas.
2) The checks were delivered Linton in the same place. 3) The
checks were dishonored in Caloocan 4) The Lims had knowledge of
their insufficiency of funds.
Under sec 191 of the Negotiable Instruments Law:ISSUE = 1ST
delivery of the instrument complete in form to a person who takes
it as a holderHOLDER = payee or indorsee of a bill/note who is in
possession of it or the bearer
The place where the bills were written, signed or dated does not
necessarily fix or determine the place where they were executed. It
is the delivery that is important. It is the final act essential to
its consummation of an obligation. An undelivered bill is
unoperative. The issuance and delivery of the check must be to a
person who takes it as a holder.Although Linton sent a collector
who received the checks fr. The Lims at their place of business,
the checks were actually issued and delivered to Linton in Navotas.
The collector is not a holder or an agent, he was just an
employee.
*SC affirms conviction of the Lims for violation of BP 22 and
the decision of CAMONTINOLA V. PNB88 PHIL 178FACTS:Ramos, as a
disbursing officer of an army division of the USAFE, made cash
advancements w/ the Provincial Treasurer of Lanao. In exchange, the
Provl Treasurer of Lanao gave him a P500,000 check. Thereafter,
Ramos presented the check to Laya for encashment. Laya in his
capacity as Provincial Treasurer of Misamis Oriental as drawer,
issued a check to Ramos in the sum of P100000, on the Philippines
National Bank as drawee; the P400000 value of the check was paid in
military notes.
Ramos was unable to encash the said check for he was captured by
the Japanese. But after his release, he sold P30000 of the check to
Montinola for P90000 Japanese Military notes, of which only P45000
was paid by the latter. The writing made by Ramos at the back of
the check was to the effect that he was assigning only P30000 of
the value of the document with an instruction to the bank to pay
P30000 to Montinola and to deposit the balance to Ramos's credit.
This writing was, however, mysteriously obliterated and in its
place, a supposed indorsement appearing on the back of the check
was made for the whole amount of the check. At the time of the
transfer of this check to Montinola, the check was long overdue by
about 2-1/2 years.
Montinola instituted an action against the PNB and the
Provincial Treasurer of Misamis Oriental to collect the sum of
P100,000, the amount of the aforesaid check. There now appears on
the face of said check the words in parenthesis "Agent, Phil.
National Bank" under the signature of Laya purportedly showing that
Laya issued the check as agent of the Philippine National
Bank.HELD:The words "Agent, Phil. National Bank" now appearing on
the face of the check were added or placed in the instrument after
it was issued by the Provincial Treasurer Laya to Ramos. The check
was issued by only as Provincial Treasurer and as an official of
the Government, which was under obligation to provide the USAFE
with advance funds, and not as agent of the bank, which had no such
obligation. The addition of those words was made after the check
had been transferred by Ramos to Montinola. The insertion of the
words "Agent, Phil. National Bank," which converts the bank from a
mere drawee to a drawer and therefore changes its liability,
constitutes a material alteration of the instrument without the
consent of the parties liable thereon, and so discharges the
instrument.88 Phil 178 Commercial Law NegotiableInstrumentsLaw
Alteration Assignee Partial IndorsementIn May 1942, Ubaldo Laya, as
provincial treasurer of Misamis Oriental issued a P100,000.00
Philippine National Bank (PNB) check to Mariano Ramos. The said
check was to be used by Ramos, as disbursing officer of the US
forces at that time, for military purposes. Before Ramos can encash
the check, he was made a prisoner of war by the invading Japanese
forces. When he got free in December 1944, he needed some cash for
himself and so he went to a certain Enrique Montinola and made
arrangements.On the back of the check, Ramos wrote:Pay to the order
of Enrique P. Montinola P30,000 only. The balance to be deposited
in the Philippine National Bank to the credit of M. V. Ramos.In
consideration thereof, Montinola promised to pay 85,000 in Japanese
notes (that time peso notes are valued higher). However, he was
only able to pay 45k in Japanese notes to Ramos.Later, Montinola
sought to have the check encashed but PNB dishonored the check. It
appears that there was an insertion made. Under the signature of
Laya, the words Agent, Philippine National Bank was inserted, thus
making it appear that Laya disbursed the check as an agent of PNB
and not as provincial treasurer of Misamis Oriental (NOTE: at that
time, a provincial treasurer is an ex officio agent of the
governments bank).ISSUE:Whether or not the subject check is a
negotiable instrument.HELD:No. It was not negotiated according to
the NegotiableInstrumentsLaw (NIL) hence it is not a negotiable
instrument. There was only a partial indorsement and not a
negotiation contemplated under the NIL. Only P30k of the P100k
amount of the check was indorsed. This merely make Montinola a mere
assignee and this is the clear intent of Ramos. Ramos was merely
assigning P30k to Montinola. Montinola may therefore not be
regarded as an indorsee and PNB has all the right to dishonor the
check. As mere assignee, he is subject to all defenses available to
the drawer Provincial Treasurer of Misamis Oriental and against
Ramos.Anent the issue of alteration, the apparent purpose of which
is to make the drawee (PNB) the drawer against which Montinola can
recover from directly. Such material alteration which was done by
Montinola without the consent of the parties liable thereon
discharges the instrument, pursuant to Sec. 124 of the
NIL.Montinola cannot be said to be a holder. He is an assignee. And
even if he is a holder, he is not in good faith because he did not
pay the full amount of the consideration for which the P30k was
issued to him he only paid 45k Japanese notes out of the 90k
Japanese notes consideration.At any rate, even assuming that there
is proper negotiation, Montinola can no longer encash said check
because when he sought to have it encashed in January 1945, it is
already stale there being two and half years passing since its time
of issuanceG.R. No. 102967 February 10, 2000BIBIANO V. BAAS,
JR.,petitioner,vs.COURT OF APPEALS, AQUILINO T. LARIN, RODOLFO
TUAZON AND PROCOPIO TALON,respondents.QUISUMBING,J.:For review is
the Decision of the Court of Appeals in CA-C.R. CV No. 17251
promulgated on November 29, 1991. It affirmedin totothe judgment of
the Regional Trial Court (RTC), Branch 39, Manila, in Civil Case
No. 82-12107. Said judgment disposed as follows:FOR ALL THE
FOREGOING CONSIDERATIONS, this Court hereby renders judgment
DISMISSING the complaint against all the defendants and ordering
plaintiff [herein petitioner] to pay defendant Larin the amount of
P200,000.00 (Two Hundred Thousand Pesos) as actual and compensatory
damages; P200,000.00 as moral damages; and P50,000.00 as exemplary
damages and attorneys fees of P100,000.00.1The facts, which we find
supported by the records, have been summarized by the Court of
Appeals as follows:On February 20, 1976, petitioner, Bibiano V.
Baas Jr. sold to Ayala Investment Corporation (AYALA), 128,265
square meters of land located at Bayanan, Muntinlupa, for two
million, three hundred eight thousand, seven hundred seventy
(P2,308,770.00) pesos. The Deed of Sale provided that upon the
signing of the contract AYALA shall pay four hundred sixty-one
thousand, seven hundred fifty-four (P461,754.00) pesos. The balance
of one million, eight hundred forty-seven thousand and sixteen
(P1,847,016.00) pesos was to be paid in four equal consecutive
annual installments, with twelve (12%) percent interestper annumon
the outstanding balance. AYALA issued one promissory note covering
four equal annual installments. Each periodic payment of
P461,754.00 pesos shall be payable starting on February 20, 1977,
and every year thereafter, or until February 20, 1980.The same day,
petitioner discounted the promissory note with AYALA, for its face
value of P1,847,016.00, evidenced by a Deed of Assignment signed by
the petitioner and AYALA. AYALA issued nine (9) checks to
petitioner, all dated February 20, 1976, drawn against Bank of the
Philippine Islands with the uniform amount of two hundred five
thousand, two hundred twenty-four (P205,224.00) pesos.In his 1976
Income Tax Return, petitioner reported the P461,754 initial payment
as income from disposition of capital asset.2Selling Price of
LandP2,308,770.00
Less Initial Payment461,754.003
Unrealized GainP1,847,016.00
1976 Declaration of Income on Disposition of Capital Asset
subject to Tax:
Initial PaymentP461,754.00
Less: Cost of land and other incidental Expenses( 76,547.90)
IncomeP385,206.10
Income subject to tax (P385,206. 10 x 50%)P192,603.65
In the succeeding years, until 1979, petitioner reported a
uniform income of two hundred thirty thousand, eight hundred
seventy-seven (P230,877.00) pesos4as gain from sale of capital
asset. In his 1980 income tax amnesty return, petitioner also
reported the same amount of P230,877.00 as the realized gain on
disposition of capital asset for the year.On April 11, 1978, then
Revenue Director Mauro Calaguio authorized tax examiners, Rodolfo
Tuazon and Procopio Talon to examine the books and records of
petitioner for the year 1976. They discovered that petitioner had
no outstanding receivable from the 1976 land sale to AYALA and
concluded that the sale was cash and the entire profit should have
been taxable in 1976 since the income was wholly derived in
1976.Tuazon and Talon filed their audit report and declared a
discrepancy of two million, ninety-five thousand, nine hundred
fifteen (P2,095,915.00) pesos in petitioner's 1976 net income. They
recommended deficiency tax assessment for two million, four hundred
seventy-three thousand, six hundred seventy-three (P2,473,673.00)
pesos.Meantime, Aquilino Larin succeeded Calaguio as Regional
Director of Manila Region IV-A. After reviewing the examiners'
report, Larin directed the revision of the audit report, with
instruction to consider the land as capital asset. The tax due was
only fifty (50%) percent of the total gain from sale of the
property held by the taxpayer beyond twelve months pursuant to
Section 345of the 1977 National Internal Revenue Code (NIRC). The
deficiency tax assessment was reduced to nine hundred thirty six
thousand, five hundred ninety-eight pesos and fifty centavos
(P936,598.50), inclusive of surcharges and penalties for the year
1976.On June 27, 1980, respondent Larin sent a letter to petitioner
informing of the income tax deficiency that must be settled him
immediately.On September 26, 1980, petitioner acknowledged receipt
of the letter but insisted that the sale of his land to AYALA was
on installment.On June 8, 1981, the matter was endorsed to the
Acting Chief of the Legal Branch of the National Office of the BIR.
The Chief of the Tax Fraud Unit recommended the prosecution of a
criminal case for conspiring to file false and fraudulent returns,
in violation of Section 51 of the Tax Code against petitioner and
his accountants, Andres P. Alejandre and Conrado Baas.On June 17,
1981, Larin filed a criminal complaint for tax evasion against the
petitioner.On July 1, 1981, news items appeared in the now defunct
Evening Express with the headline: "BIR Charges Realtor" and
another in the defunct Evening Post with a news item: "BIR raps
Realtor, 2 accountants." Another news item also appeared in the
July 2, 1981, issue of the Bulletin Today entitled: "3-face P1-M
tax evasion raps." All news items mentioned petitioner's false
income tax return concerning the sale of land to AYALA.On July 2,
1981, petitioner filed an Amnesty Tax Return under P.D. 1740 and
paid the amount of forty-one thousand, seven hundred twenty-nine
pesos and eighty-one centavos (P41,729.81). On November 2, 1981,
petitioner again filed an Amnesty Tax Return under P.D. 1840 and
paid an additional amount of one thousand, five hundred twenty-five
pesos and sixty-two centavos (P1,525.62). In both, petitioner did
not recognize that his sale of land to AYALA was on cash
basis.Reacting to the complaint for tax evasion and the news
reports, petitioner filed with the RTC of Manila an action6for
damages against respondents Larin, Tuazon and Talon for extortion
and malicious publication of the BIR's tax audit report. He claimed
that the filing of criminal complaints against him for violation of
tax laws were improper because he had already availed of two tax
amnesty decrees, Presidential Decree Nos. 1740 and 1840.The trial
court decided in favor of the respondents and awarded Larin
damages, as already stated. Petitioner seasonably appealed to the
Court of Appeals. In its decision of November 29, 1991, the
respondent court affirmed the trial court's decision, thus:The
finding of thecourt a quothat plaintiff-appellant's actions against
defendant-appellee Larin were unwarranted and baseless and as a
result thereof, defendant-appellee Larin was subjected to
unnecessary anxiety and humiliation is therefore supported by the
evidence on record.1wphi1.ntDefendant-appellee Larin acted only in
pursuance of the authority granted to him. In fact, the criminal
charges filed against him in the Tanodbayan and in the City
Fiscal's Office were all dismissed.WHEREFORE, the appealed judgment
is hereby AFFIRMEDin toto.7Hence this petition, wherein petitioner
raises before us the following queries:I. WHETHER THE COURT OF
APPEALS ERRED IN ITS INTERPRETATION OF PERTINENT TAX LAWS, THUS IT
FAILED TO APPRECIATE THE CORRECTNESS AND ACCURACY OF PETITIONER'S
RETURN OF THE INCOME DERIVED FROM THE SALE OF THE LAND TO AYALA.II.
WHETHER THE RESPONDENT COURT ERRED IN NOT FINDING THAT THERE WAS AN
ALLEGED ATTEMPT TO EXTORT [MONEY FROM] PETITIONER BY PRIVATE
RESPONDENTS.III. WHETHER THE RESPONDENT COURT ERRED IN ITS
INTERPRETATION OF PRESIDENTIAL DECREE NOS. 1740 AND 1840, AMONG
OTHERS, PETITIONER'S IMMUNITY FROM CRIMINAL PROSECUTION.IV. WHETHER
THE RESPONDENT COURT ERRED IN ITS INTERPRETATION OF
WELL-ESTABLISHED DOCTRINES OF THIS HONORABLE COURT AS REGARDS THE
AWARD OF ACTUAL, MORAL AND EXEMPLARY DAMAGES IN FAVOR OF RESPONDENT
LARIN.In essence, petitioner asks the Court to resolveseriatimthe
following issues:1. Whether respondent court erred in ruling that
there was no extortion attempt by BIR officials;2. Whether
respondent court erred in holding that P.D. 1740 and 1840 granting
tax amnesties did not grant immunity from tax suits;3. Whether
respondent court erred in finding that petitioner's income from the
sale of land in 1976 should be declared as a cash transaction in
his tax return for the same year (because the buyer discounted the
promissory note issued to the seller on future installment payments
of the sale, on the same day of the sale);4. Whether respondent
court erred and committed grave abuse of discretion in awarding
damages to respondent Larin.The first issue, on whether the Court
of Appeals erred in finding that there was no extortion, involves a
determination of fact. The Court of Appeals observed,The only
evidence to establish the alleged extortion attempt by
defendants-appellees is the plaintiff-appellant's self serving
declarations.As found by the courta quo, "said attempt was known to
plaintiff-appellant's son-in-law and counsel on record, yet, said
counsel did not take the witness stand to corroborate the testimony
of plaintiff."8As repeatedly held, findings of fact by the Court of
Appeals especially if they affirm factual findings of the trial
court will not be disturbed by this Court, unless these findings
are not supported by evidence.9Similarly, neither should we disturb
a finding of the trial court and appellate court that an allegation
is not supported by evidence on record. Thus, we agree with the
conclusion of respondent court that herein private respondents, on
the basis of evidence, could not be held liable for extortion.On
the second issue of whether P.D. Nos. 1740 and 1840 which granted
tax amnesties also granted immunity from criminal prosecution
against tax offenses, the pertinent sections of these laws
state:P.D. No. 1740. CONDONING PENALTIES FOR CERTAIN VIOLATIONS OF
THE INCOME TAX LAW UPON VOLUNTARY DISCLOSURE OF UNDECLARED INCOME
FOR INCOME TAX PURPOSES AND REQUIRING PERIODIC SUBMISSION OF NET
WORTH STATEMENT.x x x x x x x x xSec. 1.Voluntary Disclosure of
Correct Taxable Income. Any individual who, for any or all of the
taxable years 1974 to 1979, had failed to file a return is hereby,
allowed to file a return for each of the aforesaid taxable years
and accurately declare therein the true and correct income,
deductions and exemptions and pay the income tax due per return.
Likewise, any individual who filed a false or fraudulent return for
any taxable year in the period mentioned above may amend his return
and pay the correct amount of tax due after deducting the taxes
already paid, if any, in the original declaration. (emphasis ours)x
x x x x x x x xSec. 5.Immunity from Penalties. Any individual who
voluntarily files a return under this Decree and pays the income
tax due thereon shall be immune from the penalties, civil or
criminal, under the National Internal Revenue Code arising from
failure to pay the correct income tax with respect to the taxable
years from which an amended return was filed or for which an
original return was filed in cases where no return has been filed
for any of the taxable years 1974 to 1979:Provided,however, That
these immunities shall not apply in cases where the amount of net
taxable income declared under this Decree is understated to the
extent of 25% or more of the correct net taxable income. (emphasis
ours)P.D. NO. 1840 GRANTING A TAX AMNESTY ON UNTAXED INCOME AND/OR
WEALTH EARNED OR ACQUIRED DURING THE TAXABLE YEARS 1974 TO 1980 AND
REQUIRING THE FILING OF THE STATEMENT OF ASSETS, LIABILITIES, AND
NET WORTH.Sec. 1.Coverage. In case of voluntary disclosure of
previously untaxed income and/or wealth such as earnings, receipts,
gifts, bequests or any other acquisition from any source
whatsoever, realized here or abroad, by any individual taxpayer,
which are taxable under the National Internal Revenue Code, as
amended, the assessment and collection of all internal revenue
taxes, including the increments or penalties on account of
non-payment, as well as all civil, criminal or administrative
liabilities arising from or incident thereto under the National
Internal Revenue Code, are hereby condoned provided that the
individual taxpayer shall pay. (emphasis ours) . . .Sec.
2.Conditions for Immunity. The immunity granted under Section one
of this Decree shall apply only under the following conditions:a)
Such previously untaxed income and/or wealth must have been earned
or realized in any of the years 1974 to 1980;b) The taxpayer must
file an amnesty return on or before November 30, 1981, and fully
pay the tax due thereon;c) The amnesty tax paid by the taxpayer
under this Decree shall not be less than P1,000.00 per taxable
year; andd) The taxpayer must file a statement of assets,
liabilities and net worth as of December 31, 1980, as required
under Section 6 hereof. (emphasis ours)It will be recalled that
petitioner entered into a deed of sale purportedly on installment.
On the same day, he discounted the promissory note covering the
future installments. The discounting seems questionable because
ordinarily, when a bill is discounted, the lender (e.g.banks,
financial institution) charges or deducts a certain percentage from
the principal value as its compensation. Here, the discounting was
done by the buyer. On July 2, 1981, two weeks after the filing of
the tax evasion complaint against him by respondent Larin on June
17, 1981, petitioner availed of the tax amnesty under P.D. No.
1740. His amended tax return for the years 1974 - 1979 was filed
with the BIR office of Valenzuela, Bulacan, instead of Manila where
the petitioner's principal office was located. He again availed of
the tax amnesty under P.D. No. 1840. His disclosure, however, did
not include the income from his sale of land to AYALA on cash
basis. Instead he insisted that such sale was on installment. He
did not amend his income tax return. He did not pay the tax which
was considerably increased by the income derived from the
discounting. He did not meet the twin requirements of P.D. 1740 and
1840, declaration of his untaxed income and full payment of tax due
thereon. Clearly, the petitioner is not entitled to the benefits of
P.D. Nos. 1740 and 1840. The mere filing of tax amnesty return
under P.D. 1740 and 1840 does notipso factoshield him from immunity
against prosecution. Tax amnesty is a general pardon to taxpayers
who want to start a clean tax slate. It also gives the government a
chance to collect uncollected tax from tax evaders without having
to go through the tedious process of a tax case. To avail of a tax
amnesty granted by the government, and to be immune from suit on
its delinquencies, the tax payer must have voluntarily disclosed
his previously untaxed income and must have paid the corresponding
tax on such previously untaxed income.10It also bears noting that a
tax amnesty, much like a tax exemption, is never favored nor
presumed in law and if granted by statute, the terms of the amnesty
like that of a tax exemption must be construed strictly against the
taxpayer and liberally in favor of the taxing authority.11Hence, on
this matter, it is our view that petitioner's claim of immunity
from prosecution under the shield of availing tax amnesty is
untenable.On the third issue, petitioner asserts that his sale of
the land to AYALA was not on cash basis but on installment as
clearly specified in the Deed of Sale which states:That for and in
consideration of the sum of TWO MILLION THREE HUNDRED EIGHT
THOUSAND SEVEN HUNDRED SEVENTY (P2,308,770.00) PESOS Philippine
Currency, to be paid as follows:1. P461,754.00, upon the signing of
the Deed of Sale; and,2. The balance of P1,847,016.00, to be paid
in four (4) equal, consecutive, annual installments with interest
thereon at the rate of twelve percent (12%)per annum, beginning on
February 20, 1976, said installments to be evidenced by four (4)
negotiable promissory notes.12Petitioner resorts to Section 43 of
the NIRC and Sec. 175 of Revenue Regulation No. 2 to support his
claim.Sec. 43 of the 1977 NIRC states,Installment basis. (a)
Dealers in personal property. . . .(b)Sales of realty and casual
sales of personalty In the case (1) of a casual sale or other
casual disposition of personal property (other than property of a
kind which would properly be included in the inventory of the
taxpayer if on hand at the close of the taxable year), for a price
exceeding one thousand pesos, or (2) of a sale or other disposition
of real property if in either case the initial payments do not
exceed twenty-fivepercentumof the selling price, the income may,
under regulations prescribed by the Minister of Finance, be
returned on the basis and in the manner above prescribed in this
section. As used in this section the term "initial payment" means
the payments received in cash or property other than evidences of
indebtedness of the purchaser during the taxable period in which
the sale or other disposition is made. . . . (emphasis ours)Revenue
Regulation No. 2, Section 175 provides,Sale of real property
involving deferred payments. Under section 43 deferred-payment
sales of real property include (1) agreements of purchase and sale
which contemplate that a conveyance is not to be made at the
outset, but only after all or a substantial portion of the selling
price has been paid, and (b) sales in which there is an immediate
transfer of title, the vendor being protected by a mortgage or
other lien as to deferred payments. Such sales either under (a) or
(b), fall into two classes when considered with respect to the
terms of sale, as follows:(1) Sales of property on the installment
plan, that is, sales in which the payments received in cash or
property other than evidences of indebtedness of the purchaser
during the taxable year in which the sale is made do not exceed 25
per cent of the selling price;(2) Deferred-payment sales not on the
installment plan, that is sales in which the payments received in
cash or property other than evidences of indebtedness of the
purchaser during the taxable year in which the sale is made exceed
25 per cent of the selling price;In the sale of mortgaged property
the amount of the mortgage, whether the property is merely taken
subject to the mortgage or whether the mortgage is assumed by the
purchaser, shall be included as a part of the "selling price" but
the amount of the mortgage, to the extent it does not exceed the
basis to the vendor of the property sold, shall not be considered
as a part of the "initial payments" or of the "total contract
price," as those terms are used in section 43 of the Code, in
sections 174 and 176 of these regulations, and in this section. The
term "initial payments" does not include amounts received by the
vendor in the year of sale from the disposition to a third person
of notes given by the vendee as part of the purchase price which
are due and payable in subsequent years. Commissions and other
selling expenses paid or incurred by the vendor are not to be
deducted or taken into account in determining the amount of the
"initial payments," the "total contract price," or the "selling
price." The term "initial payments" contemplates at least one other
payment in addition to the initial payment. If the entire purchase
price is to be paid in a lump sum in a later year, there being no
payment during the year, the income may not be returned on the
installment basis. Income may not be returned on the installment
basis where no payment in cash or property, other than evidences of
indebtedness of the purchaser, is received during the first year,
the purchaser having promised to make two or more payments, in
later years.Petitioner asserts that Sec. 43 allows him to return as
income in the taxable years involved, the respective installments
as provided by the deed of sale between him and AYALA.
Consequently, he religiously reported his yearly income from sale
of capital asset, subject to tax, as follows:Year 1977 (50% of
P461,754)P230,877.00
1978230,877.00
1979230,877.00
1980230,877.00
Petitioner says that his tax declarations are acceptable modes
of payment under Section 175 of the Revenue Regulations (RR) No. 2.
The term "initial payment", he argues, does not include amounts
received by the vendor which are part of the complete purchase
price, still due and payable in subsequent years. Thus, the
proceeds of the promissory notes, not yet due which he discounted
to AYALA should not be included as income realized in 1976.
Petitioner states that the original agreement in the Deed of Sale
should not be affected by the subsequent discounting of the bill.On
the other hand, respondents assert that taxation is a matter of
substance and not of form. Returns are scrutinized to determine if
transactions are what they are and not declared to evade taxes.
Considering the progressive nature of our income taxation, when
income is spread over several installment payments through the
years, the taxable income goes down and the tax due correspondingly
decreases. When payment is in lump sum the tax for the year
proportionately increases. Ultimately, a declaration that a sale is
on installment diminishes government taxes for the year of initial
installment as against a declaration of cash sale where taxes to
the government is larger.As a general rule, the whole profit
accruing from a sale of property is taxable as income in the year
the sale is made. But, if not all of the sale price is received
during such year, and a statute provides that income shall be
taxable in the year in which it is "received," the profit from an
installment sale is to be apportioned between or among the years in
which such installments are paid and received.13Sec. 43 and Sec.
175 says that among the entities who may use the above-mentioned
installment method is a seller of real property who disposes his
property on installment, provided that the initial payment does not
exceed 25% of the selling price. They also state what may be
regarded as installment payment and what constitutes initial
payment. Initial payment means the payment received in cash or
property excluding evidences of indebtedness due and payable in
subsequent years, like promissory notes or mortgages, given of the
purchaser during the taxable year of sale. Initial payment does not
include amounts received by the vendor in the year of sale from the
disposition to a third person of notes given by the vendee as part
of the purchase price which are due and payable in subsequent
years.14Such disposition or discounting of receivable is material
only as to the computation of the initial payment. If the initial
payment is within 25% of total contract price, exclusive of the
proceeds of discounted notes, the sale qualifies as an installment
sale, otherwise it is a deferred sale.15Although the proceed of a
discounted promissory note is not considered part of the initial
payment, it is still taxable income for the year it was converted
into cash. The subsequent payments or liquidation of certificates
of indebtedness is reported using the installment method in
computing the proportionate income16to be returned, during the
respective year it was realized. Non-dealer sales of real or
personal property may be reported as income under the installment
method provided that the obligation is still outstanding at the
close of that year. If the seller disposes the entire installment
obligation by discounting the bill or the promissory note, he
necessarily must report the balance of the income from the
discounting not only income from the initial installment
payment.Where an installment obligation is discounted at a bank or
finance company, a taxable disposition results, even if the seller
guarantees its payment, continues to collect on the installment
obligation, or handles repossession of merchandise in case of
default.17This rule prevails in the United States.18Since our
income tax laws are of American origin,19interpretations by
American courts an our parallel tax laws have persuasive effect on
the interpretation of these laws.20Thus, by analogy, all the more
would a taxable disposition result when the discounting of the
promissory note is done by the seller himself. Clearly, the
indebtedness of the buyer is discharged, while the seller acquires
money for the settlement of his receivables. Logically then, the
income should be reported at the time of the actual gain. For
income tax purposes, income is an actual gain or an actual increase
of wealth.21Although the proceeds of a discounted promissory note
is not considered initial payment, still it must be included as
taxable income on the year it was converted to cash. When
petitioner had the promissory notes covering the succeeding
installment payments of the land issued by AYALA, discounted by
AYALA itself, on the same day of the sale, he lost entitlement to
report the sale as a sale on installment since, a taxable
disposition resulted and petitioner was required by law to report
in his returns the income derived from the discounting. What
petitioner did is tantamount to an attempt to circumvent the rule
on payment of income taxes gained from the sale of the land to
AYALA for the year 1976.Lastly, petitioner questions the damages
awarded to respondent Larin.Any person who seeks to be awarded
actual or compensatory damages due to acts of another has the
burden of proving said damages as well as the amount
thereof.22Larin says the extortion cases filed against him hampered
his immediate promotion, caused him strong anxiety and social
humiliation. The trial court awarded him two hundred thousand
(P200,000,00) pesos as actual damages. However, the appellate court
stated that, despite pendency of this case, Larin was given a
promotion at the BIR. Said respondent court:We find nothing on
record, aside from defendant-appellee Larin's statements (TSN, pp.
6-7, 11 December 1985), to show that he suffered loss of seniority
that allegedly barred his promotion. In fact, he was promoted to
his present position despite the pendency of the instant case (TSN,
pp. 35-39, 04 November 1985).23Moreover, the records of the case
contain no statement whatsoever of the amount of the actual damages
sustained by the respondents. Actual damages cannot be allowed
unless supported by evidence on the record.24The court cannot rely
on speculation, conjectures or guesswork as to the fact and amount
of damages.25To justify a grant of actual or compensatory damages,
it is necessary to prove with a reasonable degree of certainty, the
actual amount of loss.26Since we have no basis with which to
assess, with certainty, the actual or compensatory damages
counter-claimed by respondent Larin, the award of such damages
should be deleted.Moral damages may be recovered in cases involving
acts referred to in Article 2127of the Civil Code.28As a rule, a
public official may not recover damages for charges of falsehood
related to his official conduct unless he proves that the statement
was made with actual malice. InBabst,et.al.vs.National Intelligence
Board,et.al., 132 SCRA 316, 330 (1984), we reiterated the test for
actual malice as set forth in the landmark American case ofNew York
Times vs.Sullivan,29which we have long adopted, in defamation and
libel cases,viz.:. . . with knowledge that it was false or with
reckless disregard of whether it was false or not.We appreciate
petitioner's claim that he filed his 1976 return in good faith and
that he had honestly believed that the law allowed him to declare
the sale of the land, in installment. We can further grant that the
pertinent tax laws needed construction, as we have earlier done.
That petitioner was offended by the headlines alluding to him as
tax evader is also fully understandable. All these, however, do not
justify what amounted to a baseless prosecution of respondent
Larin. Petitioner presented no evidence to prove Larin extorted
money from him. He even admitted that he never met nor talked to
respondent Larin. When the tax investigation against the petitioner
started, Larin was not yet the Regional Director of BIR Region
IV-A, Manila. On respondent Larin's instruction, petitioner's tax
assessment was considered one involving a sale of capital asset,
the income from which was subjected to only fifty percent (50%)
assessment, thus reducing the original tax assessment by half.
These circumstances may be taken to show that Larin's involvement
in extortion was not indubitable. Yet, petitioner went on to file
the extortion cases against Larin in different fora. This is where
actual malice could attach on petitioner's part. Significantly, the
trial court did not err in dismissing petitioner's complaints, a
ruling affirmed by the Court of Appeals.Keeping all these in mind,
we are constrained to agree that there is sufficient basis for the
award of moral and exemplary damages in favor of respondent Larin.
The appellate court believed respondent Larin when he said he
suffered anxiety and humiliation because of the unfounded charges
against him. Petitioner's actions against Larin were found
"unwarranted and baseless," and the criminal charges filed against
him in the Tanodbayan and City Fiscal's Office were all
dismissed.30Hence, there is adequate support for respondent court's
conclusion that moral damages have been proved.Now, however, what
would be a fair amount to be paid as compensation for moral damages
also requires determination. Each case must be governed by its own
peculiar circumstances.31On this score,Del Rosario vs.Court of
Appeals,32cites several cases where no actual damages were
adjudicated, and where moral and exemplary damages were reduced for
being "too excessive," thus:In the case ofPNB v.C.A., [256 SCRA 309
(1996)], this Court quoted with approval the following observation
fromRCPI v.Rodriguez,viz:** **. Nevertheless, we find the award of
P100,000.00 as moral damages in favor of respondent Rodriguez
excessive and unconscionable. In the case ofPrudenciado v.Alliance
Transport System,Inc. (148 SCRA 440 [1987]) we said: . . . [I]t is
undisputed that the trial courts are given discretion to determine
the amount of moral damages (Alcantara v. Surro, 93 Phil. 472) and
that the Court of Appeals can only modify or change the amount
awarded when they are palpably and scandalously excessive "so as to
indicate that it was the result of passion, prejudice or corruption
on the part of the trial court" (Gellada v. Warner Barnes &
Co., Inc., 57 O.G. [4] 7347, 7358; Sadie v. Bacharach Motors Co.,
Inc., 57 O.G. [4] 636 and Adone v. Bacharach Motor Co., Inc., 57
O.G. 656). But in more recent cases where the awards of moral and
exemplary damages are far too excessive compared to the actual
loses sustained by the aggrieved party, this Court ruled that they
should be reduced to more reasonable amounts. . . . . (Emphasis
ours.)In other words, the moral damages awarded must be
commensurate with the loss or injury suffered.In the same case (PNB
v. CA), this Court found the amount of exemplary damages required
to be paid (P1,000,000,00) "too excessive" and reduced it to an
"equitable level" (P25,000.00).It will be noted that in above
cases, the parties who were awarded moral damages were not public
officials. Considering that here, the award is in favor of a
government official in connection with his official function, it is
with caution that we affirm granting moral damages, for it might
open the floodgates for government officials counter-claiming
damages in suits filed against them in connection with their
functions. Moreover, we must be careful lest the amounts awarded
make citizens hesitate to expose corruption in the government, for
fear of lawsuits from vindictive government officials. Thus,
conformably with our declaration that moral damages are not
intended to enrich anyone,33we hereby reduce the moral damages
award in this case from two hundred thousand (P200,000.00) pesos to
seventy five thousand (P75,000.00) pesos, while the exemplary
damage is set at P25,000.00 only.The law allows the award of
attorney's fees when exemplary damages are awarded, and when the
party to a suit was compelled to incur expenses to protect his
interest.34Though government officers are usually represented by
the Solicitor General in cases connected with the performance of
official functions, considering the nature of the charges, herein
respondent Larin was compelled to hire a private lawyer for the
conduct of his defense as well as the successful pursuit of his
counterclaims. In our view, given the circumstances of this case,
there is ample ground to award in his favor P50,000,00 as
reasonable attorney's fees.WHEREFORE, the assailed decision of the
Court of Appeals dated November 29, 1991, is hereby AFFIRMED with
MODIFICATION so that the award of actual damages are deleted; and
that petitioner is hereby ORDERED to pay to respondent Larin moral
damages in the amount of P75,000.00, exemplary damages in the
amount of P25,000.00, and attorney's fees in the amount of
P50,000.00 only.1wphi1.Chan wan vs tan kimFACTSChecks payable to
cash or bearer were drawn by defendant Tan Kim and were all
presented for payment by Chan Wan to the drawee bank, but they were
all dishonored. Defendant argued that plaintiff is a holder not in
due course.ISSUEWhether or not a holder not in due course is barred
from collecting the value of checks issued to him.RULINGNO. It does
not that simply because he was not a holder in due course Chan Wan
could not recover on the checks. The Negotiable Instruments Law
does not provide that a holderwho is not a holder in due course,
may not in any case, recover on the instrument. The only
disadvantage of holder who is not a holder in due course is that
the negotiable instrument is subject to defense as if it were non-
negotiable.Tan Kim and her husband (Chen So) issued 11 checks
payable to cash or bearer to be drawn against their account with
the EquitableBanking Corporation. The checks were negotiated to the
White House Shoe Supply (company). White House then deposited the
checks to their China Bank account. China Bank then presented the
checks to Equitable Bank but the checks were returned because
Equitable Bank then had no funds to cover the checks. China Bank
then stamped the checks with Account Closed and Non negotiable
China Bank Corporation.But somehow,ChanWan got hold of these checks
(ChanWan was not able to explain in court how he got hold of the
checks).ChanWan now wants to encash the checks but Equitable Bank
refused accept the said checks.ISSUE:Whether or notChanWan is a
holder in due course.HELD:No. As a general rule, a dishonored
check/instrument may still be negotiated either by indorsement or
delivery and the holder may be a holder in due course provided that
he received no notice regarding the dishonor of the instrument. In
this case, the checks were already crossed on their face
henceChanWan was properly notified of the dishonor of the checks at
the time of his acquisition.But mayChanWan still recover?Yes. The
Negotiable Instruments Law does not provide that a holderwho is not
a holder in due course, may not in any case, recover on the
instrument. The holder may recover directly from the drawee, in
this case Tan Kim and Chen So, unless the drawees have a valid
excuse in refusing payment. The only disadvantage of a holder who
is not a holder in due course is that the negotiable instrument is
subject to defense as if it were non- negotiable. The case was
remanded to the lower court for a proper determination as to
howChanWan acquired the checks and to determine if he is indeed
entitled to payment based on some other transactions involving
those checks.
ATRIUM MGMT VS CAIn 1981, Hi-Cement Corporation through Lourdes
De Leon (its Treasurer) and Antonio De Las Alas (its Chairman, now
deceased) issued four postdated checks to E.T. Henry and Co. The
checks amount to P2 million. The checks are crossed checks and are
only made payable to E.T. Henrys account. However, E.T. Henry still
indorsed the checks to Atrium Management Corporation (AMC). AMC
then made sure that the checks were validly issued by requesting
E.T. Henry to get someconfirmationfrom Atrium. Interestingly, De
Leon confirmed the checks and advised that the checks are okay to
be rediscounted by AMC notwithstanding the fact that the checks are
crossed checks payable to no other accounts but that of E.T. Henry.
So when AMC presented the check, it was dishonored because
Hi-Cement stopped payment. Eventually, AMC sued Hi-Cement, E.T.
Henry, and De Leon. The trial court ruled in favor of AMC and made
all the respondents liable.On appeal, Hi-Cement averred that De
Leons act in signing the check was ultra vires hence De Leon should
be personally liable for the check. De Leon, on the other hand,
insisted that the checks wereauthorizedby the
corporation.ISSUE:Whether or not De Leons act of signing the check
constitutes an ultra vires act hence making her personally
liable.HELD:No, the act is not ultra vires but De Leon is still
personally liable. The act is not ultra vires because the act of
issuing the checks was well within the ambit of a valid corporate
act. De Leon as treasurer isauthorizedto sign checks. When the
checks were issued, Hi-Cement has sufficient funds to cover the P2
million.As a rule, there are four instances that will make a
corporate director, trustee or officer along (although not
necessarily) with the corporation personally liable to certain
obligations. They are:1. He assents (a) to a patently unlawful act
of the corporation, or (b)for bad faith or gross negligence in
directing its affairs, or (c) for conflict of interest, resulting
in damages to the corporation, its stockholders or other persons;2.
He consents to the issuance of watered down stocks or who, having
knowledge thereof, does not forthwith file with the corporate
secretary his written objection thereto;3. He agrees to hold
himself personally and solidarily liable with the corporation; or4.
He is made, by a specific provision of law, to personally answer
for his corporate action.In the case at bar, De Leon is negligent.
She was aware that the checks were only payable to E.T. Henrys
account yet she sent aconfirmationto Atrium to the effect that the
checks can be negotiated to them (Atrium) by E.T. Henry. Therefore,
she may be held personally liable along with E.T. Henry (but not
with Hi-Cement where she is an officer).
Mesina vs IAC
Marcelo A. Mesina vs. Intermediate Appellate CourtG.R. No. 70145
November 13, 1986,145 SCRA 497--holder in due course
FACTS:Jose Go purchased from Associated Bank a cashier's check
for P800,000.00. Unfortunately, he left said check on the top of
the desk of the bank manager when he left the bank. The bank
manager entrusted the check for safekeeping to a bank official, a
certain Albert Uy.While Uy went to the men's room, the check was
stolen by his visitor in the person of Alexander Lim.Upon
discovering that the check was lost, Jose Go accomplisheda "STOP
PAYMENT" order.Two days later, Associated Bank received the lost
check for clearing from Prudential Bank.After dishonoring the same
check twice, Associated Bank received summons and copy of a
complaint for damages of Marcelo Mesina who was in possession of
the lost check and is demanding payment.Petitioner claims that a
cashier's check cannot be countermanded in the hands of a holder in
due course.
ISSUE:Whether or not petitioner can collect on the stolen check
on the ground that he is a holder in due course.
RULING:No.Petitioner failed to substantiate his claim that he is
a holder in due course and for consideration or value as shown by
the established facts of the case. Admittedly, petitioner became
the holder of the cashier's check as endorsed by Alexander Lim who
stole the check. He refused to say how and why it was passed to
him. He had therefore notice of the defect of his title over the
check from the start. The holder of a cashier's check who is not a
holder in due course cannot enforce such check against the issuing
bank which dishonors the same.FACTS:Jose Go maintains an account
with Associated Bank. He needed to transfer P800,000.00 from
Associated Bank to another bank but he realized that he does not
want to be carrying that cash so he bought a cashiers check from
Associated Bank worth P800,000.00. Associated Bank then issued the
check but Jose Go forgot to get the check so it was left on top of
the desk of the bank manager. The bank manager, when he found the
check, entrusted it to Albert Uy for the later to safe keep it. The
check was however stolen from Uy by a certain Alexander Lim.
Jose Go learned that the check was stolen son he made a stop
payment order against the check. Meanwhile, Associated Bank
received the subject check from Prudential Bank for clearing.
Apparently, the check was presented by a certain Marcelo Mesina for
payment. Associated Bank dishonored the check.
When asked how Mesina got hold of the check, he merely stated
that Alfredo Lim, whos already at large, paid the check to him for
a certain transaction.
ISSUE:Whether or not Mesina is a holder in due course.
HELD:No. Admittedly, Mesina became the holder of the cashiers
check as endorsed by Alexander Lim who stole the check. Mesina
however refused to say how and why it was passed to him. Mesina had
therefore notice of the defect of his title over the check from the
start. The holder of a cashiers check who is not a holder in due
course cannot enforce such check against the issuing bank which
dishonors the same. The check in question suffers from the
infirmity of not having been properly negotiated and for value by
Jose Go who is the real owner of said instrument.
Equitable Banking Corp. v. Special Steel Products and Pardo SSPI
a private domestic corporation sellingsteel products. Pardo SSPIs
President and majoritystockholder Interco regular customer Uy
son-in-law of its majority stockholder Equitable depository bank of
Interco and of UyFacts: SSPI sold welding electrodes to Interco, as
evidenced by sales invoices. It is due on March 16 1991 (for
thefirst sales invoice_ and May 11 1991 (for others). It also
provided that Interco would pay interest at the rate of 36% per
annum in case of delay. In payment of for the products, Interco
issued 3 checks payable to the order of SSPI. Each check was
crossed with the notation account payee only and was drawn against
Equitable. The records do not identify the signatory for the
checks, or explain how Uy came in possession of these checks.
Heclaimed that he had good title thereto. He demanded the deposits
in his personal accounts in Equitable. Thebank did so relying on
Uys status as a valued client and as son-in-law of Intercos
majority stockholder. SSPI reminded Interco of the unpaid welding
electrodes, explaining that its immediate need for paymentas it was
experiencing some financial crisis of its own. It replied that it
has already issued 3 checks payable toSSPI and drawn against
Equitable, which was denied by SSPI.Later on it was discovered that
it was Uy, not SSPI, who received the proceeds of 3 checks. Interco
finally paidthe value of 3 checks to SSPI plus portion of accrued
interests. Interco refused to pay entire accrued interest onthe
ground that it was not responsible for the delay. Hence, Pardo
filed a complaint for damages against Uy andEquitable Bank alleging
that the 3 crossed checks, all payable to order of SSPI could be
deposited and encashedby SSPI only. Trial Court rendered decision
in favor of Pardo which was affirmed by CA.Issue: What is the
nature of crossed check?Whether SSPI has a cause of action against
Equitable for quasi-delict, whereby it can recover actual
damagesfrom Equitable?Held: SSPIs cause of action based on
quasi-delist. SSPI does not ask Equitable or Uy to deliever to it
theproceeds of the checks as the rightful payee. The courts below
correctly ruled that SSPI has a cause of action forquasi-delict.The
checks that Interco issued in favor of SSPI were all crossed, made
payable to SSPIs order and contained thenotation account payee
only. This creates a reasonable expectation that the payee alone
would receive theproceeds of the checks and that diversion of the
checks would be averted. This expectation arises from theaccepted
banking practice that crossed checks are intended for deposit in
the named payees account onlyandno other. At the very least,
crossed checks should place a bank on notice that it should
exercise more caution orexpend more than a cursory inquiry, to
ascertain whether the payee on the check has authorized the holder
todeposit the same in different account.A crossed check with the
notation account payee only can only be deposited in the named
payees account.It is gross negligence for a bank to ignore this
rule solely on the basis of a third partys oral representations of
having a good title there to.[G.R. No. 168842 : August 11,
2010]
VICENTE GO, PETITIONER, VS. METROPOLITAN BANK AND TRUST CO.,
RESPONDENT.
D E C I S I O N
NACHURA,J.:
Before the Court is a petition for review oncertiorariunder Rule
45 of the Rules of Court, assailing the Decision[1]dated May 27,
2005 and the Resolution[2]dated August 31, 2005 of the Court of
Appeals (CA) in CA-G.R. CV No. 63469.The Facts
The facts of the case are as follows:
Petitioner filed two separate cases before the Regional Trial
Court (RTC) of Cebu. Civil Case No. CEB-9713 was filed by
petitioner against Ma. Teresa Chua (Chua) and Glyndah Tabaag
(Tabaag) for a sum of money with preliminary attachment. Civil Case
No. CEB-9866 was filed by petitioner for a sum of money with
damages against herein respondent Metropolitan Bank and Trust
Company (Metrobank) and Chua.[3]
In both cases, petitioner alleged that he was doing business
under the name "Hope Pharmacy" which sells medicine and other
pharmaceutical products in the City of Cebu. Petitioner had in his
employ Chua as his pharmacist and trustee or caretaker of the
business; Tabaag, on the other hand, took care of the receipts and
invoices and assisted Chua in making deposits for petitioner's
accounts in the business operations of Hope Pharmacy.[4]
In CEB-9713, petitioner claimed that there were unauthorized
deposits and encashments made by Chua and Tabaag in the total
amount of One Hundred Nine Thousand Four Hundred Thirty-three Pesos
and Thirty Centavos (P109,433.30). He questioned particularly the
following:(1) FEBTC Check No. 251111 dated April 29, 1990 in the
amount of P22,635.00 which was issued by plaintiff's [petitioner's]
customer Loy Libron in payment of the stocks purchased was
deposited under Metrobank Savings Account No. 420-920-6 belonging
to the defendant Ma. Teresa Chua;
(2) RCBC Checks Nos. 330958 and 294515, which were in blank but
pre-signed by him (plaintiff [petitioner] Vicente Go) for
convenience and intended for payment to plaintiff's [petitioner's]
suppliers, were filled up and dated September 22, 1990 and
September 7, 1990 in the amount of P30,000.00 and P50,000.00
respectively, and were deposited with defendant Chua's aforestated
account with Metrobank;
(3) PBC Check No. 005874, drawn by Elizabeth Enriquez payable to
the Hope Pharmacy in the amount of P6,798.30 was encashed by the
defendant Glyndah Tabaag;
(4) There were unauthorized deposits and encashments in the
total sum of P109,433.30;[5]
In CEB-9866, petitioner averred that there were thirty-two (32)
checks with Hope Pharmacy as payee, for varying sums, amounting to
One Million Four Hundred Ninety-Two Thousand Five Hundred
Ninety-Five Pesos and Six Centavos (P1,492,595.06), that were not
endorsed by him but were deposited under the personal account of
Chua with respondent bank,[6]and these are the following:CHECK
NO.DATEAMOUNT
FEBTC 2511665-23-90P 65,214.88
FEBTC 2393995-08-9024,917.75
FEBTC 2513507-24-90212,326.56
PBC 2798876-27-902,000.00
PBC 162387 1-24-906,300.00
PBC 16231712-22-893,300.00
PBC 279881 6-23-907,650.00
PBC 009005 7-21-893,584.00
PBC 279771 5-14-903,600.00
PBC 2797264-25-902,000.00
PBC 168004 3-22-902,800.00
PBC 167963 3-07-901,700.00
FEBTC 2677938-20-9080,085.66
FEBTC 2677617-21-9045,304.63
FEBTC 2512526-03-9064,000.00
FEBTC 2677988-15-9040,078.67
PBC 367292 8-06-902,100.00
PBC 3764459-26-901,125.00
PBC 0090568-07-892,500.00
PBC 3764029-12-9012,105.40
BPI 1970747-17-905,240.00
BPI 1970517-06-901,350.00
BPI 204358 9-19-905,402.60
BPI 2042527-31-906,715.60
FEBTC 2511716-27-9083,175.54
FEBTC 2511656-28-90231,936.10
FEBTC 2512516-30-9047,087.25
FEBTC 2511636-21-90170,600.85
FEBTC 2511705-23-9016,440.00
FEBTC 2511125-31-90211,592.69
FEBTC 2394006-15-9047,664.03
FEBTC 2511626-22-90 82,697.85
P1,492,595.06[7]
Petitioner claimed that the said checks were crossed checks
payable to Hope Pharmacy only; and that without the participation
and connivance of respondent bank, the checks could not have been
accepted for deposit to any other account, except petitioner's
account.[8]
Thus, in CEB-9866, petitioner prayed that Chua and respondent
bank be ordered, jointly and severally, to pay the principal amount
of P1,492,595.06, plus interest at 12% from the dates of the
checks, until the obligation shall have been fully paid; moral
damages of Five Hundred Thousand Pesos (P500,000.00); exemplary
damages of P500,000.00; and attorney's fees and costs in the amount
of P500,000.00.[9]
On February 23, 1995, the RTC rendered a Joint Decision,[10]the
dispositive portion of which reads:WHEREFORE, premises considered,
the Court hereby renders judgment dismissing plaintiff Vicente Go's
complaint against the defendant Ma. Teresa Chua and Glyndah Tabaag
in Civil Case No. CEB-9713, as well as plaintiff's complaint
against the same defendant Ma. Teresa Chua in Civil Case No.
CEB-9866.
Plaintiff Vicente Go is moreover sentenced to pay P50,000.00 in
attorney's fees and litigation expenses to the defendants Ma.
Teresa Chua and Glyndah Tabaag in Civil Case No. CEB-9713.
Defendant Metrobank in Civil Case No. CEB-9866 is hereby
condemned to pay unto plaintiff Vicente Go/Hope Pharmacy the amount
of P50,000.00 as moral damages, and attorney's fees and litigation
expenses in the aggregate sum of P25,000.00.
The defendant Metrobank's crossclaim against its co-defendant
Ma. Teresa Chua in Civil Case No. CEB-9866 is dismissed for lack of
merit.
No special pronouncement as to costs in both instances.
SO ORDERED.[11]
In striking down the complaint of the petitioner against Chua
and Tabaag in CEB-9713, the RTC made the following findings:(1)
FEBTC Check No. 251111, dated April 29, 1990, in the amount of
P22,635.00 payable to cash, was drawn by Loy Libron in payment of
her purchases of medicines and other drugs which Ma. Teresa Chua
was selling side by side with the medicines and drugs of the Hope
Pharmacy, for which she (Maritess) was granted permission by its
owner, Mr. Vicente Chua. These medicines and drugs from Thailand
were Maritess' sideline, and were segregated from the stocks of
Hope Pharmacy; x x x.
(2) RCBC Check Nos. 294519 and 330958 were checks belonging to
plaintiff Vicente Go payable to cash x x x; these checks were
replacements of the sums earlier advanced by Ma. Teresa Chua, but
which were deposited in the account of Vicente Go with RCBC, as
shown by the deposit slips x x x, and confirmed by the statement of
account of Vicente Go with RCBC.
(3) Check No. PCIB 005374 drawn by Elizabeth Enriquez payable to
Hope Pharmacy/Cash in the amount of P6,798.30 dated September 6,
1990, was admittedly encashed by the defendant, Glyndah Tabaag. As
per instruction by Vicente Go, Glyndah requested the drawer to
insert the word "Cash," so that she could encash the same with
PCIB, to meet the Hope Pharmacy's overdraft.
The listings x x x, made by Glyndah Tabaag and Flor Ouano will
show that the corresponding amounts covered thereby were in fact
deposited to the account of Mr. Vicente Go with RCBC; the Bank
Statement of Mr. Go x x x, confirms defendants' claim independently
of the deposit slip[s] x x x.[12]
The trial court absolved Chua in CEB-9866 because of the finding
that the subject checks in CEB-9866 were payments of petitioner for
his loans or borrowings from the parents of Ma. Teresa Chua,
through Ma. Teresa, who was given the total discretion by
petitioner to transfer money from the offices of Hope Pharmacy to
pay the advances and other obligations of the drugstore; she was
also given the full discretion where to source the funds to cover
the daily overdrafts, even to the extent of borrowing money with
interest from other persons.[13]
While the trial court exonerated Chua in CEB-9866, it however
declared respondent bank liable for being negligent in allowing the
deposit of crossed checks without the proper indorsement.
Petitioner filed an appeal before the CA. On May 27, 2005, the
CA rendered a Decision,[14]thefalloof which reads:WHEREFORE, except
for the award of attorney's fees and litigation expenses in favor
of defendants Chua and Tabaag which is hereby deleted, the decision
of the lower court is herebyAFFIRMED.
SO ORDERED.[15]
Hence, this petition.The Issue
Petitioner presented this sole issue for resolution:The Court of
Appeals Erred In Not Holding Metrobank Liable For Allowing The
Deposit, Of Crossed Checks Which Were Issued In Favor Of And
Payable To Petitioner And Without Being Indorsed By The Petitioner,
To The Account Of Maria Teresa Chua.[16]
The Ruling of the Court
A check is a bill of exchange drawn on a bank payable on
demand.[17]There are different kinds of checks. In this case,
crossed checks are the subject of the controversy. A crossed check
is one where two parallel lines are drawn across its face or across
the corner thereof. It may be crossed generally or
specially.[18]
A check is crossed specially when the name of a particular
banker or a company is written between the parallel lines drawn. It
is crossed generally when only the words "and company" are written
or nothing is written at all between the parallel lines, as in this
case. It may be issued so that presentment can be made only by a
bank.[19]
In order to preserve the credit worthiness of checks,
jurisprudence has pronounced that crossing of a check has the
following effects: (a) the check may not be encashed but only
deposited in the bank; (b) the check may be negotiated only once --
to one who has an account with a bank; and (c) the act of crossing
the check serves as warning to the holder that the check has been
issued for a definite purpose so that he must inquire if he has
received the check pursuant to that purpose, otherwise, he is not a
holder in due course.[20]
The Court has taken judicial cognizance of the practice that a
check with two parallel lines in the upper left hand corner means
that it could only be deposited and not converted into cash. The
effect of crossing a check, thus, relates to the mode of payment,
meaning that the drawer had intended the check for deposit only by
the rightful person,i.e., the payee named therein.[21]The crossing
of a check is a warning that the check should be deposited only in
the account of the payee. Thus, it is the duty of the collecting
bank to ascertain that the check be deposited to the payee's
account only.[22]
In the instant case, there is no dispute that the subject 32
checks with the total amount of P1,492,595.06 were crossed checks
with petitioner as the named payee. It is the submission of
petitioner that respondent bank should be held accountable for the
entire amount of the checks because it accepted the checks for
deposit under Chua's account despite the fact that the checks were
crossed and that the payee named therein was not Chua.
In its defense, respondent bank countered that petitioner is not
entitled to reimbursement of the total sum of P1,492,595.06 from
either Maria Teresa Chua or respondent bank because petitioner was
not damaged thereby.[23]
Respondent bank's contention is meritorious. Respondent bank
should not be held liable for the entire amount of the checks
considering that, as found by the RTC and affirmed by the CA, the
checks were actually given to Chua as payments by petitioner for
loans obtained from the parents of Chua. Furthermore, petitioner's
non-inclusion of Chua and Tabaag in the petition before this Court
is, in effect, an admission by the petitioner that Chua, in
representation of her parents, had rightful claim to the proceeds
of the checks, as payments by petitioner for money he borrowed from
the parents of Chua. Therefore, petitioner suffered no pecuniary
loss in the deposit of the checks to the account of Chua.
However, we affirm the finding of the RTC that respondent bank
was negligent in permitting the deposit and encashment of the
crossed checks without the proper indorsement. An indorsement is
necessary for the proper negotiation of checks specially if the
payee named therein or holder thereof is not the one depositing or
encashing it. Knowing fully well that the subject checks were
crossed, that the payee was not the holder and that the checks
contained no indorsement, respondent bank should have taken
reasonable steps in order to determine the validity of the
representations made by Chua. Respondent bank was amiss in its duty
as an agent of the payee. Prudence dictates that respondent bank
should not have merely relied on the assurances given by Chua.
Respondent presented Jonathan Davis as its witness in the trial
before the RTC. He was the officer-in-charge and ranked second to
the assistant vice president of the bank at the time material to
this case. Davis' testimony was summarized by the RTC as
follows:Davis also testified that he allowed Ma. Teresa Chua to
deposit the checks subject of this litigation which were payable to
Hope Pharmacy. According to him, it was a privilege given to valued
customers on a highly selective case to case basis, for marketing
purposes, based on trust and confidence, because Ma. Teresa [Chua]
told him that those checks belonged to her as payment for the
advances she extended to Mr. Go/Hope Pharmacy. x x x
Davis stressed that Metrobank granted the privilege to Ma.
Teresa Chua that for every check she deposited with Metrobank, the
same would be credited outright to her account, meaning that she
could immediately make use of the amount credited; this arrangement
went on for about three years, without any complaint from Mr.
Go/Hope Pharmacy, and Ma. Teresa Chua made warranty that she would
reimburse Metrobank if Mr. Go complained. He did not however call
or inform Mr. Go about this arrangement, because their bank being a
Chinese bank, transactions are based on trust and confidence, and
for him to inform Mr. Vicente Go about it, was tantamount to
questioning the integrity of their client, Ma. Teresa Chua.
Besides, this special privilege or arrangement would not bring any
monetary gain to the bank.[24]
Negligence was committed by respondent bank in accepting for
deposit the crossed checks without indorsement and in not verifying
the authenticity of the negotiation of the checks. The law imposes
a duty of extraordinary diligence on the collecting bank to
scrutinize checks deposited with it, for the purpose of determining
their genuineness and regularity.[25]As a business affected with
public interest and because of the nature of its functions, the
banks are under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of
the relationship.[26] The fact that this arrangement had b