Republic of the PhilippinesSUPREME COURTManila EN BANC G.R. No. L-1405 July 31, 1948 BENJAMIN ABUBAKAR, petitioner, vs.THE AUDITOR GENERAL, respondent. Viray and Viola Viray for petitioner.First Assistant Solicitor General Roberto A. Gianzon and Solicitor Manuel Tomacruz for respondent. BENGZON, J.: We are asked to overrule the decision of the Auditor General refusing to authorize the payment of Treasury warrant No. A-2867376 for P1,000 which was issued in favor of Placido S. Urbanes on December 10, 1941, but is now in the hands of herein petitioner Benjamin Abubakar. For his refusal the respondent gave two reasons: first, because the money available for the redemption of treasury warrants issued before January 2, 1942, is appropriated by Republic Act No. 80 (Item F-IV-8) and this warrant does not come within the purview of said appropriation; and second, because on of the requirements of his office had not been complied with, namely, that it must be shown that the holders of warrants covering payment or replenishment of cash advances for official expenditures (as this warrant is) received them in payment of definite government obligations. Finding the first reason to be sufficiently valid we shall not discuss, nor pass upon the second. There is no doubt as to the authenticity and date of the treasury warrant. There is no question that it was regularly indorsed by the payee and is now in the custody of the herein petitioner who is a private individual. On the other hand, it is admitted that the warrant was originally made payable to Placido S. Urbanes in his capacity as disbursing officer of the Food Administration for "additional cash advance for Food Production Campaign in La Union" (Annex A). It is thus apparent that this is a treasury warrant issued in favor of a public officer or employee and held in possession by a private individual. Such being the case, the Auditor General can hardly be blamed for not authorizing its redemption out of an appropriation specifically for "treasury warrants issued ... in favor of and held in possession by private individuals." (Republic Act No. 80, Item F-IV-8.) This warrant was not issued in favor of a private individual. It was issued in favor of a government employee. The distinction is not without a difference. Outstanding treasury warrants issued prior to January 2, 1942, amount to more than four million pesos. The appropriation herein mentioned is only for P1,750,000. Obviously Congress wished to provide for redemption of one class of warrants — those issued to private individuals — as distinguished from those issued in favor of government officials. Basis for the discrimination is not lacking. Probably the Government is not so sure that those warrants to officials have all been properly used by the latter during the Japanese occupation or maybe it wants to conduct further inquiries as to the equities of the present holders thereof. The petitioner argues that he is a holder in good faith and for value of a negotiable instrument an dis entitled to the rights and privileges of a holder in due course, free from defenses. But this treasury warrant is not within the scope of the negotiable instruments law. For one thing, the document bearing on its face the words "payable from the appropriation for 1
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Republic of the PhilippinesSUPREME COURTManilaEN BANCG.R. No. L-1405 July 31, 1948BENJAMIN ABUBAAR, petitioner, vs.T!E AU"ITOR GENERAL, respondent.Viray and Viola Viray for petitioner.First Assistant Solicitor General Roberto A. Gianzon and Solicitor Manuel Tomacruz for respondent.BENG#ON, J.$Weareaskedtooverrulethedecisionof theAuditor General refusintoauthori!ethepa"#ent of$reasur"%arrant No. A&'()*+*)for P,,---%hich%asissuedinfavor of Placido.. /rbaneson0ece#ber ,-, ,12,, but is no% in the hands of herein petitioner Ben3a#in Abubakar.4or his refusal the respondent ave t%o reasons5 first, because the #one" available for the rede#ption oftreasur" %arrants issued before 6anuar" ', ,12', is appropriated b" Republic Act No. (- 78te# 4&89&(:and this %arrant does not co#e %ithin the purvie% of said appropriation; and second, because on of thereutstandin treasur" %arrants issued prior to 6anuar" ', ,12',a#ount to#orethanfour#illionpesos. $heappropriationherein#entionedisonl"forP,,*A-,---.>bviousl" Conress %ished to provide for rede#ption of one class of %arrants B those issued to privateindividuals Bas distinuished fro#those issued in favor of overn#ent officials. Basis for thediscri#ination is not lackin. Probabl" the Govern#ent is not so sure that those %arrants to officials haveall been properl" used b" the latter durin the 6apanese occupation or #a"be it %ants to conduct furtherin448CEP 2,---.--CER$848CA$E >4 0EP>.8$Rate ,)O0ate of Maturit" 4EB. '+, ,1(2 4EB '', ,1(', ,1PPPP$his is to Certif" thatB E A R E Rhas deposited in this Bank the su# ofPE.>.5 4>/R $E>/.AN0>N@G, .EC/R8$G BANK ./CA$ >448CE P2,--- H -- C$. Pesos, Philippine Currenc", repa"able tosaid depositor *+, da"s. after date, upon presentation and surrender of this certificate, %ith interest at therate of ,)O per cent per annum.7.d. 8lleible: 7.d. 8lleible:BBBBBBBBBB BBBBBBBBBBBA/$E>R8IE0 .8GNA$/RE. 5Respondent court ruledthat theC$0sinnthe%ordinsof thedocu#ents, therefore, thea#ountsdepositedarerepa"ableto%hoever#a"bethebearer thereof. $hus, petitionerFs aforesaid %itness #erel" declared that Anel de la Cru! is the depositor?insofar as the bank is concerned,? but obviousl" other parties not priv" to the transaction bet%een the#%ould not be in a position to kno% that the depositor is not the bearer stated in the C$0s. Eence, thesituation %ould reriinal Record, p. '-(:.+. .o#eti#e in March ,1(', Anel dela Cru! infor#ed Mr. $i#oteo $ianco, the .ucat Branch Maner,that he lost all the certificates of ti#e deposit in dispute. Mr. $ianco advised said depositor to e=ecuteandsub#it anotari!edAffidavit of @oss, asren March ,(, ,1(', Anel dela Cru! e=ecuted and delivered to defendant bank the renMarch'A, ,1(',Anel delaCru!neotiatedandobtainedaloanfro#defendant bankinthe11a#ount of Eiht Eundred .event" 4ive $housandPesos 7P(*A,---.--:. >nthesa#edate, saiddepositor e=ecuted a notari!ed 0eed of Assin#ent of $i#e 0eposit 7E=hibit A)': %hich stated, a#onothers, that he 7de la Cru!: surrenders to defendant bank ?full control of the indicated ti#e deposits fro#and after date? of the assin#ent and further authori!es said bank to pre&ter#inate, set&off and ?appl" thesaid ti#e deposits to the pa"#ent of %hatever a#ount or a#ounts #a" be due? on the loan upon its#aturit" 7$.N, 4ebruar" 1, ,1(*, pp. )-&)':.). .o#eti#e in Nove#ber, ,1(', Mr. Aranas, Credit Manaer of plaintiff Calte= 7Phils.: 8nc., %ent to thedefendant bankFs .ucat branch and presented for verification the C$0s declared lost b" Anel dela Cru!alleinthat thesa#e%eredeliveredtohereinplaintiff ?assecurit"forpurchases#ade%ithCalte=Philippines, 8nc.? b" said depositor 7$.N, 4ebruar" 1, ,1(*, pp. A2&)(:.*. >nNove#ber'), ,1(', defendant receivedaletter70efendantFsE=hibit A)+:fro#hereinplaintifffor#all" infor#in it of its possession of the C$0s in n 0ece#ber (, ,1(', plaintiff %as re=D,('=.''. T+e s#oses .ontended t+at $e.asePNB'.%d+(%d ($% '$%'1) (o ($% PESLAa''o,n( %2%n *+($o,(+ndo.)%/%n(), PN; 3io!ated its .ontra.ta! o$!i"ation to t+em as de#ositors.PN; #aid t+e 1ron" #a,ees, +en.e, its+o!d $ear t+e !oss. PN; mo3ed to dismiss t+e .om#!aint on t+e "rond o- !a./ o- .ase o- a.tion. PN; ar"ed t+at t+e .!aim -ordama"es s+o!d .ome -rom t+e #a,ees o- t+e .+e./s, and not -rom s#oses Rodri"e:.Sin.e t+ere 1as no demand-rom t+e said #a,ees, t+e o$!i"ation s+o!d $e .onsidered as dis.+ar"ed. In an Order dated Aanar, 6%, %''', t+e RTC denied PN;@s motion to dismiss. In its Ans1er,5D7PN;.!aimeditis not !ia$!e-or t+e.+e./s 1+i.+ it #aidto t+ePEMS?A a..ont1it+ot an, indorsement -rom t+e #a,ees. T+e $an/ .ontended t+at s#oses Rodri"e:, t+e ma/ers, a.ta!!, d+dno( +n(%nd3o.($% na/%d0a-%%) (o.%'%+2% ($% 0.o'%%d) o3 ($% '$%'1). Conse2ent!,, t+e #a,ees 1ere.onsidered as F3+'(+(+o,) 0a-%%)G as de-ined nder t+e Ne"otia$!e Instrments ?a1 8NI?9. ;ein" .+e./s made to-i.titios #a,ees 1+i.+are$earer instrments, t+e.+e./s 1erene"otia$!e$,merede!i3er,. PN;@sAns1erin.!dedits .ross-.!aim a"ainst its .o-de-endants PEMS?A and t+e MCP, #ra,in" t+at in t+e e3ent t+at Hd"ment isrendered a"ainst t+e $an/,t+e .ross-de-endants s+o!d $e ordered to reim$rse PN; t+e amont it s+a!! #a,. A-ter tria!, t+e RTC rendered Hd"ment in -a3or o- s#oses Rodri"e: 8#!ainti--s9. It r!ed t+at PN;8de-endant9 is !ia$!e to retrn t+e 3a!e o- t+e .+e./s. A!! .onter.!aims and .ross-.!aims 1ere dismissed. T+edis#ositi3e #ortion o- t+e RTC de.ision reads: *HEREBORE, in 3ie1 o- t+e -ore"oin", t+e Cort +ere$, renders Hd"ment, as-o!!o1s: 6. 4e-endant is +ere$, ordered to #a, t+e #!ainti--s t+e tota! amont o- P%,>=D,('=.''or reinstate or restore t+e amont o- PEED,>>E.'' in t+e PN;i" 4emand 4e#ositC+e./in"-='D))). Rather, there is a .commercial bad faith/ e'ception to 0CC 1-234, applicable when thetransferee .acts dishonestly % where it has actual &nowledge of facts and circumstances thatamount to bad faith, thus itself becoming a participant in a fraudulent scheme.) ) )S.+ atest -inds s##ort in t+e te)t o- t+e Code, 1+i.+ omits a standard o- .are re2irement -romUCC >-='D $t im#oses on a!! #arties an o$!i"ation to a.t 1it+ F+onest, in -a.t.G) ) )56C78Em#+asis added9 G%((- a!so !aid t+e #rin.i#!e t+at t+e -i.titios-#a,ee r!e e)tends #rote.tion e3en to non-$an/ trans-erees o-t+e .+e./s. In t+e .ase nder re3ie1, t+e Rodri"e: .+e./s 1ere #a,a$!e to s#e.i-ied #a,ees.It is nre-ted t+at t+e&C .+e./s 1ere #a,a$!e to s#e.i-i. #ersons.?i/e1ise, it is n.ontro3erted t+at t+e #a,ees 1ere a.ta!, e)istin", and!i3in" #ersons 1+o 1ere mem$ers o- PEMS?A t+at +ad a redis.ontin" arran"ement 1it+ s#oses Rodri"e:. *+at remains to $e determined is i- t+e #a,ees, t+o"+ e)istin" #ersons, 1ere F-i.titiosG in its $roader.onte)t. Bor t+e -i.titios-#a,ee r!e to $e a3ai!a$!e as a de-ense, PN; mst s+o1 t+at t+e ma/ers did not intend-or t+e named #a,ees to $e #art o- t+e transa.tion in3o!3in" t+e .+e./s. At most, t+e $an/@s t+esis s+o1s t+at t+e#a,ees did not +a3e /no1!ed"e o- t+e e)isten.e o- t+e .+e./s.T$+) 6a'1 o3 1no*6%d4% on ($% 0a.( o3 ($% 0a-%%),$o*%2%., *a) no( (an(a/o,n( (o a 6a'1 o3 +n(%n(+on on ($% 0a.( o3 .%)0ond%n();)0o,)%) ($a( ($% 0a-%%) *o,6dno( .%'%+2% ($% '$%'1)< 0.o'%%d). Considerin" t+at res#ondents-s#oses 1ere transa.tin" 1it+ PEMS?A and not21t+e indi3ida! #a,ees, it is nderstanda$!e t+at t+e, re!ied on t+e in-ormation "i3en $, t+e o--i.ers o- PEMS?A t+att+e #a,ees 1o!d $e re.ei3in" t+e .+e./s. Meri!,, t+e s$He.t .+e./s are #resmed order instrments. T+is is $e.ase,as -ond $, $ot+ !o1er.orts, PN; -ai!ed to #resent s--i.ient e3iden.e to de-eat t+e .!aim o- res#ondents-s#oses t+at t+e named #a,ees1ere t+e intended re.i#ients o-t+e .+e./s@ #ro.eeds.T+e $an/ -ai!ed to satis-, a re2isite .ondition o- a -i.titios-#a,ee sitation J t+at t+e ma/er o- t+e .+e./ intended -or t+e #a,ee to +a3e no interest in t+e transa.tion. ;e.ase o- a 3a+6,.%to s+o1 t+at t+e #a,ees 1ere F-i.titiosG in its $roader sense, t+e -i.titios-#a,eer!e does no( a##!,.T+s, t+e .+e./s are to $e deemed #a,a$!e to order.Conse2ent!,, t+e dra1ee $an/ $ears t+e!oss.5%'7 PNB *a) .%/+)) +n +() d,(- a) ($% d.a*%% 7an1. It does not dis#te t+e -a.t t+at its te!!er or te!!ersa..e#ted t+e &C .+e./s -or de#osit to t+e PEMS?A a..ont e3en 1it+ot an, indorsement -rom t+e named #a,ees.It $ears stressin" t+at order instrments .an on!, $e ne"otiated 1it+ a 3a!id indorsement. A $an/ t+at re"!ar!, #ro.esses .+e./s t+at are neit+er #a,a$!e to t+e .stomer nor d!, indorsed $, t+e#a,ee is a##arent!, "ross!, ne"!i"ent in its o#erations.5%67 T+is Cort +as re.o"ni:ed t+e ni2e #$!i. interest#ossessed $, t+e $an/in" indstr, and t+e need -or t+e #eo#!e to +a3e -!! trst and .on-iden.e in t+eir $an/s.5%%7Bor t+is reason, $an/s are minded to treat t+eir .stomer@s a..onts 1it+ tmost .are, .on-iden.e, and +onest,.5%>7 In a .+e./in" transa.tion, t+e dra1ee $an/ +as t+e dt, to 3eri-, t+e "enineness o- t+e si"natre o- t+edra1er and to #a, t+e .+e./ stri.t!, in a..ordan.e 1it+t+e dra1er@s instr.tions, i.e., to t+e named #a,ee in t+e.+e./.It s+o!d .+ar"e to t+e dra1er@s a..onts on!, t+e #a,a$!es at+ori:ed $, t+e !atter.Ot+er1ise, t+e dra1ee1i!! $e 3io!atin" t+e instr.tions o- t+e dra1er and +( )$a66 7% 6+a76% 3o. ($% a/o,n( '$a.4%d (o ($% d.a*%.
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