Ne Go Cases Chapter 1 Part 1

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ECOND DIVISION

[G.R. No. 93397. March 3, 1997.]

TRADERS ROYAL BANK, petitioner, vs. COURT OF APPEALS, FILRITERS GUARANTY ASSURANCECORPORATION and CENTRAL BANK of the PHILIPPINES, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Jaime M. Cabiles for respondent Central Bank.

Ruben L. Almadro for respondent Filriters.

SYLLABUS

1. COMMERCIAL LAW; NEGOTIABLE INSTRUMENTS; FREEDOM OF NEGOTIABILITY; NOT PRESIN CERTIFICATE OF INDEBTEDNESS. 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 ofnegotiability is the touchstone relating to the protection of holders in due course, and the freedom ofnegotiability is the foundation for the protection which the law throws around a holder in due course(11 Am. Jur. 2d, 32). This freedom in negotiability is totally absent in a certificate of indebtedness as itmerely acknowledges to pay a sum of money to a specified person or entity for a period of time.

2. ID.; CORPORATIONS; PIERCING THE VEIL OF CORPORATE ENTITY; ELABORATED; NOT PROPECASE AT BAR. Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this ismerely an equitable remedy, and may be awarded only in cases when the corporate fiction is used todefeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is amere alter ego or business conduit of a person. Piercing the veil of corporate entity requires the court tosee through the protective shroud which exempts its stockholders from liabilities that ordinarily, theycould be subject to or distinguishes one corporation from a seemingly separate one, were it not for theexisting corporate fiction. But to do this, the court must be sure that the corporate fiction was misused,to such an extent that injustice, fraud, or crime was committed upon another, disregarding, thus, his,her, or its rights. It is the protection of the interests of innocent third persons dealing with the corporateentity which the law aims to protect by this doctrine. Though it is true that when valid reasons exist, thelegal fiction that a corporation is an entity with a juridical personality separate from its stockholders andfrom other corporations may be disregarded, in the absence of such grounds, the general rule must beupheld. The fact that Philfinance owns majority shares in Filriters is not by itself a ground to disregard

the independent corporate status of Filriters. In Liddel & Co., Inc. vs. Collector of Internal Revenue, themere ownership by a single stockholder or by another corporation of all or nearly all of the capital stockof a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporatepersonalities. In the case at bar, there is sufficient showing that the petitioner was not defrauded at allwhen it acquired the subject certificate of indebtedness from Philfinance.

3. ID.; BANKS; CENTRAL BANK CIRCULAR NO. 769; REQUIREMENTS; NON COMPLIANCE THEREFATAL; CASE AT BAR. Petitioner, being a commercial bank, cannot feign ignorance of Central Bank


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Circular 769, and its requirements. An entity which deals with corporate agents within circumstancesshowing that the agents are acting in excess of corporate authority, may not hold the corporation liable.This is only fair, as everyone must, in the exercise of his rights and in the performance of his duties, actwith justice, give everyone his due, and observe honesty and good faith. The transfer made by Filritersto Philfinance did not conform to the said Central Bank Circular, which for all intents, is considered part

of the law. As found by the courts a quo, Alfredo O. Banaria, who had signed the deed of assignmentfrom Filriters to Philfinance, purportedly for and in favor of Filriters was fictitious, and therefore voidand inexistent, as there was no consideration for the same. This is fatal to the petitioner's cause, forthen, Philfinance had no title over the subject certificate to convey to Traders Royal Bank. Nemo potestnisi quod de jure potest no man can do anything except what he can do lawfully. Concededly, thesubject CBCI (Central Bank Certificate of Indebtedness) was acquired by Filriters to form part of its legaland capital reserves, which are required by law to be maintained at a mandated level. It cannot,therefore, be taken out of the said fund, without violating the requirements of the law. Thus, theunauthorized use or distribution of the same by a corporate officer of Filriters cannot bind the saidcorporation, not without the approval of its Board of Directors, and the maintenance of the requiredreserve fund. Consequently, the title of Filriters over the subject certificate of indebtedness must beupheld over the claimed interest of Traders Royal Bank.

D E C I S I O N

TORRES, JR., J p:

Assailed in this Petition for Review on Certiorari is the Decision of the respondent Court of Appealsdated January 29, 1990, 1 affirming the nullity of the transfer of Central Bank Certificate of Indebtedness(CBCI) No. D891, 2 with a face value of P500,000.00 from the Philippine Underwriters FinanceCorporation (Philfinance) to the petitioner Trader's Royal Bank (TRB), under a Repurchase Agreement 3dated February 4, 1981, and a Detached Assignment 4 dated April 27, 1981.

Docketed as Civil Case No. 83-17966 in the Regional Trial Court of Manila, Branch 32, the action wasoriginally filed as a Petition for Mandamus 5 under Rule 65 of the Rules of Court, to compel the CentralBank of the Philippines to register the transfer of the subject CBCI to petitioner Traders Royal Bank(TRB).

In the said petition, TRB stated that:

"3. On November 27, 1979, Filriters Guaranty Assurance Corporation (Filriters) executed a'Detached Assignment' . . ., whereby Filriters, as registered owner, sold, transferred, assigned anddelivered unto Philippine Underwriters Finance Corporation (Philfinance) all its rights and title to CentralBank Certificates of Indebtedness (CBCI) Nos. D890 to D896, inclusive, each in the denomination ofPESOS: FIVE HUNDRED THOUSAND (P500,000.00) and having an aggregate value of PESOS: THREEMILLION FIVE HUNDRED THOUSAND (P3,500,000.00);

4. The aforesaid Detached Assignment (Annex "A") contains an express authorization executed bythe transferor intended to complete the assignment through the registration of the transfer in the name


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of PhilFinance, which authorization is specifically phrased as follows: '(Filriters) hereby irrevocablyauthorized the said issuer (Central Bank) to transfer the said bond/certificates on the books of its fiscalagent;

5. On February 4, 1981, petitioner entered into a Repurchase Agreement with PhilFinance . . .,

whereby, for and in consideration of the sum of PESOS: FIVE HUNDRED THOUSAND (P500,000.00),PhilFinance sold, transferred and delivered to petitioner CBCI 4-year, 8th series, Serial No. D891 with aface value of P500,000.00 . . ., which CBCI was among those previously acquired by PhilFinance fromFilriters as averred in paragraph 3 of the Petition;

6. Pursuant to the aforesaid Repurchase Agreement (Annex 'B'), Philfinance agreed to repurchaseCBCI Serial No. D891 (Annex 'C'), at the stipulated price of PESOS: FIVE HUNDRED NINETEEN THOUSANDTHREE HUNDRED SIXTY-ONE & 11/100 (P519,361.11) on April 27, 1981;

7. PhilFinance failed to repurchase the CBCI on the agreed date of maturity, April 27, 1981, whenthe checks it issued in favor of petitioner were dishonored for insufficient funds;

8. Owing to the default of PhilFinance, it executed a Detached Assignment in favor of thePetitioner to enable the latter to have its title completed and registered in the books of the respondent.And by means of said Detachment Assignment, Philfinance transferred and assigned all its rights andtitle in the said CBCI (Annex 'C') to petitioner and, furthermore, it did thereby 'irrevocably authorize thesaid issuer (respondent herein) to transfer the said bond/certificate on the books of its fiscal agent.' . . .

9. Petitioner presented the CBCI (Annex 'C'), together with the two (2) aforementioned DetachedAssignments (Annexes 'B' and 'D'), to the Securities Servicing Department of the respondent, andrequested the latter to effect the transfer of the CBCI on its books and to issue a new certificate in the

name of petitioner as absolute owner thereof;10. Respondent failed and refused to register the transfer as requested, and continues to do sonotwithstanding petitioner's valid and just title over the same and despite repeated demands in writing,the latest of which is hereto attached as Annex 'E' and made an integral part hereof;

11. The express provisions governing the transfer of the CBCI were substantially complied with inpetitioner's request for registration, to wit: cdasia

'No transfer thereof shall be valid unless made at said office (where the Certificate has been registered)by the registered owner hereof, in person or by his attorney duly authorized in writing, and similarly

noted hereon, and upon payment of a nominal transfer fee which may be required, a new Certificateshall be issued to the transferee of the registered holder thereof.'

and, without a doubt, the Detached Assignments presented to respondent were sufficientauthorizations in writing executed by the registered owner, Filriters, and its transferee, PhilFinance, asrequired by the above-quoted provision;


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12. Upon such compliance with the aforesaid requirements, the ministerial duties of registering atransfer of ownership over the CBCI and issuing a new certificate to the transferee devolves upon therespondent;"

Upon these assertions, TRB prayed for the registration by the Central Bank of the subject CBCI in its

name.

On December 4, 1984, the Regional Trial Court trying the case took cognizance of the defendant CentralBank of the Philippines' Motion for Admission of Amended Answer with Counter Claim for Interpleader,6 thereby calling to fore the respondent Filriters Guaranty Assurance Corporation (Filriters), theregistered owner of the subject CBCI as respondent.

For its part, Filriters interjected as Special Defenses the following:

"11. Respondent is the registered owner of CBCI No. 891;

12. The CBCI constitutes part of the reserve investment against liabilities required of respondent asan insurance company under the Insurance Code;

13. Without any consideration or benefit whatsoever to Filriters, in violation of law and the trustfund doctrine and to the prejudice of policyholders and to all who have present or future claim againstpolicies issued by Filriters, Alfredo Banaria, then Senior Vice-President-Treasury of Filriters, without anyboard resolution, knowledge or consent of the board of directors of Filriters and without any clearanceor authorization from the Insurance Commissioner, executed a detached assignment purportedlyassigning CBCI No. 891 to Philfinance;

xxx xxx xxx

14. Subsequently, Alberto Fabella, Senior Vice-President-Comptroller and Pilar Jacobe, Vice-President-Treasury of Filriters (both of whom were holding the same positions in Philfinance), withoutany consideration or benefit redounding to Filriters and to the grave prejudice of Filriters, its policyholders and all who have present or future claims against its policies, executed similar detachedassignment forms transferring the CBCI to plaintiff;

xxx xxx xxx

15. The detached assignment is patently void and inoperative because the assignment is withoutthe knowledge and consent of directors of Filriters, and not duly authorized in writing by the Board, as

required by Article V, Section 3 of CB Circular No. 769;

16. The assignment of the CBCI to Philfinance is a personal act of Alfredo Banaria and not thecorporate act of Filriters and as such null and void;

a) The assignment was executed without consideration and for that reason, the assignment is voidfrom the beginning (Article 1409, Civil Code);


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b) The assignment was executed without any knowledge and consent of the board of directors ofFilriters;

c) The CBCI constitutes reserve investment of Filriters against liabilities, which is a requirementunder the Insurance Code for its existence as an insurance company and the pursuit of its business

operations. The assignment of the CBCI is illegal act, in the sense of malum in se or malum prohibitum,for anyone to make, either as corporate or personal act;

d) The transfer or diminution of reserve investments of Filriters is expressly prohibited by law, isimmoral and against public policy;

e) The assignment of the CBCI has resulted in the capital impairment and in the solvency deficiencyof Filriters (and has in fact helped in placing Filriters under conservatorship), an inevitable result knownto the officer who executed the detached assignment.

17. Plaintiff had acted in bad faith and with knowledge of the illegality and invalidity of the

assignment;

a) The CBCI No. 891 is not a negotiable instrument and as a certificate of indebtedness is notpayable to bearer but is registered in the name of Filriters;

b) The provision on transfer of the CBCIs, provides that the Central Bank shall treat the registeredowner as the absolute owner and that the value of the registered certificates shall be payable only tothe registered owner; a sufficient notice to plaintiff that the assignments do not give them theregistered owner's right as absolute owner of the CBCIs;

c) CB Circular 769, Series of 1980 (Rules and Regulations Governing CBCIs) provides that registered

certificates are payable only to the registered owner (Article II, Section 1).

18. Plaintiff knew fully well that the assignment by Philfinance of CBCI No. 891 by Filriters is not aregular transaction made in the usual or ordinary course of business;

a) The CBCI constitutes part of the reserve investments of Filriters against liabilities required by theInsurance Code and its assignment or transfer is expressly prohibited by law. There was no attempt toget any clearance or authorization from the Insurance Commissioner;

b) The assignment by Filriters of the CBCI is clearly not a transaction in the usual or regular courseof its business;

c) The CBCI involved substantial amount and its assignment clearly constitutes disposition of 'all orsubstantially all' of the assets of Filriters, which requires the affirmative action of the stockholders(Section 40, Corporation [sic] Code). 7

In its Decision 8 dated April 29, 1988, the Regional Trial Court of Manila, Branch XXXII found theassignment of CBCI No. D891 in favor of Philfinance, and the subsequent assignment of the same CBCI


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by Philfinance in favor of Traders Royal Bank null and void and of no force and effect. The dispositiveportion of the decision reads:

"ACCORDINGLY, judgment is hereby rendered in favor of the respondent Filriters Guaranty AssuranceCorporation and against the plaintiff Traders Royal Bank:

(a) Declaring the assignment of CBCI No. 891 in favor of PhilFinance, and the subsequentassignment of CBCI by PhilFinance in favor of the plaintiff Traders Royal Bank as null and void and of noforce and effect;

(b) Ordering the respondent Central Bank of the Philippines to disregard the said assignment and topay the value of the proceeds of the CBCI No. D891 to the Filriters Guaranty Assurance Corporation;

(c) Ordering the plaintiff Traders Royal Bank to pay respondent Filriters Guaranty Assurance Corp.the sum of P10,000 as attorney's fees; and

(d) to pay the costs.

SO ORDERED." 9

The petitioner assailed the decision of the trial court in the Court of Appeals, 10 but their appeal likewisefailed. The findings of fact of the said court are hereby reproduced:

"The records reveal that defendant Filriters is the registered owner of CBCI No. D891. Under a deed ofassignment dated November 27, 1971, Filriters transferred CBCI No. D891 to Philippine UnderwritersFinance Corporation (Philfinance). Subsequently, Philfinance transferred CBCI No. D891, which was stillregistered in the name of Filriters, to appellant Traders Royal Bank (TRB). The transfer was made under arepurchase agreement dated February 4, 1981, granting Philfinance the right to repurchase theinstrument on or before April 27, 1981. When Philfinance failed to buy back the note on maturity date,it executed a deed of assignment, dated April 27, 1981, conveying to appellant TRB all its rights and titleto CBCI No. D891.

Armed with the deed of assignment, TRB then sought the transfer and registration of CBCI No. D891 inits name before the Security and Servicing Department of the Central Bank (CB). Central Bank, however,refused to effect the transfer and registration in view of an adverse claim filed by defendant Filriters.

Left with no other recourse, TRB filed a special civil action for mandamus against the Central Bank in theRegional Trial Court of Manila. The suit, however, was subsequently treated by the lower court as a case

of interpleader when CB prayed in its amended answer that Filriters be impleaded as a respondent andthe court adjudge which of them is entitled to the ownership of CBCI No. D891. Failing to get a favorable judgment. TRB now comes to this Court on appeal." 11

In the appellate court, petitioner argued that the subject CBCI was a negotiable instrument, and havingacquired the said certificate from Philfinance as a holder in due course, its possession of the same isthus free from any defect of title of prior parties and from any defense available to prior parties among


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themselves, and it may thus, enforce payment of the instrument for the full amount thereof against allparties liable thereon. 12

In ignoring said argument, the appellate court said that the CBCI is not a negotiable instrument, sincethe instrument clearly stated that it was payable to Filriters, the registered owner, whose name was

inscribed thereon, and that the certificate lacked the words of negotiability which serve as an expressionof consent that the instrument may be transferred by negotiation.

Obviously, the assignment of the certificate from Filriters to Philfinance was fictitious, having been madewithout consideration, and did not conform to Central Bank Circular No. 769, series of 1980, betterknown as the "Rules and Regulations Governing Central Bank Certificates of Indebtedness," whichprovided that any "assignment of registered certificates shall not be valid unless made . . . by theregistered owner thereof in person or by his representative duly authorized in writing."

Petitioner's claimed interest has no basis, since it was derived from Philfinance, whose interest wasinexistent, having acquired the certificate through simulation. What happened was Philfinance merelyborrowed CBCI No. D891 from Filriters, a sister corporation, to guarantee its financing operations.

Said the Court:

"In the case at bar, Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalfof Filriters, did not have the necessary written authorization from the Board of Directors of Filriters toact for the latter. For lack of such authority, the assignment did not therefore bind Filriters and violatedat the same time Central Bank Circular No. 769 which has the force and effect of a law, resulting in thenullity of the transfer (People v. Que Po Lay, 94 Phil. 640; 3M Philippines, Inc. vs. Commissioner ofInternal Revenue, 165 SCRA 778).

In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer toTraders Royal Bank and which the latter can register with the Central Bank.

WHEREFORE, the judgment appealed from is AFFIRMED, with costs against plaintiff-appellant.

SO ORDERED." 13

Petitioner's present position rests solely on the argument that Philfinance owns 90% of Filriter's equityand the two corporations have identical corporate officers, thus demanding the application of thedoctrine of piercing the veil of corporate fiction, as to give validity to the transfer of the CBCI from theregistered owner to petitioner TRB. 14 This renders the payment by TRB to Philfinance for CBCI, asactual payment to Filriters. Thus, there is no merit to the lower courts' ruling that the transfer of theCBCI from Filriters to Philfinance was null and void for lack of consideration. cda

Admittedly, the subject CBCI is not a negotiable instrument in the absence of words of negotiabilitywithin the meaning of the negotiable instruments law (Act 2031).

The pertinent portions of the subject CBCI read:


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xxx xxx xxx

The Central Bank of the Philippines (the Bank) for value received, hereby promises to pay to bearer, or ifthis Certificate of indebtedness be registered, to FILRITERS GUARANTY ASSURANCE CORPORATION, theregistered owner hereof, the principal sum of FIVE HUNDRED THOUSAND PESOS.

xxx xxx xxx

Properly understood, a certificate of indebtedness pertains to certificates for the creation andmaintenance of a permanent improvement revolving fund, is similar to a "bond," (82 Minn. 202). Beingequivalent to a bond, it is properly understood as an acknowledgment of an obligation to pay a fixedsum of money. It is usually used for the purpose of long term loans.

The appellate court ruled that the subject CBCI is not a negotiable instrument, stating that:

"As worded, the instrument provides a promise 'to pay Filriters Guaranty Assurance Corporation, theregistered owner hereof.' Very clearly, the instrument is payable only to Filriters, the registered owner,whose name is inscribed thereon. It lacks the words of negotiability which should have served as anexpression of consent that the instrument may be transferred by negotiation." 15

A reading of the subject CBCI indicates that the same is payable to FILRITERS GUARANTY ASSURANCECORPORATION, and to no one else, thus, discounting the petitioner's submission that the same is anegotiable instrument, and that it is a holder in due course of the certificate.

The language of negotiability which characterize a negotiable paper as a credit instrument is its freedomto circulate as a substitute for money. Hence, freedom of negotiability is the touchstone relating to theprotection 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 (11 Am. Jur. 2d, 32). This freedom innegotiability is totally absent in a certificate of indebtedness as it merely acknowledges to pay a sum ofmoney to a specified person or entity for a period of time.

As held in Caltex (Philippines), Inc. vs. Court of Appeals 16 :

"The accepted rule is that the negotiability or non-negotiability of an instrument is determined from thewriting, that is, from the face of the instrument itself. In the construction of a bill or note, the intentionof the parties is to control, if it can be legally ascertained. While the writing may be read in the light ofsurrounding circumstances in order to more perfectly understand the intent and meaning of the parties,yet as they have constituted the writing to be the only outward and visible expression of their meaning,no other words are to be added to it or substituted in its stead. The duty of the court in such case is toascertain, not what the parties may have secretly intended as contradistinguished from what theirwords express, but what is the meaning of the words they have used. What the parties meant must bedetermined by what they said."

Thus, the transfer of the instrument from Philfinance to TRB was merely an assignment, and is notgoverned by the negotiable instruments law. The pertinent question then is, was the transfer of the


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CBCI from Filriters to Philfinance and subsequently from Philfinance to TRB, in accord with existing law,so as to entitle TRB to have the CBCI registered in its name with the Central Bank?

The following are the appellate court's pronouncements on the matter:

"Clearly shown in the record is the fact that Philfinance's title over CBCI No. D891 is defective since itacquired the instrument from Filriters fictitiously. Although the deed of assignment stated that thetransfer was for 'value received,' there was really no consideration involved. What happened wasPhilfinance merely borrowed CBCI No. D891 from Filriters, a sister corporation. Thus, for lack of anyconsideration, the assignment made is a complete nullity.

What is more, We find that the transfer made by Filriters to Philfinance did not conform to Central BankCircular No. 769, series of 1980, otherwise known as the 'Rules and Regulations Governing Central BankCertificates of Indebtedness', under which the note was issued. Published in the Official Gazette onNovember 19, 1980, Section 3 thereof provides that 'any assignment of registered certificates shall notbe valid unless made . . . by the registered owner thereof in person or by his representative dulyauthorized in writing.'

In the case at bar, Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalfof Filriters, did not have the necessary written authorization from the Board of Directors of Filriters toact for the latter. For lack of such authority, the assignment did not therefore bind Filriters and violatedat the same time Central Bank Circular No. 769 which has the force and effect of a law, resulting in thenullity of the transfer (People vs. Que Po Lay, 94 Phil. 640; 3M Philippines, Inc. vs. Commissioner ofInternal Revenue, 165 SCRA 778).

In sum, 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."Petitioner now argues that the transfer of the subject CBCI to TRB must be upheld, as the respondentFilriters and Philfinance, though separate corporate entities on paper, have used their corporate fictionto defraud TRB into purchasing the subject CBCI, which purchase now is refused registration by theCentral Bank.

Says the petitioner:

"Since Philfinance owns about 90% of Filriters and the two companies have the same corporate officers,if the principle of piercing the veil of corporate entity were to be applied in this case, then TRB's

payment to Philfinance for the CBCI purchased by it could just as well be considered a payment toFilriters, the registered owner of the CBCI as to bar the latter from claiming, as it has, that it neverreceived any payment for that CBCI sold and that said CBCI was sold without its authority.

xxx xxx xxx

We respectfully submit that, considering that the Court of Appeals has held that the CBCI was merelyborrowed by Philfinance from Filriters, a sister corporation, to guarantee its (Philfinance's) financing


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operations, if it were to be consistent therewith, on the issue raised by TRB that there was a piercing aveil of corporate entity, the Court of Appeals should have ruled that such veil of corporate entity was, infact, pierced, and the payment by TRB to Philfinance should be construed as payment to Filriters." 17

We disagree with the Petitioner.

Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this is merely an equitableremedy, and may be awarded only in cases when the corporate fiction is used to defeat publicconvenience, justify wrong, protect fraud or defend crime or where a corporation is a mere alter ego orbusiness conduit of a person. 18

Piercing the veil of corporate entity requires the court to see through the protective shroud whichexempts its stockholders from liabilities that ordinarily, they could be subject to, or distinguishes onecorporation from a seemingly separate one, were it not for the existing corporate fiction. But to do this,the court must be sure that the corporate fiction was misused, to such an extent that injustice, fraud, orcrime was committed upon another, disregarding, thus, his, her, or its rights. It is the protection of theinterests of innocent third persons dealing with the corporate entity which the law aims to protect bythis doctrine.

The corporate separateness between Filriters and Philfinance remains, despite the petitioners insistenceon the contrary. For one, other than the allegation that Filriters is 90% owned by Philfinance, and theidentity of one shall be maintained as to the other, there is nothing else which could lead the courtunder the circumstances to disregard their corporate personalities. cdasia

Though it is true that when valid reasons exist, the legal fiction that a corporation is an entity with a juridical personality separate from its stockholders and from other corporations may be disregarded, 19

in the absence of such grounds, the general rule must be upheld. The fact that Philfinance owns majorityshares in Filriters is not by itself a ground to disregard the independent corporate status of Filriters. InLiddel & Co., Inc. vs. Collector of Internal Revenue, 20 the mere ownership by a single stockholder or byanother corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficientreason for disregarding the fiction of separate corporate personalities.

In the case at bar, there is sufficient showing that the petitioner was not defrauded at all when itacquired the subject certificate of indebtedness from Philfinance.

On its face, the subject certificates state that it is registered in the name of Filriters. This should have putthe petitioner on notice, and prompted it to inquire from Filriters as to Philfinance's title over the same

or its authority to assign the certificate. As it is, there is no showing to the effect that petitioner had anydealings whatsoever with Filriters, nor did it make inquiries as to the ownership of the certificate.

The terms of the CBCI No. D891 contain a provision on its TRANSFER. Thus:

"TRANSFER: This Certificate shall pass by delivery unless it is registered in the owner's name at any officeof the Bank or any agency duly authorized by the Bank, and such registration is noted hereon. After suchregistration no transfer thereof shall be valid unless made at said office (where the Certificate has been


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registered) by the registered owner hereof, in person, or by his attorney, duly authorized in writing andsimilarly noted hereon and upon payment of a nominal transfer fee which may be required, a newCertificate shall be issued to the transferee of the registered owner thereof. The bank or any agencyduly authorized by the Bank may deem and treat the bearer of this Certificate, or if this Certificate isregistered as herein authorized, the person in whose name the same is registered as the absolute owner

of this Certificate, for the purpose of receiving payment hereof, or on account hereof, and for all otherpurpose whether or not this Certificate shall be overdue."

This is notice to petitioner to secure from Filriters a written authorization for the transfer or to requirePhilfinance to submit such an authorization from Filriters.

Petitioner knew that Philfinance is not the registered owner of 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 toverify or inquire as to the title of Philfinance to dispose of the CBCI.

Moreover, CBCI No. D891 is governed by CB Circular No. 769, series of 1980 21 , known as the Rules andRegulations Governing Central Bank Certificates of Indebtedness, Section 3, Article V of which providesthat:

"SEC. 3. Assignment of Registered Certificates. Assignment of registered certificates shall not be validunless made at the office where the same have been issued and registered or at the Securities ServicingDepartment, Central Bank of the Philippines, and by the registered owner thereof, in person or by hisrepresentative, duly authorized in writing. For this purpose, the transferee may be designated as therepresentative of the registered owner."

Petitioner, being a commercial bank, cannot feign ignorance of Central Bank Circular 769, and its

requirements. An entity which deals with corporate agents within circumstances showing that theagents are acting in excess of corporate authority, may not hold the corporation liable. 22 This is onlyfair, as everyone must, in the exercise of his rights and in the performance of his duties, act with justice,give everyone his due, and observe honesty and good faith. 23

The transfer made by Filriters to Philfinance did not conform to the said Central Bank Circular, which forall intents, is considered part of the law. As found by the courts a quo, Alfredo O. Banaria, who hadsigned the deed of assignment from Filriters to Philfinance, purportedly for and in favor of Filriters, didnot have the necessary written authorization from the Board of Directors of Filriters to act for the latter.As it is, the sale from Filriters to Philfinance was fictitious, and therefore void and inexistent, as therewas no consideration for the same. This is fatal to the petitioner's cause, for then, Philfinance had notitle over the subject certificate to convey to Traders Royal Bank. Nemo potest nisi quod de jure potest no man can do anything except what he can do lawfully.

Concededly, the subject CBCI was acquired by Filriters to form part of its legal and capital reserves,which are required by law 24 to be maintained at a mandated level. This was pointed out by Elias Garcia,Manager-in-Charge of respondent Filriters, in his testimony given before the court on May 30, 1986.


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"Q Do you know this Central Bank Certificate of Indebtedness, in short, CBCI No. D891 in the facevalue of P500,000.00 subject of this case?

A Yes, sir.

Q Why do you know this?

A Well, this was the CBCI of the company sought to be examined by the Insurance Commissionsometime in early 1981 and this CBCI No. 891 was among the CBCI's that were found to be missing.

Q Let me take you back further before 1981. Did you have the knowledge of this CBCI No. 891before 1981?

A Yes, sir. This CBCI is an investment of Filriters required by the Insurance Commission as legalreserve of the company.

Q Legal reserve for the purpose of what?

A Well, you see, the Insurance companies are required to put up legal reserves under Section 213of the Insurance Code equivalent to 40 percent of the premiums receipt and further, the InsuranceCommission requires this reserve to be invested preferably in government securities or governmentbonds. This is how this CBCI came to be purchased by the company."

It cannot, therefore, be taken out of the said fund, without violating the requirements of the law. Thus,the unauthorized use or distribution of the same by a corporate officer of Filriters cannot bind the saidcorporation, not without the approval of its Board of Directors, and the maintenance of the requiredreserve fund.

Consequently, the title of Filriters over the subject certificate of indebtedness must be upheld over theclaimed interest of Traders Royal Bank.

ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated January 29, 1990 ishereby AFFIRMED.

SO ORDERED.

Regalado, Romero and Mendoza, JJ., concur.

Puno, J., took no part.

SECOND DIVISION

[G.R. No. L-35767. June 18, 1976.]

RAYMUNDO A. CRYSTAL, petitioner, vs. COURT OF APPEALS and PELAGIA OCANG, PACITA, TEODULOFELICISIMO, PABLO, LYDIA, DIOSCORA and RODRIGO, all surnamed DE GRACIA, respondents.

SYNOPSIS


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The Supreme Court affirmed the decision of the Court of Appeals dismissing the petition for certiorariwhich sought the annulment and setting aside of the lower court's order directing the issuance of a writof possession in favor of private respondents. Petitioner questioned the trial court's jurisdiction to issuethe writ of possession sought by private respondents on the ground that the lower court itself hadissued an order to the effect that the legality and effectiveness of the redemption, as well as the

question of ownership of the redemptioner, was to be decided in another case, in view of which orderpetitioner filed a separate case which is still pending trial.

Upon a motion for reconsideration, the Supreme Court reconsidered and modified its decision andremanded the case to the trial court for further proceedings, taking into consideration the possibleinjustice that might result from its unqualified reliance in its decision on the finding of the Court ofAppeals insofar as the validity of petitioner's redemption is concerned.

SYLLABUS

1. NEGOTIABLE INSTRUMENTS; CHECKS; DISHONORED AND STALE CHECKS; LEGAL CONSEQUIN CASE AT BAR. The dishonoring of a check upon presentment, and its being stale for not beingpresented at all time, are incompatible developments that naturally have variant legal consequences.Thus, if indeed the check in question had been dishonored then there can be no doubt that petitioner'sredemption was null and void. On the other hand, if it had only be come stale, then it becomesimperative that the circumstances that caused its non-presentment be determined, for if this was notdue to the fault of the petitioner, then it would be unfair to deprive him of the rights he had acquired asredemptioner, particularly, if, after all, the value of the check has otherwise been received or realized bythe party concerned.

2. JUDGMENTS; FINALITY; SUPREME COURT SHOULD NOT ALLOW ITS DECISION TO BECOME F

WHEN SUBSTANTIAL JUSTICE MIGHT SUFFER. The Supreme Court should not allow any of its decisionsto become final when it is properly made to appear in a motion for reconsideration based on relevantfacts and circumstances not previously brought to its attention, although demonstrable from therecords, that even if the technical consideration on which it is based is well taken, substantial justicemight be sacrificed, if further proceedings are not ordered to be held to verify undeniable facts whichmight have escaped the eyes of Court of Appeals.

3. ID.; ID.; ID.; CASE AT BAR. Where possible injustice that might result from the SupremeCourt's unqualified reliance in its decision on the finding of the Court of Appeals that the check forP11,200 paid by petitioner for the redemption in dispute had been dishonored, in the face of the other

finding in the same decision of the Court of Appeals indicating that instead of having been dishonored,the said check had only become stale, albeit it was being replaced with new ones from time to time, itsdecision should not be allowed to become final.

4. SPECIAL CIVIL ACTIONS; CERTIORARI; SCRUTINY LIMITED TO POINT OF JURISDICTIONCOMPLAINED OF. Courts should confine its scrutiny in certiorari cases only to the specific point of jurisdiction complained of.


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R E S O L U T I O N

BARREDO, J p:

Motion for reconsideration of the decision of this Court in this case promulgated on February 25, 1975affirming the decision of the Court of Appeals in favor of private respondents which held thatpetitioner's redemption of the property acquired by said respondents in an execution sale pursuant to afinal judgment of the trial court in Civil Case No. R-1666, Court of First Instance of Cebu, was invalidinasmuch as the check which petitioner had used in paying the redemption price had been eitherdishonored or had become stale, hence its value was never realized, thus upholding in the process the jurisdiction of the trial court to rule on the question of validity of the redemption in questionnotwithstanding that by order of that same court, said matter had been made the subject of a separatesuit, Civil Case No. 62-T also of the Court of First Instance of Cebu, filed on August 9, 1060.

In his motion for reconsideration, petitioner insists that it was an act in excess of jurisdiction on the partof the trial court in R-1666, to issue on May 31, 1971 the writ of possession sought by privaterespondents, thru Pelagia Ocang, in her motion of August 15, 1970, considering that court hadpreviously pointedly observed in its order of March 24, 1960 that "the question as to whether or not theredemption allegedly made by Mr. Crystal by paying the amount to Mrs. Pelagia Ocang without usingthe said P11,200 deposited with the sheriff is legal and effective" has to be decided in "another propercase" and, furthermore, in its order of June 4, 1960 in the same case, the same court had moredefinitely ruled that "the question of ownership of Mr. Raymundo Crystal, the redemptioner, is not aproper matter to be decided in this case but in another case where the legality or validity of the allegeddeed of redemption executed in favor of Mr. Crystal will be amply raised and threshed out" and,accordingly, in attention to such observations and ruling, petitioner did file Civil Case No. 62-T, which isstill pending trial.

While, as already explained in Our decision, such pose of petitioner has its merits, We deem itinadvisable at this point to modify Our ruling that there is really no issue of jurisdiction involved hereand that it is preferable, under the peculiar circumstances obtaining in this particular case, that the rootof the controversy between the parties be inquired into and determined in the incident already takencognizance of by the trial court in Civil Case No. R-1666 regarding the right of possession over theproperty in dispute. In this connection, it is to be noted that even after he had filed Civil Case No. 62-T,evidently in reliance of what he must have considered as his right as redemptioner of the property soldin execution under a judgment in Civil Case No. R-1666, petitioner regained possession of the four (4)parcels of land in question without the aid of the court, taking the same from Pelagia Ocang who had

previously taken it away from him also extrajudicially, claiming that she had legally acquired the sameprecisely in that same execution and that petitioner's redemption was null and void because the checkhe used to pay the redemption price had been dishonored for lack of sufficient funds. In other words,both petitioner and Ocang, predicating their respective claims to rightful possession on the same sale onexecution in the same case, Civil Case No. R-1666, had alternately taken the law in their hands to obtainpossession of the lands in question in disregard of the proper procedure for the complete satisfaction ofthe judgment of the court in that case. In the light of these peculiar circumstances, it does appear to be


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more appropriate that, since it was the court in that Civil Case No. R1666 that rendered the judgmentand subsequently ordered the execution sale from which the disputed redemption was made, it shouldbe the one to settle the whole controversy among all the interested parties, including even the judgment debtors, the heirs of Nicolas Rafols themselves, who, according to the records, have claim oftheir own relative to the same redemption, which might just as well be inquired into in said case, rather

than in Case No. 62-T in which they are not parties. Otherwise stated, in issuing the impugned writ ofpossession, the court took the bull by the horns, so to speak, thereby overturning its own previous standon the matter announced in its orders of March 24 and June 4, 1960 aforementioned. Consequently, Weoverrule the argument of jurisdiction or even abuse of discretion raised by petitioner and reiterate whatWe have said in regard thereto in Our decision.

This is not to say that the procedure followed by Ocang and sanctioned by the trial court of resorting tothe issuance of a writ of possession is not open to question, since a writ of possession is not alwaysavailable in all controversies concerning possession of real estate. But We see no need to resolve thatpoint here. More importantly, what impresses Us in the motion for reconsideration is the possible

injustice that might result from Our unqualified reliance in Our decision on the finding of the Court ofAppeals that the check for P11,200 paid by petitioner for the redemption in dispute had beendishonored, in the face of the other finding in the same decision of the Court of Appeals indicating thatinstead of having been dishonored, the said check had only become stale, albeit it was being replacedwith new ones from time to time. Surely, for a check to be dishonored upon presentment, on the onehand, and to be stale for not being presented at all in time, on the other, are incompatibledevelopments that naturally have variant legal consequences. Thus, if indeed the check in question hadbeen dishonored, then there can be no doubt that petitioner's redemption was null and void. On theother hand, if it had only become stale, then it becomes imperative that the circumstances that causedits non-presentment be determined, for if this was not due to the fault of the petitioner, then it would

be unfair to deprive him of the rights he had acquired as redemptioner, particularly, if, after all, thevalue of the check has otherwise been received or realized by the party concerned. From the motion forreconsideration and its annexes, We gather that petitioner has ready evidence showing that whenPelagia Ocang secured the writ of possession in question, she had already been paid the full amount ofthe check in dispute. What is more, there are a number of circumstances pointed out in said motion,apparently supported by corresponding evidence, tending to show that a compromise had already beenagreed upon by the parties, although not yet approved by the court, or, at least, that Ocang has madeadmissions which indicate that the issue regarding the supposed dishonoring or becoming stale of therepeatedly mentioned check is no longer of any legal significance and, for that matter, the observationsWe made in Our decision in regard to the duties of the sheriff in the premises have been rendered

academic.

Needless to say, the Supreme Court should not allow any of its decisions to become final when it isproperly made to appear in a motion for reconsideration based on relevant facts and circumstances notpreviously brought to its attention, although demonstrate from the records, that even if the technicalconsideration on which it is based is well taken, substantial justice might be sacrificed, if furtherproceedings are not ordered to be held to verify undeniable facts which might have escaped the eyes of


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the Court of Appeals. In the instant case, We took it as proven, per statements of fact in the decision ofthe Court of Appeals, that the check with which petitioner redeemed the property in dispute had beendishonored. On that premise and seeing that even if We upheld the technical point of jurisdiction raisedby petitioner, the final outcome of the controversy between the parties would not be different, Weopted to put aside the procedural aspect of the dispute, and proceeded to decide the merits of the

respective substantive claims of the parties We felt that in view of the findings of fact of the Court ofAppeals, equity demanded that the case be earlier terminated by ignoring not only whatever flaw therewas in the procedure adopted by the court below but also the seemingly unusual departure by the Courtof Appeals from the orthodox rule requiring courts to confine its scrutiny in certiorari cases only to thespecific point of jurisdiction complained of.

Now, however, there is a strong showing in the motion for reconsideration, premised on no less thanother portions of the very decision of the intermediate court and other apparently credible evidence,that not only was said check not dishonored, although it became stale, but that respondent PelagiaOcang had actually been paid already the full value thereof. And in this connection, it is notable that in

the comment of respondents on petitioner's motion for reconsideration, there is no clear andcategorical denial of these important and decisive facts.

One more point. In Our decision, We assumed that the findings of fact of the Court of Appeals were theresult of an exhaustive consideration of evidence presented in due course by the parties. It turns outnow, that inasmuch as the trial court itself had previously ruled that the validity of the redemption incontroversy should be the subject of a separate action and that, in fact, such separate action hadalready been filed by petitioner, it was in this other case that petitioner was to present thecorresponding evidence. Hence, whatever evidence was before the trial court in Case No. R-1666 whenit issued the subject writ of possession could not have been complete, much less incontrovertible. Cdpr

With these substantial considerations in view, We find no just alternative than to reconsider Ourdecision in so far as the matter of validity or invalidity of petitioner's redemption is concerned. It beingshown that the pivotal finding of the Court of Appeals regarding the check in question might actuallybelied in a more appropriate proceeding, the foundation of Our own decision has been shaken. Indeed,We are now convinced that it is but fair and just that the trial court should be allowed to receive allrelevant and competent evidence the parties may wish to present relative to the issue of whether or notrespondent Pelagia Ocang has already received in one form or another, directly or indirectly, the fullamount of P11,200 as redemption price of the four (4) parcels of land in dispute, as well as to all otherfacts which might affect the validity of the redemption here in controversy. Withal, should it be found bythe trial court that the redemption was invalid, because the redemption price has not been fully paid, itshould further determine who made the improvements found on said lands, in order that if it shouldturn out that they were introduced by petitioner, possession may not be awarded to respondents unlesssaid improvements are first properly and fully reimbursed to petitioner. It goes without saying that theproceedings herein contemplated are to be held in Civil Case No. R-1666. Correspondingly, Civil Case No.62-T and the other case reviewing the same should be deemed academic.


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WHEREFORE, the decision of this Court of February 25, 1975 is hereby reconsidered and modified in linewith the foregoing opinion and this case is remanded to the trial court for further proceedings as thereinindicated.

SECOND DIVISION

[G.R. No. L-41764. December 19, 1980.]

NEW PACIFIC TIMBER & SUPPLY COMPANY, INC., petitioner, vs. HON. ALBERTO V. SENERIS, RICARDOTONG and EX-OFFICIO SHERIFF HAKIM S. ABDULWAHID, respondents.

SYNOPSIS

Before the auction sale set by the Clerk of Court as Ex-Officio sheriff, pursuant to a writ of executionissued by respondent Judge at the instance of private respondent, upon failure of petitioner to pay the judgment obligation in the amount of P63,130.00, the latter deposited with the Clerk of Court theamount of P50,000.00 in cashier's check and P13,130.00 in cash which were both refused by privaterespondent. The sheriff proceeded with auction sale, sold the levied properties to private respondent ashighest bidder in the amount of P50, 000.00, declared a deficiency of P13,130.00 and issued a certificateof sale in favor of private respondent for P50,000.00 only. Petitioner filed an ex-parte motion for theissuance of a certificate of satisfaction of judgment which was denied in an order by the trial court.Hence, this petition.

On certiorari, the Supreme Court holding that respondent Judge gravely abused his discretion in denyingsaid motion, ruled that private respondent cannot validly refuse acceptance of payment in cashier'scheck which is deemed as cash in the business sector and that a special civil action of certiorari is properand not an appeal which is not an adequate and speedy remedy in this case, apart from the fact that thesubject of the petition as having been issued in grave abuse of discretion is not the decision, but theorder which was issued in execution of said decision.

Petition granted, order of execution set aside.

SYLLABUS

1. MERCANTILE LAW; NEGOTIABLE INSTRUMENT; CASHIER'S CHECK GOOD AS CASH. It is a well-known and accepted practice in the business sector that a Cashier's Check is deemed as cash. Moreover,since the said check had been certified by the drawee bank, by the certification, the funds representedby the check are transferred from the credit of the maker to that of the payee or holder, and for allintents and purposes, the latter becomes the depositor of the drawee bank, with rights and duties ofone in such situation. Where a check is certified by the bank on which it is drawn, the certification isequivalent to acceptance. Said certification "implies that the check is drawn upon sufficient funds in thehands of the drawee, that they have been set apart for its satisfaction, and that they shall be so appliedwhenever the check is presented for payment. It is an understanding that the check is good then, andshall continue to be good, and this agreement is as binding on the bank as its notes in circulation, acertificate of deposit payable to the order of the depositor, or any other obligation it can assume.


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2. ID.; ID.; ID.; OBJECT OR CERTIFICATION. The object of certifying a check, as regards bothparties, is to enable the holder to use it as money. (PNB vs. Nat. City Bank of New York, 63 Phil. 711, 718-719.) When the holder procures the check to be certified, "the check operates as an assignment of apart of the funds to the creditors". (PNB vs. Nat. City Bank of New York, supra, 711-717; Sec. 189.)Hence, the exception to the rule enunciated under Section 63 of the Central Bank Act to the effect "that

a check which has been cleared and credited to the account of the creditor shall be equivalent to adelivery to the creditor in cash in an amount equal to the amount credited to his account" shall apply.

3. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; SATISFACTION OF; PAYMENT IN CASHIER'CHECK GOOD AS CASH; REFUSAL OF RESPONDENT JUDGE TO ISSUE CERTIFICATE OF SATISFACTIOJUDGMENT; GRAVE ABUSE OF DISCRETION; CASE AT BAR. Where the check deposited by the judgment debtor is not an ordinary check but a Cashier's Check of the Equitable Banking Corporation, abank of good standing and reputation and the whole amount deposited by the petitioners consisting ofCashier's Check of P150,000.00 and P13,130.00 in cash covers the judgment obligation of P63,130.00 asmentioned in the writ of execution, there is no valid reason for the private respondent to have refused

acceptance of the payment of the obligation in his favor. The auction sale, therefore, was uncalled for.Further, it appears that on January 17, 1975, the Cashier's check was even withdrawn by the petitionerand replaced with cash in the corresponding amount of P50,000.00 but private respondent still refusedto receive the same. Thus, petitioner's motion for the issuance of a certificate of satisfaction ofJudgment is clearly meritorious and the respondent Judge gravely abused his discretion in not grantingthe same under the circumstances.

4. ID.; SPECIAL CIVIL ACTION; CERTIORARI, ADEQUATE AND PROPER WHERE WRIT OF EXECUALREADY ISSUED. The contention that appeal and not a special civil action for the certiorari is theproper remedy in this case, and that since the period to appeal from the decision has already expired,

then the present petition has been filed out of time, is untenable. The decision of the respondent judgein Civil Case No. 250 (166) has long become final and executory and so the same is not being questionedherein. The subject of the petition at bar as having been issued in grave abuse of discretion is the orderdated August 28, 1975 of the respondent judge which was merely issued in execution of the saiddecision. Thus, even granting that appeal is open to the petitioner, the same is not an adequate andspeedy remedy for the respondent judge had already issued a writ of execution.

D E C I S I O N

CONCEPCION, JR., J p:

A petition for certiorari with preliminary injunction to annul and/or modify the order of the Court ofFirst Instance of Zamboanga City (Branch II) dated August 28, 1975 denying petitioner's Ex-Parte Motionfor Issuance of Certificate Of Satisfaction Of Judgment. LLphil

Herein petitioner is the defendant in a complaint for collection of a sum of money filed by the privaterespondent. 1 On July 19, 1974, a compromise judgment was rendered by the respondent Judge inaccordance with an amicable settlement entered into by the parties the terms and conditions of which,are as follows:


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"(1) That defendant will pay to the plaintiff the amount of Fifty Four Thousand Five Hundred Pesos(P54,500.00) at 6% interest per annum to be reckoned from August 25, 1972;

"(2) That defendant will pay to the plaintiff the amount of Six Thousand Pesos (P6,000.00) asattorney's fees for which P5,000.00 had been acknowledged received by the plaintiff under

Consolidated Bank and Trust Corporation Check No. 16-135022 amounting to P5,000.00 having abalance of One Thousand Pesos (P1,000.00);

"(3) That the entire amount of P54,500.00 plus interest, plus the balance of P1,000.00 for attorney'sfees will be paid by defendant to the plaintiff within five months from today, July 19, 1974; and

"(4) Failure on the part of the defendant to comply with any of the above-conditions, a writ ofexecution may be issued by this Court for the satisfaction of the obligation." 2

For failure of petitioner to comply with his judgment obligation, the respondent Judge, upon motion ofthe private respondent, issued an order for the issuance of a writ of execution on December 21, 1974.

Accordingly, writ of execution was issued for the amount of P63,130.00 pursuant to which, the Ex-Officio Sheriff levied upon the following personal properties of the petitioner, to wit: prcd

(1) Unit American Lathe 24"

(1) Unit American Lathe 18" Cracker Wheeler

(1) Unit Rockford Shaper 24"

and set the auction sale thereof on January 15, 1975. However, prior to January 15, 1975, petitionerdeposited with the Clerk of Court, Court of First Instance, Zamboanga City, in his capacity as Ex-OfficioSheriff of Zamboanga City, the sum of P63,130.00 for the payment of the judgment obligation,consisting of the following:

1. P50,000 in Cashier's Check no. S-314361 dated January 3, 1975 of the Equitable BankingCorporation; and

2. P13,130.00 in cash. 3

In a letter dated January 14, 1975, to the Ex-Officio Sheriff, 4 private respondent through counsel,refused to accept the check as well as the cash deposit. In the same letter, private respondent requestedthe scheduled auction sale on January 15, 1975 to proceed if the petitioner cannot produce the cash.

However, the scheduled auction sale at 10:00 a.m. on January 15, 1975 was postponed to 3:00 o'clockp.m. of the same day due to further attempts to settle the case. Again the scheduled auction sale thatafternoon did not push through because of a last ditch attempt to convince the private respondent toaccept the check, The auction sale was then postponed on the following day, January 16, 1975 at 10:00o'clock a.m. 5 At about 9:15 a.m., on January 16, 1975, a certain Mr. Mr. Taedo representing thepetitioner appeared in the office of the Ex-Officio Sheriff and the latter reminded Mr. Taedo that theauction sale would proceed at 10:00 o'clock. At 10:00 a.m., Mr. Taedo and Mr. Librado, both


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representing the petitioner requested the Ex-Officio Sheriff to give them fifteen minutes within which tocontract their lawyer which request was granted. After Mr. Taedo and Mr. Librado failed to return,counsel for private respondent insisted that the sale must proceed and the Ex Officio Sheriff proceededwith the auction sale. 6 In the course of the proceedings, Deputy Sheriff Castro sold the leviedproperties item by item to the private respondent as the highest bidder in the amount of P50,000.00. As

a result thereof, the Ex-Officio Sheriff declared a deficiency of P13,130.00. 7 Thereafter, on January 16,1975, the Ex-Officio Sheriff issued a "Sheriff's Certificate of Sale" in favor of the private respondent,Ricardo Tong, married to Pascuala Tong for the total amount of P50,000.00 only. 8 Subsequently, onJanuary 17, 1975, petitioner filed an ex-parte motion for issuance of certificate of satisfaction of judgment. This motion was denied by the respondent Judge in his order dated August 28, 1975. In viewthereof, petitioner now questions said order by way of the present petition alleging in the main that saidrespondent Judge capriciously and whimsically abused his discretion in not granting the motion forissuance of certificate of satisfaction of judgment for the following reasons: (1) that there was already afull satisfaction of the judgment before the auction sale was conducted with the deposit made to the Ex-Officio Sheriff in the amount of P63,000.00 consisting of P50,000.00 in Cashier's Check and P13,130.00in cash; and (2) that the auction sale was invalid for lack of proper notice to the petitioner and itscounsel when the Ex-Officio Sheriff postponed the sale from June 15, 1975 to January 16, 1976 contraryto Section 24, Rule 39 of the Rules of Court. On November 10, 1975, the Court issued a temporaryrestraining order enjoining the respondent Ex-Officio Sheriff from delivering the personal propertiessubject of the petition to Ricardo A. Tong in view of the issuance of the "Sheriff Certificate of Sale."

We find the petition to be impressed with merit. cdll

The main issue to be resolved in this instance is as to whether or not the private respondent can validlyrefuse acceptance of the payment of the judgment obligation made by the petitioner consisting of

P50,000.00 in Cashier's Check and P13,130.00 in cash which it deposited with the Ex-Officio Sheriffbefore the date of the scheduled auction sale. In upholding private respondent's claim that he has theright to refuse payment by means of a check, the respondent Judge cited the following:

Section 63 of the Central Bank Act:

"Sec. 63. Legal Character. Checks representing deposit money do not have legal tender powerand then acceptance in payment of debts, both public and private, is at the option of the creditor,Provided, however, that a check which has been cleared and credited to the account of the creditor shallbe equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to hisaccount."

Article 1249 of the New Civil Code:

"Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is notpossible to deliver such currency, then in the currency which is legal tender in the Philippines.


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"The delivery of promissory notes payable to order, or bills of exchange or other mercantile documentsshall produce the effect of payment only when they have been cashed, or when through the fault of thecreditor they have been impaired.

"In the meantime, the action derived from the original obligation shall be held in abeyance."

Likewise, the respondent Judge sustained the contention of the private respondent that he has the rightto refuse payment of the amount of P13,130.00 in cash because the said amount is less than the judgment obligation, citing the following Article of the New Civil Code:

"Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelledpartially to receive the presentations in which the obligation consists. Neither may the debtor berequired to make partial payment.

"However, when the debt is in part liquidated and in part unliquidated, the creditor may demand andthe debtor may effect the payment of the former without waiting for the liquidation of the latter."

It is to be emphasized in this connection that the check deposited by the petitioner in the amount ofP50,000.00 is not an ordinary check but a Cashier's Check of the Equitable Banking Corporation, a bankof good standing and reputation. As testified to by the Ex-Officio Sheriff with whom it has beendeposited, it is a certified crossed check. 9 It is a well-known and accepted practice in the businesssector that a Cashier's Check is deemed as cash. Moreover, since the said check had been certified bythe drawee bank, by the certification, the funds represented by the check are transferred from thecredit of the maker to that of the payee or holder, and for all intents and purposes, the latter becomesthe depositor of the drawee bank, with rights and duties of one in such situation. 10 Where a check iscertified by the bank on which it is drawn, the certification is equivalent to acceptance. 11 Said

certification "implies that the check is drawn upon sufficient funds in the hands of the drawee, that theyhave been set apart for its satisfaction, and that they shall be so applied whenever the check ispresented for payment. It is an understanding that the check is good then, and shall continue good, andthis agreement is as binding on the bank as its notes in circulation, a certificate of deposit payable to theorder of the depositor, or any other obligation it can assume. The object of certifying a check, as regardsboth parties, is to enable the holder to use it as money." 12 When the holder procures the check to becertified, "the check operates as an assignment of a part of the funds to the creditors". 13 Hence, theexception to the rule enunciated under Section 63 of the Central Bank Act to the effect "that a checkwhich has been cleared and credited to the account of the creditor shall be equivalent to a delivery tothe creditor in cash in an amount equal to the amount credited to his account" shall apply in this case.

Considering that the whole amount deposited by the petitioner consisting of Cashier's Check ofP50,000.00 and P13,130.00 in cash covers the judgment obligation of P63,000.00 as mentioned in thewrit of execution, then, We see no valid reason for the private respondent to have refused acceptanceof the payment of the obligation in his favor. The auction sale, therefore, was uncalled for. Furthermore,it appears that on January 17, 1975, the Cashier's Check was even withdrawn by the petitioner andreplaced with cash in the corresponding amount of P50,000.00 on January 27, 1975 pursuant to anagreement entered into by the parties at the instance of the respondent Judge. However, the private


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respondent still refused to receive the same. Obviously, the private respondent is more interested in thelevied properties than in the mere satisfaction of the judgment obligation. Thus, petitioner's motion forthe issuance of a certificate of satisfaction of judgment is clearly meritorious and the respondent Judgegravely abused his discretion in not granting the same under the circumstances.

In view of the conclusion reached in this instance, We find no more need to discuss the ground relied inthe petition. Cdpr

It is also contended by the private respondent that Appeal and not a special civil action for certiorari isthe proper remedy in this case, and that since the period to appeal from the decision of the respondentJudge has already expired, then, the present petition has been filed out of time. The contention isuntenable. The decision of the respondent Judge in Civil Case No. 250 (166) has long become final andexecutory and so, the same is not being questioned herein. The subject of the petition at bar as havingbeen issued in grave abuse of discretion is the order dated August 28, 1975 of the respondent Judgewhich was merely issued in execution of the said decision. Thus, even granting that appeal is open to thepetitioner, the same is not an adequate and speedy remedy for the respondent Judge had already issueda writ of execution. 14

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

1. Declaring as null and void the order of the respondent Judge dated August 28, 1975;

2. Declaring as null and void the auction sale conducted on January 16, 1975 and the certificate ofsale issued pursuant thereto;

3. Ordering the private respondent to accept the sum of P63,130.00 under deposit as payment ofthe judgment obligation in his favor;

4. Ordering the respondent Judge and respondent Ex-Officio Sheriff to release the leviedproperties to the herein petitioner.

The temporary restraining order issued is hereby made permanent.

Costs against the private respondent.

SO ORDERED.

Barredo, Aquino, Abad Santos and De Castro, JJ ., concur.

SECOND DIVISION

[G.R. No. L-222. April 26, 1950.]

SALVACION F. VDA. DE EDUQUE, ETC., plaintiff-appellee, vs. JOSE M. OCAMPO, defendant-appellant.

Alfredo B. Cacnio and Padilla, Carlos & Fernando for appellant.


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Jose Feria for appellee.

Delfin L. Gonzalez for plaintiff-intervenor.

SYLLABUS

OBLIGATIONS AND CONTRACTS; TENDER OF PAYMENT; CASHIER'S CHECK WHERE NO OBJECTION MADE. A cashier's check may constitute a sufficient tender where no objection is made on thisground.

D E C I S I O N

MORAN, C.J p:

This is an action to compel acceptance of payment of a mortgage debt.

On February 16, 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de Leon, Doa

Escolastica de los Reyes and Don Jose M. Ocampo, the first in the amount of P40,000 and the second inthe sum of P15,000, both payable within the period of twenty years, with interest at the rate of 5 percent per annum. Payment of these two loans was guaranteed by mortgage on real property. In themortgage contract it is stipulated that any of the mortgage creditors may receive payment and executedeeds of cancellation of the mortgage debts.

On December 6, 1943, plaintiff and appellee, as administratrix of the estate of the deceased Dr. JoseEduque, tendered payment, by means of a cashier's check, of the total amount of the two loans,P55,000, to defendant-appellant Jose M. Ocampo, one of the creditors, who refused to accept payment.By reason of such refusal, an action was brought and a cashier's check for the total amount of P55,000was deposited in court. After trial, judgment was rendered against defendant compelling him to acceptthe P55,000 deposited in court, to issue deeds for cancellation of the mortgage debts, and to pay theexpenses of consignation and costs.

Defendant accepted the judgment with respect to the second loan of P15,000 upon the ground that,according to him, in the deed of mortgage corresponding to that loan it clearly appeared that the loanwas payable "durante el trmino de 20 aos," and that the only question remaining between the partiesis the interpretation of the first deed of mortgage regarding the first loan of P40,000. And he asked thecourt to order "que de la cantidad de P55,000 consignada en este Juzgado, se entregue al demandado lasuma de P15,000, despus de descontar proporcionalmente cualesquiera cantidades por depsito yotros conceptos segn los trminos de la decisin promulgada." The order was issued accordingly andthe sum P15,000 out of the P55,000 deposited in court was delivered to the defendant.

The present appeal concerns the decision of the lower court regarding the first loan of P40,000, and theprincipal error assigned by the appellant is that tender of payment by means of a cashier's checkrepresenting Japanese war notes is not valid.


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We have already held that Japanese military notes were legal tender during the Japanese occupation.But appellant argues, further, that the consignation of a cashier's check, which is not legal tender, is notbinding upon him. This question, however, has never been raised in the lower court. Upon the contrary,defendant accepted impliedly the consignation of the cashier's check when he himself asked the courtthat out of the money thus consigned he be paid the amount of the second loan of P15,000. It is a rule

that "a cashier's check may constitute a sufficient tender where no objection is made on this ground."(62 C. J., p. 670; see also 40 Amer. Jur., p. 764.)

For all the foregoing, judgment is affirmed with costs against appellant.

Ozaeta, Pablo, Bengzon, Montemayor, and Reyes, JJ., concur.

Judgment affirmed.

Separate Opinion

TUASON, J., dissenting:

I am constrained to dissent from the majority decision on the ground on which I rested my dissent invarious cases involving the validity of payments in Japanese military notes.

I maintain that Japanese war notes were not legal tender and could not be made so by military orders.Accordingly, payment in that currency of pre-war obligation over the protest of the creditor did notoperate to discharge the debt except to the extent he was or could have been benefited by thepayment.

SECOND DIVISION

[G.R. No. 72110. November 16, 1990.]

ROMAN CATHOLIC BISHOP OF MALOLOS, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT, andROBES-FRANCISCO REALTY AND DEVELOPMENT CORPORATION, respondents.

Rodrigo Law Office for petitioner.

Antonio P. Barredo and Napoleon M. Malinas for private respondent.

SYLLABUS

1. CIVIL LAW; CONTRACTS; TENDER OF PAYMENT; CANNOT BE PRESUMED BY MERE INFERENFROM SURROUNDING CIRCUMSTANCES. We agree with the petitioner that a finding that the privaterespondent had sufficient available funds on or before the grace period for the payment of its obligationdoes not constitute proof of tender of payment by the latter for its obligation within the said period.Tender of payment involves a positive and unconditional act by the obligor of offering legal tendercurrency as payment to the obligee for the former's obligation and demanding that the latter accept thesame. Thus, tender of payment cannot be presumed by a mere inference from surroundingcircumstances. At most, sufficiency of available funds is only affirmative of the capacity or ability of the


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obligor to fulfill his part of the bargain. But whether or not the obligor avails himself of such funds tosettle his outstanding account remains to be proven by independent and credible evidence. Tender ofpayment presupposes not only that the obligor is able, ready, and willing, but more so, in the act ofperforming his obligation. Ab posse ad actu non vale illatio. "A proof that an act could have been done isno proof that it was actually done." The respondent court was therefore in error to have concluded from

the sheer proof of sufficient available funds on the part of the private respondent to meet more thanthe total obligation within the grace period, the alleged truth of tender of payment. The same is a classiccase of non-sequitur.

2. ID.; ID.; ID.; NOT VALIDLY CONSTITUTED BY PAYMENT OF A CERTIFIED PERSONAL CHECK. With regard to the third issue, granting arguendo that we would rule affirmatively on the two precedingissues, the case of the private respondent still can not succeed in view of the fact that the latter used acertified personal check which is not legal tender nor the currency stipulated, and therefore, can notconstitute valid tender of payment. The first paragraph of Art. 1249 of the Civil Code provides that "thepayment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver

such currency, then in the currency which is legal tender in the Philippines. The Court en banc in therecent case of Philippine Airlines v. Court of Appeals, (Promulgated on January 30, 1990) G.R. No. L-49188, stated thus: Since a negotiable instrument is only a substitute for money and not money, thedelivery of such an instrument does not, by itself, operate as payment (citing Sec. 189, Act 2031 onNegs. Insts.; Art. 1249, Civil Code; Bryan London Co. v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager's check or ordinary check, is not legal tender, andan offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt bythe obligee or creditor. Hence, where the tender of payment by the private respondent was not valid forfailure to comply with the requisite payment in legal tender or currency stipulated within the graceperiod and as such, was validly refused receipt by the petitioner, the subsequent consignation did not

operate to discharge the former from its obligation to the latter.

3. ID.; ID.; OBLIGATIONS ARISING THEREFROM HAVE THE FORCE OF LAW BETWEEN THECONTRACTING PARTIES. Art. 1159 of the Civil Code of the Philippines provides that "obligationsarising from contracts have the force of law between the contracting parties and should be compliedwith in good faith." And unless the stipulations in said contract are contrary to law, morals, goodcustoms, public order, or public policy, the same are binding as between the parties. (Article 1409, CivilCode, par. 1). What the private respondent should have done if it was indeed desirous of complying withits obligations would have been to pay the petitioner within the grace period and obtain a receipt ofsuch payment duly issued by the latter. Thereafter, or, allowing a reasonable time, the private

respondent could have demanded from the petitioner the execution of the necessary documents. Incase the petitioner refused, the private respondent could have had always resorted to judicial action forthe legitimate enforcement of its right. For the failure of the private respondent to undertake this more judicious course of action, it alone shall suffer the consequences.

4. REMEDIAL LAW; APPEAL; FACTUAL FINDINGS OF TRIAL COURT AS A RULE, SHOULD BEACCORDED FULL CONSIDERATION AND RESPECT. On the contrary, the respondent court finds itselfremiss in overlooking or taking lightly the more important findings of fact made by the trial court which


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we have earlier mentioned and which as a rule, are entitled to great weight on appeal and should beaccorded full consideration and respect and should not be disturbed unless for strong and cogentreasons. (Natividad del Rosario Vda. de Alberto v. Court of Appeals, G.R. 29759, May 18, 1989;Matabuena v. Court of Appeals, G.R. 76542, May 5, 1989).

5. ID.; SUPREME COURT; INSTANCES WHEN THE COURT HAS TO REVIEW THE EVIDENCE. Whilethe Court is not a trier of facts, yet, when the findings of fact of the Court of Appeals are at variance withthose of the trial court, (Robleza v. Court of Appeals, G.R. 80364, June 28, 1989) or when the inferenceof the Court of Appeals from its findings of fact is manifestly mistaken, (Reynolds Philippine Corporationv. Court of Appeals, G.R. 38187, January 17, 1987) the Court has to review the evidence in order toarrive at the correct findings based on the record.

D E C I S I O N

SARMIENTO, J p:

This is a petition for review on certiorari which seeks the reversal and setting aside of the decision 1 ofthe Court of Appeals, 2 the dispositive portion of which reads: LLpr

WHEREFORE, the decision appealed from is hereby reversed and set aside and another one entered forthe plaintiff ordering the defendant-appellee Roman Catholic Bishop of Malolos, Inc. to accept thebalance of P124,000.00 being paid by plaintiff-appellant and thereafter to execute in favor of Robes-Francisco Realty Corporation a registerable Deed of Absolute Sale over 20,655 square meters portion ofthat parcel of land situated in San Jose del Monte, Bulacan described in OCT No. 575 (now TransferCertificates of Title Nos. T-169493, 169494,169495 and 169496) of the Register of Deeds of Bulacan. Incase of refusal of the defendant to execute the Deed of Final Sale, the clerk of court is directed to

execute the said document. Without pronouncement as to damages and attorney's fees. Costs againstthe defendant-appellee. 3

The case at bar arose from a complaint filed by the private respondent, then plaintiff, against thepetitioner, then defendant, in the Court of First Instance (now Regional Trial Court) of Bulacan, at Sta.Maria, Bulacan, 4 for specific performance with damages, based on a contract 5 executed on July 7,1971.

The property subject matter of the contract consists of a 20,655 sq.m.-portion, out of the 30,655 sq.m.total area, of a parcel of land covered by Original Certificate of Title No. 575 of the Province of Bulacan,issued and registered in the name of the petitioner which it sold to the private respondent for and in

consideration of P123,930.00. cdphil

The crux of the instant controversy lies in the compliance or non-compliance by the private respondentwith the provision for payment to the petitioner of the principal balance of P100,000.00 and the accruedinterest of P24,000.00 within the grace period.

A chronological narration of the antecedent facts is as follows:


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On July 7, 1971, the subject contract over the land in question was executed between the petitioner asvendor and the private respondent through its then president, Mr. Carlos F. Robes, as vendee,stipulating for a downpayment of P23,930.00 and the balance of P100,000.00 plus 12% interest perannum to be paid within four (4) years from execution of the contract, that is, on or before July 7, 1975.The contract likewise provides for cancellation, forfeiture of previous payments, and reconveyance of

the land in question in case the private respondent would fail to complete payment within the saidperiod.

On March 12, 1973, the private respondent, through its new president, Atty. Adalia Francisco, addresseda letter 6 to Father Vasquez, parish priest of San Jose Del Monte, Bulacan, requesting to be furnishedwith a copy of the subject contract and the supporting documents.

On July 17, 1975, admittedly after the expiration of the stipulated period for payment, the same Atty.Francisco wrote the petitioner a formal request 7 that her company be allowed to pay the principalamount of P100,000.00 in three (3) equal installments of six (6) months each with the first installmentand the accrued interest of P24,000.00 to be paid immediately upon approval of the said request.

On July 29, 1975, the petitioner, through its counsel, Atty. Carmelo Fernandez, formally denied the saidrequest of the private respondent, but granted the latter a grace period of five (5) days from the receiptof the denial 8 to pay the total balance of P124,000.00, otherwise, the provisions of the contractregarding cancellation, forfeiture, and reconveyance would be implemented.

On August 4, 1975, the private respondent, through its president, Atty. Francisco, wrote 9 the counsel ofthe petitioner requesting an extension of 30 days from said date to fully settle its account. The counselfor the petitioner, Atty. Fernandez, received the said letter on the same day. Upon consultation with thepetitioner in Malolos, Bulacan, Atty. Fernandez, as instructed, wrote the private respondent a letter 10

dated August 7, 1975 informing the latter of the denial of the request for an extension of the graceperiod.

Consequently, Atty. Francisco, the private respondent's president, wrote a letter 11 dated August 22,1975, directly addressed to the petitioner, protesting the alleged refusal of the latter to accept tender ofpayment purportedly made by the former on August 5, 1975, the last day of the grace period. In thesame letter of August 22, 1975, received on the following day by the petitioner, the private respondentdemanded the execution of a deed of absolute sale over the land in question and after which it wouldpay its account in full, otherwise, judicial action would be resorted to. prLL

On August 27, 1975, the petitioner's counsel, Atty. Fernandez, wrote a reply 12 to the privaterespondent stating the refusal of his client to execute the deed of absolute sale due to its (privaterespondent's) failure to pay its full obligation. Moreover, the petitioner denied that the privaterespondent had made any tender of payment whatsoever within the grace period. In view of this allegedbreach of contract, the petitioner cancelled the contract and considered all previous payments forfeitedand the land as ipso facto reconveyed.


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From a perusal of the foregoing facts, we find that both the contending parties have conflicting versionson the main question of tender of payment.

The trial court, in its ratiocination, preferred not to give credence to the evidence presented by theprivate respondent. According to the trial court:

. . . What made Atty. Francisco suddenly decide to pay plaintiff's obligation on August 5, 1975, go todefendant's office at Malolos, and there tender her payment, when her request of August 4, 1975 hadnot yet been acted upon until August 7, 1975? If Atty. Francisco had decided to pay the obligation andhad available funds for the purpose on August 5, 1975, then there would have been no need for her towrite defendant on August 4, 1975 to request an extension of time. Indeed, Atty. Francisco's claim thatshe made a tender of payment on August 5, 1975 such alleged act, considered in relation to thecircumstances both antecedent and subsequent thereto, being not in accord with the normal pattern ofhuman conduct is not worthy of credence. 13

The trial court likewise noted the inconsistency in the testimony of Atty. Francisco, president of theprivate respondent, who earlier testified that a certain Mila Policarpio accompanied her on August 5,1975 to the office of the petitioner. Another person, however, named Aurora Oracion, was presented totestify as the secretary-companion of Atty. Francisco on that same occasion.

Furthermore, the trial court considered as fatal the failure of Atty. Francisco to present in court thecertified personal check allegedly tendered as payment or, at least, its xerox copy, or even bank recordsthereof. Finally, the trial court found that the private respondent had insufficient funds available to fulfillthe entire obligation considering that the latter, through its president, Atty. Francisco, only had a savingsaccount deposit of P64,840.00, and although the latter had a money-market placement of P300,000.00,the same was to mature only after the expiration of the 5-day grace period.

Based on the above considerations, the trial court rendered a decision in favor of the petitioner, thedispositive portion of which reads: cdphil

WHEREFORE, finding plaintiff to have failed to make out its case, the court hereby declares the subjectcontract cancelled and plaintiff's downpayment of P23,930.00 forfeited in favor of defendant, andhereby dismisses the complaint; and on the counterclaim, the Court orders plaintiff to pay defendant.

(1) Attorney's fees of P10,000.00;

(2) Litigation expenses of P2,000.00; and

(3) Judicial costs.

SO ORDERED. 14

Not satisfied with the said decision, the private respondent appealed to the respondent IntermediateAppellate Court (now Court of Appeals) assigning as reversible errors, among others, the findings of the


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trial court that the avail

Documents

Ne Go Cases Chapter 1 Part 1