NEGO Introduction

8/20/2019 NEGO Introduction

1/22

APPLICABILITY OF THE NEGOTIABLE INSTRUMENTS LAW

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 16454 Septembe !"# 1"!1

GEORGE A. $AUFFMAN# plaintiff-appellee,vs.THE PHILIPPINE NATIONAL BAN$# defendant-appellant.

Roman J. Lacson for appellant.Ross and Lawrence for appellee.

STREET# J.:

At the time of the transaction which ave rise to this litiation the plaintiff, !eore A."auffman, was the president of a domestic corporation enaed chiefl# in the e$portationof hemp from the Philippine %slands and &nown as the Philippine 'iber and ProduceCompan#, of which compan# the plaintiff apparentl# held in his own riht nearl# the entireissue of capital stoc&. (n 'ebruar# ), *+*, the board of directors of said compan#,declared a dividend of P*, from its surplus earnins for the #ear *+*, of which theplaintiff was entitled to the sum of P+,. /his amount was accordinl# placed to hiscredit on the boo&s of the compan#, and so remained until in (ctober of the same #earwhen an unsuccessful effort was made to transmit the whole, or a reater part thereof, tothe plaintiff in New 0or& Cit#.

%n this connection it appears that on (ctober +, *+*, !eore B. 1ic&s, treasurer of thePhilippine 'iber and Produce Compan#, presented himself in the e$chane department

of the Philippine National Ban& in Manila and re2uested that a teleraphic transfer of34), should be made to the plaintiff in New 0or& Cit#, upon account of the Philippine'iber and Produce Compan#. 5e was informed that the total cost of said transfer,includin e$chane and cost of messae, would be P+,6)).). Accordinl#, 1ic&s, astreasurer of the Philippine ' iber and Produce Compan#, thereupon drew and delivered achec& for that amount on the Philippine National Ban&7 and the same was accepted b#the officer sellin the e$chane in pa#ment of the transfer in 2uestion. As evidence of thistransaction a document was made out and delivered to 1ic&s, which is referred to b# theban&8s assistant cashier as its official receipt. /his memorandum receipt is in thefollowin lanuae9

(ctober +th, *+*.

CAB:E /RAN;'ER B( P+,66.)

Pa#able throuh Philippine National Ban&, New 0or&. /o !. A. "auffman, New0or&. /otal P+,6)).). Account of Philippine 'iber and Produce Compan#. ;oldto Messrs. Philippine 'iber and Produce Compan#, Manila.

?;d.@ 0 :ERMA,

Manager, Foreign Department.

(n the same da# the Philippine National Ban& dispatched to its New 0or& aenc# acableram to the followin effect9

Pa# !eore A. "auffman, New 0or&, account Philippine 'iber Produce Co.,34),. ?;d.@ P5%:%PP%NE NA/%(NA: BAN", Manila.


2/22

%n view of these facts, the plaintiff "auffman instituted the present action in the Court of'irst %nstance of the cit# of Manila to recover said sum, with interest and costs7 and udment havin been there entered favorabl# to the plaintiff, the defendant appealed.

Amon additional facts pertinent to the case we note the circumstance that at the time ofthe transaction above-mentioned, the Philippines 'iber and Produce Compan# did nothave on deposit in the Philippine National Ban& mone# ade2uate to pa# the chec& forP+,6)).), which was delivered in pa#ment of the teleraphic order7 but the compan#did have credit to that e$tent, or more, for overdraft in current account, and the chec& in

2uestion was chared as an overdraft aainst the Philippine 'iber and ProduceCompan# and has remained on the boo&s of the ban& as an interest-bearin item in theaccount of said compan#.

%t is furthermore noteworth# that no evidence has been introduced tendin to show failureof consideration with respect to the amount paid for said teleraphic order. %t is true thatin the defendant8s answer it is suested that the failure of the ban& to pa# over theamount of this remittance to the plaintiff in New 0or& Cit#, pursuant to its areement, wasdue to a desire to protect the ban& in its relations with the Philippine 'iber and ProduceCompan#, whose credit was secured at the ban& b# warehouse receipts on Phil ippineproducts7 and it is alleed that after the e$chane in 2uestion was sold the ban& foundthat it did not have sufficient to warrant pa#ment of the remittance. %n view, however, ofthe failure of the ban& to substantiate these alleations, or to offer an# other proof

showin failure of consideration, it must be assumed that the obliation of the ban& wassupported b# ade2uate consideration.

%n this court the defense is mainl#, if not e$clusivel#, based upon the proposition that,inasmuch as the plaintiff "auffman was not a part# to the contract with the ban& for thetransmission of this credit, no riht of action can be vested in him for the breach thereof.%n this situation, we here 2uote the words of the appellant8s brief, if there e$ists acause of action aainst the defendant, it would not be in favor of the plaintiff who hadta&en no part at all in the transaction nor had entered into an# contract with the plaintiff,but in favor of the Philippine 'iber and Produce Compan#, the part# which contracted inits own name with the defendant.

/he 2uestion thus placed before us is one purel# of law7 and at the ver# threshold of the

discussion it can be stated that the provisions of the Neotiable %nstruments :aw cancome into operation there must be a document in e$istence of the character described insection * of the :aw7 and no rihts properl# spea&in arise in respect to said instrumentuntil it is delivered. %n the case before us there was an order, it is true, transmitted b# thedefendant ban& to its New 0or& branch, for the pa#ment of a specified sum of mone# to!eore A. "auffman. But this order was not made pa#able to order or to bearer, asre2uired in subsection ?d @ of that Act7 and inasmuch as it never left the possession of theban&, or its representative in New 0or& Cit#, there was no deliver# in the sense intendedin section *D of the same :aw. %n this connection it is unnecessar# to point out that theofficial receipt delivered b# the ban& to the purchaser of the teleraphic order, andalread# set out above, cannot itself be viewed in the liht of a neotiable instrument,althouh it affords complete proof of the obliation actuall# assumed b# the ban&.

;tated in bare simplicit# the admitted facts show that the defendant ban& for a valuableconsideration paid b# the Philippine 'iber and Produce Compan# areed on (ctober +,

*+*, to cause a sum of mone# to be paid to the plaintiff in New 0or& Cit#7 and the2uestion is whether the plaintiff can maintain an action aainst the ban& for thenonperformance of said underta&in. %n other words, is the lac& of privit# with the contracton the part of the plaintiff fatal to the maintenance of an action b# him

/he onl# e$press provision of law that has been cited as bearin directl# on this 2uestionis the second pararaph of article *F) of the Civil Code7 and unless the present actioncan be maintained under the provision, the plaintiff admittedl# has no case. /hisprovision states an e$ception to the more eneral rule e$pressed in the fi rst pararaph of

the same article to the effect that contracts are productive of effects onl# between theparties who e$ecute them7 and in harmon# with this eneral rule are numerous decisionsof this court ?1olfson vs. Estate of MartineG, F Phil., 647 %baHeG de Aldecoa vs. 5on&on and ;hanhai Ban&in Corporation, FF Phil., )F, )47 ManilaRailroad Co. vs. CompaHia /rasatlantica and Atlantic, !ulf and Pacific Co., 6 Phil., 6,+4.@

/he pararaph introducin the e$ception which we are now to consider is in these words9

;hould the contract contain an# stipulation in favor of a third person, he ma#demand its fulfillment, provided he has iven notice of his acceptance to theperson bound before the stipulation has been revo&ed. ?Art. *F), par. F, Civ.Code.@

%n the case of


3/22

%n the liht of the conclusion thus stated, the riht of the plaintiff to maintain the presentaction is clear enouh7 for it is undeniable that the ban&8s promise to cause a definitesum of mone# to be paid to the plaintiff in New 0or& Cit# is a stipulation in his favor withinthe meanin of the pararaph above 2uoted7 and the circumstances under which thatpromise was iven disclose an evident intention on the part of the contractin parties thatthe plaintiff should have the mone# upon demand in New 0or& Cit#. /he reconition ofthis un2ualified riht in the plaintiff to receive the mone# implies in our opinion the riht inhim to maintain an action to recover it7 and indeed if the provision in 2uestion were notapplicable to the facts now before us, it would be difficult to conceive of a case arisin

under it.

%t will be noted that under the pararaph cited a third person see&in to enforcecompliance with a stipulation in his favor must sinif# his acceptance before it has beenrevo&ed. %n this case the plaintiff clearl# sinified his acceptance to the ban& b#demandin pa#ment7 and althouh the Philippine National Ban& had alread# directed itsNew 0or& aenc# to withhold pa#ment when this demand was made, the rihts of theplaintiff cannot be considered to as there used, must be understood to impl# revocationb# the mutual consent of the contractin parties, or at least b# direction of the part#purchasin he e$chane.

%n the course of the arument attention was directed to the case of :eniti vs. Mechanics,etc. Ban& ?*6 N.E. Rep., )+@, decided b# the Court of Appeals of the ;tate of New 0or&

on March *, *+F*, wherein it is held that, b# sellin a cable transfer of funds on a foreincountr# in ordinar# course, a ban& incurs a simple contractual obliation, and cannot beconsidered as holdin the mone# which was paid for the transfer in the character of aspecific trust. /hus, it was said, Cable transfers, therefore, mean a method oftransmittin mone# b# cable wherein the seller enaes that he has the balance at thepoint on which the pa#ment is ordered and that on receipt of the cable directin thetransfer his correspondent at such point will ma&e pa#ment to the beneficiar# describedin the cable. All these transaction are matters of purchase and sale create no trustrelationship.

As we view it there is nothin in the decision referred to decisive of the 2uestion nowbefore us, wish is merel# that of the riht of the beneficiar# to maintain an action aainstthe ban& sellin the transfer.


4/22

APPLICABILITY OF THE NEGOTIABLE INSTRUMENTS LAW


Manila

;EC(NJ J%K%;%(N

G.R. No. L%4&'!4 Feb()* !+# 1"'"

GO,ERNMENT SER,ICE INSURANCE SYSTEM# petitioner,vs.COURT OF APPEALS )- MR. / MRS. ISABELO R. RACHO# respondents.

"he #overnment $orporate $ounsel for petitioner.

Loren%o A. &ales for private respondents.

REGALA0O # J.:

Private respondents, Mr. and Mrs. %sabelo R. Racho, toether with the spouses Mr. andMrs 'laviano :aasca, e$ecuted a deed of mortae, dated November *6, *+), in favor of petitioner !overnment ;ervice %nsurance ;#stem ?hereinafter referred to as !;%;@ andsubse2uentl#, another deed of mortae, dated April *4, *+), in connection with twoloans ranted b# the latter in the sums of P **,). and P 6,., respectivel#. 1 Aparcel of land covered b# /ransfer Certificate of /itle No. 6++ of the Reister of Jeedof LueGon Cit#, co-owned b# said mortaor spouses, was iven as securit# under the

aforesaid two deeds. ! /he# also e$ecuted a 8promissor# note which states in part9

... for value received, we the undersined ... I(%N/:0, ;EKERA::0and ;(:%JAR%:0, promise to pa# the !(KERNMEN/ ;ERK%CE%N;@ per centum compoundedmonthl# pa#able in . . . ?*F@e2ual monthl# installments of . . . ?P*F.D)@ each. +

(n Iul# **, *+D*, the :aasca spouses e$ecuted an instrument denominatedAssumption of Mortae under which the# obliated themselves to assume theaforesaid obliation to the !;%; and to secure the release of the mortae coverin thatportion of the land belonin to herein private respondents and which was mortaed tothe !;%;. 4 /his underta&in was not fulfilled. 5


5/22

%n view of all the foreoin, the udment appealed from is hereb#reversed, and another one entered ?*@ declarin the foreclosure of the

mortae void insofar as it affects the share of the appellants7 ?F@directin the !;%; to reconve# to appellants their share of the

mortaed propert#, or the value thereof if alread# sold to third part#, inthe sum of P 6),., and ?6@ orderin the appellees 'laviano:aasca and Esther :aasca to pa# the appellants the sum of P*,. as moral damaes, P ),. as attorne#8s fees, andcosts. 11

/he case is now before us in this petition for review.

%n submittin their case to this Court, both parties relied on the provisions of ;ection F+of Act No. F6*, otherwise &nown as the Neotiable %nstruments :aw, which provide thatan accommodation part# is one who has sined an instrument as ma&er, drawer,acceptor of indorser without receivin value therefor, but is held liable on the instrumentto a holder for value althouh the latter &new him to be onl# an accommodation part#.

/his approach of both parties appears to be misdirected and their reliance misplaced./he promissor# note hereinbefore 2uoted, as well as the mortae deeds subect of thiscase, are clearl# not neotiable instruments. /hese documents do not compl# with the

fourth re2uisite to be considered as such under ;ection * of Act No. F6* because the#are neither pa#able to order nor to bearer. /he note is pa#able to a specified part#, the!;%;. Absent the aforesaid re2uisite, the provisions of Act No. F6* would not appl#7overnance shall be afforded, instead, b# the provisions of the Civil Code and speciallaws on mortaes.

As earlier indicated, the factual findins of respondent court are that private respondentssined the documents onl# to ive their consent to the mortae as re2uired b# !;%;,with the latter havin full &nowlede that the loans secured thereb# were solel# for thebenefit of the :aasca spouses. 1! /his appears to be dul# supported b# sufficientevidence on record. %ndeed, it would be unusual for the !;%; to arrane for and deduct

the monthl# amortiGations on the loans from the salar# as an arm# officer of 'laviano

:aasca without li&ewise affectin deductions from the salar# of %sabelo Racho who wasalso an arm# sereant. /hen there is also the undisputed fact, as alread# stated, that the:aasca spouses e$ecuted a so-called Assumption of Mortae promisin to e$cludeprivate respondents and their share of the mortaed propert# from liabilit# to themortaee. /here is no intimation that the former e$ecuted such instrument for aconsideration, thus confirmin that the# did so pursuant to their oriinal areement.

/he parol evidence rule 1+ cannot be used b# petitioner as a shield in this case for it isclear that there was no obection in the court below reardin the admissibilit# of thetestimon# and documents that were presented to prove that the private respondents

sined the mortae papers ust to accommodate their co-owners, the :aasca spouses.Besides, the introduction of such evidence falls under the e$ception to said rule, there

bein alleations in the complaint of private respondents in the court below reardin thefailure of the mortae contracts to e$press the true areement of the parties.14

5owever, contrar# to the holdin of the respondent court, it cannot be said that privaterespondents are without liabilit# under the aforesaid mortae contracts. /he factual

conte$t of this case is precisel# what is contemplated in the last pararaph of Article F)of the Civil Code to the effect that third persons who are not parties to the principal

obliation ma# secure the latter b# pledin or mortain their own propert#

;o lon as valid consent was iven, the fact that the loans were solel# for the benefit ofthe :aasca spouses would not invalidate the mortae with respect to privaterespondents8 share in the propert#. %n consentin thereto, even assumin that privaterespondents ma# not be assumin personal liabilit# for the debt, their share in thepropert# shall nevertheless secure and respond for the performance of the principalobliation. /he parties to the mortae could not have intended that the same wouldappl# onl# to the ali2uot portion of the :aasca spouses in the propert#, otherwise the

consent of the private respondents would not have been re2uired.

/he supposed re2uirement of prior demand on the private respondents would not be inpoint here since the mortae contracts created obliations with specific terms for thecompliance thereof. /he facts further show that the private respondents e$pressl# boundthemselves as solidar# debtors in the promissor# note hereinbefore 2uoted.

Comin now to the e$traudicial foreclosure effected b# !;%;, 1e cannot aree with the

rulin of respondent court that lac& of notice to the private respondents of thee$traudicial foreclosure sale impairs the validit# thereof. %n 'onnevie, et al. vs. $ourt ofappeals, et al., 15 the Court ruled that Act No. 6*6), as amended, does not re2uirepersonal notice on the mortaor, 2uotin the re2uirement on notice in such cases asfollows9

;ection 6. Notice shall be iven b# postin notices of sale for not lessthan twent# da#s in at least three public places of the municipalit#where the propert# is situated, and if such propert# is worth more thanfour hundred pesos, such notice shall also be published once a wee&for at least three consecutive wee&s in a newspaper of eneral

circulation in the municipalit# or cit#.

/here is no showin that the foreoin re2uirement on notice was not complied with inthe foreclosure sale complained of .

/he respondent court, therefore, erred in annullin the mortae insofar as it affected theshare of private respondents or in directin reconve#ance of their propert# or thepa#ment of the value thereof %ndubitabl#, whether or not private respondents herein

benefited from the loan, the mortae and the e$traudicial foreclosure proceedins werevalid.

15ERE'(RE, udment is hereb# rendered REKER;%N! the decision of therespondent Court of Appeals and RE%N;/A/%N! the decision of the court a (uo in Civil

Case No. L-+4* thereof.


6/22

;( (RJEREJ.

Melencio-5errera ?Chairperson@, Paras, Padilla and ;armiento, II., concur.


7/22

CONCEPT OF NEGOTIABLE INSTRUMENTS


Manila

;EC(NJ J%K%;%(N

G.R. No. 1&&!"& 2(-e 4# 1""+

NORBERTO TIBA2IA# 2R. )- CARMEN TIBA2IA# petitioners,vs.THE HONORABLE COURT OF APPEALS )- E0EN TAN# respondents.

PA0ILLA# J.:

Petitioners, spouses Norberto /ibaia, Ir. and Carmen /ibaia, are before this Courtassailin the decision 3 of respondent appellate court dated F4 April *++* in CA-!.R. ;PNo. F4*D4 den#in their petition for certiorari prohibition, and inunction which souht toannul the order of Iude Eutropio MiriHo of the Reional /rial Court, Branch *)*, Pasi,Metro Manila in Civil Case No. )4D6 entitled Eden /an vs. ;ps. Norberto and Carmen/ibaia.

;tated briefl#, the relevant facts are as follows9

Case No. )4D6 was a suit for collection of a sum of mone# filed b# Eden /an aainst the/ibaia spouses. A writ of attachment was issued b# the trial court on * Auust *+ andon * ;eptember *+, the Jeput# ;heriff filed a return statin that a deposit made b#

the /ibaia spouses in the Reional /rial Court of "aloo&an Cit# in the amount of 'our5undred 'ort# /wo /housand ;even 5undred and 'ift# Pesos ?P44F,).@ in anothercase, had been arnished b# him. (n * March *+, the Reional /rial Court, Branch*)* of Pasi, Metro Manila rendered its decision in Civil Case No. )4D6 in favor of theplaintiff Eden /an, orderin the /ibaia spouses to pa# her an amount in e$cess of /hree5undred /housand Pesos ?P6,.@. (n appeal, the Court of Appeals modified thedecision b# reducin the award of moral and e$emplar# damaes. /he decision havinbecome final, Eden /an filed the correspondin motion for e$ecution and thereafter, the

arnished funds which b# then were on deposit with the cashier of the Reional /rialCourt of Pasi, Metro Manila, were levied upon.

(n *4 Jecember *++, the /ibaia spouses delivered to Jeput# ;heriff Eduardo Bolima

the total mone# udment in the followin form9

Cashier8s Chec& PFDF,).Cash *6),66.

/otal P6+,46.

Private respondent, Eden /an, refused to accept the pa#ment made b# the /ibaiaspouses and instead insisted that the arnished funds deposited with the cashier of theReional /rial Court of Pasi, Metro Manila be withdrawn to satisf# the udmentobliation. (n *) Ianuar# *++*, defendant spouses ?petitioners@ filed a motion to lift thewrit of e$ecution on the round that the udment debt had alread# been paid. (n F+Ianuar# *++*, the motion was denied b# the trial court on the round that pa#ment incashier8s chec& is not pa#ment in leal tender and that pa#ment was made b# a thirdpart# other than the defendant. A motion for reconsideration was denied on 'ebruar#

*++*. /hereafter, the spouses /ibaia filed a petition for certiorari , prohibition andinunction in the Court of Appeals. /he appellate court dismissed the petition on F4 April*++* holdin that pa#ment b# cashier8s chec& is not pa#ment in leal tender as re2uiredb# Republic Act No. )F+. /he motion for reconsideration was denied on F Ma# *++*.

%n this petition for review, the /ibaia spouses raise the followin issues9

% 15E/5ER (R N(/ /5E BP% CA;5%ER8; C5EC" N(. *4F* %N

/5E AM(


8/22

Art. *F4+. /he pa#ment of debts in mone# shall be made in thecurrenc# stipulated, and if it is not possible to deliver such currenc#,

then in the currenc# which is leal tender in the Philippines.

/he deliver# of promissor# notes pa#able to order, or bills of e$chaneor other mercantile documents shall produce the effect of pa#ment onl#when the# have been cashed, or when throuh the fault of the creditorthe# have been impaired.

%n the meantime, the action derived from the oriinal obliation shall be

held in abe#ance.7

b. ;ection * of Republic Act No. )F+, as amended, which provides9

;ec. *. Ever# provision contained in, or made with respect to, an#obliation which purports to ive the obliee the riht to re2uirepa#ment in old or in an# particular &ind of coin or currenc# other thanPhilippine currenc# or in an amount of mone# of the Philippines

measured thereb#, shall be as it is hereb# declared aainst publicpolic# null and void, and of no effect, and no such provision shall be

contained in, or made with respect to, an# obliation thereafterincurred. Ever# obliation heretofore and hereafter incurred, whetheror not an# such provision as to pa#ment is contained therein or madewith respect thereto, shall be dischared upon pa#ment in an# coin orcurrenc# which at the time of pa#ment is leal tender for public andprivate debts.

c. ;ection D6 of Republic Act No. FD), as amended ?Central Ban& Act@ which provides9

;ec. D6. Legal character Chec&s representin deposit mone# do nothave leal tender power and their acceptance in the pa#ment of debts,both public and private, is at the option of the creditor9 Provided,however, that a chec& which has been cleared and credited to theaccount of the creditor shall be e2uivalent to a deliver# to the creditorof cash in an amount e2ual to the amount credited to his account.

'rom the afore2uoted provisions of law, it is clear that this petition must fail.

%n the recent cases of Philippine Airlines, Inc. vs. $ourt of Appeals 4 and Roman $atholic'ishop of Malolos, Inc. vs. Intermediate Appellate $ourt , 5 this Court held that

A chec&, whether a manaer8s chec& or ordinar# chec&, is not lealtender, and an offer of a chec& in pa#ment of a debt is not a validtender of pa#ment and ma# be refused receipt b# the obliee or

creditor.

/he rulin in these two ?F@ cases merel# applies the statutor# provisions which la# downthe rule that a chec& is not leal tender and that a creditor ma# validl# refuse pa#ment b#

chec&, whether it be a manaer8s, cashier8s or personal chec&.

Petitioners erroneousl# rel# on one of the dissentin opinions in the Philippine Airlines case 6 to support their cause. /he dissentin opinion however does not in an#wa# support the contention that a chec& is leal tender but, on the contrar#, states that %f the PA: chec&s in 2uestion had not been encashed b# ;heriff Re#es, there would be nopa#ment b# PA: and, conse2uentl#, no dischare or satisfaction of its udment

obliation. Moreover, the circumstances in the Philippine Airlines case are 2uitedifferent from those in the case at bar for in that case the chec&s issued b# the udmentdebtor were made pa#able to the sheriff, Emilio . Re#es, who encashed the chec&s butfailed to deliver the proceeds of said encashment to the udment creditor.

%n the more recent case of Fortunado vs. $ourt of Appeals, ' this Court stressed that, 1eare not, b# this decision, sanctionin the use of a chec& for the pa#ment of obliationsover the obection of the creditor.

15ERE'(RE, the petition is JEN%EJ. /he appealed decision is hereb# A''%RMEJ,with costs aainst the petitioners.

;( (RJEREJ.

)arvasa, $.J., Regalado and )ocon, JJ., concur.


9/22

CONCEPT OF NEGOTIABLE INSTRUMENTS


Manila

EN BANC

G.R. No. L%4"1'' 2)-()* + 1""&

PHILIPPINE AIRLINES# INC.# petitioner,vs.HON. COURT OF APPEALS# HON. 2U0GE RICAR0O 0. GALANO# Co(t o FtI-t)-7e o M)-8)# B)-79 :III# 2AIME $. 0EL ROSARIO# 0ep(t* S9e# Co(t oFt I-t)-7e# M)-8)# )- AMELIA TAN#respondents.

GUTIERRE;# 2R.# J.:

Behind the simple issue of validit# of an alias writ of e$ecution in this case is a morefundamental 2uestion. ;hould the Court allow a too literal interpretation of the Rules withan open invitation to &naver# to prevail over a more discernin and ust approach

;hould we not appl# the ancient rule of statutor# construction that laws are to beinterpreted b# the spirit which vivifies and not b# the letter which &illeth

/his is a petition to review on certiorari the decision of the Court of Appeals in CA-!.R.No. D+) entitled Philippine Airlines, Inc. v. on. Judge Ricardo D. #alano, et

al.-, dismissin the petition for certiorari aainst the order of the Court of 'irst %nstance ofManila which issued an alias writ of e$ecution aainst the petitioner.

/he petition involvin the alias writ of e$ecution had its beinnins on November , *+D,

when respondent Amelia /an, under the name and st#le of Able Printin Presscommenced a complaint for damaes before the Court of 'irst %nstance of Manila. /hecase was doc&eted as Civil Case No. *6, entitled Amelia "an, et al. v. Philippine Airlines, Inc .

After trial, the Court of 'irst %nstance of Manila, Branch *6, then presided over b# the lateIude Iesus P. Morfe rendered udment on Iune F+, *+F, in favor of privaterespondent Amelia /an and aainst petitioner Philippine Airlines, %nc. ?PA:@ as follows9

15ERE'(RE, udment is hereb# rendered, orderin the defendant Philippine Air :ines9

*. (n the first cause of action, to pa# to the plaintiff the amount of P),.as actual damaes, with leal interest thereon from plaintiffs e$tra-udicial

demand made b# the letter of Iul# F, *+D7

F. (n the third cause of action, to pa# to the plaintiff the amount of P*,F.,representin the unrealiGed profit of *> included in the contract price ofPF,. plus leal interest thereon from Iul# F,*+D7

6. (n the fourth cause of action, to pa# to the plaintiff the amount of PF,.as and for moral damaes, with leal interest thereon from Iul# F, * +D7

4. (n the si$th cause of action, to pa# to the plaintiff the amount of P),.damaes as and for attorne#8s fee.

Plaintiffs second and fifth causes of action, and defendant8s counterclaim, aredismissed.

1ith costs aainst the defendant. ?CA Rollo, p. *@

(n Iul# F, *+F, the petitioner filed its appeal with the Court of Appeals. /he case was

doc&eted as CA-!.R. No. )*+-R.

(n 'ebruar# 6, *+, the appellate court rendered its decision, the dispositive portion of

which reads9

%N K%E1 15ERE(', with the modification that PA: is condemned topa# plaintiff the sum of PF),. as damaes and P),. asattorne#8s fee, udment is affirmed, with costs. ?CA Rollo, p. F+@

Notice of udment was sent b# the Court of Appeals to the trial court and on datessubse2uent thereto, a motion for reconsideration was f iled b# respondent Amelia /an,

dul# opposed b# petitioner PA:.

(n Ma# F6,*+, the Court of Appeals rendered its resolution den#in the respondent8smotion for reconsideration for lac& of merit.

No further appeal havin been ta&en b# the parties, the udment became final ande$ecutor# and on Ma# 6*, *+, udment was correspondinl# entered in the case.

/he case was remanded to the t rial court for e$ecution and on ;eptember F,*+,respondent Amelia /an filed a motion pra#in for the issuance of a writ of e$ecution ofthe udment rendered b# the Court of Appeals. (n (ctober **, *+, the trial court,presided over b# Iude !alano, issued its order of e$ecution with the correspondin writin favor of the respondent. /he writ was dul# referred to Jeput# ;heriff Emilio . Re#es of Branch *6 of the Court of 'irst %nstance of Manila for enforcement.


10/22

'our months later, on 'ebruar# **, *+, respondent Amelia /an moved for the issuanceof an alias writ of e$ecution statin that the udment rendered b# the lower court, and

affirmed with modification b# the Court of Appeals, remained unsatisfied.

(n March *, *+, the petitioner filed an opposition to the motion for the issuance of analias writ of e$ecution statin that it had alread# full# paid i ts obliation to plaintiff throuhthe deput# sheriff of the respondent court, Emilio . Re#es, as evidenced b# cashvouchers properl# sined and receipted b# said Emilio . Re#es.

(n March 6,*+, the Court of Appeals denied the issuance of the alias writ for bein

premature, orderin the e$ecutin sheriff Emilio . Re#es to appear with his return ande$plain the reason for his failure to surrender the amounts paid to him b# petitioner PA:.

5owever, the order could not be served upon Jeput# ;heriff Re#es who had abscondedor disappeared.

(n March F, *+, motion for the issuance of a partial alias writ of e$ecution was filedb# respondent Amelia /an.

(n April *+, *+, respondent Amelia /an filed a motion to withdraw Motion for Partial Alias 1rit of E$ecution with ;ubstitute Motion for Alias 1rit of E$ecution. (n Ma# *,

*+, the respondent Iude issued an order which reads9

As pra#ed for b# counsel for the plaintiff, the Motion to 1ithdraw8Motion for Partial Alias 1rit of E$ecution with ;ubstitute Motion for Alias 1rit of E$ecution is hereb# ranted, and the motion for partialalias writ of e$ecution is considered withdrawn.

:et an Alias 1rit of E$ecution issue aainst the defendant for the fallsatisfaction of the udment rendered. Jeput# ;heriff Iaime ". delRosario is hereb# appointed ;pecial ;heriff for the enforcementthereof. ?CA Rollo, p. 64@

(n Ma# *, *+, the petitioner received a cop# of the first alias writ of e$ecution issuedon the same da# directin ;pecial ;heriff Iaime ". del Rosario to lev# on e$ecution inthe sum of PF),. with leal interest thereon from Iul# F,*+D when respondent Amelia /an made an e$tra-udicial demand throuh a letter. :ev# was also ordered forthe further sum of P),. awarded as attorne#8s fees.

(n Ma# F6, *+, the petitioner filed an urent motion to 2uash the alias writ ofe$ecution statin that no return of the writ had as #et been made b# Jeput# ;heriff Emilio. Re#es and that the udment debt had alread# been full# satisfied b# the petitioner asevidenced b# the cash vouchers sined and receipted b# the server of the writ ofe$ecution, Jeput# ;heriff Emilio . Re#es.

(n Ma# FD,*+, the respondent Iaime ". del Rosario served a notice of arnishment onthe depositor# ban& of petitioner, 'ar East Ban& and /rust Compan#, Rosario Branch,

Binondo, Manila, throuh its manaer and arnished the petitioner8s deposit in the saidban& in the total amount of PD4,4. as of Ma# *D, *+. 5ence, this petition for

certiorari filed b# the Philippine Airlines, %nc., on the rounds that9

%

AN A:%A; 1R%/ (' EEC


11/22

whereb# the mischief of an errin officer of the court could be utiliGedto impede indefinitel# the undisputed and awarded r ihts which a

prevailin part# rihtfull# deserves to obtain and with dispatch. /hefinal udment in this case should not indeed be permitted to become

illusor# or incapable of e$ecution for an indefinite and over e$tendedperiod, as had alread# transpired. ?Rollo, pp. 6)-6D@

Judicium non de*et esse illusorium suum effectum ha*ere de*et ?A udment ouht notto be illusor# it ouht to have its proper effect@.

%ndeed, technicalit# cannot be countenanced to defeat the e$ecution of a udment fore$ecution is the fruit and end of the suit and is ver# aptl# called the life of the law

?%pe&dian Merchandisin Co. v. Court of /a$ Appeals, ;CRA )+ O*+D67 Commissionerof %nternal Revenue v. Kisa#an Electric Co., *+ ;CRA D+, D+ O*+D@. A udmentcannot be rendered nuator# b# the unreasonable application of a strict rule ofprocedure. Kested rihts were never intended to rest on the re2uirement of a return, theoffice of which is merel# to inform the court and the parties, of an# and all actions ta&enunder the writ of e$ecution. 1here such information can be established in some othermanner, the absence of an e$ecutin officer8s return will not preclude a udment frombein treated as dischared or bein e$ecuted throuh an alias writ of e$ecution as thecase ma# be. More so, as in the case at bar. 1here the return cannot be e$pected to be

forthcomin, to re2uire the same would be to compel the enforcement of rihts under a udment to rest on an impossibilit#, thereb# allowin the total avoidance of udmentdebts. ;o lon as a udment is not satisfied, a plaintiff is entitled to other writs of

e$ecution ?!overnment of the Philippines v. Echaus and !onGales, * Phil. 6*@. %t is awell &nown leal ma$im that he who cannot prosecute his udment with effect, sues hiscase vainl#.

More important in the determination of the propriet# of the trial court8s issuance of analias writ of e$ecution is the issue of satisfaction of udment.


12/22

/he deliver# of promissor# notes pa#able to order, or bills of e$chaneor other mercantile documents shall produce the effect of pa#ment onl#

when the# have been cashed, or when throuh the fault of the creditorthe# have been impaired.

%n the meantime, the action derived from the oriinal obliation shall beheld in abe#ance.

%n the absence of an areement, either e$press or implied, pa#ment means thedischare of a debt or obliation in mone# ?


13/22

/he attention of this Court has been called to the bad practice of a number of e$ecutinofficers, of re2uirin chec&s in satisfaction of udment debts to be made out in their own

names. %f a sheriff directs a udment debtor to issue the chec&s in the sheriff8s name,claimin he must et his commission or fees, the debtor must report the sheriff

immediatel# to the court which ordered the e$ecution or to the ;upreme Court forappropriate disciplinar# action. 'ees, commissions, and salaries are paid throuh reular channels. /his improper procedure also allows such officers, who have si$t# ?D@ da#swithin which to ma&e a return, to treat the mone#s as their personal finds and to depositthe same in their private accounts to earn si$t# ?D@ da#s interest, before said finds are

turned over to the court or udment creditor ?;ee Balos v. Kelasco, * ;CRA )F)O*+*@. Luite as easil#, such officers could put up the defense that said chec&s had beenissued to them in their private or personal capacit#. 1ithout a receipt evidencin pa#mentof the udment debt, the misappropriation of finds b# such officers becomes clean andcomplete. /he practice is inenious but evil as it unustl# enriches court personnel at thee$pense of litiants and the proper administration of ustice. /he temptation could be farreater, as proved to be in this case of the abscondin sheriff. /he correct and prudent

thin for the petitioner was to have issued the chec&s in the intended pa#ee8s name.

/he pernicious effects of issuin chec&s in the name of a person other than the intendedpa#ee, without the latter8s areement or consent, are as man# as the wa#s that an artfulmind could concoct to et around the safeuards provided b# the law on neotiable

instruments. An anr# litiant who loses a case, as a rule, would not want the winninpart# to et what he won in the udment. 5e would thin& of wa#s to dela# the winninpart#8s ettin what has been aduded in his favor. 1e cannot condone that practiceespeciall# in cases where the courts and their officers are involved. 1e rule aainst thepetitioner.

Anent the applicabilit# of ;ection *), Rule 6+, as follows9

;ection *). 34ecution of mone+ 5udgments. /he officer mustenforce an e$ecution of a mone# udment b# lev#in on all thepropert#, real and personal of ever# name and nature whatsoever, andwhich ma# be disposed of for value, of the udment debtor not e$empt

from e$ecution, or on a sufficient amount of such propert#, if the# besufficient, and sellin the same, and pa+ing to the 5udgment creditor , or

his attorne#, so much of the proceeds as will satisf# the udment. ...

the respondent court held9

1e are oblied to rule that the udment debt cannot be consideredsatisfied and therefore the orders of the respondent ude rantin the

alias writ of e$ecution ma# not be pronounced as a nullit#.

$$$ $$$ $$$

%t is clear and manifest that after lev# or arnishment, for a udment tobe e$ecuted there is the re2uisite of pa#ment b# the officer to the

udment creditor, or his attorne#, so much of the proceeds as willsatisf# the udment and none such pa#ment had been concededl#

made #et b# the abscondin ;heriff to the private respondent Amelia/an. /he ultimate and essential step to complete the e$ecution of the

udment not havin been performed b# the Cit# ;heriff, the udmentdebt leall# and factuall# remains unsatisfied.

;trictl# spea&in e$ecution cannot be e2uated with satisfaction of a udment.


14/22

NEGOTIABLE INSTRUMENTS COMPARE0 WITH OTHER PAPERS


Manila

/5%RJ J%K%;%(N

G.R. No. '"!5! M)* !4# 1""+

RAUL SESBRE per annum7

?b@ the Certificate of securities Jeliver# Receipt No. *D) indicatin

the sale of JMC PN No. F6* to petitioner, with the notation that thesaid securit# was in custodianship of Pilipinas Ban&, as per

Jenominated Custodian Receipt ?JCR@ No. *) dated + 'ebruar#*+*7 and

?c@ post-dated chec&s pa#able on *6 March *+* ?i.e., the maturit#date of petitioner8s investment@, with petitioner as pa#ee, Philfinance as

drawer, and %nsular Ban& of Asia and America as drawee, in the totalamount of P64,)66.66.

(n *6 March *+*, petitioner souht to encash the postdated chec&s issued b#Philfinance. 5owever, the chec&s were dishonored for havin been drawn aainst

insufficient funds.

(n FD March *+*, Philfinance delivered to petitioner the JCR No. *) issued b#private respondent Pilipinas Ban& ?Pilipinas@. %t reads as follows9

P%:%P%NA; BAN"Ma&ati ;toc& E$chane Bld.,

A#ala Avenue, Ma&ati,

Metro Manila

'ebruar# +, *+*

KA:


15/22

1e further certif# that these securities ma# be inspected b# #ou or#our dul# authoriGed representative at an# time durin reular ban&in

hours.


16/22

respondents Jelta and Pilipinas, considerin that the three ?6@ entities belon to the;ilverio !roup of Companies under the leadership of Mr. Ricardo ;ilverio, ;r. '

/here are at least two ?F@ sets of relationships which we need to address9 firstl#, therelationship of petitioner vis6a6visJelta7 secondl#, the relationship of petitioner in respectof Pilipinas. Actuall#, of course, there is a third relationship that is of critical importance9the relationship of petitioner and Philfinance. 5owever, since Philfinance has not beenimpleaded in this case, neither the trial court nor the Court of Appeals ac2uired urisdiction over the person of Philfinance. %t is, conse2uentl#, not necessar# for present

purposes to deal with this third relationship, e$cept to the e$tent it necessaril# impinesupon or intersects the first and second relationships.

%.

1e consider first the relationship between petitioner and Jelta.

/he Court of appeals in effect held that petitioner ac2uired no rihts vis6a6vis Jelta inrespect of the Jelta promissor# note ?JMC PN No. F6*@ which Philfinance sold without

recourse to petitioner, to the e$tent of P64,)66.66. /he Court of Appeals said on thispoint9

Nor could plaintiff-appellant have ac2uired an# riht over JMC PN No.F6* as the same is non-neotiable as stamped on its face ?E$hibitD@, neotiation bein defined as the transfer of an instrument fromone person to another so as to constitute the transferee the holder ofthe instrument ?;ec. 6, Neotiable %nstruments :aw@. A person not aholder cannot sue on the instrument in his own name and cannotdemand or receive pa#ment ?;ection )*, id .@ "

Petitioner admits that JMC PN No. F6* was non-neotiable but contends that the Notehad been validl# transferred, in part to him b# assinment and that as a result of suchtransfer, Jelta as debtor-ma&er of the Note, was obliated to pa# petitioner the portion ofthat Note assined to him b# the pa#ee Philfinance.

Jelta, however, disputes petitioner8s contention and arues9

?*@ that JMC PN No. F6* was not intended to be neotiated orotherwise transferred b# Philfinance as manifested b# the word non-neotiable stamp across the face of the Note 1& and because ma&erJelta and pa#ee Philfinance intended that this Note would be offsetaainst the outstandin obliation of Philfinance represented b#Philfinance PN No. *46-A issued to Jelta as pa#ee7

?F@ that the assinment of JMC PN No. F6* b# Philfinance was

without Jelta8s consent, if not aainst its instructions7 and

?6@ assumin ?arguendo onl#@ that the partial assinment in favor ofpetitioner was valid, petitioner too& the Note subect to the defenses

available to Jelta, in particular, the offsettin of JMC PN No. F6*aainst Philfinance PN No. *46-A. 11

1e consider Jelta8s aruments seriatim.

'irstl#, it is important to bear in mind that the negotiation of a neotiable instrument mustbe distinuished from theassignment or transfer of an instrument whether that beneotiable or non-neotiable. (nl# an instrument 2ualif#in as a neotiable instrument

under the relevant statute ma# be negotiated either b# indorsement thereof coupled withdeliver#, or b# deliver# alone where the neotiable instrument is in bearer form. A

neotiable instrument ma#, however, instead of bein neotiated, alsobe assigned or transferred . /he leal conse2uences of neotiation as distinuished fromassinment of a neotiable instrument are, of course, different. A non-neotiableinstrument ma#, obviousl#, not be neotiated7 but it ma# be assined or transferred,absent an e$press prohibition aainst assinment or transfer written in the face of theinstrument9

/he words -not negotia*le,- stamped on the face of the bill ofladin, did not destro+ its assigna*ilit+ , but the sole effect was to

e$empt the bill from the statutor# provisions relative thereto, and a *ill ,thouh not negotia*le, ma+ *e transferred *+ assignment 7 theassinee ta&in subect to the e2uities between the oriinalparties. 1! ?Emphasis added@

JMC PN No. F6*, while mar&ed non-neotiable, was not at the same time stampednon-transferable or non-assinable. %t contained no stipulation which prohibitedPhilfinance from assinin or transferrin, in whole or in part, that Note.

Jelta adduced the :etter of Areement which it had entered into with Philf inance andwhich should be 2uoted in full9

April *, *+

Philippine


17/22

/his refers to our outstandin placement of P4,D*,DDD.D asevidenced b# #our Promissor# Note No. *46-A, dated April *, *+, to

mature on April D, *+*.

As areed upon, we enclose our non-neotiable Promissor# Note No.F6 and F6* for PF,,. each, dated April *, *+, to beoffsetted Osic aainst #our PN No. *46-A upon co-terminal maturit#.

Please deliver the proceeds of our PNs to our representative, Mr. EricCastillo.

Ker# /rul# 0ours,

?;d.@

'lorencio B.Biaan;enior Kice

President 1+

1e find nothin in his :etter of Areement which can be reasonabl# construed as a

prohibition upon Philfinance assinin or transferrin all or part of JMC PN No. F6*,before the maturit# thereof. %t is scarcel# necessar# to add that, even had this :etter of Areement set forth an e$plicit prohibition of transfer upon Philfinance, such aprohibition cannot be invo&ed aainst an assinee or transferee of the Note who partedwith valuable consideration in ood faith and without notice of such prohibition. %t is notdisputed that petitioner was such an assinee or transferee. (ur conclusion on this point

is reinforced b# the fact that what Philfinance and Jelta were doin b# their e$chane oftheir promissor# notes was this9 Jelta invested, b# ma&in a mone# mar&et placementwith Philfinance, appro$imatel# P4,D,. on * April *+7 but promptl#, on thesame da#, borrowed bac& the bul& of that placement, i.e., P4,,., b# issuin itstwo ?F@ promissor# notes9 JMC PN No. F6 and JMC PN No. F6*, both also dated * April *+. /hus, Philfinance was left with not P4,D,. but onl# PD,. incash and the two ?F@ Jelta promissor# notes.

Apropos Jelta8s complaint that the partial assinment b# Philfinance of JMC PN No.F6* had been effected without the consent of Jelta, we note that such consent was notnecessar# for the validit# and enforceabilit# of the assinment in favor of

petitioner. 14 Jelta8s arument that Philfinance8s sale or assinment of part of its rihts toJMC PN No. F6* constituted conventional subroation, which re2uired its ?Jelta8s@consent, is 2uite mista&en. Conventional subroation, which in the first place is neverlihtl# inferred, 15 must be clearl# established b# the une2uivocal terms of the substitutinobliation or b# the evident incompatibilit# of the new and old obliations on ever#point. 16 Nothin of the sort is present in the instant case.

%t is in fact difficult to be impressed with Jelta8s complaint, since it released its JMC PN

No. F6* to Philfinance, an entit# enaed in the business of bu#in and sellin debt

instruments and other securities, and more enerall#, in mone# mar&et transactions.%n Pere% v. $ourt of Appeals, 1 the Court, spea&in throuh Mme. Iustice 5errera, made

the followin important statement9

/here is another aspect to this case. 1hat is involved here is a mone#mar&et transaction. As defined b# :awrence ;mith the mone# mar&etis a mar&et dealin in standardiGed short-term credit instruments?involvin lare amounts@ where lenders and borrowers do not dealdirectl# with each other but throuh a middle manor a dealer in the

open mar&et. %t involves commercial papers which are instrumentsevidencin indebtness of an# person or entit#. . ., which are issued,endorsed, sold or transferred or in an# manner conve#ed to anotherperson or entit#, with or without recourse. /he fundamental function of

the mone# mar&et device in its operation is to match and brin toether in a most impersonal manner both the fund users and the fundsuppliers. "he mone+ mar8et is an -impersonal mar8et-, free from personal considerations. -"he mar8et mechanism is intended to

provide (uic8 mo*ilit+ of mone+ and securities.-

/he impersonal character of the mone# mar&et device overloo&s theindividuals or entities concerned. "he issuer of a commercial paper in

the mone+ mar8et necessaril+ 8nows in advance that it would *ee4penditiousl+ transacted and transferred to an+ investor9lender

without need of notice to said issuer. In practice, no notification is

given to the *orrower or issuer of commercial paper of the sale or

transfer to the investor.

$$$ $$$ $$$

/here is need to individuate a mone# mar&et transaction, a relativel#novel institution in the Philippine commercial scene. It has *eenintended to facilitate the flow and ac(uisition of capital on an

impersonal *asis. And as specificall# re2uired b# Presidential Jecree

No. D, the investing pu*lic must *e given ade(uate and effective protection in availing of the credit of a *orrower in the commercial

paper mar8et.1' ?Citations omitted7 emphasis supplied@

1e turn to Jelta8s aruments concernin alleed compensation or offsettin betweenJMC PN No. F6* and Philfinance PN No. *46-A. %t is important to note that at the time

Philfinance sold part of its rights under DM$ P) )o. :2;/ to petitioner on 0 Fe*ruar+

/0


18/22

?F@ /hat both debts consists in a sum of mone#, or if the thins due areconsumable, the# be of the same &ind, and also of the same 2ualit# if

the latter has been stated7

?6@ "hat the two de*ts are due

?4@ /hat the# be l i2uidated and demandable7

?)@ /hat over neither of them there be an# retention or controvers#,commenced b# third persons and communicated in due time to thedebtor. ?Emphasis supplied@

(n + 'ebruar# *+*, neither JMC PN No. F6* nor Philfinance PN No. *46-A was due./his was e$plicitl# reconiGed b# Jelta in its * April *+ :etter of Areement withPhilfinance, where Jelta ac&nowleded that the relevant promissor# notes were to beoffsetted ?sic @ aainst OPhilfinance PN No. *46-A upon co6terminal maturit+ .

As noted, the assinment to petitioner was made on + 'ebruar# *+* or from fort#-nine?4+@ da#s before the co-terminal maturit# date, that is to sa#, before an# compensationhad ta&en place. 'urther, the assinment to petitioner would have prevented

compensation had ta&en place between Philfinance and Jelta, to the e$tent ofP64,)66.66, because upon e$ecution of the assinment in favor of petitioner,Philfinance and Jelta would have ceased to be creditors and debtors of each other intheir own riht to the e$tent of the amount assined b# Philfinance to petitioner. /hus, weconclude that the assinment effected b# Philfinance in favor of petitioner was a validone and that petitioner accordinl# became owner of JMC PN No. F6* to the e$tent ofthe portion thereof assined to him.

/he record shows, however, that petitioner notified Jelta of the fact of the assinment tohim onl# on *4 Iul# *+*, 1"that is, after the maturit# not onl# of the mone# mar&etplacement made b# petitioner but also of both JMC PN No. F6* and Philfinance PN No.*46-A. %n other words, petitioner notified Delta of his rights as assignee aftercompensation had ta8en place *+ operation of law *ecause the offsetting instruments

had *oth reached maturit+ . %t is a fi rml# settled doctrine that the rihts of an assinee arenot an# reater that the rihts of the assinor, since the assinee is merel# substituted inthe place of the assinor !& and that the assinee ac2uires his rihts subect to thee2uities i.e., the defenses which the debtor could have set up aainst the oriinalassinor before notice of the assinment was iven to the debtor. Article *F) of the CivilCode provides that9

Art. *F). /he debtor who has consented to the assinment of rihtsmade b# a creditor in favor of a third person, cannot set up aainst theassinee the compensation which would pertain to him aainst theassinor, unless the assinor was notified b# the debtor at the time heave his consent, that he reserved his riht to the compensation.

%f the creditor communicated the cession to him but the de*tor did notconsent thereto, the latter ma+ set up the compensation ofde*ts previous to the cession, but not of subse2uent ones.

%f the assignment is made without the 8nowledge of the de*tor, he ma+ set up the compensation of all credits prior to thesame and also laterones until he had 8nowledge of the assignment . ?Emphasis supplied@

Article *DFD of the same code states that9 the debtor who, before havin &nowlede ofthe assinment, pa#s his creditor shall be released from the obliation. %n &ison v . =ap6"ico, !1 the Court e$plained that9

Ono man is bound to remain a debtor7 he ma# pa# to him with whom hecontacted to pa#7 and if he pa# before notice that his debt has beenassined, the law holds him e$onerated, for the reason that it is thedut# of the person who has ac2uired a title b# transfer to demandpa#ment of the debt, to ive his debt or notice. !!

At the time that Jelta was first put to notice of the assinment in petitioner8s favor on *4Iul# *+*, JMC PN No. F6* had alread# been dischared b# compensation. ;ince the

assinor Philfinance could not have then compelled pa#ment anew b# Jelta of JMC PNNo. F6*, petitioner, as assinee of Philfinance, is similarl# disabled from collectin fromJelta the portion of the Note assined to him.

%t bears some emphasis that petitioner could have notified Jelta of the assinment orsale was effected on + 'ebruar# *+*. 5e could have notified Jelta as soon as hismone# mar&et placement matured on *6 March *+* without pa#ment thereof beinmade b# Philfinance7 at that time, compensation had #et to set in and dischare JMC PNNo. F6*. Aain petitioner could have notified Jelta on FD March *+* when petitioner

received from Philfinance the Jenominated Custodianship Receipt ?JCR@ No. *)issued b# private respondent Pilipinas in favor of petitioner. Petitioner could, in fine, havenotified Jelta at an# time before the maturit# date of JMC PN No. F6*. Becausepetitioner failed to do so, and because the record is bare of an# indication that

Philfinance had itself notified Jelta of the assinment to petitioner, the Court is compelledto uphold the defense of compensation raised b# private respondent Jelta. (f course,Philfinance remains liable to petitioner under the terms of the assinment made b#Philfinance to petitioner.

%%.

1e turn now to the relationship between petitioner and private respondent Pilipinas.Petitioner contends that Pilipinas became solidaril# liable with Philfinance and Jeltawhen Pilipinas issued JCR No. *) with the followin words9


19/22

/he Court is not persuaded. 1e find nothin in the JCR that establishes an obliation onthe part of Pilipinas to pa# petitioner the amount of P6,+66.66 nor an# assumption of

liabilit# in solidum with Philfinance and Jelta under JMC PN No. F6*. 1e read the JCRas a confirmation on the part of Pilipinas that9

?*@ it has in its custod#, as dul# constituted custodian ban&, JMC PNNo. F6* of a certain face value, to mature on D April *+* andpa#able to the order of Philfinance7

?F@ Pilipinas was, from and after said date of the assinment b#

Philfinance to petitioner ?+ 'ebruar# *+*@, holding that )ote on *ehalf and for the *enefit of petitioner, at least to the e4tent it had *een

assigned to petitioner *+ pa+ee Philfinance7 !4

?6@ petitioner ma# inspect the Note either personall# or b# authoriGedrepresentative, at an# time durin reular ban& hours7 and

?4@ upon written instructions of petitioner, Pilipinas would ph+sicall+deliver the DM$ P) )o. :2;/ >or a participation therein to the e4tent

of P;?2,0;;.;;@ should this Jenominated Custodianship receipt

remain outstandin in Opetitioner8s favor thirt# ?6@ da#s after itsmaturit#.

/hus, we find nothin written in printers in& on the JCR which could reasonabl# be readas convertin Pilipinas into an oblior under the terms of JMC PN No. F6* assined topetitioner, either upon maturit# thereof or an# other time. 1e note that both in hiscomplaint and in his testimon# before the trial court, petitioner referred merel# to theobliation of private respondent Pilipinas to effect the ph#sical deliver# to him of JMC PNNo. F6*. !5 Accordinl#, petitioner8s theor# that Pilipinas had assumed a solidar#

obliation to pa# the amount represented b# a portion of the Note assined to him b#Philfinance, appears to be a new theor# constructed onl# after the trial court had ruledaainst him. /he solidar# liabilit# that petitioner see&s to impute Pilipinas cannot,however, be lihtl# inferred.


20/22

Philfinance was made7 secondl#, such term runs counter to the ver# purpose of thecustodianship or depositar# areement as an interal part of a mone# mar&et

transaction7 and thirdl#, it is inconsistent with the provisions of Article *+ of the CivilCode noted above. %ndeed, in principle, petitioner became entitled to demand ph#sical

deliver# of the Note held b# Pilipinas as soon as petitioner8s mone# mar&et placementmatured on *6 March *+* without pa#ment from Philfinance.

1e conclude, therefore, that private respondent Pilipinas must respond to petitioner fordamaes sustained b# arisin out of its breach of dut#. B# failin to deliver the Note to

the petitioner as depositor-beneficiar# of the thin deposited, Pilipinas effectivel# andunlawfull# deprived petitioner of the Note deposited with it. 1hether or not Pilipinas itselfbenefitted from such conversion or unlawful deprivation inflicted upon petitioner, is of nomoment for present purposes.Prima facie, the damaes suffered b# petitioner consisted

of P64,)66.66, the portion of the JMC PN No. F6* assined to petitioner but lost b#him b# reason of dischare of the Note b# compensation, plus leal interest of si$percent ?D>@ per annum containin from *4 March *+*.

/he conclusion we have reached is, of course, without preudice to such riht ofreimbursement as Pilipinas ma# havevis6a6vis Philfinance.

%%%.

/he third principal contention of petitioner that Philfinance and private respondentsJelta and Pilipinas should be treated as one corporate entit# need not detain us forlon.

%n the first place, as alread# noted, urisdiction over the person of Philfinance was neverac2uired either b# the trial court nor b# the respondent Court of Appeals. Petitionersimilarl# did not see& to implead Philfinance in the Petition before us.

;econdl#, it is not disputed that Philf inance and private respondents Jelta and Pilipinashave been oraniGed as separate corporate entities. Petitioner as&s us to pierce theirseparate corporate entities, but has been able onl# to cite the presence of a common

Jirector Mr. Ricardo ;ilverio, ;r., sittin on the Board of Jirectors of all three ?6@companies. Petitioner has neither alleed nor proved that one or another of the three ?6@concededl# related companies used the other two ?F@ as mere alter egos or that thecorporate affairs of the other two ?F@ were administered and manaed for the benefit ofone. /here is simpl# not enouh evidence of record to ustif# disreardin the separatecorporate personalities of delta and Pilipinas and to hold them liable for an# assumed orundetermined liabilit# of Philfinance to petitioner. !'

15ERE'(RE, for all the foreoin, the Jecision and Resolution of the Court of Appealsin C.A.-!.R. CK No. *)*+) dated F* march *++ and * Iul# *++, respectivel#, arehereb# M(J%'%EJ and ;E/ A;%JE, to the e$tent that such Jecision and Resolution haddismissed petitioner8s complaint aainst Pilipinas Ban&. Private respondent Pilipinas

ban& is hereb# (RJEREJ to indemnif# petitioner for damaes in the amount ofP64,)66.66, plus leal interest thereon at the rate of si$ percent ?D>@ per

annum counted from F April *+*. As so modified, the Jecision and Resolution of theCourt of Appeals are hereb# A''%RMEJ. No pronouncement as to costs.

;( (RJEREJ.

'idin, Davide, Jr., Romero and Melo, JJ., concur.


21/22

SOME NEGOTIABLE INSTRUMENTS


Manila

EN BANC

G.R. No. L%!!4&5 2(-e + 1"1

PHILIPPINE E0UCATION CO.# INC.# plaintiff-appellant,vs.MAURICIO A. SORIANO# ET AL.# defendant-appellees.

Marcial 3sposo for plaintiff6appellant.

ffice of the &olicitor #eneral Arturo A. Alafri%, Assistant &olicitor #eneral Antonio #.

I*arra and Attorne+ $oncepcion "orri5os6Agapinan for defendants6appellees.

0I;ON# J.:

An appeal from a decision of the Court of 'irst %nstance of Manila dismissin thecomplaint filed b# the Philippine Education Co., %nc. aainst Mauricio A. ;oriano, EnricoPalomar and Rafael Contreras.

(n April *, *+) Enri2ue Montinola souht to purchase from the Manila Post (ffice ten?*@ mone# orders of PF. each pa#able to E.P. Montinola withaddress at :ucena,

LueGon. After the postal teller had made out mone# ordersnumbered *F4D), *F4D-*F4D+), Montinola offered to pa# for them with a private chec&s were not enerall#accepted in pa#ment of mone# orders, the teller advised him to see the Chief of theMone# (rder Jivision, but instead of doin so, Montinola manaed to leave buildin withhis own chec& and the ten?*@ mone# orders without the &nowlede of the teller.

(n the same date, April *, *+), upon discover# of the disappearance of the unpaid

mone# orders, an urent messae was sent to all postmasters, and the followin da#notice was li&ewise served upon all ban&s, instructin them not to pa# an#one of themone# orders aforesaid if presented for pa#ment. /he Ban& of America received a cop#of said notice three da#s later.

(n April F6, *+) one of the above-mentioned mone# orders numbered *F4D wasreceived b# appellant as part of its sales receipts. /he followin da# it deposited the

same with the Ban& of America, and one da# thereafter the latter cleared it with theBureau of Posts and received from the latter its face value of PF..

(n ;eptember F, *+D*, appellee Mauricio A. ;oriano, Chief of the Mone# (rderJivision of the Manila Post (ffice, actin for and in behalf of his co-appellee, PostmasterEnrico Palomar, notified the Ban& of America that mone# order No. *F4D attached tohis letter had been found to have been irreularl# issued and that, in view thereof, theamount it represented had been deducted from the ban&8s clearin account. 'or its part,on Auust F of the same #ear, the Ban& of America debited appellant8s account with the

same amount and ave it advice thereof b# means of a debit memo.

(n (ctober *F, *+D* appellant re2uested the Postmaster !eneral to reconsider the

action ta&en b# his office deductin the sum of PF. from the clearin account of theBan& of America, but his re2uest was denied. ;o was appellant8s subse2uent re2uestthat the matter be referred to the ;ecretar# of Iustice for advice. /hereafter, appellantelevated the matter to the ;ecretar# of Public 1or&s and Communications, but the lattersustained the actions ta&en b# the postal officers.

%n connection with the events set forth above, Montinola was chared with theft in theCourt of 'irst %nstance of Manila ?Criminal Case No. 46DD@ but after trial he wasac2uitted on the round of reasonable doubt.

(n Ianuar# , *+DF appellant filed an action aainst appellees in the Municipal Court ofManila pra#in for udment as follows9

15ERE'(RE, plaintiff pra#s that after hearin defendants be ordered9

?a@ /o countermand the notice iven to the Ban& of America on;eptember F, *+D*, deductin from the said Ban&8s clearin accountthe sum of PF. represented b# postal mone# order No. *F4D, or in the alternative indemnif# the plaintiff in the same amount withinterest at -Q> per annum from ;eptember F, *+D*, which is therate of interest bein paid b# plaintiff on its overdraft account7

?b@ /o pa# to the plaintiff out of their own personal funds, ointl# andseverall#, actual and moral damaes in the amount of P*,. or insuch amount as will be proved and=or determined b# this 5onorable

Court9 e$emplar# damaes in the amount of P*,., attorne#8s feesof P*,., and the costs of action.

Plaintiff also pra#s for such other and further relief as ma# be deemed ust and e2uitable.

(n November *, *+DF, after the parties had submitted the stipulation of factsreproduced at paes *F to *) of the Record on Appeal, the above-named court rendered

udment as follows9


22/22

15ERE'(RE, udment is hereb# rendered, orderin the defendantsto countermand the notice iven to the Ban& of America on ;eptember

F, *+D*, deductin from said Ban&8s clearin account the sum ofPF. representin the amount of postal mone# order No. *F4D,

or in the alternative, to indemnif# the plaintiff in the said sum ofPF. with interest thereon at the rate of -Q> per annum from;eptember F, *+D* until full# paid7 without an# pronouncement as tocost and attorne#8s fees.

/he case was appealed to the Court of 'irst %nstance of Manila where, after the partieshad resubmitted the same stipulation of facts, the appealed decision dismissin thecomplaint, with costs, was rendered.

/he first, second and fifth assinments of error discussed in appellant8s brief are relatedto the other and will therefore be discussed ointl#. /he# raise this main issue9 that thepostal mone# order in 2uestion is a neotiable instrument7 that its nature as such is not inan#wa# affected b# the letter dated (ctober FD, *+4 sined b# the Jirector of Posts andaddressed to all ban&s with a clearin account with the Post (ffice, and that mone#orders, once issued, create a contractual relationship of debtor and creditor, respectivel#,between the overnment, on the one hand, and the remitters pa#ees or endorses, on theother.

%t is not disputed that our postal statutes were patterned after statutes in force in the

Documents

NEGO Introduction