G.R. No. L-40824 February 23, 1989GOVERNMENT SERVICE INSURANCE SYSTEM,petitioner,vs.COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO,respondents.The Government Corporate Counsel for petitioner.Lorenzo A. Sales for private respondents.REGALADO ,J.:Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and Mrs Flaviano Lagasca, executed a deed of mortgage, dated November 13, 1957, in favor of petitioner Government Service Insurance System (hereinafter referred to as GSIS) and subsequently, another deed of mortgage, dated April 14, 1958, in connection with two loans granted by the latter in the sums of P 11,500.00 and P 3,000.00, respectively.1A parcel of land covered by Transfer Certificate of Title No. 38989 of the Register of Deed of Quezon City, co-owned by said mortgagor spouses, was given as security under the aforesaid two deeds.2They also executed a 'promissory note" which states in part:... for value received, we the undersigned ... JOINTLY, SEVERALLY and SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P 11,500.00) Philippine Currency, with interest at the rate of six (6%) per centum compounded monthly payable in . . . (120)equal monthly installments of . . . (P 127.65) each.3On July 11, 1961, the Lagasca spouses executed an instrument denominated "Assumption of Mortgage" under which they obligated themselves to assume the aforesaid obligation to the GSIS and to secure the release of the mortgage covering that portion of the land belonging to herein private respondents and which was mortgaged to the GSIS.4This undertaking was not fulfilled.5Upon failure of the mortgagors to comply with the conditions of the mortgage, particularly the payment of the amortizations due, GSIS extrajudicially foreclosed the mortgage and caused the mortgaged property to be sold at public auction on December 3, 1962.6More than two years thereafter, or on August 23, 1965, herein private respondents filed a complaint against the petitioner and the Lagasca spouses in the former Court ofFirst Instance of Quezon City,7praying that the extrajudicial foreclosure "made on, their property and all other documents executed in relation thereto in favor of the Government Service Insurance System" be declared null and void. It was further prayed that they be allowed to recover said property, and/or the GSIS be ordered to pay them the value thereof, and/or they be allowed to repurchase the land. Additionally, they asked for actual and moral damages and attorney's fees.In their aforesaid complaint, private respondents alleged that they signed the mortgage contracts not as sureties or guarantors for the Lagasca spouses but they merely gave their common property to the said co-owners who were solely benefited by the loans from the GSIS.The trial court rendered judgment on February 25, 1968 dismissing the complaint for failure to establish a cause of action.8Said decision was reversed by the respondent Court of Appeals9which held that:... although formally they are co-mortgagors, they are so only for accomodation (sic) in that the GSIS required their consent to the mortgage of the entire parcel of land which was covered with only one certificate of title, with full knowledge that the loans secured thereby were solely for the benefit of the appellant (sic) spouses who alone applied for the loan.x x x x'It is, therefore, clear that as against the GSIS, appellants have a valid cause for having foreclosed the mortgage without having given sufficient notice to them as required either as to their delinquency in the payment of amortization or as to the subsequent foreclosure of the mortgage by reason of any default in such payment. The notice published in the newspaper, 'Daily Record (Exh. 12) and posted pursuant to Sec 3 of Act 3135 is not the notice to which the mortgagor is entitled upon the application being made for an extrajudicial foreclosure. ...10On the foregoing findings, the respondent court consequently decreed that-In view of all the foregoing, the judgment appealed from is hereby reversed, and another one entered (1) declaring the foreclosure of the mortgage void insofar as it affects the share of the appellants; (2) directing the GSIS to reconvey to appellants their share of the mortgaged property, or the value thereof if already sold to third party, in the sum of P 35,000.00, and (3) ordering the appellees Flaviano Lagasca and Esther Lagasca to pay the appellants the sum of P 10,00.00 as moral damages, P 5,000.00 as attorney's fees, and costs.11The case is now before us in this petition for review.In submitting their case to this Court, both parties relied on the provisions of Section 29 of Act No. 2031, otherwise known as the Negotiable Instruments Law, which provide that an accommodation party is one who has signed an instrument as maker, drawer, acceptor of indorser without receiving value therefor, but is held liable on the instrument to a holder for value although the latter knew him to be only an accommodation party.This approach of both parties appears to be misdirected and their reliance misplaced. The promissory note hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable instruments. These documents do not comply with the fourth requisite to be considered as such under Section 1 of Act No. 2031 because they are neither payable to order nor to bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031 would not apply; governance shall be afforded, instead, by the provisions of the Civil Code and special laws on mortgages.As earlier indicated, the factual findings of respondent court are that private respondents signed the documents "only to give their consent to the mortgage as required by GSIS", with the latter having full knowledge that the loans secured thereby were solely for the benefit of the Lagasca spouses.12This appears to be duly supported by sufficient evidence on record. Indeed, it would be unusual for the GSIS to arrange for and deduct the monthly amortizations on the loans from the salary as an army officer of Flaviano Lagasca without likewise affecting deductions from the salary of Isabelo Racho who was also an army sergeant. Then there is also the undisputed fact, as already stated, that the Lagasca spouses executed a so-called "Assumption of Mortgage" promising to exclude private respondents and their share of the mortgaged property from liability to the mortgagee. There is no intimation that the former executed such instrument for a consideration, thus confirming that they did so pursuant to their original agreement.The parol evidence rule13cannot be used by petitioner as a shield in this case for it is clear that there was no objection in the court below regarding the admissibility of the testimony and documents that were presented to prove that the private respondents signed the mortgage papers just to accommodate their co-owners, the Lagasca spouses. Besides, the introduction of such evidence falls under the exception to said rule, there being allegations in the complaint of private respondents in the court below regarding the failure of the mortgage contracts to express the true agreement of the parties.14However, contrary to the holding of the respondent court, it cannot be said that private respondents are without liability under the aforesaid mortgage contracts. The factual context of this case is precisely what is contemplated in the last paragraph of Article 2085 of the Civil Code to the effect that third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own propertySo long as valid consent was given, the fact that the loans were solely for the benefit of the Lagasca spouses would not invalidate the mortgage with respect to private respondents' share in the property. In consenting thereto, even assuming that private respondents may not be assuming personal liability for the debt, their share in the property shall nevertheless secure and respond for the performance of the principal obligation. The parties to the mortgage could not have intended that the same would apply only to the aliquot portion of the Lagasca spouses in the property, otherwise the consent of the private respondents would not have been required.The supposed requirement of prior demand on the private respondents would not be in point here since the mortgage contracts created obligations with specific terms for the compliance thereof. The facts further show that the private respondents expressly bound themselves as solidary debtors in the promissory note hereinbefore quoted.Coming now to the extrajudicial foreclosure effected by GSIS, We cannot agree with the ruling of respondent court that lack of notice to the private respondents of the extrajudicial foreclosure sale impairs the validity thereof. InBonnevie, et al. vs. Court of appeals, et al.,15the Court ruled that Act No. 3135, as amended, does not require personal notice on the mortgagor, quoting the requirement on notice in such cases as follows:Section 3. Notice shall be given by posting notices of sale for not less than twenty days in at least three public places of the municipality where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.There is no showing that the foregoing requirement on notice was not complied with in the foreclosure sale complained of .The respondent court, therefore, erred in annulling the mortgage insofar as it affected the share of private respondents or in directing reconveyance of their property or the payment of the value thereof Indubitably, whether or not private respondents herein benefited from the loan, the mortgage and the extrajudicial foreclosure proceedings were valid.WHEREFORE, judgment is hereby rendered REVERSING the decision of the respondent Court of Appeals and REINSTATING the decision of the courta quoin Civil Case No. Q-9418 thereof.SO ORDERED.G.R. No. 75908 October 22, 1999FEDERICO O. BORROMEO, LOURDES O. BORROMEO and FEDERICO O. BORROMEO, INC.,petitioners,vs.AMANCIO SUN and the COURT OF APPEALS,respondents.PURISIMA,J.:At bar is a Petition for review onCertiorariunder Rule 45 of the Revised Rules of Court seeking to set aside the Resolution of the then Intermediate Appellate Court1, dated March 13, 1986, in AC-G.R. CV NO. 67988, which reversed its earlier Decision dated February 12, 1985, setting aside the Decision of the former Court of the First Instance of Rizal, Branch X, in Civil Case No. 19466.The antecedent facts are as follows:Private respondent Amancio Sun brought before the then Court of the First Instance of Rizal, Branch X, an action against Lourdes O. Borromeo (in her capacity as corporate secretary), Federico O. Borromeo and Federico O. Borromeo (F.O.B.), Inc., to compel the transfer to his name in the books of F.O.B., Inc., 23,223 shares of stock registered in the name of Federico O. Borromeo, as evidenced by a Deed of Assignment dated January 16, 1974.Private respondent averred2that all the shares of stock of F.O.B. Inc. registered in the name of Federico O. Borromeo belong to him, as the said shares were placed in the name of Federico O. Borromeo "only to give the latter personality and importance in the business world."3According to the private respondent, on January 16, 1974 Federico O. Borromeo executed in his favor a Deed of Assignment with respect to the said 23,223 shares of stock.On the other hand, petitioner Federico O. Borromeo disclaimed any participation in the execution of the Deed of Assignment, theorizing that his supposed signature thereon was forged.1wphi1.ntAfter trial, the lower court of origin came out with a decision declaring the questioned signature on subject Deed of Assignment, dated January 16, 1974, as the genuine signature of Federico O. Borromeo; ratiocinating thus:After considering the testimonies of the two expert witnesses for the parties and after a careful and judicious study and analysis of the questioned signature as compared to the standard signatures, the Court is not in a position to declare that the questioned signature in Exh. A is a forgery. On the other hand, the Court is of the opinion that the questioned signature is the real signature of Federico O. Borromeo between the years 1954 to 1957 but definitely is not his signature in 1974 for by then he has changed his signature. Consequently, to the mind of the Court Exhibit A was signed by defendant Federico O. Borromeo between the years 1954 to 1957 although the words in the blank were filled at a much later date.4On appeal by petitioners, the Court of Appeals adjudged as forgery the controverted signature of Federico O. Borromeo; disposing as follows:WHEREFORE, the judgment of the Courta quoas to the second cause of action dated March 12, 1980 is hereby reversed and set aside and a new judgment is hereby rendered:1. Ordering the dismissal of the complaint as to defendant-appellants;2. Ordering plaintiff-appellee on appellants' counterclaim to pay the latter:a) P20,000.00 as moral damages;b) P10,000.00 as exemplary damages;c) P 10,000.00 as attorney's fees.3. Ordering plaintiff-appellee to pay the costs.5On March 29, 1985, Amancio Sun interposed a motion for reconsideration of the said decision, contending that Segundo Tabayoyong, petitioners' expert witness, is not a credible witness as found and concluded in the following disposition by this Court inCesar vs.Sandigan Bayan6:The testimony of Mr. Segundo Tabayoyong on March 5, 1980, part of which is cited on pages 19-23 of the petition, shows admissions which are summarized by the petitioner as follows:He never finished any degree in Criminology. Neither did he obtain any degree in physics or chemistry. He was a mere trainee in the NBI laboratory. He said he had gone abroad only once-to Argentina which, according to him is the only one country in the world that gives this degree (?) . . . "People go there where they obtain this sort of degree (?) where they are authorized to practice (sic)examination of questioned documents."His civil service eligibility was second grade (general clerical). His present position had to be "re-classified" "confidential" in order to qualify him to it. He never passed any Board Examination.He has never authored any book on the subject on which he claimed to be an "expert." Well, he did "write" a so-called pamphlet pretentiously called "Fundamentals of Questioned Documents Examination and Forgery Detection." In that pamphlet, he mentioned some references' (some) are Americans and one I think is a British, sir, like in the case of Dr. Wilson Harrison, a British' (he repeated with emphasis). Many of the "theories" contained in his pamphlet were lifted body and soul from those references, one of them being Albert Osborn. His pamphlet has neither quotations nor footnotes, although he was too aware of the crime committed by many an author called "plagiarism." But that did not deter him, nor bother him in the least.He has never been a member of any professional organization of experts in his supposed field of expertise, because he said there is none locally. Neither is he on an international level.7Acting an the aforesaid motion for reconsideration, the Court of Appeals reconsidered its decision of February 12, 1985 aforementioned. Thereafter, the parties agreed to have subject Deed of Assignment examined by the Philippine Constabulary (PC) Crime Laboratory, which submitted a Report on January 9, 1986, the pertinent portion of which, stated:1. Comparative examination and analysis of the questioned and the standard signature reveal significant similarities in the freedom of movement, good quality of lines, skills and individual handwriting characteristics.2. By process of interpolation the questioned signature fits in and can be bracketed in time with the standard signatures written in the years between 1956 to 1959. Microscopic examination of the ink used in the questioned signature and the standard signature in document dated 30 July 1959 marked Exh. "E" indicate gallotanic ink.xxx xxx xxx1. The questioned signature FEDERICO O. BORROMEO marked "Q" appearing in the original Deed of Assignment dated 16 January 1974 and the submitted standard signatures of Federico O. Borromeo marked "S-1" to "S-49" inclusive were written BY ONE AND THE SAME PERSON.2. The questioned signature FEDERICO O. BORROMEO marked "Q" COULD HAVE BEEN SIGNED IN THE YEARS BETWEEN 1950-1957.8After hearing the arguments the lawyers of record advanced on the said "Report" of the PC Crime Laboratory, the Court of Appeals resolved:xxx xxx xxx1) to ADMIT the Report dated Jan. 9, 1986 of the PC Crime Laboratory on the Deed of Assignment in evidence, without prejudice to the parties' assailing the credibility of said Report;2) to GIVE both parties a non-extendible period of FIVE (5) DAYS from February 27, 1986, within which to file simultaneous memoranda.9On March 13, 1986, the Court of Appeals reversed its decision of February 12, 1985, which affirmedin totothe decision of the trial court of origin; resolving thus:WHEREFORE, finding the Motion for Reconsideration meritorious. We hereby set aside our Decision, dated February 12, 1985 and in its stead a new judgment is hereby rendered affirmingin totothe decision of the trial Court, dated March 12, 1980, without pronouncement as to costs.SO ORDERED.10Therefrom, petitioners found their way to this court via the present Petition; theorizing that:ITHE RESPONDENT COURT ERRED IN HOLDING THAT WHEN PETITIONER AGREED TO THE SUGGESTION OF RESPONDENT COURT TO HAVE THE QUESTIONED DOCUMENT EXAMINED BY THE PC CRIME LABORATORY THEY COULD NO LONGER QUESTION THE COMPETENCY OF THE DOCUMENT.IITHE COURT OF APPEALS ERRED IN HOLDING THAT THE QUESTIONED DOCUMENT WAS SIGNED IN 1954 BUT WAS DATED IN 1974.IIITHE COURT OF APPEALS ERRED IN HOLDING THAT THE SIGNATURE OF FEDERICO O. BORROMEO IN THE DEED OF ASSIGNMENT (EXHIBIT "A") IS A GENUINE SIGNATURE CIRCA 1954-1957.The Petition is barren of merit.Well-settled is the rule that "factual findings of the Court of Appeals are conclusive on the parties and not reviewable by the Supreme Court and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court."11In the present case, the trial court found that the signature in question is the genuine signature of Federico O. Borromeo between the years 1954 to 1957 although the words in the blank space of the document in question were written on a much later date. The same conclusion was arrived at by the Court of Appeals on the basis of the Report of the PC crime Laboratory corroborating the findings of Col. Jose Fernandez that the signature under controversy is genuine.It is significant to note that Mr. Tabayoyong, petitioners' expert witness, limited his comparison of the questioned signature with the 1974 standard signature of Federico O. Borromeo. No comparison of the subject signature with the 1950 1957 standard signature was ever made by Mr. Tabayoyong despite his awareness that the expert witness of private respondent, Col. Jose Fernandez, made a comparison of said signatures and notwithstanding his (Tabayoyong's) access to such signatures as they were all submitted to the lower Court. As correctly ratiocinated12by the Court of origin, the only conceivable reason why Mr. Tabayoyong avoided making such a comparison must have been, that even to the naked eye the questioned signature affixed to the Deed of Assignment, dated January 16, 1974, is strikingly similar to the 1950 to 1954 standard signature of Federico O. Borromeo, such that if a comparison thereof was made by Mr. Tabayoyong, he would have found the questioned signature genuine.That the Deed of Assignment is dated January 16, 1974 while the questioned signature was found to be circa 1954-1957, and not that of 1974, is of no moment. It does not necessarily mean, that the deed is a forgery. Pertinent records reveal that the subject Deed of Assignment is embodied in a blank form for the assignment of shares with authority to transfer such shares in the books of the corporation. It was clearly intended to be signed in blank to facilitate the assignment of shares from one person to another at any future time. This is similar to Section 14 of the Negotiable Instruments Law where the blanks may be filled up by the holder, the signing in blank being with the assumed authority to do so. Indeed, as the shares were registered in the name of Federico O. Borromeo just to give him personality and standing in the business community, private respondent had to have a counter evidence of ownership of the shares involved. Thus, the execution of the deed of assignment in blank, to be filled up whenever needed. The same explains the discrepancy between the date of the deed of assignment and the date when the signature was affixed thereto.While it is true that the 1974 standard signature of Federico O. Borromeo is to the naked eye dissimilar to his questioned signature circa 1954-1957, which could have been caused by sheer lapse of time, Col. Jose Fernander, respondent's expert witness, found the said signatures similar to each other after subjecting the same to stereomicroscopic examination and analysis because the intrinsic and natural characteristics of Federico O. Borromeo's handwriting were present in all the exemplar signatures used by both Segundo Tabayoyong and Col. Jose Fernandez.It is therefore beyond cavil that the findings of the Court of origin affirmed by the Court of Appeals on the basis of the corroborative findings of the Philippine Constabulary Crime Laboratory confirmed the genuineness of the signature of Federico O. Borromeo in the Deed of Assignment dated January 16, 1974.Petitioners, however, question the "Report" of the document examiner on the ground that they were not given an opportunity to cross-examine the Philippine Constabulary document examiner; arguing that they never waived their right to question the compentecy of the examiner concerned. While the Court finds merit in the contention of petitioners, that they did not actually waive their right to cross-examine on any aspect of subject Report of the Philippine Constabulary Crime Laboratory, the Court discerns no proper basis for deviating from the findings of the Court of Appeals on the matter. It is worthy to stress that courts may place whatever weight due on the testimony of an expert witness.13Conformably, in giving credence and probative value to the said "Report" of the Philippine Constabulary Crime Laboratory, corroborating the findings of the trial Court, the Court of Appeals merely exercised its discretion. There being no grave abuse in the exercise of such judicial discretion, the findings by the Court of Appeals should not be disturbed on appeal.1wphi1.ntPremises studiedly considered, the Court is of the irresistible conclusion, and so holds, that the respondent Court erred not in affirming the decision of the Regional Trial Courta quoin Civil Case No. 19466.WHEREFORE, the Petition is DISMISSED for lack of merit and the assailed Resolution, dated March 13, 1986, AFFIRMED. No pronouncement as to costs.SO ORDERED.G.R. No. 16454 September 29, 1921GEORGE A. KAUFFMAN,plaintiff-appellee,vs.THE PHILIPPINE NATIONAL BANK,defendant-appellant.Roman J. Lacson for appellant.Ross and Lawrence for appellee.STREET,J.:At the time of the transaction which gave rise to this litigation the plaintiff, George A. Kauffman, was the president of a domestic corporation engaged chiefly in the exportation of hemp from the Philippine Islands and known as the Philippine Fiber and Produce Company, of which company the plaintiff apparently held in his own right nearly the entire issue of capital stock. On February 5, 1918, the board of directors of said company, declared a dividend of P100,000 from its surplus earnings for the year 1917, of which the plaintiff was entitled to the sum of P98,000. This amount was accordingly placed to his credit on the books of the company, and so remained until in October of the same year when an unsuccessful effort was made to transmit the whole, or a greater part thereof, to the plaintiff in New York City.In this connection it appears that on October 9, 1918, George B. Wicks, treasurer of the Philippine Fiber and Produce Company, presented himself in the exchange department of the Philippine National Bank in Manila and requested that a telegraphic transfer of $45,000 should be made to the plaintiff in New York City, upon account of the Philippine Fiber and Produce Company. He was informed that the total cost of said transfer, including exchange and cost of message, would be P90,355.50. Accordingly, Wicks, as treasurer of the Philippine Fiber and Produce Company, thereupon drew and delivered a check for that amount on the Philippine National Bank; and the same was accepted by the officer selling the exchange in payment of the transfer in question. As evidence of this transaction a document was made out and delivered to Wicks, which is referred to by the bank's assistant cashier as its official receipt. This memorandum receipt is in the following language:October 9th, 1918.

CABLE TRANSFER BOUGHT FROM PHILIPPINE NATIONAL BANK, Manila, P.I. Stamp P18Foreign Amount Rate$45,000. 3/8 % P90,337.50Payable through Philippine National Bank, New York. To G. A. Kauffman, New York. Total P90,355.50. Account of Philippine Fiber and Produce Company. Sold to Messrs. Philippine Fiber and Produce Company, Manila. (Sgd.) Y LERMA,Manager, Foreign Department.

On the same day the Philippine National Bank dispatched to its New York agency a cablegram to the following effect:Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000. (Sgd.) PHILIPPINE NATIONAL BANK,Manila.Upon receiving this telegraphic message, the bank's representative in New York sent a cable message in reply suggesting the advisability of withholding this money from Kauffman, in view of his reluctance to accept certain bills of the Philippine Fiber and Produce Company. The Philippine National Bank acquiesced in this and on October 11 dispatched to its New York agency another message to withhold the Kauffman payment as suggested.Meanwhile Wicks, the treasurer of the Philippine Fiber and Produce Company, cabled to Kauffman in New York, advising him that $45,000 had been placed to his credit in the New York agency of the Philippine National Bank; and in response to this advice Kauffman presented himself at the office of the Philippine National Bank in New York City on October 15, 1918, and demanded the money. By this time, however, the message from the Philippine National Bank of October 11, directing the withholding of payment had been received in New York, and payment was therefore refused.In view of these facts, the plaintiff Kauffman instituted the present action in the Court of First Instance of the city of Manila to recover said sum, with interest and costs; and judgment having been there entered favorably to the plaintiff, the defendant appealed.Among additional facts pertinent to the case we note the circumstance that at the time of the transaction above-mentioned, the Philippines Fiber and Produce Company did not have on deposit in the Philippine National Bank money adequate to pay the check for P90,355.50, which was delivered in payment of the telegraphic order; but the company did have credit to that extent, or more, for overdraft in current account, and the check in question was charged as an overdraft against the Philippine Fiber and Produce Company and has remained on the books of the bank as an interest-bearing item in the account of said company.It is furthermore noteworthy that no evidence has been introduced tending to show failure of consideration with respect to the amount paid for said telegraphic order. It is true that in the defendant's answer it is suggested that the failure of the bank to pay over the amount of this remittance to the plaintiff in New York City, pursuant to its agreement, was due to a desire to protect the bank in its relations with the Philippine Fiber and Produce Company, whose credit was secured at the bank by warehouse receipts on Philippine products; and it is alleged that after the exchange in question was sold the bank found that it did not have sufficient to warrant payment of the remittance. In view, however, of the failure of the bank to substantiate these allegations, or to offer any other proof showing failure of consideration, it must be assumed that the obligation of the bank was supported by adequate consideration.In this court the defense is mainly, if not exclusively, based upon the proposition that, inasmuch as the plaintiff Kauffman was not a party to the contract with the bank for the transmission of this credit, no right of action can be vested in him for the breach thereof. "In this situation," we here quote the words of the appellant's brief, "if there exists a cause of action against the defendant, it would not be in favor of the plaintiff who had taken no part at all in the transaction nor had entered into any contract with the plaintiff, but in favor of the Philippine Fiber and Produce Company, the party which contracted in its own name with the defendant."The question thus placed before us is one purely of law; and at the very threshold of the discussion it can be stated that the provisions of the Negotiable Instruments Law can come into operation there must be a document in existence of the character described in section 1 of the Law; and no rights properly speaking arise in respect to said instrument until it is delivered. In the case before us there was an order, it is true, transmitted by the defendant bank to its New York branch, for the payment of a specified sum of money to George A. Kauffman. But this order was not made payable "to order or "to bearer," as required in subsection (d) of that Act; and inasmuch as it never left the possession of the bank, or its representative in New York City, there was no delivery in the sense intended in section 16 of the same Law. In this connection it is unnecessary to point out that the official receipt delivered by the bank to the purchaser of the telegraphic order, and already set out above, cannot itself be viewed in the light of a negotiable instrument, although it affords complete proof of the obligation actually assumed by the bank.Stated in bare simplicity the admitted facts show that the defendant bank for a valuable consideration paid by the Philippine Fiber and Produce Company agreed on October 9, 1918, to cause a sum of money to be paid to the plaintiff in New York City; and the question is whether the plaintiff can maintain an action against the bank for the nonperformance of said undertaking. In other words, is the lack of privity with the contract on the part of the plaintiff fatal to the maintenance of an action by him?The only express provision of law that has been cited as bearing directly on this question is the second paragraph of article 1257 of the Civil Code; and unless the present action can be maintained under the provision, the plaintiff admittedly has no case. This provision states an exception to the more general rule expressed in the first paragraph of the same article to the effect that contracts are productive of effects only between the parties who execute them; and in harmony with this general rule are numerous decisions of this court (Wolfsonvs.Estate of Martinez, 20 Phil., 340; Ibaez de Aldecoavs.Hongkong and Shanghai Banking Corporation, 22 Phil., 572, 584; Manila Railroad Co.vs.Compaia Trasatlantica and Atlantic, Gulf and Pacific Co., 38 Phil., 873, 894.)The paragraph introducing the exception which we are now to consider is in these words:Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment, provided he has given notice of his acceptance to the person bound before the stipulation has been revoked. (Art. 1257, par. 2, Civ. Code.)In the case of Uy Tam and Uy Yetvs.Leonard (30 Phil., 471), is found an elaborate dissertation upon the history and interpretation of the paragraph above quoted and so complete is the discussion contained in that opinion that it would be idle for us here to go over the same matter. Suffice it to say that Justice Trent, speaking for the court in that case, sums up its conclusions upon the conditions governing the right of the person for whose benefit a contract is made to maintain an action for the breach thereof in the following words:So, we believe the fairest test, in this jurisdiction at least, whereby to determine whether the interest of a third person in a contract is a stipulationpour autrui, or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract.If a third person claims an enforcible interest in the contract, the question must be settled by determining whether the contracting parties desired to tender him such an interest. Did they deliberately insert terms in their agreement with the avowed purpose of conferring a favor upon such third person? In resolving this question, of course, the ordinary rules of construction and interpretation of writings must be observed. (Uy Tam and Uy Yetvs.Leonard,supra.)Further on in the same opinion he adds: "In applying this test to a stipulationpour autrui, it matters not whether the stipulation is in the nature of a gift or whether there is an obligation owing from the promise to the third person. That no such obligation exists may in some degree assist in determining whether the parties intended to benefit a third person, whether they stipulated for him." (Uy Tam and Uy Yetvs.Leonard,supra.)In the light of the conclusion thus stated, the right of the plaintiff to maintain the present action is clear enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the plaintiff in New York City is a stipulation in his favor within the meaning of the paragraph above quoted; and the circumstances under which that promise was given disclose an evident intention on the part of the contracting parties that the plaintiff should have the money upon demand in New York City. The recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right in him to maintain an action to recover it; and indeed if the provision in question were not applicable to the facts now before us, it would be difficult to conceive of a case arising under it.It will be noted that under the paragraph cited a third person seeking to enforce compliance with a stipulation in his favor must signify his acceptance before it has been revoked. In this case the plaintiff clearly signified his acceptance to the bank by demanding payment; and although the Philippine National Bank had already directed its New York agency to withhold payment when this demand was made, the rights of the plaintiff cannot be considered to as there used, must be understood to imply revocation by the mutual consent of the contracting parties, or at least by direction of the party purchasing he exchange.In the course of the argument attention was directed to the case of Legnitivs.Mechanics, etc. Bank (130 N.E. Rep., 597), decided by the Court of Appeals of the State of New York on March 1, 1921, wherein it is held that, by selling a cable transfer of funds on a foreign country in ordinary course, a bank incurs a simple contractual obligation, and cannot be considered as holding the money which was paid for the transfer in the character of a specific trust. Thus, it was said, "Cable transfers, therefore, mean a method of transmitting money by cable wherein the seller engages that he has the balance at the point on which the payment is ordered and that on receipt of the cable directing the transfer his correspondent at such point will make payment to the beneficiary described in the cable. All these transaction are matters of purchase and sale create no trust relationship."As we view it there is nothing in the decision referred to decisive of the question now before us, wish is merely that of the right of the beneficiary to maintain an action against the bank selling the transfer.Upon the considerations already stated, we are of the opinion that the right of action exists, and the judgment must be affirmed. It is so ordered, with costs against the appellant. Interest will be computed as prescribed in section 510 of the Code of Civil Procedure.G.R. No. 97753 August 10, 1992CALTEX (PHILIPPINES), INC.,petitioner,vs.COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY,respondents.Bito, Lozada, Ortega & Castillo for petitioners.Nepomuceno, Hofilea & Guingona for private.REGALADO,J.:This petition for review oncertiorariimpugns and seeks the reversal of the decision promulgated by respondent court on March 8, 1991 in CA-G.R. CV No. 236151affirming with modifications, the earlier decision of the Regional Trial Court of Manila, Branch XLII,2which dismissed the complaint filed therein by herein petitioner against respondent bank.The undisputed background of this case, as found by the courta quoand adopted by respondent court, appears of record:1. On various dates, defendant, a commercial banking institution, through its Sucat Branch issued 280 certificates of time deposit (CTDs) in favor of one Angel dela Cruz who deposited with herein defendant the aggregate amount of P1,120,000.00, as follows: (Joint Partial Stipulation of Facts and Statement of Issues, Original Records, p. 207; Defendant's Exhibits 1 to 280);CTD CTDDates Serial Nos. Quantity Amount22 Feb. 82 90101 to 90120 20 P80,00026 Feb. 82 74602 to 74691 90 360,0002 Mar. 82 74701 to 74740 40 160,0004 Mar. 82 90127 to 90146 20 80,0005 Mar. 82 74797 to 94800 4 16,0005 Mar. 82 89965 to 89986 22 88,0005 Mar. 82 70147 to 90150 4 16,0008 Mar. 82 90001 to 90020 20 80,0009 Mar. 82 90023 to 90050 28 112,0009 Mar. 82 89991 to 90000 10 40,0009 Mar. 82 90251 to 90272 22 88,000 Total 280 P1,120,000===== ========2. Angel dela Cruz delivered the said certificates of time (CTDs) to herein plaintiff in connection with his purchased of fuel products from the latter (Original Record, p. 208).3. Sometime in March 1982, Angel dela Cruz informed Mr. Timoteo Tiangco, the Sucat Branch Manger, that he lost all the certificates of time deposit in dispute. Mr. Tiangco advised said depositor to execute and submit a notarized Affidavit of Loss, as required by defendant bank's procedure, if he desired replacement of said lost CTDs (TSN, February 9, 1987, pp. 48-50).4. On March 18, 1982, Angel dela Cruz executed and delivered to defendant bank the required Affidavit of Loss (Defendant's Exhibit 281). On the basis of said affidavit of loss, 280 replacement CTDs were issued in favor of said depositor (Defendant's Exhibits 282-561).5. On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from defendant bank in the amount of Eight Hundred Seventy Five Thousand Pesos (P875,000.00). On the same date, said depositor executed a notarized Deed of Assignment of Time Deposit (Exhibit 562) which stated, among others, that he (de la Cruz) surrenders to defendant bank "full control of the indicated time deposits from and after date" of the assignment and further authorizes said bank to pre-terminate, set-off and "apply the said time deposits to the payment of whatever amount or amounts may be due" on the loan upon its maturity (TSN, February 9, 1987, pp. 60-62).6. Sometime in November, 1982, Mr. Aranas, Credit Manager of plaintiff Caltex (Phils.) Inc., went to the defendant bank's Sucat branch and presented for verification the CTDs declared lost by Angel dela Cruz alleging that the same were delivered to herein plaintiff "as security for purchases made with Caltex Philippines, Inc." by said depositor (TSN, February 9, 1987, pp. 54-68).7. On November 26, 1982, defendant received a letter (Defendant's Exhibit 563) from herein plaintiff formally informing it of its possession of the CTDs in question and of its decision to pre-terminate the same.8. On December 8, 1982, plaintiff was requested by herein defendant to furnish the former "a copy of the document evidencing the guarantee agreement with Mr. Angel dela Cruz" as well as "the details of Mr. Angel dela Cruz" obligation against which plaintiff proposed to apply the time deposits (Defendant's Exhibit 564).9. No copy of the requested documents was furnished herein defendant.10. Accordingly, defendant bank rejected the plaintiff's demand and claim for payment of the value of the CTDs in a letter dated February 7, 1983 (Defendant's Exhibit 566).11. In April 1983, the loan of Angel dela Cruz with the defendant bank matured and fell due and on August 5, 1983, the latter set-off and applied the time deposits in question to the payment of the matured loan (TSN, February 9, 1987, pp. 130-131).12. In view of the foregoing, plaintiff filed the instant complaint, praying that defendant bank be ordered to pay it the aggregate value of the certificates of time deposit of P1,120,000.00 plus accrued interest and compounded interest therein at 16%per annum, moral and exemplary damages as well as attorney's fees.After trial, the courta quorendered its decision dismissing the instant complaint.3On appeal, as earlier stated, respondent court affirmed the lower court's dismissal of the complaint, hence this petition wherein petitioner faults respondent court in ruling (1) that the subject certificates of deposit are non-negotiable despite being clearly negotiable instruments; (2) that petitioner did not become a holder in due course of the said certificates of deposit; and (3) in disregarding the pertinent provisions of the Code of Commerce relating to lost instruments payable to bearer.4The instant petition is bereft of merit.A sample text of the certificates of time deposit is reproduced below to provide a better understanding of the issues involved in this recourse.SECURITY BANKAND TRUST COMPANY6778 Ayala Ave., Makati No. 90101Metro Manila, PhilippinesSUCAT OFFICEP 4,000.00CERTIFICATE OF DEPOSITRate16%Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____This is to Certify thatB E A R E Rhas deposited in this Bank the sum ofPESOS: FOUR THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 & 00 CTSPesos, Philippine Currency, repayable to said depositor731 days.after date, upon presentation and surrender of this certificate, with interest at the rate of16%per centper annum.(Sgd. Illegible) (Sgd. Illegible) AUTHORIZED SIGNATURES5Respondent court ruled that the CTDs in question are non-negotiable instruments, nationalizing as follows:. . . While it may be true that the word "bearer" appears rather boldly in the CTDs issued, it is important to note that after the word "BEARER" stamped on the space provided supposedly for the name of the depositor, the words "has deposited" a certain amount follows. The document further provides that the amount deposited shall be "repayable to said depositor" on the period indicated. Therefore, the text of the instrument(s) themselves manifest with clarity that they are payable, not to whoever purports to be the "bearer" but only to the specified person indicated therein, the depositor. In effect, the appellee bank acknowledges its depositor Angel dela Cruz as the person who made the deposit and further engages itself to pay said depositor the amount indicated thereon at the stipulated date.6We disagree with these findings and conclusions, and hereby hold that the CTDs in question are negotiable instruments. Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites for an instrument to become negotiable,viz:(a) It must be in writing and signed by the maker or drawer;(b) Must contain an unconditional promise or order to pay a sum certain in money;(c) Must be payable on demand, or at a fixed or determinable future time;(d) Must be payable to order or to bearer; and(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.The CTDs in question undoubtedly meet the requirements of the law for negotiability. The parties' bone of contention is with regard to requisite (d) set forth above. It is noted that Mr. Timoteo P. Tiangco, Security Bank's Branch Manager way back in 1982, testified in open court that the depositor reffered to in the CTDs is no other than Mr. Angel de la Cruz.xxx xxx xxxAtty. Calida:q In other words Mr. Witness, you are saying that per books of the bank, the depositor referred (sic) in these certificates states that it was Angel dela Cruz?witness:a Yes, your Honor, and we have the record to show that Angel dela Cruz was the one who cause (sic) the amount.Atty. Calida:q And no other person or entity or company, Mr. Witness?witness:a None, your Honor.7xxx xxx xxxAtty. Calida:q Mr. Witness, who is the depositor identified in all of these certificates of time deposit insofar as the bank is concerned?witness:a Angel dela Cruz is the depositor.8xxx xxx xxxOn this score, the accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself.9In the construction of a bill or note, the intention of the parties is to control, if it can be legally ascertained.10While the writing may be read in the light of surrounding 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 to ascertain, not what the parties may have secretly intended as contradistinguished from what their words express, but what is the meaning of the words they have used. What the parties meant must be determined by what they said.11Contrary to what respondent court held, the CTDs are negotiable instruments. The documents provide that the amounts deposited shall be repayable to the depositor. And who, according to the document, is the depositor? It is the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the documents or, for that matter, whosoever may be the bearer at the time of presentment.If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so expressed that fact in clear and categorical terms in the documents, instead of having the word "BEARER" stamped on the space provided for the name of the depositor in each CTD. On the wordings of the documents, therefore, the amounts deposited are repayable to whoever may be the bearer thereof. Thus, petitioner's aforesaid witness merely declared that Angel de la Cruz is the depositor "insofar as the bank is concerned," but obviously other parties not privy to the transaction between them would not be in a position to know that the depositor is not the bearer stated in the CTDs. Hence, the situation would require any party dealing with the CTDs to go behind the plain import of what is written thereon to unravel the agreement of the parties thereto through factsaliunde.This need for resort to extrinsic evidence is what is sought to be avoided by the Negotiable Instruments Law and calls for the application of the elementary rule that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.12The next query is whether petitioner can rightfully recover on the CTDs. This time, the answer is in the negative. The records reveal that Angel de la Cruz, whom petitioner chose not to implead in this suit for reasons of its own, delivered the CTDs amounting to P1,120,000.00 to petitioner without informing respondent bank thereof at any time. Unfortunately for petitioner, although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it and De la Cruz, as ultimately ascertained, requires both delivery and indorsement. For, although petitioner seeks to deflect this fact, the CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel products. Any doubt as to whether the CTDs were delivered as payment for the fuel products or as a security has been dissipated and resolved in favor of the latter by petitioner's own authorized and responsible representative himself.In a letter dated November 26, 1982 addressed to respondent Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . . These certificates of deposit were negotiated to us by Mr. Angel dela Cruzto guarantee his purchases of fuel products" (Emphasis ours.)13This admission is conclusive upon petitioner, its protestations notwithstanding. Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.14A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them.15In the law of evidence, whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act, or omission, be permitted to falsify it.16If it were true that the CTDs were delivered as payment and not as security, petitioner's credit manager could have easily said so, instead of using the words "to guarantee" in the letter aforequoted. Besides, when respondent bank, as defendant in the court below, moved for a bill of particularity therein17praying, among others, that petitioner, as plaintiff, be required to aver with sufficient definiteness or particularity (a) the due date or dates ofpaymentof the alleged indebtedness of Angel de la Cruz to plaintiff and (b) whether or not it issued a receipt showing that the CTDs were delivered to it by De la Cruz aspaymentof the latter's alleged indebtedness to it, plaintiff corporation opposed the motion.18Had it produced the receipt prayed for, it could have proved, if such truly was the fact, that the CTDs were delivered as payment and not as security. Having opposed the motion, petitioner now labors under the presumption that evidence willfully suppressed would be adverse if produced.19Under the foregoing circumstances, this disquisition inIntergrated Realty Corporation, et al. vs. Philippine National Bank, et al.20is apropos:. . . Adverting again to the Court's pronouncements inLopez, supra, we quote therefrom:The character of the transaction between the parties is to be determined by their intention, regardless of what language was used or what the form of the transfer was. If it was intended to secure the payment of money, it must be construed as a pledge; but if there was some other intention, it is not a pledge. However, even though a transfer, if regarded by itself, appears to have been absolute, its object and character might still be qualified and explained by contemporaneous writing declaring it to have been a deposit of the property as collateral security. It has been said that a transfer of property by the debtor to a creditor, even if sufficient on its face to make an absolute conveyance, should be treated as a pledge if the debt continues in inexistence and is not discharged by the transfer, and that accordingly the use of the terms ordinarily importing conveyance of absolute ownership will not be given that effect in such a transaction if they are also commonly used in pledges and mortgages and therefore do not unqualifiedly indicate a transfer of absolute ownership, in the absence of clear and unambiguous language or other circumstances excluding an intent to pledge.Petitioner's insistence that the CTDs were negotiated to it begs the question. Under the Negotiable Instruments Law, an instrument is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder thereof,21and a holder may be the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.22In the present case, however, there was no negotiation in the sense of a transfer of the legal title to the CTDs in favor of petitioner in which situation, for obvious reasons, mere delivery of the bearer CTDs would have sufficed. Here, the delivery thereof only as security for the purchases of Angel de la Cruz (and we even disregard the fact that the amount involved was not disclosed) could at the most constitute petitioner only as a holder for value by reason of his lien. Accordingly, a negotiation for such purpose cannot be effected by mere delivery of the instrument since, necessarily, the terms thereof and the subsequent disposition of such security, in the event of non-payment of the principal obligation, must be contractually provided for.The pertinent law on this point is that where the holder has a lien on the instrument arising from contract, he is deemed a holder for value to the extent of his lien.23As such holder of collateral security, he would be a pledgee but the requirements therefor and the effects thereof, not being provided for by the Negotiable Instruments Law, shall be governed by the Civil Code provisions on pledge of incorporeal rights,24which inceptively provide:Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged. The instrument proving the right pledged shall be delivered to the creditor, and if negotiable, must be indorsed.Art. 2096. A pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument.Aside from the fact that the CTDs were only delivered but not indorsed, the factual findings of respondent court quoted at the start of this opinion show that petitioner failed to produce any document evidencing any contract of pledge or guarantee agreement between it and Angel de la Cruz.25Consequently, the mere delivery of the CTDs did not legally vest in petitioner any right effective against and binding upon respondent bank. The requirement under Article 2096 aforementioned is not a mere rule of adjective law prescribing the mode whereby proof may be made of the date of a pledge contract, but a rule of substantive law prescribing a condition without which the execution of a pledge contract cannot affect third persons adversely.26On the other hand, the assignment of the CTDs made by Angel de la Cruz in favor of respondent bank was embodied in a public instrument.27With regard to this other mode of transfer, the Civil Code specifically declares:Art. 1625. An assignment of credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property.Respondent bank duly complied with this statutory requirement. Contrarily, petitioner, whether as purchaser, assignee or lien holder of the CTDs, neither proved the amount of its credit or the extent of its lien nor the execution of any public instrument which could affect or bind private respondent. Necessarily, therefore, as between petitioner and respondent bank, the latter has definitely the better right over the CTDs in question.Finally, petitioner faults respondent court for refusing to delve into the question of whether or not private respondent observed the requirements of the law in the case of lost negotiable instruments and the issuance of replacement certificates therefor, on the ground that petitioner failed to raised that issue in the lower court.28On this matter, we uphold respondent court's finding that the aspect of alleged negligence of private respondent was not included in the stipulation of the parties and in the statement of issues submitted by them to the trial court.29The issues agreed upon by them for resolution in this case are:1. Whether or not the CTDs as worded are negotiable instruments.2. Whether or not defendant could legally apply the amount covered by the CTDs against the depositor's loan by virtue of the assignment (Annex "C").3. Whether or not there was legal compensation or set off involving the amount covered by the CTDs and the depositor's outstanding account with defendant, if any.4. Whether or not plaintiff could compel defendant to preterminate the CTDs before the maturity date provided therein.5. Whether or not plaintiff is entitled to the proceeds of the CTDs.6. Whether or not the parties can recover damages, attorney's fees and litigation expenses from each other.As respondent court correctly observed, with appropriate citation of some doctrinal authorities, the foregoing enumeration does not include the issue of negligence on the part of respondent bank. An issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel.30Questions raised on appeal must be within the issues framed by the parties and, consequently, issues not raised in the trial court cannot be raised for the first time on appeal.31Pre-trial is primarily intended to make certain that all issues necessary to the disposition of a case are properly raised. Thus, to obviate the element of surprise, parties are expected to disclose at a pre-trial conference all issues of law and fact which they intend to raise at the trial, except such as may involve privileged or impeaching matters. The determination of issues at a pre-trial conference bars the consideration of other questions on appeal.32To accept petitioner's suggestion that respondent bank's supposed negligence may be considered encompassed by the issues on its right to preterminate and receive the proceeds of the CTDs would be tantamount to saying that petitioner could raise on appeal any issue. We agree with private respondent that the broad ultimate issue of petitioner's entitlement to the proceeds of the questioned certificates can be premised on a multitude of other legal reasons and causes of action, of which respondent bank's supposed negligence is only one. Hence, petitioner's submission, if accepted, would render a pre-trial delimitation of issues a useless exercise.33Still, even assumingarguendothat said issue of negligence was raised in the court below, petitioner still cannot have the odds in its favor. A close scrutiny of the provisions of the Code of Commerce laying down the rules to be followed in case of lost instruments payable to bearer, which it invokes, will reveal that said provisions, even assuming their applicability to the CTDs in the case at bar, are merely permissive and not mandatory. The very first article cited by petitioner speaks for itself.Art 548. Thedispossessed owner, no matter for what cause it may be,mayapply to the judge or court of competent jurisdiction, asking that the principal, interest or dividends due or about to become due, be not paid a third person, as well as in order to prevent the ownership of the instrument that a duplicate be issued him. (Emphasis ours.)xxx xxx xxxThe use of the word "may" in said provision shows that it is not mandatory but discretionary on the part of the "dispossessed owner" to apply to the judge or court of competent jurisdiction for the issuance of a duplicate of the lost instrument. Where the provision reads "may," this word shows that it is not mandatory but discretional.34The word "may" is usually permissive, not mandatory.35It is an auxiliary verb indicating liberty, opportunity, permission and possibility.36Moreover, as correctly analyzed by private respondent,37Articles 548 to 558 of the Code of Commerce, on which petitioner seeks to anchor respondent bank's supposed negligence, merely established, on the one hand, a right of recourse in favor of a dispossessed owner or holder of a bearer instrument so that he may obtain a duplicate of the same, and, on the other, an option in favor of the party liable thereon who, for some valid ground, may elect to refuse to issue a replacement of the instrument. Significantly, none of the provisions cited by petitioner categorically restricts or prohibits the issuance a duplicate or replacement instrumentsanscompliance with the procedure outlined therein, and none establishes a mandatory precedent requirement therefor.WHEREFORE, on the modified premises above set forth, the petition is DENIEDand the appealed decision is hereby AFFIRMED.SO ORDERED.G.R. No. 76788 January 22, 1990JUANITA SALAS,petitioner,vs.HON. COURT OF APPEALS and FIRST FINANCE & LEASING CORPORATION,respondents.Arsenio C. Villalon, Jr. for petitioner.Labaguis, Loyola, Angara & Associates for private respondent.FERNAN,C.J.:Assailed in this petition for review oncertiorariis the decision of the Court of Appeals in C.A.-G.R. CV No. 00757 entitled "Filinvest Finance & Leasing Corporation v. Salas", which modified the decision of the Regional Trial Court of San Fernando, Pampanga in Civil Case No. 5915, a collection suit between the same parties.Records disclose that on February 6, 1980, Juanita Salas (hereinafter referred to as petitioner) bought a motor vehicle from the Violago Motor Sales Corporation (VMS for brevity) for P58,138.20 as evidenced by a promissory note. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation (hereinafter referred to as private respondent) which financed the purchase.Petitioner defaulted in her installments beginning May 21, 1980 allegedly due to a discrepancy in the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and deed of chattel mortgage, which fact she discovered when the vehicle figured in an accident on 9 May 1980.This failure to pay prompted private respondent to initiate Civil Case No. 5915 for a sum of money against petitioner before the Regional Trial Court of San Fernando, Pampanga.In its decision dated September 10, 1982, the trial court held, thus:WHEREFORE, and in view of all the foregoing, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of P28,414.40 with interest thereon at the rate of 14% from October 2, 1980 until the said sum is fully paid; and the further amount of P1,000.00 as attorney's fees.The counterclaim of defendant is dismissed.With costs against defendant.1Both petitioner and private respondent appealed the aforesaid decision to the Court of Appeals.Imputing fraud, bad faith and misrepresentation against VMS for having delivered a different vehicle to petitioner, the latter prayed for a reversal of the trial court's decision so that she may be absolved from the obligation under the contract.On October 27, 1986, the Court of Appeals rendered its assailed decision, the pertinent portion of which is quoted hereunder:The allegations, statements, or admissions contained in a pleading are conclusive as against the pleader. A party cannot subsequently take a position contradictory of, or inconsistent with his pleadings (Cunanan vs. Amparo, 80 Phil. 227). Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings, do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistake (Sec. 2, Rule 129, Revised Rules of Court; Sta. Ana vs. Maliwat, L-23023, Aug. 31, 1968, 24 SCRA 1018).When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denied them, and sets forth what he claims to be the facts (Sec. 8, Rule 8, Revised Rules of Court; Hibbered vs. Rohde and McMillian, 32 Phil. 476).A perusal of the evidence shows that the amount of P58,138.20 stated in the promissory note is the amount assumed by the plaintiff in financing the purchase of defendant's motor vehicle from the Violago Motor Sales Corp., the monthly amortization of winch is Pl,614.95 for 36 months. Considering that the defendant was able to pay twice (as admitted by the plaintiff, defendant's account became delinquent only beginning May, 1980) or in the total sum of P3,229.90, she is therefore liable to pay the remaining balance of P54,908.30 at l4%per annumfrom October 2, 1980 until full payment.WHEREFORE, considering the foregoing, the appealed decision is hereby modified ordering the defendant to pay the plaintiff the sum of P54,908.30 at 14%per annumfrom October 2, 1980 until full payment. The decision is AFFIRMED in all other respects. With costs to defendant.2Petitioner's motion for reconsideration was denied; hence, the present recourse.In the petition before us, petitioner assigns twelve (12) errors which focus on the alleged fraud, bad faith and misrepresentation of Violago Motor Sales Corporation in the conduct of its business and which fraud, bad faith and misrepresentation supposedly released petitioner from any liability to private respondent who should instead proceed against VMS.3Petitioner argues that in the light of the provision of the law on sales by description4which she alleges is applicable here, no contract ever existed between her and VMS and therefore none had been assigned in favor of private respondent.She contends that it is not necessary, as opined by the appellate court, to implead VMS as a party to the case before it can be made to answer for damages because VMS was earlier sued by her for "breach of contract with damages" before the Regional Trial Court of Olongapo City, Branch LXXII, docketed as Civil Case No. 2916-0. She cites as authority the decision therein where the court originally ordered petitioner to pay the remaining balance of the motor vehicle installments in the amount of P31,644.30 representing the difference between the agreed consideration of P49,000.00 as shown in the sales invoice and petitioner's initial downpayment of P17,855.70 allegedly evidenced by a receipt. Said decision was however reversed later on, with the same court ordering defendant VMS instead to return to petitioner the sum of P17,855.70. Parenthetically, said decision is still pending consideration by the First Civil Case Division of the Court of Appeals, upon an appeal by VMS, docketed as AC-G.R. No. 02922.5Private respondent in its comment, prays for the dismissal of the petition and counters that the issues raised and the allegations adduced therein are a mere rehash of those presented and already passed upon in the court below, and that the judgment in the "breach of contract" suit cannot be invoked as an authority as the same is still pending determination in the appellate court.We see no cogent reason to disturb the challenged decision.The pivotal issue in this case is whether the promissory note in question is a negotiable instrument which will bar completely all the available defenses of the petitioner against private respondent.Petitioner's liability on the promissory note, the due execution and genuineness of which she never denied under oath is, under the foregoing factualmilieu, as inevitable as it is clearly established.The records reveal that involved herein is not a simple case of assignment of credit as petitioner would have it appear, where the assignee merely steps into the shoes of, is open to all defenses available against and can enforce payment only to the same extent as, the assignor-vendor.Recently, in the case ofConsolidated Plywood Industries Inc.v.IFC Leasing and Acceptance Corp.,6this Court had the occasion to clearly distinguish between a negotiable and a non-negotiable instrument.Among others, the instrument in order to be considered negotiable must contain the so-called "words of negotiability i.e., must be payable to "order" or "bearer"". Under Section 8 of the Negotiable Instruments Law, there are only two ways by which an instrument may be made payable to order. There must always be a specified person named in the instrument and the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. Without the words "or order or "to the order of", the instrument is payable only to the person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument, but will merely "step into the shoes" of the person designated in the instrument and will thus be open to all defenses available against the latter. Such being the situation in the above-cited case, it was held that therein private respondent is not a holder in due course but a mere assignee against whom all defenses available to the assignor may be raised.7In the case at bar, however, the situation is different. Indubitably, the basis of private respondent's claim against petitioner is a promissory note which bears all the earmarks of negotiability.The pertinent portion of the note reads:PROMISSORY NOTE(MONTHLY)P58,138.20San Fernando, Pampanga, PhilippinesFeb. 11, 1980For value received, I/We jointly and severally, promise to payViolago Motor Sales Corporation or order,at its office inSan Fernando,Pampanga,the sum ofFIFTY EIGHT THOUSAND ONE HUNDRED THIRTY EIGHT & 201/100 ONLY (P58,138.20)Philippine currency, which amount includes interest at 14%per annumbased on the diminishing balance, the said principal sum, to be payable, without need of notice or demand, in installments of the amounts following and at the dates hereinafter set forth, to wit:P1,614.95monthly for "36" months due and payable on the 21st day of each month starting March 21, 1980 thru and inclusive of February 21, 1983. P_________ monthly for ______ months due and payable on the ______ day of each month starting _____198__ thru and inclusive of _____, 198________ provided that interest at 14%per annumshall be added on each unpaid installment from maturity hereof until fully paid.xxx xxx xxxMaker; Co-Maker:(SIGNED) JUANITA SALAS _________________Address:____________________ ____________________WITNESSESSIGNED: ILLEGIBLE SIGNED: ILLEGIBLETAN # TAN #PAY TO THE ORDER OFFILINVEST FINANCE AND LEASING CORPORATIONVIOLAGO MOTOR SALES CORPORATIONBY: (SIGNED) GENEVEVA V. BALTAZARCash Manager8A careful study of the questioned promissory note shows that it is a negotiable instrument, having complied with the requisites under the law as follows: [a] it is in writing and signed by the maker Juanita Salas; [b] it contains an unconditional promise to pay the amount of P58,138.20; [c] it is payable at a fixed or determinable future time which is "P1,614.95 monthly for 36 months due and payable on the 21 st day of each month starting March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is payable to Violago Motor Sales Corporation,or orderand as such, [e] the drawee is named or indicated with certainty.9It was negotiated by indorsement in writing on the instrument itself payable to the Order of Filinvest Finance and Leasing Corporation10and it is an indorsement of the entire instrument.11Under the circumstances, there appears to be no question that Filinvest is a holder in due course, having taken the instrument under the following conditions: [a] it is complete and regular upon its face; [b] it became the holder thereof before it was overdue, and without notice that it had previously been dishonored; [c] it took the same in good faith and for value; and [d] when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation.12Accordingly, respondent corporation holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof.13This being so, petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS.Even assuming for the sake of argument that there is an iota of truth in petitioner's allegation that there was in fact deception made upon her in that the vehicle she purchased was different from that actually delivered to her, this matter cannot be passed upon in the case before us, where the VMS was never impleaded as a party.Whatever issue is raised or claim presented against VMS must be resolved in the "breach of contract" case.Hence, we reach a similar opinion as did respondent court when it held:We can only extend our sympathies to the defendant (herein petitioner) in this unfortunate incident. Indeed, there is nothing We can do as far as the Violago Motor Sales Corporation is concerned since it is not a party in this case. To even discuss the issue as to whether or not the Violago Motor Sales Corporation is liable in the transaction in question would amount, to denial of due process, hence, improper and unconstitutional. She should have impleaded Violago Motor Sales.14IN VIEW OF THE FOREGOING, the assailed decision is hereby AFFIRMED. With costs against petitioner.SO ORDERED.[G.R. No. 154127.December 8, 2003]ROMEO C. GARCIA,petitioner, vs.DIONISIO V. LLAMAS,respondent.D E C I S I O NPANGANIBAN,J.:Novation cannot be presumed.It must be clearly shown either by the express assent of the parties or by the complete incompatibility between the old and the new agreements. Petitioner herein fails to show either requirement convincingly; hence, the summary judgment holding him liable as a joint andsolidarydebtor stands.The CaseBefore us is a Petition for Review[1]under Rule 45 of the Rules of Court, seeking to nullify theNovember 26, 2001Decision[2]and theJune 26, 2002Resolution[3]of the Court of Appeals (CA) in CA-GR CV No. 60521.The appellate court disposed as follows:UPON THE VIEW WE TAKE OF THIS CASE, THUS,the judgment appealed from, insofar as it pertains to [Petitioner] Romeo Garcia, must be, as it hereby is,AFFIRMED, subject to the modification that the award for attorneys fees and cost of suit isDELETED.The portion of the judgment that pertains to xxxEduardo de Jesus isSET ASIDEandVACATED.Accordingly, the case against xxxEduardo de Jesus isREMANDEDto the court of origin for purposes of receivingexparte[Respondent]DionisioLlamas evidence against xxxEduardo de Jesus.[4]The challenged Resolution, on the other hand, denied petitioners Motion for Reconsideration.The AntecedentsThe antecedents of the case are narrated by the CA as follows:This case started out as a complaint for sum of money and damages byxxx[Respondent]DionisioLlamas against xxx[Petitioner] Romeo Garcia and Eduardo de Jesus.Docketed as Civil Case No. Q97-32-873, the complaint alleged that on 23 December 1996[,] [petitioner and de Jesus] borrowedP400,000.00 from [respondent]; that, on the same day, [they] executed a promissory note whereinthey bound themselves jointly and severally to pay the loan on or before 23 January 1997 with a 5% interest per month; that the loan has long been overdue and, despite repeated demands, [petitioner and de Jesus] have failed and refused to pay it; and that, by reason of the[ir] unjustified refusal, [respondent] was compelled to engage the services of counsel to whom he agreed to pay 25% of the sum to be recovered from [petitioner and de Jesus], plusP2,000.00 for every appearance in court.Annexed to the complaint were the promissory note above-mentioned and a demand letter, dated02 May 1997, by [respondent] addressed to [petitioner and de Jesus].Resisting the complaint, [Petitioner Garcia,] in his [Answer,] averred that he assumed no liability under the promissory note because he signed it merely as an accommodation party for xxxde Jesus; and, alternatively, that he is relieved from any liability arising from the note inasmuch as the loan had been paid by xxxde Jesus by means of a check dated 17 April 1997; and that, in any event, the issuance of the check and [respondents] acceptance thereofnovatedor superseded the note.[Respondent] tendered a reply to [Petitioner] Garcias answer, thereunder asserting that the loan remained unpaid for the reason that the check issued by xxxde Jesus bounced, and that [Petitioner] Garcias answer was not even accompanied by a certificate of non-forum shopping.Annexed to the reply were the face of the check and the reverse side thereof.For his part, xxxde Jesus asserted in his [A]nswerwith [C]ounterclaimthat out of the supposedP400,000.00 loan, he received onlyP360,000.00, theP40,000.00 having been advance interest thereon for two months, that is, for January and February 1997; that[,] in fact[,] he paid the sum ofP120,000.00 by way of interests; that this was made when [respondents] daughter, one Nits Llamas-Quijencio, received from the Central Police District Command atBicutan,Taguig, Metro Manila (where xxxde Jesus worked), the sum ofP40,000.00, representing the peso equivalent of his accumulated leave credits, anotherP40,000.00 as advance interest, and still anotherP40,000.00 as interest for the months of March and April 1997; that he had difficulty in paying the loan and had asked [respondent] for an extension of time; that [respondent] acted in bad faith in instituting the case, [respondent] having agreed to accept the benefits he (de Jesus) would receive for his retirement, but [respondent] nonetheless filed the instant case while his retirement was being processed; and that, in defense of his rights, he agreed to pay his counselP20,000.00 [as] attorneys fees, plusP1,000.00 for every court appearance.During the pre-trial conference, xxxde Jesus and his lawyer did not appear, nor did they file any pre-trial brief.Neither did [Petitioner] Garcia file a pre-trial brief, and his counsel even manifested that he would no [longer] present evidence. Given this development, the trial court gave [respondent] permission to present his evidenceexparteagainst xxxde Jesus; and, as regards [Petitioner] Garcia, the trial court directed [respondent] to file a motion for judgment on the pleadings, and for [Petitioner] Garcia to file his comment or opposition thereto.Instead, [respondent] filed a [M]otionto declare [Petitioner] Garcia in default and to allow him to present his evidenceexparte.Meanwhile, [Petitioner] Garcia filed a [M]anifestationsubmitting his defense to a judgment on the pleadings. Subsequently, [respondent] filed a [M]anifestation/[M]otionto submit the case for judgement on the pleadings, withdrawing in the process his previous motion.Thereunder, he asserted that [petitioners and de Jesus]solidaryliability under the promissory note cannot be any clearer, and that the check issued by de Jesus did not discharge the loan since the check bounced.[5]OnJuly 7, 1998, the Regional Trial Court (RTC) ofQuezonCity(Branch 222) disposed of the case as follows:WHEREFORE, premises considered, judgment on the pleadings is hereby rendered in favor of [respondent] and against [petitioner and De Jesus], who are hereby ordered to pay, jointly and severally, the [respondent] the following sums, to wit:1)P400,000.00 representing the principal amount plus 5% interest thereon per month from January 23, 1997 until the same shall have been fully paid, less the amount ofP120,000.00 representing interests already paid by xxxde Jesus;2)P100,000.00 as attorneys fees plus appearance fee ofP2,000.00 for each day of [c]ourtappearance, and;3)Cost of this suit.[6]Ruling of the Court of AppealsThe CA ruled that the trial court had erred when it rendered a judgment on the pleadings against De Jesus. According to the appellate court, his Answer raised genuinely contentious issues. Moreover, he was still required to present his evidenceexparte.Thus, respondent was notipso factoentitled to the RTC judgment, even though De Jesus had been declared in default.The case againstthe latter was therefore remanded by the CA to the trial court for theexpartereception oftheformersevidence.As to petitioner, the CA treated his case as a summary judgment, because his Answer had failed to raise even a single genuine issue regarding any material fact.The appellate court ruled that nonovation-- express or implied -- had taken place when respondent accepted the check from De Jesus.According to the CA, the check was issued precisely to pay for the loan that was covered by the promissory note jointly and severally undertaken by petitioner and De Jesus. Respondents acceptance of the check did not serve to make De Jesus the sole debtor because,first, the obligation incurred by him and petitioner was joint and several; and,second, the check -- which had been intended to extinguish the obligation -- bounced upon its presentment.Hence, this Petition.[7]IssuesPetitioner submits the following issues for our consideration:IWhether or not the Honorable Court of Appeals gravely erred in not holding thatnovationapplies in the instant case as xxxEduardo de Jesus had expressly assumed sole and exclusive liability for the loan obligation he obtained from xxxRespondentDionisioLlamas, as clearly evidenced by:a)Issuance by xxxde Jesus of a check in payment of the full amount of the loan ofP400,000.00 in favor of Respondent Llamas, although the check subsequently bounced[;]b)Acceptance of the check by the xxxrespondent xxxwhich resulted in [the] substitution byxxxde Jesus or [the superseding of] the promissory note;c)xxxde Jesus having paid interests on the loan in the total amount ofP120,000.00;d)The fact that Respondent Llamas agreed to the proposal ofxxxde Jesus that due to financial difficulties, he be given an extension of time to pay his loan obligation and that his retirement benefits from the Philippine National Police will answer for said obligation.IIWhether or not the Honorable Court of Appeals seriously erred in not holding that the defense of petitioner that he was merely an accommodation party, despite the fact that the promissory note provided for a joint andsolidaryliability, should have been given weight and credence considering that subsequent events showed that the principal obligor was in truth and in fact xxxde Jesus, as evidenced by the foregoing circumstances showing his assumption of sole liability over the loan obligation.IIIWhether or not judgment on the pleadings or summary judgment was properly availed of by Respondent Llamas, despite the fact that there are genuine issues of fact, which the Honorable Court of Appeals itself admitted in its Decision, which call for the presentation of evidence in a full-blown trial.[8]Simply put, the issues are the following: 1) whether there wasnovationof the obligation; 2) whether the defense that petitioner was only an accommodation party had any basis; and 3) whether the judgment against him -- be it a judgment on the pleadings or a summary judgment -- was proper.The Courts RulingThe Petition has no merit.First Issue:NovationPetitioner seeks to extricate himself from his obligation as joint andsolidarydebtor by insisting thatnovationtook place, either through the substitution of De Jesus as sole debtor or the replacement of the promissory note by the check. Alternatively, the former argues that the original obligation was extinguished when the latter, who was his co-obligor, paid the loan with the check.The fallacy of the second (alternative) argument is all too apparent. The check could not have extinguished the obligation, because it bounced upon presentment. By law,[9]the delivery of a check produces the effect of payment only when it isencashed.We now come to the main issue of whethernovationtook place.Novation is a mode of extinguishing an obligation by changing its objects or principal obligations, by substituting a new debtor in place of the old one, or by subrogating a third person to the rights of the creditor.[10]Article 1293 of the Civil Code definesnovationas follows:Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor.Payment by the new debtor gives him rights mentioned in articles 1236 and 1237.In general, there are two modes of substituting the person of the debtor: (1)expromisionand (2)delegacion.Inexpromision, the initiative for the change does not come from -- and may even be made without the knowledge of -- the debtor, since it consists of a third persons assumption of the obligation.As such, it logically requires the consent of the third person and the creditor.Indelegacion, the debtor offers, and the creditor accepts, a third person who consents to the substitution and assumes the obligation; thus, the consent of these three persons are necessary.[11]Both modes of substitution by the debtor require the consent of the creditor.[12]Novation may also be extinctive ormodificatory. It is extinctive when an old obligation is terminated by the creation of a new one that takes the place of the former.It is merelymodificatorywhen the old obligation subsists to the extent that it remains compatible with the amendatory agreement.[13]Whether extinctive ormodificatory,novationis made either by changing the object or the principal conditions, referred to as objective or realnovation; or by substituting the person of the debtor or subrogating a third person to the rights of the creditor, an act known as subjective or personalnovation.[14]Fornovationto take place, the following requisites must concur:1)There must be a previous valid obligation.2)The parties concerned must agree to a new contract.3)The old contract must be extinguished.4)There must be a valid new contract.[15]Novation may also be express or implied. It is express when the new obligation declares in unequivocal terms that the old obligation is extinguished.It is implied when the new obligation is incompatible with the old one on every point.[16]The test of incompatibility is whether the two obligations can stand together, each one with its own independent existence.[17]Applying the foregoing to the instant case, we hold that nonovationtook place.The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the acceptance of the check, or that the check would take the place of the note.There is no incompatibility between the promissory note and the check. As the CA correctly observed, the check had been issued precisely to answer for the obligation.On the one hand, the note evidences the loan obligation; and on the other, the check answers for it.Verily, the two can stand together.Neither could the payment of interests -- which, in petitioners view, also constitutesnovation[18]-- change the terms and conditions of the obligation.Such payment was already provided for in the promissory note and, like the check, was totally in accord with the terms thereof.Also unmeritorious is petitioners argument that the obligation wasnovatedby the substitution of debtors.In order to change the person of the debtor, the old one must be expressly released from the obligation, and the third person or new debtor must assume theformersplace in the relation.[19]Well-settled is the rule thatnovationis never presumed.[20]Consequently, that which arises from a purported change in the person of the debtor must be clear and express.[21]It is thus incumbent on petitioner to show clearly and unequivocally thatnovationhas indeed taken place.In the present case, petitioner has not shown that he was expressly released from the obligation, that a third person was substituted in his place, or that the joint andsolidaryobligation was cancelled and substituted by the solitary undertaking of De Jesus.The CA aptly held:xxx. Plaintiffs acceptance of the bum check did not result in substitution by de Jesus either, the nature of the obligation beingsolidarydue to the fact that the promissory note expressly declared that the liability of appellants thereunder is joint and [solidary.]Reason: under the law, a creditor may demand payment or performance from one of thesolidarydebtors or some or all of them simultaneously, and payment made by one of them extinguishes the obligation.It therefore follows that in case the creditor fails to collect from one of thesolidarydebtors, he may still proceed against the other or others.xxx[22]Moreover, it must be noted that fornovationto be valid and legal, the law requires that the creditor expressly consent to the substitution of a new debtor.[23]Sincenovationimplies a waiver of the right the creditor had before thenovation, such waiver must be express.[24]It cannot be supposed, without clear proof, that the present respondent has done away with his right to exact fulfillment from either of thesolidarydebtors.[25]More important, De Jesus was not a third person to the obligation.From the beginning, he was a joint andsolidaryobligor of theP400,000 loan; thus, he can be released from it only upon its extinguishment.Respondents acceptance of his check did not change the person of the debtor, because a joint andsolidaryobligor is required to pay the entirety of the obligation.It must be noted that in asolidaryobligation, the creditor is entitled to demand the satisfaction of the wh