Requisites of Negotiability Full Text

7/24/2019 Requisites of Negotiability Full Text

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Requisites of Negotiability:

#1

Republic of the Philippines

SUPREME COURT

Manila

SECOND DIISION

G.R. No. 97753 August 10, 1992

CALTEX (PHLPPNES!, NC.,petitione!"

s$

COURT O" APPEALS #$% SECURT& 'AN AN)

TRUST COMPAN&, !espon%ents$

REGALA)O,J.:

&his petition fo! !eie' on certiorarii(pugns an% see)s

the !ee!sal of the %ecision p!o(ulgate% by !espon%ent

cou!t on Ma!ch *" 1++1 in C,-.$R$ C No$

/012 1affi!(ing 'ith (o%ifications" the ea!lie!

%ecision of the Regional &!ial Cou!t of Manila" 3!anch

45II" 2'hich %is(isse% the co(plaint file% the!ein by

he!ein petitione! against !espon%ent ban)$

&he un%ispute% bac)g!oun% of this case" as foun% by thecou!t a quo an% a%opte% by !espon%ent cou!t" appea!s of

!eco!%:

1$ On a!ious %ates" %efen%ant" a

co((e!cial ban)ing institution" th!ough

its Sucat 3!anch issue% /*6 ce!tificates

of ti(e %eposit 7C&Ds8 in fao! of one

,ngel %ela C!u9 'ho %eposite% 'ith

he!ein %efen%ant the agg!egate a(ount

of P1"1/6"666$66" as follo's: 7oint

Pa!tial Stipulation of ;acts an%

State(ent of Issues" O!iginal Reco!%s" p$

/6s E?hibits 1 to /*68=

CTDCTD

DatesSerial Nos.QuantityAmount

// ;eb$ */ +6161 to +61/6 /6 P*6"666

/ ;eb$ */ s E?hibits /*/-

218$

1


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NEGO

2$ On Ma!ch /2" 1+*/" ,ngel %ela C!u9

negotiate% an% obtaine% a loan f!o(

%efen%ant ban) in the a(ount of Eight

un%!e% Seenty ;ie &housan% Pesos

7P*s %e(an% an% clai(

fo! pay(ent of the alue of the C&Ds in

a lette! %ate% ;eb!ua!y


3/83

NEGO

, sa(ple te?t of the ce!tificates of ti(e %eposit is

!ep!o%uce% belo' to p!oi%e a bette! un%e!stan%ing of

the issues inole% in this !ecou!se$

SECGRI&H 3,N

,ND &RGS& COMP,NH


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NEGO

fo!th aboe$ It is note% that M!$ &i(oteo P$ &iangco"

Secu!ity 3an)>s 3!anch Manage! 'ay bac) in 1+*/"

testifie% in open cou!t that the %eposito! !effe!e% to in the

C&Ds is no othe! than M!$ ,ngel %e la C!u9$

??? ??? ???

,tty$ Cali%a:

q In othe! 'o!%s M!$

itness" you a!e saying

that pe! boo)s of the

ban)" the %eposito!

!efe!!e% 7sic8 in these

ce!tificates states that it

'as ,ngel %ela C!u9

'itness:

a Hes" you! ono!" an%

'e hae the !eco!% to

sho' that ,ngel %ela

C!u9 'as the one 'ho

cause 7sic8 the a(ount$

,tty$ Cali%a:

q ,n% no othe! pe!son

o! entity o! co(pany"

M!$ itness

'itness:

a None" you! ono!$ 7

??? ??? ???

,tty$ Cali%a:

q M!$ itness" 'ho is

the %eposito! i%entifie%

in all of these

ce!tificates of ti(e

%eposit insofa! as the

ban) is conce!ne%

'itness:

a ,ngel %ela C!u9 is the

%eposito!$

??? ??? ???

On this sco!e" the accepte% !ule is that the negotiability

o! non-negotiability of an inst!u(ent is %ete!(ine% f!o(

the '!iting" that is" f!o( the face of the inst!u(ent

itself$9In the const!uction of a bill o! note" the intention

of the pa!ties is to cont!ol" if it can be legally

asce!taine%$ 10hile the '!iting (ay be !ea% in the light

of su!!oun%ing ci!cu(stances in o!%e! to (o!e pe!fectly

un%e!stan% the intent an% (eaning of the pa!ties" yet as

they hae constitute% the '!iting to be the only out'a!%

an% isible e?p!ession of thei! (eaning" no othe! 'o!%s

a!e to be a%%e% to it o! substitute% in its stea%$ &he %uty

of the cou!t in such case is to asce!tain" not 'hat the

pa!ties (ay hae sec!etly inten%e% as

cont!a%istinguishe% f!o( 'hat thei! 'o!%s e?p!ess" but

'hat is the (eaning of the 'o!%s they hae use%$ hat

the pa!ties (eant (ust be %ete!(ine% by 'hat they

sai%$ 11

Cont!a!y to 'hat !espon%ent cou!t hel%" the C&Ds a!e

negotiable inst!u(ents$ &he %ocu(ents p!oi%e that the

a(ounts %eposite% shall be !epayable to the %eposito!$

,n% 'ho" acco!%ing to the %ocu(ent" is the %eposito! It

is the bea!e!$ &he %ocu(ents %o not say that the

%eposito! is ,ngel %e la C!u9 an% that the a(ounts

%eposite% a!e !epayable specifically to hi($ Rathe!" the

a(ounts a!e to be !epayable to the bea!e! of the%ocu(ents o!" fo! that (atte!" 'hosoee! (ay be the

bea!e! at the ti(e of p!esent(ent$

If it 'as !eally the intention of !espon%ent ban) to pay

the a(ount to ,ngel %e la C!u9 only" it coul% hae 'ith

facility so e?p!esse% that fact in clea! an% catego!ical

te!(s in the %ocu(ents" instea% of haing the 'o!%

3E,RER sta(pe% on the space p!oi%e% fo! the na(e

of the %eposito! in each C&D$ On the 'o!%ings of the

%ocu(ents" the!efo!e" the a(ounts %eposite% a!e

!epayable to 'hoee! (ay be the bea!e! the!eof$ &hus"

petitione!>s afo!esai% 'itness (e!ely %ecla!e% that ,ngel

%e la C!u9 is the %eposito! insofa! as the ban) is

conce!ne%" but obiously othe! pa!ties not p!iy to the

4


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NEGO

t!ansaction bet'een the( 'oul% not be in a position to

)no' that the %eposito! is not the bea!e! state% in the

C&Ds$ ence" the situation 'oul% !equi!e any pa!ty

%ealing 'ith the C&Ds to go behin% the plain i(po!t of

'hat is '!itten the!eon to un!ael the ag!ee(ent of the

pa!ties the!eto th!ough facts aliunde.&his nee% fo! !eso!tto e?t!insic ei%ence is 'hat is sought to be aoi%e% by

the Negotiable Inst!u(ents 5a' an% calls fo! the

application of the ele(enta!y !ule that the inte!p!etation

of obscu!e 'o!%s o! stipulations in a cont!act shall not

fao! the pa!ty 'ho cause% the obscu!ity$ 12

&he ne?t que!y is 'hethe! petitione! can !ightfully

!ecoe! on the C&Ds$ &his ti(e" the ans'e! is in the

negatie$ &he !eco!%s !eeal that ,ngel %e la C!u9"

'ho( petitione! chose not to i(plea% in this suit fo!

!easons of its o'n" %elie!e% the C&Ds a(ounting to

P1"1/6"666$66 to petitione! 'ithout info!(ing

!espon%ent ban) the!eof at any ti(e$ Gnfo!tunately fo!

petitione!" although the C&Ds a!e bea!e! inst!u(ents" a

ali% negotiation the!eof fo! the t!ue pu!pose an%

ag!ee(ent bet'een it an% De la C!u9" as ulti(ately

asce!taine%" !equi!es both %elie!y an% in%o!se(ent$ ;o!"

although petitione! see)s to %eflect this fact" the C&Ds

'e!e in !eality %elie!e% to it as a secu!ity fo! De la

C!u9> pu!chases of its fuel p!o%ucts$ ,ny %oubt as to

'hethe! the C&Ds 'e!e %elie!e% as pay(ent fo! the

fuel p!o%ucts o! as a secu!ity has been %issipate% an%

!esole% in fao! of the latte! by petitione!>s o'n

autho!i9e% an% !esponsible !ep!esentatie hi(self$

In a lette! %ate% Noe(be! /" 1+*/ a%%!esse% to

!espon%ent Secu!ity 3an)" $$ ,!anas" !$" Calte? C!e%it

Manage!" '!ote: $ $ $ &hese ce!tificates of %eposit 'e!e

negotiate% to us by M!$ ,ngel %ela C!u9 to guarantee his

purchases of fuel products 7E(phasis ou!s$8 13&his

a%(ission is conclusie upon petitione!" its p!otestations

not'ithstan%ing$ Gn%e! the %oct!ine of estoppel" an

a%(ission o! !ep!esentation is !en%e!e% conclusie upon

the pe!son (a)ing it" an% cannot be %enie% o! %isp!oe%

as against the pe!son !elying the!eon$ 1*, pa!ty (ay not

go bac) on his o'n acts an% !ep!esentations to the

p!eu%ice of the othe! pa!ty 'ho !elie% upon the($ 15In

the la' of ei%ence" 'henee! a pa!ty has" by his o'n

%ecla!ation" act" o! o(ission" intentionally an%

%elibe!ately le% anothe! to beliee a pa!ticula! thing t!ue"

an% to act upon such belief" he cannot" in any litigation

a!ising out of such %ecla!ation" act" o! o(ission" be

pe!(itte% to falsify it$ 1+

If it 'e!e t!ue that the C&Ds 'e!e %elie!e% as pay(ent

an% not as secu!ity" petitione!>s c!e%it (anage! coul%

hae easily sai% so" instea% of using the 'o!%s to

gua!antee in the lette! afo!equote%$ 3esi%es" 'hen

!espon%ent ban)" as %efen%ant in the cou!t belo'" (oe%

fo! a bill of pa!ticula!ity the!ein 17p!aying" a(ong

othe!s" that petitione!" as plaintiff" be !equi!e% to ae!

'ith sufficient %efiniteness o! pa!ticula!ity 7a8 the %ue

%ate o! %ates ofpayment of the allege% in%ebte%ness of

,ngel %e la C!u9 to plaintiff an% 7b8 'hethe! o! not it

issue% a !eceipt sho'ing that the C&Ds 'e!e %elie!e% to

it by De la C!u9 aspayment of the latte!>s allege%

in%ebte%ness to it" plaintiff co!po!ation oppose% the

(otion$ 1a% it p!o%uce% the !eceipt p!aye% fo!" it coul%

hae p!oe%" if such t!uly 'as the fact" that the C&Ds

'e!e %elie!e% as pay(ent an% not as secu!ity$ aing

oppose% the (otion" petitione! no' labo!s un%e! the

p!esu(ption that ei%ence 'illfully supp!esse% 'oul% be

a%e!se if p!o%uce%$ 19

Gn%e! the fo!egoing ci!cu(stances" this %isquisition

inIntergrated ealty Corporation! et al. vs. "hilippine

National #an$! et al$20is ap!opos:

$ $ $ ,%e!ting again to the Cou!t>s

p!onounce(ents in%opez! supra" 'equote the!ef!o(:

&he cha!acte! of the

t!ansaction bet'een the

pa!ties is to be

%ete!(ine% by thei!

intention" !ega!%less of

'hat language 'as use%

o! 'hat the fo!( of the

t!ansfe! 'as$ If it 'as

inten%e% to secu!e the

pay(ent of (oney" it

(ust be const!ue% as a

ple%ge= but if the!e 'as

5


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NEGO

so(e othe! intention" it

is not a ple%ge$

o'ee!" een though a

t!ansfe!" if !ega!%e% by

itself" appea!s to hae

been absolute" its obectan% cha!acte! (ight still

be qualifie% an%

e?plaine% by

conte(po!aneous

'!iting %ecla!ing it to

hae been a %eposit of

the p!ope!ty as

collate!al secu!ity$ It hasbeen sai% that a t!ansfe!

of p!ope!ty by the

%ebto! to a c!e%ito!"

een if sufficient on its

face to (a)e an

absolute coneyance"

shoul% be t!eate% as a

ple%ge if the %ebtcontinues in ine?istence

an% is not %ischa!ge% by

the t!ansfe!" an% that

acco!%ingly the use of

the te!(s o!%ina!ily

i(po!ting coneyance

of absolute o'ne!ship

'ill not be gien that

effect in such a

t!ansaction if they a!e

also co((only use% in

ple%ges an% (o!tgages

an% the!efo!e %o not

unqualifie%ly in%icate a

t!ansfe! of absolute

o'ne!ship" in the

absence of clea! an%

una(biguous language

o! othe! ci!cu(stances

e?clu%ing an intent to

ple%ge$

Petitione!>s insistence that the C&Ds 'e!e negotiate% to

it begs the question$ Gn%e! the Negotiable Inst!u(ents

5a'" an inst!u(ent is negotiate% 'hen it is t!ansfe!!e%

f!o( one pe!son to anothe! in such a (anne! as to

constitute the t!ansfe!ee the hol%e! the!eof" 21an% a

hol%e! (ay be the payee o! in%o!see of a bill o! note"'ho is in possession of it" o! the bea!e! the!eof$ 22In the

p!esent case" ho'ee!" the!e 'as no negotiation in the

sense of a t!ansfe! of the legal title to the C&Ds in fao!

of petitione! in 'hich situation" fo! obious !easons"

(e!e %elie!y of the bea!e! C&Ds 'oul% hae suffice%$

e!e" the %elie!y the!eof only as secu!ity fo! the

pu!chases of ,ngel %e la C!u9 7an% 'e een %is!ega!%

the fact that the a(ount inole% 'as not %isclose%8coul% at the (ost constitute petitione! only as a hol%e!

fo! alue by !eason of his lien$ ,cco!%ingly" a

negotiation fo! such pu!pose cannot be effecte% by (e!e

%elie!y of the inst!u(ent since" necessa!ily" the te!(s

the!eof an% the subsequent %isposition of such secu!ity"

in the eent of non-pay(ent of the p!incipal obligation"

(ust be cont!actually p!oi%e% fo!$

&he pe!tinent la' on this point is that 'he!e the hol%e!

has a lien on the inst!u(ent a!ising f!o( cont!act" he is

%ee(e% a hol%e! fo! alue to the e?tent of his lien$ 23,s

such hol%e! of collate!al secu!ity" he 'oul% be a ple%gee

but the !equi!e(ents the!efo! an% the effects the!eof" not

being p!oi%e% fo! by the Negotiable Inst!u(ents 5a'"

shall be goe!ne% by the Ciil Co%e p!oisions on

ple%ge of inco!po!eal !ights" 2*'hich inceptiely

p!oi%e:

,!t$ /6+2$ Inco!po!eal !ights" ei%ence%

by negotiable inst!u(ents" $ $ $ (ay also

be ple%ge%$ &he inst!u(ent p!oing the

!ight ple%ge% shall be %elie!e% to the

c!e%ito!" an% if negotiable" (ust be

in%o!se%$

,!t$ /6+$ , ple%ge shall not ta)e effect

against thi!% pe!sons if a %esc!iption of

the thing ple%ge% an% the %ate of the

ple%ge %o not appea! in a public

inst!u(ent$

6


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NEGO

,si%e f!o( the fact that the C&Ds 'e!e only %elie!e%

but not in%o!se%" the factual fin%ings of !espon%ent cou!t

quote% at the sta!t of this opinion sho' that petitione!

faile% to p!o%uce any %ocu(ent ei%encing any cont!act

of ple%ge o! gua!antee ag!ee(ent bet'een it an% ,ngel

%e la C!u9$25

Consequently" the (e!e %elie!y of theC&Ds %i% not legally est in petitione! any !ight

effectie against an% bin%ing upon !espon%ent ban)$ &he

!equi!e(ent un%e! ,!ticle /6+ afo!e(entione% is not a

(e!e !ule of a%ectie la' p!esc!ibing the (o%e 'he!eby

p!oof (ay be (a%e of the %ate of a ple%ge cont!act" but a

!ule of substantie la' p!esc!ibing a con%ition 'ithout

'hich the e?ecution of a ple%ge cont!act cannot affect

thi!% pe!sons a%e!sely$2+

On the othe! han%" the assign(ent of the C&Ds (a%e by

,ngel %e la C!u9 in fao! of !espon%ent ban) 'as

e(bo%ie% in a public inst!u(ent$ 27ith !ega!% to this

othe! (o%e of t!ansfe!" the Ciil Co%e specifically

%ecla!es:

,!t$ 1/2$ ,n assign(ent of c!e%it" !ight

o! action shall p!o%uce no effect as

against thi!% pe!sons" unless it appea!s

in a public inst!u(ent" o! the inst!u(ent

is !eco!%e% in the Regist!y of P!ope!ty in

case the assign(ent inoles !eal

p!ope!ty$

Respon%ent ban) %uly co(plie% 'ith this statuto!y

!equi!e(ent$ Cont!a!ily" petitione!" 'hethe! as pu!chase!"assignee o! lien hol%e! of the C&Ds" neithe! p!oe% the

a(ount of its c!e%it o! the e?tent of its lien no! the

e?ecution of any public inst!u(ent 'hich coul% affect o!

bin% p!iate !espon%ent$ Necessa!ily" the!efo!e" as

bet'een petitione! an% !espon%ent ban)" the latte! has

%efinitely the bette! !ight oe! the C&Ds in question$

;inally" petitione! faults !espon%ent cou!t fo! !efusing to

%ele into the question of 'hethe! o! not p!iate

!espon%ent obse!e% the !equi!e(ents of the la' in the

case of lost negotiable inst!u(ents an% the issuance of

!eplace(ent ce!tificates the!efo!" on the g!oun% that

petitione! faile% to !aise% that issue in the lo'e! cou!t$ 2

On this (atte!" 'e uphol% !espon%ent cou!t>s fin%ing that

the aspect of allege% negligence of p!iate !espon%ent

'as not inclu%e% in the stipulation of the pa!ties an% in

the state(ent of issues sub(itte% by the( to the t!ial

cou!t$ 29&he issues ag!ee% upon by the( fo! !esolution in

this case a!e:

1$ hethe! o! not the C&Ds as 'o!%e%

a!e negotiable inst!u(ents$

/$ hethe! o! not %efen%ant coul%

legally apply the a(ount coe!e% by the

C&Ds against the %eposito!>s loan by

i!tue of the assign(ent 7,nne? C8$

0$ hethe! o! not the!e 'as legal

co(pensation o! set off inoling the

a(ount coe!e% by the C&Ds an% the

%eposito!>s outstan%ing account 'ith

%efen%ant" if any$

@$ hethe! o! not plaintiff coul% co(pel

%efen%ant to p!ete!(inate the C&Dsbefo!e the (atu!ity %ate p!oi%e%

the!ein$

2$ hethe! o! not plaintiff is entitle% to

the p!ocee%s of the C&Ds$

$ hethe! o! not the pa!ties can !ecoe!

%a(ages" atto!ney>s fees an% litigation

e?penses f!o( each othe!$

,s !espon%ent cou!t co!!ectly obse!e%" 'ith app!op!iate

citation of so(e %oct!inal autho!ities" the fo!egoing

enu(e!ation %oes not inclu%e the issue of negligence on

the pa!t of !espon%ent ban)$ ,n issue !aise% fo! the fi!st

ti(e on appeal an% not !aise% ti(ely in the p!ocee%ings

in the lo'e! cou!t is ba!!e% by estoppel$ 30uestions

!aise% on appeal (ust be 'ithin the issues f!a(e% by thepa!ties an%" consequently" issues not !aise% in the t!ial

cou!t cannot be !aise% fo! the fi!st ti(e on appeal$ 31

P!e-t!ial is p!i(a!ily inten%e% to (a)e ce!tain that all

issues necessa!y to the %isposition of a case a!e p!ope!ly

!aise%$ &hus" to obiate the ele(ent of su!p!ise" pa!ties

7


8/83

NEGO

a!e e?pecte% to %isclose at a p!e-t!ial confe!ence all

issues of la' an% fact 'hich they inten% to !aise at the

t!ial" e?cept such as (ay inole p!iilege% o!

i(peaching (atte!s$ &he %ete!(ination of issues at a

p!e-t!ial confe!ence ba!s the consi%e!ation of othe!

questions on appeal$32

&o accept petitione!>s suggestion that !espon%ent ban)>s

suppose% negligence (ay be consi%e!e% enco(passe% by

the issues on its !ight to p!ete!(inate an% !eceie the

p!ocee%s of the C&Ds 'oul% be tanta(ount to saying

that petitione! coul% !aise on appeal any issue$ e ag!ee

'ith p!iate !espon%ent that the b!oa% ulti(ate issue of

petitione!>s entitle(ent to the p!ocee%s of the questione%

ce!tificates can be p!e(ise% on a (ultitu%e of othe! legal

!easons an% causes of action" of 'hich !espon%ent ban)>s

suppose% negligence is only one$ ence" petitione!>s

sub(ission" if accepte%" 'oul% !en%e! a p!e-t!ial

%eli(itation of issues a useless e?e!cise$ 33

Still" een assu(ing arguendothat sai% issue of

negligence 'as !aise% in the cou!t belo'" petitione! still

cannot hae the o%%s in its fao!$ , close sc!utiny of the

p!oisions of the Co%e of Co((e!ce laying %o'n the

!ules to be follo'e% in case of lost inst!u(ents payable

to bea!e!" 'hich it ino)es" 'ill !eeal that sai%

p!oisions" een assu(ing thei! applicability to the

C&Ds in the case at ba!" a!e (e!ely pe!(issie an% not

(an%ato!y$ &he e!y fi!st a!ticle cite% by petitione!

spea)s fo! itself$

,!t 2@*$ &he dispossessed o&ner" no

(atte! fo! 'hat cause it (ay

be" mayapply to the u%ge o! cou!t of

co(petent u!is%iction" as)ing that the

p!incipal" inte!est o! %ii%en%s %ue o!

about to beco(e %ue" be not pai% a thi!%

pe!son" as 'ell as in o!%e! to p!eent the

o'ne!ship of the inst!u(ent that a%uplicate be issue% hi($ 7E(phasis

ou!s$8

??? ??? ???

&he use of the 'o!% (ay in sai% p!oision sho's that

it is not (an%ato!y but %isc!etiona!y on the pa!t of the

%ispossesse% o'ne! to apply to the u%ge o! cou!t of

co(petent u!is%iction fo! the issuance of a %uplicate of

the lost inst!u(ent$ he!e the p!oision !ea%s (ay"

this 'o!% sho's that it is not (an%ato!y but%isc!etional$ 3*&he 'o!% (ay is usually pe!(issie"

not (an%ato!y$ 35It is an au?ilia!y e!b in%icating libe!ty"

oppo!tunity" pe!(ission an% possibility$ 3+

Mo!eoe!" as co!!ectly analy9e% by p!iate

!espon%ent" 37,!ticles 2@* to 22* of the Co%e of

Co((e!ce" on 'hich petitione! see)s to ancho!

!espon%ent ban)>s suppose% negligence" (e!ely

establishe%" on the one han%" a !ight of !ecou!se in fao!

of a %ispossesse% o'ne! o! hol%e! of a bea!e! inst!u(ent

so that he (ay obtain a %uplicate of the sa(e" an%" on

the othe!" an option in fao! of the pa!ty liable the!eon

'ho" fo! so(e ali% g!oun%" (ay elect to !efuse to issue

a !eplace(ent of the inst!u(ent$ Significantly" none of

the p!oisions cite% by petitione! catego!ically !est!icts

o! p!ohibits the issuance a %uplicate o! !eplace(ent

inst!u(entsans co(pliance 'ith the p!oce%u!e outline%

the!ein" an% none establishes a (an%ato!y p!ece%ent

!equi!e(ent the!efo!$

ERE;ORE" on the (o%ifie% p!e(ises aboe set

fo!th" the petition is DENIEDan% the appeale% %ecision

is he!eby ,;;IRMED$

SO ORDERED$

8


9/83

NEGO

#/


SUPREME COURT

Manila

SECOND DIISION

G.R. No. 72593 A-/ 30, 197

CONSOL)ATE) PL&OO) N)USTRES, NC.,

HENR& EE, #$% RO)OL"O T.

ERGARA,petitione!s"

s$

"C LEASNG AN) ACCEPTANCE

CORPORATON, !espon%ent$

GUTERRE, 4R.,J.:

&his is a petition fo! ce!tio!a!i un%e! Rule @2 of the

Rules of Cou!t 'hich assails on questions of la' a

%ecision of the Inte!(e%iate ,ppellate Cou!t in ,C-.$R$

C No$ *6+ %ate% uly 1


10/83

NEGO

co!po!ation th!ough petitione!s ee an% e!ga!a"

p!esi%ent an% ice- p!esi%ent" !espectiely" ag!ee% to

pu!chase on install(ent sai% t'o 7/8 units of Gse%

,llis C!a'le! &!acto!s$ It also pai% the %o'n pay(ent of

&'o un%!e% &en &housan% Pesos 7P/16"666$668$

On ,p!il 2" 1+


11/83

NEGO

1$ o!%e!ing %efen%ants to pay ointly an%

see!ally in thei! official an% pe!sonal

capacities the p!incipal su( of ONE

MI55ION NINE&H &REE

&OGS,ND SEEN GNDRED

NINE&H EI.& PESOS K


12/83

NEGO

!eceiable %iscounting e?ten%ing c!e%it

facilities to consu(e!s an% in%ust!ial"

co((e!cial o! ag!icultu!al ente!p!ises

by %iscounting o! facto!ing co((e!cial

pape!s o! accounts !eceiable %uly

autho!i9e% pu!suant to R$,$ 2+*6othe!'ise )no'n as the ;inancing ,ct$

, stu%y of the questione% p!o(isso!y

note !eeals that it is a negotiable

inst!u(ent 'hich 'as %iscounte% o! sol%

to the I;C 5easing an% ,cceptance

Co!po!ation fo! P*66"666$66 7E?h$ ,8

consi%e!ing the follo'ing$ it is in

'!iting an% signe% by the (a)e!= it

contains an uncon%itional p!o(ise to

pay a ce!tain su( of (oney payable at a

fi?e% o! %ete!(inable futu!e ti(e= it is

payable to o!%e! 7Sec$ 1" NI58= the

p!o(isso!y note 'as negotiate% 'hen it

'as t!ansfe!!e% an% %elie!e% by IPM to

the appellee an% %uly en%o!se% to the

latte! 7Sec$ 06" NI58= it 'as ta)en in the

con%itions that the note 'as co(plete

an% !egula! upon its face befo!e the

sa(e 'as oe!%ue an% 'ithout notice"

that it ha% been p!eiously %ishono!e%

an% that the note is in goo% faith an% fo!

alue 'ithout notice of any infi!(ity o!

%efect in the title of IPM 7Sec$ 2/" NI58=

that I;C 5easing an% ,cceptance

Co!po!ation hel% the inst!u(ent f!ee

f!o( any %efect of title of p!io! pa!ties

an% f!ee f!o( %efenses aailable to p!io!

pa!ties a(ong the(seles an% (ay

enfo!ce pay(ent of the inst!u(ent fo!

the full a(ount the!eof against all

pa!ties liable the!eon 7Sec$ 2


13/83

NEGO

,8 &E SE55ER-,SSI.NOR IS .GI5&H O;

3RE,C O; ,RR,N&H GNDER &E 5,=

38 I; ,& ,55" &E RESPONDEN& M,H RECOER

ON5H ;ROM &E SE55ER-,SSI.NOR O; &E

PROMISSORH NO&E$

$

&E ,SSI.NMEN& O; &E C,&&E5 MOR&.,.E

3H &E SE55ER- ,SSI.NOR IN ;,OR O; &E

RESPONDEN& DOES NO& C,N.E &E N,&GRE

O; &E &R,NS,C&ION ;ROM 3EIN. , S,5E ON

INS&,55MEN&S &O , PGRE 5O,N$

I$

&E PROMISSORH NO&E C,NNO& 3E ,DMI&&ED

OR GSED IN EIDENCE IN ,NH COGR& 3EC,GSE

&E REGISI&E DOCGMEN&,RH S&,MPS ,E

NO& 3EEN ,;;I4ED &EREON OR C,NCE55ED$

&he petitione!s p!aye% that u%g(ent be !en%e!e% setting

asi%e the %ecision %ate% uly 1


14/83

NEGO

,R&$ 12@$ ,n i(plie% 'a!!anty o!

con%ition as to the quality o! fitness fo!

a pa!ticula! pu!pose (ay be anne?e% by

the usage of t!a%e$

??? ??? ???

,R&$ 12$ The vendor is responsi'le to

the vendee for any hidden faults or

defects in the thing sold even though he

&as not a&are thereof.

&his p!oision shall not apply if the

cont!a!y has been stipulate%" an% the

en%o! 'as not a'a!e of the hi%%en

faults o! %efects in the thing sol%$

7E(phasis supplie%8$

It is patent then" that the selle!-assigno! is liable fo! its

b!each of 'a!!anty against the petitione!$ &his liability as

a gene!al !ule" e?ten%s to the co!po!ation to 'ho( it

assigne% its !ights an% inte!ests unless the assignee is a

hol%e! in %ue cou!se of the p!o(isso!y note in question"assu(ing the note is negotiable" in 'hich case the latte!>s

!ights a!e base% on the negotiable inst!u(ent an%

assu(ing fu!the! that the petitione!>s %efenses (ay not

p!eail against it$

Secon%ly" it li)e'ise cannot be %enie% that as soon as the

t!acto!s b!o)e %o'n" the petitione!-co!po!ation notifie%

the selle!-assigno!>s siste! co(pany" ,. K P" about the

b!ea)%o'n base% on the selle!-assigno!>s e?p!ess +6-%ay

'a!!anty" 'ith 'hich the latte! co(plie% by sen%ing its

(echanics$ o'ee!" %ue to the selle!-assigno!>s %elay

an% its failu!e to co(ply 'ith its 'a!!anty" the t!acto!s

beca(e totally unse!iceable an% useless fo! the pu!pose

fo! 'hich they 'e!e pu!chase%$

&hi!%ly" the petitione!-co!po!ation" the!eafte!"

unilate!ally !escin%e% its cont!act 'ith the selle!-

assigno!$

,!ticles 11+1 an% 12< of the Ciil Co%e p!oi%e that:

,R&$ 11+1$ The po&er to rescind

o'ligations is implied in reciprocal

ones!in case one of the obligo!s shoul%

not co(ply 'ith 'hat is incu(bent upon

hi($

The in+ured party may choose 'et&een

the fulfillment and the rescission of the

o'ligation &ith the payment of damages

in either case$ e (ay also see)

!escission" een afte! he has chosen

fulfill(ent" if the latte! shoul% beco(e

i(possible$

??? ??? ???

,R&$ 12


15/83

NEGO

other0s 'reach &ill have to passively sit

and &atch its damages accumulate

during the pendency of the suit until the

final +udgment of rescission is rendered

&hen the la& itself requires that he

should e*ercise due diligence tominimize its o&n damages ,Civil Code!

Article 1123-.7E(phasis supplie%8

.oing bac) to the co!e issue" 'e !ule that the p!o(isso!y

note in question is not a negotiable inst!u(ent$

&he pe!tinent po!tion of the note is as follo's:

;OR ,5GE RECEIED" I'e ointly

an% see!ally p!o(ise to pay to the

INDGS&RI,5 PRODGC&S

M,RE&IN." the su( of ONE

MI55ION NINE&H &REE

&OGS,ND SEEN GNDRED

EI.&H NINE PESOS K 'o!%s of negotiable" (ust be

payable to >o!%e!> o! >bea!e!>$ &hese

'o!%s se!e as an e?p!ession of consent

that the inst!u(ent (ay be t!ansfe!!e%$

&his consent is in%ispensable since a

(a)e! assu(es g!eate! !is) un%e! a

negotiable inst!u(ent than un%e! a non-

negotiable one$ $$$

??? ??? ???

hen inst!u(ent is payable to o!%e!$

SEC$ *$ EN P,H,35E &O ORDER$

A &he inst!u(ent is payable to o!%e!

'he!e it is %!a'n payable to the o!%e! of

a specifie% pe!son o! to hi( o! his o!%e!$

$ $ $

??? ??? ???

&hese a!e the only t'o 'ays by 'hich

an inst!u(ent (ay be (a%e payable to

o!%e!$ &he!e (ust al'ays be a specifie%

pe!son na(e% in the inst!u(ent$ It

(eans that the bill o! note is to be pai%

to the pe!son %esignate% in the

inst!u(ent o! to any pe!son to 'ho( he

has in%o!se% an% %elie!e% the

sa(e$ )ithout the &ords 4or order4

or4to the order of! 4the instrument is

paya'le only to the person designated

therein and is therefore non5negotia'le.

Any su'sequent purchaser thereof &ill

not en+oy the advantages of 'eing a

holder of a negotia'le instrument 'ut

&ill merelystep into the shoes of the

pe!son %esignate% in the inst!u(ent an%

'ill thus be open to all %efenses

aailable against the latte!$ 7Ca(pos

an% Ca(pos" Notes an% Selecte% Cases

on Negotiable Inst!u(ents 5a'" &hi!%E%ition" page 0*8$ 7E(phasis supplie%8

&he!efo!e" consi%e!ing that the subect p!o(isso!y note

is not a negotiable inst!u(ent" it follo's that the

!espon%ent can nee! be a hol%e! in %ue cou!se but

!e(ains a (e!e assignee of the note in question$ &hus"

the petitione! (ay !aise against the !espon%ent all

%efenses aailable to it as against the selle!-assigno!

In%ust!ial P!o%ucts Ma!)eting$

&his being so" the!e 'as no nee% fo! the petitione! to

i(plie% the selle!-assigno! 'hen it 'as sue% by the

!espon%ent-assignee because the petitione!>s %efenses

apply to both o! eithe! of eithe! of the($Actually! the

15


16/83

NEGO

records sho& that even the respondent itself admitted to

'eing a mere assignee of the promissory note in

question! to &it(

,&&H$ P,5,C,:

Di% 'e get it !ight f!o(

the counsel that 'hat is

being assigne% is the

Dee% of Sale 'ith

Chattel Mo!tgage 'ith

the p!o(isso!y note

'hich is as testifie% to

by the 'itness 'as

in%o!se% 7Counsel fo!

Plaintiff no%%ing his

hea%$8 &hen 'e hae no

fu!the! questions on

c!oss"

COGR&:

Hou confi!( his(anifestation Hou a!e

no%%ing you! hea% Do

you confi!( that

,&&H$ I5,.,N:

&he Dee% of Sale

cannot be assigne%$ ,

%ee% of sale is a

t!ansaction bet'een t'o

pe!sons= 'hat is

assigne% a!e !ights" the

!ights of the (o!tgagee

'e!e assigne% to the

I;C 5easing K

,cceptance

Co!po!ation$

COGR&:

e puts it in a si(ple

'ay as one-%ee% of sale

an% chattel (o!tgage

'e!e assigne%= $ $ $ you

'ant to (a)e a

%istinction" one is an

assign(ent of (o!tgage

!ight an% the othe! one

is in%o!se(ent of thep!o(isso!y note$ hat

counsel fo! %efen%ants

'ants is that you

stipulate that it is

containe% in one single

t!ansaction

,&&H$ I5,.,N:

e stipulate it is one

single t!ansaction$ 7pp$

/


17/83

NEGO

)no'le%ge of the fact that the selle!-assigno!>s !ight to

collect the pu!chase p!ice 'as not uncon%itional" an%

that it 'as subect to the con%ition that the t!acto!s -sol%

'e!e not %efectie$ &he !espon%ent )ne' that 'hen the

t!acto!s tu!ne% out to be %efectie" it 'oul% be subect to

the %efense of failu!e of consi%e!ation an% cannot!ecoe! the pu!chase p!ice f!o( the petitione!s$ Een

assu(ing fo! the sa)e of a!gu(ent that the p!o(isso!y

note is negotiable" the !espon%ent" 'hich too) the sa(e

'ith actual )no'le%ge of the fo!egoing facts so that its

action in ta)ing the inst!u(ent a(ounte% to ba% faith" is

not a hol%e! in %ue cou!se$ ,s such" the !espon%ent is

subect to all %efenses 'hich the petitione!s (ay !aise

against the selle!-assigno!$ ,ny othe! inte!p!etation'oul% be (ost inequitous to the unfo!tunate buye! 'ho

is not only sa%%le% 'ith t'o useless t!acto!s but (ust

also face a la'suit f!o( the assignee fo! the enti!e

pu!chase p!ice an% all its inci%ents 'ithout being able to

!aise ali% %efenses aailable as against the assigno!$

5astly" the !espon%ent faile% to p!esent any ei%ence to

p!oe that it ha% no )no'le%ge of any fact" 'hich 'oul%

ustify its act of ta)ing the p!o(isso!y note as not

a(ounting to ba% faith$

Sections 2/ an% 2 of the Negotiable Inst!u(ents 5a'

p!oi%e that: negotiating it$

??? ??? ???

SEC$ 2/$ ,& CONS&I&G&ES ,

O5DER IN DGE COGRSE$ A ,

hol%e! in %ue cou!se is a hol%e! 'ho has

ta)en the inst!u(ent un%e! the follo'ing

con%itions:

??? ??? ???

??? ??? ???

7c8 That he too$ it in good faith and for

value

7%8 That the time it &as negotiated 'y

him he had no notice of any infirmity in

the instrument of deffect in the title of

the person negotiating it

??? ??? ???

SEC$ 2$ )6AT C/NSTIT7T8S

N/TIC8 /9 D8998CT. : To

constitute notice of an infirmity in the

instrument or defect in the title of the

person negotiating the same! the person

to &hom it is negotiated must have had

actual $no&ledge of the infirmity or

defect! or $no&ledge of such facts that

his action in ta$ing the instrument

amounts to 'ad faith$ 7E(phasis

supplie%8

e subsc!ibe to the ie' of Campos and Camposthat a

financing co(pany is not a hol%e! in goo% faith as to the

buye!" to 'it:

In install(ent sales" the buye! usually

issues a note payable to the selle! tocoe! the pu!chase p!ice$ Many ti(es" in

pu!suance of a p!eious a!!ange(ent

'ith the selle!" a finance co(pany pays

the full p!ice an% the note is in%o!se% to

it" sub!ogating it to the !ight to collect

the p!ice f!o( the buye!" 'ith inte!est$

ith the inc!easing f!equency of

install(ent buying in this count!y" it is

(ost p!obable that the ten%ency of the

cou!ts in the Gnite% States to p!otect the

buye! against the finance co(pany 'ill "

the finance co(pany 'ill be subect to

the %efense of failu!e of consi%e!ation

an% cannot !ecoe! the pu!chase p!ice

f!o( the buye!$ ,s against the a!gu(ent

that such a !ule 'oul% se!iously affect a

ce!tain (o%e of t!ansacting business

a%opte% th!oughout the State" a cou!t in

one case state%:

It (ay be that ou!

hol%ing he!e 'ill

17


18/83

NEGO

!equi!e so(e changes in

business (etho%s an%

'ill i(pose a g!eate!

bu!%en on the finance

co(panies$ e thin) the

buye!-M!$ K M!s$.ene!al Public-shoul%

hae so(e p!otection

so(e'he!e along the

line$ e beliee the

finance co(pany is

bette! able to bea! the

!is) of the %eale!>s

insolency than thebuye! an% in a fa! bette!

position to p!otect his

inte!ests against

unsc!upulous an%

insolent %eale!s$ $ $ $

If this opinion i(poses

g!eat bu!%ens on

finance co(panies it is

a potent a!gu(ent in

fao! of a !ule 'hich

'in affo!% public

p!otection to the gene!al

buying public against

unsc!upulous %eale!s in

pe!sonal p!ope!ty$ $ $ $

7Mutual ;inance Co$ $

Ma!tin" 0 So$ /% @+"

@@ ,5R /% 1 Q1+208

7Ca(pos an% Ca(pos"

Notes an% Selecte%

Cases on Negotiable

Inst!u(ents 5a'" &hi!%

E%ition" p$ 1/*8$

In the case of Commercial Credit Corporation v. /range

Country ;achine )or$s 70@ Cal$ /%


19/83

NEGO

#0


SUPREME COURT

Manila

SECOND DIISION

G.R. No. 93397 M#6 3, 1997

TRA)ERS RO&AL 'AN,petitione!"

s$

COURT O" APPEALS, "LRTERS GUARANT&

ASSURANCE CORPORATON #$% CENTRAL

'AN o t68 PHLPPNES, !espon%ents$

TORRES, 4R.,J.:

,ssaile% in this Petition fo! Reie' on Certiorariis the

Decision of the !espon%ent Cou!t of ,ppeals %ate%

anua!y /+" 1++6"1affi!(ing the nullity of the t!ansfe! of

Cent!al 3an) Ce!tificate of In%ebte%ness 7C3CI8 No$

D*+1"2'ith a face alue of P266"666$66" f!o( the

Philippine Gn%e!'!ite!s ;inance Co!po!ation

7Philfinance8 to the petitione! &!a%e!>s Royal 3an)

7&R38" un%e! a Repu!chase ,g!ee(ent3%ate% ;eb!ua!y

@" 1+*1" an% a Detache% ,ssign(ent*%ate% ,p!il /


20/83

NEGO

the na(e of Phil;inance" 'hich

autho!i9ation is specifically ph!ase% as

follo's: >7;il!ite!s8 he!eby i!!eocably

autho!i9e% the sai% issue! 7Cent!al 3an)8

to t!ansfe! the sai% bon%ce!tificates on

the boo)s of its fiscal agent=

2$ On ;eb!ua!y @" 1+*1" petitione!

ente!e% into a Repu!chase ,g!ee(ent

'ith Phil;inance $ $ $" 'he!eby" fo! an%

in consi%e!ation of the su( of PESOS:

;IE GNDRED &OGS,ND

7P266"666$668" Phil;inance sol%"

t!ansfe!!e% an% %elie!e% to petitione!

C3CI @-yea!" *th se!ies" Se!ial No$

D*+1 'ith a face alue of P266"666$66 $

$ $" 'hich C3CI 'as a(ong those

p!eiously acqui!e% by Phil;inance

f!o( ;il!ite!s as ae!!e% in pa!ag!aph 0

of the Petition=

$ Pu!suant to the afo!esai% Repu!chase

,g!ee(ent 7,nne? 38" Philfinance

ag!ee% to !epu!chase C3CI Se!ial No$

D*+1 7,nne? C8" at the stipulate%

p!ice of PESOS: ;IE GNDRED

NINE&EEN &OGS,ND &REE

GNDRED SI4&H-ONE K 11166

7P21+"01$118 on ,p!il /s ali% an% ust title oe! the

sa(e an% %espite !epeate% %e(an%s in

'!iting" the latest of 'hich is he!eto

attache% as ,nne? E an% (a%e an

integ!al pa!t he!eof=

11$ &he e?p!ess p!oisions goe!ning

the t!ansfe! of the C3CI 'e!e

substantially co(plie% 'ith the

petitione!>s !equest fo! !egist!ation" to

'it:

No t!ansfe! the!eof

shall be ali% unless

(a%e at sai% office

7'he!e the Ce!tificate

has been !egiste!e%8 by

the !egiste!e% o'ne!

he!eof" in pe!son o! by

his atto!ney %uly

autho!i9e% in '!iting"

an% si(ila!ly note%

he!eon" an% upon

pay(ent of a no(inal

t!ansfe! fee 'hich (ay

be !equi!e%" a ne'

20


21/83

NEGO

Ce!tificate shall be

issue% to the t!ansfe!ee

of the !egiste!e% hol%e!

the!eof$

an%" 'ithout a %oubt" the Detache%

,ssign(ents p!esente% to !espon%ent

'e!e sufficient autho!i9ations in '!iting

e?ecute% by the !egiste!e% o'ne!"

;il!ite!s" an% its t!ansfe!ee" Phil;inance"

as !equi!e% by the aboe-quote%

p!oision=

1/$ Gpon such co(pliance 'ith the

afo!esai% !equi!e(ents" the (iniste!ial

%uties of !egiste!ing a t!ansfe! of

o'ne!ship oe! the C3CI an% issuing a

ne' ce!tificate to the t!ansfe!ee

%eoles upon the !espon%ent=

Gpon these asse!tions" &R3 p!aye% fo! the !egist!ation

by the Cent!al 3an) of the subect C3CI in its na(e$

On Dece(be! @" 1+*@" the Regional &!ial Cou!t the case

too) cogni9ance of the %efen%ant Cent!al 3an) of the

Philippines> Motion fo! ,%(ission of ,(en%e% ,ns'e!

'ith Counte! Clai( fo! Inte!plea%e!+the!eby calling to

fo!e the !espon%ent ;il!ite!s .ua!anty ,ssu!ance

Co!po!ation 7;il!ite!s8" the !egiste!e% o'ne! of the

subect C3CI as !espon%ent$

;o! its pa!t" ;il!ite!s inte!ecte% as Special Defenses the

follo'ing:

11$ Respon%ent is the !egiste!e% o'ne!

of C3CI No$ *+1=

1/$ &he C3CI constitutes pa!t of the

!ese!e inest(ent against liabilities

!equi!e% of !espon%ent as an insu!anceco(pany un%e! the Insu!ance Co%e=

10$ ithout any consi%e!ation o! benefit

'hatsoee! to ;il!ite!s" in iolation of

la' an% the t!ust fun% %oct!ine an% to

the p!eu%ice of policyhol%e!s an% to all

'ho hae p!esent o! futu!e clai( against

policies issue% by ;il!ite!s" ,lf!e%o

3ana!ia" then Senio! ice-P!esi%ent-

&!easu!y of ;il!ite!s" 'ithout any boa!%

!esolution" )no'le%ge o! consent of the

boa!% of %i!ecto!s of ;il!ite!s" an%'ithout any clea!ance o! autho!i9ation

f!o( the Insu!ance Co((issione!"

e?ecute% a %etache% assign(ent

pu!po!te%ly assigning C3CI No$ *+1 to

Philfinance=

??? ??? ???

1@$ Subsequently" ,lbe!to ;abella"

Senio! ice-P!esi%ent-Co(pt!olle! a!e

Pila! acobe" ice-P!esi%ent-&!easu!y of

;il!ite!s 7both of 'ho( 'e!e hol%ing the

sa(e positions in Philfinance8" 'ithout

any consi%e!ation o! benefit !e%oun%ing

to ;il!ite!s an% to the g!ae p!eu%ice of

;il!ite!s" its policy hol%e!s an% all 'ho

hae p!esent o! futu!e clai(s against its

policies" e?ecute% si(ila! %etache%

assign(ent fo!(s t!ansfe!!ing the C3CI

to plaintiff=

??? ??? ???

12$ &he %etache% assign(ent is patently

oi% an% inope!atie because the

assign(ent is 'ithout the )no'le%ge

an% consent of %i!ecto!s of ;il!ite!s" an%

not %uly autho!i9e% in '!iting by the

3oa!%" as !equi!ing by ,!ticle " Section

0 of C3 Ci!cula! No$


22/83

NEGO

b8 &he assign(ent 'as e?ecute% 'ithout

any )no'le%ge an% consent of the boa!%

of %i!ecto!s of ;il!ite!s=

c8 &he C3CI constitutes !ese!e

inest(ent of ;il!ite!s against liabilities"

'hich is a !equi!e(ent un%e! the

Insu!ance Co%e fo! its e?istence as an

insu!ance co(pany an% the pu!suit of its

business ope!ations$ &he assign(ent of

the C3CI is illegal act in the sense

of malum in se o!malum prohi'itum" fo!

anyone to (a)e" eithe! as co!po!ate o!

pe!sonal act=

%8 &he t!ansfe! of %i(unition of !ese!e

inest(ents of ;il!ite!s is e?p!essly

p!ohibite% by la'" is i((o!al an%

against public policy=

e8 &he assign(ent of the C3CI has

!esulte% in the capital i(pai!(ent an% in

the solency %eficiency of ;il!ite!s 7an%

has in fact helpe% in placing ;il!ite!s

un%e! conse!ato!ship8" an ineitable

!esult )no'n to the office! 'ho e?ecute%

assign(ent$

1s=

c8 C3 Ci!cula!


23/83

NEGO

7a8 Decla!ing the assign(ent of C3CI

No$ *+1 in fao! of Phil;inance" an% the

subsequent assign(ent of C3CI by

Phil;inance in fao! of the plaintiff

&!a%e!s Royal 3an) as null an% oi% an%

of no fo!ce an% effect=

7b8 O!%e!ing the !espon%ent Cent!al

3an) of the Philippines to %is!ega!% the

sai% assign(ent an% to pay the alue of

the p!ocee%s of the C3CI No$ D*+1 to

the ;il!ite!s .ua!anty ,ssu!ance

Co!po!ation=

7c8 O!%e!ing the plaintiff &!a%e!s Royal

3an) to pay !espon%ent ;il!ite!s

.ua!anty ,ssu!ance Co!p$ &he su( of

P16"666 as atto!ney>s fees= an%

7%8 to pay the costs$

SO ORDERED$9

&he petitione! assaile% the %ecision of the t!ial cou!t in

the Cou!t of ,ppeals 10" but thei! appeals li)e'ise faile%$

&he fin%ings of the fact of the sai% cou!t a!e he!eby

!ep!o%uce%:

&he !eco!%s !eeal that %efen%ant

;il!ite!s is the !egiste!e% o'ne! of C3CI

No$ D*+1$ Gn%e! a %ee% of assign(ent

%ate% Noe(be! /


24/83

NEGO

Obiously" the assign(ent of the ce!tificate f!o(

;il!ite!s to Philfinance 'as fictitious" haing (a%e

'ithout consi%e!ation" an% %i% not confo!( to Cent!al

3an) Ci!cula! No$ s clai(e% inte!est has no basis" since it 'as

%e!ie% f!o( Philfinance 'hose inte!est 'as ine?istent"

haing acqui!e% the ce!tificate th!ough si(ulation$ hat

happene% 'as Philfinance (e!ely bo!!o'e% C3CI No$

D*+1 f!o( ;il!ite!s" a siste! co!po!ation" to gua!antee its

financing ope!ations$

Sai% the Cou!t:

In the case at ba!" ,lf!e%o O$ 3ana!ia"

'ho signe% the %ee% of assign(ent

pu!po!te%ly fo! an% on behalf of

;il!ite!s" %i% not hae the necessa!y

'!itten autho!i9ation f!o( the 3oa!% of

Di!ecto!s of ;il!ite!s to act fo! the latte!$

;o! lac) of such autho!ity" the

assign(ent %i% not the!efo!e bin%

;il!ite!s an% iolate% as the sa(e ti(e

Cent!al 3an) Ci!cula! No$


25/83

NEGO

,s 'o!%e%" the inst!u(ent p!oi%es a

p!o(ise to pay ;il!ite!s .ua!anty

,ssu!ance Co!po!ation" the !egiste!e%

o'ne! he!eof$ e!y clea!ly" the

inst!u(ent is payable only to ;il!ite!s"

the !egiste!e% o'ne!" 'hose na(e isinsc!ibe% the!eon$ It lac)s the 'o!%s of

negotiability 'hich shoul% hae se!e%

as an e?p!ession of consent that the

inst!u(ent (ay be t!ansfe!!e% by

negotiation$15

, !ea%ing of the subect C3CI in%icates that the sa(e is

payable to ;I5RI&ERS .G,R,N&H ,SSGR,NCE

CORPOR,&ION" an% to no one else" thus" %iscounting

the petitione!>s sub(ission that the sa(e is a negotiable

inst!u(ent" an% that it is a hol%e! in %ue cou!se of the

ce!tificate$

&he language of negotiability 'hich cha!acte!i9e a

negotiable pape! as a c!e%it inst!u(ent is its f!ee%o( to

ci!culate as a substitute fo! (oney$ ence" f!ee%o( of

negotiability is the touchtone !elating to the p!otection of

hol%e!s in %ue cou!se" an% the f!ee%o( of negotiability is

the foun%ation fo! the p!otection 'hich the la' th!o's

a!oun% a hol%e! in %ue cou!se 711 ,($ u!$ /%" 0/8$ &his

f!ee%o( in negotiability is totally absent in a ce!tificate

in%ebte%ness as it (e!ely to pay a su( of (oney to a

specifie% pe!son o! entity fo! a pe!io% of ti(e$

,s hel% in Calte* ,"hilippines-! Inc$v$ Court of

Appeals" 1+:

&he accepte% !ule is that the

negotiability o! non-negotiability of an

inst!u(ent is %ete!(ine% f!o( the

'!iting" that is" f!o( the face of the

inst!u(ent itself$ In the const!uction of a

bill o! note" the intention of the pa!ties is

to cont!ol" if it can be legally

asce!taine%$ hile the '!iting (ay be

!ea% in the light of su!!oun%ing

ci!cu(stance in o!%e! to (o!e pe!fectly

un%e!stan% the intent an% (eaning of the

pa!ties" yet as they hae constitute% the

'!iting to be the only out'a!% an%

isible e?p!ession of thei! (eaning" no

othe! 'o!%s a!e to be a%%e% to it o!

substitute% in its stea%$ &he %uty of the

cou!t in such case is to asce!tain" not

'hat the pa!ties (ay hae sec!etlyinten%e% as cont!a%istinguishe% f!o(

'hat thei! 'o!%s e?p!ess" but 'hat is the

(eaning of the 'o!%s they hae use%$

hat the pa!ties (eant (ust be

%ete!(ine% by 'hat they sai%$

&hus" the t!ansfe! of the inst!u(ent f!o( Philfinance to

&R3 'as (e!ely an assign(ent" an% is not goe!ne% by

the negotiable inst!u(ents la'$ &he pe!tinent question

then is" 'as the t!ansfe! of the C3CI f!o( ;il!ite!s to

Philfinance an% subsequently f!o( Philfinance to &R3"

in acco!% 'ith e?isting la'" so as to entitle &R3 to hae

the C3CI !egiste!e% in its na(e 'ith the Cent!al 3an)

&he follo'ing a!e the appellate cou!t>s p!onounce(ents

on the (atte!:

Clea!ly sho'n in the !eco!% is the fact

that Philfinance>s title oe! C3CI No$

D*+1 is %efectie since it acqui!e% the

inst!u(ent f!o( ;il!ite!s fictitiously$

,lthough the %ee% of assign(ent state%

that the t!ansfe! 'as fo! alue

!eceie%" the!e 'as !eally no

consi%e!ation inole%$ hat happene%'as Philfinance (e!ely bo!!o'e% C3CI

No$ D*+1 f!o( ;il!ite!s" a siste!

co!po!ation$ &hus" fo! lac) of any

consi%e!ation" the assign(ent (a%e is a

co(plete nullity$

hat is (o!e" e fin% that the t!ansfe!

(a%e by ;il!ite!s to Philfinance %i% not

confo!( to Cent!al 3an) Ci!cula! No$


26/83

NEGO

on Noe(be! 1+" 1+*6" Section 0

the!eof p!oi%es that any assign(ent of

!egiste!e% ce!tificates shall not be ali%

unless (a%e $ $ $ by the !egiste!e% o'ne!

the!eof in pe!son o! by his !ep!esentatie

%uly autho!i9e% in '!iting$

In the case at ba!" ,lf!e%o O$ 3ana!ia"

'ho signe% the %ee% of assign(ent

pu!po!te%ly fo! an% on behalf of

;il!ite!s" %i% not hae the necessa!y

'!itten autho!i9ation f!o( the 3oa!% of

Di!ecto!s of ;il!ite!s to act fo! the latte!$

;o! lac) of such autho!ity" the

assign(ent %i% not the!efo!e bin%

;il!ite!s an% iolate% at the sa(e ti(e

Cent!al 3an) Ci!cula! No$ s8 financing ope!ations" if it

'e!e to be consistent the!e'ith" on the

issue% !aise% by &R3 that the!e 'as a

pie!cing a eil of co!po!ate entity" the

Cou!t of ,ppeals shoul% hae !ule% that

such eil of co!po!ate entity 'as" in fact"

pie!ce%" an% the pay(ent by &R3 to

Philfinance shoul% be const!ue% as

pay(ent to ;il!ite!s$ 17

e %isag!ee 'ith Petitione!$

Petitione! cannot put up the e?cuse of pie!cing the eil

of co!po!ate entity" as this (e!ely an equitable !e(e%y"

an% (ay be a'a!%e% only in cases 'hen the co!po!ate

fiction is use% to %efeat public conenience" ustify

'!ong" p!otect f!au% o! %efen% c!i(e o! 'he!e a

co!po!ation is a (e!e alte! ego o! business con%uit of a

pe!son$ 1

Peie!cing the eil of co!po!ate entity !equi!es the cou!t to

see th!ough the p!otectie sh!ou% 'hich e?e(pts its

stoc)hol%e!s f!o( liabilities that o!%ina!ily" they coul%

be subect to" o! %istinguishe% one co!po!ation f!o( a

see(ingly sepa!ate one" 'e!e it not fo! the e?isting

co!po!ate fiction$ 3ut to %o this" the cou!t (ust be su!e

that the co!po!ate fiction 'as (isuse%" to such an e?tent

that inustice" f!au%" o! c!i(e 'as co((itte% upon

anothe!" %is!ega!%ing" thus" his" he!" o! its !ights$ It is the

p!otection of the inte!ests of innocent thi!% pe!sons

26


27/83

NEGO

%ealing 'ith the co!po!ate entity 'hich the la' ai(s to

p!otect by this %oct!ine$

&he co!po!ate sepa!ateness bet'een ;il!ite!s an%

Philfinance !e(ains" %espite the petitione!s insistence on

the cont!a!y$ ;o! one" othe! than the allegation that

;il!ite!s is +6F o'ne% by Philfinance" an% the i%entity

of one shall be (aintaine% as to the othe!" the!e is

nothing else 'hich coul% lea% the cou!t un%e!

ci!cu(stance to %is!ega!% thei! co!po!ate pe!sonalities$

&hough it is t!ue that 'hen ali% !easons e?ist" the legal

fiction that a co!po!ation is an entity 'ith a u!i%ical

pe!sonality sepa!ate f!o( its stoc)hol%e!s an% f!o( othe!

co!po!ations (ay be %is!ega!%e%" 19in the absence of

such g!oun%s" the gene!al !ule (ust uphel%$ &he fact that

;ilfinance o'ns (ao!ity sha!es in ;il!ite!s is not by

itself a g!oun% to %is!ega!% the in%epen%ent co!po!ate

status of ;il!ite!s$ In%iddel < Co$"Inc$ vs$ Collector of

Internal evenue" 20the (e!e o'ne!ship by a single

stoc)hol%e! o! by anothe! co!po!ation of all o! nea!ly all

of the capital stoc) of a co!po!ation is not of itself a

sufficient !eason fo! %is!ega!%ing the fiction of sepa!ate

co!po!ate pe!sonalities$

In the case at ba!" the!e is sufficient sho'ing that the

petitione! 'as not %ef!au%e% at all 'hen it acqui!e% the

subect ce!tificate of in%ebte%ness f!o( Philfinance$

On its face the subect ce!tificates states that it is

!egiste!e% in the na(e of ;il!ite!s$ &his shoul% hae put

the petitione! on notice" an% p!o(pte% it to inqui!e f!o(

;il!ite!s as to Philfinance>s title oe! the sa(e o! its

autho!ity to assign the ce!tificate$ ,s it is" the!e is no

sho'ing to the effect that petitione! ha% any %ealings

'hatsoee! 'ith ;il!ite!s" no! %i% it (a)e inqui!ies as to

the o'ne!ship of the ce!tificate$

&he te!(s of the C3CI No$ D*+1 contain a p!oision on

its &R,NS;ER$ &hus:

&R,NS;ER$ &his Ce!tificate shall pass

by %elie!y unless it is !egiste!e% in the

o'ne!>s na(e at any office of the 3an)

o! any agency %uly autho!i9e% by the

3an)" an% such !egist!ation is note%

he!eon$ ,fte! such !egist!ation no

t!ansfe! the!eof shall be ali% unless

(a%e at sai% office 7'he!e the

Ce!tificates has been !egiste!e%8 by the

!egiste!e% o'ne! he!eof" in pe!son" o! by

his atto!ney" %uly autho!i9e% in '!itingan% si(ila!ly note% he!eon an% upon

pay(ent of a no(inal t!ansfe! fee 'hich

(ay be !equi!e%" a ne' Ce!tificate shall

be issue% to the t!ansfe!ee of the

!egiste!e% o'ne! the!eof$ &he ban) o!

any agency %uly autho!i9e% by the 3an)

(ay %ee( an% t!eat the bea!e! of this

Ce!tificate" o! if this Ce!tificate is!egiste!e% as he!ein autho!i9e%" the

pe!son in 'hose na(e the sa(e is

!egiste!e% as the absolute o'ne! of this

Ce!tificate" fo! the pu!pose of !eceiing

pay(ent he!eof" o! on account he!eof"

an% fo! all othe! pu!pose 'hethe! o! not

this Ce!tificate shall be oe!%ue$

&his is notice to petitione! to secu!e f!o( ;il!ite!s a

'!itten autho!i9ation fo! the t!ansfe! o! to !equi!e

Philfinance to sub(it such an autho!i9ation f!o(

;il!ite!s$

Petitione! )ne' that Philfinance is not !egiste!e% o'ne!

of the C3CI No$ D*+1$ &he fact that a non-o'ne! 'as

%isposing of the !egiste!e% C3CI o'ne% by anothe!

entity 'as a goo% !eason fo! petitione! to e!ify of

inqui!e as to the title Philfinance to %ispose to the C3CI$

Mo!eoe!" C3CI No$ D*+1 is goe!ne% by C3 Ci!cula!

No$


28/83

NEGO

Cent!al 3an) of the Philippines" an% by

the !egiste!e% o'ne! the!eof" in pe!son

o! by his !ep!esentatie" %uly autho!i9e%

in '!iting$ ;o! this pu!pose" the

t!ansfe!ee (ay be %esignate% as the

!ep!esentatie of the !egiste!e% o'ne!$

Petitione!" being a co((e!cial ban)" cannot feign

igno!ance of Cent!al 3an) Ci!cula! s

that 'e!e foun% to be

(issing$

5et (e ta)e you bac)

fu!the! befo!e 1+*1$ Di%

you hae the )no'le%ge

of this C3CI No$ *+1

befo!e 1+*1

, Hes" si!$ &his C3CI is

an inest(ent of

;il!ite!s !equi!e% by the

Insu!ance Co((ission

as legal !ese!e of the

co(pany$

5egal !ese!e fo! the

pu!pose of 'hat

, ell" you see" the

Insu!ance co(panies

a!e !equi!e% to put up

legal !ese!es un%e!

Section /10 of the

Insu!ance Co%eequialent to @6 pe!cent

of the p!e(iu(s !eceipt

an% fu!the!" the

Insu!ance Co((ission

!equi!es this !ese!e to

be ineste% p!efe!ably

28


29/83

NEGO

in goe!n(ent secu!ities

o! goe!n(ent bin%s$

&his is ho' this C3CI

ca(e to be pu!chase%

by the co(pany$

It cannot" the!efo!e" be ta)en out of the sai% fun%s"

'ithout iolating the !equi!e(ents of the la'$ &hus" the

anautho!i9e% use o! %ist!ibution of the sa(e by a

co!po!ate office! of ;il!ite!s cannot bin% the sai%

co!po!ation" not 'ithout the app!oal of its 3oa!% of

Di!ecto!s" an% the (aintenance of the !equi!e% !ese!e

fun%$

Consequently" the title of ;il!ite!s oe! the subect

ce!tificate of in%ebte%ness (ust be uphel% oe! the

clai(e% inte!est of &!a%e!s Royal 3an)$

,CCORDIN.5H" the petition is DISMISSED an% the

%ecision appeale% f!o( %ate% anua!y /+" 1++6 is he!eby

,;;IRMED$

SO ORDERED$

#@

R8-u/ o t68 P6//--/$8s

Su-8:8 Cout

M#$/#

THR) )SON

PHLPPNE NATONAL 'AN, G.R. No. 170325

Petitione!"P!esent:HN,RES-S,N&I,.O"=.!

hairper

son!

5 versus 5,GS&RI,-M,R&INEL"CICO-N,L,RIO"

N

,CG

R," an

%R

EHES"

==$

29


30/83

NEGO

ERLAN)O T. RO)RGUE P!o(ulgate%:#$% NORMA RO)RGUE,

Respon%ents$ Septe(be! /"

/66*? - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - ?

) E C S O N

RE&ES, R.T.,J.;

EN the payee of the chec) is not inten%e% to be the

t!ue !ecipient of its p!ocee%s" is it payable to o!%e! o!

bea!e! hat is the fictitious-payee !ule an% 'ho is

liable un%e! it Is the!e any e?ception&hese questions see) ans'e!s in this petition fo!

!eie' on certiorariof the ,(en%e% DecisionQ1of the

Cou!t of ,ppeals 7C,8 'hich affi!(e% 'ith (o%ification

that of the Regional &!ial Cou!t 7R&C8$Q/

T68 "#ts

&he

facts as bo!ne by the !eco!%s a!e as follo's:

Respon%ents-Spouses E!lan%o an% No!(a

Ro%!igue9 'e!e clients of petitione! Philippine National

3an) 7PN38" ,(elia ,enue 3!anch" Cebu City$ &hey

(aintaine% saings an% %e(an%chec)ing accounts"

na(ely" PN3ig De(an% Deposits 7Chec)ingCu!!ent

,ccount No$ *16/@- un%e! the account na(e E!lan%o

an%o! No!(a Ro%!igue98" an% PN3ig De(an% Deposit

7Chec)ingCu!!ent ,ccount No$ *16@*6-@ un%e! the

account na(e E!lan%o &$ Ro%!igue98$

&he spouses 'e!e engage% in the info!(al

len%ing business$ In line 'ith thei! business" they ha% a

%iscountingQ0

a!!ange(ent 'ith the Philnaban)

E(ployees Saings an% 5oan ,ssociation 7PEMS5,8"

an association of PN3 e(ployees$ Natu!ally" PEMS5,

'as li)e'ise a client of PN3 ,(elia ,enue

3!anch$ &he association (aintaine% cu!!ent an% saings

accounts 'ith petitione! ban)$

PEMS5, !egula!ly g!ante% loans to its

(e(be!s$ Spouses Ro%!igue9 'oul% !e%iscount the

post%ate% chec)s issue% to (e(be!s 'henee! the

association 'as sho!t of fun%s$ ,s 'as custo(a!y" the

spouses 'oul% !eplace the post%ate% chec)s 'ith thei!

o'n chec)s issue% in the na(e of the (e(be!s$

It 'as PEMS5,s policy not to app!oe

applications fo! loans of (e(be!s 'ith outstan%ing

%ebts$ &o sube!t this policy" so(e PEMS5, office!s

%eise% a sche(e to obtain a%%itional loans %espite thei!

outstan%ing loan accounts$ &hey too) out loans in the

na(es of un)no'ing (e(be!s" 'ithout the )no'le%ge

o! consent of the latte!$ &he PEMS5, chec)s issue% fo!

these loans 'e!e then gien to the spouses fo!

!e%iscounting$ &he office!s ca!!ie% this out by fo!ging

the in%o!se(ent of the na(e% payees in the chec)s$

In !etu!n" the spouses issue% thei! pe!sonal

chec)s 7Ro%!igue9 chec)s8 in the na(e of the (e(be!s

an% %elie!e% the chec)s to an office! of PEMS5,$ &he

PEMS5, chec)s" on the othe! han%" 'e!e %eposite% by

the spouses to thei! account$

Mean'hile" the Ro%!igue9 chec)s 'e!e

%eposite% %i!ectly by PEMS5, to its saings

account


31/83

NEGO

,la!(e% oe! the une?pecte% tu!n of eents" the

spouses Ro%!igue9 file% a ciil co(plaint fo! %a(ages

against PEMS5," the Multi-Pu!pose Coope!atie of

Philnaban)e!s 7MCP8" an% petitione! PN3$ &hey sought

to !ecoe! the alue of thei! chec)s that 'e!e %eposite%

to the PEMS5, saings account a(ounting

to P/"0@2"*6@$66$ &he spouses

conten%e% that

because PN' 8%/t8% t68 68>s to t68 PEMSLA

#ou$t 8?8$


32/83

NEGO

th!ough an% the

cont!acto! een

th!eatene% to file a

case against the

plaintiffs=

7b8 Mo!al %a(ages in

the a(ount

of P1"666"666$66=7c8 E?e(pla!y %a(ages

in the a(ount

of P266"666$66=7%8 ,tto!neys fees in the

a(ountof P126"666$66

consi%e!ing that

this case %oes not

inole e!y

co(plicate% issues=

an% fo! the7e8 Costs of suit$

0$ Othe! clai(s an% counte!clai(s a!e

he!eby %is(isse%$Q

CA )/s-os/t/o$

PN3 appeale% the %ecision of the t!ial cou!t to

the C, on the p!incipal g!oun% that the %ispute% chec)s

shoul% be consi%e!e% as payable to bea!e! an% not to

o!%e!$In a DecisionQ


33/83

NEGO

anothe!$ &hey 'e!e able to achiee this

conspi!acy by using othe! (e(be!s 'ho

ha% loane% lesse! a(ounts of (oney o!

ha% not applie% at all$ ? ? ?$Q*7E(phasis

a%%e%8&he

C, foun% that the chec)s 'e!e bea!e! inst!u(ents"

thus they %o not !equi!e in%o!se(ent fo! negotiation= an%

that spouses Ro%!igue9 an% PEMS5, conspi!e% 'ith

each othe! to acco(plish this (oney-(a)ing

sche(e$ &he payees in the chec)s 'e!e fictitious payees

because they 'e!e not the inten%e% payees at all$

&he spouses Ro%!igue9 (oe% fo!

!econsi%e!ation$ &hey a!gue%" inter alia" that the chec)s

on thei! faces 'e!e unquestionably payable to o!%e!= an%that PN3 co((itte% a b!each of cont!act 'hen it pai%

the alue of the chec)s to PEMS5, 'ithout in%o!se(ent

f!o( the payees$ &hey also a!gue% that thei! cause of

action is not only against PEMS5, but also

against PN3 to !ecoe! the alue of the chec)s$

On Octobe! 11" /662" the C, 8?8s8%itself ia

an ,(en%e% Decision" the last pa!ag!aph an%falloof

'hich !ea%:

In su(" 'e !ule that the

%efen%ant-appellant PN3 is liable to the

plaintiffs-appellees Sps$ Ro%!igue9 fo!

the follo'ing:1$ ,ctual %a(ages

in the a(ount

of P/"0@2"*6@ 'ith

inte!est at F pe!

annu( f!o( 1@

May 1+++ until

fully pai%=

/$ Mo!al %a(ages

in the a(ount

of P/66"666=

0$ ,tto!neys fees in

the a(ount

of P166"666= an%

@$ Costs of suit$ERE;ORE" in ie' of the

fo!egoing p!e(ises" u%g(ent is he!eby

!en%e!e% by Gs ,;;IRMIN. I&

MODI;IC,&ION the assaile% %ecision

!en%e!e% in Ciil Case No$ ++-16*+/" as

set fo!th in the i((e%iately ne?t

p!ece%ing pa!ag!aph he!eof" an%

SE&&IN. ,SIDE Ou! o!iginal %ecisionp!o(ulgate% in this case on // uly

/66@$SO ORDERED$Q+

&he C, !ule% that the chec)s 'e!e payable to

o!%e!$ ,cco!%ing to the appellate cou!t" PN3 faile% to

p!esent sufficient p!oof to %efeat the clai( of the spouses

Ro%!igue9 that they !eally inten%e% the chec)s to be

!eceie% by the specifie% payees$ &hus" PN3 is liable fo!

the alue of the chec)s 'hich it pai% to PEMS5,

'ithout in%o!se(ents f!o( the na(e% payees$ &he

a'a!% fo! %a(ages 'as %ee(e% app!op!iate in ie' of

the failu!e of PN3 to t8#t t68 Ro%/gu8@ #ou$t


34/83

NEGO

its u%g(ent 'ith the singula! obectie of achieing

ustice fo! the litigants$Q16

o'ee!" a 'o!% of caution to lo'e! cou!ts" the

C, in Cebu in this pa!ticula! case" is in o!%e!$ &he Cou!t

%oes not sanction ca!eless %isposition of cases by cou!ts

of ustice$ &he highest %eg!ee of %iligence (ust go into

the stu%y of ee!y cont!oe!sy sub(itte% fo! %ecision by

litigants$ Ee!y issue an% factual %etail (ust be closely

sc!utini9e% an% analy9e%" an% all the applicable la's

u%iciously stu%ie%" befo!e the p!o(ulgation of ee!y

u%g(ent by the cou!t$ Only in this (anne! 'ill e!!o!s in

u%g(ents be aoi%e%$

No' to the co!e of the petition$

As # u8, /s o$s/%88% #s # 8#8 /$stu:8$t$ , chec) is

a bill of e?change %!a'n on a ban) payable on %e(an%$

Q11It is eithe! an o!%e! o! a bea!e! inst!u(ent$Sections *

an% + of the NI5 states:

SEC$ *$

)hen paya'le to

order.&he inst!u(ent is payable to o!%e!

'he!e it is %!a'n payable to the o!%e! of

a specifie% pe!son o! to hi( o! his

o!%e!$ It (ay be %!a'n payable to the

o!%e! of

7a8 , payee 'ho is not (a)e!"

%!a'e!" o! %!a'ee= o!7b8 &he %!a'e! o! (a)e!= o!

7c8 &he %!a'ee= o!7%8 &'o o! (o!e payees

ointly= o!7e8 One o! so(e of see!al

payees= o!7f8 &he hol%e! of an office fo!

the ti(e being$

he!e the inst!u(ent is payable

to o!%e!" the payee (ust be na(e% o!

othe!'ise in%icate% the!ein 'ith

!easonable ce!tainty$

SEC$ +$ )hen paya'le to

'earer$ &he inst!u(ent is payable to

bea!e!

7a8 hen it is e?p!esse% to

be so payable= o!7b8 hen it is payable to a

pe!son na(e% the!ein o!

bea!e!= o!7c8 hen it is payable to the

o!%e! of a fictitious o! non-

e?isting pe!son" an% such

fact is )no'n to the pe!son

(a)ing it so payable

= o!7%8 hen the na(e of the

payee %oes not pu!po!t to

be the na(e of any pe!son=

o!7e8 he!e the only o! last

in%o!se(ent is an

in%o!se(ent in blan)$

Q1/7Gn%e!sco!ing supplie%8

&he

%/st/$t/o$bet'een bea!e! an% o!%e!

inst!u(ents lies in thei! (anne! of negotiation$ Gn%e!

Section 06 of the NI5" an o!%e! inst!u(ent !equi!es an

in%o!se(ent f!o( the payee o! hol%e! befo!e it (ay be

ali%ly negotiate%$ , bea!e! inst!u(ent" on the othe!han%" %oes not !equi!e an in%o!se(ent to be ali%ly

negotiate%$ It is negotiable by (e!e %elie!y$ &he

p!oision !ea%s:

SEC$ 06$ )hat constitutes

negotiation.,n inst!u(ent is negotiate%

'hen it is t!ansfe!!e% f!o( one pe!son to

anothe! in such (anne! as to constitute

the t!ansfe!ee the hol%e! the!eof$ If

payable to bea!e!" it is negotiate% by

%elie!y= if payable to o!%e!" it is

negotiate% by the in%o!se(ent of the

hol%e! co(plete% by %elie!y$

, chec) that is payable to a specifie% payee is an

o!%e! inst!u(ent$ o'ee!" un%e! Section +7c8 of the

NI5" a chec) payable to a specifie% payee (ay

nee!theless be consi%e!e% as a bea!e! inst!u(ent if it is

payable to the o!%e! of a fictitious o! non-e?isting

pe!son" an% such fact is )no'n to the pe!son (a)ing it

so payable$ &hus" chec)s issue% to"rinsipe A'anteo! Si

;ala$as at si ;aganda" 'ho a!e 'ell-)no'n cha!acte!s

34
http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm#_ftn10http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm#_ftn10http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm#_ftn12http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm#_ftn10http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm#_ftn11http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm#_ftn12


35/83

NEGO

in Philippine (ythology" a!e bea!e! inst!u(ents because

the na(e% payees a!e fictitious an% non-e?istent$

e hae yet to %iscuss a b!oa%e! (eaning of the

te!( fictitious as use% in the NI5$ It is fo! this !eason

that e loo) else'he!e fo! gui%ance$ Cou!t !ulings in

the Gnite% States a!e a logical sta!ting point since ou!

la' on negotiable inst!u(ents 'as %i!ectly lifte% f!o(

the Gnifo!( Negotiable Inst!u(ents 5a' of the Gnite%

States$Q10

, !eie' of GS u!isp!u%ence yiel%s that an

actual" e?isting" an% liing payee (ay also be fictitious if

the (a)e! of the chec) %i% not inten% fo! the payee to in

fact !eceie the p!ocee%s of the chec)$ &his usually

occu!s 'hen the (a)e! places a na(e of an e?isting

payee on the chec) fo! conenience o! to coe! up an

illegal actiity$Q1@&hus" a chec) (a%e e?p!essly payable

to a non-fictitious an% e?isting pe!son is not necessa!ily

an o!%e! inst!u(ent$

t68 -#=88 /s $ot t68 /$t8$%8%

8/-/8$t o t68 -o88%s o t68 68>, t68 -#=88 /s

o$s/%88% # /t/t/ous -#=88 #$% t68 68> /s # 8#8

/$stu:8$t$

In a fictitious-payee situation" the %!a'ee ban)

is absole% f!o( liability an% t68 %#


36/83

NEGO

inestigate an% othe! pe!(utations of

negligence a!e not !eleant

consi%e!ations un%e! Section 0-@62 ? ?

?$ather! there is a commercial 'ad

faith e*ception to 7CC 35?2@!

applica'le &hen the transferee actsdishonestly &here it has actual

$no&ledge of facts and circumstances

that amount to 'ad faith! thus itself

'ecoming a participant in a fraudulent

scheme.? ? ? Such a test fin%s suppo!t

in the te?t of the Co%e" 'hich o(its a

stan%a!% of ca!e !equi!e(ent f!o( GCC

0-@62 but i(poses on all pa!ties anobligation to act 'ith honesty in fact$ ?

? ?Q1+7E(phasis a%%e%8G8tt=also lai% the p!inciple that the fictitious-payee !ule

e?ten%s p!otection een to non-ban) t!ansfe!ees of the

chec)s$

In the case un%e! !eie'" the Ro%!igue9 chec)s

'e!e payable to specifie% payees$ It is un!efute% that the

+ chec)s 'e!e payable to specific pe!sons$ 5i)e'ise" it

is uncont!oe!te% that the payees 'e!e actual" e?isting"

an% liing pe!sons 'ho 'e!e (e(be!s of PEMS5, that

ha% a !e%iscounting a!!ange(ent 'ith spouses

Ro%!igue9$

hat !e(ains to be %ete!(ine% is if the payees"

though e?isting pe!sons" 'e!e fictitious in its b!oa%e!

conte?t$

;o! the fictitious-payee !ule to be aailable as a

%efense" PN3 (ust sho' that the (a)e!s %i% not inten%

fo! the na(e% payees to be pa!t of the t!ansaction

inoling the chec)s$ ,t (ost" the ban)s thesis sho's

that the payees %i% not hae )no'le%ge of the e?istence

of the chec)s$ T6/s #> o >$o


37/83

NEGO

ha% the !esponsibility to asce!tain the !egula!ity of the

in%o!se(ents" an% the genuineness of the signatu!es on

the chec)s befo!e accepting the( fo!

%eposit$ 5astly" PN3 'as obligate% to pay the chec)s in

st!ict acco!%ance 'ith the inst!uctions of the

%!a'e!s$ Petitione! (ise!ably faile% to %ischa!ge thisbu!%en$

&he chec)s 'e!e p!esente% to PN3 fo! %eposit

by a !ep!esentatie of PEMS5, absent any type of

in%o!se(ent" fo!ge% o! othe!'ise$ &he facts clea!ly sho'

that the ban) %i% not pay the chec)s in st!ict acco!%ance

'ith the inst!uctions of the %!a'e!s" !espon%ents-

spouses$ Instea%" it pai% the alues of the chec)s not to

the na(e% payees o! thei! o!%e!" but to PEMS5," a thi!%

pa!ty to the t!ansaction bet'een the %!a'e!s an% the

payees$

Mo!eoe!" PN3 'as negligent in the selection

an% supe!ision of its e(ployees$ &he t!ust'o!thiness of

ban) e(ployees is in%ispensable to (aintain the stability

of the ban)ing in%ust!y$ &hus" ban)s a!e enoine% to be

e?t!a igilant in the (anage(ent an% supe!ision of thei!

e(ployees$ In#an$ of the "hilippine Islands v. Court of

Appeals"Q/2this Cou!t cautione% thus:

3an)s han%le %aily t!ansactions

inoling (illions of pesos$ 3y the e!y

natu!e of thei! 'o!) the %eg!ee of

!esponsibility"

ca!e an% t!ust'o!thiness

e?pecte% of thei! e(ployees an%

officials is fa! g!eate! than those of

o!%ina!y cle!)s an% e(ployees$ ;o!

obious !easons" the ban)s a!e e?pecte%

to e?e!cise the highest %eg!ee of

%iligence in the selection an%

supe!ision of thei! e(ployees$Q/

PN3s telle!s an% office!s" in iolation of ban)ing

!ules of p!oce%u!e" pe!(itte% the inali% %eposits of

chec)s to the PEMS5, account$ In%ee%" 'hen it is the

g!oss negligence of the ban) e(ployees that cause% the

loss" the ban) shoul% be hel% liable$Q/


38/83

NEGO

Co(pletion an% Delie!y:

#2Republic of the Philippines

SUPREME COURT

Manila

&IRD DIISION

G.R. No. 19++0 Oto8 23, 2013

TNG TNG PUA,Petitione!"s$

SPOUSES 'ENTO LO 'UN TONG #$%

CAROLNE SO CHNG TENG,Respon%ents$

R E S O 5 G & I O N

ELASCO, 4R.,J.:

Gn%e! consi%e!ation is the Motion fo! Reconsi%e!ation

inte!pose% by petitione! &ing &ing Pua Pua8 of ou!

Resolution %ate% ,p!il 1*" /61/ effectiely affi!(ing the

Decision1an% Resolution/%ate% Ma!ch 01" /611 an%

Septe(be! /" /611" !espectiely" of the Cou!t of

,ppeals C,8 In C,- .$R$ C No$ +0


39/83

NEGO

So(eti(e in Septe(be! 1++" 'hen thei! financial

situation tu!ne% bette!" !espon%ents allege%ly calle% an%

as)e% petitione! Pua fo! the co(putation of thei! loan

obligations$16ence" petitione! han%e% the( a

co(putation %ate% Octobe! /" 1++11'hich sho'e% that"

at the ag!ee% /F co(poun%e% inte!est !ate pe! (onth"the a(ount of the loan payable to petitione! !ose to

thi!teen (illion t'o hun%!e% eighteen thousan% fie

hun%!e% fo!ty-fou! pesos an% /6166 7PhP

10"/1*"2@@$/68$1/On !eceiing the co(putation" the

!espon%ents as)e% petitione! to !e%uce thei! in%ebte%ness

to PhP *"266"666$10anting to get pai% the soonest

possible ti(e" petitione! Pua ag!ee% to the lo'e!e%

a(ount$1@

Respon%ents then %elie!e% to petitione! ,siat!ust Chec)

No$ 3ND62


40/83

NEGO

&he 'itness fo! the !espon%ents" Ms$ &ua9on" testifie%

that !espon%ent Ca!oline opene% ,siat!ust ,ccount No$

2210-662@-+ in Septe(be! 1++@$0/She clai(e% that the

ae!age (aintaining balance of !espon%ent Ca!oline 'as

PhP /"666 an% the highest a(ount issue% by Ca!oline

f!o( he! account 'as PhP @02"666$00

She (aintaine%that !espon%ent Ca!oline ha% al'ays co(plete% he!

chec)s 'ith he! o'n han%'!iting an% not 'ith a chec)

'!ite!$ On Octobe! 12" 1++" Ca!olineTs chec)ing

account 'as close% at the instance of the ban) %ue to +

instances of chec) issuance against insufficient

balance$0@

,fte! t!ial" the R&C issue% its Decision %ate% anua!y 01"

/66 in fao! of petitione!$ In hol%ing thus" the R&C

state% that the possession by petitione! of the chec)s

signe% by Ca!oline" un%e! the Negotiable Inst!u(ents

5a'" !aises the p!esu(ption that they 'e!e issue% an%

%elie!e% fo! a aluable consi%e!ation$ On the othe!

han%" the cou!t a quo %iscounte% the testi(ony fo! the

%efense co(pletely %enying !espon%entsT loan obligation

to Pua$02

&he t!ial cou!t" ho'ee!" !efuse% to o!%e! !espon%ents to

pay petitione! the a(ount of PhP *"266"666 consi%e!ing

that the ag!ee(ent to pay inte!est on the loan 'as not

e?p!essly stipulate% in '!iting by the pa!ties$ &he R&C"

instea%" o!%e!e% !espon%ents to pay the p!incipal a(ount

of the loan as !ep!esente% by the 1< chec)s plus legal

inte!est f!o( the %ate of %e(an%$ ,s !ectifie%"0the

%ispositie po!tion of R&CTs Decision !ea%s:

Defen%ant-spouses 3enito 5o 3un &iong an% Ca!oline

Sio) Ching &eng" a!e he!eby o!%e!e% ointly an%

soli%a!ily:

1$ &o pay plaintiff P

1"+


41/83

NEGO

Clea!ly" the issue in the p!esent case is factual in natu!e

as it inoles an inqui!y into the e!y e?istence of the

%ebt suppose%ly o'e% by !espon%ents to petitione!$

&he gene!al !ule is that this Cou!t in petitions fo! !eie'

on ce!tio!a!i only conce!ns itself 'ith questions of la'"

not of fact"@1the !esolution of factual issues being the

p!i(a!y function of lo'e! cou!ts$@/o'ee!" see!al

e?ceptions hae been lai% %o'n by u!isp!u%ence to

allo' the sc!utiny of the factual a!gu(ents a%ance% by

the conten%ing pa!ties" i9: 718 the conclusion is

g!oun%e% on speculations" su!(ises o! conectu!es= 7/8

the infe!ence is (anifestly (ista)en" absu!% o!

i(possible = 708 the!e is g!ae abuse of %isc!etion= 7@8 the

u%g(ent is base% on a (isapp!ehension of facts= 728 the

fin%ings of fact a!e conflicting = 78 the!e is no citation of

specific ei%ence on 'hich the factual fin%ings a!e

base%= 7


42/83

NEGO

se(inal case of 5o9ano $ Ma!tine9"26e pointe% out

that a chec) functions (o!e than a p!o(isso!y note since

it not only contains an un%e!ta)ing to pay an a(ount of

(oney but is an o!%e! a%%!esse% to a ban) an% pa!ta)es

of a !ep!esentation that the %!a'e! has fun%s on %eposit

against 'hich the chec) is %!a'n" sufficient to ensu!epay(ent upon its p!esentation to the ban)$21&his Cou!t

!eite!ate% this !ule in the !elatiely !ecent 5i( $

Min%anao ines an% 5iquou! .alle!ia stating that a

chec)" the ent!ies of 'hich a!e in '!iting" coul% p!oe a

loan t!ansaction$2/&his e!y sa(e p!inciple un%e!pins

Section /@ of the Negotiable Inst!u(ents 5a' 7NI58:

Section /@$ P!esu(ption of consi%e!ation$ U Ee!y

negotiable inst!u(ent is %ee(e% p!i(a facie to hae

been issue% fo! a aluable consi%e!ation= an% ee!y

pe!son 'hose signatu!e appea!s the!eon to hae beco(e

a pa!ty fo! alue$

Consequently" the 1< o!iginal chec)s" co(plete% an%

%elie!e% to petitione!" a!e sufficient by the(seles to

p!oe the e?istence of the loan obligation of the

!espon%ents to petitione!$ Note that !espon%ent Ca!oline

ha% not %enie% the genuineness of these

chec)s$20Instea%" !espon%ents a!gue that they 'e!e gien

to a!ious othe! pe!sons an% petitione! ha% si(ply

collecte% all these 1< chec)s f!o( the( in o!%e! to

%a(age !espon%entsT !eputation$2@&his account is not

only inc!e%ible= it !uns counte! to hu(an e?pe!ience" as

ensh!ine% in Sec$ 1 of the NI5 'hich p!oi%es that

'hen an inst!u(ent is no longe! in the possession of the

pe!son 'ho signe% it an% it is co(plete in its te!(s a

ali% an% intentional %elie!y by hi( is p!esu(e% until

the cont!a!y is p!oe%$

&he appellate cou!tTs ustification in giing c!e%it to

!espon%entsT contention that the !espon%ents ha%

%elie!e% the 1< chec)s to pe!sons othe! than petitione!

lies on the suppose% failu!e of petitione! to establish fo!'hose accounts Qthe chec)s 'e!e %eposite% an%

subsequently %ishono!e%$22&his is clea!ly cont!a!y to

the ei%ence on !eco!%$ It see(s that the appellate cou!t

oe!loo)e% the o!iginal copies of the ban) !etu!n slips

offe!e% by petitione! in ei%ence$ &hese !etu!n slips

sho' that the 1+** chec)s issue% by !espon%ent Ca!oline

'e!e %ishono!e% by the %!a'ee ban)s because they 'e!e

%!a'n against insufficient fun%s$2;u!the!" a close

sc!utiny of these !etu!n slips 'ill !eeal that the chec)s

'e!e %eposite% eithe! in petitione!Ts account2


43/83

NEGO

Clea!ly" !espon%entsT %efense that Ca!oline left blan)

chec)s 'ith petitione!Ts siste! 'ho" it is sai%" is no'

%ete!(ine% to !ecoup he! past losses an% b!ing financial

!uin to !espon%ents by falsifying the sa(e blan) chec)s"

ha% al!ea%y been tho!oughly passe% upon an% !eecte%

by this Cou!t$ It cannot" the!efo!e" be use% to suppo!t!espon%entsT %enial of thei! liability$

Respon%entsT othe! %efenses a!e equally unconincing$

&hey asse!t that petitione! coul% not hae accepte% a

chec) 'o!th PhP *$2 (illion consi%e!ing that she shoul%

hae )no'n that !espon%ent Ca!oline ha% issue% see!al

chec)s fo! PhP /2"666 each in fao! of 5ilian an% all of

the( ha% bounce%$2Nee%less to state" an act %one

cont!a!y to la' cannot be sustaine% to %efeat a legal

obligation= !epeate% failu!e to hono! obligations coe!e%

by see!al negotiable inst!u(ents cannot se!e to %efeat

yet anothe! obligation coe!e% by anothe! inst!u(ent$

In%ee%" it see(s that !espon%ent Ca!oline ha% %isplaye%

a caalie! attitu%e to'a!%s the alue" an% the obligation

conco(itant 'ith the issuance" of a chec)$ ,s atteste% to

by !espon%entsT e!y o'n 'itness" !espon%ent Ca!oline

has a %ocu(ente% histo!y of issuing insufficiently

fun%e% chec)s fo! + ti(es" at the e!y least$&his fact

alone bolste!s petitione!Ts allegation that the chec)s

%elie!e% to he! by !espon%ent Ca!oline 'e!e si(ila!ly

not fun%e%$

In Mag%i'ang Realty Co!p$ $ Manila 3an)ing Co!p$"

e st!esse% that the quantu( of ei%ence !equi!e% inciil casesAp!epon%e!ance of ei%enceAis a ph!ase

'hich" in the last analysis" (eans p!obability to t!uth$ It

is ei%ence 'hich is (o!e conincing to the cou!t as

'o!thie! of belief than that 'hich is offe!e% in

opposition the!eto$


44/83

NEGO

#

"RST )SON

SAN MGUEL CORPORATON, G.R. N

"etitioner"

P!esent:

CORO

- e!sus - C,RPI

E5,

DE5 C

PEREL

'ARTOLOME PUON, 4R., P!o(ul

espondent$ Septe(

? - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - - - - - ?

) E C S O N

)EL CASTLLO,J.:

&his petition fo! !eie' assails the Dece(be! /1" /66@

DecisionQ1an% Ma!ch /*" /662 ResolutionQ/of the Cou!t of

,ppeals 7C,8 in C,-.$R$ SP No$ *0+62" 'hich %is(isse% the

petition befo!e it an% %enie% !econsi%e!ation" !espectiely$Factual Antecedents

Respon%ent

3a!tolo(e $ Pu9on" !$" 7Pu9on8 o'ne! of

3a!ten(y) Ente!p!ises" 'as a %eale! of bee! p!o%ucts of

petitione! San Miguel Co!po!ation 7SMC8

fo! Pa!aaque City$ Pu9on pu!chase% SMC p!o%ucts on

c!e%it$ &o ensu!e pay(ent an% as a business p!actice" SMC

!equi!e% hi( to issue post%ate% chec)s equialent to the alue

of the p!o%ucts pu!chase% on c!e%it befo!e the sa(e 'e!e

!elease% to hi($ Sai% chec)s 'e!e !etu!ne% to Pu9on 'hen the

t!ansactions coe!e% by these chec)s 'e!e pai% o! settle% in

full$

44
http://sc.judiciary.gov.ph/jurisprudence/2010/september2010/167567.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2010/september2010/167567.htm#_ftn3http://sc.judiciary.gov.ph/jurisprudence/2010/september2010/167567.htm#_ftn2http://sc.judiciary.gov.ph/jurisprudence/2010/september2010/167567.htm#_ftn3


45/83


46/83

NEGO

PGRC,SED ON CREDI& SOG5D

&E &R,NS,C&IONS COERED 3H

&ESE CECS Q3E SE&&5ED ON

Q&E M,&GRI&H D,&ES &EREO;

COG5D 3E 5IENED &O ,

CON&R,C& O; P5ED.E$

IE&ER 4 4 4 SMC ,D

ES&,35ISED PRO3,35E C,GSE &O

GS&I;H &E INDIC&MEN& O;

PGLON ;OR &E CRIME O; &E;&

PGRSG,N& &O ,R&$ 06* O; &E

REISED PEN,5 CODE$Q*

Petitioner$s Arguments

SMC conten%s that Pu9on 'as positiely i%entifie% by its

e(ployees to hae ta)en the subect post%ate% chec)s$ It also

conten%s that o'ne!ship of the chec)s 'as t!ansfe!!e% to it

because these 'e!e issue%" not (e!ely as secu!ity but 'e!e" in

pay(ent of Pu9ons pu!chases$ SMC points out that it has

establishe% (o!e than sufficient p!obable cause to ustify the

in%ict(ent of Pu9on fo! the c!i(e of &heft$Respondents Arguments

On the othe! han%" Pu9on conten%s that SMC !aises questions

of fact that a!e beyon% the p!oince of an appeal

on certiorari$ e also insists that the!e is no p!obable cause to

cha!ge hi( 'ith theft because the subect chec)s 'e!e issue%

only as secu!ity an% he the!efo!e !etaine% o'ne!ship of the

sa(e$Ou Ru/$g

&he petition has no (e!it$Preliminary "atters

,t the outset 'e fin% that as pointe% out by Pu9on" SMC

!aises questions of fact$ &he !esolution of the fi!st issue !aise%

by SMC of 'hethe! !espon%ent stole the subect chec)" 'hich

calls fo! the Cou!t to %ete!(ine 'hethe! !espon%ent is guilty of

a felony" fi!st !equi!es that the facts be %uly establishe% in the

p!ope! fo!u( an% in acco!% 'ith the p!ope! p!oce%u!e$ &his

issue cannot be !esole% base% on (e!e allegations of facts

an% affi%aits$ &he sa(e is t!ue 'ith the secon% issue !aise%

by petitione!" to 'it: 'hethe! the chec)s issue% by Pu9on 'e!e

pay(ents fo! his pu!chases o! 'e!e inten%e% (e!ely as

secu!ity to ensu!e pay(ent$ &hese issues cannot be p!ope!ly

!esole% in the p!esent petition fo! !eie' on certiorari'hich

is !oote% (e!ely on the !esolution of the p!osecuto! fin%ing no

p!obable cause fo! the filing of an info!(ation fo! theft$&he thi!% issue !aise% by petitione!" on the othe! han%" 'oul%

entail entu!ing into constitutional (atte!s fo! a co(plete

!esolution$ &his !oute is unnecessa!y in the p!esent case

consi%e!ing that the (ain (atte! fo! !esolution he!e only

conce!ns g!ae abuse of %isc!etion an% the e?istence of

p!obable cause fo! theft" 'hich at this point is (o!e p!ope!ly

!esole% th!ough anothe! (o!e clea! cut !oute$Pro%a%le ause for &heft

P!obable cause is %efine% as such facts an% ci!cu(stances that'ill engen%e! a 'ell-foun%e% belief that a c!i(e has been

co((itte% an% that the !espon%ent is p!obably guilty the!eof

an% shoul% be hel% fo! t!ial$Q+On the fine points of the

%ete!(ination of p!obable cause"eyes v. "earl'an$

Securities! Inc.Q16co(p!ehensiely elabo!ate% that:

&he %ete!(ination of Qthe e?istence o!

absence of p!obable cause lies 'ithin the

%isc!etion of the p!osecuting office!s afte!

con%ucting a p!eli(ina!y inestigation upon

co(plaint of an offen%e% pa!ty$ &hus" the

%ecision 'hethe! to %is(iss a co(plaint o!

not is %epen%ent upon the soun% %isc!etion

of the p!osecuting fiscal$ e (ay %is(iss

the co(plaint fo!th'ith"

Documents

Requisites of Negotiability Full Text