Section 10JIMENEZ vs BUCOY

103 Phil. 40 – Mercantile Law – Negotiable Instruments Law – Negotiable Instruments in General – Unconditional Promise To Pay 

During the Japanese occupation, Pacita Young issued three promissory notes to Pacifica Jimenez. The total sum of the notes was P21k. All three promissory notes were couched in this manner:Received from Miss Pacifica Jimenez the total amount of ___________ payable six months after the war, without interest.

When the promissory notes became due, Jimenez presented the notes for payment. Pacita and her husband died and so the notes were presented to the administrator of the estate of the spouses (Dr. Jose Bucoy). Bucoy manifested his willingness to pay but he said that since the loan was contracted during the Japanee occupation the amount should be deducted and the Ballantyne Schedule should be used, that is peso-for-yen (which would lower the amount due from P21k). Bucoy also pointed out that nowhere in the not can be seen an express “promise” to pay because of the absence of the words “I promise to pay…”ISSUE: Whether or not Bucoy is correct.HELD: No. The Ballantyne schedule may not be used here because the debt is not payable during the Japanese occupation. It is expressly stated in the notes that the amounts stated therein are payable “six months after the war”. Therefore, no reduction could be effected, and peso-for-peso payment shall be ordered in Philippine currency.The notes also amounted in effect to a promise to pay the amounts indicated therein. An acknowledgment may become a promise by the addition of words by which a promise of payment is naturally implied, such as, “payable,” “payable” on a given day, “payable on demand,” “paid . . . when called for,” . . . To constitute a good promissory note, no precise words of contract are necessary, provided they amount, in legal effect, to a promise to pay. In other words, if over and above the mere acknowledgment of the debt there may be collected from the words used a promise to pay it, the instrument may be regarded as a promissory note.

Section 12Pacheco vs CA

D E C I S I O NYNARES_SANTIAGO, J.:

Petitioner spouses are engaged in the construction business. Complainant Romualdo Vicencio was a former Judge and his wife, Luz Vicencio, owns a pawnshop in Samar. On May 17, 1989, due to financial difficulties arising from the repeated delays in the payment of their receivables for the construction projects from the DPWH,[1] petitioners were constrained to obtain a loan of P10,000.00 from Mrs. Vicencio. The latter acceded. Instead of merely requiring a note of indebtedness, however, her husband Mr. Vicencio required petitioners to issue an undated check as evidence of the loan which allegedly will not be presented to the bank. Despite being informed by petitioners that their bank account no longer had any funds, Mrs. Vicencio insisted that they issue the check, which according to her was only a formality. Thus, petitioner Virginia Pacheco issued on May 17, 1989 an undated RCBC[2] check with number CT 101756 for P10,000.00. However, she only received the amount of P9,000.00 as the 10% interest on the loan was already deducted. Mrs. Vicencio also required Virginias husband, herein petitioner Ernesto Pacheco, to sign the check on the same understanding that the check is not to be encashed but merely intended as an evidence of indebtedness which cannot be negotiated.

On June 14, 1989, Virginia obtained another loan of P50,000.00 from Mrs. Vicencio. She received only P35,000.00 as the previous loan of P10,000.00 as well as the 10% interest amounting to P5,000.00 on the new loan were deducted by the latter. With the payment of the previous debt, Virginia asked for the return of the first check (RCBC check no. 101756) but Mrs. Vicencio told her that her filing clerk was absent. Despite several demands for the return of the first check, Mrs. Vicencio told Virginia that they can no longer locate the folder containing that check. For the new loan, she also required Virginia to issue three (3) more checks in various amounts two checks for P20,000.00 each and the third check for P10,000.00. Petitioners were not amenable to these requirements, but Mrs. Vicencio insisted that they issue the same assuring them that the checks will not be presented to the banks but will merely serve as guarantee for the loan since there was no promissory note required of them. Due to her dire financial needs, Virginia issued three undated RCBC checks numbered 101783 and 101784 in the sum of P20,000.00 each and 101785 for P10,000.00, and again informed Mrs. Vicencio that the checks cannot be encashed as the same were not funded. Petitioner Ernesto also signed the three checks as required by Mrs. Vicencio on the same conditions as the first check.

On June 20 and July 21, 1989, petitioner Virginia obtained two more loans, one for P10,000.00 and another for P15,000.00. Again she issued two more RCBC checks (No. 101768 for P10,000.00 and No. 101774 for P15,000.00) as required by Mrs. Vicencio with the same assurance that the checks shall not be presented for payment but shall stand only as evidence of indebtedness in lieu of the usual promissory note.

All the checks were undated at the time petitioners handed them to Mrs. Vicencio. The six checks represent a total obligation of P85,000.00. However, since the loan of P10,000.00 under the first check was already paid when the amount thereof was deducted from the proceeds of the second loan, the remaining account was only P75,000.00. Of this amount, petitioners were able to settle and pay in cash P60,000.00 in July 1989. Petitioners never had any transaction nor ever dealt with Mrs. Vicencios husband, the complainant herein.

When the remaining balance of P15,000.00 on the loans became due and demandable, petitioners were not able to pay despite demands to do so. On August 3, 1992, Mrs. Vicencio together with her husband and their daughter Lucille, went to petitioners residence to persuade Virginia to place the date August 15, 1992 on checks nos. 101756 and 101774, although said checks were respectively given undated to Mrs. Vicencio on May 17, 1989 and July 21, 1989. Check no. 101756 was required by Mrs. Vicencio to be dated as additional guarantee for the P15,000.00 unpaid balance allegedly under check no. 101774. Despite being informed by petitioner Virginia that their account with RCBC had been closed as early as August 17, 1989, Mrs. Vicencio and her daughter insisted that she place a date on the checks allegedly so that it will become evidence of their indebtedness. The former reluctantly wrote the date on the checks for fear that she might not be able to obtain future loans from Mrs. Vicencio.

Later, petitioners were surprised to receive on August 29, 1992 a demand letter from Mrs. Vicencios spouse informing them that the checks when presented for payment on August 25, 1992 were dishonored due to Account Closed. Consequently, upon the complaint of Mrs. Vicencios husband with whom petitioners never had any transaction, two informations for estafa, defined in Article 315(2)(d) of the Revised Penal Code, were filed against them. The informations which were amended on April 1, 1993 alleged that petitioners through fraud and false pretenses and in payment of a diamond ring (gold necklace) issued checks which when presented for payment were dishonored due to account closed.[3] After entering a plea of not guilty during arraignment, petitioners were tried and sentenced to suffer imprisonment and ordered to indemnify the complainant in the total amount of P25,000.00.[4] On appeal, the Court of Appeals (CA) affirmed the decision of the court a quo.[5] Hence this petition.

Estafa may be committed in several ways. One of these is by postdating a check or issuing a check in payment of an obligation, as provided in Article 315, paragraph 2(d) of the RPC, viz:

ART. 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:

x x x x x x x x x

2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud:

x x x x x x x x x

(d) By postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check. The failure of the drawer of the check to deposit the amount necessary to cover his check within three (3) days from receipt of notice from the bank and/or the payee or holder that said check has been dishonored for lack or insufficiency of funds shall be prima facie evidence of deceit constituting false pretense or fraudulent act.

The essential elements in order to sustain a conviction under the above paragraph are:

1. that the offender postdated or issued a check in payment of an obligation contracted at the time the check was issued;

2. that such postdating or issuing a check was done when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check;

3. deceit or damage to the payee thereof.[6]

The first and third elements are not present in this case. A check has the character of negotiability and at the same time it constitutes an evidence of indebtedness. By mutual agreement of the parties, the negotiable character of a check may be waived and the instrument may be treated simply as proof of an obligation. There cannot be deceit on the part of the obligor, petitioners herein, because they agreed with the obligee at the time of the issuance and postdating of the checks that the same shall not be encashed or presented to the banks. As per assurance of the lender, the checks are nothing but evidence of the loan or security thereof in lieu of and for the same purpose as a promissory note. By their own covenant, therefore, the checks became mere evidence of indebtedness. It has been ruled that a drawer who issues a check as security or evidence of investment is not liable for estafa.[7] Mrs. Vicencio could not have been deceived nor defrauded by

petitioners in order to obtain the loans because she was informed that they no longer have funds in their RCBC accounts. In 1992, when the Vicencio family asked Virginia to place a date on the check, the latter again informed Mrs. Vicencio that their account with RCBC was already closed as early as August 1989. With the assurance, however, that the check will only stand as a firm evidence of indebtedness, Virginia placed a date on the check. Under these circumstances, Mrs. Vicencio cannot claim that she was deceived or defrauded by petitioners in obtaining the loan. In the absence of the essential element of deceit,[8] no estafa was committed by petitioners.

Both courts below relied so much on the fact that Mrs. Vicencios husband is a former Judge who knows the law. He should have known, then, that he need not even ask the petitioners to place a date on the check, because as holder of the check, he could have inserted the date pursuant to Section 13 of the Negotiable Instruments Law (NIL).[9] Moreover, as stated in Section 14 thereof, complainant, as the person in possession of the check, has prima facie authority to complete it by filling up the blanks therein. Besides, pursuant to Section 12 of the same law, a negotiable instrument is not rendered invalid by reason only that it is antedated or postdated. [10] Thus, the allegation of Mrs. Vicencio that the date to be placed by Virginia was necessary so as to make the check evidence of indebtedness is nothing but a ploy. Petitioners openly disclosed and never hid the fact that they no longer have funds in the bank as their bank account was already closed. Knowledge by the complainant that the drawer does not have sufficient funds in the bank at the time it was issued to him does not give rise to a case for estafa through bouncing checks.[11]

Moreover, a check must be presented within a reasonable time from issue.[12] By current banking practice, a check becomes stale after more than six (6) months. In fact a check long overdue for more than two and one-half years is considered stale.[13] In this case, the checks were issued more than three years prior to their presentment. In his complaint, complainant alleged that petitioners bought jewelry from him and that he would not have parted with his jewelry had not petitioners issued the checks. The evidence on record, however, does not support the theory of the crime.

There were six checks given by petitioners to Mrs. Vicencio but only two were presented for encashment. If all were issued in payment of the alleged jewelry, why were not all the checks presented? There was a deliberate choice of these two checks as the total amount reflected therein is equivalent to the amount due under the unpaid obligation. The other checks, on the other hand, could not be used as the amounts therein do not jibe with the amount of the unpaid balance. Following complainants theory that he would not have sold the jewelries had not petitioners issued postdated checks, still no estafa can be imputed to petitioners. It is clear that the checks were not intended for encashment with the bank, but were delivered as mere security for the payment of the loan and under an agreement that

the checks would be redeemed with cash as they fell due. Hence, the checks were not intended by the parties to be modes of payment but only as promissory notes. Since complainant and his wife were well aware of that fact, they cannot now complain there was deception on the part of petitioners. Awareness by the complainant of the fictitious nature of the pretense cannot give rise to estafa by means of deceit.[14] When the payee was informed by the drawer that the checks are not covered by adequate funds it does not give rise to bad faith or estafa.[15]

Moreover, complainants allegations that the two subject checks were issued in 1992 as payment for the jewelry he allegedly sold to petitioners is belied by the evidence on record. First, complainant is not engaged in the sale of jewelry.[16] Neither are petitioners. If the pieces of jewelry were important to complainant considering that they were with him for more than twenty-five years already,[17] he would not have easily parted with them in consideration for unfunded personal checks in favor of persons whose means of living or source of income were unknown to him.[18] Applicable here is the legal precept that persons are presumed to have taken care of their business.[19]

Second, petitioners bank account with RCBC was opened on March 26, 1987 and was closed on April 17, 1989, during the span of which they were issued 10 check booklets with the last booklet issued on April 6, 1989. This last booklet contains 50 checks consecutively numbered from 101751 to 101800. The two subject checks came from this booklet. All the checks in this booklet were issued in the year 1989 including the two subject checks, so that the complainants theory that the jewelry were sold in 1992 cannot be believed.

The rule that factual findings of the trial court bind this court is not absolute but admits of exceptions such as when the conclusion is a finding grounded on speculation, surmise, and conjecture and when the findings of the lower court is premised on the absence of evidence and is contradicted by the evidence on record.[20] Based on the foregoing discussions, this Court is constrained to depart from the general rule. Equally applicable is what Vice-Chancellor Van Fleet once said:[21]

Evidence to be believed must not only proceed from the mouth of a credible witness but must be credible in itself such as the common experience and observation of mankind can approve as probable under the circumstances. We have no test of the truth of human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous, and is outside of judicial cognizance.

Petitioners, however, are not without liability. An accused acquitted of a criminal charge may nevertheless be held civilly liable in the same case where the facts established by the evidence so warrant.[22]Based on the

records, they still have an outstanding obligation of P15,000.00 in favor of Mrs. Vicencio. There was mention that the loan shall earn interests. However, an agreement as to payment of interest must be in writing, otherwise it cannot be valid,[23] although there was actual payment of interests by virtue of the advance deductions from the loan. Once the judgment becomes final and executory, the amount due is deemed equivalent to a forbearance of credit during the interim period from the finality of judgment until full payment, in which case it shall earn legal interest at the rate of twelve per cent (12%) per annum pursuant to Central Bank (CB) Circular No. 416.[24]

WHEREFORE, the assailed Decision is REVERSED and SET ASIDE. Petitioners are ACQUITTED of the charge of estafa but they are ORDERED to pay Mrs. Vicencio the amount of P15,000.00 without interest. However, from the time this judgment becomes final and executory, the amount due shall earn legal interest of twelve percent (12%) per annum until full payment.

SO ORDERED.

Pp vs Tongko

PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROBERTO TONGKO, accused-appellant.

D E C I S I O NPUNO, J.:

This is an appeal by accused Roberto Tongko from the Decision of the RTC of Pasig City, Branch 156 finding him guilty of estafa under Article 315(2)(d) of the Revised Penal Code. He was sentenced to suffer twenty seven (27) years of reclusion perpetua and to indemnify Carmelita V. Santos by way of actual damages in the sum of P100,000.00 and to pay the cost of suit.

Accused was charged under the following Information:

"That on or about the 20th day of August, 1993, in the Municipality of Pasig, Metro Manila, Philippines and within the jurisdiction of this Honorable Court, the above-named accused, by means of deceit and false pretenses committed prior to or simultaneously with the commission of the fraudulent acts, did then and there willfully, unlawfully and feloniously make or draw and issue to one, Carmelita Santos to apply on account or for value, the check described below:

BANK CHECK NO. DATE AMOUNT

Phil. Amanah Bank 203729 12-20-93 P10,000.00

Phil. Amanah Bank 203730 12-20-93 10,000.00

Phil. Amanah Bank 203731 12-20-93 10,000.00

Phil. Amanah Bank 203732 12-20-93 10,000.00

Phil. Amanah Bank 203733 12-20-93 10,000.00

Phil. Amanah Bank 203737 12-20-93 10,000.00

Phil. Amanah Bank 203738 12-20-93 10,000.00

Phil. Amanah Bank 203739 12-20-93 10,000.00

Phil. Amanah Bank 203740 12-20-93 10,000.00

Phil. Amanah Bank 203741 12-20-93 10,000.00

said accused well knowing at the time of issue he did not have sufficient funds in or credit with the drawee bank for the payment in full of the face amount of such check upon presentment which check when presented for payment within ninety (90) days from the date thereof was subsequently dishonored by the drawee bank for the reason "Account Closed" and despite the lapse of three (3) banking days from receipt of notice that said check has been dishonored, the accused failed to pay said payee the face amount of such check or to make arrangement for full payment thereof, to the damage and prejudice of said Carmelita Santos in the total amount of P100,000.00.

CONTRARY TO LAW."

Accused pled not guilty and underwent trial.The evidence for the prosecution shows that on September 21, 1990,

accused opened savings and current accounts with Amanah Bank. [1] In the morning of August 20, 1993, Marites Bo-ot brought the accused to the office of Carmelita V. Santos at Room 504 Pacific Place, Pearl Drive, Ortigas Center, Pasig City to borrow money.[2] The accused asked for P50,000.00 to be paid not later than December 1993.[3] He assured Santos that his receivables would come in by November 1993. He persuaded Santos to give the loan by issuing five (5) checks, each in the sum of P10,000.00, postdated December 20, 1993 and by signing a promissory note.[4] The promissory note was co-

signed by Bo-ot. In the afternoon of the same date, the accused returned to Santos and borrowed an additional P50,000.00. Again, he issued five (5) checks, each worth P10,000.00 postdated December 20, 1993. He also signed a promissory note together with Bo-ot.[5]

On September 14, 1993, Amanah Bank closed accused's current account for lack of funds. On October 19, 1993, accused himself requested for the closing of his savings account.[6]

Santos did not present accused's checks to the drawee bank on their due date upon the request of accused himself.[7] Instead, the checks were presented on March 1, 1994 but were dishonored as accused's accounts had been closed.[8] Accused was informed that his checks had bounced. He promised to make good the checks. He failed to redeem his promise, hence, the case at bar.[9]

The accused testified for himself. Nobody corroborated his testimony. He admitted the evidence of the prosecution but alleged that the postdated checks were issued a day or two after he signed the promissory notes.[10] Obviously, he was relying on the defense that the checks were in payment of a pre-existing obligation.

As aforestated, the trial court convicted the accused. He appealed to this Court and changed his counsel.[11] He now contends:"I

THE TRIAL COURT ERRED IN HOLDING THAT THE ISSUANCE OF THE TEN (10) POSTDATED CHECKS (EXHS. "C" TO "L") BY THE ACCUSED-APPELLANT CONSTITUTED FRAUD WHICH INDUCED THE PRIVATE COMPLAINANT TO EXTEND THE LOANS. IT IS RESPECTFULLY SUBMITTED THAT THE INDUCEMENT WAS THE EXECUTION OF THE TWO (2) PROMISSORY NOTES AS WELL AS THE CO-SIGNING THEREOF BY MA. THERESA DEL ROSARIO BO-OT (WHO INTRODUCED ACCUSED-APPELLANT TO PRIVATE COMPLAINANT), IN A JOINT AND SEVERAL CAPACITY.

IITHE TRIAL COURT ERRED IN NOT HOLDING THAT THE POST-DATED

CHECKS WERE IN PAYMENT OF PRE-EXISTING OBLIGATIONS.III

THE TRIAL COURT ERRED IN FINDING THE ACCUSED-APPELLANT GUILTY OF ESTAFA AS CHARGED, AND IN IMPOSING A STIFF PRISON TERM OF 27 YEARS OF RECLUSION PERPETUA, A PENALTY "TOO HARSH AND OUT OF PROPORTION" AS TO BE VIOLATIVE OF THE CONSTITUTION."

The appeal is without merit.

Estafa, under Article 315, paragraph 2(d) of the Revised Penal Code, as amended by Republic Act No. 4885, has the following elements: (1) postdating or issuance of a check in payment of an obligation contracted at the time the check was issued; (2) lack of sufficiency of funds to cover the check; and (3) damage to the payee thereof.

To avoid the first element, appellant contends that he was able to borrow P100,000.00 from Santos due to the promissory notes he co-signed with Bo-ot and not due to the postdated checks he issued. We reject this contention. Firstly, this contention was contrived only after appellant's conviction in the trial court. The records show that appellant did not raise this defense in the trial court. He cannot fault the trial court for failing to consider a defense which he never raised. Secondly, Santos is the best person who can testify on what induced her to lendP100,000.00 to the appellant. Santos categorically declared that it was the issuance of postdated checks which persuaded her to part with her money. We quote her testimony, viz.:[12]

"Q What happened to those checks you mentioned in the promissory note?

A When presented to the bank they were all returned by the bank for reason, account closed.

Q Before this was deposited to the bank when the accused came to your office and loaned money from you, what was his representation if any to you?

A That his collection will come in by Nov. 1993 and also the checks issued to me will be definitely funded on the date that it will become due.

Q Were you persuaded as a result of the statement of the accused that these checks will be good that you parted away the amount?

A Yes, sir."There is likewise no merit to the submission of appellant that his

postdated checks were in payment of a pre-existing obligation. Again, we note appellant's change of theory in foisting this argument. In the trial court, appellant testified that he issued the postdated checks, thru Bo-ot, a day or two after he obtained the P100,000.00 loan from Santos.[13] The falsity of the uncorroborated claim, however, is too obvious and the trial court correctly rejected it. The claim cannot succeed in light of Santos' testimony that the issuance of said checks persuaded her to grant the loans. A look at the two promissory notes will show that they bear the date August 20, 1993 and they referred to the postdated checks issued by the appellant. There could be no reference to the postdated checks if they were issued a day or two after the loans. In this appeal, however, appellant offers the new thesis that since the checks were postdated December 1993, ergo, they were issued in payment

of the P100,000.00 he got from Santos on August 20, 1993. The postdating of the checks to December 1993 simply means that on said date the checks would be properly funded. It does not mean that the checks should be deemed as issued only on December 1993.

Lastly, appellant contends that the penalty of twenty seven (27) years of reclusion perpetua is too harsh and out of proportion to the crime he committed. He submits that his sentence violates section 19(1), Article III of the Constitution which prohibits the infliction of cruel, degrading or inhuman punishment. We are not persuaded. In People v. de la Cruz,[14] we held that "x x x the prohibition of cruel and unusual punishments is generally aimed at the form or character of the punishment rather than its severity in respect of duration or amount, and apply to punishments which never existed in America or which public sentiment has regarded as cruel or obsolete x x x for instance those inflicted at the whipping post, or in the pillory, burning at the stake, breaking on the wheel, disemboweling, and the like..." In People v. Estoista,[15] we further held:

"It takes more than merely being harsh, excessive, out of proportion, or severe for a penalty to be obnoxious to the Constitution. The fact that the punishment authorized by the statute is severe does not make it cruel and unusual. Expressed in other terms, it has been held that to come under the ban, the punishment must be "flagrantly and plainly oppressive," "wholly disproportionate to the nature of the offense as to shock the moral sense of the community."

The legislature was not thoughtless in imposing severe penalties for violation of par. 2(d) of Article 315 of the Revised Penal Code. The history of the law will show that the severe penalties were intended to stop the upsurge of swindling by issuance of bouncing checks. It was felt that unless aborted, this kind of estafa "... would erode the people's confidence in the use of negotiable instruments as a medium of commercial transaction and consequently result in the retardation of trade and commerce and the undermining of the banking system of the country."[16] The Court cannot impugn the wisdom of Congress in setting this policy.

IN VIEW WHEREOF, the Decision dated January 16, 1996 of the RTC of Pasig City, Br. 156 in Criminal Case No. 106614 convicting appellant is affirmed. Costs against appellant. SO ORDERED.Section 14Borromeo vs Sun

G.R. No. 75908. October 22, 1999PURISIMA, J

At bar is a Petition for review on Certiorari under Rule 45 of the Revised Rules of Court seeking to set aside the Resolution of the then Intermediate Appellate Court, which reversed its earlier Decision setting aside the Decision of the former Court of the First Instance of Rizal.

Facts: 

Amancio Sun brought before the then Court of the First Instance of Rizal 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., shares of stock registered in the name of Federico O. Borromeo, as evidenced by a Deed of Assignment. Private respondent averred that 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.' 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. LL

The lower court of origin came out with a decision declaring the questioned signature on subject Deed of Assignment as the genuine signature of Federico O. Borromeo. 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. On appeal by petitioners, the Court of Appeals adjudged as forgery the controverted signature of Federico O. Borromeo. Amancio Sun interposed a motion for reconsideration of the said decision, contending that Segundo Tabayoyong, petitioners' expert witness, is not a credible witness. Acting on the aforesaid motion for reconsideration, the Court of Appeals reconsidered its decision.

Issue: WON the signature of Frederico O. Borromeo in the Deed of Assignments is a genuine signature.

Held:

Pertinent records reveal that the subject Deed of Assignment is embodied in 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 Fernandez, 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 characteristic of Federico O. Borromeo's handwriting were present in all the exemplar signatures used by both Segundo Tabayoyong and Col. Jose Fernandez.

Ponce de Leon vs Rehab Finance Corp

On October 8, 1951, Jose Ponce De Leon and Francisco Soriano took out a loan from the Rehabilitation Finance Corporation or RFC (now Development Bank of the Philippines) for P495,000.00. The loan was secured by a parcel of land owned by Soriano. A deed of mortgage was then executed in view of the loan. Soriano and Ponce de Leon also executed a promissory note in the amount of P495k, payable in monthly installments of P28,831.64.Part of the P495k was used to pay off the previous encumbrances amounting to P135k on the property of Soriano. The rest were released to Ponce de Leon in various amounts from December 1951 to July 1952, still pursuant to the deed of mortgage.The loan went unpaid and so RFC initiated a foreclosure proceeding on the mortgaged property. According to RFC, the monthly payments were supposed to be due in October 1952.In his defense, Ponce de Leon insists that the amortizations never became due because allegedly, RFC did not complete the disbursement of the loan to

him (allegedly, P19k was withheld). He also invokes that on the face of the promissory note it was written that the installments have “no fixed or determined dates of payment”. Hence, the monthly payments were never due therefore the foreclosure is void. He insists that the court should first determine the date of maturity of the loan.ISSUE: Whether or not Ponce de Leon is right.HELD: No. During trial and based on the records, Ponce de Leon’s lawyer admitted that all the remainder of the loan was released to Ponce de Leon so he cannot invoke that not all of the P495k was released by RFC.Anent the issue of the loan’s maturity date, under Secs. 13 and 14 of the Negotiable Instruments Law, when a  promissory note expresses “no time for payment,” it is deemed “payable on demand.” Therefore, when RFC demanded payment on October 24, 1952, the installments become due.

Section 16

De La Victoria vs. BurgosG.R. No. 111190. June 27, 1995Bellosillo, J. Assistant City Fiscal Bienvenido N. Mabanto was ordered to pay herein private respondent Raul Sesbreño P11,000.00 as damages. A notice of garnishment was served on herein petitioner Loreto D. de la Victoria as City Fiscal of Mandaue City where Mabanto was detailed. V was directed not to disburse, transfer, release or convey to any other person except to the deputy sheriff concerned the salary checks or other checks, monies, or cash due or belonging to Mabanto, Jr., under penalty of law. Later, V was directed to submit his report showing the amount of the garnished salaries. V moved to quash the notice of garnishment claiming that he was not in possession of any money, funds, credit, property or anything of value belonging to Mabanto, Jr., except his salary and RATA checks, but that said checks were not yet properties of Mabanto, Jr., until delivered to him. He further claimed that, as such, they were still public funds which could not be subject to garnishment.

 ISSUE: W/N a check still in the hands of the maker or its duly authorized representative is owned by the payee before physical delivery to the latter. RULING: As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He receives his compensation in the form of checks from the DOJ through V as City Fiscal of Mandaue City and head of office. Under Sec. 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means the transfer of the possession of the instrument by the maker or drawer with intent to transfer title to the payee and recognize him as the holder thereof. Inasmuch as said checks had not yet been delivered to Mabanto, Jr., they did not belong to him and still had the character of public funds. The salary check of a government officer or employee does not belong to him before it is physically delivered to him. Until that time the check belongs to the government. Accordingly, before there is actual delivery of the check, the payee has no power over it; he cannot assign it without the consent of the Government. Being public fund, the checks may not be garnished to satisfy the judgment in consideration of public policy.

State Investment House Inc vs CA

GR No. 101163 January 11, 1993

Bellosillo, J.:

Facts:Nora Moulic issued to Corazon Victoriano, as security for pieces of

jewellery to be sold on commission, two postdated checks in the amount of fifty thousand each. Thereafter, Victoriano negotiated the checks to State Investment House, Inc. When Moulic failed to sell the jewellry, she returned it to Victoriano before the maturity of the checks. However, the checks cannot be retrieved as they have been negotiated. Before the maturity date Moulic withdrew her funds from the bank contesting that she incurred no obligation on the checks because the jewellery was never sold and the checks are

negotiated without her knowledge and consent. Upon presentment of for payment, the checks were dishonoured for insufficiency of funds.

Issues:1. Whether or not State Investment House inc. was a holder of the check in due course2. Whether or not Moulic can set up against the petitioner the defense that there was failure or absence of consideration

Held:

Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence shows that: on the faces of the post dated checks were complete and regular; that State Investment House Inc. bought the checks from Victoriano before the due dates; that it was taken in good faith and for value; and there was no knowledge with regard that the checks were issued as security and not for value. A prima facie presumption exists that a holder of a negotiable instrument is a holder in due course. Moulic failed to prove the contrary.No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for which they were issued and therefore is not a holder in due course.

No, Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke paragraphs c and d as possible grounds for the discharge of the instruments. Since Moulic failed to get back the possession of the checks as provided by paragraph c, intentional cancellation of instrument is impossible. As provided by paragraph d, the acts which will discharge a simple contract of payment of money will discharge the instrument. Correlating Article 1231 of the Civil Code which enumerates the modes of extinguishing obligation, none of those modes outlined therein is applicable in the instant case. Thus, Moulic may not unilaterally discharge herself from her liability by mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to excuse herself from liability on her check to a holder in due course. Moreover, the fact that the petitioner failed to give notice of dishonor is of no moment. The need for such notice is not absolute; there are exceptions provided by Sec 114 of NIL.

People vs Yabut

G.R. No. L-42902. April 29, 1977Martin, J. Accused Cecilia Que Yabut as treasurer and her husband Geminiano Yabut, Jr. as president of the Yabut Transit Line were charged with estafa for issuing several checks payable to the Free Tires Supply and Free Caltex Station owned and operated by Alicia P. Andan. The complaint alleged that the accused by means of false pretenses and pretending to have sufficient funds in the Merchants Banking Corporation and Manufacturers Bank and Trust Company in Caloocan City prepared, issued and made out several checks despite full knowledge that at the time there was no or insufficient funds in said bank, that upon presentation of the said checks, the checks were dishonored and inspite of repeated demands by Freeway to deposit the necessary funds to cover the checks within the reglementary period enjoined by law, the accused failed and refused to do so, to the damage and prejudice of Andan. Respondents instead of entering a plea respectively filed their motions for the quashal of the information citing as one of their reasons that the venue was improperly laid in Malolos, Bulacan, because the postdated checks were issued and delivered to, and received by the complainant in Caloocan. RULING:While the subject checks were written, signed, or dated in Caloocan City, they were not completely made or drawn there, but in Malolos (place of business and residence of the payee) where they were uttered and delivered. The place where the bills were written, signed, or dated does not necessarily fix or determine the place where they were executed. What is of decisive importance is the delivery thereof. The delivery of the instrument is the final actessential to its consummation as an obligation. An undelivered bill or note is inoperative. Until delivery, the contract is revocable. And the issuance as well as the delivery of the check must be to a person who takes it as a holder, which means “(t)he payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.” Delivery of the check signifies transfer of possession, whether actual or constructive, from one person to another with intent totransfer title thereto. Thus, the penalizing clause of the provision of Art. 315, par. 2 (d) states: “By postdating a check, or issuing a

check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check.” Clearly, therefore, the element of deceit thru the issuance and delivery of the worthless checks to the complainant took place in Malolos conferring upon a court in that locality jurisdiction to try the case.A prosecution for issuing a worthless check with intent to defraud is in the place where the check was uttered and delivered. The venue of the offense lies at the place where the check was executed and delivered to the payee. Since in the instant case it was in Malolos, Bulacan where the checks were uttered and delivered to complaint Andan, at which place, her business and residence were also located, the criminal prosecution of estafa may be lodged therein.The giving of the checks by the two private respondents in Caloocan City to Modesto Yambao cannot be treated as valid delivery of the checks, because Yambao is a mere “messenger” or “part-time employee” and not an agent of complaint Alicia P. Andan.

People vs Grospe

FACTS:Parolan was an authorized wholesale dealer of SMC.  He was charged with violations of BP22 and estafa for allegedly issuing checks in favor of SMC but  when  the  check  was  presented,  it  was  dishonored  for  having insufficiency  funds.    This  is  even  more  aggravated  by  the  allegation  that Paralan failed to make good the check to the prejudice of SMC.  

HELD:

Estafa  by  postdating  or  issuing  a  bad  check  may  be  a  transitory  or continuing  offense.    Its  basic  elements  of  deceit  and  damage  may  arise independently in separate places.  In this case, it did and jurisdiction may be conferred in any of the two places wherein the two elements arose.    For  while  the  subject  check  was  issued  in  Bulacan,  it  wasn't  completely drawn  thereat,  but  in  Pampanga.    What  is  of  decisive 

importance  is  the delivery thereof.  The delivery of the instrument is the final act essential to its  consummation  as  an  obligation.    For  although  the  check  was  received by   the   SMC   Supervisor   in   Bulacan,   that   was   not   delivery   in   the contemplation of law.  The rule is that the issuancve as well as the delivery of the check must be to a person who takes it as a holder, which  means the  payee  or  indorser  of  a  bill  or  note,  who  is  in  possession  of  it,  or  the bearer  thereof.    The  said  representative  had  to  forward  the  check  to  the SMC regional office, who thereafter forwarded it to the Finance Officer and later on to the depository bank.  

Lim vs. CAG.R. No. 107898. December 19, 1995Bellosillo, J. Manuel and Rosita Lim, spouses, andpresident and treasurer respectively of Rigi Bilt Industries, Inc., allegedly issued 7 Solidbank checks as payment for goods purchased from and delivered by Linton Commercial Company, Inc. When deposited with Rizal Commercial Banking Corporation, said checks were dishonored for “insufficiency of funds” with the additional notation “payment stopped” stamped thereon. Despite demand, spouses Lim refused to make good the checks or pay the value of the deliveries. The RTC held spouses Lim guilty of estafa and violation of BP22. On appeal, the CA acquitted accused-appellants of estafa on the ground that the checks were not made in payment of an obligation contracted at the time of their issuance but affirmed the finding that they were guilty of having violated B.P. Blg. 22. In the present case, petitioners maintain that the prosecution failed to prove that any of the essential elements of the crime punishable under B.P. Blg. 22 was committed within the jurisdiction of RTC-Malabon claiming that what was proved was that all the elements of the offense were committed in Kalookan City.

  RULING:

Under Sec. 191 NIL, the term “issue” means the first delivery of the instrument complete in form to a person who takes it as a holder. On the other hand, the term “holder” refers to the payee or indorsee of a bill or note who is in possession of it or the bearer thereof. Although LINTON sent a collector who received the checks from petitioners at their place of business in Kalookan City, they were actually issued and delivered to LINTON at its place of business in Balut, Navotas. The receipt of the checks by the collector of LINTON is not the issuance and delivery to the payee in contemplation of law. The collector was not the person who could take the checks as a holder, i.e., as a payee or indorsee thereof, with the intent to transfer title thereto. Neither could the collector be deemed an agent of LINTON with respect to the checks because he was a mere employee.Section 2 of B.P. Blg. 22 establishes a prima facie evidence of knowledge of insufficient funds as follows

The making, drawing and issuance of a check payment of which is refused by the bank because of insufficient funds in or credit with such bank, when presented within ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon, or makes arrangement for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee.

The prima facie evidence has not been overcome by petitioners in the cases before us because they did not pay LINTON the amounts due on the checks; neither did they make arrangements for payment in full by the drawee bank within five (5) banking days after receiving notices that the checks had not been paid by the drawee bank. In People v. Grospe  citing People v. Manzanilla we held that “. . . knowledge on the part of the maker or drawer of the check of the insufficiency of his funds is by itself a continuing eventuality, whether the accused be within one territory or another.” Consequently, venue or jurisdiction lies either in the RTC of Kalookan City or Malabon. Moreover, we ruled in the same Grospe and Manzanilla cases as reiterated in Lim v. Rodrigo that venue or jurisdiction is determined by the allegations in the Information. The Informations in the cases under consideration allege that the offenses were committed in the Municipality of

Navotas which is controlling and sufficient to vest jurisdiction upon the Regional Trial Court of Malabon. We therefore sustain likewise the conviction of petitioners by RTC-Malabon for violation of BP22.

Dev’t Bank of Riza vs Sima Wei

DEVELOPMENT BANK OF RIZAL vs. SIMA WEI, ET AL.G.R. No. 85419 March 9, 1993--complete undelivered

FACTS:Respondent Sima Wei executed and delivered to petitioner Bank a promissory note engaging to pay the petitioner Bank or order the amount of P1,820,000.00.  Sima Wei subsequently issued two crossed checks payable to petitioner Bank drawn against China Banking Corporation in full settlement of the drawer's account evidenced by the promissory note. These two checks however were not delivered to the petitioner-payee or to any of its authorized representatives but instead came into the possession of respondent Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement to the account of respondent Plastic Corporation with Producers Bank.  Inspite of the fact that the checks were crossed and payable to petitioner Bank and bore no indorsement of the latter, the Branch Manager of Producers Bank authorized the acceptance of the checks for deposit and credited them to the account of said Plastic Corporation.

ISSUE:Whether petitioner Bank has a cause of action against Sima Wei for the undelivered checks.

RULING:No.  A negotiable instrument must be delivered to the payee in order to evidence its existence as a binding contract.  Section 16 of the NIL provides that every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto.  Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him.  Without the initial delivery of the instrument from the drawer to the payee, there can be no liability on the instrument.  Petitioner however has a right of action against Sima Wei for the balance due on the promissory note.

Gempesaw vs CA

FACTS:Gempensaw was the owner of many grocery stores.  She paid her suppliers through  the  issuance  of  checks  drawn  against  her  checking  account  with respondent  bank.    The  checks  were  prepared  by  her  bookkeeper  Galang.  In the signing of the checks prepared by Galang, Gempensaw didn't bother herself  in  verifying  to  whom  the  checks  were  being  paid  and  if  the issuances  were  necessary.    She didn't  even verify  the  returned  checks  of the bank when the latter notifies her of the same.  During her two years in business,  there  were  incidents  shown  that  the  amounts  paid  for  were  in excess of what should have been paid.  It was also shown that even if the checks were crossed, the intended payees didn't receive the amount of the checks.    This  prompted  Gempensaw  to  demand  the  bank  to  credit  her account for the amount of the forged checks.  The bank refused to do so and this prompted her to file the case against the bank.      

HELD:Forgery is a real defense by the party whose signature was forged.  A party whose signature was forged was never a party and never gave his consent to  the  instrument.    Since  his  signature  doesn’t  appear  in  the  instrument, the same cannot be enforced against him even by a holder in due course.  The drawee bank cannot charge the account of the drawer whose signature was forged because he never gave the bank the order to pay.  In  the  case  at  bar  the  checks  were  filled  up  by  petitioner’s  employee Galang and were later given to her for signature.  Her signing the checks made the negotiable instruments complete.  Prior to signing of the checks, there  was  no  valid  contract  yet.    Petitioner  completed  the  checks  by signing them and thereafter authorized Galang to deliver the same to their respective  payees.    The  checks  were  then  indorsed,  forged  indorsements thereon.    As a rule, a drawee bank who has paid a check on which an indorsement has  been  forged  cannot  debit  the  account  of  a  drawer  for  the  amount  of said  check.    An  exception  to  this  rule  is  when  the  drawer  is  guilty  of negligence which causes the bank to honor such checks.  Petitioner in this case  has  relied  solely  on  the  honesty  and  loyalty  of  her  bookkeeper  and never  bothered  to  verify  the  accuracy  of  the  amounts  of  the  checks  she signed  the  invoices  attached  thereto.   And  though  she  received  her  bank statements,  she  didn't  carefully  examine  the  same 

to  double-check  her payments.  Petitioner didn't exercise reasonable diligence which eventually led to the fruition of her bookkeeper’s fraudulent schemes

Banawa vs Mirano

FACTS: Defendants-appellants spouses Doroteo Banawa and Juliana Mendoza took care of MariaMirano, Juliana’s niece, since Maria is 9 years old and treated her the same way as they treated the co-appellant Gliceria Abrenica, their legally adopted child. On May 5, 1921, the spouses bought a parcel of land situated at Brgy. Iba, Taal, Batangas from Placido Punzalan and registered the said parcel of land in the name of Maria, because the said spouses wanted something for Maria after their death.On July 31, 1949, after a lingering illness, Maria Mirano died. At the time of her death she left only as her nearest relatives the herein plaintiffs-appellees, namely Primitiva, who is a surviving sister, and Gregoria, Juana and Marciano, all surnamed Mirano, who are children of the deceased’s brother.The Miranos filed a case in court against the Banawas with regards to the possession of the Iba property as legal heirs of Maria. The court ruled in favor of the Miranos. The Banawas appealed to the Court of Appeals stating that they are entitled to the land in question by virtue of Section 5, Rule 100 of the Old Rules of Court, the pertinent portion of which reads: In case of the death of the child, his parents and relatives by nature, and not by adoption,shall be his legal heirs, except as to property received or inherited by the adopted child from either of his parents by adoption, which shall become the property of the latter or their legitimate relatives who shall participate in the order established by the Civil Code for intestate estates.The defendant spouses died during the pendency of the case at the Court of Appeals and were substituted by their legally adopted child Gliceria Abrenica and her husband Casiano Amponin. The Court of Appeals affirmed the decision of the lower court. The Appellants filed at the Supreme Court a petition for review by certiorari of the decision of the Court of Appeals regarding its ruling that Sec. 5, Rule 100 of the Old Rules of Court does not apply in theinstant case because Maria Mirano was not legally adopted.

ISSUE: Whether or not, Sec. 5, Rule 100 of the Old Rules of Court applicable to the instant case?HELD: NO. It is very clear in the rule involved that specifically provides for the case of the judicially adopted child and does not include extrajudicial adoption. It is an elementary rule in statutory construction that when the language of the law is clear and unequivocal, the law must be taken to mean exactly what it says.

Vicente de Ocampo vs Gatchalian

Facts: Anita Gatchalian was interested in buying a car when she was offered by Manuel Gonzales to a car owned by the Ocampo Clinic. Gonzales claim that he was duly authorized to look for a buyer, negotiate and accomplish the sale by the Ocampo Clinic. Anita accepted the offer and insisted to deliver the car with the certificate of registration the next day but Gonzales advised that the owners would only comply only upon showing of interest on the part of the buyer. Gonzales recommended issuing a check (P600 / payable-to-bearer /cross-checked) as evidence of the buyer’s goodfaith. Gonzales added that it will only be for safekeeping and will be returned to her the following day.

The next day, Gonzales never appeared. The failure of Gonzales to appeal resulted in Gatchalian to issue a STOP PAYMENT ORDER on the check. It was later found out that Gonzales used the check aspayment to the Vicente de Ocampo (Ocampo Clinic) for the hospitalization fees of his wife (the fees were only P441.75, so he got a refund of P158.25). De Ocampo now demands payment for the check, which Gatchalian refused, arguing that de Ocampo is not a holder in due course and that there is no negotiation of the check.

The Court of First Instance ordered Gatchalian to pay the amount of the check to De Ocampo. Hence this case. 

Issue: Whether or not De Ocampo is a holder in due course.

Held: NO. De Ocampo is not a holder in due course. De Ocampo was negligent in his acquisition of the check. There were many instances that arouse suspicion: the drawer in the check (Gatchalian) has no liability with de Ocampo ; it was cross-checked(only for deposit) but was used a payment by Gonzales; it was not the exact amount of the medical fees. The circumstances should have led him to inquire on the validity of the

check. However, he failed to exercise reasonable prudence and caution.

In showing a person had knowledge of facts that hisaction in taking the instrument amounted to bad faith need not prove that he knows the exact fraud. It is sufficient to show that the person had NOTICE that there was something wrong. The bad faith here means bad faith in the commercial sense – obtaining an instrument with no questions asked or no further inquiry upon suspicion. 

The presumption of good faith did not apply to de Ocampo because the defect was apparent on the instruments face – it was not payable to Gonzales or bearer. Hence, the holder’s title is defective or suspicious. Being the case, de Ocampo had the burden of proving he was a holder in due course, but failed

Westmont Bank vs Ong

WESTMONT BANK v. ONG

[G.R. No. 132560. January 30, 2002.]

SYNOPSIS

Respondent, a current account depositor with petitioner bank, was debited the amount of P1,754,787.50 representing the face value of two Pacific Banking Corporation's Manager's checks containing respondent's forged signature. These two checks were deposited by respondent's friend, Paciano Tanlimco, in his account with petitioner bank which accepted and credited both checks without verifying the signature of respondent. Tanlimco immediately withdrew the money. Respondent sought the help of Tanlimco's family to recover the amount, but to no avail. Hence, he filed the collection case almost five months from the discovery of the fraud. The trial court ruled in favor of respondent. It found that petitioner bank was grossly negligent in encashing the checks without verifying the signature of its own depositor, herein respondent. It ordered petitioner to pay the amount of the manager's checks with legal interest and moral and exemplary damages. The Court of Appeals affirmed the trial court's decision. Hence, the present recourse, petitioner assailing, among others, that respondent was guilty of laches.

It was held that a forged signature or one made without authority is inoperative and ineffectual under Section 24 of the Negotiable

Instruments Law; that a collecting bank has the legal duty to ascertain that the payee's endorsement was genuine before cashing the check and is liable to the payee and must bear the loss for payment made on a forged signature; that findings of the trial court are binding and conclusive on appeal; that there is no laches where a party filed the case only after exhausting possibilities of settling the case amicably.

FACTS:

1. Eugene Ong maintained a current account with the petitioner and sometime in May 1976, he sold certain shares of stocks through Island Securities Corporation. Latter purchased 2 Pacific Banking Corp. Manager’s checks with the total face value of P1,754,787.50, dated May 4, 1976 and issued in the name of Ong.

2. Before Ong could get hold of the said checks, his friend Faciano Tanlimco got hold of them, forged Ong’s signature and deposited such with the petitioner, where Tanlimco was also a depositor.

3. Even though Ong’s signature was on file, petitioner accepted and credited both checks to the account of Tanlimco, without verifying the ‘signature indorsements’ appearing at the back thereof. Hence, Tanlimco immediately withdrew the money and absconded.

4. Ong first sought the help Tanlimco’s family then reported the incident to the Central Bank but he was still unable to recover the amount.

5. It was only 5 months from the discovery of the fraud did Ong demanded in his complaint that the petitioner pay the value of the 2 checks from the bank on whose gross negligence he imputed his loss. He claimed that he did not deliver, negotiate, endorse or transfer to any person/entity the said checks and that the signatures on the back were spurious.

6. Petitioner on the other hand claimed that since Ong admitted to have never received the 2 checks from Island Securities, he never acquired ownership of these checks. Hence, he had no legal personality to sue as he is not a real party-in-interest.

7. RTC Manila and the CA ruled in favour of Ong, hence this petition.

ISSUE:1. WON respondent Ong has a cause of action against the petitioner

Westmont Bank

2. WON Ong is barred to recover the money from Westmont Bank due to laches

[Petitioner’s Arguments:1. Under Sec. 51 of the NIL, it is only when a person becomes a holder of

a negotiable instrument can he sue in his own name. This is in relation to the definition of a “holder” under Sec. 191, who is a payee or indorsee of a bill or note, who is in possession of the instrument or the bearer thereof. Petitioner maintains that Ong, even though the named payee but not having actual or physical possession of the two checks in question, did not become a holder thereof, hence, he cannot sue in his own name.

2. Art. 1249 of the Civil code also explained that a check is not a legal tender. Therefore, It is petitioner's position that for all intents and purposes, Island Securities has not yet tendered payment to respondent.

3. Petitioner also claims that it would be liable to the drawee bank and not to Ong, since latter has no cause of action.

Respondent’s arguments:1. Ong leans on the ruling of the trial court and the CA which held that

the suit of Ong is a desirable shortcut to reach a party who ought in any event to be untimely liable

2. Respondent also cited Associated Bank v. Court of Appeals which held that the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements. The bank is also made liable because it is privy to the depositor who negotiated the check. The bank knows him, his address and history because he is a client. Hence, it is in a better position to detect forgery, fraud or irregularity in the indorsement

HELD:

SC did not grant the petition. There is a cause of action in here since it is respondent's right as payee of the manager's checks to receive the amount involved, petitioner's correlative duty as collecting bank to ensure that the amount gets to the rightful payee or his order, and a breach of that duty

because of a blatant act of negligence on the part of petitioner which violated respondent's rights

Under Section 23 of the Negotiable Instruments Law:

When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.

Since the signature of the payee, in the case at bar, was forged to make it appear that he had made an endorsement in favor of the forger, such signature should be deemed as inoperative and ineffectual. Petitioner, as the collecting bank grossly erred in making payment by virtue of said forged signature. The payee, herein respondent, should therefore be allowed to recover from the collecting bank.

The collecting bank is liable to the payee and must bear the loss because it is its legal duty to ascertain that the payee's endorsement was genuine before cashing the check. As a general rule, a bank or a corporation who has obtained possession of a check upon an unauthorized or forged indorsement of the payee's signature and who collects the amount of the check from the drawee, is liable for the proceeds thereof to the payee or other owner, notwithstanding that the amount has been paid to the person from whom the check was obtained.

The theory for this rule is that the possession of the check on the forged or unauthorized indorsement is wrongful, and when the money had been collected on the check, the bank or other person or corporation can be held as for moneys had and received, and the proceeds are held for the rightful owners who may recover them. The position of the bank taking the check on the forged or unauthorized indorsement is the same as if it had taken the check and collected the money without indorsement at all and the act of the bank amounts to conversion of the check.

Petitioner relies on the view to the effect that where there is no delivery to the payee and no title vests in him, he ought not to be allowed to recover on

the ground that he lost nothing because he never became the owner of the check and still retained his claim of debt against the drawer. However, another view in certain cases holds that even if the absence of delivery is considered, such consideration is not material. The rationale for this view is that in said cases the plaintiff uses one action to reach, by a desirable short cut, the person who ought in any event to be ultimately liable as among the innocent persons involved in the transaction. In other words, the payee ought to be allowed to recover directly from the collecting bank regardless of whether the check was delivered to the payee or not.

Hence, petitioner could not escape liability for its negligent acts. Banks are engaged in a business impressed with public interest, and it is their duty to protect in return their many clients and depositors who transact business with them. They have the obligation to treat their client's account meticulously and with the highest degree of care, considering the fiduciary nature of their relationship. The diligence required of banks, therefore, is more than that of a good father of a family. The bank was held to be grossly negligent in performing its duties since it apparently failed to make such a verification or, what is worse did so but, chose to disregard the obvious dissimilarity of the signatures. The first omission makes it guilty of gross negligence; the second of bad faith. In either case, defendant is liable to plaintiff for the proceeds of the checks in question.

As for the second issue, it cannot be said that Ong sat on his rights. This can be fairly seen on the remedies he took and exhausted before bringing the matter to the Central Bank and then the courts. These acts cannot be construed as undue delay in or abandonment of the assertion of his rights. Moreover, it is petitioner which had the last clear chance to stop the fraudulent encashment of the subject checks had it exercised due diligence and followed the proper and regular banking procedures in clearing checks. As we had earlier ruled, the one who had the last clear opportunity to avoid the impending harm but failed to do so is chargeable with the consequences thereof.

Petition denied.