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Negotiable Instrument Law July 22, 2017 Page |1

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. L-22405 June 30, 1971

PHILIPPINE EDUCATION CO., INC., plaintiff-appellant,


vs.
MAURICIO A. SORIANO, ET AL., defendant-appellees.

Marcial Esposo for plaintiff-appellant.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio G. Ibarra and Attorney Concepcion Torrijos-
Agapinan for defendants-appellees.

DIZON, J.:

An appeal from a decision of the Court of First Instance of Manila dismissing the complaint filed by the Philippine Education Co.,
Inc. against Mauricio A. Soriano, Enrico Palomar and Rafael Contreras.

On April 18, 1958 Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders of P200.00 each
payable to E.P. Montinola withaddress at Lucena, Quezon. After the postal teller had made out money ordersnumbered 124685,
124687-124695, Montinola offered to pay for them with a private checks were not generally accepted in payment of money
orders, the teller advised him to see the Chief of the Money Order Division, but instead of doing so, Montinola managed to leave
building with his own check and the ten(10) money orders without the knowledge of the teller.

On the same date, April 18, 1958, upon discovery of the disappearance of the unpaid money orders, an urgent message was sent
to all postmasters, and the following day notice was likewise served upon all banks, instructing them not to pay anyone of the
money orders aforesaid if presented for payment. The Bank of America received a copy of said notice three days later.

On April 23, 1958 one of the above-mentioned money orders numbered 124688 was received by appellant as part of its sales
receipts. The following day it deposited the same with the Bank of America, and one day thereafter the latter cleared it with the
Bureau of Posts and received from the latter its face value of P200.00.

On September 27, 1961, appellee Mauricio A. Soriano, Chief of the Money Order Division of the Manila Post Office, acting for and
in behalf of his co-appellee, Postmaster Enrico Palomar, notified the Bank of America that money order No. 124688 attached to
his letter had been found to have been irregularly issued and that, in view thereof, the amount it represented had been
deducted from the bank's clearing account. For its part, on August 2 of the same year, the Bank of America debited appellant's
account with the same amount and gave it advice thereof by means of a debit memo.

On October 12, 1961 appellant requested the Postmaster General to reconsider the action taken by his office deducting the sum
of P200.00 from the clearing account of the Bank of America, but his request was denied. So was appellant's subsequent
request that the matter be referred to the Secretary of Justice for advice. Thereafter, appellant elevated the matter to the
Secretary of Public Works and Communications, but the latter sustained the actions taken by the postal officers.

In connection with the events set forth above, Montinola was charged with theft in the Court of First Instance of Manila
(Criminal Case No. 43866) but after trial he was acquitted on the ground of reasonable doubt.

On January 8, 1962 appellant filed an action against appellees in the Municipal Court of Manila praying for judgment as follows:
Negotiable Instrument Law July 22, 2017 Page |2

WHEREFORE, plaintiff prays that after hearing defendants be ordered:

(a) To countermand the notice given to the Bank of America on September 27, 1961, deducting from the said
Bank's clearing account the sum of P200.00 represented by postal money order No. 124688, or in the
alternative indemnify the plaintiff in the same amount with interest at 8-% per annum from September 27,
1961, which is the rate of interest being paid by plaintiff on its overdraft account;

(b) To pay to the plaintiff out of their own personal funds, jointly and severally, actual and moral damages in
the amount of P1,000.00 or in such amount as will be proved and/or determined by this Honorable Court:
exemplary damages in the amount of P1,000.00, attorney's fees of P1,000.00, and the costs of action.

Plaintiff also prays for such other and further relief as may be deemed just and equitable.

On November 17, 1962, after the parties had submitted the stipulation of facts reproduced at pages 12 to 15 of the Record on
Appeal, the above-named court rendered judgment as follows:

WHEREFORE, judgment is hereby rendered, ordering the defendants to countermand the notice given to the
Bank of America on September 27, 1961, deducting from said Bank's clearing account the sum of P200.00
representing the amount of postal money order No. 124688, or in the alternative, to indemnify the plaintiff in
the said sum of P200.00 with interest thereon at the rate of 8-% per annum from September 27, 1961 until
fully paid; without any pronouncement as to cost and attorney's fees.

The case was appealed to the Court of First Instance of Manila where, after the parties had resubmitted the same stipulation of
facts, the appealed decision dismissing the complaint, with costs, was rendered.

The first, second and fifth assignments of error discussed in appellant's brief are related to the other and will therefore be
discussed jointly. They raise this main issue: that the postal money order in question is a negotiable instrument; that its nature as
such is not in anyway affected by the letter dated October 26, 1948 signed by the Director of Posts and addressed to all banks
with a clearing account with the Post Office, and that money orders, once issued, create a contractual relationship of debtor and
creditor, respectively, between the government, on the one hand, and the remitters payees or endorses, on the other.

It is not disputed that our postal statutes were patterned after statutes in force in the United States. For this reason, ours are
generally construed in accordance with the construction given in the United States to their own postal statutes, in the absence
of any special reason justifying a departure from this policy or practice. The weight of authority in the United States is that
postal money orders are not negotiable instruments (Bolognesi vs. U.S. 189 Fed. 395; U.S. vs. Stock Drawers National Bank, 30
Fed. 912), the reason behind this rule being that, in establishing and operating a postal money order system, the government is
not engaging in commercial transactions but merely exercises a governmental power for the public benefit.

It is to be noted in this connection that some of the restrictions imposed upon money orders by postal laws and regulations are
inconsistent with the character of negotiable instruments. For instance, such laws and regulations usually provide for not more
than one endorsement; payment of money orders may be withheld under a variety of circumstances (49 C.J. 1153).

Of particular application to the postal money order in question are the conditions laid down in the letter of the Director of Posts
of October 26, 1948 (Exhibit 3) to the Bank of America for the redemption of postal money orders received by it from its
depositors. Among others, the condition is imposed that "in cases of adverse claim, the money order or money orders involved
will be returned to you (the bank) and the, corresponding amount will have to be refunded to the Postmaster, Manila, who
reserves the right to deduct the value thereof from any amount due you if such step is deemed necessary." The conditions thus
imposed in order to enable the bank to continue enjoying the facilities theretofore enjoyed by its depositors, were accepted by
the Bank of America. The latter is therefore bound by them. That it is so is clearly referred from the fact that, upon receiving
advice that the amount represented by the money order in question had been deducted from its clearing account with the
Manila Post Office, it did not file any protest against such action.

Moreover, not being a party to the understanding existing between the postal officers, on the one hand, and the Bank of
America, on the other, appellant has no right to assail the terms and conditions thereof on the ground that the letter setting
forth the terms and conditions aforesaid is void because it was not issued by a Department Head in accordance with Sec. 79 (B)
of the Revised Administrative Code. In reality, however, said legal provision does not apply to the letter in question because it
does not provide for a department regulation but merely sets down certain conditions upon the privilege granted to the Bank of
Negotiable Instrument Law July 22, 2017 Page |3

Amrica to accept and pay postal money orders presented for payment at the Manila Post Office. Such being the case, it is clear
that the Director of Posts had ample authority to issue it pursuant to Sec. 1190 of the Revised Administrative Code.

In view of the foregoing, We do not find it necessary to resolve the issues raised in the third and fourth assignments of error.

WHEREFORE, the appealed decision being in accordance with law, the same is hereby affirmed with costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Teehankee, Barredo and Villamor, JJ., concur.

Castro and Makasiar, JJ., took no part.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 88866 February 18, 1991

METROPOLITAN BANK & TRUST COMPANY, petitioner,


vs.
COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA
CASTILLO, respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.


Bengzon, Zarraga, Narciso, Cudala, Pecson & Bengson for Magno and Lucia Castillo.
Agapito S. Fajardo and Jaime M. Cabiles for respondent Golden Savings & Loan Association, Inc.

CRUZ, J.:

This case, for all its seeming complexity, turns on a simple question of negligence. The facts, pruned of all non-essentials, are
easily told.

The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the Philippines and even abroad. Golden
Savings and Loan Association was, at the time these events happened, operating in Calapan, Mindoro, with the other private
respondents as its principal officers.

In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and deposited over a period of two months
38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the Philippine Fish Marketing Authority and
purportedly signed by its General Manager and countersigned by its Auditor. Six of these were directly payable to Gomez while
the others appeared to have been indorsed by their respective payees, followed by Gomez as second indorser. 1

On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by Gloria Castillo as Cashier
of Golden Savings and deposited to its Savings Account No. 2498 in the Metrobank branch in Calapan, Mindoro. They were then
sent for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury for
special clearing.2

More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask whether the warrants
had been cleared. She was told to wait. Accordingly, Gomez was meanwhile not allowed to withdraw from his account. Later,
however, "exasperated" over Gloria's repeated inquiries and also as an accommodation for a "valued client," the petitioner says
Negotiable Instrument Law July 22, 2017 Page |4

it finally decided to allow Golden Savings to withdraw from the proceeds of the
warrants.3

The first withdrawal was made on July 9, 1979, in the amount of P508,000.00, the second on July 13, 1979, in the amount of
P310,000.00, and the third on July 16, 1979, in the amount of P150,000.00. The total withdrawal was P968.000.00.4

In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually collecting the total
amount of P1,167,500.00 from the proceeds of the apparently cleared warrants. The last withdrawal was made on July 16, 1979.

On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury on
July 19, 1979, and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in
its account.

The demand was rejected. Metrobank then sued Golden Savings in the Regional Trial Court of Mindoro. 5 After trial, judgment
was rendered in favor of Golden Savings, which, however, filed a motion for reconsideration even as Metrobank filed its notice
of appeal. On November 4, 1986, the lower court modified its decision thus:

ACCORDINGLY, judgment is hereby rendered:

1. Dismissing the complaint with costs against the plaintiff;

2. Dissolving and lifting the writ of attachment of the properties of defendant Golden Savings and Loan Association, Inc.
and defendant Spouses Magno Castillo and Lucia Castillo;

3. Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the sum of P1,754,089.00 and to
reinstate and credit to such account such amount existing before the debit was made including the amount of
P812,033.37 in favor of defendant Golden Savings and Loan Association, Inc. and thereafter, to allow defendant Golden
Savings and Loan Association, Inc. to withdraw the amount outstanding thereon before the debit;

4. Ordering the plaintiff to pay the defendant Golden Savings and Loan Association, Inc. attorney's fees and expenses
of litigation in the amount of P200,000.00.

5. Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia Castillo attorney's fees and expenses of
litigation in the amount of P100,000.00.

SO ORDERED.

On appeal to the respondent court,6 the decision was affirmed, prompting Metrobank to file this petition for review on the
following grounds:

1. Respondent Court of Appeals erred in disregarding and failing to apply the clear contractual terms and conditions on
the deposit slips allowing Metrobank to charge back any amount erroneously credited.

(a) Metrobank's right to charge back is not limited to instances where the checks or treasury warrants are
forged or unauthorized.

(b) Until such time as Metrobank is actually paid, its obligation is that of a mere collecting agent which cannot
be held liable for its failure to collect on the warrants.

2. Under the lower court's decision, affirmed by respondent Court of Appeals, Metrobank is made to pay for warrants
already dishonored, thereby perpetuating the fraud committed by Eduardo Gomez.

3. Respondent Court of Appeals erred in not finding that as between Metrobank and Golden Savings, the latter should
bear the loss.
Negotiable Instrument Law July 22, 2017 Page |5

4. Respondent Court of Appeals erred in holding that the treasury warrants involved in this case are not negotiable
instruments.

The petition has no merit.

From the above undisputed facts, it would appear to the Court that Metrobank was indeed negligent in giving Golden Savings
the impression that the treasury warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw the
proceeds thereof from his account with it. Without such assurance, Golden Savings would not have allowed the withdrawals;
with such assurance, there was no reason not to allow the withdrawal. Indeed, Golden Savings might even have incurred liability
for its refusal to return the money that to all appearances belonged to the depositor, who could therefore withdraw it any time
and for any reason he saw fit.

It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to its account with
Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to determine the validity of the warrants
through its own services. The proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden Savings
itself to withdraw them from its own deposit.7 It was only when Metrobank gave the go-signal that Gomez was finally allowed
by Golden Savings to withdraw them from his own account.

The argument of Metrobank that Golden Savings should have exercised more care in checking the personal circumstances of
Gomez before accepting his deposit does not hold water. It was Gomez who was entrusting the warrants, not Golden Savings
that was extending him a loan; and moreover, the treasury warrants were subject to clearing, pending which the depositor
could not withdraw its proceeds. There was no question of Gomez's identity or of the genuineness of his signature as checked
by Golden Savings. In fact, the treasury warrants were dishonored allegedly because of the forgery of the signatures of the
drawers, not of Gomez as payee or indorser. Under the circumstances, it is clear that Golden Savings acted with due care and
diligence and cannot be faulted for the withdrawals it allowed Gomez to make.

By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling more than one and a half
million pesos (and this was 1979). There was no reason why it should not have waited until the treasury warrants had been
cleared; it would not have lost a single centavo by waiting. Yet, despite the lack of such clearance and notwithstanding that it
had not received a single centavo from the proceeds of the treasury warrants, as it now repeatedly stresses it allowed
Golden Savings to withdraw not once, not twice, but thrice from the uncleared treasury warrants in the total amount of
P968,000.00

Its reason? It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and it also wanted to
"accommodate" a valued client. It "presumed" that the warrants had been cleared simply because of "the lapse of one
week."8 For a bank with its long experience, this explanation is unbelievably naive.

And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal side of the deposit slips
through which the treasury warrants were deposited by Golden Savings with its Calapan branch. The conditions read as follows:

Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's collecting agent, assuming no
responsibility beyond care in selecting correspondents, and until such time as actual payment shall have come into
possession of this bank, the right is reserved to charge back to the depositor's account any amount previously credited,
whether or not such item is returned. This also applies to checks drawn on local banks and bankers and their branches as
well as on this bank, which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft or any other reason.
(Emphasis supplied.)

According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent for Golden Savings and
give it the right to "charge back to the depositor's account any amount previously credited, whether or not such item is
returned. This also applies to checks ". . . which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft of any
other reason." It is claimed that the said conditions are in the nature of contractual stipulations and became binding on Golden
Savings when Gloria Castillo, as its Cashier, signed the deposit slips.

Doubt may be expressed about the binding force of the conditions, considering that they have apparently been imposed by the
bank unilaterally, without the consent of the depositor. Indeed, it could be argued that the depositor, in signing the deposit slip,
does so only to identify himself and not to agree to the conditions set forth in the given permit at the back of the deposit slip.
Negotiable Instrument Law July 22, 2017 Page |6

We do not have to rule on this matter at this time. At any rate, the Court feels that even if the deposit slip were considered a
contract, the petitioner could still not validly disclaim responsibility thereunder in the light of the circumstances of this case.

In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to be suggesting that as a mere
agent it cannot be liable to the principal. This is not exactly true. On the contrary, Article 1909 of the Civil Code clearly provides
that

Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged 'with more or
less rigor by the courts, according to whether the agency was or was not for a compensation.

The negligence of Metrobank has been sufficiently established. To repeat for emphasis, it was the clearance given by it that
assured Golden Savings it was already safe to allow Gomez to withdraw the proceeds of the treasury warrants he had deposited
Metrobank misled Golden Savings. There may have been no express clearance, as Metrobank insists (although this is refuted by
Golden Savings) but in any case that clearance could be implied from its allowing Golden Savings to withdraw from its account
not only once or even twice but three times. The total withdrawal was in excess of its original balance before the treasury
warrants were deposited, which only added to its belief that the treasury warrants had indeed been cleared.

Metrobank's argument that it may recover the disputed amount if the warrants are not paid for any reason is not acceptable.
Any reason does not mean no reason at all. Otherwise, there would have been no need at all for Golden Savings to deposit the
treasury warrants with it for clearance. There would have been no need for it to wait until the warrants had been cleared before
paying the proceeds thereof to Gomez. Such a condition, if interpreted in the way the petitioner suggests, is not binding for
being arbitrary and unconscionable. And it becomes more so in the case at bar when it is considered that the supposed dishonor
of the warrants was not communicated to Golden Savings before it made its own payment to Gomez.

The belated notification aggravated the petitioner's earlier negligence in giving express or at least implied clearance to the
treasury warrants and allowing payments therefrom to Golden Savings. But that is not all. On top of this, the supposed reason
for the dishonor, to wit, the forgery of the signatures of the general manager and the auditor of the drawer corporation, has not
been established.9 This was the finding of the lower courts which we see no reason to disturb. And as we said in MWSS v. Court
of Appeals:10

Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139 SCRA 238). It must be established by clear, positive and
convincing evidence. This was not done in the present case.

A no less important consideration is the circumstance that the treasury warrants in question are not negotiable instruments.
Clearly stamped on their face is the word "non-negotiable." Moreover, and this is of equal significance, it is indicated that they
are payable from a particular fund, to wit, Fund 501.

The following sections of the Negotiable Instruments Law, especially the underscored parts, are pertinent:

Sec. 1. Form of negotiable instruments. An instrument to be negotiable must conform to the following
requirements:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable
certainty.

xxx xxx xxx


Negotiable Instrument Law July 22, 2017 Page |7

Sec. 3. When promise is unconditional. An unqualified order or promise to pay is unconditional within the meaning of
this Act though coupled with

(a) An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited
with the amount; or

(b) A statement of the transaction which gives rise to the instrument judgment.

But an order or promise to pay out of a particular fund is not unconditional.

The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or promise to pay
"not unconditional" and the warrants themselves non-negotiable. There should be no question that the exception on Section 3
of the Negotiable Instruments Law is applicable in the case at bar. This conclusion conforms to Abubakar vs. Auditor
General11 where the Court held:

The petitioner argues that he is a holder in good faith and for value of a negotiable instrument and is entitled to the
rights and privileges of a holder in due course, free from defenses. But this treasury warrant is not within the scope of
the negotiable instrument law. For one thing, the document bearing on its face the words "payable from the
appropriation for food administration, is actually an Order for payment out of "a particular fund," and is not
unconditional and does not fulfill one of the essential requirements of a negotiable instrument (Sec. 3 last sentence and
section [1(b)] of the Negotiable Instruments Law).

Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were "genuine and in
all respects what they purport to be," in accordance with Section 66 of the Negotiable Instruments Law. The simple reason is
that this law is not applicable to the non-negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the
purpose of guaranteeing the genuineness of the warrants but merely to deposit them with Metrobank for clearing. It was in fact
Metrobank that made the guarantee when it stamped on the back of the warrants: "All prior indorsement and/or lack of
endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch."

The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine Islands, 12 but we feel this case is inapplicable to
the present controversy.1wphi1 That case involved checks whereas this case involves treasury warrants. Golden Savings never
represented that the warrants were negotiable but signed them only for the purpose of depositing them for clearance. Also, the
fact of forgery was proved in that case but not in the case before us. Finally, the Court found the Jai Alai Corporation negligent
in accepting the checks without question from one Antonio Ramirez notwithstanding that the payee was the Inter-Island Gas
Services, Inc. and it did not appear that he was authorized to indorse it. No similar negligence can be imputed to Golden Savings.

We find the challenged decision to be basically correct. However, we will have to amend it insofar as it directs the petitioner to
credit Golden Savings with the full amount of the treasury checks deposited to its account.

The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez was allowed to withdraw
P1,167,500.00 before Golden Savings was notified of the dishonor. The amount he has withdrawn must be charged not to
Golden Savings but to Metrobank, which must bear the consequences of its own negligence. But the balance of P586,589.00
should be debited to Golden Savings, as obviously Gomez can no longer be permitted to withdraw this amount from his deposit
because of the dishonor of the warrants. Gomez has in fact disappeared. To also credit the balance to Golden Savings would
unduly enrich it at the expense of Metrobank, let alone the fact that it has already been informed of the dishonor of the treasury
warrants.

WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the dispositive portion of the
judgment of the lower court shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing defendant Golden Savings
& Loan Association, Inc. to withdraw the amount outstanding thereon, if any, after the debit.

SO ORDERED. Republic of the Philippines


SUPREME COURT
Manila
Negotiable Instrument Law July 22, 2017 Page |8

EN BANC

G.R. No. L-2516 September 25, 1950

ANG TEK LIAN, petitioner,


vs.
THE COURT OF APPEALS, respondent.

Laurel, Sabido, Almario and Laurel for petitioner.


Office of the Solicitor General Felix Bautista Angelo and Solicitor Manuel Tomacruz for respondent.

BENGZON, J.:

For having issued a rubber check, Ang Tek Lian was convicted of estafa in the Court of First Instance of Manila. The Court of
Appeals affirmed the verdict.

It appears that, knowing he had no funds therefor, Ang Tek Lian drew on Saturday, November 16, 1946, the check Exhibits A
upon the China Banking Corporation for the sum of P4,000, payable to the order of "cash". He delivered it to Lee Hua Hong in
exchange for money which the latter handed in act. On November 18, 1946, the next business day, the check was presented by
Lee Hua Hong to the drawee bank for payment, but it was dishonored for insufficiency of funds, the balance of the deposit of
Ang Tek Lian on both dates being P335 only.

The Court of Appeals believed the version of Lee Huan Hong who testified that "on November 16, 1946, appellant went to his
(complainant's) office, at 1217 Herran, Paco, Manila, and asked him to exchange Exhibit A which he (appellant) then brought
with him with cash alleging that he needed badly the sum of P4,000 represented by the check, but could not withdraw it
from the bank, it being then already closed; that in view of this request and relying upon appellant's assurance that he had
sufficient funds in the blank to meet Exhibit A, and because they used to borrow money from each other, even before the war,
and appellant owns a hotel and restaurant known as the North Bay Hotel, said complainant delivered to him, on the same date,
the sum of P4,000 in cash; that despite repeated efforts to notify him that the check had been dishonored by the bank,
appellant could not be located any-where, until he was summoned in the City Fiscal's Office in view of the complaint
for estafa filed in connection therewith; and that appellant has not paid as yet the amount of the check, or any part thereof."

Inasmuch as the findings of fact of the Court of Appeals are final, the only question of law for decision is whether under the
facts found, estafa had been accomplished.

Article 315, paragraph (d), subsection 2 of the Revised Penal Code, punishes swindling committed "By post dating a check, or
issuing such check in payment of an obligation the offender knowing that at the time he had no funds in the bank, or the funds
deposited by him in the bank were not sufficient to cover the amount of the check, and without informing the payee of such
circumstances".

We believe that under this provision of law Ang Tek Lian was properly held liable. In this connection, it must be stated that, as
explained in People vs. Fernandez (59 Phil., 615), estafa is committed by issuing either a postdated check or an ordinary check to
accomplish the deceit.

It is argued, however, that as the check had been made payable to "cash" and had not been endorsed by Ang Tek Lian, the
defendant is not guilty of the offense charged. Based on the proposition that "by uniform practice of all banks in the Philippines
a check so drawn is invariably dishonored," the following line of reasoning is advanced in support of the argument:

. . . When, therefore, he (the offended party ) accepted the check (Exhibit A) from the appellant, he did so with full
knowledge that it would be dishonored upon presentment. In that sense, the appellant could not be said to have acted
fraudulently because the complainant, in so accepting the check as it was drawn, must be considered, by every rational
consideration, to have done so fully aware of the risk he was running thereby." (Brief for the appellant, p. 11.)

We are not aware of the uniformity of such practice. Instances have undoubtedly occurred wherein the Bank required the
indorsement of the drawer before honoring a check payable to "cash." But cases there are too, where no such requirement had
been made . It depends upon the circumstances of each transaction.
Negotiable Instrument Law July 22, 2017 Page |9

Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the order of "cash" is a check payable to bearer,
and the bank may pay it to the person presenting it for payment without the drawer's indorsement.

A check payable to the order of cash is a bearer instrument. Bacal vs. National City Bank of New York (1933), 146 Misc.,
732; 262 N. Y. S., 839; Cleary vs. De Beck Plate Glass Co. (1907), 54 Misc., 537; 104 N. Y. S., 831; Massachusetts Bonding &
Insurance Co. vs. Pittsburgh Pipe & Supply Co. (Tex. Civ. App., 1939), 135 S. W. (2d), 818. See also H. Cook &
Son vs. Moody (1916), 17 Ga. App., 465; 87 S. E., 713.

Where a check is made payable to the order of "cash", the word cash "does not purport to be the name of any person",
and hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but
may pay it to the person presenting it without any indorsement. . . . (Zollmann, Banks and Banking, Permanent Edition,
Vol. 6, p. 494.)

Of course, if the bank is not sure of the bearer's identity or financial solvency, it has the right to demand identification and /or
assurance against possible complications, for instance, (a) forgery of drawer's signature, (b) loss of the check by the rightful
owner, (c) raising of the amount payable, etc. The bank may therefore require, for its protection, that the indorsement of the
drawer or of some other person known to it be obtained. But where the Bank is satisfied of the identity and /or the
economic standing of the bearer who tenders the check for collection, it will pay the instrument without further question; and it
would incur no liability to the drawer in thus acting.

A check payable to bearer is authority for payment to holder. Where a check is in the ordinary form, and is payable to
bearer, so that no indorsement is required, a bank, to which it is presented for payment, need not have the holder
identified, and is not negligent in falling to do so. . . . (Michie on Banks and Banking, Permanent Edition, Vol. 5, p. 343.)

. . . Consequently, a drawee bank to which a bearer check is presented for payment need not necessarily have the
holder identified and ordinarily may not be charged with negligence in failing to do so. See Opinions 6C:2 and 6C:3 If the
bank has no reasonable cause for suspecting any irregularity, it will be protected in paying a bearer check, "no matter
what facts unknown to it may have occurred prior to the presentment." 1 Morse, Banks and Banking, sec. 393.

Although a bank is entitled to pay the amount of a bearer check without further inquiry, it is entirely reasonable for the
bank to insist that holder give satisfactory proof of his identity. . . . (Paton's Digest, Vol. I, p. 1089.)

Anyway, it is significant, and conclusive, that the form of the check Exhibit A was totally unconnected with its dishonor. The
Court of Appeals declared that it was returned unsatisfied because the drawer had insufficient funds not because the drawer's
indorsement was lacking.

Wherefore, there being no question as to the correctness of the penalty imposed on the appellant, the writ ofcertiorari is denied
and the decision of the Court of Appeals is hereby affirmed, with costs.

Moran, C. J., Ozaeta, Paras, Pablo, Tuason, and Reyes, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 93073 December 21, 1992

REPUBLIC PLANTERS BANK, petitioner,


vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.

CAMPOS, JR., J.:


Negotiable Instrument Law July 22, 2017 P a g e | 10

This is an appeal by way of a Petition for Review on Certiorari from the decision * of the Court of Appeals in CA G.R. CV No.
07302, entitled "Republic Planters Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and Fermin
Canlas, Defendant-Appellant", which affirmed the decision ** in Civil Case No. 82-5448 except that it completely absolved
Fermin Canlas from liability under the promissory notes and reduced the award for damages and attorney's fees. The RTC
decision, rendered on June 20, 1985, is quoted hereunder:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff Republic Planters
Bank, ordering defendant Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing,
Inc.) and defendants Shozo Yamaguchi and Fermin Canlas to pay, jointly and severally, the plaintiff bank the
following sums with interest thereon at 16% per annum from the dates indicated, to wit:

Under the promissory note (Exhibit "A"), the sum of P300,000.00 with interest from January 29, 1981 until fully
paid; under promissory note (Exhibit "B"), the sum of P40,000.00 with interest from November 27, 1980; under
the promissory note (Exhibit "C"), the sum of P166,466.00 which interest from January 29, 1981; under the
promissory note (Exhibit "E"), the sum of P86,130.31 with interest from January 29, 1981; under the promissory
note (Exhibit "G"), the sum of P12,703.70 with interest from November 27, 1980; under the promissory note
(Exhibit "H"), the sum of P281,875.91 with interest from January 29, 1981; and under the promissory note
(Exhibit "I"), the sum of P200,000.00 with interest from January 29, 1981.

Under the promissory note (Exhibit "D") defendants Pinch Manufacturing Corporation (formerly named
Worldwide Garment Manufacturing, Inc.), and Shozo Yamaguchi are ordered to pay jointly and severally, the
plaintiff bank the sum of P367,000.00 with interest of 16% per annum from January 29, 1980 until fully paid

Under the promissory note (Exhibit "F") defendant corporation Pinch (formerly Worldwide) is ordered to pay
the plaintiff bank the sum of P140,000.00 with interest at 16% per annum from November 27, 1980 until fully
paid.

Defendant Pinch (formely Worldwide) is hereby ordered to pay the plaintiff the sum of P231,120.81 with
interest at 12% per annum from July 1, 1981, until fully paid and the sum of P331,870.97 with interest from March
28, 1981, until fully paid.

All the defendants are also ordered to pay, jointly and severally, the plaintiff the sum of P100,000.00 as and for
reasonable attorney's fee and the further sum equivalent to 3% per annum of the respective principal sums
from the dates above stated as penalty charge until fully paid, plus one percent (1%) of the principal sums as
service charge.

With costs against the defendants.

SO ORDERED. 1

From the above decision only defendant Fermin Canlas appealed to the then Intermediate Court (now the Court Appeals). His
contention was that inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment
Manufacturing, Inc, he should not be held personally liable for such authorized corporate acts that he performed. It is now the
contention of the petitioner Republic Planters Bank that having unconditionally signed the nine (9) promissory notes with Shozo
Yamaguchi, jointly and severally, defendant Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the nine notes.

We find merit in this appeal.

From the records, these facts are established: Defendant Shozo Yamaguchi and private respondent Fermin Canlas were
President/Chief Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of Board
Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private respondent Fermin Canlas were authorized to
apply for credit facilities with the petitioner Republic Planters Bank in the forms of export advances and letters of credit/trust
receipts accommodations. Petitioner bank issued nine promissory notes, marked as Exhibits A to I inclusive, each of which were
uniformly worded in the following manner:
Negotiable Instrument Law July 22, 2017 P a g e | 11

___________, after date, for value received, I/we, jointly and severaIly promise to pay to the ORDER of the
REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of ___________ PESOS(....) Philippine
Currency...

On the right bottom margin of the promissory notes appeared the signatures of Shozo Yamaguchi and Fermin Canlas above
their printed names with the phrase "and (in) his personal capacity" typewritten below. At the bottom of the promissory notes
appeared: "Please credit proceeds of this note to:

________ Savings Account ______XX Current Account

No. 1372-00257-6

of WORLDWIDE GARMENT MFG. CORP.

These entries were separated from the text of the notes with a bold line which ran horizontally across the pages.

In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment Manufacturing, Inc. was apparently rubber
stamped above the signatures of defendant and private respondent.

On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its corporate name to Pinch Manufacturing
Corporation.

On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money covered among others, by the nine
promissory notes with interest thereon, plus attorney's fees and penalty charges. The complainant was originally brought
against Worldwide Garment Manufacturing, Inc. inter alia, but it was later amended to drop Worldwide Manufacturing, Inc. as
defendant and substitute Pinch Manufacturing Corporation it its place. Defendants Pinch Manufacturing Corporation and Shozo
Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only
private respondent Fermin Canlas filed an Amended Answer wherein he, denied having issued the promissory notes in question
since according to him, he was not an officer of Pinch Manufacturing Corporation, but instead of Worldwide Garment
Manufacturing, Inc., and that when he issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the
same were in blank, the typewritten entries not appearing therein prior to the time he affixed his signature.

In the mind of this Court, the only issue material to the resolution of this appeal is whether private respondent Fermin Canlas is
solidarily liable with the other defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on the nine
promissory notes.

We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes bearing his signature for the
following reasons:

The promissory motes are negotiable instruments and must be governed by the Negotiable Instruments Law. 2

Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are
liable as such.3 By signing the notes, the maker promises to pay to the order of the payee or any holder 4according to the tenor
thereof.5 Based on the above provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-
makers of the promissory notes. As such, he cannot escape liability arising therefrom.

Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly
and severally liable thereon.6 An instrument which begins" with "I" ,We" , or "Either of us" promise to, pay, when signed by two
or more persons, makes them solidarily liable. 7 The fact that the singular pronoun is used indicates that the promise is individual
as to each other; meaning that each of the co-signers is deemed to have made an independent singular promise to pay the notes
in full.

In the case at bar, the solidary liability of private respondent Fermin Canlas is made clearer and certain, without reason for
ambiguity, by the presence of the phrase "joint and several" as describing the unconditional promise to pay to the order of
Republic Planters Bank. A joint and several note is one in which the makers bind themselves both jointly and individually to the
payee so that all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit. 8 A
joint and several obligation in common law corresponds to a civil law solidary obligation; that is, one of several debtors bound in
Negotiable Instrument Law July 22, 2017 P a g e | 12

such wise that each is liable for the entire amount, and not merely for his proportionate share. 9 By making a joint and several
promise to pay to the order of Republic Planters Bank, private respondent Fermin Canlas assumed the solidary liability of a
debtor and the payee may choose to enforce the notes against him alone or jointly with Yamaguchi and Pinch Manufacturing
Corporation as solidary debtors.

As to whether the interpolation of the phrase "and (in) his personal capacity" below the signatures of the makers in the notes
will affect the liability of the makers, We do not find it necessary to resolve and decide, because it is immaterial and will not
affect to the liability of private respondent Fermin Canlas as a joint and several debtor of the notes. With or without the
presence of said phrase, private respondent Fermin Canlas is primarily liable as a co-maker of each of the notes and his liability is
that of a solidary debtor.

Finally, the respondent Court made a grave error in holding that an amendment in a corporation's Articles of Incorporation
effecting a change of corporate name, in this case from Worldwide Garment manufacturing Inc to Pinch Manufacturing
Corporation extinguished the personality of the original corporation.

The corporation, upon such change in its name, is in no sense a new corporation, nor the successor of the original corporation. It
is the same corporation with a different name, and its character is in no respect changed.10

A change in the corporate name does not make a new corporation, and whether effected by special act or under a general law,
has no affect on the identity of the corporation, or on its property, rights, or liabilities. 11

The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously
contracted or incurred.12

As a general rule, officers or directors under the old corporate name bear no personal liability for acts done or contracts entered
into by officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old
corporation and the change of name meant only the continuation of the old juridical entity, the corporation bearing the same
name is still bound by the acts of its agents if authorized by the Board. Under the Negotiable Instruments Law, the liability of a
person signing as an agent is specifically provided for as follows:

Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or a person adds to his
signature words indicating that he signs for or on behalf of a principal , or in a representative capacity, he is not
liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent,
or as filling a representative character, without disclosing his principal, does not exempt him from personal
liability.

Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a representative
capacity or the name of the third party for whom he might have acted as agent, the agent is personally liable to take holder of
the instrument and cannot be permitted to prove that he was merely acting as agent of another and parol or extrinsic evidence
is not admissible to avoid the agent's personal liability. 13

On the private respondent's contention that the promissory notes were delivered to him in blank for his signature, we rule
otherwise. A careful examination of the notes in question shows that they are the stereotype printed form of promissory notes
generally used by commercial banking institutions to be signed by their clients in obtaining loans. Such printed notes are
incomplete because there are blank spaces to be filled up on material particulars such as payee's name, amount of the loan, rate
of interest, date of issue and the maturity date. The terms and conditions of the loan are printed on the note for the borrower-
debtor 's perusal. An incomplete instrument which has been delivered to the borrower for his signature is governed by Section
14 of the Negotiable Instruments Law which provides, in so far as relevant to this case, thus:

Sec. 14. Blanks: when may be filled. Where the instrument is wanting in any material particular, the person in
possesion thereof has a prima facie authority to complete it by filling up the blanks therein. ... In order,
however, that any such instrument when completed may be enforced against any person who became a party
thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a
reasonable time...

Proof that the notes were signed in blank was only the self-serving testimony of private respondent Fermin Canlas, as
determined by the trial court, so that the trial court ''doubts the defendant (Canlas) signed in blank the promissory notes". We
Negotiable Instrument Law July 22, 2017 P a g e | 13

chose to believe the bank's testimony that the notes were filled up before they were given to private respondent Fermin Canlas
and defendant Shozo Yamaguchi for their signatures as joint and several promissors. For signing the notes above their
typewritten names, they bound themselves as unconditional makers. We take judicial notice of the customary procedure of
commercial banks of requiring their clientele to sign promissory notes prepared by the banks in printed form with blank spaces
already filled up as per agreed terms of the loan, leaving the borrowers-debtors to do nothing but read the terms and conditions
therein printed and to sign as makers or co-makers. When the notes were given to private respondent Fermin Canlas for his
signature, the notes were complete in the sense that the spaces for the material particular had been filled up by the bank as per
agreement. The notes were not incomplete instruments; neither were they given to private respondent Fermin Canlas in blank
as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.

The ruling in case of Reformina vs. Tomol relied upon by the appellate court in reducing the interest rate on the promissory notes
from 16% to 12% per annum does not squarely apply to the instant petition. In the abovecited case, the rate of 12% was applied to
forebearances of money, goods or credit and court judgemets thereon, only in the absence of any stipulation between the
parties.

In the case at bar however , it was found by the trial court that the rate of interest is 9% per annum, which interest rate the
plaintiff may at any time without notice, raise within the limits allowed law. And so, as of February 16, 1984 , the plaintiff had
fixed the interest at 16% per annum.

This Court has held that the rates under the Usury Law, as amended by Presidential Decree No. 116, are applicable only to
interests by way of compensation for the use or forebearance of money. Article 2209 of the Civil Code, on the other hand,
governs interests by way of damages.15 This fine distinction was not taken into consideration by the appellate court, which
instead made a general statement that the interest rate be at 12% per annum.

Inasmuch as this Court had declared that increases in interest rates are not subject to any ceiling prescribed by the Usury Law,
the appellate court erred in limiting the interest rates at 12% per annum. Central Bank Circular No. 905, Series of 1982 removed
the Usury Law ceiling on interest rates. 16

In the 1ight of the foregoing analysis and under the plain language of the statute and jurisprudence on the matter, the decision
of the respondent: Court of Appeals absolving private respondent Fermin Canlas is REVERSED and SET ASIDE. Judgement is
hereby rendered declaring private respondent Fermin Canlas jointly and severally liable on all the nine promissory notes with the
following sums and at 16% interest per annum from the dates indicated, to wit:

Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest from January 29, 1981 until fully paid;
under promissory note marked as Exhibit B, the sum of P40,000.00 with interest from November 27, 1980: under the promissory
note denominated as Exhibit C, the amount of P166,466.00 with interest from January 29, 1981; under the promissory note
denominated as Exhibit D, the amount of P367,000.00 with interest from January 29, 1981 until fully paid; under the promissory
note marked as Exhibit E, the amount of P86,130.31 with interest from January 29, 1981; under the promissory note marked as
Exhibit F, the sum of P140,000.00 with interest from November 27, 1980 until fully paid; under the promissory note marked as
Exhibit G, the amount of P12,703.70 with interest from November 27, 1980; the promissory note marked as Exhibit H, the sum of
P281,875.91 with interest from January 29, 1981; and the promissory note marked as Exhibit I, the sum of P200,000.00 with
interest on January 29, 1981.

The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide Garment Manufacturing, Inc.) and Shozo
Yamaguchi, for not having appealed from the decision of the trial court, shall be adjudged in accordance with the judgment
rendered by the Court a quo.

With respect to attorney's fees, and penalty and service charges, the private respondent Fermin Canlas is hereby held jointly and
solidarity liable with defendants for the amounts found, by the Court a quo. With costs against private respondent.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION
Negotiable Instrument Law July 22, 2017 P a g e | 14

G.R. No. 107898 December 19, 1995

MANUEL LIM and ROSITA LIM, petitioners,


vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

BELLOSILLO, J.:

MANUEL LIM and ROSITA LIM, spouses, were charged before the Regional Trial Court of Malabon with estafa on three (3)
counts under Art. 315, par. 2 (d), of The Revised Penal Code, docketed as Crim. Cases Nos. 1696-MN to 1698-MN. The Informations
substantially alleged that Manuel and Rosita, conspiring together, purchased goods from Linton Commercial Company, Inc.
(LINTON), and with deceit issued seven Consolidated Bank and Trust Company (SOLIDBANK) checks simultaneously with the
delivery as payment therefor. When presented to the drawee bank for payment the checks were dishonored as payment on the
checks had been stopped and/or for insufficiency of funds to cover the amounts. Despite repeated notice and demand the Lim
spouses failed and refused to pay the checks or the value of the goods.

On the basis of the same checks, Manuel and Rosita Lim were also charged with seven (7) counts of violation of B.P. Blg. 22,
otherwise known as the Bouncing Checks Law, docketed as Crim. Cases Nos. 1699-MN to 1705-MN. In substance, the
Informations alleged that the Lims issued the checks with knowledge that they did not have sufficient funds or credit with the
drawee bank for payment in full of such checks upon presentment. When presented for payment within ninety (90) days from
date thereof the checks were dishonored by the drawee bank for insufficiency of funds. Despite receipt of notices of such
dishonor the Lims failed to pay the amounts of the checks or to make arrangements for full payment within five (5) banking
days.

Manuel Lim and Rosita Lim are the president and treasurer, respectively, of Rigi Bilt Industries, Inc. (RIGI). RIGI had been
transacting business with LINTON for years, the latter supplying the former with steel plates, steel bars, flat bars and purlin
sticks which it uses in the fabrication, installation and building of steel structures. As officers of RIGI the Lim spouses were
allowed 30, 60 and sometimes even up to 90 days credit.

On 27 May 1983 the Lims ordered 100 pieces of mild steel plates worth P51,815.00 from LINTON which were delivered on the
same day at their place of business at 666 7th Avenue, 8th Street, Kalookan City. To pay LINTON for the delivery the Lims issued
SOLIDBANK Check No. 027700 postdated 3 September 1983 in the amount of P51,800.00.1

On 30 May 1983 the Lims ordered another 65 pieces of mild steel plates worth P63,455.00 from LINTON which were delivered at
their place of business on the same day. They issued as payment SOLIDBANK Check No. 027699 in the amount of P63,455.00
postdated 20 August 1983.2

The Lim spouses also ordered 2,600 "Z" purlins worth P241,800.00 which were delivered to them on various dates, to wit: 15 and
22 April 1983; 11, 14, 20, 23, 25, 28 and 30 May 1983; and, 2 and 9 June 1983. To pay for the deliveries, they issued seven
SOLIDBANK checks, five of which were

Check No. Date of Issue Amount

027683 16 July 1983 P27,900.003


027684 23 July 1983 P27,900.004
027719 6 Aug. 1983 P32,550.005
027720 13 Aug. 1983 P27,900.006
027721 27 Aug. 1983 P37,200.007

William Yu Bin, Vice President and Sales Manager of LINTON, testified that when those seven (7) checks were deposited with
the Rizal Commercial Banking Corporation they were dishonored for "insufficiency of funds" with the additional notation
"payment stopped" stamped thereon. Despite demand Manuel and Rosita refused to make good the checks or pay the value of
the deliveries.
Negotiable Instrument Law July 22, 2017 P a g e | 15

Salvador Alfonso, signature verifier of SOLIDBANK, Grace Park Branch, Kalookan City, where the Lim spouses maintained an
account, testified on the following transactions with respect to the seven (7) checks:

CHECK NO. DATE PRESENTED REASON FOR DISHONOR

027683 22 July 1983 Payment Stopped (PS)8


027684 23 July 1983 PS and Drawn Against
Insufficient Fund (DAIF)9
027699 24 Aug. 1983 PS and DAIF10
027700 5 Sept. 1983 PS and DAIF11
027719 9 Aug. 1983 DAIF 12
027720 16 Aug. 1983 PS and DAIF13
027721 30 Aug. 1983 PS and DAIF14

Manuel Lim admitted having issued the seven (7) checks in question to pay for deliveries made by LINTON but denied that his
company's account had insufficient funds to cover the amounts of the checks. He presented the bank ledger showing a balance
of P65,752.75. Also, he claimed that he ordered SOLIDBANK to stop payment because the supplies delivered by LINTON were
not in accordance with the specifications in the purchase orders.

Rosita Lim was not presented to testify because her statements would only be corroborative.

On the basis of the evidence thus presented the trial court held both accused guilty of estafa and violation of B.P. Blg. 22 in its
decision dated 25 January 1989. In Crim. Case No. 1696-MN they were sentenced to an indeterminate penalty of six (6) years and
one (1) day of prision mayor as minimum to twelve (12) years and one (1) day ofreclusion temporal as maximum plus one (1) year
for each additional P10,000.00 with all the accessory penalties provided for by law, and to pay the costs. They were also ordered
to indemnify LINTON in the amount of P241,800.00. Similarly sentences were imposed in Crim. Cases Nos. 1697-MN and 1698-
MN except as to the indemnities awarded, which were P63,455.00 and P51,800.00, respectively.

In Crim. Case No. 1699-MN the trial court sentenced both accused to a straight penalty of one (1) year imprisonment with all the
accessory penalties provided for by law and to pay the costs. In addition, they were ordered to indemnify LINTON in the amount
of P27,900.00. Again, similar sentences were imposed in Crim. Cases Nos. 1700-MN to 1705-MN except for the indemnities
awarded, which were P32,550.00, P27,900.00, P27,900.00, P63,455.00, P51,800.00 and P37,200.00 respectively. 15

On appeal, the accused assailed the decision as they imputed error to the trial court as follows: (a) the regional Trial Court of
malabon had no jurisdiction over the cases because the offenses charged ere committed outside its territory; (b) they could not
be held liable for estafa because the seven (7) checks were issued by them several weeks after the deliveries of the goods; and,
(c) neither could they be held liable for violating B.P. Blg. 22 as they ordered payment of the checks to be stopped because the
goods delivered were not those specified by them, besides they had sufficient funds to pay the checks.

In the decision of 18 September 199216 respondent Court of Appeals acquitted accused-appellants of estafa on the ground that
indeed the checks were not made in payment of an obligation contracted at the time of their issuance. However it affirmed the
finding of the trial court that they were guilty of having violated B.P. Blg. 22.17 On 6 November 1992 their motion for
reconsideration was denied.18

In the case at bench 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 the Regional Trial Court of Malabon. They claim that what
was proved was that all the elements of the offense were committed in Kalookan City. The checks were issued at their place of
business, received by a collector of LINTON, and dishonored by the drawee bank, all in Kalookan City. Furthermore, no evidence
whatsoever supports the proposition that they knew that their checks were insufficiently funded. In fact, some of the checks
were funded at the time of presentment but dishonored nonetheless upon their instruction to the bank to stop payment. In
fine, considering that the checks were all issued, delivered, and dishonored in Kalookan City, the trial court of Malabon
exceeded its jurisdiction when it tried the case and rendered judgment thereon.

The petition has no merit. Section 1, par. 1, of B.P. Blg. 22 punishes "[a]ny person who makes or draws and issues any check to
apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit with the drawee
bank for the payment of such check in full upon its presentment, which check is subsequently dishonored by the drawee bank
for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid
Negotiable Instrument Law July 22, 2017 P a g e | 16

reason, ordered the bank to stop payment . . ." The gravamen of the offense is knowingly issuing a worthless check.19 Thus, a
fundamental element is knowledge on the part of the drawer of the insufficiency of his funds in20 or credit with the drawee bank
for the payment of such check in full upon presentment. Another essential element is subsequent dishonor of the check by the
drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer,
without any valid reason, ordered the bank to stop payment.21

It is settled that venue in criminal cases is a vital ingredient of jurisdiction. 22 Section 14, par. (a), Rule 110, of the Revised Rules of
Court, which has been carried over in Sec. 15, par. (a), Rule 110 of the 1985 Rules on Criminal Procedure, specifically provides:

Sec. 14. Place where action is to be instituted. (a) In all criminal prosecutions the action shall be instituted and
tried in the court of the municipality or province wherein the offense was committed or anyone of the essential
ingredients thereof took place.

If all the acts material and essential to the crime and requisite of its consummation occurred in one municipality or territory, the
court therein has the sole jurisdiction to try the case.23 There are certain crimes in which some acts material and essential to the
crimes and requisite to their consummation occur in one municipality or territory and some in another, in which event, the court
of either has jurisdiction to try the cases, it being understood that the first court taking cognizance of the case excludes the
other.24 These are the so-called transitory or continuing crimes under which violation of B.P. Blg. 22 is categorized. In other
words, a person charged with a transitory crime may be validly tried in any municipality or territory where the offense was in
part committed.25

In determining proper venue in these cases, the following acts material and essential to each crime and requisite to its
consummation must be considered: (a) the seven (7) checks were issued to LINTON at its place of business in Balut, Navotas; b)
they were delivered to LINTON at the same place; (c) they were dishonored in Kalookan City; and, (d) petitioners had
knowledge of the insufficiency of their funds in SOLIDBANK at the time the checks were issued. Since there is no dispute that
the checks were dishonored in Kalookan City, it is no longer necessary to discuss where the checks were dishonored.

Under Sec. 191 of the Negotiable Instruments Law 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. In People v. Yabut26 this Court explained

. . . 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 act essential 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 to transfer titlethereto . . .

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. As this Court further
explained in People v. Yabut27

Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut or Geminiano Yabut, Jr., in Caloocan City
cannot, contrary to the holding of the respondent Judges, be licitly taken as delivery of the checks to the
complainant Alicia P. Andan at Caloocan City to fix the venue there. He did not take delivery of the checks as
holder, i.e., as "payee" or "indorsee." And there appears to be no contract of agency between Yambao and
Andan so as to bind the latter for the acts of the former. Alicia P. Andan declared in that sworn testimony
before the investigating fiscal that Yambao is but her "messenger" or "part-time employee." There was
no special fiduciary relationship that permeated their dealings. For a contract of agency to exist, the consent of
both parties is essential. The principal consents that the other party, the agent, shall act on his behalf, and the
agent consents so as to act. It must exist as afact. The law makes no presumption thereof. The person alleging
it has the burden of proof to show, not only the fact of its existence, but also its nature and extent . . .
Negotiable Instrument Law July 22, 2017 P a g e | 17

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. InPeople v. Grospe28 citing People
v. Manzanilla29 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 Regional Trial Court of Kalookan City or Malabon. Moreover, we ruled in the
same Grospe and Manzanilla cases as reiterated in Lim v. Rodrigo30 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. 31

We therefore sustain likewise the conviction of petitioners by the Regional Trial Court of Malabon for violation of B.P. Blg. 22
thus

Accused-appellants claim that they ordered payment of the checks to be stopped because the goods delivered
were not those specified by them. They maintain that they had sufficient funds to cover the amount of the
checks. The records of the bank, however, reveal otherwise. The two letters (Exhs. 21 and 22) dated July 23,
and August 10, 1983 which they claim they sent to Linton Commercial, complaining against the quality of the
goods delivered by the latter, did not refer to the delivery of mild steel plates (6mm x 4 x 8) and "Z" purlins (16
x 7 x 2-1/2 mts) for which the checks in question were issued. Rather, the letters referred to B.1. Lally columns
(Sch. #20), which were the subject of other purchase orders.

It is true, as accused-appellants point out, that in a case brought by them against the complainant in the
Regional Trial Court of Kalookan City (Civil Case No. C-10921) the complainant was held liable for actual
damages because of the delivery of goods of inferior quality (Exh. 23). But the supplies involved in that case
were those of B.I. pipes, while the purchases made by accused-appellants, for which they issued the checks in
question, were purchases of mild steel plates and "Z" purlins.

Indeed, the only question here is whether accused-appellants maintained funds sufficient to cover the
amounts of their checks at the time of issuance and presentment of such checks. Section 3 of B.P. Blg. 22
provides that "notwithstanding receipt of an order to stop payment, the drawee bank shall state in the notice
of dishonor that there were no sufficient funds in or credit with such bank for the payment in full of the check,
if such be the fact."

The purpose of this provision is precisely to preclude the maker or drawer of a worthless check from ordering
the payment of the check to be stopped as a pretext for the lack of sufficient funds to cover the check.

In the case at bar, the notice of dishonor issued by the drawee bank, indicates not only that payment of the
check was stopped but also that the reason for such order was that the maker or drawer did not have
sufficient funds with which to cover the checks. . . . Moreover, the bank ledger of accused-appellants' account
in Consolidated Bank shows that at the time the checks were presented for encashment, the balance of
accused-appellants' account was inadequate to cover the amounts of the checks. 32 . . .

WHEREFORE, the decision of the Court of Appeals dated 18 September 1992 affirming the conviction of petitioners Manuel Lim
and Rosita Lim

In CA-G.R. CR No. 07277 (RTC Crim. Case No. 1699-MN); CA-G.R. CR No. 07278 (RTC Crim. Case No. 1700-MN);
CA-G.R. CR No. 07279 (RTC Crim. Case No. 1701-MN); CA-G.R. CR No. 07280 (RTC Crim. Case No. 1702-MN); CA-
Negotiable Instrument Law July 22, 2017 P a g e | 18

G.R. CR No. 07281 (RTC Crim. Case No. 1703-MN); CA-G.R. CA No. 07282 (RTC Crim. Case No. 1704-MN); and CA-
G.R. CR No. 07283 (RTC Crim Case No. 1705-MN), the Court finds the accused-appellants

MANUEL LIM and ROSITA LIM guilty beyond reasonable doubt of violation of Batas Pambansa Bilang 22 and
are hereby sentenced to suffer a STRAIGHT PENALTY OF ONE (1) YEAR IMPRISONMENT in each case, together
with all the accessory penalties provided by law, and to pay the costs.

In CA-G.R. CR No. 07277 (RTC Crim. Case No. 1699-MN), both accused-appellants are hereby ordered to
indemnify the offended party in the sum of P27,900.00.

In CA-G.R. CR No. 07278 (RTC Crim. Case No. 1700-MN) both accused-appellants are hereby ordered to
indemnify the offended party in the sum of P32,550.00.

In CA-G.R. CR No. 07278 (RTC Crim. Case No. 1701-MN) both accused-appellants are hereby ordered to
indemnify the offended party in the sum of P27,900.00.

In CA-G.R. CR No. 07280 (RTC Crim. Case No. 1702-MN) both accused-appellants are hereby ordered to
indemnify the offended party in the sum of P27,900.00.

In CA-G.R. CR No. 07281 (RTC Crim. Case No. 1703-MN) both accused are hereby ordered to indemnify the
offended party in the sum of P63,455.00.

In CA-G.R CR No. 07282 (RTC Crim. Case No. 1704-MN) both accused-appellants are hereby ordered to
indemnify the offended party in the sum of P51,800.00, and

In CA-G.R. CR No. 07283 (RTC Crim. Case No. 1705-MN) both accused-appellants are hereby ordered to
indemnify the offended party in the sum of P37,200.00 33

as well as its resolution of 6 November 1992 denying reconsideration thereof, is AFFIRMED. Costs against petitioners.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 111190 June 27, 1995

LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City and in his personal capacity as garnishee,petitioner,
vs.
HON. JOSE P. BURGOS, Presiding Judge, RTC, Br. XVII, Cebu City, and RAUL H. SESBREO, respondents.

BELLOSILLO, J.:

RAUL H. SESBREO filed a complaint for damages against Assistant City Fiscals Bienvenido N. Mabanto, Jr., and Dario D. Rama,
Jr., before the Regional Trial Court of Cebu City. After trial judgment was rendered ordering the defendants to pay P11,000.00 to
Negotiable Instrument Law July 22, 2017 P a g e | 19

the plaintiff, private respondent herein. The decision having become final and executory, on motion of the latter, the trial court
ordered its execution. This order was questioned by the defendants before the Court of Appeals. However, on 15 January 1992 a
writ of execution was issued.

On 4 February 1992 a notice of garnishment was served on petitioner Loreto D. de la Victoria as City Fiscal of Mandaue City
where defendant Mabanto, Jr., was then detailed. The notice directed petitioner 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. 1 On 10 March 1992 private respondent filed a motion before the trial court for examination
of the garnishees.

On 25 May 1992 the petition pending before the Court of Appeals was dismissed. Thus the trial court, finding no more legal
obstacle to act on the motion for examination of the garnishees, directed petitioner on 4 November 1992 to submit his report
showing the amount of the garnished salaries of Mabanto, Jr., within fifteen (15) days from receipt 2 taking into consideration
the provisions of Sec. 12, pars. (f) and (i), Rule 39 of the Rules of Court.

On 24 November 1992 private respondent filed a motion to require petitioner to explain why he should not be cited in contempt
of court for failing to comply with the order of 4 November 1992.

On the other hand, on 19 January 1993 petitioner 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.

On 9 March 1993 the trial court denied both motions and ordered petitioner to immediately comply with its order of 4
November 1992. 3 It opined that the checks of Mabanto, Jr., had already been released through petitioner by the Department of
Justice duly signed by the officer concerned. Upon service of the writ of garnishment, petitioner as custodian of the checks was
under obligation to hold them for the judgment creditor. Petitioner became a virtual party to, or a forced intervenor in, the case
and the trial court thereby acquired jurisdiction to bind him to its orders and processes with a view to the complete satisfaction
of the judgment. Additionally, there was no sufficient reason for petitioner to hold the checks because they were no longer
government funds and presumably delivered to the payee, conformably with the last sentence of Sec. 16 of the Negotiable
Instruments Law.

With regard to the contempt charge, the trial court was not morally convinced of petitioner's guilt. For, while his explanation
suffered from procedural infirmities nevertheless he took pains in enlightening the court by sending a written explanation dated
22 July 1992 requesting for the lifting of the notice of garnishment on the ground that the notice should have been sent to the
Finance Officer of the Department of Justice. Petitioner insists that he had no authority to segregate a portion of the salary of
Mabanto, Jr. The explanation however was not submitted to the trial court for action since the stenographic reporter failed to
attach it to the record. 4

On 20 April 1993 the motion for reconsideration was denied. The trial court explained that it was not the duty of the garnishee
to inquire or judge for himself whether the issuance of the order of execution, writ of execution and notice of garnishment was
justified. His only duty was to turn over the garnished checks to the trial court which issued the order of execution. 5

Petitioner raises the following relevant issues: (1) whether 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: and, (2) whether the salary check of a government
official or employee funded with public funds can be subject to garnishment.

Petitioner reiterates his position that the salary checks were not owned by Mabanto, Jr., because they were not yet delivered to
him, and that petitioner as garnishee has no legal obligation to hold and deliver them to the trial court to be applied to
Mabanto, Jr.'s judgment debt. The thesis of petitioner is that the salary checks still formed part of public funds and therefore
beyond the reach of garnishment proceedings.

Petitioner has well argued his case.

Garnishment is considered as a species of attachment for reaching credits belonging to the judgment debtor owing to him from
a stranger to the litigation. 6 Emphasis is laid on the phrase "belonging to the judgment debtor" since it is the focal point in
resolving the issues raised.
Negotiable Instrument Law July 22, 2017 P a g e | 20

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 Department of Justice through petitioner 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. 7

According to the trial court, the checks of Mabanto, Jr., were already released by the Department of Justice duly signed by the
officer concerned through petitioner and upon service of the writ of garnishment by the sheriff petitioner was under obligation
to hold them for the judgment creditor. It recognized the role of petitioner ascustodian of the checks. At the same time
however it considered the checks as no longer government funds and presumed delivered to the payee based on the last
sentence of Sec. 16 of the Negotiable Instruments Law which states: "And where the instrument is no longer in the possession
of a party whose signature appears thereon, a valid and intentional delivery by him is presumed." Yet, the presumption is not
conclusive because the last portion of the provision says "until the contrary is proved." However this phrase was deleted by the
trial court for no apparent reason. Proof to the contrary is its own finding that the checks were in the custody of petitioner.
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. In Tiro v. Hontanosas 8 we ruled that

The salary check of a government officer or employee such as a teacher 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.

As a necessary consequence of being public fund, the checks may not be garnished to satisfy the judgment. 9 The rationale
behind this doctrine is obvious consideration of public policy. The Court succinctly stated in Commissioner of Public Highways v.
San Diego 10 that

The functions and public services rendered by the State cannot be allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate and specific objects, as appropriated by law.

In denying petitioner's motion for reconsideration, the trial court expressed the additional ratiocination that it was not the duty
of the garnishee to inquire or judge for himself whether the issuance of the order of execution, the writ of execution, and the
notice of garnishment was justified, citing our ruling in Philippine Commercial Industrial Bank v. Court of Appeals. 11 Our precise
ruling in that case was that "[I]t is not incumbent upon the garnishee to inquire or to judge for itself whether or not the order
for the advance execution of a judgment is valid." But that is invoking only the general rule. We have also established therein
the compelling reasons, as exceptions thereto, which were not taken into account by the trial court, e.g., a defect on the face of
the writ or actual knowledge by the garnishee of lack of entitlement on the part of the garnisher. It is worth to note that the
ruling referred to the validity of advance execution of judgments, but a careful scrutiny of that case and similar cases reveals
that it was applicable to a notice of garnishment as well. In the case at bench, it was incumbent upon petitioner to inquire into
the validity of the notice of garnishment as he had actual knowledge of the non-entitlement of private respondent to the checks
in question. Consequently, we find no difficulty concluding that the trial court exceeded its jurisdiction in issuing the notice of
garnishment concerning the salary checks of Mabanto, Jr., in the possession of petitioner.

WHEREFORE, the petition is GRANTED. The orders of 9 March 1993 and 20 April 1993 of the Regional Trial Court of Cebu City, Br.
17, subject of the petition are SET ASIDE. The notice of garnishment served on petitioner dated 3 February 1992 is ordered
DISCHARGED.

SO ORDERED.

Quiason and Kapunan, JJ., concur.

Separate Opinions
Negotiable Instrument Law July 22, 2017 P a g e | 21

DAVIDE, JR., J., concurring and dissenting:

This Court may take judicial notice of the fact that checks for salaries of employees of various Departments all over the country
are prepared in Manila not at the end of the payroll period, but days before it to ensure that they reach the employees
concerned not later than the end of the payroll period. As to the employees in the provinces or cities, the checks are sent
through the heads of the corresponding offices of the Departments. Thus, in the case of Prosecutors and Assistant Prosecutors
of the Department of Justice, the checks are sent through the Provincial Prosecutors or City Prosecutors, as the case may be,
who shall then deliver the checks to the payees.

Involved in the instant case are the salary and RATA checks of then Assistant City Fiscal Bienvenido Mabanto, Jr., who was
detailed in the Office of the City Fiscal (now Prosecutor) of Mandaue City. Conformably with the aforesaid practice, these checks
were sent to Mabanto thru the petitioner who was then the City Fiscal of Mandaue City.

The ponencia failed to indicate the payroll period covered by the salary check and the month to which the RATA check
corresponds.

I respectfully submit that if these salary and RATA checks corresponded, respectively, to a payroll period and to a month which
had already lapsed at the time the notice of garnishment was served, the garnishment would be valid, as the checks would then
cease to be property of the Government and would become property of Mabanto. Upon the expiration of such period and
month, the sums indicated therein were deemed automatically segregated from the budgetary allocations for the Department
of Justice under the General Appropriations Act.

It must be recalled that the public policy against execution, attachment, or garnishment is directed to public funds.

Thus, in the case of Director of the Bureau of Commerce and Industry vs. Concepcion 1 where the core issue was whether or not
the salary due from the Government to a public officer or employee can, by garnishment, be seized before being paid to him
and appropriated to the payment of his judgment debts, this Court held:

A rule, which has never been seriously questioned, is that money in the hands of public officers, although it
may be due government employees, is not liable to the creditors of these employees in the process of
garnishment. One reason is, that the State, by virtue of its sovereignty, may not be sued in its own courts
except by express authorization by the Legislature, and to subject its officers to garnishment would be to
permit indirectly what is prohibited directly. Another reason is that moneys sought to be garnished, as long as
they remain in the hands of the disbursing officer of the Government, belong to the latter, although the defendant
in garnishment may be entitled to a specific portion thereof. And still another reason which covers both of the
foregoing is that every consideration of public policy forbids it.

The United States Supreme Court, in the leading case of Buchanan vs. Alexander ([1846], 4 How., 19), in
speaking of the right of creditors of seamen, by process of attachment, to divert the public money from its
legitimate and appropriate object, said:

To state such a principle is to refute it. No government can sanction it. At all times it would be
found embarrassing, and under some circumstances it might be fatal to the public service. . .
. So long as money remains in the hands of a disbursing officer, it is as much the money of the
United States, as if it had not been drawn from the treasury. Until paid over by the agent of the
government to the person entitled to it, the fund cannot, in any legal sense, be considered a part
of his effects." (See, further, 12 R.C.L., p. 841; Keene vs. Smith [1904], 44 Ore., 525; Wild vs.
Ferguson [1871], 23 La. Ann., 752; Bank of Tennessee vs. Dibrell [1855], 3 Sneed [Tenn.], 379).
(emphasis supplied)

The authorities cited in the ponencia are inapplicable. Garnished or levied on therein were public funds, to wit: (a) the pump
irrigation trust fund deposited with the Philippine National Bank (PNB) in the account of the Irrigation Service Unit in Republic
vs. Palacio; 2 (b) the deposits of the National Media Production Center in Traders Royal Bank vs. Intermediate Appellate
Court; 3 and (c) the deposits of the Bureau of Public Highways with the PNB under a current account, which may be expended
Negotiable Instrument Law July 22, 2017 P a g e | 22

only for their legitimate object as authorized by the corresponding legislative appropriation in Commissioner of Public Highways
vs. Diego. 4

Neither is Tiro vs. Hontanosas 5 squarely in point. The said case involved the validity of Circular No. 21, series of 1969, issued by
the Director of Public Schools which directed that "henceforth no cashier or disbursing officer shall pay to attorneys-in-fact or
other persons who may be authorized under a power of attorney or other forms of authority to collect the salary of an
employee, except when the persons so designated and authorized is an immediate member of the family of the employee
concerned, and in all other cases except upon proper authorization of the Assistant Executive Secretary for Legal and
Administrative Matters, with the recommendation of the Financial Assistant." Private respondent Zafra Financing Enterprise,
which had extended loans to public school teachers in Cebu City and obtained from the latter promissory notes and special
powers of attorney authorizing it to take and collect their salary checks from the Division Office in Cebu City of the Bureau of Public
Schools, sought,inter alia, to nullify the Circular. It is clear that the teachers had in fact assigned to or waived in favor of Zafra
their future salaries which were still public funds. That assignment or waiver was contrary to public policy.

I would therefore vote to grant the petition only if the salary and RATA checks garnished corresponds to an unexpired payroll
period and RATA month, respectively.

Padilla, J., concurs.