SECOND DIVISION The former Court of Appeals, by its resolution dated

October 16, 1974 certified this case to this Court the issue
[G.R. No. L-39641. February 28, 1983.] raised therein being one purely of law.

METROPOL (BACOLOD) FINANCING & INVESTMENT
CORPORATION, Plaintiff-Appellee, v. SAMBOK
MOTORS COMPANY and NG SAMBOK SONS MOTORS
CO., LTD., Defendants-Appellants.
Rizal Quimpo & Cornelio P. Revena for Plaintiff-
Appellee.
Diosdado Garingalao, for Defendants-Appellants.
On April 15, 1969 Dr. Javier Villaruel executed a
promissory note in favor of Ng Sambok Sons Motors Co.,
Ltd., in the amount of P15,939.00 payable in twelve (12)
equal monthly installments, beginning May 18, 1969, with
interest at the rate of one percent per month. It is further
provided that in case on non-payment of any of the
installments, the total principal sum then remaining
unpaid shall become due and payable with an additional
interest equal to twenty-five percent of the total amount
due. chanrobles law library

SYLLABUS On the same date, Sambok Motors Company (hereinafter

referred to as Sambok), a sister company of Ng Sambok
Sons Motors Co., Ltd., and under the same management
1. MERCANTILE LAW; PROMISSORY NOTE; QUALIFIED as the former, negotiated and indorsed the note in favor
INDORSEMENT; EFFECT THEREOF. A qualified of plaintiff Metropol Financing & Investment Corporation
indorsement constitutes the indorser a mere assignor of with the following indorsement: jgc:chanrobles.com.ph

the title to the instrument. It may be made by adding to

the indorsers signature the words "without recourse" or "Pay to the order of Metropol Bacolod Financing &
any words of similar import. Such an indorsement relieves Investment Corporation with recourse. Notice of Demand;
the indorser of the general obligation to pay if the Dishonor; Protest; and Presentment are hereby waived.
instrument is dishonored but not of the liability arising
from warranties on the instrument as provided in Section SAMBOK MOTORS CO. (BACOLOD)
65 of the Negotiable Instruments Law. However, appellant
Sambok indorse the note "with recourse and even By: chanrob1es virtual 1aw library

waived the notice of demand, dishonor, protest and

presentment. RODOLFO G. NONILLO

2. ID.; ID.; ADDITION OF THE WORDS "WITH RECOURSE"
DO NOT MAKE THE INDORSEMENT QUALIFIED; CASE AT
BAR. Appellant, by indorsing the note "with recourse
does not make itself a qualified indorser but a general
indorser who is secondarily liable, because by such
indorsement, it agreed that if Dr. Villaruel fails to pay the
note, plaintiff-appellee can go after said appellant. The
effect of such indorsement is that the note was indorsed
without qualification. A person who indorses without
qualification engages that on due presentment, the note
shall be accepted or paid, or both as the case may be, and
that if it be dishonored, he will pay the amount thereof to
the holder. Appellant Samboks intention of indorsing the
note without qualification is made even more apparent by
the fact that the notice of demand, dishonor, protest and
presentment were all waived. The words added by said
appellant do not limit his liability, but rather confirm his
obligations as a general indorser.
3. ID.; ID.; AFTER DISHONORED BY NON-PAYMENT,
PERSON SECONDARILY LIABLE BECOMES THE PRINCIPAL
DEBTOR. The lower court did not err in not declaring
appellant as only secondarily liable because after an
instrument is dishonored by, non-payment. the person
secondarily liable thereon ceases to be such and becomes
a principal debtor. His liability becomes the same as that
Asst. General Manager"
The maker, Dr. Villaruel defaulted in the payment of his
installments when they became due, so on October 30,
1969 plaintiff formally presented the promissory note for
payment to the maker. Dr. Villaruel failed to pay the
promissory note as demanded, hence plaintiff notified
Sambok as indorsee of said note of the fact that the same
has been dishonored and demanded payment.
Sambok failed to pay, so on November 26, 1969 plaintiff
filed a complaint for collection of a sum of money before
the Court of First Instance of Iloilo, Branch I. Sambok did
not deny its liability but contended that it could not be
obliged to pay until after its co-defendant Dr. Villaruel,
has been declared insolvent.
During the pendency of the case in the trial court,
defendant Dr. Villaruel died, hence, on October 24, 1972
the lower court, on motion, dismissed the case against Dr.
Villaruel pursuant to Section 21, Rule 3 of the Rules of
Court. 1
On plaintiffs motion for summary judgment, the trial
court rendered its decision dated September 12, 1973,
the dispositive portion of which reads as follows: jgc:chanrobles.com.ph

of the original obligor. Consequently, the holder need not

even proceed against the maker before suing the "WHEREFORE, judgment is rendered: jgc:chanrobles.com.ph

indorser.
"(a) Ordering Sambok Motors Company to pay to the
plaintiff the sum of P15,939.00 plus the legal rate of
DECISION interest from October 30, 1969;

"(b) Ordering same defendant to pay to plaintiff the sum

DE CASTRO, J.: equivalent to 25% of P15,939.00 plus interest thereon
until fully paid; and chanrobles virtual lawlibrary

1
 affirmed. No costs.
"(c) To pay the cost of suit." cralaw virtua1aw library

SO ORDERED.
Not satisfied with the decision, the present appeal was
instituted, appellant Sambok raising a lone assignment of Makasiar, Concepcion, Jr., Guerrero and Escolin, JJ.,
error as follows: jgc:chanrobles.com.ph concur.

"The trial court erred in not dismissing the complaint by Aquino, J., is on leave.
finding defendant-appellant Sambok Motors Company as
assignor and a qualified indorsee of the subject Abad Santos, J., I concur and wish to add the observation
promissory note and in not holding it as only secondarily that the appeal could have been treated as a petition for
liable thereof." cralaw virtua1aw library review under R.A. 5440 and dismissed by minute
resolution.
Appellant Sambok argues that by adding the words "with
recourse" in the indorsement of the note, it becomes a
qualified indorser; that being a qualified indorser, it does
not warrant that if said note is dishonored by the maker
on presentment, it will pay the amount to the holder; that
it only warrants the following pursuant to Section 65 of
the Negotiable Instruments Law: (a) that the instrument
is genuine and in all respects what it purports to be; (b)
that he has a good title to it; (c) that all prior parties had
capacity to contract; (d) that he has no knowledge of any EN BANC
fact which would impair the validity of the instrument or
render it valueless. [G.R. No. L-15380. September 30, 1960.]

The appeal is without
A qualified indorsement constitutes the indorser a mere
assignor of the title to the instrument. It may be made by
adding to the indorsers signature the words "without
recourse" or any words of similar import. 2 Such an
indorsement relieves the indorser of the general obligation
to pay if the instrument is dishonored but not of the
liability arising from warranties on the instrument as
provided in Section 65 of the Negotiable Instruments Law
already mentioned herein. However, appellant Sambok
indorsed the note "with recourse" and even waived the
notice of demand, dishonor, protest and presentment.
"Recourse" means resort to a person who is secondarily
liable after the default of the person who is primarily
liable. 3 Appellant, by indorsing the note "with recourse"
does not make itself a qualified indorser but a general
indorser who is secondarily liable, because by such
indorsement, it agreed that if Dr. Villaruel fails to pay the
note, plaintiff-appellee can go after said appellant. The
effect of such indorsement is that the note was indorsed
without qualification. A person who indorses without
qualification engages that on due presentment, the note
shall be accepted or paid, or both as the case may be, and
that if it be dishonored, he will pay the amount thereof to
the holder. 4 Appellant Samboks intention of indorsing
the note without qualification is made even more apparent
by the fact that the notice of demand, dishonor, protest
and presentment were all waived. The words added by
said appellant do not limit his liability, but rather confirm
his obligation as a general indorser.
Lastly, the lower court did not err in not declaring
appellant as only secondarily liable because after an
instrument is dishonored by non-payment, the person
secondarily liable thereon ceases to be such and becomes
a principal debtor. 5 His liability becomes the same as
that of the original obligor. 6 Consequently, the holder
need not even proceed against the maker before suing the
indorser.chanrobles law
merit. CHAN WAN, Plaintiff-Appellant, v. TAN KIM and
CHEN SO, Defendants-Appellees.
Manuel Domingo for Appellant.
C. M. de los Reyes for Appellees.
SYLLABUS
1. NEGOTIABLE INSTRUMENTS; CROSSED CHECKS;
ABSENCE OF DUE PRESENTMENT; LIABILITY OF DRAWER.
The drawer in drawing the check engaged that on due
presentment, the check would be paid, and that if it be
dishonored, he will pay the amount thereof to the holder.
Wherefore, in the absence of due presentment, the
drawer did not become liable.
2. ID.; ID.; CHECK CROSSED SPECIALLY IN FAVOR OF A
CERTAIN BANK; HOW COLLECTED; LIABILITY OF DRAWEE
OR WRONG PAYMENT. Where a check is crossed
specially in favor of a certain bank, the check is generally
deposited with the bank mentioned in the crossing, so
that the latter may take charge of the collection. If it is
not presented by said bank for payment, the drawee is
liable to the true owner, in case of payment to persons
not entitled thereto.
3. ID.; ID.; HOLDER WHO IS NOT HOLDER IN DUE COURT
CAN STILL RECOVER ON THE CHECK. The Negotiable
Instruments law does not provide that a holder who is not
a holder in due course, may not in any case, recover on
the instrument. The only disadvantage of a holder who is
not a holder in due course is that the negotiable
instrument is subject to defenses as if it were non-
negotiable.
DECISION
library

WHEREFORE, the decision of the lower court is hereby

2
 BENGZON, J.:
This suit to collect eleven checks totalling P4,290.00 is
here for decision because it involves no issue of fact.
Such checks payable to "cash or bearer" and drawn by
defendant Tan Kim (the other defendant is her husband)
upon the Equitable Banking Corporation, were all
presented for payment by Chan Wan to the drawee bank,
but they "were all dishonored and returned to him unpaid
due to insufficient funds and/or causes attributable to the
drawer." cralaw virtua1aw library
At the hearing of the case, in the Manila court of first
instance, the plaintiff did not take the witness stand. His
attorney, however, testified only to identify the checks
which are Exhibits A to K plus the letters of demand
upon defendants.
On the other hand, Tan Kim declared without
contradiction that the checks had been issued to two
persons named Pinong and Muy for some shoes the
former had promised to make and "were intended as
mere receipts."
In view of such circumstances, the court declined to order
payment for two principal reasons: (a) plaintiff failed to
prove he was a holder in due course, and (b) the checks
being crossed checks should not have been presented to
the drawee for "payment," but should have been
deposited instead with the bank mentioned in the
crossing.
It may be stated in this connection, that defendants
asserted a counterclaim, the court dismissed it for failure
of proof, and from such dismissal they did not appeal.
The only issue is, therefore, the plaintiffs right to collect
on the eleven commercial documents.
The Negotiable Instruments Law regulating the issuance
of negotiable checks, the rights and the liabilities arising
therefrom, does not mention "crossed checks." Art. 541 of
the Code of Commerce refers to such instruments. 1 The
bills of Exchange Act of England of 1882, contains several
provisions about them, some of which are quoted in the
margin. 2 In Philippine National Bank v. Zulueta, 101
Phil., 1071; 55 Off. Gaz., 222, we applied some provisions
of said Bills of Exchange Act because the Negotiable
Instruments Law, originating from England and codified in
the United States, permits resort thereto in matters not
covered by it and local legislation. 3 promissory note signed by A, he is not a holder in due
Eight of the checks here in question bear across their face
two parallel transverse lines between which these words
are written: non- negotiable - China Banking Corporation.
These checks have, therefore, been crossed specially to
the China Banking Corporation, and should have been
presented for payment by China Banking, and not by
Chan Wan. 4 Inasmuch as Chan Wan did present them for
payment himself - the Manila court said - there was no
proper presentment, and the liability did not attach to the
drawer.
We agree to the legal premises and conclusion. It must be
remembered, at this point, that the drawer in drawing the
check engaged that "on due presentment, the check
3
would be paid, and that if it be dishonored . . . he will pay
the amount thereof to the holder." 5 Wherefore, in the
absence of due presentment, the drawer did not become
liable.
Nevertheless we find, on the backs of the checks,
endorsements which apparently show they had been
deposited with the China Banking Corporation and were,
by the latter, presented to the drawee bank for collection.
For instance, on the back of the check Exhibit A (same as
in Exh. B), this endorsement appears: jgc:chanrobles.com.ph
"For deposit to the account of White House Shoe Supply
with the China Banking Corporation." cralaw virtua1aw library
and then this: jgc:chanrobles.com.ph
"Cleared through the clearing office Central Bank of the
Philippines. All prior endorsements and/or lack of
endorsements guaranteed. China Banking Corporation." cralaw virtua1aw library
And on the back of Exh. G: jgc:chanrobles.com.ph
"For deposit to the credit of our account. Viuda e Hijos de
Chua Chiong Pio. Peoples Shoe Company."
followed by the endorsement of China Banking
Corporation as in Exhibits A and B. All the crossed checks
have the "clearance" endorsement of China Banking
Corporation.
These circumstances would seem to show deposit of the
checks with China Banking Corporation and subsequent
presentation by the latter through the clearing office; but
as drawee had no funds, they were unpaid and returned,
some of them stamped "account closed." How they
reached his hands, plaintiff did not indicate. Most
probably, as the trial court surmised, - this is not a finding
of fact he got them after they had been thus returned,
because he presented them in court with such "account
closed" stamps, without bothering to explain. Naturally
and rightly, the lower court held him not to be a holder in
due course under the circumstances, since he knew, upon
taking them up, that the checks had already been
dishonored. 6
Yet it does not follow as a legal proposition, that simply
because he was not a holder in due course, Chan Wan
could not recover on the checks. The Negotiable
Instruments Law does not provide that a holder 7 who is
not a holder in due course, may not in any case, recover
on the instrument. If B purchases an overdue negotiable
course; but he may recover from A, 8 if the latter has no
valid excuse for refusing payment. The only disadvantage
of a holder who is not a holder in due course is that the
negotiable instrument is subject to defenses as if it were
non-negotiable. 9
Now what defenses did the defendant Tan Kim prove? The
lower courts decision does not mention any, evidently His
Honor had in mind the defense pleaded in defendants
answer, but thought it unnecessary to specify, because
the crossing" and presentation incidents sufficed to bar
recovery, in his opinion.
Tan Kim admitted on cross-examination either that the
checks had been issued as evidence of debts to Pinong
and Muy, and/or that they had been issued in payment of
shoes which Pinong had promised to make for her.
Seeming to imply that Pinong had failed to make the
shoes, she asserted Pinong had "promised to pay the
checks for me." Yet she did not complete the idea,
perhaps because she was just answering cross-questions,
her main testimony having referred merely to their
counter-claim.
Needless to say, if it were true that the checks had been
issued in payment for shoes that were never made and
delivered, Tan Kim would have a good defense as against
a holder who is not a holder in due course. 10
Considering the deficiency of important details on which a
fair adjudication of the parties rights depends, we think
the record should be and is hereby returned, in the
interest of justice, to the court below for additional
evidence, and such further proceedings as are not
inconsistent with this opinion. With the understanding
that, as defendants did not appeal, their counterclaim
must he and is hereby definitely dismissed. So ordered.
Paras, C.J., Padilla, Bautista Angelo, Labrador,
Concepcin, Reyes, J.B.L., Barrera, Gutierrez David,
Paredes, and Dizon, JJ., concur.
transverse lines, either with or without the words "not
negotiable;" or
(b) Two parallel transverse lines simply, either with or
without the words "not negotiable;" that addition
constitutes a crossing, and the cheque is crossed
generally.
(2) Where a cheque bears across its face an addition of
the name of a banker, either with or without the words
"not negotiable," that addition constitutes a crossing, and
the cheque is crossed specially and to that banker.
79. . . . (2) Where the banker on whom a cheque is drawn
which is so crossed nevertheless pays the same, or pays a
cheque crossed generally otherwise than to a banker, or if
crossed specially otherwise than to the banker to whom it
is crossed, or his agent for collection being a banker, he is
liable to the true owner of the cheque for any loss he may
sustain owing to the cheque having been so paid. (Taken
from Brannans Negotiable Instruments Law, 6th Ed.
1250-1251.)
3. Sec. 196, Negotiable Instruments Law.
4. If it is not presented by said Bank for payment, the
drawee runs the risk, in case of payment to persons not
entitled thereto. So the practice is for the drawee to
refuse when presented by individuals. The check is
generally deposited with the bank mentioned in the
crossing, so that the latter may take charge of the
collection.
5. Sec. 61. Negotiable Instruments Law.
6. Sec. 52 (b), Negotiable Instruments Law.
7. He was a holder all right, because he had possession of
4
the checks that were payable to bearer.
8. Sec. 51. Negotiable Instruments Law.
9. SEC. 58. Negotiable Instruments Law.
10. Lack of consideration is a defense. (Sec. 28,
Negotiable Instruments Law.)
SECOND DIVISION
[G.R. No. 96160. June 17, 1992.]
STELCO MARKETING CORPORATION, Petitioner, v.
HON. COURT OF APPEALS and STEELWELD
CORPORATION OF THE PHILIPPINES,
INC., Respondents.
Reyes, Kho & Associates for Petitioner.
Ocampo, Dizon & Domingo for Private Respondent.
SYLLABUS
1. NEGOTIABLE INSTRUMENTS LAW; ACCOMMODATION
PARTY; LIABLE TO A HOLDER FOR VALUE. STELCO
evidently places much reliance on the pronouncement of
the Regional Trial Court in Criminal Case No. 66571, that
the acquittal of the two (2) accused (Limson and Torres)
did not operate "to release Steelweld Corporation from its
liability under Sec. 29 of the Negotiable Instruments Law
for having issued (the check) for the accommodation of
Romeo Lim." The cited provision reads as follows:
"SECTION 29. Liability of accommodation party. An
accommodation party is one who has signed the
instrument as maker, drawer, acceptor, or indorser,
without receiving value therefor, and for the purpose of
lending his name to some other person. Such a person is
liable on the instrument to a holder for value,
notwithstanding such holder, at the time of taking the
instrument, knew him to be only an accommodation
party." It is noteworthy that the Trial Courts
pronouncement containing reference to said Section 29
did not specify to whom STEELWELD, as accommodation
party, is supposed to be liable; and certain it is that
neither said pronouncement nor any other part of the
judgment of acquittal declared it liable to STELCO. To be
sure, as regards an accommodation party (such as
STEELWELD), lack of notice of any infirmity in the
instrument or defect in title of the persons negotiating it,
has no application. This is because Section 29 of the law
above quoted preserves the right of recourse of a "holder
for value" against the accommodation party
notwithstanding that "such holder, at the time of taking
the instrument, knew him to be only an accommodation
party" [Prudential Bank and Trust Co, v. Ramesh Trading
Co. C.A. 32908-R, September 10, 1964].
2. ID.; ID.; HOLDER IN DUE COURSE; DEFINED. "A
holder in due course," says the law, [SEC. 52, Negotiable
Instruments Law, Act No. 2031] "is a holder who has
taken the instrument under the following conditions: (a)
That it is complete and regular upon its face; (b) That he
became the holder of it before it was overdue, and
without notice that it had been previously dishonored, if
such was the fact; (c) That he took it in good faith and for
value; (d) That at the time it was negotiated to him, he
had no notice of any infirmity in the instrument or defect
in the title of the persons negotiating it." cralaw
3. ID.; ID.; EFFECTS OF POSSESSION OF NEGOTIABLE
INSTRUMENT AFTER PRESENTMENT AND DISHONOR, OR
PAYMENT. The record does show that after the check
had been deposited and dishonored, STELCO came into
possession of it in some way, and was able, several years
after the dishonor of the check, to give it in evidence at
the trial of the civil case it had instituted against the
drawers of the check (Limson and Torres) and RLY. But,
as already pointed out, possession of a negotiable
instrument after presentment and dishonor, or payment,
is utterly inconsequential; it does not make the possessor
a holder for value within the meaning of the law; it gives
rise to no liability on the part of the maker or drawer and
indorsers.
4. REMEDIAL LAW; FACTUAL FINDINGS OF THE COURT
OF APPEALS; NORMALLY CONCLUSIVE ON THE SUPREME
COURT. Now, STELCO theorizes that it should be
deemed a "holder for value" of STEELWELDs Check No.
765380 because the record shows it to have been in
"actual possession" thereof; otherwise, it "could not have
presented, marked and introduced (said check) in
evidence before the court a quo." "Besides," it adds, the
check in question was presented by STELCO to the drawee
bank for payment through Armstrong Industries, the
manufacturing arm of STELCO and its sister company."
The trouble is, there is no evidence whatever that
STELCOs possession of Check No. 765380 ever dated
back to any time before the instruments presentment and
dishonor. There is no evidence whatsoever that the check
was ever given to it, or indorsed to it in any manner or
form in payment of an obligation or as security for an
obligation, or for any other purpose before it was
presented for payment. On the contrary, the factual
finding of the Court of Appeals, which by traditional
precept is normally conclusive on this Court, is that
STELCO never became a holder for value and that"
(n)owhere in the check itself does the name of Stelco
Marketing appear as payee, indorsee or depositor
thereof."
DECISION
NARVASA, J.:
Stelco Marketing Corporation is engaged in the
distribution and sale to the public of structural steel bars.
1 On seven (7) different occasions in September and
5
October, 1980, it sold to RYL Construction, Inc. quantities
of steel bars of various sizes and rolls of G.I. wire. These
bars and wire were delivered at different places at the
indication of RYL Construction, Inc. The aggregate price
for the purchases was P126,859.61. chanrobles virtual lawlibrary
Although the corresponding invoices issued by STELCO
stipulated that RYL would pay "COD" (cash on delivery),
the latter made no payments for the construction
materials thus ordered and delivered despite insistent
demands for payment by the former.
On April 4, 1981, RYL gave to Armstrong Industries
described by STELCO as its "sister corporation" and
"manufacturing arm" 2 a check drawn against
virtua1aw library Metrobank in the amount of P126,129.86, numbered
765380 and dated April 4, 1981. That check was a
company check of another corporation, Steelweld
Corporation of the Philippines, signed by its President,
Peter Rafael Limson, and its Vice-President, Artemio
Torres.
The check was issued by Limson at the behest of his
friend, Romeo Y. Lim, President of RYL. Romeo Lim had
asked Limson for financial assistance, and the latter had
agreed to give Lim a check only by way of
accommodation, "only as guaranty but not to pay for
anything." 3 Why the check was made out in the amount
of P126,129.86 is not explained. Anyway, the check was
actually issued in said amount of P126,129.86, and as
already stated, was given by R.Y. Lim to Armstrong,
Industries, 4 in payment of an obligation. When the latter
deposited the check at its bank, it was dishonored
because "drawn against insufficient funds." 5 When so
deposited, the check bore two (2) indorsements, that of
"RYL Construction," followed by that of "Armstrong
Industries." 6
On account of the dishonor of Metrobank Check No.
765380, and on complaint of Armstrong Industries
(through a Mr. Young), Rafael Limson and Artemio Torres
were charged in the Regional Trial Court of Manila with a
violation of Batas Pambansa Bilang 22. 7 They were
acquitted in a decision rendered on June 28, 1984 "on the
ground that the check in question was not issued by the
drawer to apply on account for value, it being merely for
accommodation purposes." 8 That judgment however
conditioned the acquittal with the following
pronouncement: jgc:chanrobles.com.ph
"This is not however to release Steelweld Corporation
from its liability under Sec. 29 of the Negotiable
Instruments Law for having issued it for the
accommodation of Romeo Lim." cralaw virtua1aw library
Eleven months or so later and some four (4) years after
issuance of the check in question in May, 1985, STELCO
filed with the Regional Trial Court of Caloocan City a civil
complaint 9 against both RYL and STEELWELD for the
recovery of the value of the steel bars and wire sold to
and delivered to RYL (as already narrated) in the amount
of P126,129.86, "plus 18% interest from August 20,
1980 . . . (and) 25% of the total amount sought to be
recovered as and by way of attorneys fees . . ." 10
Among the allegations of its complaint was that
Metrobank Check No. 765380 above mentioned had been
given to it in payment of RYLs indebtedness, duly
indorsed by R.Y. Lim. 11 A preliminary attachment was
issued by the trial court on the basis of the averments of
the complaint but was shortly dissolved upon the filing of
a counter-bond by STEELWELD.
RYL could no longer be located and could not be served
with summons. 12 It never appeared. Only STEELWELD
filed an answer, under date of July 16, 1985. 13 In said
pleading, it specifically denied the facts alleged in the
Court of Appeals 17 and there succeeded in reversing the
judgment. By Decision promulgated on May 29, 1990, 18
the Court of Appeals 19 ordered "the complaint against
appellant (STEELWELD) DISMISSED; (and the appellee,
STELCO) to pay appellant the sum of P15,000.00 as
attorneys fees and cost of litigation, the suit . . . (being)
a baseless one that dragged appellant in court and caused
it to incur attorneys fees and expense of litigation." cralaw virtua1aw library

complaint, the truth, according to Steelweld, being

basically that STELCOs motion for reconsideration was denied by the
Appellate Tribunals resolution dated November 13, 1990.
1) STELCO "is a complete stranger to it;" it had "not 20 The Court stressed that
entered into any transaction or business dealing of any
kind" with STELCO, the transactions described in the ". . . as far as Steelweld is concerned, there was no
complaint having been solely and exclusively between the commercial transaction between said appellant and
plaintiff and RYL Construction; appellee. Moreover, there is no evidence that appellee
Stelco Marketing became a holder for value. Nowhere in
2) the check in question was "only given to a certain R. the check itself does the name of Stelco Marketing appear
Lim to be used as collateral for another obligation . . . as payee, indorsee or depositor thereof. Finally, appellees
(but) in breach of his agreement (Lim) utilized and complaint is for the collection of the unpaid accounts for
negotiated the check for another purpose . . .;" delivery of steel bars and construction materials. It having
been established that appellee had no commercial
3) nevertheless, the check "is wholly inoperative since . . . transaction with appellant Stelco, appellee had no cause
Steelweld . . . did not issue it for any valuable of action against said appellant." cralaw virtua1aw library

consideration either to R. Lim or to the plaintiff not to

mention also the fact that the said plaintiff failed to STELCO appealed to this Court in accordance with Rule 45
comply with the requirements of the law to hold the said of the Rules of Court. In this Court it seeks to make the
defendant (STEELWELD) liable . . ." cralaw virtua1aw library following points in connection with its plea for the
overthrow of the Appellate Tribunals aforesaid decision,
Trial ensued upon these issues, after which judgment was viz.: chanrob1es virtual 1aw library

rendered on June 26, 1986. 14 The judgment sentenced

"the defendant Steelweld corporation to pay to . . . 1) said decision is "not in accord with law and
(Stelco Marketing Corporation) the amount of jurisprudence;"
P126,129.86 with legal rate of interest from May 9, 1985,
when this case was instituted until fully paid, plus another 2) "STELCO is a holder within the meaning of the
sum equivalent to 25% of the total amount due as and for Negotiable Instruments Law;
attorneys fees . . ." 15 That disposition was justified in
the judgment as follows: 16 3) "STELCO is a holder in due course of Metrobank Check
No. 765380 . . . (and hence) holds the same free from
"There is no question, then, that as far as any commercial personal or equitable defense;" and
transaction is concerned between plaintiff and defendant
Steelweld no such transaction over occurred. Ordinarily, 4) "Negotiation in breach of faith is a personal
under civil law rules, there having been no transaction defense . . . (and hence) no effective as against a holder
between them involving the purchase of certain in due course." cralaw virtua1aw library

merchandise there would be no privity of contract

between them, and plaintiff will have no right to sue the The points are not well taken.
defendant for payment of said merchandise for simple
reason that the defendant did not order them, much less The crucial question is whether or not STELCO ever
receive them. became a holder in due course of Check No. 765380, a
bearer instrument within the contemplation of the
But we have here a case where the defendant Steelweld Negotiable Instruments Law. It never did.
thru its President Peter Rafael Limson admitted to have
issued a check payable to cash in favor of his friend STELCO evidently places much reliance on the
Romeo Lim who was the President of RYL Construction by pronouncement of the Regional Trial Court in Criminal
way of accommodation. Under the Negotiable Instruments Case No. 66571, 21 that the acquittal of the two (2)
Law an accommodation party is liable. accused (Limson and Torres) did not operate "to release
Steelweld Corporation from its liability under Sec. 29 of
SEC. 29. Liability of an accommodation party. An the Negotiable Instruments Law for having issued . . .
accommodation party is one who has signed the (the check) for the accommodation of Romeo Lim." The
instrument as maker, drawer, acceptor, or indorser, cited provision reads as follows: jgc:chanrobles.com.ph

without receiving value therefor, and for the purpose of

lending his name to some other person. Such a person is
liable on the instrument to a holder for value
notwithstanding such holder at the time of taking the
instrument knew him to be only an accommodation
party."
From this adverse judgment STEELWELD appealed to the
6
"SECTION 29. Liability of accommodation party. An
accommodation party is one who has signed the
instrument as maker, drawer, acceptor, or indorser,
without receiving value therefor, and for the purpose of
lending his name to some other person. Such a person is
liable on the instrument to a holder for value,
notwithstanding such holder, at the time of taking the
instrument, knew him to be only an accommodation
party."
cralaw virtua1aw
It is noteworthy that the Trial Courts pronouncement
containing reference to said Section 29 did not specify to
whom STEELWELD, as accommodation party, is supposed
to be liable; and certain it is that neither said
pronouncement nor nay other part of the judgment of
acquittal declared it liable to STELCO.
"A holder in due course," says the law, 22 "is a holder
who has taken the instrument under the following
conditions: chanrob1es virtual 1aw
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue,
and without notice that it had been previously dishonored,
if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no
notice of any infirmity in the instrument or defect in the
title of the persons negotiating it." cralaw
To be sure, as regards an accommodation party (such as
STEELWELD), the fourth condition, i.e., lack of notice of
any infirmity in the instrument or defect in title of the
persons negotiating it, has no application. This is because
Section 29 of the law above quoted preserves the right of
recourse of a "holder for value" against the
accommodation party notwithstanding that "such holder,
at the time of taking the instrument, knew him to be only
an accommodation party." 23
Now, STELCO theorizes that it should be deemed a
"holder for value" of STEELWELDs Check No. 765380
because the record shows it to have been in "actual
possession" thereof; otherwise, it "could not have
presented, marked and introduced (said check) in
evidence . . . before the court a quo." "Besides," it adds,
the check in question was presented by STELCO to the
drawee bank for payment through Armstrong Industries,
the manufacturing arm of STELCO and its sister
company." 24
The trouble is, there is no evidence whatever that
STELCOs possession of Check No. 765380 ever dated
back to any time before the instruments presentment and
dishonor. There is no evidence whatsoever that the check
was ever given to it, or indorsed to it in any manner or
form in payment of an obligation or as security for an
obligation, or for any other purpose before it was
presented for payment. On the contrary, the factual
finding of the Court of Appeals, which by traditional
precept is normally conclusive on this Court, is that
STELCO never became a holder for value and that"
(n)owhere in the check itself does the name of Stelco
Marketing appear as payee, indorsee or depositor
thereof."25 cralaw:red
What the record shows is that: (1) the STEELWELD
company check in question was given by its president to
R.Y. Lim; (2) it was given only by way of accommodation,
to be "used as collateral for another obligation;" (3) in
breach of the agreement, however, R.Y. Lim indorsed the
check to Armstrong in payment of an obligation; (4)
7
Armstrong deposited the check to its account, after
library indorsing it; (5) the check was dishonored. The record
does not show any intervention or participation by
STELCO in any manner or form whatsoever in these
transactions, or any communication of any sort between
STEELWELD and STELCO, or between either of them and
Armstrong Industries, at any time before the dishonor of
the check.
The record does show that after the check had been
deposited and dishonored, STELCO came into possession
of it in some way, and was able, several years after the
library dishonor of the check, to give it in evidence at the trial of
the civil case it had instituted against the drawers of the
check (Limson and Torres) and RYL. But, as already
pointed out, possession of a negotiable instrument after
presentment and dishonor, or payment, is utterly
inconsequential; it does not make the possessor a holder
for value within the meaning of the law; it gives rise to no
liability on the part of the maker or drawer and
indorsers.chanrobles law library : red
It is clear from the relevant circumstances that STELCO
cannot be deemed a holder of the check for value. It does
virtua1aw library not meet two of the essential requisites prescribed by the
statute. It did not become "the holder of it before it was
overdue, and without notice that it had been previously
dishonored," and it did not take the check "in good faith
and for value." 26
Neither is there any evidence whatever that Armstrong
Industries, to whom R.Y. Lim negotiated the check,
accepted the instrument and attempted to encash it in
behalf, and as agent of STELCO. On the contrary, the
indications are that Armstrong was really the intended
payee of the check and was the party actually injured by
its dishonor; it was after all its representative (a Mr.
Young) who instituted the criminal prosecution of the
drawers, Limson and Torres, albeit unsuccessfully.
The petitioner has failed to show any sufficient cause for
modification or reversal of the challenged judgment of the
Court of Appeals which, on the contrary, appears to be
entirely in accord with the facts and the applicable law.
WHEREFORE, the petition is DENIED and the Decision of
the Court of Appeals in CA-G.R. CV No. 13418 is
AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
Paras, Padilla and Regalado, JJ., concur.
Nocon, J., is on leave.
FIRST DIVISION
[G.R. No. L-29432. August 6, 1975.]
JAI-ALAI CORPORATION OF THE
PHILIPPINES, Petitioner, v. BANK OF THE
PHILIPPINE ISLAND, Respondent.
Bausa, Ampil & Suarez for Petitioner.
Aviado & Aranda for Respondent.
SYNOPSIS
Petitioner deposited in its current account with respondent
bank several checks with a total face value of P8,030.58,
all acquired from Antonio J. Ramirez, a regular bettor at
the jai-alai games and a sale agent of the Inter-Island
Gas Service, Inc., the payee of the checks. The deposits
were all temporarily credited to petitioners account in
accordance with the clause printed on the banks deposit
slip. Subsequently, Ramirez resigned and after the checks
had been submitted to inter-bank clearing, the Inter-
Island Gas discovered that all the indorsement made on
the cheeks purportedly by its cashiers, as well as the
rubber stamp impression thereon reading "Inter-Island
Gas Service, Inc.", were forgeries. It informed petitioner,
the respondent, the drawers and the drawee banks of the
said checks and forgeries and filed a criminal complaint
against its former employee. In view of these
circumstances, the respondent Bank debited the
petitioners current account and forwarded to the latter
the checks containing the forged indorsements, which
petitioner refused to accept. Later, petitioner drew against
its current account a check for P135,000.00. This check
was dishonored by respondent as its records showed that
petitioners balance after netting out the value of the
checks with the forged indorsement, was insufficient to
cover the value of the check drawn. A complaint was filed
by petitioner with the Court of First Instance of Manila.
The same was dismissed by the said court after due trial,
as well as by the Court of Appeals, on appeal. Hence, this
petition for review.
The Supreme Court ruled that respondent acted within
legal bounds when it debited petitioners account; that the
payments made by the drawee banks to the respondent
on account of the checks with forged indorsements were
ineffective; that on account thereof, no creditor-debtor
relationship was created between the parties; that
petitioner was grossly recreant in accepting the checks in
question from Ramirez without making any inquiry as to
authority to exchange checks belonging to the payee-
corporation; and that petitioner, in indorsing the said
checks when it deposited them with respondent,
guaranteed the genuineness of all prior indorsement
thereon so that the respondent, which relied upon its
warranty, cannot be held liable for the resulting
loss.Judgment affirmed
SYLLABUS
1. NEGOTIABLE INSTRUMENT; CHECKS; FORGED
INDORSEMENTS EFFECT. A forged signature in a
negotiable instrument makes it wholly inoperative and no
right to discharge it or enforce its payment can be
acquired through or under the forged signature except
against a party who cannot invoke the forgery.
2. ID.; ID.; ID.; NO RELATION OF CREDITOR-DEBTOR
BETWEEN THE PARTIES CREATED EVEN IF DEPOSITARY
OR COLLECTING BANK HAD ALREADY COLLECTED THE
PROCEEDS OF THE CHECKS WHEN IT DEBITED
PETITIONERS ACCOUNT; REASON. Where the
indorsement made on the checks were forged prior to
their delivery to depositor, the payments made by the
drawee-banks to the collecting bank on account of the
said checks were ineffective. Such being the case, the
relationship of creditor and debtor between the depositor
and the depository had not been validly effected, the
8
checks not having properly and legitimately converted into
cash.
3. ID.; ID.; ID.; COLLECTING BANKS HAS DUTY TO
REIMBURSE TO DRAWEE-BANKS THE VALUE OF CHECKS
CONTAINING FORGED INDORSEMENT; RULING IN THE
CASE OF GREAT EASTERN LIFE INSURANCE CO. v.
HONGKONG & SHANGHAI BANK. In Great Eastern Life
Ins. Co. v. Hongkong & Shanghai Bank, 43 Phil. 678
(1992), the Court ruled that it is the obligation of the
collecting bank to reimburse the drawee-bank the value of
the checks subsequently found to contain the forged
indorsement of the payee. The reason is that the bank
with which the check was deposited has no right to pay
the sum stated therein to the forger "or to anyone else
upon a forged signature." "It was its duty to know," said
the Court, "that (the payees) endorsement was genuine
before cashing the check." The depositor must in turn
shoulder the loss of the amounts which the respondent, as
its collecting agent, had no reimburse to the drawee-
banks.
4. ID.; ID.; ACCEPTANCE OF CHECKS INDORSED BY AN
AGENT; RULING IN THE CASE OF INSULAR DRUG CO. v.
NATIONAL. In Insular Drug Co. v. National, 58 Phil. 685
(1933), the Court made the pronouncement that." . .The
right of an agent to indorse commercial paper is a very
responsible power and will not be lightly inferred. A
salesman with authority to collect money belonging to his
principal does not have the implied authority to indorse
checks received in payment. Any person taking checks
made payable to a corporation which can act by agents,
does so at his peril, and must abide by the consequences
if the agent who endorses the same is without authority."
virtua1aw
cralaw
library
5. ID.; ID.; LIABILITY OF AN INDORSER; NO LOSS TO BE
SUFFERED BY A BANK WHO RELIED ON INDORSERS
WARRANTY. Under Section 67 of the Negotiable
Instruments Law, "Where a person places his indorsement
on an instrument negotiable by delivery he incurs all the
liability of an indorser," and under Section 66 of the same
statute a general indorser warrants that the instrument "is
genuine and in all respects what it purports to be." Where
the depositor indorsed the checks with forged
indorsement when it deposited them with the collecting
bank, the former as an endorser guaranteed the
genuineness of all prior indorsement thereon. The
collecting bank which relied upon this warranty cannot be
held liable for the resulting loss.
6. ID.; ID.; FORGED CHECKS; TRANSFER OF FUNDS
FROM DRAWEE TO COLLECTING BANK; APPLICATION OF
ART. 2154 OF THE CIVIL CODE. The transfer by the
drawee-banks of funds to the collecting bank on account
of forged checks would be ineffectual when made under
the mistaken and valid assumption that the indorsement
of the payee thereon were genuine. Under Article 2154 of
the New Civil Code "If something is received when there is
no right to demand it and it was unduly delivered through
mistake, the obligation to return it arises," By virtue
thereof, there can be no valid payment of money by
drawee-banks to the collecting bank on account of forged
checks.
DECISION
CASTRO, J.: itself the right to charge back the item to the account of
its depositor, at any time before that event, regardless of
whether or not the item itself can be returned." cralaw virtua1aw library

This is a petition by the Jai-Alai Corporation of the

Philippines (hereinafter referred to as the petitioner) for
review of the decision of the Court of Appeals in C.A.-G.R.
34042-R dated June 25, 1968 in favor of the Bank of the
Philippine Islands (hereinafter referred to as the
respondent).
From April 2, 1959 to May 18, 1959, ten checks with a
total face value of P8,030.58 were deposited by the
petitioner in its current account with the respondent bank.
The particulars of these checks are as follows:
1. Drawn by the Delta Engineering Service upon the
Pacific Banking Corporation and payable to the Inter-
Island Gas Service Inc. or order:
About the latter part of July 1959, after Ramirez had
resigned from the Inter-Island Gas and after the checks
had been submitted to inter-bank clearing, the Inter-
Island Gas discovered that all the indorsements made on
the checks purportedly by its cashiers, Santiago Amplayo
and Vicenta Mucor (who were merely authorized to
deposit checks issued payable to the said company) as
well as the rubber stamp impression thereon reading
"Inter-Island Gas Service, Inc.," were forgeries. In due
chanrob1es virtual 1aw library time, the Inter-Island Gas advised the petitioner, the
respondent, the drawers and the drawee-banks of the said
checks about the forgeries, and filed a criminal complaint
against Ramirez with the Office of the City Fiscal of
chanrob1es virtual 1aw library Manila. 1

Date Check Exhibit The respondents cashier, Ramon Sarthou, upon receipt of
the latter of Inter-Island Gas dated August 31, 1959,
Deposited Number Amount Number called up the petitioners cashier, Manuel Garcia, and
advised the latter that in view of the circumstances he
4/2/59 B-352680 P500.00 18 would debit the value of the checks against the
petitioners account as soon as they were returned by the
4/20/59 A-156907 372.32 19 respective drawee-banks.

4/24/59 A-156924 397.82 20 Meanwhile, the drawers of the checks, having been
notified of the forgeries, demanded reimbursement to
5/4/59 B-364764 250.00 23 their respective accounts from the drawee-banks, which in
turn demanded from the respondent, as collecting bank,
5/6/59 B-364775 250.00 24 the return of the amounts they had paid on account
thereof. When the drawee-banks returned the checks to
2. Drawn by the Enrique Cortiz & Co. upon the Pacific the respondent, the latter paid their value which the
Banking Corporation and payable to the Inter-Island Gas former in turn paid to the Inter-Island Gas. The
Service, Inc. or bearer: chanrob1es virtual 1aw library respondent, for its part, debited the petitioners current
account and forwarded to the latter the checks containing
4/13/59 B-335063 P 2108.70 21 the forged indorsements, which the petitioner, however,
refused to accept.
4/27/59 B-335072 P2210.94 22
On October 8, 1959 the petitioner drew against its current
3. Drawn by the Luzon Tinsmith & Company upon the account with the respondent a check for P135,000
China Banking Corporation and payable to the Inter-Island payable to the order of the Mariano Olondriz y Cia. in
Gas Service, Inc. or bearer: chanrob1es virtual 1aw library payment of certain shares of stock. The check was,
however, dishonored by the respondent as its records
5/18/59 VN430188 P940.8025 cralaw:red showed that as of October 8, 1959 the current account of
the petitioner, after netting out the value of the checks
4. Drawn by the Roxas Manufacturing, Inc. upon the P8,030.58) with the forged indorsements, had a balance
Philippine National Bank and payable to the Inter-Island of only P128,257.65.
Gas Service, Inc. order: chanrob1es virtual 1aw library

The petitioner then filed a complaint against the

5/14/59 1860160 P 500.00 26 respondent with the Court of First Instance of Manila,
which was however dismissed by the trial court after due
5/18/59 1860660 P 500.00 27 trial, and as well by the Court of Appeals, on appeal.

All the foregoing checks, which were acquired by the Hence, the present recourse.
petitioner from one Antonio J. Ramirez, a sales agent of
the Inter-Island Gas and a regular bettor at jai-alai The issues posed by the petitioner in the instant petition
games, were, upon deposit, temporarily credited to the may be briefly stated as follows:chanrob1es virtual 1aw library

petitioners account in accordance with the clause printed

on the deposit slips issued by the respondent and which (a) Whether the respondent had the right to debit the
reads: jgc:chanrobles.com.ph petitioners current account in the amount corresponding
to the total value of the checks in question after more
"Any credit allowed the depositor on the books of the than three months had elapsed from the date their value
Bank for checks or drafts hereby received for deposit, is was credited to the petitioners account:(b) Whether the
provisional only, until such time as the proceeds thereof, respondent is estopped from claiming that the amount of
in current funds or solvent credits, shall have been P8,030.58, representing the total value of the checks with
actually received by the Bank and the latter reserves to the forged indorsements, had not been properly credited
9
to the petitioners account, since the same had already
been paid by the drawee-banks and received in due
course by the respondent; and(c) On the assumption that
the respondent had improperly debited the petitioners
current account, whether the latter is entitled to damages.
These three issues interlock and will be resolved jointly.
In our opinion, the respondent acted within legal bounds
when it debited the petitioners account. When the
petitioner deposited the checks with the respondent, the
nature of the relationship created at that stage was one of
agency, that is, the bank was to collect from the drawees
of the checks the corresponding proceeds. It is true that
the respondent had already collected the proceeds of the
checks when it debited the petitioners account, so that
following the rule in Gullas v. Philippine National Bank 2 it
might be argued that the relationship between the parties
had become that of creditor and debtor as to preclude the
respondent from using the petitioners funds to make
payments not authorized by the latter. It is our view
nonetheless that no creditor-debtor relationship was
created between the parties.
Section 23 of the Negotiable Instruments Law (Act 2031)
states that 3 authority to exchange checks belonging to the payee-
"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." cralaw
Since under the foregoing provision, a forged signature in
a negotiable instrument is wholly inoperative and no right
to discharge it or enforce its payment can be acquired
through or under the forged signature except against a
party who cannot invoke the forgery, it stands to reason,
upon the facts of record, that the respondent, as a
collecting bank which indorsed the checks to the drawee-
banks for clearing, should be liable to the latter for
reimbursement, for, as found by the court a quo and by
the appellate court, the indorsements on the checks had
been forged prior to their delivery to the petitioner. In
legal contemplation, therefore, the payments made by the
drawee-banks to the respondent on account of the said
checks were ineffective; and, such being the case, the
relationship of creditor and debtor between the petitioner
and the respondent had not been validly effected, the
checks not having been properly and legitimately
converted into cash. 4 the petitioner ostensibly on the strength of the payees
In Great Eastern Life Ins. Co. v. Hongkong & Shanghai
Bank, 5 the Court ruled that it is the obligation of the
collecting bank to reimburse the drawee-bank the value of
the checks subsequently found to contain the forged
indorsement of the payee. The reason is that the bank
with which the check was deposited has no right to pay
the sum stated therein to the forger "or anyone else upon
a forged signature." "It was its duty to know," said the
Court, "that [the payees] endorsement was genuine
before cashing the check." The petitioner must in turn
shoulder the loss of the amounts which the respondent;
as its collecting agent, had to reimburse to the drawee-
banks.
10
We do not consider material for the purposes of the case
at bar that more than three months had elapsed since the
proceeds of the checks in question were collected by
the Respondent. The record shows that the respondent
had acted promptly after being informed that the
indorsements on the checks were forged. Moreover,
having received the checks merely for collection and
deposit, the respondent cannot he expected to know or
ascertain the genuineness of all prior indorsements on the
said checks. Indeed, having itself indorsed them to the
respondent in accordance with the rules and practices of
commercial banks, of which the Court takes due
cognizance, the petitioner is deemed to have given the
warranty prescribed in Section 66 of the Negotiable
Instruments Law that every single one of those checks "is
genuine and in all respects what it purports to be.."
The petitioner was, moreover, grossly recreant in
accepting the checks in question from Ramirez. It could
not have escaped the attention of the petitioner that the
payee of all the checks was a corporation the Inter-
Island Gas Service, Inc. Yet, the petitioner cashed these
checks to a mere individual who was admittedly a habitue
at its jai-alai games without making any inquiry as to his
corporation. In Insular Drug Co. v. National 6 the Court
made the pronouncement that.
". . . The right of an agent to indorse commercial paper is
a very responsible power and will not be lightly inferred. A
salesman with authority to collect money belonging to his
principal does not have the implied authority to indorse
checks received in payment. Any person taking checks
virtua1aw library made payable to a corporation, which can act only by
agents, does so at his peril, and must abide by the
consequences if the agent who indorses the same is
without authority." (underscoring supplied)
It must be noted further that three of the checks in
question are crossed checks, namely, exhs. 21, 25 and
27, which may only be deposited, but not encashed; yet,
the petitioner negligently accepted them for cash. That
two of the crossed checks, namely, exhs. 21 and 25, are
bearer instruments would not, in our view, exculpate the
petitioner from liability with respect to them. The fact that
they are bearer checks and at the same time crossed
checks should have aroused the petitioners suspicion as
to the title of Ramirez over them and his authority to cash
them (apparently to purchase jai-alai tickets from the
petitioner), it appearing on their face that a corporate
entity the Inter Island Gas Service, Inc. was the
payee thereof and Ramirez delivered the said checks to
cashiers indorsements.
At all events, under Section 67 of the Negotiable
Instruments Law, "Where a person places his indorsement
on an instrument negotiable by delivery he incurs all the
liability of an indorser," and under Section 66 of the same
statute a general indorser warrants that the instrument "is
genuine and in all respects what it purports to be."
Considering that the petitioner indorsed the said checks
when it deposited them with the respondent, the
petitioner as an indorser guaranteed the genuineness of
all prior indorsements thereon. The respondent which
relied upon the petitioners warranty should not be held
liable for the resulting loss. This conclusion applied
similarly to exh. 22 which is an uncrossed bearer
instrument, for under Section 65 of the Negotiable
Instrument Law. "Every person negotiating an instrument
by delivery . . . warrants (a) That the instrument is
genuine and in all respects what it purports to be." Under
that same section this warranty "extends in favor of no
holder other than the immediate transferee," which, in the
case at bar, would be the Respondent.
The provision in the deposit slip issued by the respondent
which stipulates that it "reserves to itself the right to
charge back the item to the account of its depositor," at
any time before "current funds or solvent credits shall
have been actually received by the Bank," would not
materially affect the conclusion we have reached. That
stipulation prescribes that there must be an actual receipt
by the bank of current funds or solvent credits; but as we
have earlier indicated the transfer by the drawee-banks of
funds to the respondent on account of the checks in
question was ineffectual because made under the
mistaken and valid assumption that the indorsements of
the payee thereon were genuine. Under article 2154 of
the New Civil Code "If something is received when there is
no right to demand it and it was unduly delivered through
mistake, the obligation to return it arises." There was,
therefore, in contemplation of law, no valid payment of
money made by the drawee-banks to the respondent on
account of the questioned checks.
ACCORDINGLY, the judgment of the Court of Appeals is
affirmed, at petitioners cost.
Makasiar, Esguerra, Muoz Palma and Martin, JJ., concur.
Teehankee, J., is on leave.
SECOND DIVISION
[G.R. No. L-34539. July 14, 1986.]
EULALIO PRUDENCIO and ELISA T.
PRUDENCIO, Petitioners, v. THE HONORABLE COURT
OF APPEALS, THE PHILIPPINE NATIONAL BANK,
RAMON C. CONCEPCION and MANUEL M. TAMAYO,
partners of the defunct partnership Concepcion &
Tamayo Construction Company, JOSE TORIBIO,
Atty.-in-Fact of Concepcion & Tamayo Construction
Company, and THE DISTRICT ENGINEER, Puerto
Princesa, Palawan, Respondents.
Fernando R. Mangubat, Jr. for respondent PNB.
DECISION
GUTIERREZ, JR., J.:
This is a petition for review seeking to annul and set aside
the decision of the Court of Appeals, now the Intermediate
11
Appellate Court, affirming the order of the trial court
which dismissed the petitioners complaint for cancellation
of their real estate mortgage and held them jointly and
severally liable with the principal debtors on a promissory
note which they signed as accommodation makers.
The factual background of this case is stated in the
decision of the appellate court: jgc:chanrobles.com.ph
"Appellants are the registered owners of a parcel of land
located in Sampaloc, Manila, and covered by T.C.T. 35161
of the Register of Deeds of Manila. On October 7, 1954,
this property was mortgaged by the appellants to the
Philippine National Bank, hereinafter called PNB, to
guarantee a loan of P1,000.00 extended to one Domingo
Prudencio.
"Sometime in 1955, the Concepcion & Tamayo
Construction Company, hereinafter called Company, had a
pending contract with the Bureau of Public Works,
hereinafter called the Bureau, for the construction of the
municipal building in Puerto Princesa, Palawan, in the
amount of P36,800.00 and, as said Company needed
funds for said construction, Jose Toribio, appellants
relative, and attorney-in-fact of the Company, approached
the appellants asking them to mortgage their property to
secure the loan of P10,000.00 which the Company was
negotiating with the PNB.
"After some persuasion appellants signed on December
23, 1955 the Amendment of Real Estate Mortgage,
mortgaging their said property to the PNB to guaranty the
loan of P10,000.00 extended to the Company. The terms
and conditions of the original mortgage for P1,000.00
were made integral part of the new mortgage for
P10,000.00 and both documents were registered with the
Register of Deeds of Manila. The promissory note covering
the loan of P10,000.00 dated December 29, 1955,
maturing on April 27, 1956, was signed by Jose Toribio,
as attorney-in-fact of the Company, and by the
appellants. Appellants also signed the portion of the
promissory note indicating that they are requesting the
PNB to issue the Check covering the loan to the Company.
On the same date (December 23, 1955) that the
Amendment of Real Estate was executed, Jose Toribio, in
the same capacity as attorney-in-fact of the Company,
executed also the Deed of Assignment assigning all
payments to be made by the Bureau to the Company on
account of the contract for the construction of the Puerto
Princesa building in favor of the PNB.
"This assignment of credit to the contrary
notwithstanding, the Bureau, with approval, of the PNB,
conditioned, however that they should be for labor and
materials, made three payments to the Company on
account of the contract price totalling P11,234.40. The
Bureaus last request for P5,000.00 on June 20, 1956,
however, was denied by the PNB for the reason that since
the loan was already overdue as of April 28, 1956) the
remaining balance of the contract price should be applied
to the loan.
"The Company abandoned the work, as a consequence of
which on June 30, 1956, the Bureau rescinded the
construction contract and assumed the work of completing
the building. On November 14. 1958, appellants wrote the
PNB contending that since the PNB authorized payments
to the Company instead of on account of the loan
guaranteed by the mortgage there was a change in the
conditions of the contract without the knowledge of THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
appellants, which entitled the latter to a cancellation of THAT PETITIONERS WERE NOT RELEASED FROM THEIR
their mortgage contract. OBLIGATION TO THE RESPONDENT PNB, WHEN THE PNB,
WITHOUT THE KNOWLEDGE AND CONSENT OF
"Failing in their bid to have the real estate mortgage PETITIONERS, CHANGED THE TENOR AND CONDITION OF
cancelled, appellants filed on June 27, 1959 this action THE ASSIGNMENT OF PAYMENTS MADE BY THE
against the PNB, the Company, the latters attorney-in- PRINCIPAL DEBTOR; CONCEPCION & TAMAYO
fact Jose Toribio, and the District Engineer of Puerto CONSTRUCTION COMPANY; AND RELEASED TO SUCH
Princesa, Palawan, seeking the cancellation of their real PRINCIPAL DEBTOR PAYMENTS FROM THE BUREAU OF
estate mortgage. The complaint was amended to exclude PUBLIC WORKS WHICH WERE MORE THAN ENOUGH TO
the Company as defendant, it having been shown that its WIPE OUT THE INDEBTEDNESS TO THE PNB.
life as a partnership had already expired and, in lieu
thereof, Ramon Concepcion and Manuel M. Tamayo, The petitioners contend that as accommodation makers,
partners of the defunct Company, were impleaded in their the nature of their liability is only that of mere sureties
private capacity as defendants." cralaw virtua1aw library instead of solidary co-debtors such that "a material
alteration in the principal contract, effected by the creditor
After hearing, the trial court rendered judgment, denying without the knowledge and consent of the sureties,
the prayer in the complaint that the petitioners be completely discharges the sureties from all liability on the
absolved from their obligation under the mortgage contract of suretyship." They state that when respondent
contract and that the said mortgage be released or PNB did not apply the initial and subsequent payments to
cancelled. The petitioners were ordered to pay jointly and the petitioners debt as provided for in the deed of
severally with their co-makers Ramon C. Concepcion and assignment, they were released from their obligation as
Manuel M. Tamayo the sum of P11,900.19 with interest at sureties and, therefore, the real estate mortgage
the rate of 6% per annum from the date of the filing of executed by them should have been cancelled.
the complaint on June 27, 1959 until fully paid and
P1,000.00 attorneys fees. Section 29 of the Negotiable Instrument Law provides: jgc:chanrobles.com.ph

The decision also provided that if the judgment was not "Liability of accommodation party. An accommodation
satisfied within 90 days from its receipt, the mortgaged party is one who has signed the instrument as maker,
properties together with all the improvements thereon drawer, acceptor, or indorser, without receiving value
belonging to the petitioners would be sold at public therefor, and for the purpose of lending his name to some
auction and applied to the judgment debt. other person. Such a person is liable on the instrument to
a holder for value, notwithstanding such holder at the
The Court of Appeals affirmed the trial courts decision in time of taking the instrument knew him to be only an
toto stating that, as accommodation makers, the accommodation party." cralaw virtua1aw library

petitioners liability is that of solidary co-makers and that

since "the amounts released to the construction company In the case of Philippine Bank of Commerce v. Aruego
were used therein and, therefore, were spent for the (102 SCRA 530, 539), we held that." . . in lending his
successful accomplishment of the work constructed for, name to the accommodated party, the accommodation
the authorization made by the Philippine National Bank of party is in effect a surety. . . ." However, unlike in a
partial payments to the construction company which was contract of suretyship, the liability of the accommodation
also one of the solidary debtors cannot constitute a valid party remains not only primary but also unconditional to a
defense on the part of the other solidary debtors. holder for value such that even if the accommodated
Moreover, those who rendered services and furnished party receives an extension of the period for payment
materials in the construction are preferred creditors and without the consent of the accommodation party, the
have a lien on the price of the contract." The appellate latter is still liable for the whole obligation and such
court further held that PNB had no obligation whatsoever extension does not release him because as far as a holder
to notify the petitioners of its authorizing the three for value is concerned, he is a solidary co-debtor.
payments in the total amount of P11,234.00 in favor of
the Company because aside from the fact that the Expounding on the nature of the liability of an
petitioners were not parties to the deed of assignment, accommodation party under the aforequoted section, we
there was no stipulation in said deed making it obligatory ruled in Ang Tiong v. Ting (22 SCRA 713, 716): jgc:chanrobles.com.ph

on the part of the PNB to notify the petitioners everytime

it authorizes payment to the Company. It ruled that the "3. That the appellant, again assuming him to be an
petitioners cannot ask to be released from the real estate accommodation indorser, may obtain security from the
mortgage. maker to protect himself against the danger of insolvency
of the latter, cannot in any manner affect his liability to
In this petition, the petitioners raise the following issues the appellee, as the said remedy is a matter of concern
which they present in the form of errors: chanrob1es virtual 1aw library exclusively between accommodation indorser and
accommodated party. So that the appellant stands only as
I. First Assignment of Error. a surety in relation to the maker, granting this to be true
for the sake of argument, is immaterial to the claim of the
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING appellee, and does not a whit diminish nor defeat the
THAT HEREIN PETITIONERS WERE SOLIDARY CO- rights of the latter who is a holder for value. The liability
DEBTORS INSTEAD OF SURETIES: chanrob1es virtual 1aw library of the appellant remains primary and unconditional. To
sanction the appellants theory is to give unwarranted
II. Second Assignment of Error. legal recognition to the patent absurdity of a situation
12
where an indorser, when sued on an instrument by a
holder in due course and for value, can escape liability on
his indorsement by the convenient expedient of
interposing the defense that he is a mere accommodation
indorser."
cralaw virtua1aw
There is, therefore, no question that as accommodation
makers, petitioners would be primarily and unconditionally
liable on the promissory note to a holder for value,
regardless of whether they stand as sureties or solidary
co-debtors since such distinction would be entirely
immaterial and inconsequential as far as a holder for
value is concerned. Consequently, the petitioners cannot
claim to have been released from their obligation simply
because the time of payment of such obligation was
temporarily deferred by PNB without their knowledge and
consent. There has to be another basis for their claim of
having been freed from their obligation. The question
which should be resolved in this instant petition,
therefore, is whether or not PNB can be considered a
holder for value under Section 29 of the Negotiable
Instruments Law such that the petitioners must be
necessarily barred from setting up the defense of want of
consideration or some other personal defenses which may
be set up against a party who is not a holder in due
course.
A holder for value under Section 29 of the Negotiable
Instruments Law is one who must meet all the
requirements of a holder in due course under Section 52
of the same law except notice of want of consideration.
(Agbayani, Commercial Laws of the Philippines, 1964, p.
208). If he does not qualify as a holder in due course then
he holds the instrument subject to the same defenses as if
it were non-negotiable (Section 58, Negotiable
Instruments Law).
In the case at bar, can PNB, the payee of the promissory
note be considered a holder in due course?
Petitioners contend that the payee PNB is an immediate
party and, therefore, is not a holder in due course and
stands on no better footing than a mere assignee.
In those cases where a payee was considered a holder in
due course, such payee either acquired the note from
another holder or has not directly dealt with the maker
thereof. As was held in the case of Bank of Commerce and
Savings v. Randell (186 NorthWestern Reporter 71):
"We conclude, therefore, that a payee who receives a
negotiable promissory note, in good faith, for value,
before maturity, and without any notice of any infirmity,
from a holder, not the maker, to whom it was negotiated
as a completed instrument, is a holder in due course
within the purview of a Negotiable Instruments law, so as
to preclude the defense of fraud and failure of
consideration between the maker and the holder to whom
the instrument, was delivered."cralaw virtua1aw
Similarly, in the case of Stone v. Goldberg & Lewis (60
Southern Reporter 748) on rehearing and quoting Daniel
on Negotiable Instruments, it was held:
"It is a general principle of the law merchant that, as
between the immediate parties to a negotiable instrument
the parties between whom there is a privity the
consideration may be inquired into; and as to them the
13
only superiority of a bill or note over other unsealed
evidence of debt is that it prima facie imports a
consideration."cralaw virtua1aw library
library Although as a general rule, a payee may be considered a
holder in due course we think that such a rule cannot
apply with respect to the respondent PNB. Not only was
PNB an immediate party or in privy to the promissory
note, that is, it had dealt directly with the petitioners
knowing fully well that the latter only signed as
accommodation makers but more important, it was the
Deed of Assignment executed by the Construction
Company in favor of PNB which principally moved the
petitioners to sign the promissory note also in favor of
PNB. Petitioners were made to believe and on that belief
entered into the agreement that no other conditions would
alter the terms thereof and yet, PNB altered the same.
The Deed of Assignment specifically provided that Jose F.
Toribio, on behalf of the Company, "have assigned,
transferred and conveyed and by these presents, do
assign, transfer and convey unto the said Philippine
National Bank, its successors and assigns all payments to
be received from the Bureau of Public Works on account of
contract for the construction of the Puerto Princesa
Municipal Building in Palawan, involving the total amount
of P36,000.00" and that "This assignment shall be
irrevocable and subject to the terms and conditions of the
promissory note and or any other kind of documents
which the Philippine National Bank have required or may
require the assignor to execute to evidence the above-
mentioned obligation." cralaw virtua1aw library
Under the terms of the above Deed, it is clear that there
are no further conditions which could possibly alter the
agreement without the consent of the petitioners such as
the grant of greater priority to obligations other than the
payment of the loan due to the PNB and part of which
loan was guaranteed by the petitioners in the amount of
P10,000.00.
This, notwithstanding, PNB approved the Bureaus release
of three payments directly to the Company instead of
paying the same to the Bank. This approval was in
violation of the Deed of Assignment and without any
notice to the petitioners who stood to lose their property
once the promissory note falls due without the same
having been paid because the PNB, in effect, waived
payments of the first three releases. From the foregoing
jgc:chanrobles.com.ph circumstances, PNB can not be regarded as having acted
in good faith which is also one of the requisites of a holder
in due course under Section 52 of the Negotiable
Instruments Law. The PNB knew that the promissory note
which it took from the accommodation makers was signed
by the latter because of full reliance on the Deed of
Assignment, which, PNB had no intention to comply with
strictly. Worse, the third payment to the Company in the
amount of P4,293.60 was approved by PNB although the
promissory note was almost a month overdue, an act
library which is clearly detrimental to the petitioners.
We, therefore, hold that respondent PNB is not a holder in
due course. Thus, the petitioners can validly set up their
jgc:chanrobles.com.ph personal defense of release from the real estate mortgage
against PNB. The latter, in authorizing the third payment
to the Company after the promissory note became due, in
effect, extended the term of the payment of the note
without the consent of the accommodation makers who
stand as sureties to the accommodated party and to all
other parties who are not holders in due course or who do
not derive their right from the same, including PNB.
It may be argued that the Prudencios could have
mortgaged their property even without the promissory
note. The records show, however, that they would not
have mortgaged the lot were it not for the sake of the
Company whose attorney-in-fact was their relative. The
spouses did not need the money for themselves.
The attorney-in-fact tried twice to convince the Prudencios
to mortgage their property in order to secure a loan in
favor of the Company but the Prudencios refused. It was
only when the deed of assignment was shown to the
spouses that they consented to the mortgage and signed
the promissory note in the Banks favor.
Article 2085 of the Civil Code enumerates the requisites of
a valid mortgage contract. Petitioners do not dispute the
validity of the mortgage. They only want to have it
cancelled because the Bank violated the deed of
assignment and extended the period of time of payment
of the promissory note without the petitioners consent
and to the latters detriment.
The mortgage cannot be separated from the promissory
note for it is the latter which is the basis of determining
whether the mortgage should be foreclosed or cancelled.
Without the promissory note which determines the
amount of indebtedness there would have been no basis
for the mortgage.
True, if the Bank had not been the assignee, then the
petitioners would be obliged to pay the Bank as their
creditor on the promissory note, irrespective of whether or
not the deed of assignment had been violated. However,
the assignee and the creditor in this case are one and the
same the Bank itself. When the Bank violated the deed
of assignment, it prejudiced itself because its very
violation was the reason why it was not paid on time in its
capacity as creditor in the promissory note. It would be
unfair to make the petitioners now answer for the debt or
to foreclose on their property.
Neither can PNB justify its acts on the ground that the
Bureau of Public Works approved the deed of assignment
with the condition that the wages of laborers and
materials needed in the construction work must take
precedence over the payment of the promissory note. In
the first place, PNB did not need the approval of the
Bureau. But even if it did, it should have informed the
petitioners about the amendment of the deed of
assignment. Secondly, the wages and materials have
already been paid. That issue is academic. What is in
dispute is who should bear the loss in this case. As
between the petitioners and the Bank, the law and the
equities of the case favor the petitioners. And thirdly, the
wages and materials constitute a lien only on the
constructed building but do not enjoy preference over the
loan unless there is a liquidation proceeding such as in
insolvency or settlement of estate. (See Philippine Savings
Bank v. Lantin, 124 SCRA 476). There were remedies
available at the time if the laborers and the creditors had
not been paid. The fact is, they have been paid. Hence
when the PNB accepted the condition imposed by the
Bureau without the knowledge or consent of the
petitioners, it amended the deed of assignment which, as
stated earlier, was the principal reason why the
14
petitioners consented to become accommodation makers.
WHEREFORE, the petition is GRANTED. The decision of the
Court of Appeals affirming the decision of the trial court is
hereby REVERSED and SET ASIDE and a new one entered
absolving the petitioners from liability on the promissory
note and under the mortgage contract. The Philippine
National Bank is ordered to release the real estate
mortgage constituted on the property of the petitioners
and to pay the amount of THREE THOUSAND PESOS
(P3,000.00) as attorneys fees.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.
FIRST DIVISION
[G.R. No. L-30910. February 27, 1987.]
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
v. JULIA MANIEGO, Accused-Appellant.
SYLLABUS
1. CIVIL LAW; DAMAGES; A PERSON ACQUITTED OF A
CRIME MAY STILL BE HELD CIVILLY LIABLE. Well
known is the principle that "any person criminally liable
for felony is also civilly liable." But a persons acquittal
of a crime on the ground that his guilt has not been
proven beyond reasonable doubt does not bar a civil
action for damages founded on the same acts involved
in the offense. "Extinction of the penal action does not
carry with it extinction of the civil, unless the
extinction proceeds from a declaration in a final
judgment that the fact from which the civil might arise
did not exist."
cralaw virtua1aw library
2. ID.; ID.; ID.; CASE AT BAR. Contrary to her
submission, Maniegos acquittal on reasonable doubt of
the crime of Malversation imputed to her and her two
(2) co-accused did not operate to absolve her from
civil liability for reimbursement of the amount rightfully
due to the Government as owner thereof. Her liability
thereof could properly be adjudged, as it was so
adjudged, by the Trial Court on the basis of the
evidence before it which adequately established that
she was an indorser of several checks drawn by her
sister, which were dishonored after they had been
exchanged with cash belonging to the Government,
then in the official custody of Lt. Ubay.
3. MERCANTILE LAW; NEGOTIABLE INSTRUMENTS;
CHECKS; LAST INDORSEE HAS THE RIGHT TO
ENFORCE FULL PAYMENT OF THE INSTRUMENT
AGAINST ALL PARTIES LIABLE THEREON.
Appellants contention that a mere indorser, she may
not be made liable on account of the dishonor of the
checks indorsed by her, is likewise untenable. Under
the law, the holder or last indorsee of a negotiable
instrument for the full amount thereof against all
parties liable thereon." Among the "parties liable
thereon" is an indorser of the instrument i.e., "a
person placing his signature upon an instrument
otherwise than a maker, drawer, or acceptor** unless
he clearly indicates by appropriate words his intention
to be bound in some other capacity." Such an indorser
"who indorses without qualification," inter alia
"engages that on due presentment,** (the instrument)
shall be accepted or paid, or both, as the case may be,
according to its tenor, and that if it be dishonored, and
the necessary proceedings on dishonor be duly taken,
he will pay the amount thereof to the holder, or to any
subsequent indorser who may be compelled to pay it."
virtua1aw library
4. ID.; ACCOMMODATION PARTY; LIABLE ON THE
INSTRUMENT TO A HOLDER FOR VALUE. Maniego
may also be deemed an" ACCOMMODATION party" in
the light of the facts, i.e., a person "who has signed
the instrument as maker, drawer, acceptor or indorser,
without receiving value therefor, and for the purpose
of lending his name to some other person." As such,
she is under the law "liable on the instrument to a
holder for value, notwithstanding such holder at the
time of taking the instrument knew** (her) to be only
an ACCOMMODATION party," although she has the
right, after paying the holder, to obtain reimbursement
from the party accommodated, "since the relation
between them is in effect that of principal and surety,
the ACCOMMODATION party being the surety."
5. CRIMINAL LAW; ACTION; CIVIL LIABILITY MAY BE
ADJUDGED IN THE SAME CRIMINAL ACTION
DISPENSING WITH THE NECESSITY OF A SEPARATE
CIVIL ACTION. The Trial Court acted correctly in
adjudging Maniego to be civilly liable in the same
criminal action in which she had been acquitted of the
felony of Malversation ascribed to her, dispensing with
the necessity of having a separate civil action
subsequently instituted against her for the purpose.
DECISION
NARVASA, J.:
Application of the established rule in this jurisdiction,
that the acquittal of an accused on reasonable doubt is
not generally an impediment to the imposition, in the
same criminal action, of civil liability for damages on
said accused, is what is essentially called into question
by the appellant in this case.
chanrobles virtual lawlibrary
The information which initiated the instant criminal
proceedings in the Court of First Instance of Rizal
indicted three (3) persons Lt. Rizalino M. Ubay, Mrs.
Milagros Pamintuan, and Mrs. Julia T. Maniego for
the crime of MALVERSATION committed as follows:
"That on or about the period covering the month of
May, 1957 up to and including the month of August,
1957, in Quezon City, Philippines, the above-named
accused, conspiring together, confederating with and
15
cralaw
with intent of gain and without authority of law, and in
cralaw virtua1aw library
Maniego sought reconsideration of the judgment,
jgc:chanrobles.com.ph
helping one another, with intent of gain and without
authority of law, did, then and there, wilfully,
unlawfully and feloniously malverse, misappropriate
and misapply public funds in the amount of P66,434.50
belonging to the Republic of the Philippines, in the
following manner, to wit: the accused, Lt. RIZALINO M.
Ubay, a duly appointed officer in the Armed Forces of
the Philippines in active duty, who, during the period
specified above, was designated as Disbursing Officer
in the Officer of the Chief of Finance, GHQ, Camp
Murphy, Quezon City, and as such was entrusted with
and had under his custody and control public funds,
conspiring and confederating with his co-accused,
MILAGROS T. PAMINTUAN and JULIA T. MANIEGO, did
then and there, unlawfully, willfully and feloniously,
pursuance of their conspiracy, take, receive, and
accept from his said co-accused several personal
checks drawn against the Philippine National Bank and
the Bank of the Philippine Islands, of which the
accused, MILAGROS T. PAMINTUAN is the drawer and
the accused, JULIA T. MANIEGO, is the indorser, in the
total amount of P66,434.50, cashing said checks and
using for this purpose the public funds entrusted to
and placed under the custody and control of the said
Lt. Rizalino M. Ubay, all the said accused knowing fully
well that the said checks are worthless and are not
covered by funds in the aforementioned banks, for
which reason the same were dishonored and rejected
by the said banks when presented for encashment, to
the damage and prejudice of the Republic of the
Philippines, in the amount of P66,434.50, Philippine
currency." 1
Only Lt. Ubay and Mrs. Maniego were arraigned, Mrs.
Pamintuan having apparently fled to the United States
in August, 1962. 2 Both Ubay and Maniego entered a
plea of not guilty. 3
After trial judgment was rendered by the Court of First
Instance, 4 the dispositive part whereof reads: chanrobles.com.ph : virtual law library
"There being sufficient evidence beyond reasonable
doubt against the accused, Rizalino M. Ubay, the Court
hereby convicts him of the crime of malversation and
sentences him to suffer the penalty of reclusion
temporal of TWELVE (12) YEARS, ONE (1) DAY to
FOURTEEN (14) YEARS, EIGHT (8) MONTHS, and a fine
of P57,434.50 which is the amount malversed, and to
suffer perpetual special disqualification.
"In the absence of evidence against accused Julia T.
Maniego, the Court hereby acquits her, but both she
and Rizal T. Ubay are hereby ordered to pay jointly
and severally the amount of P57,434.50 to the
government." 5
praying that she be absolved from civil liability or, at
the very least, that her liability be reduced to
P46,934.50. 6 The Court declined to negate her civil
liability, but did reduce the amount thereof to
P46,934.50. 7 She appealed to the Court of Appeals 8
as Ubay had earlier done. 9

Ubays appeal was subsequently dismissed by the
Appellate Court because of his failure to file brief. 10
On the other hand, Maniego submitted her brief in due
course, and ascribed three (3) errors to the Court a
quo, to wit:chanrob1es virtual 1aw library
1) The Lower Court erred in holding her civilly liable to
indemnify the Government for the value of the checks
after she had been found not guilty of the crime out of
which the civil liability arises.
2) Even assuming arguendo that she could properly be
held civilly liable after her acquittal, it was error for the
lower Court to adjudge her liable as an indorser to
indemnify the government for the amount of the
checks.
3) The Lower Court erred in declaring her civilly liable
jointly and severally with her co-defendant Ubay,
instead of absolving her altogether. 11
Because, in the Appellate Courts view, Maniegos brief
raised only questions of law, her appeal was later
certified to this Court pursuant to Section 17, in
relation to Section 31, of the Judiciary Act, as
amended, and Section 3, Rule 50 of the Rules of Court.
12
The verdict must go against the appellant. chanrobles.com.ph : virtual law library
Well known is the principle that "any person criminally
liable for felony is also civilly liable." 13 But a person
adjudged not criminally responsible may still be held to
be civilly liable. A persons acquittal of a crime on the
ground that his guilt has not been proven beyond
reasonable doubt 14 does not bar a civil action for
damages founded on the same acts involved in the
offense. 15 "Extinction of the penal action does not
carry with it extinction of the civil, unless the
extinction proceeds from a declaration in a final
judgment that the fact from which the civil might arise
did not exist." 16
"Rule 111 SEC. 3(b) Extinction of the penal action
does not carry with it extinction of the civil, unless the
extinction proceeds from a declaration in a final
judgment that the fact from which the civil might arise
did not exist. In other cases, the person entitled to the
civil action may institute it in the jurisdiction and in the
manner provided by law against the person who may
be liable for restitution of the thing and reparation of
indemnity for the damage suffered." (1985 Rules on
Criminal Procedure).
Hence, contrary to her submission, 17 Maniegos
acquittal on reasonable doubt of the crime of
Malversation imputed to her and her two (2) co-
accused did not operate to absolve her from civil
liability for reimbursement of the amount rightfully due
to the Government as owner thereof. Her liability
therefor could properly be adjudged, as it was so
adjudged, by the Trial Court on the basis of the
evidence before it, which adequately establishes that
16
she was an indorser of several checks drawn by her
sister, which were dishonored after they had been
exchanged with cash belonging to the Government,
then in the official custody of Lt. Ubay.
Appellants contention that as mere indorser, she may
not be made liable on account of the dishonor of the
checks indorsed by her, is likewise untenable. Under
the law, the holder or last indorsee of a negotiable
instrument has the right to "enforce payment of the
instrument for the full amount thereof against all
parties liable thereon." 18 Among the "parties liable
thereon" is an indorser of the instrument i.e., "a
person placing his signature upon an instrument
otherwise than as maker, drawer, or acceptor . . .
unless he clearly indicates by appropriate words his
intention to be bound in some other capacity." 19 Such
an indorser "who indorses without qualification," inter
alia "engages that on due presentment, . . . (the
instrument) shall be accepted or paid, or both, as the
case may be, according to its tenor, and that if it be
dishonored, and the necessary proceedings on
dishonor be duly taken, he will pay the amount thereof
to the holder, or to any subsequent indorser who may
be compelled to pay it." 20 Maniego may also be
deemed an "accommodation party" in the light of the
facts, i.e., a person "who has signed the instrument as
maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name
to some other person." 21 As such, she is under the
law "liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the
instrument knew . . . (her) to be only an
accommodation party," 22 although she has the right,
after paying the holder, to obtain reimbursement from
the party accommodated, "since the relation between
them is in effect that of principal and surety, the
accommodation party being the surety." 23
One last word. The Trial Court acted correctly in
adjudging Maniego to be civilly liable in the same
criminal action in which she had been acquitted of the
felony of Malversation ascribed to her, dispensing with
the necessity of having a separate civil action
subsequently instituted against her for the purpose.
24
WHEREFORE, the judgment of the Trial Court, being
entirely in accord with the facts and the law, is hereby
affirmed in toto, with costs against the appellant.
chanrobles virtual lawlibrary
SO ORDERED.
Yap, Melencio-Herrera, Cruz, Feliciano, Gancayco and
Sarmiento, JJ., concur.