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219037, 2016-10-

Respondent Noel M. Odrada (Odrada) sold a secondhand Mitsubishi Montero (Montero) to Teodoro
L. Lim (Lim) for One Million Five Hundred Ten Thousand Pesos (P1,510,000)

(P610,000) was initially paid by Lim and the balance of Nine Hundred Thousand Pesos (P900,000)
was financed by petitioner RCBC Savings Bank (RCBC) through a car loan

RCBC required Lim to submit the original copies of the Certificate of Registration (CR) and Official
Receipt (OR) in his name. Unable to produce the Montero's OR and CR, Lim requested RCBC to
execute a letter addressed to Odrada informing the latter that his application for a car loan had been

Odrada executed a Deed of Absolute Sale on 9 April 2002 in favor of Lim and the latter took
possession of the Montero.

When RCBC received the documents, RCBC issued two manager's checks... for Nine Hundred
Thousand Pesos (P900,000) and Thirteen Thousand Five Hundred Pesos (P13,500).

After the issuance of the manager's checks and their turnover to Odrada but prior to the checks'
presentation, Lim notified Odrada in a letter dated 15 April 2002 that there was an issue regarding
the roadworthiness of the Montero. When you open its engine cover there is a trace of a head-on
collision. The 4-wheel drive shift is not functioning , the odometer has still an original mileage data
but found tampered represented the vehicle as model 1998 however; it is indicated in the front left
A-pillar inscribed at the identification plate [as] model 1997.

Odrada filed a collection suit[9] against Lim and RCBC. Lim claimed that the cancellation was not
done ex parte but through a letter. RCBC contended that the manager's checks were dishonored
because Lim had cancelled the loan prior to the presentation of the manager's checks. RCBC also
sent a formal notice of cancellation of the loan on 18 April 2002 to both Odrada and Lim. The trial
court ruled in favor of Odrada.

Odrada was the proper party to ask for rescission , the right of rescission is implied in reciprocal
obligations where one party fails to perform what is incumbent upon him when the other is willing
and ready to comply.

It was not proper for Lim to exercise the right of rescission since Odrada had already complied with
the contract of sale by delivering the Montero while Lim remained delinquent in payment , the
defective condition of the Montero was not a supervening event that would justify the dishonor of the
manager's checks.

A manager's check is equivalent to cash and is really the bank's own check. It may be treated as a
promissory note with the bank as maker ,constitutes a written promise to pay on demand.

Being the party primarily liable, the trial court ruled that RCBC was liable to Odrada for the value of
the manager's checks. Court of Appeals dismissed the appeal... when RCBC issued the manager's
checks in favor of Odrada, RCBC admitted the existence of the payee and his then capacity to
endorse, and undertook that on due presentment the checks which were negotiable instruments
would be accepted or paid, or both according to its tenor.
Whether or not the court a quo erred in holding that Lim cannot cancel the auto loan despite the
failure in consideration due to the contested roadworthiness of the vehicle delivered by Odrada to

Whether or not Lim can validly countermand the manager's checks in the hands of a holder who
does not hold the same in due course.


Petition granted.

A contract of sale is perfected the moment there is a meeting of the minds upon the thing which is
the object of the contract and upon the price which is the consideration. From that moment, the
parties may reciprocally demand performance.

However, the obligations between the parties do not cease upon delivery of the subject matter. The
vendor and vendee remain concurrently bound by specific obligations. The vendor, in particular, is
responsible for an implied warranty against hidden defects.

Article 1547 of the Civil Code... e states: "In a contract of sale, unless a contrary intention appears,
there is an implied warranty that the thing shall be free from any hidden faults or defects."

Article 1566 of the Civil Code provides that "the vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware thereof."... under the law, Odrada's
warranties against hidden defects continued even after the Montero's delivery. Consequently, a
misrepresentation as to the Montero's roadworthiness constitutes a breach of warranty against
hidden defects.

Supercars Management & Development Corporation v. Flores... a breach of warranty against hidden
defects occurred when the vehicle, after it was delivered to respondent, malfunctioned despite
repairs by petitioner.

When Lim acquired possession, he discovered that the Montero was not roadworthy.

However, during the proceedings in the trial court, Lim's testimony was stricken off the record
because he failed to appear during cross-examination.

Jurisprudence defines a manager's check as a check drawn by the bank's manager upon the bank
itself and accepted in advance by the bank by the act of its issuance.

It is really the bank's own check and may be treated as a promissory note with the bank as its maker.

Upon its purchase, the check becomes the primary obligation of the bank and constitutes its written
promise to pay the holder upon demand

As a general rule, the drawee bank is not liable until it accepts.

Prior to a bill's acceptance, no contractual relation exists between the holder... and the drawee.

Acceptance,... creates a privity of contract between the holder and the drawee so much so that the
latter, once it accepts, becomes the party primarily liable on the instrument.
acceptance is the act which triggers the operation of the liabilities of the drawee (acceptor) under
Section 62... of the Negotiable Instruments Law... once he accepts, the drawee admits the following:
(a) existence of the drawer; (b) genuineness of the drawer's signature; (c) capacity and authority of
the drawer to draw the instrument; and (d) existence of the payee and his then capacity to endorse.

a manager's check is accepted by the bank upon its issuance.

the distinct feature of a manager's check is that it is accepted in advance.

the mere issuance of a manager's check creates a privity of contract between the holder and the
drawee bank, the latter primarily binding itself to pay according to the tenor of its acceptance.

The drawee bank, as a result, has the unconditional obligation to pay a manager's check to a holder
in due course irrespective of any available personal defenses.

However, while this Court has consistently held that a manager's check is automatically accepted, a
holder other than a holder in due course is still subject to defenses.

the mere issuance of a manager's check does not ipso facto work as an automatic transfer of funds
to the account of the payee.

In order for the holder to acquire title to the instrument, there still must have been effective delivery.

the doctrine that the deposit represented by a manager's check automatically passes to the payee
is inapplicable, because the instrument - although accepted in advance remains undelivered."[57]...
if the holder of a manager's check is not a holder in due course, can the drawee bank interpose a
personal defense of the purchaser?

"the holder of a cashier's check who is not a holder in due course cannot enforce such check against
the issuing bank which dishonors the same."[64]... the purchaser of a manager's check may validly
countermand payment to a holder who is not a holder in due course. Accordingly, the drawee bank
may refuse to pay the manager's check by interposing a personal defense of the purchaser. Hence,
the resolution of the present case requires a determination of the status of Odrada as holder of the
manager's checks.

the Court of Appeals gravely erred when it considered Odrada as a holder in due course. Section 52
of the Negotiable Instruments Law defines a holder in due course as one 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 has 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
person negotiating it.

To be a holder in due course, the law requires that a party must have acquired the instrument in
good faith and for value.

Good faith means that the person taking the instrument has acted with due honesty with regard to
the rights of the parties liable on the instrument and that at the time he,took the instrument, the holder
has no knowledge of any defect or infirmity of the instrument

To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the
same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect,
or knowledge of such facts that his action in taking the instrument would amount to bad faith.

Value, on the other hand, is defined as any consideration sufficient to support a simple contract.
Odrada attempted to deposit the manager's checks on 16 April 2002, a day after Lim had informed
him that there was a serious problem with the Montero. Instead of addressing the issue, Odrada
decided to deposit the manager's checks. Odrada's actions do not amount to good faith.

Odrada's action in depositing the manager's checks despite knowledge of the Montero's defects
amounted to bad faith.

Moreover, when Odrada redeposited the manager's checks on 19 April 2002, he was already
formally notified by RCBC the previous day of the cancellation of Lim's auto loan transaction.

CBC may refuse payment by interposing a personal defense of Lim - that the title of Odrada had
become defective when there arose a partial failure or lack of consideration.

RCBC acted in good faith in following the instructions of Lim. The records show that Lim notified
RCBC of the defective condition of the Montero before Odrada presented the manager's checks.

RCBC also received a formal notice of cancellation of the auto loan from Lim and this prompted
RCBC to cancel the manager's checks since the auto loan was the consideration for issuing the
manager's checks. RCBC acted in good faith in stopping the payment of the manager's checks.

Section 58 of the Negotiable Instruments Law provides: "In the hands of any holder other than a
holder in due course, a negotiable instrument is subject to the same defenses as if it were non-
negotiable, x x x." Since Odrada was not a holder in due course, the instrument becomes subject to
personal defenses under the Negotiable Instruments Law.


ENTERPRISES," RESPONDENTS , G.R. No. 190667, November 07, 2016


Petitioner is a domestic corporation engaged in the large-scale manufacture, sale, and distribution
of beverages around the country.[On the other hand, respondents, doing business under the name
"Jolly Beverage Enterprises," are wholesalers of softdrinks in Quezon City, particularly in the
vicinities of Bulacan Street, V. Luna Road, Katipunan Avenue, and Timog Avenue.

The business relationship between the parties commenced in 1987 when petitioner designated
respondents as its distributor. On 22 March 1994, the parties formally entered into an exclusive
dealership contract for three years.Under the Agreement, petitioner would extend developmental
assistance to respondents in the form of cash assistance and trade discount incentives. For their
part, respondents undertook to sell petitioner's products exclusively, meet the sales quota of 7,000
cases per month, and assist petitioner in its marketing efforts.

Sometime in late 1998 or early 1999, before the contract expired, petitioner required respondents to
submit a list of their customers on the pretext that it would formulate a policy defining its territorial
dealership in Quezon City. It assured respondents that their contract would be renewed for a longer
period, provided that they would submit the list. However, despite their compliance, the promise did
not materialize.

Respondents filed a Complaint for damages, alleging that the acts of petitioner constituted
dishonesty, bad faith, gross negligence, fraud, and unfair competition in commercial enterprise.The
Complaint was later amended to implead petitioner's officers and personnel, include additional
factual allegations, and increase the amount of damages prayed for.

Petitioner denied the allegations. It maintained that it had obtained a list of clients through surveys,
and that promotional activities or developmental strategies were implemented only after the
expiration of the Agreements. It opined that the filing of the complaint was a mere ploy resorted to
by respondents to evade the payment of the deliveries.


WON petitioner violate Articles 19, 20, 21 or 28; hence, the award of damages and attorney's fees
was proper.


Petitioner was liable for temperate, moral and exemplary damages, as well as attorney's fees, tor
abuse of rights and unfair competition.

Both the RTC and the CA found that petitioner had employed oppressive and high-handed schemes
to unjustly limit the market coverage and diminish the investment returns of respondents.[49] The
CA summarized its findings as follows:[50]
This [cut-throat competition] is precisely what appellant did in order to take over the market: directly
sell its products to or deal them off to competing stores at a price substantially lower than those
imposed on its wholesalers. As a result, the wholesalers suffered losses, and in [respondents'] case,
laid ofT a number of employees and alienated the patronage of its major customers including small-
scale stores.
It must be emphasized that petitioner is not only a beverage giant, but also the manufacturer of the
products; hence, it sets the price. In addition, it took advantage of the infonnation provided by
respondents to facilitate its takeover of the latter's usual business area. Distributors like respondents,
who had assisted petitioner in its marketing efforts, suddenly found themselves with fewer
customers. Other distributors were left with no choice but to fold.

Articles 19, 20, and 21 of the Civil Code provide the legal bedrock for the award of damages to a
party who suffers damage whenever another person commits an act in violation of some legal
provision; or an act which, though not con'itituting a transgression of positive law, nevertheless
violates certain rudimentary rights of the party aggrieved.

Meanwhile, the use of unjust, oppressive, or high-handed business methods resulting in unfair
competition also gives a right of action to the injured party. Article 28 of the Civil Code provides:
Art. 28. Unfair competition in agricultural, commercial or industrial enterprises or in labor through the
use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method
shall give rise to a right of action by the person who thereby sutlers damage.


ESCOBIDO, AND RESTY P. CAPILI, Respondents , G.R. No. 202639,
November 09, 2016

Petitioner, through counsel Atty. Genesis M. Adarlo (Atty. Adarlo) of Joaquin Adarlo and Caoile,
sought assistance from the Criminal Investigation and Detection Group, Anti-Fraud and Commercial
Crimes Division (CIDG-AFCCD) of the Philippine National Police3 in the surveillance, investigation,
apprehension, and prosecution of certain persons and establishments within Metro Manila reportedly
committing acts violative of Batas Pambansa Blg. 33.

A few days later Atty. Adarlo again wrote the CIDG-AFCCD informing the latter of its confirmation
that ACCS Ideal Gas Corporation (ACCS), which allegedly has been refilling branded LPG cylinders
in its refilling plant at 882 G. Araneta Avenue, Quezon City, has no authority to refill per certifications
from gas companies owning the branded LPG cylinders. Acting upon the same, they conducted a
test-buy operation.

Having reasonable grounds to believe that ACCS was in violation of BP 33, P/Supt. Esguerra filed
with the Regional Trial Court (RTC) of Manila applications for search warrant against the officers of
ACCS. Pursuant to search warrant , a search and seizure operation was conducted . This resulted
in the seizure of an electric motor, a hose with filling head, scales, v-belt, vapor compressor, booklets
of various receipts, and 73 LPG cylinders of various brands and sizes, four of which were filled, i.e.,
two Superkalan 3.7 kg. LPG cylinders, one Shellane 11 kg. LPG cylinder, and one Totalgaz 11 kg.
cylinder.17 Inspection and evaluation of the said filled LPG cylinders showed that they were
underfilled by 0.5 kg. to 0.9 kg.18

On December 14, 2006, P/Supt Esguerra filed with the Department of Justice (DOJ) Complaints-
Affidavits against Antonio and respondents for illegal trading of petroleum products and for
underfilling of LPG cylinders under Section 2(a) and 2(c), respectively, of BP 33, as amended.

The DOJ recommended that Antonio G. Del Rosario be charged with illegal refilling of LPG cylinders
penalized under Section 2(a) of Batas Pambansa Bilang 33 as amended by Presidential Decree No.
1865 and that the complaints as against Ma. Cristina L. Del Rosario, Celso E. Escobido II, Sheila M.
Escobido, and Resty P. Capili be dismissed.

P/Supt. Esguerra and petitioner elevated the matter to the CA through a certiorari petition. They
contended that the Secretary of Justice acted with grave abuse of discretion amounting to lack of or
in excess of jurisdiction in affirming the dropping of respondents from the complaints and the ruling
out of the offense of underfilling.

The CA, however, sustained the Secretary of Justice.


1. WON respondents, as members of the Board of Directors of ACCS, may be criminally prosecuted
for the latter's alleged violation/s of BP 33 as amended?

2. WON offenses of illegal trading of petroleum products under Section 2(a) and underfilling under
Section 2(c), both of BP 33 as amended, distinct offenses?


1. Respondents cannot be prosecuted for ACCS' alleged violations of BP 33. They were thus
correctly dropped as respondents in the complaints.
The CA ratiocinated that by the election or designation of Antonio as General Manager of ACCS, the
daily business operations of the corporation were vested in his hands and had ceased to be the
responsibility of respondents as members of the Board of Directors. Respondents, therefore, were
not officers charged with the management of the business affairs who could be held liable pursuant
to paragraph 3, Section 4 of BP 33, as amended, which states that:

When the offender is a corporation, partnership, or other juridical person, the president, the general
manager, managing partner, or such other officer charged with the management of the business
affairs thereof, or employee responsible for the violation shall be criminally liable.

2. The offenses of illegal trading under Section 2(a) and underfilling under Section 2(c) both under
BP 33, as amended distinct offenses.

Illegal trading and underfilling are among the eight acts prohibited under Section 2 of BP 33, as

By definition, the acts penalized by both offenses are essentially different. Under paragraph 1(c) of
Section 3 of the said law, illegal trading in petroleum and/or petroleum products is committed by
refilling LPG cylinders without authority from the Bureau of Energy Utilization, or refilling of another
company's or firm's cylinder without such company's or firm's written authorization. Underfilling or
underdelivery, on the other hand, under paragraph 3 of the same section refers to a sale, transfer,
delivery or filling of petroleum products of a quantity that is actually below the quantity indicated or
registered on the metering device of a container. While it may be said that an act could be common
to both of them, the act of refilling does not in itself constitute illegal trading through unauthorized
refilling or that of underfilling. The concurrence of an additional requisite different in each one is
necessary to constitute each offense. Thus, aside from the act of refilling, the offender must have no
authority to refill from the concerned government agency or the company or firm owning the LPG
cylinder refilled for the act to be considered illegal trading through unauthorized refilling. Whereas in
underfilling, it is necessary that apart from the act of refilling, the offender must have refilled the LPG
cylinder below the authorized limits in the sale of petroleum products. Moreover, the offense of
underfilling is not limited to the act of refilling below the authorized limits. Possession of an
underfilled LPG cylinder another way of committing the offense. As therefore correctly argued by
petitioner, the offenses of illegal trading through unauthorized refilling and underfilling are separate
and distinct offenses.

Besides, it is not accurate to say that in this case the charges of illegal trading and underfilling were
based on the same act of refilling committed by ACCS during the test-buy operation. While it appears
from the records that the charge of illegal trading was principally based on ACCS' act of refilling the
four branded LPG cylinders without authority during the test buy, the Complaint-Affidavit for
underfilling would show that it was not solely based on the same. Aside from the four branded LPG
cylinders caused to be refilled by police operatives in the test buy which were later found to be
underfilled by 0.5 kg to 1.3 kg, the said complaint was likewise anchored on the other four branded
LPG cylinders seized during the search and seizure operation which were also found to be
underfilled, this time by 0.5 kg. to 0.9 kg. It is thus apparent that with respect to the last four underfilled
cylinders, the basis for the charge is not the act of refilling but ACCS's possession of the same since
as already mentioned, the offense of underfilling is not limited to the act of refilling an LPG cylinder
below authorized limits but also contemplates possession of underfilled LPG cylinders for the
purpose of sale, distribution, transportation, exchange or barter.
4) Green Star Express Inc. vs Nissin Universal Robina Corporation
G.R. No. 181517 July 6, 2015


On February 25, 2003, a Mitsubishi L-300 van which Universal Robina

Corporation ( URC) owned figured in a vehicular accident with petitioner Green
Star Express, Inc.’ s (Green Star) passenger bus, resulting in the death of the
van’s driver. Thus, the bus driver, petitioner Fruto Sayson, Jr., was charged
with the crime of reckless imprudence resulting in homicide. Thereafter, Green
Star sent a demand letter to respondent NissinUniversal Robina Corporation
(NURC) for the repair of its passenger bus amounting to ₱567, 070.68. NURC
denied any liability therefore and argued that the criminal case shall determine
the ultimate liabilities of the parties. Thereafter, the criminal case was
dismissed without prejudice, due to insufficiency of evidence. Sayson and
Green Star then filed a complaint for damages against NURC before the R TC
of San Pedro, Laguna. Francis Tinio, one of NURC’s employees, was the one
who received the summons. On February 6, 2004, NURC filed a Motion to
Dismiss claiming lack of jurisdiction due to improper service.

WON respondents are liable for the damages sustained

No. The resolution of this case must consider two (2) rules. First, Article 2180's
specification that '[e]mployers shall be liable for the damages caused by their
employees ... acting within the scope of their assigned tasks [.]' Second, the
operation of the registered-owner rule that registered owners are liable for
death or injuries caused by the operation of their Vehicles.

These rules appear to be in conflict when it comes to cases in which the

employer is also the registered owner of a vehicle. Article 2180 requires proof
of two things: first, an employment relationship between the driver and the
owner; and second, that the driver acted within the scope of his or her assigned
tasks. On the other hand, applying the registered-owner rule only requires the
plaintiff to prove that the defendant-employer is the registered owner of the

The registered-owner rule was articulated as early as 1957 in Erezo, et al. v.

Jepte,[25] where this court explained that the registration of motor vehicles, as
required by Section 5(a) of Republic Act No. 41365 the and Transportation
and Traffic Code, was necessary 'not to make said registration the operative
act by which ownership in vehicles is transferred, ... but to permit the use and
operation of the vehicle upon any public highway[.]' Its 'main aim ... is to identify
the owner so that if any accident happens, or that any damage or injury is
caused by the vehicle on the public highways, responsibility therefor can be
fixed on a definite individual, the registered owner.

Therefore, the appropriate approach is that in cases where both the registered-
owner rule and Article 2180 apply, the plaintiff must first establish that the
employer is the registered owner of the vehicle in question. Once the plaintiff
successfully proves ownership, there arises a disputable presumption that the
requirements of Article 2180 have been proven. As a consequence, the burden
of proof shifts to the defendant to show that no liability under Article 2180 has

Applying the above pronouncement in the Caravan Travel and Tours case, it
must be said that when by evidence the ownership of the van and Bicomong's
employment were proved, the presumption of negligence on respondents' part
attached, as the registered owner of the van. and as Bicomong's employer. Hie
burden of proof then shifted to respondents to show that no liability under
Article 2180 arose. This may be done by proof of any of the following:

1. That they had no employment relationship with Bicomong; or

2. That Bicomong acted outside the scope of his assigned tasks; or

3. That they exercised the diligence of a good father of a family in the selection
and supervision of Bicomong.

Respondents succeeded in overcoming the presumption of negligence, having

shown that when the collision took place, Bicomong was not in the performance
of his work; that he was in possession of a service vehicle that did not belong
to his employer NURC, but to URC, and which vehicle was not officially
assigned to him, but to another employee; that his use of the URC van was
unauthorized - even if he had used the same vehicle in furtherance of a
personal undertaking in the past,[31] this does not amount to implied
permission; that the accident occurred on a holiday and while Bicomong was
on his way home to his family in Quezon province; and that Bicomong had no
official business whatsoever in his hometown in Quezon, or in Laguna where
the collision occurred, his area of operations being limited to the Cavite area.