1.

Cebu International VS CA 316 SCRA 488

SECOND DIVISION
[G.R. No. 123031. October 12, 1999]
CEBU INTERNATIONAL FINANCE CORPORATION, petitioner, vs. COURT OF APPEALS, VICENTE ALEGRE, respondents.

DECISION
QUISUMBING, J.:

This petition for review on certiorari assails respondent appellate courts Decision,[1] dated December 8, 1995, in CA
G.R. CV No. 44085, which affirmed the ruling of the Regional Trial Court of Makati, Branch 132. The dispositive portion of
the trial courts decision reads:

WHEREFORE, judgment is hereby rendered ordering defendant [herein petitioner] to pay plaintiff [herein private
respondent]:

(1) the principal sum of P514,390.94 with legal interest thereon computed from August 6, 1991 until fully paid; and

(2) the costs of suit.

SO ORDERED.[2]

Based on the records, the following are the pertinent facts of the case:
Cebu International Finance Corporation (CIFC), a quasi-banking institution, is engaged in money market operations.
On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC, five hundred thousand (P500,000.00)
pesos, in cash. Petitioner issued a promissory note to mature on May 27, 1991. The note for five hundred sixteen
thousand, two hundred thirty-eight pesos and sixty-seven centavos (P516,238.67) covered private respondents
placement plus interest at twenty and a half (20.5%) percent for thirty-two (32) days.
On May 27, 1991, CIFC issued BPI Check No. 513397 (hereinafter the CHECK) for five hundred fourteen thousand,
three hundred ninety pesos and ninety-four centavos (P514,390.94) in favor of the private respondent as proceeds of his
matured investment plus interest. The CHECK was drawn from petitioners current account number 0011-0803-59,
maintained with the Bank of the Philippine Islands (BPI), main branch at Makati City.
On June 17, 1991, private respondents wife deposited the CHECK with Rizal Commercial Banking Corp. (RCBC), in
Puerto Princesa, Palawan. BPI dishonored the CHECK with the annotation, that the Check (is) Subject of an Investigation.
BPI took custody of the CHECK pending an investigation of several counterfeit checks drawn against CIFCs aforestated
checking account. BPI used the check to trace the perpetrators of the forgery.
Immediately, private respondent notified CIFC of the dishonored CHECK and demanded, on several occasions, that
he be paid in cash. CIFC refused the request, and instead instructed private respondent to wait for its ongoing bank
reconciliation with BPI. Thereafter, private respondent, through counsel, made a formal demand for the payment of his
money market placement. In turn, CIFC promised to replace the CHECK but required an impossible condition that the
original must first be surrendered.
On February 25, 1992, private respondent Alegre filed a complaint[3] for recovery of a sum of money against the
petitioner with the Regional Trial Court of Makati (RTC-Makati), Branch 132.
On July 13, 1992, CIFC sought to recover its lost funds and formally filed against BPI, a separate civil action[4] for
collection of a sum of money with the RTC-Makati, Branch 147. The collection suit alleged that BPI unlawfully deducted
from CIFCs checking account, counterfeit checks amounting to one million, seven hundred twenty-four thousand, three
hundred sixty-four pesos and fifty-eight centavos (P1,724,364.58). The action included the prayer to collect the amount
of the CHECK paid to Vicente Alegre but dishonored by BPI.
Meanwhile, in response to Alegres complaint with RTC-Makati, Branch 132, CIFC filed a motion for leave of court to
file a third-party complaint against BPI. BPI was impleaded by CIFC to enforce a right, for contribution and indemnity,
with respect to Alegres claim. CIFC asserted that the CHECK it issued in favor of Alegre was genuine, valid and sufficiently
funded.
On July 23, 1992, the trial court granted CIFCs motion. However, BPI moved to dismiss the third-party complaint on
the ground of pendency of another action with RTC-Makati, Branch 147. Acting on the motion, the trial court dismissed
the third-party complaint on November 4, 1992, after finding that the third party complaint filed by CIFC against BPI is
similar to its ancillary claim against the bank, filed with RTC-Makati Branch 147.
 Thereafter, during the hearing by RTC-Makati, Branch 132, held on May 27, and June 22, 1993, Vito Arieta, Bank
Manager of BPI, testified that the bank, indeed, dishonored the CHECK, retained the original copy and forwarded only a
certified true copy to RCBC. When Arieta was recalled on July 20, 1993, he testified that on July 16, 1993, BPI encashed
and deducted the said amount from the account of CIFC, but the proceeds, as well as the CHECK remained in BPIs
custody. The banks move was in accordance with the Compromise Agreement[5] it entered with CIFC to end the litigation
in RTC-Makati, Branch 147. The compromise agreement, which was submitted for the approval of the said court,
provided that:
1. Defendant [BPI] shall pay to the plaintiff [CIFC] the amount of P1,724,364.58 plus P 20,000 litigation
expenses as full and final settlement of all of plaintiffs claims as contained in the Amended Complaint dated
September 10, 1992. The aforementioned amount shall be credited to plaintiffs current account No. 0011-
0803-59 maintained at defendants Main Branch upon execution of this Compromise Agreement.
2. Thereupon, defendant shall debit the sum of P 514,390.94 from the aforesaid current account representing
payment/discharge of BPI Check No. 513397 payable to Vicente Alegre.
3. In case plaintiff is adjudged liable to Vicente Alegre in Civil Case No. 92-515 arising from the alleged dishonor
of BPI Check No. 513397, plaintiff cannot go after the defendant: otherwise stated, the defendant shall not
be liable to the plaintiff. Plaintiff [CIFC] may however set-up the defense of payment/discharge stipulated in
par. 2 above.[6]
On July 27, 1993, BPI filed a separate collection suit[7] against Vicente Alegre with the RTC-Makati, Branch 62. The
complaint alleged that Vicente Alegre connived with certain Lina A. Pena and Lita A. Anda and forged several checks of
BPIs client, CIFC. The total amount of counterfeit checks was P 1,724,364.58. BPI prevented the encashment of some
checks amounting to two hundred ninety five thousand, seven hundred seventy-five pesos and seven centavos
(P295,775.07). BPI admitted that the CHECK, payable to Vicente Alegre for P514,390.94, was deducted from BPIs claim,
hence, the balance of the loss incurred by BPI was nine hundred fourteen thousand, one hundred ninety-eight pesos and
fifty-seven centavos (P914,198.57), plus costs of suit for twenty thousand (P20,000.00) pesos. The records are silent on
the outcome of this case.
On September 27, 1993, RTC-Makati, Branch 132, rendered judgment in favor of Vicente Alegre.
CIFC appealed from the adverse decision of the trial court. The respondent court affirmed the decision of the trial
court.
Hence this appeal,[8] in which petitioner interposes the following assignments of errors:
1. The Honorable Court of Appeals erred in affirming the finding of the Honorable Trial Court holding that
petitioner was not discharged from the liability of paying the value of the subject check to private
respondent after BPI has debited the value thereof against petitioners current account.
2. The Honorable Court of Appeals erred in applying the provisions of paragraph 2 of Article 1249 of the Civil
Code in the instant case. The applicable law being the Negotiable Instruments Law.
3. The Honorable Court of Appeals erred in affirming the Honorable Trial Courts findings that the petitioner
was guilty of negligence and delay in the performance of its obligation to the private respondent.
4. The Honorable Court of Appeals erred in affirming the Honorable Trial Courts decision ordering petitioner to
pay legal interest and the cost of suit.
5. The Honorable Court of Appeals erred in affirming the Honorable Trial Courts dismissal of petitioners third-
party complaint against BPI.
These issues may be synthesized into three:
1. WHETHER OR NOT ARTICLE 1249 OF THE NEW CIVIL CODE APPLIES IN THE PRESENT CASE;
2. WHETHER OR NOT BPI CHECK NO. 513397 WAS VALIDLY DISCHARGED; and
3. WHETHER OR NOT THE DISMISSAL OF THE THIRD PARTY COMPLAINT OF PETITIONER AGAINST BPI BY
REASON OF LIS PENDENS WAS PROPER?
On the first issue, petitioner contends that the provisions of the Negotiable Instruments Law (NIL) are the pertinent
laws to govern its money market transaction with private respondent, and not paragraph 2 of Article 1249 of the Civil
Code. Petitioner stresses that it had already been discharged from the liability of paying the value of the CHECK due to
the following circumstances:
1) There was ACCEPTANCE of the subject check by BPI, the drawee bank, as defined under the Negotiable
Instruments Law, and therefore, BPI, the drawee bank, became primarily liable for the payment of the
check, and consequently, the drawer, herein petitioner, was discharged from its liability thereon;
2) Moreover, BPI, the drawee bank, has not validly DISHONORED the subject check; and,
 3) The act of BPI, the drawee bank of debiting/deducting the value of the check from petitioners account
amounted to and/or constituted a discharge of the drawers (petitioners) liability under the
instrument/subject check.[9]
Petitioner cites Section 137 of the Negotiable Instruments Law, which states:

Liability of drawee retaining or destroying bill - Where a drawee to whom a bill is delivered for acceptance destroys the
same, or refuses within twenty-four hours after such delivery or such other period as the holder may allow, to return the
bill accepted or non-accepted to the Holder, he will be deemed to have accepted the same.

Petitioner asserts that since BPI accepted the instrument, the bank became primarily liable for the payment of the
CHECK. Consequently, when BPI offset the value of CHECK against the losses from the forged checks allegedly
committed by the private respondent, the check was deemed paid.
Article 1249 of the New Civil Code deals with a mode of extinction of an obligation and expressly provides for the
medium in the payment of debts. It provides that:

The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such
currency, then in the currency, which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance.

Considering the nature of a money market transaction, the above-quoted provision should be applied in the
present controversy. As held in Perez vs. Court of Appeals,[10] a money market is a market dealing in standardized short-
term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but
through a middle man or dealer in open market. In a money market transaction, the investor is a lender who loans his
money to a borrower through a middleman or dealer.[11]
In the case at bar, the money market transaction between the petitioner and the private respondent is in the
nature of a loan. The private respondent accepted the CHECK, instead of requiring payment in money. Yet, when he
presented it to RCBC for encashment, as early as June 17, 1991, the same was dishonored by non-acceptance, with BPIs
annotation: Check (is) subject of an investigation. These facts were testified to by BPIs manager. Under these
circumstances, and after the notice of dishonor,[12] the holder has an immediate right of recourse against the
drawer,[13] and consequently could immediately file an action for the recovery of the value of the check.
In a loan transaction, the obligation to pay a sum certain in money may be paid in money, which is the legal tender
or, by the use of a check. A check is not a legal tender, and therefore cannot constitute valid tender of payment. In the
case of Philippine Airlines, Inc. vs. Court of Appeals,[14] this Court held:

Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does
not, by itself, operate as payment (citation omitted). A check, whether a managers check or ordinary check, is not legal
tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the
obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not
extinguished and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil
Code, par. 3.)[15]

Turning now to the second issue, when the bank deducted the amount of the CHECK from CIFCs current account,
this did not ipso facto operate as a discharge or payment of the instrument. Although the value of the CHECK was
deducted from the funds of CIFC, it was not delivered to the payee, Vicente Alegre. Instead, BPI offset the amount
against the losses it incurred from forgeries of CIFC checks, allegedly committed by Alegre. The confiscation of the value
of the check was agreed upon by CIFC and BPI. The parties intended to amicably settle the collection suit filed by CIFC
with the RTC-Makati, Branch 147, by entering into a compromise agreement, which reads:
xxx
2. Thereupon, defendant shall debit the sum of P 514,390.94 from the aforesaid current account representing
payment/discharge of BPI Check No. 513397 payable to Vicente Alegre.
3. In case plaintiff is adjudged liable to Vicente Alegre in Civil Case No. 92-515 arising from the alleged dishonor
of BPI Check No. 513397, plaintiff cannot go after the defendant; otherwise stated, the defendant shall
not be liable to the plaintiff. Plaintiff however (sic) set-up the defense of payment/discharge stipulated in
par. 2 above.[16]
 A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end
to one already commenced.[17] It is an agreement between two or more persons who, for preventing or putting an end
to a lawsuit, adjust their difficulties by mutual consent in the manner which they agree on, and which everyone of them
prefers in the hope of gaining, balanced by the danger of losing.[18] The compromise agreement could not bind a party
who did not sign the compromise agreement nor avail of its benefits.[19] Thus, the stipulations in the compromise
agreement is unenforceable against Vicente Alegre, not a party thereto. His money could not be the subject of an
agreement between CIFC and BPI. Although Alegres money was in custody of the bank, the banks possession of it was
not in the concept of an owner. BPI cannot validly appropriate the money as its own. The codal admonition on this issue
is clear:

Art. 1317 -

No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to
represent him.

A Contract entered into in the name of another by one who has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it
has been executed, before it is revoked by the other contracting party.[20]

BPIs confiscation of Alegres money constitutes garnishment without the parties going through a valid proceeding in
court. Garnishment is an attachment by means of which the plaintiff seeks to subject to his claim the property of the
defendant in the hands of a third person or money owed to such third person or a garnishee to the defendant. [21] The
garnishment procedure must be upon proper order of RTC-Makati, Branch 62, the court who had jurisdiction over the
collection suit filed by BPI against Alegre. In effect, CIFC has not yet tendered a valid payment of its obligation to the
private respondent. Tender of payment involves a positive and unconditional act by the obligor of offering legal tender
currency as payment to the obligee for the formers obligation and demanding that the latter accept the same. [22] Tender
of payment cannot be presumed by a mere inference from surrounding circumstances.
With regard to the third issue, for litis pendentia to be a ground for the dismissal of an action, the following
requisites must concur: (a) identity of parties or at least such as to represent the same interest in both actions; (b)
identity of rights asserted and relief prayed for, the relief being founded on the same acts; and (c) the identity in the two
cases should be such that the judgment which may be rendered in one would, regardless of which party is successful,
amount to res judicata in the other.[23]
The trial courts ruling as adopted by the respondent court states, thus:

A perusal of the complaint in Civil Case No. 92-1940, entitled Cebu International Finance Corporation vs. Bank of the
Philippine Islands now pending before Branch 147 of this Court and the Third Party Complaint in the instant case would
readily show that the parties are not only identical but also the cause of action being asserted, which is the recovery of
the value of BPI Check No. 513397 is the same. In Civil Case No. 92-1940 and in the Third Party Complaint the rights
asserted and relief prayed for, the reliefs being founded on the facts, are identical.

xxx

WHEREFORE, the motion to dismiss is granted and consequently, the Third Party Complaint is hereby ordered dismissed
on ground of lis pendens.[24]

We agree with the observation of the respondent court that, as between the third party claim filed by the
petitioner against BPI in Civil Case No. 92-515 and petitioners ancillary claim against the bank in Civil Case No. 92-1940,
there is identity of parties as well as identity of rights asserted, and that any judgment that may be rendered in one case
will amount to res judicata in another.
The compromise agreement between CIFC and BPI, categorically provided that In case plaintiff is adjudged liable to
Vicente Alegre in Civil Case No. 92-515 arising from the alleged dishonor of BPI Check No. 513397, plaintiff (CIFC) cannot
go after the defendant (BPI); otherwise stated, the defendant shall not be liable to the plaintiff.[25] Clearly, this
stipulation expressed that CIFC had already abandoned any further claim against BPI with respect to the value of BPI
Check No. 513397. To ask this Court to allow BPI to be a party in the case at bar, would amount to res judicata and
would violate terms of the compromise agreement between CIFC and BPI. The general rule is that a compromise has
upon the parties the effect and authority of res judicata, with respect to the matter definitely stated therein, or which by
implication from its terms should be deemed to have been included therein.[26] This holds true even if the agreement has
not been judicially approved.[27]
WHEREFORE, the instant petition is hereby DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 44085 is
AFFIRMED. Costs against petitioner.
SO ORDERED.
Mendoza, and Buena, JJ., concur.
Bellosillo, (Chairman), J., on official leave.
2. ROMAN CATHOLIC BISHOP OF MALOLOS, INC., Petitioner, v. INTERMEDIATE APPELLATE
COURT
SECOND DIVISION

[G.R. No. 72110. November 16, 1990.]

ROMAN CATHOLIC BISHOP OF MALOLOS, INC., Petitioner, v. INTERMEDIATE APPELLATE COURT, and ROBES-FRANCISCO
REALTY AND DEVELOPMENT CORPORATION, Respondents.

Rodrigo Law Office for Petitioner.

Antonio P. Barredo and Napoleon M. Malinas for Private Respondent.

SYLLABUS

1. CIVIL LAW; CONTRACTS; TENDER OF PAYMENT; CANNOT BE PRESUMED BY MERE INFERENCE FROM SURROUNDING
CIRCUMSTANCES. — We agree with the petitioner that a finding that the private respondent had sufficient available
funds on or before the grace period for the payment of its obligation does not constitute proof of tender of payment by
the latter for its obligation within the said period. Tender of payment involves a positive and unconditional act by the
obligor of offering legal tender currency as payment to the obligee for the former’s obligation and demanding that the
latter accept the same. Thus, tender of payment cannot be presumed by a mere inference from surrounding
circumstances. At most, sufficiency of available funds is only affirmative of the capacity or ability of the obligor to fulfill
his part of the bargain. But whether or not the obligor avails himself of such funds to settle his outstanding account
remains to be proven by independent and credible evidence. Tender of payment presupposes not only that the obligor
is able, ready, and willing, but more so, in the act of performing his obligation. Ab posse ad actu non vale illatio. "A proof
that an act could have been done is no proof that it was actually done." The respondent court was therefore in error to
have concluded from the sheer proof of sufficient available funds on the part of the private respondent to meet more
than the total obligation within the grace period, the alleged truth of tender of payment. The same is a classic case of
non-sequitur.

2. ID.; ID.; ID.; NOT VALIDLY CONSTITUTED BY PAYMENT OF A CERTIFIED PERSONAL CHECK. — With regard to the third
issue, granting arguendo that we would rule affirmatively on the two preceding issues, the case of the private
respondent still can not succeed in view of the fact that the latter used a certified personal check which is not legal
tender nor the currency stipulated, and therefore, can not constitute valid tender of payment. The first paragraph of Art.
1249 of the Civil Code provides that "the payment of debts in money shall be made in the currency stipulated, and if it is
not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The Court en banc in
the recent case of Philippine Airlines v. Court of Appeals, (Promulgated on January 30, 1990) G.R. No. L-49188, stated
thus: Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument
does not, by itself, operate as payment (citing Sec. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan London Co.
v. American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager’s check or
ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and
may be refused receipt by the obligee or creditor. Hence, where the tender of payment by the private respondent was
not valid for failure to comply with the requisite payment in legal tender or currency stipulated within the grace period
and as such, was validly refused receipt by the petitioner, the subsequent consignation did not operate to discharge the
former from its obligation to the latter.

3. ID.; ID.; OBLIGATIONS ARISING THEREFROM HAVE THE FORCE OF LAW BETWEEN THE CONTRACTING PARTIES. — Art.
1159 of the Civil Code of the Philippines provides that "obligations arising from contracts have the force of law between
the contracting parties and should be complied with in good faith." And unless the stipulations in said contract are
contrary to law, morals, good customs, public order, or public policy, the same are binding as between the parties.
(Article 1409, Civil Code, par. 1). What the private respondent should have done if it was indeed desirous of complying
with its obligations would have been to pay the petitioner within the grace period and obtain a receipt of such payment
duly issued by the latter. Thereafter, or, allowing a reasonable time, the private respondent could have demanded from
the petitioner the execution of the necessary documents. In case the petitioner refused, the private respondent could
have had always resorted to judicial action for the legitimate enforcement of its right. For the failure of the private
respondent to undertake this more judicious course of action, it alone shall suffer the consequences.

4. REMEDIAL LAW; APPEAL; FACTUAL FINDINGS OF TRIAL COURT AS A RULE, SHOULD BE ACCORDED FULL
CONSIDERATION AND RESPECT. — On the contrary, the respondent court finds itself remiss in overlooking or taking
lightly the more important findings of fact made by the trial court which we have earlier mentioned and which as a rule,
are entitled to great weight on appeal and should be accorded full consideration and respect and should not be
disturbed unless for strong and cogent reasons. (Natividad del Rosario Vda. de Alberto v. Court of Appeals, G.R. 29759,
May 18, 1989; Matabuena v. Court of Appeals, G.R. 76542, May 5, 1989).

5. ID.; SUPREME COURT; INSTANCES WHEN THE COURT HAS TO REVIEW THE EVIDENCE. — While the Court is not a trier
of facts, yet, when the findings of fact of the Court of Appeals are at variance with those of the trial court, (Robleza v.
Court of Appeals, G.R. 80364, June 28, 1989) or when the inference of the Court of Appeals from its findings of fact is
manifestly mistaken, (Reynolds Philippine Corporation v. Court of Appeals, G.R. 38187, January 17, 1987) the Court has
to review the evidence in order to arrive at the correct findings based on the record.

DECISION

SARMIENTO, J.:

This is a petition for review on certiorari which seeks the reversal and setting aside of the decision 1 of the Court of
Appeals, 2 the dispositive portion of which reads:chanrobles law library : red

WHEREFORE, the decision appealed from is hereby reversed and set aside and another one entered for the plaintiff
ordering the defendant-appellee Roman Catholic Bishop of Malolos, Inc. to accept the balance of P124,000.00 being
paid by plaintiff-appellant and thereafter to execute in favor of Robes-Francisco Realty Corporation a registerable Deed
of Absolute Sale over 20,655 square meters portion of that parcel of land situated in San Jose del Monte, Bulacan
described in OCT No. 575 (now Transfer Certificates of Title Nos. T-169493, 169494,169495 and 169496) of the Register
of Deeds of Bulacan. In case of refusal of the defendant to execute the Deed of Final Sale, the clerk of court is directed to
execute the said document. Without pronouncement as to damages and attorney’s fees. Costs against the defendant-
appellee. 3

The case at bar arose from a complaint filed by the private respondent, then plaintiff, against the petitioner, then
defendant, in the Court of First Instance (now Regional Trial Court) of Bulacan, at Sta. Maria, Bulacan, 4 for specific
performance with damages, based on a contract 5 executed on July 7, 1971.

The property subject matter of the contract consists of a 20,655 sq.m.-portion, out of the 30,655 sq.m. total area, of a
parcel of land covered by Original Certificate of Title No. 575 of the Province of Bulacan, issued and registered in the
name of the petitioner which it sold to the private respondent for and in consideration of P123,930.00.chanrobles virtual
lawlibrary

The crux of the instant controversy lies in the compliance or non-compliance by the private respondent with the
provision for payment to the petitioner of the principal balance of P100,000.00 and the accrued interest of P24,000.00
within the grace period.

A chronological narration of the antecedent facts is as follows:chanrob1es virtual 1aw library

On July 7, 1971, the subject contract over the land in question was executed between the petitioner as vendor and the
private respondent through its then president, Mr. Carlos F. Robes, as vendee, stipulating for a downpayment of
P23,930.00 and the balance of P100,000.00 plus 12% interest per annum to be paid within four (4) years from execution
of the contract, that is, on or before July 7, 1975. The contract likewise provides for cancellation, forfeiture of previous
payments, and reconveyance of the land in question in case the private respondent would fail to complete payment
within the said period.

On March 12, 1973, the private respondent, through its new president, Atty. Adalia Francisco, addressed a letter 6 to
Father Vasquez, parish priest of San Jose Del Monte, Bulacan, requesting to be furnished with a copy of the subject
contract and the supporting documents.

On July 17, 1975, admittedly after the expiration of the stipulated period for payment, the same Atty. Francisco wrote
the petitioner a formal request 7 that her company be allowed to pay the principal amount of P100,000.00 in three (3)
equal installments of six (6) months each with the first installment and the accrued interest of P24,000.00 to be paid
immediately upon approval of the said request.

On July 29, 1975, the petitioner, through its counsel, Atty. Carmelo Fernandez, formally denied the said request of the
private respondent, but granted the latter a grace period of five (5) days from the receipt of the denial 8 to pay the total
balance of P124,000.00, otherwise, the provisions of the contract regarding cancellation, forfeiture, and reconveyance
would be implemented.
On August 4, 1975, the private respondent, through its president, Atty. Francisco, wrote 9 the counsel of the petitioner
requesting an extension of 30 days from said date to fully settle its account. The counsel for the petitioner, Atty.
Fernandez, received the said letter on the same day. Upon consultation with the petitioner in Malolos, Bulacan, Atty.
Fernandez, as instructed, wrote the private respondent a letter 10 dated August 7, 1975 informing the latter of the
denial of the request for an extension of the grace period.

Consequently, Atty. Francisco, the private respondent’s president, wrote a letter 11 dated August 22, 1975, directly
addressed to the petitioner, protesting the alleged refusal of the latter to accept tender of payment purportedly made
by the former on August 5, 1975, the last day of the grace period. In the same letter of August 22, 1975, received on the
following day by the petitioner, the private respondent demanded the execution of a deed of absolute sale over the land
in question and after which it would pay its account in full, otherwise, judicial action would be resorted
to.chanrobles.com.ph : virtual law library

On August 27, 1975, the petitioner’s counsel, Atty. Fernandez, wrote a reply 12 to the private respondent stating the
refusal of his client to execute the deed of absolute sale due to its (private respondent’s) failure to pay its full obligation.
Moreover, the petitioner denied that the private respondent had made any tender of payment whatsoever within the
grace period. In view of this alleged breach of contract, the petitioner cancelled the contract and considered all previous
payments forfeited and the land as ipso facto reconveyed.

From a perusal of the foregoing facts, we find that both the contending parties have conflicting versions on the main
question of tender of payment.

The trial court, in its ratiocination, preferred not to give credence to the evidence presented by the private Respondent.
According to the trial court:chanrob1es virtual 1aw library

. . . What made Atty. Francisco suddenly decide to pay plaintiff’s obligation on August 5, 1975, go to defendant’s office
at Malolos, and there tender her payment, when her request of August 4, 1975 had not yet been acted upon until
August 7, 1975? If Atty. Francisco had decided to pay the obligation and had available funds for the purpose on August
5, 1975, then there would have been no need for her to write defendant on August 4, 1975 to request an extension of
time. Indeed, Atty. Francisco’s claim that she made a tender of payment on August 5, 1975 — such alleged act,
considered in relation to the circumstances both antecedent and subsequent thereto, being not in accord with the
normal pattern of human conduct — is not worthy of credence. 13

The trial court likewise noted the inconsistency in the testimony of Atty. Francisco, president of the private respondent,
who earlier testified that a certain Mila Policarpio accompanied her on August 5, 1975 to the office of the petitioner.
Another person, however, named Aurora Oracion, was presented to testify as the secretary-companion of Atty.
Francisco on that same occasion.

Furthermore, the trial court considered as fatal the failure of Atty. Francisco to present in court the certified personal
check allegedly tendered as payment or, at least, its xerox copy, or even bank records thereof. Finally, the trial court
found that the private respondent had insufficient funds available to fulfill the entire obligation considering that the
latter, through its president, Atty. Francisco, only had a savings account deposit of P64,840.00, and although the latter
had a money-market placement of P300,000.00, the same was to mature only after the expiration of the 5-day grace
period.

Based on the above considerations, the trial court rendered a decision in favor of the petitioner, the dispositive portion
of which reads:chanrobles virtual lawlibrary

WHEREFORE, finding plaintiff to have failed to make out its case, the court hereby declares the subject contract
cancelled and plaintiff’s downpayment of P23,930.00 forfeited in favor of defendant, and hereby dismisses the
complaint; and on the counterclaim, the Court orders plaintiff to pay defendant.

(1) Attorney’s fees of P10,000.00;

(2) Litigation expenses of P2,000.00; and

(3) Judicial costs.

SO ORDERED. 14

Not satisfied with the said decision, the private respondent appealed to the respondent Intermediate Appellate Court
(now Court of Appeals) assigning as reversible errors, among others, the findings of the trial court that the available
funds of the private respondent were insufficient and that the latter did not effect a valid tender of payment and
consignation.

The respondent court, in reversing the decision of the trial court, essentially relies on the following findings:chanrob1es
virtual 1aw library

. . . We are convinced from the testimony of Atty. Adalia Francisco and her witnesses that in behalf of the plaintiff-
appellant they have a total available sum of P364,840.00 at her and at the plaintiff’s disposal on or before August 4,
1975 to answer for the obligation of the plaintiff-appellant. It was not correct for the trial court to conclude that the
plaintiff-appellant had only about P64,840.00 in savings deposit on or before August 5, 1975, a sum not enough to pay
the outstanding account of P124,000.00. The plaintiff-appellant, through Atty. Francisco proved and the trial court even
acknowledged that Atty. Adalia Francisco had about P300,000.00 in money market placement. The error of the trial
court has in concluding that the money market placement of P300,000.00 was out of reach of Atty. Francisco. But as
testified to by Mr. Catalino Estrella, a representative of the Insular Bank of Asia and America, Atty. Francisco could
withdraw anytime her money market placement and place it at her disposal, thus proving her financial capability of
meeting more than the whole of P124,000.00 then due per contract. This situation, We believe, proves the truth that
Atty. Francisco apprehensive that her request for a 30-day grace period would be denied, she tendered payment on
August 4, 1975 which offer defendant through its representative and counsel refused to receive. . .15 (Emphasis
supplied)

In other words, the respondent court, finding that the private respondent had sufficient available funds, ipso facto
concluded that the latter had tendered payment. Is such conclusion warranted by the facts proven? The petitioner
submits that it is not.cralawnad

Hence, this petition. 16

The petitioner presents the following issues for resolution:chanrob1es virtual 1aw library

x x x

A. Is a finding that private respondent had sufficient available funds on or before the grace period for the payment of its
obligation proof that it (private respondent) did tender of (sic) payment for its said obligation within said period?

x x x

B. Is it the legal obligation of the petitioner (as vendor) to execute a deed of absolute sale in favor of the private
respondent (as vendee) before the latter has actually paid the complete consideration of the sale — where the contract
between and executed by the parties stipulates —

"That upon complete payment of the agreed consideration by the herein VENDEE, the VENDOR shall cause the
execution of a Deed of Absolute Sale in favor of the VENDEE."cralaw virtua1aw library

x x x.

C. Is an offer of a check a valid tender of payment of an obligation under a contract which stipulates that the
consideration of the sale is in Philippine Currency? 17

We find the petition impressed with merit.

With respect to the first issue, we agree with the petitioner that a finding that the private respondent had sufficient
available funds on or before the grace period for the payment of its obligation does not constitute proof of tender of
payment by the latter for its obligation within the said period. Tender of payment involves a positive and unconditional
act by the obligor of offering legal tender currency as payment to the obligee for the former’s obligation and demanding
that the latter accept the same. Thus, tender of payment cannot be presumed by a mere inference from surrounding
circumstances. At most, sufficiency of available funds is only affirmative of the capacity or ability of the obligor to fulfill
his part of the bargain. But whether or not the obligor avails himself of such funds to settle his outstanding account
remains to be proven by independent and credible evidence. Tender of payment presupposes not only that the obligor
is able, ready, and willing, but more so, in the act of performing his obligation. Ab posse ad actu non vale illatio. "A proof
that an act could have been done is no proof that it was actually done."cralaw virtua1aw library

The respondent court was therefore in error to have concluded from the sheer proof of sufficient available funds on the
part of the private respondent to meet more than the total obligation within the grace period, the alleged truth of
tender of payment. The same is a classic case of non-sequitur.chanrobles virtual lawlibrary
On the contrary, the respondent court finds itself remiss in overlooking or taking lightly the more important findings of
fact made by the trial court which we have earlier mentioned and which as a rule, are entitled to great weight on appeal
and should be accorded full consideration and respect and should not be disturbed unless for strong and cogent
reasons. 18

While the Court is not a trier of facts, yet, when the findings of fact of the Court of Appeals are at variance with those of
the trial court, 19 or when the inference of the Court of Appeals from its findings of fact is manifestly mistaken, 20 the
Court has to review the evidence in order to arrive at the correct findings based on the record.

Apropos the second issue raised, although admittedly the documents for the deed of absolute sale had not been
prepared, the subject contract clearly provides that the full payment by the private respondent is an a priori condition
for the execution of the said documents by the petitioner.

That upon complete payment of the agreed consideration by the herein VENDEE, the VENDOR shall cause the execution
of a Deed of Absolute Sale in favor of the VENDEE. 21

The private respondent is therefore in estoppel to claim otherwise as the latter did in the testimony in cross-
examination of its president, Atty. Francisco, which reads:chanrob1es virtual 1aw library

Q Now, you mentioned, Atty. Francisco, that you wanted the defendant to execute the final deed of sale before you
would given (sic) the personal certified check in payment of your balance, is that correct?

A Yes, sir. 22

x x x

Art. 1159 of the Civil Code of the Philippines provides that "obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good faith." And unless the stipulations in said contract
are contrary to law, morals, good customs, public order, or public policy, the same are binding as between the
parties.23

What the private respondent should have done if it was indeed desirous of complying with its obligations would have
been to pay the petitioner within the grace period and obtain a receipt of such payment duly issued by the latter.
Thereafter, or, allowing a reasonable time, the private respondent could have demanded from the petitioner the
execution of the necessary documents. In case the petitioner refused, the private respondent could have had always
resorted to judicial action for the legitimate enforcement of its right. For the failure of the private respondent to
undertake this more judicious course of action, it alone shall suffer the consequences.chanrobles.com:cralaw:red

With regard to the third issue, granting arguendo that we would rule affirmatively on the two preceding issues, the case
of the private respondent still can not succeed in view of the fact that the latter used a certified personal check which is
not legal tender nor the currency stipulated, and therefore, can not constitute valid tender of payment. The first
paragraph of Art. 1249 of the Civil Code provides that "the payment of debts in money shall be made in the currency
stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.

The Court en banc in the recent case of Philippine Airlines v. Court of Appeals, 24 G.R. No. L-49188, stated
thus:chanrob1es virtual 1aw library

Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does
not, by itself, operate as payment (citing Sec. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan London Co. v.
American Bank, 7 Phil. 255; Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a manager’s check or
ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and
may be refused receipt by the obligee or creditor.

Hence, where the tender of payment by the private respondent was not valid for failure to comply with the requisite
payment in legal tender or currency stipulated within the grace period and as such, was validly refused receipt by the
petitioner, the subsequent consignation did not operate to discharge the former from its obligation to the latter.

In view of the foregoing, the petitioner in the legitimate exercise of its rights pursuant to the subject contract, did validly
order therefore the cancellation of the said contract, the forfeiture of the previous payment, and the reconveyance ipso
facto of the land in question.chanrobles lawlibrary : rednad

WHEREFORE, the petition for review on certiorari is GRANTED and the DECISION of the respondent court promulgated
on April 25, 1985 is hereby SET ASIDE and ANNULLED and the DECISION of the trial court dated May 25, 1981 is hereby
REINSTATED. Costs against the private Respondent.

SO ORDERED.

Melencio-Herrera, Paras and Regalado, JJ., concur.

Padilla, J., took no part.

3. BPI Express Card Corp VS CA 292
THIRD DIVISION
[G.R. No. 120639. September 25, 1998]
BPI EXPRESS CARD CORPORATION, petitioner, vs. COURT OF APPEALS and RICARDO J. MARASIGAN, respondents.

DECISION
KAPUNAN, J.:

The question before this Court is whether private respondent can recover moral damages arising from the
cancellation of his credit card by petitioner credit card corporation.
The facts of the case are as stated in the decision of the respondent court,[1] to wit:
The case arose from the dishonor of the credit card of the plaintiff Atty. Ricardo J. Marasigan by Cafe Adriatico,
a business establishment accredited with the defendant-appellant BPI Express Card Corporation (BECC for
brevity) on December 8, 1989 when the plaintiff entertained some guests thereat.
The records of this case show that plaintiff, who is a lawyer by profession was a complimentary member of
BECC from February 1988 to February 1989 and was issued Credit Card No. 100-012-5534 with a credit limit
of P3,000.00 and with a monthly billing every 27th of the month (Exh. N), subject to the terms and conditions
stipulated in the contract (Exh. 1-b). His membership was renewed for another year or until February 1990 and
the credit limit was increased to P5,000.00 (Exh. A). The plaintiff oftentimes exceeded his credit limits (Exhs. I, I-
1 to I-12) but this was never taken against him by the defendant and even his mode of paying his monthly bills
in check was tolerated. Their contractual relations went on smoothly until his statement of account for
October, 1989 amounting to P8,987.84 was not paid in due time. The plaintiff admitted having inadvertently
failed to pay his account for the said month because he was in Quezon province attending to some professional
and personal commitments. He was informed by his secretary that defendant was demanding immediate
payment of his outstanding account, was requiring him to issue a check for P15,000.00 which would include his
future bills, and was threatening to suspend his credit card. Plaintiff issued Far East Bank and Trust Co. Check
No. 494675 in the amount of P15,000.00, postdated December 15, 1989 which was received on November 23,
1989 by Tess Lorenzo, an employee of the defendant (Exhs. J and J-1), who in turn gave the said check to Jeng
Angeles, a co-employee who handles the account of the plaintiff. The check remained in the custody of Jeng
Angeles. Mr. Roberto Maniquiz, head of the collection department of defendant was formally informed of the
postdated check about a week later. On November 28, 1989, defendant served plaintiff a letter by ordinary
mail informing him of the temporary suspension of the privileges of his credit card and the inclusion of his
account number in their Caution List. He was also told to refrain from further use of his credit card to avoid any
inconvenience/embarrassment and that unless he settles his outstanding account with the defendant within 5
days from receipt of the letter, his membership will be permanently cancelled (Exh. 3). There is no showing that
the plaintiff received this letter before December 8, 1989. Confident that he had settled his account with the
issuance of the postdated check, plaintiff invited some guests on December 8, 1989 and entertained them at
Caf Adriatico. When he presented his credit card to Caf Adriatico for the bill amounting to P735.32, said card
was dishonored. One of his guests, Mary Ellen Ringler, paid the bill by using her own credit card, a Unibankard
(Exhs. M, M-1 and M-2).
In a letter addressed to the defendant dated December 12, 1989, plaintiff requested that he be sent the exact
billing due him as of December 15, 1989, to withhold the deposit of his postdated check and that said check be
returned to him because he had already instructed his bank to stop the payment thereof as the defendant
violated their agreement that the plaintiff issue the check to the defendant to cover his account amounting to
only P8,987.84 on the condition that the defendant will not suspend the effectivity of the card (Exh. D). A letter
dated December 16, 1989 was sent by the plaintiff to the manager of FEBTC, Ramada Branch, Manila
requesting the bank to stop the payment of the check (Exhs. E, E-1). No reply was received by plaintiff from the
defendant to his letter dated December 12, 1989. Plaintiff sent defendant another letter dated March 12, 1990
reminding the latter that he had long rescinded and cancelled whatever arrangement he entered into with
defendant and requesting for his correct billing, less the improper charges and penalties, and for an
explanation within five (5) days from receipt thereof why his card was dishonored on December 8, 1989 despite
assurance to the contrary by defendant's personnel-in-charge, otherwise the necessary court action shall be
filed to hold defendant responsible for the humiliation and embarrassment suffered by him (Exh. F). Plaintiff
alleged further that after a few days, a certain Atty. Albano, representing himself to be working with office of
Atty. Lopez, called him inquiring as to how the matter can be threshed out extrajudicially but the latter said
that such is a serious matter which cannot be discussed over the phone. The defendant served its final demand
to the plaintiff dated March 21, 1990 requiring him to pay in full his overdue account, including stipulated fees
 and charges, within 5 days from receipt thereof or face court action also to replace the postdated check with
cash within the same period or face criminal suit for violation of the Bouncing Check Law (Exh. G/Exh. 13). The
plaintiff, in a reply letter dated April 5, 1990 (Exh. H), demanded defendant's compliance with his request in his
first letter dated March 12, 1990 within three (3) days from receipt, otherwise the plaintiff will file a case
against them, x x x.[2]
Thus, on May 7, 1990 private respondent filed a complaint for damages against petitioner before the Regional Trial
Court of Makati, Branch 150, docketed as Civil Case No. 90-1174.
After trial, the trial court ruled for private respondent, finding that herein petitioner abused its right in
contravention of Article 19 of the Civil Code.[3] The dispositive portion of the decision reads:

Wherefore, judgment is hereby rendered ordering the defendant to pay plaintiff the following:

1. P100,000.00 as moral damages;

2. P50,000.00 as exemplary damages; and
3. P20,000.00 by way of attorney's fees.
On the other hand, plaintiff is ordered to pay defendant its outstanding obligation in the amount of P14,439.41,
amount due as of December 15, 1989.[4]
The trial court's ruling was based on its findings and conclusions, to wit:
There is no question that plaintiff had been in default in the payment of his billings for more than two months,
prompting defendant to call him and reminded him of his obligation. Unable to personally talk with him, this
Court is convinced that somehow one or another employee of defendant called him up more than once.
However, while it is true that, as indicated in the terms and conditions of the application for BPI credit card,
upon failure of the cardholder to pay his outstanding obligation for more than thirty (30) days, the defendant
can automatically suspend or cancel the credit card, that reserved right should not have been abused, as it was
in fact abused, in plaintiff's case. What is more peculiar here is that there have been admitted communications
between plaintiff and defendant prior to the suspension or cancellation of plaintiff's credit card and his
inclusion in the caution list. However, nowhere in any of these communications was there ever a hint given to
plaintiff that his card had already been suspended or cancelled. In fact, the Court observed that while
defendant was trying its best to persuade plaintiff to update its account and pay its obligation, it had already
taken steps to suspend/cancel plaintiff's card and include him in the caution list. While the Court admires
defendant's diplomacy in dealing with its clients, it cannot help but frown upon the backhanded way defendant
dealt with plaintiff's case. For despite Tess Lorenzo's denial, there is reason to believe that plaintiff was indeed
assured by defendant of the continued honoring of his credit card so long as he pays his obligation
of P15,000.00. Worst, upon receipt of the postdated check, defendant kept the same until a few days before it
became due and said check was presented to the head of the collection department, Mr. Maniquiz, to take
steps thereon, resulting to the embarrassing situation plaintiff found himself in on December 8,
1989. Moreover, Mr. Maniquiz himself admitted that his request for plaintiff to replace the check with cash was
not because it was a postdated check but merely to tally the payment with the account due.
Likewise, the Court is not persuaded by the sweeping denials made by Tess Lorenzo and her claim that her only
participation was to receive the subject check. Her immediate superior, Mr. Maniquiz testified that he had
instructed Lorenzo to communicate with plaintiff once or twice to request the latter to replace the questioned
check with cash, thus giving support to the testimony of plaintiff's witness, Dolores Quizon, that it was one Tess
Lorenzo who she had talked over the phone regarding plaintiff's account and plaintiff's own statement that it
was this woman who assured him that his card has not yet been and will not be cancelled/suspended if he
would pay defendant the sum of P15,000.00.
Now, on the issue of whether or not upon receipt of the subject check, defendant had agreed that the card
shall remain effective, the Court takes note of the following:

1. An employee of defendant corporation unconditionally accepted the subject check upon its delivery, despite its being
a postdated one; and the amount did not tally with plaintiff's obligation;

2. Defendant did not deny nor controvert plaintiff's claim that all his payments were made in checks;

3. Defendant's main witness, Mr. Maniquiz, categorically stated that the request for plaintiff to replace his postdated
check with cash was merely for the purpose of tallying plaintiff's outstanding obligation with his payment and not to
question the postdated check;

4. That the card was suspended almost a week after receipt of the postdated check;
5. That despite the many instances that defendant could have informed plaintiff over the phone of the cancellation or
suspension of his credit card, it did not do so, which could have prevented the incident of December 8, 1989, the notice
allegedly sent thru ordinary mail is not only unreliable but takes a long time. Such action as suspension of credit card
must be immediately relayed to the person affected so as to avoid embarrassing situations.

6. And that the postdated check was deposited on December 20, 1989.

In view of the foregoing observations, it is needless to say that there was indeed an arrangement between
plaintiff and the defendant, as can be inferred from the acts of the defendant's employees, that the subject
credit card is still good and could still be used by the plaintiff as it would be honored by the duly accredited
establishment of defendant.[5]
Not satisfied with the Regional Trial Court's decision, petitioner appealed to the Court of Appeals, which, in a
decision promulgated on March 9, 1995 ruled in its dispositive portion:
WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED with the MODIFICATION
that the defendant-appellant shall pay the plaintiff-appellee the following:P50,000.00 as moral
damages; P25,000.00 as exemplary damages; and P10,000.00 by way of attorney's fees.
SO ORDERED.[6]
Hence, the present petition on the following assignment of errors:
I
THE LOWER COURT ERRED IN DECLARING THAT THERE WAS INDEED AN AGREEMENT OR ARRANGEMENT
ENTERED INTO BETWEEN THE PARTIES WHEREIN THE DEFENDANT REQUIRED THE PLAINTIFF TO ISSUE A
POSTDATED CHECK IN ITS FAVOR IN THE AMOUNT OF P15,000.00 AS PAYMENT FOR HIS OVERDUE ACCOUNTS,
WITH THE CONDITION THAT THE PLAINTIFF'S CREDIT CARD WILL NOT BE SUSPENDED OR CANCELLED.
II
THE LOWER COURT ERRED IN HOLDING DEFENDANT LIABLE FOR DAMAGES AND ATTORNEY'S FEES ARISING
OUT FROM THE DISHONOR OF THE PLAINTIFF'S CREDIT CARD.[7]
We find the petition meritorious.
The first issue to be resolved is whether petitioner had the right to suspend the credit card of the private
respondent.
Under the terms and conditions of the credit card, signed by the private respondent, any card with outstanding
balances after thirty (30) days from original billing/statement shall automatically be suspended, thus:
PAYMENT OF CHARGES - BECC shall furnish the Cardholder a monthly statement of account made through the
use of the CARD and the Cardholder agrees that all charges made through the use of the CARD shall be paid by
the Cardholder on or before the last day for payments, which is twenty (20) days from the date of the said
statement of account, and such payment due date may be changed to an earlier date if the Cardholder's
account is considered overdue and/or with balances in excess of the approved credit limit; or to such other
date as may be deemed proper by the CARD issuer with notice to the Cardholder on the same monthly
statement of account. If the last day for payment falls on a Saturday, Sunday or Holiday, the last day for
payment automatically becomes the last working day prior to said payment date. However, notwithstanding
the absence or lack of proof of service of the statement of charges to the Cardholder, the latter shall pay any
or all charges made through the use of the CARD within thirty (30) days from the date or dates thereof. Failure
of Cardholder to pay any and all charges made through the CARD within the payment period as stated in the
statement of charges or within thirty (30) days from actual date or dates whichever occur earlier, shall render
him in default without the necessity of demand from BECC, which the Cardholder expressly waives. These
charges or balance thereof remaining unpaid after the payment due date indicated on the monthly statement
of account shall bear interest at the rate of 3% per month and an additional penalty fee equivalent to another
3% of the amount due for every month or a fraction of a month's delay. PROVIDED, that if there occurs any
change on the prevailing market rates. BECC shall have the option to adjust the rate of interest and/or penalty
fee due on the outstanding obligation with prior notice to the Cardholder.
xxx xxx xxx
Any CARD with outstanding balances unpaid after thirty (30) days from original billing/statement date shall
automatically be suspended, and those with accounts unpaid after sixty (60) days from said original
billing/statement date shall automatically be cancelled, without prejudice to BECC's right to suspend or cancel
any CARD any time and for whatever reason. In case of default in his obligation as provided for in the
preceding paragraph, Cardholder shall surrender his CARD to BECC and shall in addition to the interest and
penalty charges aforementioned, pay the following liquidated damages and/or fees (a) a collection fee of 25%
 of the amount due if the account is referred to a collection agency or attorney; (b) a service fee of P100 for
every dishonored check issued by the Cardholder in payment of his account, with prejudice, however, to
BECC's right of considering Cardholder's obligation unpaid, cable cost for demanding payment or advising
cancellation of membership shall also be for Cardholder's account; and (c) a final fee equivalent to 25% of the
unpaid balance, exclusive of litigation expenses and judicial costs, if the payment of the account is enforced
through court action.[8]
The aforequoted provision of the credit card cannot be any clearer. By his own admission, private respondent made no
payment within thirty days for his original billing/statement dated 27 September 1989.Neither did he make payment for
his original billing/statement dated 27 October 1989. Consequently, as early as 28 October 1989, thirty days from the
non-payment of his billing dated 27 September 1989, petitioner corporation could automatically suspend his credit card.
The next issue is whether prior to the suspension of private respondent's credit card on 28 November 1989, the
parties entered into an agreement whereby the card could still be used and would be duly honored by duly accredited
establisments.
We agree with the findings of the respondent court, that there was an arrangement between the parties, wherein
the petitioner required the private respondent to issue a check worth P15,000 as payment for the latter's
billings. However, we find that the private respondent was not able to comply with his obligation.
As the testimony of private respondent himself bears out, the agreement was for the immediate payment of the
outstanding account:
Q In said statement of account that you are supposed to pay the P8,974.84 the charge of interest and penalties, did
you note that?
A Yes, sir. I noted the date.
Q When?
A When I returned from the Quezon province, sir.
Q When?
A I think November 22, sir.
Q So that before you used again the credit card you were not able to pay immediately this P8,987.84 in cash?
A I paid P15,000.00, sir.
Q My question Mr. Witness is, did you pay this P8,987.84 in charge of interest and penalties immediately in cash?
A In cash no, but in check, sir.
Q You said that you noted the word "immediately" in bold letters in your statement of account, why did you not pay
immediately?
A Because I received that late, sir.
Q Yes, on November 22 when you received from the secretary of the defendant telling you to pay the principal
amount of P8,987.84, why did you not pay?
A There was a communication between me and the defendant, I was required to pay P8,000.00 but I paid in check
for P15,000.00, sir.
Q Do you have any evidence to show that the defendant required you to pay in check for P15,000.00?
A Yes, sir.
Q Where is it?
A It was by telecommunication, sir.
Q So there is no written communication between you and the defendant?
A There was none, sir.
Q There is no written agreement which says that P8,987.84 should be paid for P15,000.00 in check, there is none?
A Yes, no written agreement, sir.
Q And you as a lawyer you know that a check is not considered as cash specially when it is postdated sent to the
defendant?
A That is correct, sir.
 Clearly, the purpose of the arrangement between the parties on November 22, 1989, was for the immediate
payment of the private respondent's outstanding account, in order that his credit card would not be suspended.
As agreed upon by the parties, on the following day, private respondent did issue a check for P15,000. However,
the check was postdated 15 December 1989. Settled is the doctrine that a check is only a substitute for money and not
money, the delivery of such an instrument does not, by itself operate as payment.[9] This is especially true in the case of
a postdated check.
Thus, the issuance by the private respondent of the postdated check was not effective payment. It did not comply
with his obligation under the arrangement with Miss Lorenzo. Petitioner corporation was therefore justified in
suspending his credit card.
Finally, we find no legal and factual basis for private respondent's assertion that in canceling the credit card of the
private respondent, petitioner abused its right under the terms and conditions of the contract.
To find the existence of an abuse of right under Article 19 the following elements must be present: (1) There is a
legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.[10]
Time and again this Court has held that good faith is presumed and the burden of proving bad faith is on the party
alleging it.[11] This private respondent failed to do. In fact, the action of the petitioner belies the existence of bad faith. As
early as 28 October 1989, petitioner could have suspended private respondent's card outright. Instead, petitioner
allowed private respondent to use his card for several weeks. Petitioner had even notified private respondent of the
impending suspension of his credit card and made special accommodations for him for settling his outstanding account.
As such, petitioner cannot be said to have capriciously and arbitrarily canceled the private respondent's credit card.
We do not dispute the findings of the lower court that private respondent suffered damages as a result of the
cancellation of his credit card. However, there is a material distinction between damages and injury. Injury is the illegal
invasion of a legal right; damage is the loss, hurt, or harm which results from the injury; and damages are the
recompense or compensation awarded for the damage suffered. Thus, there can be damage without injury in those
instances in which the loss or harm was not the result of a violation of a legal duty. In such cases, the consequences
must be borne by the injured person alone, the law affords no remedy for damages resulting from an act which does not
amount to a legal injury or wrong. These situations are often called damnum absque injuria.[12]
In other words, in order that a plaintiff may maintain an action for the injuries of which he complains, he must
establish that such injuries resulted from a breach of duty which the defendant owed to the plaintiff - a concurrence of
injury to the plaintiff and legal responsibility by the person causing it. The underlying basis for the award of tort damages
is the premise that an individual was injured in contemplation of law. Thus, there must first be a breach of some duty
and the imposition of liability for that breach before damages may be awarded;[13] and the breach of such duty should
be the proximate cause of the injury.
We therefore disagree with the ruling of the respondent court that the dishonor of the credit card of the private
respondent by Caf Adriatico is attributable to petitioner for its willful or gross neglect to inform the private respondent
of the suspension of his credit card, the unfortunate consequence of which brought social humiliation and
embarrassment to the private respondent.[14]
It was petitioner's failure to settle his obligation which caused the suspension of his credit card and subsequent
dishonor at Caf Adriatico. He can not now pass the blame to the petitioner for not notifying him of the suspension of his
card. As quoted earlier, the application contained the stipulation that the petitioner could automatically suspend a card
whose billing has not been paid for more than thirty days.Nowhere is it stated in the terms and conditions of the
application that there is a need of notice before suspension may be effected as private respondent claims.[15]
This notwithstanding, on November 28, 1989, the day of the suspension of private respondent's card, petitioner
sent a letter by ordinary mail notifying private respondent that his card had been temporarily suspended. Under the
Rules on Evidence, there is a disputable presumption that letters duly directed and mailed were received on the regular
course of mail.[16] Aside from the private respondent's bare denial, he failed to present evidence to rebut the
presumption that he received said notice. In fact upon cross examination, private respondent admitted that he did
received the letter notifying him of the cancellation:
Q Now you were saying that there was a first letter sent to you by the defendant?
A Your letter, sir.
Q Was that the first letter that you received?
A Yes, sir.
Q Is it that there was a communication first between you and the defendant?
A There was none, sir. I received a cancellation notice but that was after November 27.[17]
 As it was private respondent's own negligence which was the proximate cause of his embarrassing and humiliating
experience, we find the award of damages by the respondent court clearly unjustified.We take note of the fact that
private respondent has not yet paid his outstanding account with petitioner.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals ordering petitioner to pay private
respondent P100,000.00 as moral damages, P50,000.00 as exemplary damages and P20,000.00 as attorney's fees, is SET
ASIDE. Private respondent is DIRECTED to pay his outstanding obligation with the petitioner in the amount
of P14,439.41.
SO ORDERED.
Narvasa, C.J., (Chairman), and Romero, J., concur.
Purisima, J., no part, being signatory to CA decision.
4. Development Bank of Rizal VS Sima Wei 219

G.R. No. 85419 March 9, 1993

DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,

vs.
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN INDUSTRIAL PLASTIC CORPORATION and
PRODUCERS BANK OF THE PHILIPPINES, defendants-respondents.

Yngson & Associates for petitioner.

Henry A. Reyes & Associates for Samso Tung & Asian Industrial Plastic Corporation.

Eduardo G. Castelo for Sima Wei.

Monsod, Tamargo & Associates for Producers Bank.

Rafael S. Santayana for Mary Cheng Uy.

CAMPOS, JR., J.:

On July 6, 1986, the Development Bank of Rizal (petitioner Bank for brevity) filed a complaint for a sum of money against
respondents Sima Wei and/or Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation (Plastic
Corporation for short) and the Producers Bank of the Philippines, on two causes of action:

(1) To enforce payment of the balance of P1,032,450.02 on a promissory note executed by respondent
Sima Wei on June 9, 1983; and

(2) To enforce payment of two checks executed by Sima Wei, payable to petitioner, and drawn against
the China Banking Corporation, to pay the balance due on the promissory note.

Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging a common ground that the
complaint states no cause of action. The trial court granted the defendants' Motions to Dismiss. The Court of Appeals
affirmed this decision, * to which the petitioner Bank, represented by its Legal Liquidator, filed this Petition for Review
by Certiorari, assigning the following as the alleged errors of the Court of Appeals:1

(1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE PLAINTIFF-PETITIONER HAS NO CAUSE OF
ACTION AGAINST DEFENDANTS-RESPONDENTS HEREIN.

(2) THE COURT OF APPEALS ERRED IN HOLDING THAT SECTION 13, RULE 3 OF THE REVISED RULES OF
COURT ON ALTERNATIVE DEFENDANTS IS NOT APPLICABLE TO HEREIN DEFENDANTS-RESPONDENTS.

The antecedent facts of this case are as follows:

In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the latter executed and delivered to
the former a promissory note, engaging to pay the petitioner Bank or order the amount of P1,820,000.00 on or before
June 24, 1983 with interest at 32% per annum. Sima Wei made partial payments on the note, leaving a balance of
P1,032,450.02. On November 18, 1983, Sima Wei issued two crossed checks payable to petitioner Bank drawn against
China Banking Corporation, bearing respectively the serial numbers 384934, for the amount of P550,000.00 and 384935,
for the amount of P500,000.00. The said checks were allegedly issued in full settlement of the drawer's account
evidenced by the promissory note. These two checks were not delivered to the petitioner-payee or to any of its
authorized representatives. For reasons not shown, these checks came into the possession of respondent Lee Kian Huat,
who deposited the checks without the petitioner-payee's indorsement (forged or otherwise) to the account of
respondent Plastic Corporation, at the Balintawak branch, Caloocan City, of the Producers Bank. Cheng Uy, Branch
Manager of the Balintawak branch of Producers Bank, relying on the assurance of respondent Samson Tung, President of
Plastic Corporation, that the transaction was legal and regular, instructed the cashier of Producers Bank to accept the
checks for deposit and to credit them to the account of said Plastic Corporation, inspite of the fact that the checks were
crossed and payable to petitioner Bank and bore no indorsement of the latter. Hence, petitioner filed the complaint as
aforestated.

The main issue before Us is whether petitioner Bank has a cause of action against any or all of the defendants, in the
alternative or otherwise.
A cause of action is defined as an act or omission of one party in violation of the legal right or rights of another. The
essential elements are: (1) legal right of the plaintiff; (2) correlative obligation of the defendant; and (3) an act or
omission of the defendant in violation of said legal right.2

The normal parties to a check are the drawer, the payee and the drawee bank. Courts have long recognized the business
custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the amount
payable and the drawer's signature. All the drawer has to do when he wishes to issue a check is to properly fill up the
blanks and sign it. However, the mere fact that he has done these does not give rise to any liability on his part, until and
unless the check is delivered to the payee or his representative. A negotiable instrument, of which a check is, is not only
a written evidence of a contract right but is also a species of property. Just as a deed to a piece of land must be delivered
in order to convey title to the grantee, so must a negotiable instrument be delivered to the payee in order to evidence
its existence as a binding contract. Section 16 of the Negotiable Instruments Law, which governs checks, provides in
part:

Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument
for the purpose of giving effect thereto. . . .

Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him.3Delivery of
an instrument means transfer of possession, actual or constructive, from one person to another.4 Without the initial
delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. Moreover, such
delivery must be intended to give effect to the instrument.

The allegations of the petitioner in the original complaint show that the two (2) China Bank checks, numbered 384934
and 384935, were not delivered to the payee, the petitioner herein. Without the delivery of said checks to petitioner-
payee, the former did not acquire any right or interest therein and cannot therefore assert any cause of action, founded
on said checks, whether against the drawer Sima Wei or against the Producers Bank or any of the other respondents.

In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei on the promissory note, and the
alternative defendants, including Sima Wei, on the two checks. On appeal from the orders of dismissal of the Regional
Trial Court, petitioner Bank alleged that its cause of action was not based on collecting the sum of money evidenced by
the negotiable instruments stated but on quasi-delict — a claim for damages on the ground of fraudulent acts and
evident bad faith of the alternative respondents. This was clearly an attempt by the petitioner Bank to change not only
the theory of its case but the basis of his cause of action. It is well-settled that a party cannot change his theory on
appeal, as this would in effect deprive the other party of his day in court.5

Notwithstanding the above, it does not necessarily follow that the drawer Sima Wei is freed from liability to petitioner
Bank under the loan evidenced by the promissory note agreed to by her. Her allegation that she has paid the balance of
her loan with the two checks payable to petitioner Bank has no merit for, as We have earlier explained, these checks
were never delivered to petitioner Bank. And even granting, without admitting, that there was delivery to petitioner
Bank, the delivery of checks in payment of an obligation does not constitute payment unless they are cashed or their
value is impaired through the fault of the creditor.6 None of these exceptions were alleged by respondent Sima Wei.

Therefore, unless respondent Sima Wei proves that she has been relieved from liability on the promissory note by some
other cause, petitioner Bank has a right of action against her for the balance due thereon.

However, insofar as the other respondents are concerned, petitioner Bank has no privity with them. Since petitioner
Bank never received the checks on which it based its action against said respondents, it never owned them (the checks)
nor did it acquire any interest therein. Thus, anything which the respondents may have done with respect to said checks
could not have prejudiced petitioner Bank. It had no right or interest in the checks which could have been violated by
said respondents. Petitioner Bank has therefore no cause of action against said respondents, in the alternative or
otherwise. If at all, it is Sima Wei, the drawer, who would have a cause of action against her
co-respondents, if the allegations in the complaint are found to be true.

With respect to the second assignment of error raised by petitioner Bank regarding the applicability of Section 13, Rule 3
of the Rules of Court, We find it unnecessary to discuss the same in view of Our finding that the petitioner Bank did not
acquire any right or interest in the checks due to lack of delivery. It therefore has no cause of action against the
respondents, in the alternative or otherwise.

In the light of the foregoing, the judgment of the Court of Appeals dismissing the petitioner's complaint is AFFIRMED
insofar as the second cause of action is concerned. On the first cause of action, the case is REMANDED to the trial court
for a trial on the merits, consistent with this decision, in order to determine whether respondent Sima Wei is liable to
the Development Bank of Rizal for any amount under the promissory note allegedly signed by her.
SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Nocon, JJ., concur.

5. CF SHARP & CO., INC. V. NORTHWEST AIRLINES, INC. 381 SCRA 314

FIRST DIVISION

[G.R. No. 133498. April 18, 2002]

C.F. SHARP & CO., INC., petitioner, vs. NORTHWEST AIRLINES, INC., respondent.

DECISION
YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the Rules of Court assailing the February 17, 1997 Decision[1] and the
April 2, 1998 Resolution[2] of the Court of Appeals[3] in CA-G.R. SP No. 40996.
The undisputed facts are as follows:
On May 9, 1974, respondent, through its Japan Branch, entered into an International Passenger Sales Agency
Agreement with petitioner, authorizing the latter to sell its air transport tickets. Petitioner failed to remit the proceeds
of the ticket sales, for which reason, respondent filed a collection suit against petitioner before the Tokyo District Court
which rendered judgment on January 29, 1981, ordering petitioner to pay respondent the amount of 83,158,195 Yen
and damages for the delay at the rate of 6% per annum from August 28, 1980 up to and until payment is
completed.[4] Unable to execute the decision in Japan, respondent filed a case to enforce said foreign judgment with the
Regional Trial Court of Manila, Branch 54.[5] However, the case was dismissed on the ground of failure of the Japanese
Court to acquire jurisdiction over the person of the petitioner. Respondent appealed to the Court of Appeals, which
affirmed the decision of the trial court.
Respondent filed a petition for review with this Court, docketed as G.R. No. 112573. On February 9, 1995, a decision
was rendered, the dispositive portion of which reads:

WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied
NORTHWESTs claims for attorneys fees, litigation expenses, and exemplary damages but REVERSED insofar as it
sustained the trial courts dismissal of NORTHWESTs complaint in Civil Case No. 83-17637 of Branch 54 of the Regional
Trial Court of Manila, and another in its stead is hereby rendered ORDERING private respondent C.F. SHARP &
COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign judgment subject of said case, with interest
thereon at the legal rate from the filing of the complaint therein until the said foreign judgment is fully satisfied.

Costs against the private respondent.

SO ORDERED.[6]

Accordingly, the Regional Trial Court of Manila, Branch 54, issued a writ of execution of the foregoing decision.[7] On
November 22, 1995, the trial court modified its order for the execution of the decision, viz:

WHEREFORE, in view of the foregoing, this Court hereby issues another order, as follows: the writ of execution is issued
against defendant C.F. Sharp ordering said defendant to pay the plaintiff the sum of 83,158,195 Yen at the exchange rate
prevailing on the date of the foreign judgment on January 29, 1981, plus 6% per annum until May 19, 1983; and from
said date until full payment, 12% per annum (6% by way of damages and 6% interest) until the entire obligation is fully
satisfied.

SO ORDERED.[8]

On December 18, 1995, petitioner filed a petition for certiorari under Rule 65, docketed as G.R. No. 122890,
assailing the aforequoted order. On May 29, 1996, the case was referred to the Court of Appeals. Petitioner contended
that it had already made partial payments; hence, it was liable only for the amount of 61,734,633 Yen. Moreover, it
argued that it was not liable to pay additional interest on top of the 6% interest imposed in the foreign judgment.
The Court of Appeals rendered the assailed decision on February 17, 1997. It sustained the imposition of additional
interest on the liability of petitioner as adjudged in the foreign judgment. The appellate court likewise corrected the
reckoning date of the imposition of the interests in accordance with the February 9, 1995 decision to be executed, but
lowered the additional interest from 12% to 6% per annum.Further, it ruled that the basis of the conversion of
petitioners liability in its peso equivalent should be the prevailing rate at the time of payment and not the rate on the
date of the foreign judgment. The dispositive portion of the said decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated October 13, 1995 and November 22, 1995 are
annulled and set aside on the ground that they varied the final judgment of the First Division of the Supreme Court in
G.R. No. 112573, entitled, NORTHWEST ORIENT AIRLINES, INC., Petitioner, versus, COURT OF APPEALS and C. F. SHARP &
COMPANY, INC., Respondents.

Respondent court is enjoined to execute the said final judgment with an unpaid principal balance of Y61,734,633 plus
damages for delay at the rate of 6% per annum from August 28, 1980, until fully paid, which may be paid in local
currency based on the conversion rate prevailing at the time of payment; plus 6% legal interest per annum from August
28, 1980, the date of the filing of the complaint in the foreign judgment.

No costs.

SO ORDERED.[9]

On April 2, 1998, the Court of Appeals denied both the motion for reconsideration and the partial motion for
reconsideration filed by petitioner and respondent, respectively.
In the present recourse, petitioner questions the applicable conversion rate of its liability, and claims that a ruling
thereon by the Court of Appeals effectively deprived it of due process of law because said rate was not among the issues
submitted for resolution.
The petition is without merit.
In ruling that the applicable conversion rate of petitioners liability is the rate at the time of payment, the Court of
Appeals cited the case of Zagala v. Jimenez,[10] interpreting the provisions of Republic Act No. 529, as amended by R.A.
No. 4100. Under this law, stipulations on the satisfaction of obligations in foreign currency are void. Payments of
monetary obligations, subject to certain exceptions, shall be discharged in the currency which is the legal tender in the
Philippines. But since R.A. No. 529 does not provide for the rate of exchange for the payment of foreign currency
obligations incurred after its enactment, the Court held in a number of cases[11] that the rate of exchange for the
conversion in the peso equivalent should be the prevailing rate at the time of payment.
Petitioner, however, contends that with the repeal of R.A. No. 529 by R.A. No. 8183,[12] the jurisprudence relied
upon by the Court of Appeals is no longer applicable.
Republic Act No. 529, as amended by R.A. No. 4100, provides:

SECTION 1. Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation
contracted in the Philippines which provision purports to give the obligee the right to require payment in gold or in a
particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured
thereby, be as it is hereby declared against public policy, and null, void, and of no effect, and no such provision shall be
contained in, or made with respect to, any obligation hereafter incurred. The above prohibition shall not apply to (a)
transactions where the funds involved are the proceeds of loans or investments made directly or indirectly, through
bona fide intermediaries or agents, by foreign governments, their agencies and instrumentalities, and international
financial banking institutions so long as the funds are identifiable, as having emanated from the sources enumerated
above; b) transactions affecting high-priority economic projects for agricultural, industrial and power development as
may be determined by the National Economic Council which are financed by or through foreign funds; (c) forward
exchange transactions entered into between banks or between banks and individuals or juridical persons; (d) import-
export and other international banking, financial investment and industrial transactions. With the exception of the cases
enumerated in items (a), (b), (c) and (d) in the foregoing provision, in which cases the terms of the parties agreement
shall apply, every other domestic obligation heretofore or hereafter incurred, whether or not any such provision as to
payment is contained therein or made with respect thereto, shall be discharged upon payment in any coin or currency
which at the time of payment is legal tender for public and private debts: Provided, That if the obligation was incurred
prior to the enactment of this Act and required payment in a particular kind of coin or currency other than Philippine
currency, it shall be discharged in Philippine currency, measured at the prevailing rates of exchange at the time the
obligation was incurred, except in case of a loan made in a foreign currency stipulated to be payable in the same
currency in which case the rate of exchange prevailing at the time of the stipulated date of payment shall prevail. All
coin and currency, including Central Bank notes, heretofore or hereafter issued and declared by the Government of the
Philippines shall be legal tender for all debts, public and private.

Pertinent portion of Republic Act No. 8183 states:

SECTION 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in the
Philippines. However, the parties may agree that the obligation or transaction shall be settled in any other currency at
the time of payment.
SEC. 2. Republic Act Numbered Five Hundred and Twenty-Nine (R.A. No. 529), as amended, entitled An Act to Assure the
Uniform Value of Philippine Coin and Currency is hereby repealed.

The repeal of R.A. No. 529 by R.A. No. 8183 has the effect of removing the prohibition on the stipulation of currency
other than Philippine currency, such that obligations or transactions may now be paid in the currency agreed upon by
the parties. Just like R.A. No. 529, however, the new law does not provide for the applicable rate of exchange for the
conversion of foreign currency-incurred obligations in their peso equivalent. It follows, therefore, that the jurisprudence
established in R.A. No. 529 regarding the rate of conversion remains applicable. Thus, in Asia World Recruitment, Inc. v.
National Labor Relations Commission,[13] the Court, applying R.A. No. 8183, sustained the ruling of the NLRC that
obligations in foreign currency may be discharged in Philippine currency based on the prevailing rate at the time of
payment. The wisdom on which the jurisprudence interpreting R.A. No. 529 is based equally holds true with R.A. No.
8183. Verily, it is just and fair to preserve the real value of the foreign exchange- incurred obligation to the date of its
payment.[14]
We find no denial of due process in the instant case. Contrary to the argument of petitioner, the matter of the
applicable conversion rate was one of the issues submitted for resolution before the Court of Appeals. Moreover,
opportunity to be heard, which is the very essence of due process, was afforded petitioner when it filed a motion for
reconsideration of the Court of Appeals decision.
Petitioners contention that it is Article 1250[15] of the Civil Code that should be applied is untenable. The rule that
the value of the currency at the time of the establishment of the obligation shall be the basis of payment finds
application only when there is an official pronouncement or declaration of the existence of an extraordinary inflation or
deflation.[16]
For its part, respondent prays for the modification of the Court of Appeals award of interest. While as a general
rule, a party who has not appealed is not entitled to affirmative relief other than what was granted in the decision of the
court below, law and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1)
errors affecting the lower courts jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical
errors.[17]
In the case at bar, the Court of Appeals failure to apply the correct legal rate of interest, to which respondent is
lawfully entitled, amounts to a plain error. In Eastern Shipping Lines, Inc. v. Court of Appeals,[18] it was held that absent
any stipulation, the legal rate of interest in obligations which consists in the payment of a sum of money, as in the
present case, is 12% per annum. As stated in the decision of the Court in G.R. No. 112573, which is final and executory,
petitioner is liable to pay respondent the amount adjudged in the foreign judgment, with interest thereon at the legal
rate [12% per annum] from the filing of the complaint therein [on August 28, 1980] until the said foreign judgment is
fully satisfied. Since petitioner already made partial payments, his obligation was reduced to 61,734,633 Yen. Thus,
petitioner should pay respondent the amount of 61,734,633 Yen plus damages for the delay at the rate of 6% per
annum from August 28, 1980 up to and until payment is completed, with interest thereon at the rate of 12% per
annum from the filing of the complaint on August 28, 1980, until fully satisfied.
The Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it
finds that their consideration is necessary in arriving at a just decision of the case. Rules of procedure are mere tools
designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that
tend to frustrate rather than promote substantial justice, must be avoided. Hence, substantive rights, like the applicable
legal rate of interest on petitioners long due and demandable obligation, must not be prejudiced by a rigid and technical
application of the rules.[19]
WHEREFORE, in view of all the foregoing, the instant petition is DENIED. The February 17, 1997 decision and the
April 2, 1998 resolution of the Court of Appeals in CA-G.R. SP No. 40996 are AFFIRMED with MODIFICATION. Petitioner is
directed to pay respondent 61,734,633 Yen plus damages for the delay at the rate of 6% per annum from August 28,
1980 up to and until payment is completed, with interest at the rate of 12% per annum counted from the date of filing of
the complaint on August 28, 1980, until fully satisfied. Petitioners liability may be paid in Philippine currency, computed
at the exchange rate prevailing at the time of payment.
SO ORDERED.
Puno, and Sandoval-Gutierrez, JJ., concur.
Davide, Jr., C.J., (Chairman), Kapunan, and Austria-Martinez, JJ., on official leave.
6. TIBAJIA VS 223 SCRA 163

G.R. No. 100290 June 4, 1993

NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA, petitioners,

vs.
THE HONORABLE COURT OF APPEALS and EDEN TAN, respondents.

PADILLA, J.:

Petitioners, spouses Norberto Tibajia, Jr. and Carmen Tibajia, are before this Court assailing the decision * of respondent
appellate court dated 24 April 1991 in CA-G.R. SP No. 24164 denying their petition for certiorari prohibition, and
injunction which sought to annul the order of Judge Eutropio Migriño of the Regional Trial Court, Branch 151, Pasig,
Metro Manila in Civil Case No. 54863 entitled "Eden Tan vs. Sps. Norberto and Carmen Tibajia."

Stated briefly, the relevant facts are as follows:

Case No. 54863 was a suit for collection of a sum of money filed by Eden Tan against the Tibajia spouses. A writ of
attachment was issued by the trial court on 17 August 1987 and on 17 September 1987, the Deputy Sheriff filed a return
stating that a deposit made by the Tibajia spouses in the Regional Trial Court of Kalookan City in the amount of Four
Hundred Forty Two Thousand Seven Hundred and Fifty Pesos (P442,750.00) in another case, had been garnished by him.
On 10 March 1988, the Regional Trial Court, Branch 151 of Pasig, Metro Manila rendered its decision in Civil Case No.
54863 in favor of the plaintiff Eden Tan, ordering the Tibajia spouses to pay her an amount in excess of Three Hundred
Thousand Pesos (P300,000.00). On appeal, the Court of Appeals modified the decision by reducing the award of moral
and exemplary damages. The decision having become final, Eden Tan filed the corresponding motion for execution and
thereafter, the garnished funds which by then were on deposit with the cashier of the Regional Trial Court of Pasig,
Metro Manila, were levied upon.

On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff Eduardo Bolima the total money judgment in the
following form:

Cashier's Check P262,750.00

Cash 135,733.70
————
Total P398,483.70

Private respondent, Eden Tan, refused to accept the payment made by the Tibajia spouses and instead insisted that the
garnished funds deposited with the cashier of the Regional Trial Court of Pasig, Metro Manila be withdrawn to satisfy
the judgment obligation. On 15 January 1991, defendant spouses (petitioners) filed a motion to lift the writ of execution
on the ground that the judgment debt had already been paid. On 29 January 1991, the motion was denied by the trial
court on the ground that payment in cashier's check is not payment in legal tender and that payment was made by a
third party other than the defendant. A motion for reconsideration was denied on 8 February 1991. Thereafter, the
spouses Tibajia filed a petition for certiorari, prohibition and injunction in the Court of Appeals. The appellate court
dismissed the petition on 24 April 1991 holding that payment by cashier's check is not payment in legal tender as
required by Republic Act No. 529. The motion for reconsideration was denied on 27 May 1991.

In this petition for review, the Tibajia spouses raise the following issues:

I WHETHER OR NOT THE BPI CASHIER'S CHECK NO. 014021 IN THE AMOUNT OF P262,750.00 TENDERED BY PETITIONERS
FOR PAYMENT OF THE JUDGMENT DEBT, IS "LEGAL TENDER".

II WHETHER OR NOT THE PRIVATE RESPONDENT MAY VALIDLY REFUSE THE TENDER OF PAYMENT PARTLY IN CHECK AND
PARTLY IN CASH MADE BY PETITIONERS, THRU AURORA VITO AND COUNSEL, FOR THE SATISFACTION OF THE MONETARY
OBLIGATION OF PETITIONERS-SPOUSES.1

The only issue to be resolved in this case is whether or not payment by means of check (even by cashier's check) is
considered payment in legal tender as required by the Civil Code, Republic Act No. 529, and the Central Bank Act.
It is contended by the petitioners that the check, which was a cashier's check of the Bank of the Philippine Islands,
undoubtedly a bank of good standing and reputation, and which was a crossed check marked "For Payee's Account
Only" and payable to private respondent Eden Tan, is considered legal tender, payment with which operates to
discharge their monetary obligation.2 Petitioners, to support their contention, cite the case of New Pacific Timber and
Supply Co., Inc. v. Señeris3 where this Court held through Mr. Justice Hermogenes Concepcion, Jr. that "It is a well-known
and accepted practice in the business sector that a cashier's check is deemed as cash".

The provisions of law applicable to the case at bar are the following:

a. Article 1249 of the Civil Code which provides:

Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such
currency, then in the currency which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the
effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

In the meantime, the action derived from the original obligation shall be held in abeyance.;

b. Section 1 of Republic Act No. 529, as amended, which provides:

Sec. 1. Every provision contained in, or made with respect to, any obligation which purports to give the obligee the right
to require payment in gold or in any particular kind of coin or currency other than Philippine currency or in an amount of
money of the Philippines measured thereby, shall be as it is hereby declared against public policy null and void, and of no
effect, and no such provision shall be contained in, or made with respect to, any obligation thereafter incurred. Every
obligation heretofore and hereafter incurred, whether or not any such provision as to payment is contained therein or
made with respect thereto, shall be discharged upon payment in any coin or currency which at the time of payment is
legal tender for public and private debts.

c. Section 63 of Republic Act No. 265, as amended (Central Bank Act) which provides:

Sec. 63. Legal character — Checks representing deposit money do not have legal tender power and their acceptance in
the payment of debts, both public and private, is at the option of the creditor: Provided, however, that a check which has
been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an
amount equal to the amount credited to his account.

From the aforequoted provisions of law, it is clear that this petition must fail.

In the recent cases of Philippine Airlines, Inc. vs. Court of Appeals4 and Roman Catholic Bishop of Malolos, Inc. vs.
Intermediate Appellate Court,5 this Court held that —

A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in
payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or
creditor.

The ruling in these two (2) cases merely applies the statutory provisions which lay down the rule that a check is not legal
tender and that a creditor may validly refuse payment by check, whether it be a manager's, cashier's or personal check.

Petitioners erroneously rely on one of the dissenting opinions in the Philippine Airlines case6 to support their cause. The
dissenting opinion however does not in any way support the contention that a check is legal tender but, on the contrary,
states that "If the PAL checks in question had not been encashed by Sheriff Reyes, there would be no payment by PAL
and, consequently, no discharge or satisfaction of its judgment obligation."7 Moreover, the circumstances in
the Philippine Airlines case are quite different from those in the case at bar for in that case the checks issued by the
judgment debtor were made payable to the sheriff, Emilio Z. Reyes, who encashed the checks but failed to deliver the
proceeds of said encashment to the judgment creditor.

In the more recent case of Fortunado vs. Court of Appeals,8 this Court stressed that, "We are not, by this decision,
sanctioning the use of a check for the payment of obligations over the objection of the creditor."

WHEREFORE, the petition is DENIED. The appealed decision is hereby AFFIRMED, with costs against the petitioners.

SO ORDERED.
Narvasa, C.J., Regalado and Nocon, JJ., concur.
7. CALTEX VS CA 12 SCRA 448

G.R. No. 97753 August 10, 1992

CALTEX (PHILIPPINES), INC., petitioner,
vs.
COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.
Bito, Lozada, Ortega & Castillo for petitioners.
Nepomuceno, Hofileña & Guingona for private.

DECISION
REGALADO, J.:
This petition for review on certiorari impugns and seeks the reversal of the decision promulgated by respondent court
on March 8, 1991 in CA-G.R. CV No. 23615 1 affirming with modifications, the earlier decision of the Regional Trial Court
of Manila, Branch XLII, 2 which dismissed the complaint filed therein by herein petitioner against respondent bank.
The undisputed background of this case, as found by the court a quo and adopted by respondent court, appears of
record:
1. On various dates, defendant, a commercial banking institution, through its Sucat Branch issued 280 certificates of
time deposit (CTDs) in favor of one Angel dela Cruz who deposited with herein defendant the aggregate amount of
P1,120,000.00, as follows: (Joint Partial Stipulation of Facts and Statement of Issues, Original Records, p. 207;
Defendant’s Exhibits 1 to 280);
CTD CTD
Dates Serial Nos. Quantity Amount
22 Feb. 82 90101 to 90120 20 P80,000
26 Feb. 82 74602 to 74691 90 360,000
2 Mar. 82 74701 to 74740 40 160,000
4 Mar. 82 90127 to 90146 20 80,000
5 Mar. 82 74797 to 94800 4 16,000
5 Mar. 82 89965 to 89986 22 88,000
5 Mar. 82 70147 to 90150 4 16,000
8 Mar. 82 90001 to 90020 20 80,000
9 Mar. 82 90023 to 90050 28 112,000
9 Mar. 82 89991 to 90000 10 40,000
9 Mar. 82 90251 to 90272 22 88,000
——— ————
Total 280 P1,120,000
===== ========
2. Angel dela Cruz delivered the said certificates of time (CTDs) to herein plaintiff in connection with his purchased of
fuel products from the latter (Original Record, p. 208).
3. Sometime in March 1982, Angel dela Cruz informed Mr. Timoteo Tiangco, the Sucat Branch Manger, that he lost all
the certificates of time deposit in dispute. Mr. Tiangco advised said depositor to execute and submit a notarized
Affidavit of Loss, as required by defendant bank’s procedure, if he desired replacement of said lost CTDs (TSN, February
9, 1987, pp. 48-50).
4. On March 18, 1982, Angel dela Cruz executed and delivered to defendant bank the required Affidavit of Loss
(Defendant’s Exhibit 281). On the basis of said affidavit of loss, 280 replacement CTDs were issued in favor of said
depositor (Defendant’s Exhibits 282-561).
5. On March 25, 1982, Angel dela Cruz negotiated and obtained a loan from defendant bank in the amount of Eight
Hundred Seventy Five Thousand Pesos (P875,000.00). On the same date, said depositor executed a notarized Deed of
Assignment of Time Deposit (Exhibit 562) which stated, among others, that he (de la Cruz) surrenders to defendant bank
“full control of the indicated time deposits from and after date” of the assignment and further authorizes said bank to
pre-terminate, set-off and “apply the said time deposits to the payment of whatever amount or amounts may be due”
on the loan upon its maturity (TSN, February 9, 1987, pp. 60-62).
6. Sometime in November, 1982, Mr. Aranas, Credit Manager of plaintiff Caltex (Phils.) Inc., went to the defendant
bank’s Sucat branch and presented for verification the CTDs declared lost by Angel dela Cruz alleging that the same were
delivered to herein plaintiff “as security for purchases made with Caltex Philippines, Inc.” by said depositor (TSN,
February 9, 1987, pp. 54-68).
7. On November 26, 1982, defendant received a letter (Defendant’s Exhibit 563) from herein plaintiff formally informing
it of its possession of the CTDs in question and of its decision to pre-terminate the same.
8. On December 8, 1982, plaintiff was requested by herein defendant to furnish the former “a copy of the document
evidencing the guarantee agreement with Mr. Angel dela Cruz” as well as “the details of Mr. Angel dela Cruz” obligation
against which plaintiff proposed to apply the time deposits (Defendant’s Exhibit 564).
9. No copy of the requested documents was furnished herein defendant.
10. Accordingly, defendant bank rejected the plaintiff’s demand and claim for payment of the value of the CTDs in a
letter dated February 7, 1983 (Defendant’s Exhibit 566).
11. In April 1983, the loan of Angel dela Cruz with the defendant bank matured and fell due and on August 5, 1983, the
latter set-off and applied the time deposits in question to the payment of the matured loan (TSN, February 9, 1987, pp.
130-131).
12. In view of the foregoing, plaintiff filed the instant complaint, praying that defendant bank be ordered to pay it the
aggregate value of the certificates of time deposit of P1,120,000.00 plus accrued interest and compounded interest
therein at 16%per annum, moral and exemplary damages as well as attorney’s fees.
After trial, the court a quo rendered its decision dismissing the instant complaint. 3
On appeal, as earlier stated, respondent court affirmed the lower court’s dismissal of the complaint, hence this petition
wherein petitioner faults respondent court in ruling (1) that the subject certificates of deposit are non-negotiable
despite being clearly negotiable instruments; (2) that petitioner did not become a holder in due course of the said
certificates of deposit; and (3) in disregarding the pertinent provisions of the Code of Commerce relating to lost
instruments payable to bearer. 4
The instant petition is bereft of merit.
A sample text of the certificates of time deposit is reproduced below to provide a better understanding of the issues
involved in this recourse.
SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR THOUSAND ONLY, SECURITY BANK
SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine Currency, repayable to said depositor 731 days. after date, upon
presentation and surrender of this certificate, with interest at the rate of 16% per cent per annum.
(Sgd. Illegible) (Sgd. Illegible)
—————————— ———————————
AUTHORIZED SIGNATURES 5
Respondent court ruled that the CTDs in question are non-negotiable instruments, nationalizing as follows:
. . . While it may be true that the word “bearer” appears rather boldly in the CTDs issued, it is important to note that
after the word “BEARER” stamped on the space provided supposedly for the name of the depositor, the words “has
deposited” a certain amount follows. The document further provides that the amount deposited shall be “repayable to
said depositor” on the period indicated. Therefore, the text of the instrument(s) themselves manifest with clarity that
they are payable, not to whoever purports to be the “bearer” but only to the specified person indicated therein, the
depositor. In effect, the appellee bank acknowledges its depositor Angel dela Cruz as the person who made the deposit
and further engages itself to pay said depositor the amount indicated thereon at the stipulated date. 6
We disagree with these findings and conclusions, and hereby hold that the CTDs in question are negotiable instruments.
Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites for an
instrument to become negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable
certainty.
The CTDs in question undoubtedly meet the requirements of the law for negotiability. The parties’ bone of contention is
with regard to requisite (d) set forth above. It is noted that Mr. Timoteo P. Tiangco, Security Bank’s Branch Manager way
back in 1982, testified in open court that the depositor reffered to in the CTDs is no other than Mr. Angel de la Cruz.
xxx xxx xxx
Atty. Calida:
q In other words Mr. Witness, you are saying that per books of the bank, the depositor referred (sic) in these certificates
states that it was Angel dela Cruz?
witness:
a Yes, your Honor, and we have the record to show that Angel dela Cruz was the one who cause (sic) the amount.
Atty. Calida:
q And no other person or entity or company, Mr. Witness?
witness:
a None, your Honor. 7
xxx xxx xxx
Atty. Calida:
q Mr. Witness, who is the depositor identified in all of these certificates of time deposit insofar as the bank is
concerned?
witness:
a Angel dela Cruz is the depositor. 8
xxx xxx xxx
On this score, the accepted rule is that the negotiability or non-negotiability of an instrument is determined from the
writing, that is, from the face of the instrument itself. 9 In the construction of a bill or note, the intention of the parties is
to control, if it can be legally ascertained. 10 While the writing may be read in the light of surrounding circumstances in
order to more perfectly understand the intent and meaning of the parties, yet as they have constituted the writing to be
the only outward and visible expression of their meaning, no other words are to be added to it or substituted in its
stead. The duty of the court in such case is to ascertain, not what the parties may have secretly intended as
contradistinguished from what their words express, but what is the meaning of the words they have used. What the
parties meant must be determined by what they said. 11
Contrary to what respondent court held, the CTDs are negotiable instruments. The documents provide that the amounts
deposited shall be repayable to the depositor. And who, according to the document, is the depositor? It is the “bearer.”
The documents do not say that the depositor is Angel de la Cruz and that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be repayable to the bearer of the documents or, for that matter,
whosoever may be the bearer at the time of presentment.
If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so
expressed that fact in clear and categorical terms in the documents, instead of having the word “BEARER” stamped on
the space provided for the name of the depositor in each CTD. On the wordings of the documents, therefore, the
amounts deposited are repayable to whoever may be the bearer thereof. Thus, petitioner’s aforesaid witness merely
declared that Angel de la Cruz is the depositor “insofar as the bank is concerned,” but obviously other parties not privy
to the transaction between them would not be in a position to know that the depositor is not the bearer stated in the
CTDs. Hence, the situation would require any party dealing with the CTDs to go behind the plain import of what is
written thereon to unravel the agreement of the parties thereto through facts aliunde. This need for resort to extrinsic
evidence is what is sought to be avoided by the Negotiable Instruments Law and calls for the application of the
elementary rule that the interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity. 12
The next query is whether petitioner can rightfully recover on the CTDs. This time, the answer is in the negative. The
records reveal that Angel de la Cruz, whom petitioner chose not to implead in this suit for reasons of its own, delivered
the CTDs amounting to P1,120,000.00 to petitioner without informing respondent bank thereof at any time.
Unfortunately for petitioner, although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose
and agreement between it and De la Cruz, as ultimately ascertained, requires both delivery and indorsement. For,
although petitioner seeks to deflect this fact, the CTDs were in reality delivered to it as a security for De la Cruz’
purchases of its fuel products. Any doubt as to whether the CTDs were delivered as payment for the fuel products or as
a security has been dissipated and resolved in favor of the latter by petitioner’s own authorized and responsible
representative himself.
In a letter dated November 26, 1982 addressed to respondent Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager,
wrote: “. . . These certificates of deposit were negotiated to us by Mr. Angel dela Cruz to guarantee his purchases of fuel
products” (Emphasis ours.) 13 This admission is conclusive upon petitioner, its protestations notwithstanding. Under the
doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon. 14 A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon them. 15 In the law of evidence, whenever a party
has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true,
and to act upon such belief, he cannot, in any litigation arising out of such declaration, act, or omission, be permitted to
falsify it. 16
If it were true that the CTDs were delivered as payment and not as security, petitioner’s credit manager could have
easily said so, instead of using the words “to guarantee” in the letter aforequoted. Besides, when respondent bank, as
defendant in the court below, moved for a bill of particularity therein 17 praying, among others, that petitioner, as
plaintiff, be required to aver with sufficient definiteness or particularity (a) the due date or dates of payment of the
alleged indebtedness of Angel de la Cruz to plaintiff and (b) whether or not it issued a receipt showing that the CTDs
were delivered to it by De la Cruz as payment of the latter’s alleged indebtedness to it, plaintiff corporation opposed the
motion. 18 Had it produced the receipt prayed for, it could have proved, if such truly was the fact, that the CTDs were
delivered as payment and not as security. Having opposed the motion, petitioner now labors under the presumption
that evidence willfully suppressed would be adverse if produced. 19
Under the foregoing circumstances, this disquisition in Intergrated Realty Corporation, et al. vs. Philippine National Bank,
et al. 20 is apropos:
. . . Adverting again to the Court’s pronouncements in Lopez, supra, we quote therefrom:
The character of the transaction between the parties is to be determined by their intention, regardless of what language
was used or what the form of the transfer was. If it was intended to secure the payment of money, it must be construed
as a pledge; but if there was some other intention, it is not a pledge. However, even though a transfer, if regarded by
itself, appears to have been absolute, its object and character might still be qualified and explained by contemporaneous
writing declaring it to have been a deposit of the property as collateral security. It has been said that a transfer of
property by the debtor to a creditor, even if sufficient on its face to make an absolute conveyance, should be treated as
a pledge if the debt continues in inexistence and is not discharged by the transfer, and that accordingly the use of the
terms ordinarily importing conveyance of absolute ownership will not be given that effect in such a transaction if they
are also commonly used in pledges and mortgages and therefore do not unqualifiedly indicate a transfer of absolute
ownership, in the absence of clear and unambiguous language or other circumstances excluding an intent to pledge.
Petitioner’s insistence that the CTDs were negotiated to it begs the question. Under the Negotiable Instruments Law, an
instrument is negotiated when it is transferred from one person to another in such a manner as to constitute the
transferee the holder thereof, 21 and a holder may be the payee or indorsee of a bill or note, who is in possession of it, or
the bearer thereof. 22 In the present case, however, there was no negotiation in the sense of a transfer of the legal title
to the CTDs in favor of petitioner in which situation, for obvious reasons, mere delivery of the bearer CTDs would have
sufficed. Here, the delivery thereof only as security for the purchases of Angel de la Cruz (and we even disregard the fact
that the amount involved was not disclosed) could at the most constitute petitioner only as a holder for value by reason
of his lien. Accordingly, a negotiation for such purpose cannot be effected by mere delivery of the instrument since,
necessarily, the terms thereof and the subsequent disposition of such security, in the event of non-payment of the
principal obligation, must be contractually provided for.
The pertinent law on this point is that where the holder has a lien on the instrument arising from contract, he is deemed
a holder for value to the extent of his lien. 23 As such holder of collateral security, he would be a pledgee but the
requirements therefor and the effects thereof, not being provided for by the Negotiable Instruments Law, shall be
governed by the Civil Code provisions on pledge of incorporeal rights, 24 which inceptively provide:
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged. The instrument proving the
right pledged shall be delivered to the creditor, and if negotiable, must be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the thing pledged and the date of the
pledge do not appear in a public instrument.
Aside from the fact that the CTDs were only delivered but not indorsed, the factual findings of respondent court quoted
at the start of this opinion show that petitioner failed to produce any document evidencing any contract of pledge or
guarantee agreement between it and Angel de la Cruz. 25 Consequently, the mere delivery of the CTDs did not legally
vest in petitioner any right effective against and binding upon respondent bank. The requirement under Article 2096
aforementioned is not a mere rule of adjective law prescribing the mode whereby proof may be made of the date of a
pledge contract, but a rule of substantive law prescribing a condition without which the execution of a pledge contract
cannot affect third persons adversely. 26
On the other hand, the assignment of the CTDs made by Angel de la Cruz in favor of respondent bank was embodied in a
public instrument. 27 With regard to this other mode of transfer, the Civil Code specifically declares:
Art. 1625. An assignment of credit, right or action shall produce no effect as against third persons, unless it appears in a
public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real
property.
Respondent bank duly complied with this statutory requirement. Contrarily, petitioner, whether as purchaser, assignee
or lien holder of the CTDs, neither proved the amount of its credit or the extent of its lien nor the execution of any public
instrument which could affect or bind private respondent. Necessarily, therefore, as between petitioner and respondent
bank, the latter has definitely the better right over the CTDs in question.
Finally, petitioner faults respondent court for refusing to delve into the question of whether or not private respondent
observed the requirements of the law in the case of lost negotiable instruments and the issuance of replacement
certificates therefor, on the ground that petitioner failed to raised that issue in the lower court. 28
On this matter, we uphold respondent court’s finding that the aspect of alleged negligence of private respondent was
not included in the stipulation of the parties and in the statement of issues submitted by them to the trial court. 29 The
issues agreed upon by them for resolution in this case are:
1. Whether or not the CTDs as worded are negotiable instruments.
2. Whether or not defendant could legally apply the amount covered by the CTDs against the depositor’s loan by virtue
of the assignment (Annex “C”).
3. Whether or not there was legal compensation or set off involving the amount covered by the CTDs and the
depositor’s outstanding account with defendant, if any.
4. Whether or not plaintiff could compel defendant to preterminate the CTDs before the maturity date provided therein.
5. Whether or not plaintiff is entitled to the proceeds of the CTDs.
6. Whether or not the parties can recover damages, attorney’s fees and litigation expenses from each other.
As respondent court correctly observed, with appropriate citation of some doctrinal authorities, the foregoing
enumeration does not include the issue of negligence on the part of respondent bank. An issue raised for the first time
on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. 30 Questions raised on
appeal must be within the issues framed by the parties and, consequently, issues not raised in the trial court cannot be
raised for the first time on appeal. 31
Pre-trial is primarily intended to make certain that all issues necessary to the disposition of a case are properly raised.
Thus, to obviate the element of surprise, parties are expected to disclose at a pre-trial conference all issues of law and
fact which they intend to raise at the trial, except such as may involve privileged or impeaching matters. The
determination of issues at a pre-trial conference bars the consideration of other questions on appeal. 32
To accept petitioner’s suggestion that respondent bank’s supposed negligence may be considered encompassed by the
issues on its right to preterminate and receive the proceeds of the CTDs would be tantamount to saying that petitioner
could raise on appeal any issue. We agree with private respondent that the broad ultimate issue of petitioner’s
entitlement to the proceeds of the questioned certificates can be premised on a multitude of other legal reasons and
causes of action, of which respondent bank’s supposed negligence is only one. Hence, petitioner’s submission, if
accepted, would render a pre-trial delimitation of issues a useless exercise. 33
Still, even assuming arguendo that said issue of negligence was raised in the court below, petitioner still cannot have the
odds in its favor. A close scrutiny of the provisions of the Code of Commerce laying down the rules to be followed in case
of lost instruments payable to bearer, which it invokes, will reveal that said provisions, even assuming their applicability
to the CTDs in the case at bar, are merely permissive and not mandatory. The very first article cited by petitioner speaks
for itself.
Art 548. The dispossessed owner, no matter for what cause it may be, may apply to the judge or court of competent
jurisdiction, asking that the principal, interest or dividends due or about to become due, be not paid a third person, as
well as in order to prevent the ownership of the instrument that a duplicate be issued him. (Emphasis ours.)
xxx xxx xxx
The use of the word “may” in said provision shows that it is not mandatory but discretionary on the part of the
“dispossessed owner” to apply to the judge or court of competent jurisdiction for the issuance of a duplicate of the lost
instrument. Where the provision reads “may,” this word shows that it is not mandatory but discretional. 34 The word
“may” is usually permissive, not mandatory. 35 It is an auxiliary verb indicating liberty, opportunity, permission and
possibility. 36
Moreover, as correctly analyzed by private respondent, 37 Articles 548 to 558 of the Code of Commerce, on which
petitioner seeks to anchor respondent bank’s supposed negligence, merely established, on the one hand, a right of
recourse in favor of a dispossessed owner or holder of a bearer instrument so that he may obtain a duplicate of the
same, and, on the other, an option in favor of the party liable thereon who, for some valid ground, may elect to refuse
to issue a replacement of the instrument. Significantly, none of the provisions cited by petitioner categorically restricts
or prohibits the issuance a duplicate or replacement instrument sans compliance with the procedure outlined therein,
and none establishes a mandatory precedent requirement therefor.
WHEREFORE, on the modified premises above set forth, the petition is DENIED and the appealed decision is
hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Padilla and Nocon, JJ., concur.
8. TRADERS ROYAL TRADE VS CA 269 SCRA 15

G.R. No. 93397 March 3, 1997

TRADERS ROYAL BANK, petitioner,

vs.
COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the
PHILIPPINES, respondents.

TORRES, JR., J.:

Assailed in this Petition for Review on Certiorari is the Decision of the respondent Court of Appeals dated January 29,
1990,1 affirming the nullity of the transfer of Central Bank Certificate of Indebtedness (CBCI) No. D891,2 with a face value
of P500,000.00, from the Philippine Underwriters Finance Corporation (Philfinance) to the petitioner Trader's Royal Bank
(TRB), under a Repurchase Agreement3 dated February 4, 1981, and a Detached Assignment4dated April 27, 1981.

Docketed as Civil Case No. 83-17966 in the Regional Trial Court of Manila, Branch 32, the action was originally filed as a
Petition for Mandamus5 under Rule 65 of the Rules of Court, to compel the Central Bank of the Philippines to register
the transfer of the subject CBCI to petitioner Traders Royal Bank (TRB).

In the said petition, TRB stated that:

3. On November 27, 1979, Filriters Guaranty Assurance Corporation (Filriters) executed a "Detached
Assignment" . . ., whereby Filriters, as registered owner, sold, transferred, assigned and delivered unto
Philippine Underwriters Finance Corporation (Philfinance) all its rights and title to Central Bank
Certificates of Indebtedness of PESOS: FIVE HUNDRED THOUSAND (P500,000) and having an aggregate
value of PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00);

4. The aforesaid Detached Assignment (Annex "A") contains an express authorization executed by the
transferor intended to complete the assignment through the registration of the transfer in the name of
PhilFinance, which authorization is specifically phrased as follows: '(Filriters) hereby irrevocably
authorized the said issuer (Central Bank) to transfer the said bond/certificates on the books of its fiscal
agent;

5. On February 4, 1981, petitioner entered into a Repurchase Agreement with PhilFinance . . ., whereby,
for and in consideration of the sum of PESOS: FIVE HUNDRED THOUSAND (P500,000.00), PhilFinance
sold, transferred and delivered to petitioner CBCI 4-year, 8th series, Serial No. D891 with a face value of
P500,000.00 . . ., which CBCI was among those previously acquired by PhilFinance from Filriters as
averred in paragraph 3 of the Petition;

6. Pursuant to the aforesaid Repurchase Agreement (Annex "B"), Philfinance agreed to repurchase CBCI
Serial No. D891 (Annex "C"), at the stipulated price of PESOS: FIVE HUNDRED NINETEEN THOUSAND
THREE HUNDRED SIXTY-ONE & 11/100 (P519,361.11) on April 27, 1981;

7. PhilFinance failed to repurchase the CBCI on the agreed date of maturity, April 27, 1981, when the
checks it issued in favor of petitioner were dishonored for insufficient funds;

8. Owing to the default of PhilFinance, it executed a Detached Assignment in favor of the Petitioner to
enable the latter to have its title completed and registered in the books of the respondent. And by
means of said Detachment, Philfinance transferred and assigned all, its rights and title in the said CBCI
(Annex "C") to petitioner and, furthermore, it did thereby "irrevocably authorize the said issuer
(respondent herein) to transfer the said bond/certificate on the books of its fiscal agent." . . .

9. Petitioner presented the CBCI (Annex "C"), together with the two (2) aforementioned Detached
Assignments (Annexes "B" and "D"), to the Securities Servicing Department of the respondent, and
requested the latter to effect the transfer of the CBCI on its books and to issue a new certificate in the
name of petitioner as absolute owner thereof;

10. Respondent failed and refused to register the transfer as requested, and continues to do so
notwithstanding petitioner's valid and just title over the same and despite repeated demands in writing,
the latest of which is hereto attached as Annex "E" and made an integral part hereof;
 11. The express provisions governing the transfer of the CBCI were substantially complied with the
petitioner's request for registration, to wit:

"No transfer thereof shall be valid unless made at said office (where the Certificate has
been registered) by the registered owner hereof, in person or by his attorney duly
authorized in writing, and similarly noted hereon, and upon payment of a nominal
transfer fee which may be required, a new Certificate shall be issued to the transferee of
the registered holder thereof."

and, without a doubt, the Detached Assignments presented to respondent were sufficient
authorizations in writing executed by the registered owner, Filriters, and its transferee, PhilFinance, as
required by the above-quoted provision;

12. Upon such compliance with the aforesaid requirements, the ministerial duties of registering a
transfer of ownership over the CBCI and issuing a new certificate to the transferee devolves upon the
respondent;

Upon these assertions, TRB prayed for the registration by the Central Bank of the subject CBCI in its name.

On December 4, 1984, the Regional Trial Court the case took cognizance of the defendant Central Bank of the
Philippines' Motion for Admission of Amended Answer with Counter Claim for Interpleader6 thereby calling to fore the
respondent Filriters Guaranty Assurance Corporation (Filriters), the registered owner of the subject CBCI as respondent.

For its part, Filriters interjected as Special Defenses the following:

11. Respondent is the registered owner of CBCI No. 891;

12. The CBCI constitutes part of the reserve investment against liabilities required of respondent as an
insurance company under the Insurance Code;

13. Without any consideration or benefit whatsoever to Filriters, in violation of law and the trust fund
doctrine and to the prejudice of policyholders and to all who have present or future claim against
policies issued by Filriters, Alfredo Banaria, then Senior Vice-President-Treasury of Filriters, without any
board resolution, knowledge or consent of the board of directors of Filriters, and without any clearance
or authorization from the Insurance Commissioner, executed a detached assignment purportedly
assigning CBCI No. 891 to Philfinance;

xxx xxx xxx

14. Subsequently, Alberto Fabella, Senior Vice-President-Comptroller are Pilar Jacobe, Vice-President-
Treasury of Filriters (both of whom were holding the same positions in Philfinance), without any
consideration or benefit redounding to Filriters and to the grave prejudice of Filriters, its policy holders
and all who have present or future claims against its policies, executed similar detached assignment
forms transferring the CBCI to plaintiff;

xxx xxx xxx

15. The detached assignment is patently void and inoperative because the assignment is without the
knowledge and consent of directors of Filriters, and not duly authorized in writing by the Board, as
requiring by Article V, Section 3 of CB Circular No. 769;

16. The assignment of the CBCI to Philfinance is a personal act of Alfredo Banaria and not the corporate
act of Filriters and such null and void;

a) The assignment was executed without consideration and for that reason, the assignment is void from
the beginning (Article 1409, Civil Code);

b) The assignment was executed without any knowledge and consent of the board of directors of
Filriters;

c) The CBCI constitutes reserve investment of Filriters against liabilities, which is a requirement under
the Insurance Code for its existence as an insurance company and the pursuit of its business operations.
 The assignment of the CBCI is illegal act in the sense of malum in se or malum prohibitum, for anyone to
make, either as corporate or personal act;

d) The transfer of dimunition of reserve investments of Filriters is expressly prohibited by law, is

immoral and against public policy;

e) The assignment of the CBCI has resulted in the capital impairment and in the solvency deficiency of
Filriters (and has in fact helped in placing Filriters under conservatorship), an inevitable result known to
the officer who executed assignment.

17. Plaintiff had acted in bad faith and with knowledge of the illegality and invalidity of the assignment.

a) The CBCI No. 891 is not a negotiable instrument and as a certificate of indebtedness is not payable to
bearer but is a registered in the name of Filriters;

b) The provision on transfer of the CBCIs provides that the Central Bank shall treat the registered owner
as the absolute owner and that the value of the registered certificates shall be payable only to the
registered owner; a sufficient notice to plaintiff that the assignments do not give them the registered
owner's right as absolute owner of the CBCI's;

c) CB Circular 769, Series of 1980 (Rules and Regulations Governing CBCIs) provides that the registered
certificates are payable only to the registered owner (Article II, Section 1).

18. Plaintiff knew full well that the assignment by Philfinance of CBCI No. 891 by Filriters is not a regular
transaction made in the usual of ordinary course of business;

a) The CBCI constitutes part of the reserve investments of Filriters against liabilities requires by the
Insurance Code and its assignment or transfer is expressly prohibited by law. There was no attempt to
get any clearance or authorization from the Insurance Commissioner;

b) The assignment by Filriters of the CBCI is clearly not a transaction in the usual or regular course of its
business;

c) The CBCI involved substantial amount and its assignment clearly constitutes disposition of "all or
substantially all" of the assets of Filriters, which requires the affirmative action of the stockholders
(Section 40, Corporation [sic] Code.7

In its Decision8 dated April 29, 1988, the Regional Trial Court of Manila, Branch XXXIII found the assignment of CBCI No.
D891 in favor of Philfinance, and the subsequent assignment of the same CBCI by Philfinance in favor of Traders Royal
Bank null and void and of no force and effect. The dispositive portion of the decision reads:

ACCORDINGLY, judgment is hereby rendered in favor of the respondent Filriters Guaranty Assurance
Corporation and against the plaintiff Traders Royal Bank:

(a) Declaring the assignment of CBCI No. 891 in favor of PhilFinance, and the subsequent assignment of
CBCI by PhilFinance in favor of the plaintiff Traders Royal Bank as null and void and of no force and
effect;

(b) Ordering the respondent Central Bank of the Philippines to disregard the said assignment and to pay
the value of the proceeds of the CBCI No. D891 to the Filriters Guaranty Assurance Corporation;

(c) Ordering the plaintiff Traders Royal Bank to pay respondent Filriters Guaranty Assurance Corp. The
sum of P10,000 as attorney's fees; and

(d) to pay the costs.

SO ORDERED.9

The petitioner assailed the decision of the trial court in the Court of Appeals 10, but their appeals likewise failed. The
findings of the fact of the said court are hereby reproduced:

The records reveal that defendant Filriters is the registered owner of CBCI No. D891. Under a deed of
assignment dated November 27, 1971, Filriters transferred CBCI No. D891 to Philippine Underwriters
 Finance Corporation (Philfinance). Subsequently, Philfinance transferred CBCI No. D891, which was still
registered in the name of Filriters, to appellant Traders Royal Bank (TRB). The transfer was made under a
repurchase agreement dated February 4, 1981, granting Philfinance the right to repurchase the
instrument on or before April 27, 1981. When Philfinance failed to buy back the note on maturity date,
it executed a deed of assignment, dated April 27, 1981, conveying to appellant TRB all its right and the
title to CBCI No. D891.

Armed with the deed of assignment, TRB then sought the transfer and registration of CBCI No. D891 in
its name before the Security and Servicing Department of the Central Bank (CB). Central Bank, however,
refused to effect the transfer and registration in view of an adverse claim filed by defendant Filriters.

Left with no other recourse, TRB filed a special civil action for mandamus against the Central Bank in the
Regional Trial Court of Manila. The suit, however, was subsequently treated by the lower court as a case
of interpleader when CB prayed in its amended answer that Filriters be impleaded as a respondent and
the court adjudge which of them is entitled to the ownership of CBCI No. D891. Failing to get a favorable
judgment. TRB now comes to this Court on appeal. 11

In the appellate court, petitioner argued that the subject CBCI was a negotiable instrument, and having acquired the said
certificate from Philfinance as a holder in due course, its possession of the same is thus free for any defect of title of
prior parties and from any defense available to prior parties among themselves, and it may thus, enforce payment of the
instrument for the full amount thereof against all parties liable thereon. 12

In ignoring said argument, the appellate court that the CBCI is not a negotiable instrument, since the instrument clearly
stated that it was payable to Filriters, the registered owner, whose name was inscribed thereon, and that the certificate
lacked the words of negotiability which serve as an expression of consent that the instrument may be transferred by
negotiation.

Obviously, the assignment of the certificate from Filriters to Philfinance was fictitious, having made without
consideration, and did not conform to Central Bank Circular No. 769, series of 1980, better known as the "Rules and
Regulations Governing Central Bank Certificates of Indebtedness", which provided that any "assignment of registered
certificates shall not be valid unless made . . . by the registered owner thereof in person or by his representative duly
authorized in writing."

Petitioner's claimed interest has no basis, since it was derived from Philfinance whose interest was inexistent, having
acquired the certificate through simulation. What happened was Philfinance merely borrowed CBCI No. D891 from
Filriters, a sister corporation, to guarantee its financing operations.

Said the Court:

In the case at bar, Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalf
of Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to
act for the latter. For lack of such authority, the assignment did not therefore bind Filriters and violated
as the same time Central Bank Circular No. 769 which has the force and effect of a law, resulting in the
nullity of the transfer (People v. Que Po Lay, 94 Phil. 640; 3M Philippines, Inc. vs. Commissioner of
Internal Revenue, 165 SCRA 778).

In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer to
Traders Royal Bank and which the latter can register with the Central Bank.

WHEREFORE, the judgment appealed from is AFFIRMED, with costs against plaintiff-appellant.

SO ORDERED. 13

Petitioner's present position rests solely on the argument that Philfinance owns 90% of Filriters equity and the two
corporations have identical corporate officers, thus demanding the application of the doctrine or piercing the veil of
corporate fiction, as to give validity to the transfer of the CBCI from registered owner to petitioner TRB. 14 This renders
the payment by TRB to Philfinance of CBCI, as actual payment to Filriters. Thus, there is no merit to the lower court's
ruling that the transfer of the CBCI from Filriters to Philfinance was null and void for lack of consideration.

Admittedly, the subject CBCI is not a negotiable instrument in the absence of words of negotiability within the meaning
of the negotiable instruments law (Act 2031).

The pertinent portions of the subject CBCI read:

 xxx xxx xxx

The Central Bank of the Philippines (the Bank) for value received, hereby promises to pay bearer, of if
this Certificate of indebtedness be registered, to FILRITERS GUARANTY ASSURANCE CORPORATION, the
registered owner hereof, the principal sum of FIVE HUNDRED THOUSAND PESOS.

xxx xxx xxx

Properly understood, a certificate of indebtedness pertains to certificates for the creation and maintenance of a
permanent improvement revolving fund, is similar to a "bond," (82 Minn. 202). Being equivalent to a bond, it is properly
understood as acknowledgment of an obligation to pay a fixed sum of money. It is usually used for the purpose of long
term loans.

The appellate court ruled that the subject CBCI is not a negotiable instrument, stating that:

As worded, the instrument provides a promise "to pay Filriters Guaranty Assurance Corporation, the
registered owner hereof." Very clearly, the instrument is payable only to Filriters, the registered owner,
whose name is inscribed thereon. It lacks the words of negotiability which should have served as an
expression of consent that the instrument may be transferred by negotiation.15

A reading of the subject CBCI indicates that the same is payable to FILRITERS GUARANTY ASSURANCE CORPORATION,
and to no one else, thus, discounting the petitioner's submission that the same is a negotiable instrument, and that it is
a holder in due course of the certificate.

The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a
substitute for money. Hence, freedom of negotiability is the touchtone relating to the protection of holders in due
course, and the freedom of negotiability is the foundation for the protection which the law throws around a holder in
due course (11 Am. Jur. 2d, 32). This freedom in negotiability is totally absent in a certificate indebtedness as it merely
to pay a sum of money to a specified person or entity for a period of time.

As held in Caltex (Philippines), Inc. v. Court of Appeals, 16:

The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the
writing, that is, from the face of the instrument itself. In the construction of a bill or note, the intention
of the parties is to control, if it can be legally ascertained. While the writing may be read in the light of
surrounding circumstance in order to more perfectly understand the intent and meaning of the parties,
yet as they have constituted the writing to be the only outward and visible expression of their meaning,
no other words are to be added to it or substituted in its stead. The duty of the court in such case is to
ascertain, not what the parties may have secretly intended as contradistinguished from what their
words express, but what is the meaning of the words they have used. What the parties meant must be
determined by what they said.

Thus, the transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed by the
negotiable instruments law. The pertinent question then is, was the transfer of the CBCI from Filriters to Philfinance and
subsequently from Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the CBCI registered in its
name with the Central Bank?

The following are the appellate court's pronouncements on the matter:

Clearly shown in the record is the fact that Philfinance's title over CBCI No. D891 is defective since it
acquired the instrument from Filriters fictitiously. Although the deed of assignment stated that the
transfer was for "value received", there was really no consideration involved. What happened was
Philfinance merely borrowed CBCI No. D891 from Filriters, a sister corporation. Thus, for lack of any
consideration, the assignment made is a complete nullity.

What is more, We find that the transfer made by Filriters to Philfinance did not conform to Central Bank
Circular No. 769, series of 1980, otherwise known as the "Rules and Regulations Governing Central Bank
Certificates of Indebtedness", under which the note was issued. Published in the Official Gazette on
November 19, 1980, Section 3 thereof provides that any assignment of registered certificates shall not
be valid unless made . . . by the registered owner thereof in person or by his representative duly
authorized in writing.
 In the case at bar, Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalf
of Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to
act for the latter. For lack of such authority, the assignment did not therefore bind Filriters and violated
at the same time Central Bank Circular No. 769 which has the force and effect of a law, resulting in the
nullity of the transfer (People vs. Que Po Lay, 94 Phil. 640; 3M Philippines, Inc. vs. Commissioner of
Internal Revenue, 165 SCRA 778).

In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer to
Traders Royal Bank and which the latter can register with the Central Bank

Petitioner now argues that the transfer of the subject CBCI to TRB must upheld, as the respondent Filriters and
Philfinance, though separate corporate entities on paper, have used their corporate fiction to defraud TRB into
purchasing the subject CBCI, which purchase now is refused registration by the Central Bank.

Says the petitioner;

Since Philfinance own about 90% of Filriters and the two companies have the same corporate officers, if
the principle of piercing the veil of corporate entity were to be applied in this case, then TRB's payment
to Philfinance for the CBCI purchased by it could just as well be considered a payment to Filriters, the
registered owner of the CBCI as to bar the latter from claiming, as it has, that it never received any
payment for that CBCI sold and that said CBCI was sold without its authority.

xxx xxx xxx

We respectfully submit that, considering that the Court of Appeals has held that the CBCI was merely
borrowed by Philfinance from Filriters, a sister corporation, to guarantee its (Philfinance's) financing
operations, if it were to be consistent therewith, on the issued raised by TRB that there was a piercing a
veil of corporate entity, the Court of Appeals should have ruled that such veil of corporate entity was, in
fact, pierced, and the payment by TRB to Philfinance should be construed as payment to Filriters. 17

We disagree with Petitioner.

Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this merely an equitable remedy, and may
be awarded only in cases when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or
defend crime or where a corporation is a mere alter ego or business conduit of a person. 18

Peiercing the veil of corporate entity requires the court to see through the protective shroud which exempts its
stockholders from liabilities that ordinarily, they could be subject to, or distinguished one corporation from a seemingly
separate one, were it not for the existing corporate fiction. But to do this, the court must be sure that the corporate
fiction was misused, to such an extent that injustice, fraud, or crime was committed upon another, disregarding, thus,
his, her, or its rights. It is the protection of the interests of innocent third persons dealing with the corporate entity
which the law aims to protect by this doctrine.

The corporate separateness between Filriters and Philfinance remains, despite the petitioners insistence on the
contrary. For one, other than the allegation that Filriters is 90% owned by Philfinance, and the identity of one shall be
maintained as to the other, there is nothing else which could lead the court under circumstance to disregard their
corporate personalities.

Though it is true that when valid reasons exist, the legal fiction that a corporation is an entity with a juridical personality
separate from its stockholders and from other corporations may be disregarded, 19 in the absence of such grounds, the
general rule must upheld. The fact that Filfinance owns majority shares in Filriters is not by itself a ground to disregard
the independent corporate status of Filriters. In Liddel & Co., Inc. vs. Collector of Internal Revenue, 20 the mere
ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not
of itself a sufficient reason for disregarding the fiction of separate corporate personalities.

In the case at bar, there is sufficient showing that the petitioner was not defrauded at all when it acquired the subject
certificate of indebtedness from Philfinance.

On its face the subject certificates states that it is registered in the name of Filriters. This should have put the petitioner
on notice, and prompted it to inquire from Filriters as to Philfinance's title over the same or its authority to assign the
certificate. As it is, there is no showing to the effect that petitioner had any dealings whatsoever with Filriters, nor did it
make inquiries as to the ownership of the certificate.
The terms of the CBCI No. D891 contain a provision on its TRANSFER. Thus:

TRANSFER. This Certificate shall pass by delivery unless it is registered in the owner's name at any office
of the Bank or any agency duly authorized by the Bank, and such registration is noted hereon. After such
registration no transfer thereof shall be valid unless made at said office (where the Certificates has been
registered) by the registered owner hereof, in person, or by his attorney, duly authorized in writing and
similarly noted hereon and upon payment of a nominal transfer fee which may be required, a new
Certificate shall be issued to the transferee of the registered owner thereof. The bank or any agency
duly authorized by the Bank may deem and treat the bearer of this Certificate, or if this Certificate is
registered as herein authorized, the person in whose name the same is registered as the absolute owner
of this Certificate, for the purpose of receiving payment hereof, or on account hereof, and for all other
purpose whether or not this Certificate shall be overdue.

This is notice to petitioner to secure from Filriters a written authorization for the transfer or to require Philfinance to
submit such an authorization from Filriters.

Petitioner knew that Philfinance is not registered owner of the CBCI No. D891. The fact that a non-owner was disposing
of the registered CBCI owned by another entity was a good reason for petitioner to verify of inquire as to the title
Philfinance to dispose to the CBCI.

Moreover, CBCI No. D891 is governed by CB Circular No. 769, series of 1990 21, known as the Rules and Regulations
Governing Central Bank Certificates of Indebtedness, Section 3, Article V of which provides that:

Sec. 3. Assignment of Registered Certificates. — Assignment of registered certificates shall not be valid
unless made at the office where the same have been issued and registered or at the Securities Servicing
Department, Central Bank of the Philippines, and by the registered owner thereof, in person or by his
representative, duly authorized in writing. For this purpose, the transferee may be designated as the
representative of the registered owner.

Petitioner, being a commercial bank, cannot feign ignorance of Central Bank Circular 769, and its requirements. An
entity which deals with corporate agents within circumstances showing that the agents are acting in excess of corporate
authority, may not hold the corporation liable. 22 This is only fair, as everyone must, in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. 23

The transfer made by Filriters to Philfinance did not conform to the said. Central Bank Circular, which for all intents, is
considered part of the law. As found by the courts a quo, Alfredo O. Banaria, who had signed the deed of assignment
from Filriters to Philfinance, purportedly for and in favor of Filriters, did not have the necessary written authorization
from the Board of Directors of Filriters to act for the latter. As it is, the sale from Filriters to Philfinance was fictitious,
and therefore void and inexistent, as there was no consideration for the same. This is fatal to the petitioner's cause, for
then, Philfinance had no title over the subject certificate to convey the Traders Royal Bank. Nemo potest nisi quod de
jure potest — no man can do anything except what he can do lawfully.

Concededly, the subject CBCI was acquired by Filriters to form part of its legal and capital reserves, which are required
by law 24 to be maintained at a mandated level. This was pointed out by Elias Garcia, Manager-in-Charge of respondent
Filriters, in his testimony given before the court on May 30, 1986.

Q Do you know this Central Bank Certificate of Indebtedness, in short, CBCI No. D891 in
the face value of P5000,000.00 subject of this case?

A Yes, sir.

Q Why do you know this?

A Well, this was CBCI of the company sought to be examined by the Insurance
Commission sometime in early 1981 and this CBCI No. 891 was among the CBCI's that
were found to be missing.

Q Let me take you back further before 1981. Did you have the knowledge of this CBCI
No. 891 before 1981?

A Yes, sir. This CBCI is an investment of Filriters required by the Insurance Commission
as legal reserve of the company.
 Q Legal reserve for the purpose of what?

A Well, you see, the Insurance companies are required to put up legal reserves under
Section 213 of the Insurance Code equivalent to 40 percent of the premiums receipt and
further, the Insurance Commission requires this reserve to be invested preferably in
government securities or government binds. This is how this CBCI came to be purchased
by the company.

It cannot, therefore, be taken out of the said funds, without violating the requirements of the law. Thus, the
anauthorized use or distribution of the same by a corporate officer of Filriters cannot bind the said corporation, not
without the approval of its Board of Directors, and the maintenance of the required reserve fund.

Consequently, the title of Filriters over the subject certificate of indebtedness must be upheld over the claimed interest
of Traders Royal Bank.

ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated January 29, 1990 is hereby AFFIRMED.

SO ORDERED.

Regalado, Romero and Mendoza, JJ., concur.

Puno, J., took no part.

9. Inciong VS CA 257 SCRA 578

G.R. No. 96405 June 26, 1996

BALDOMERO INCIONG, JR., petitioner,

vs.
COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.

ROMERO, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals affirming that of the Regional Trial Court
of Misamis Oriental, Branch 18,1 which disposed of Civil Case No. 10507 for collection of a sum of money and damages,
as follows:

WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudged solidarily liable and ordered to pay to
the plaintiff Philippine Bank of Communications, Cagayan de Oro City, the amount of FIFTY THOUSAND
PESOS (P50,000.00), with interest thereon from May 5, 1983 at 16% per annum until fully paid; and
6% per annum on the total amount due, as liquidated damages or penalty from May 5, 1983 until fully
paid; plus 10% of the total amount due for expenses of litigation and attorney's fees; and to pay the
costs.

The counterclaim, as well as the cross claim, are dismissed for lack of merit.

SO ORDERED.

Petitioner's liability resulted from the promissory note in the amount of P50,000.00 which he signed with Rene C. Naybe
and Gregorio D. Pantanosas on February 3, 1983, holding themselves jointly and severally liable to private respondent
Philippine Bank of Communications, Cagayan de Oro City branch. The promissory note was due on May 5, 1983.

Said due date expired without the promissors having paid their obligation. Consequently, on November 14, 1983 and on
June 8, 1984, private respondent sent petitioner telegrams demanding payment thereof.2 On December 11, 1984 private
respondent also sent by registered mail a final letter of demand to Rene C. Naybe. Since both obligors did not respond to
the demands made, private respondent filed on January 24, 1986 a complaint for collection of the sum of P50,000.00
against the three obligors.

On November 25, 1986, the complaint was dismissed for failure of the plaintiff to prosecute the case. However, on
January 9, 1987, the lower court reconsidered the dismissal order and required the sheriff to serve the summonses. On
January 27, 1987, the lower court dismissed the case against defendant Pantanosas as prayed for by the private
respondent herein. Meanwhile, only the summons addressed to petitioner was served as the sheriff learned that
defendant Naybe had gone to Saudi Arabia.

In his answer, petitioner alleged that sometime in January 1983, he was approached by his friend, Rudy Campos, who
told him that he was a partner of Pio Tio, the branch manager of private respondent in Cagayan de Oro City, in the
falcata logs operation business. Campos also intimated to him that Rene C. Naybe was interested in the business and
would contribute a chainsaw to the venture. He added that, although Naybe had no money to buy the equipment, Pio
Tio had assured Naybe of the approval of a loan he would make with private respondent. Campos then persuaded
petitioner to act as a "co-maker" in the said loan. Petitioner allegedly acceded but with the understanding that he would
only be a co-maker for the loan of P50,000.00.

Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by Campos at his office. He
affixed his signature thereto but in one copy, he indicated that he bound himself only for the amount of P5,000.00. Thus,
it was by trickery, fraud and misrepresentation that he was made liable for the amount of P50,000.00.

In the aforementioned decision of the lower court, it noted that the typewritten figure "-- 50,000 --" clearly appears
directly below the admitted signature of the petitioner in the promissory note. 3 Hence, the latter's uncorroborated
testimony on his limited liability cannot prevail over the presumed regularity and fairness of the transaction, under Sec.
5 (q) of Rule 131. The lower court added that it was "rather odd" for petitioner to have indicated in a copy and not in the
original, of the promissory note, his supposed obligation in the amount of P5,000.00 only. Finally, the lower court held
that, even granting that said limited amount had actually been agreed upon, the same would have been merely
collateral between him and Naybe and, therefore, not binding upon the private respondent as creditor-bank.
The lower court also noted that petitioner was a holder of a Bachelor of Laws degree and a labor consultant who was
supposed to take due care of his concerns, and that, on the witness stand, Pio Tio denied having participated in the
alleged business venture although he knew for a fact that the falcata logs operation was encouraged by the bank for its
export potential.

Petitioner appealed the said decision to the Court of Appeals which, in its decision of August 31, 1990, affirmed that of
the lower court. His motion for reconsideration of the said decision having been denied, he filed the instant petition for
review on certiorari.

On February 6, 1991, the Court denied the petition for failure of petitioner to comply with the Rules of Court and
paragraph 2 of Circular
No. 1-88, and to sufficiently show that respondent court had committed any reversible error in its questioned
decision.4 His motion for the reconsideration of the denial of his petition was likewise denied with finality in the
Resolution of April 24, 1991.5 Thereafter, petitioner filed a motion for leave to file a second motion for reconsideration
which, in the Resolution of May 27, 1991, the Court denied. In the same Resolution, the Court ordered the entry of
judgment in this case.6

Unfazed, petitioner filed a notion for leave to file a motion for clarification. In the latter motion, he asserted that he had
attached Registry Receipt No. 3268 to page 14 of the petition in compliance with Circular No. 1-88. Thus, on August 7,
1991, the Court granted his prayer that his petition be given due course and reinstated the same.7

Nonetheless, we find the petition unmeritorious.

Annexed to the petition is a copy of an affidavit executed on May 3, 1988, or after the rendition of the decision of the
lower court, by Gregorio Pantanosas, Jr., an MTCC judge and petitioner's co-maker in the promissory note. It supports
petitioner's allegation that they were induced to sign the promissory note on the belief that it was only for P5,000.00,
adding that it was Campos who caused the amount of the loan to be increased to P50,000.00.

The affidavit is clearly intended to buttress petitioner's contention in the instant petition that the Court of Appeals
should have declared the promissory note null and void on the following grounds: (a) the promissory note was signed in
the office of Judge Pantanosas, outside the premises of the bank; (b) the loan was incurred for the purpose of buying a
second-hand chainsaw which cost only P5,000.00; (c) even a new chainsaw would cost only P27,500.00; (d) the loan was
not approved by the board or credit committee which was the practice, as it exceeded P5,000.00; (e) the loan had no
collateral; (f) petitioner and Judge Pantanosas were not present at the time the loan was released in contravention of
the bank practice, and (g) notices of default are sent simultaneously and separately but no notice was validly sent to
him.8 Finally, petitioner contends that in signing the promissory note, his consent was vitiated by fraud as, contrary to
their agreement that the loan was only for the amount of P5,000.00, the promissory note stated the amount of
P50,000.00.

The above-stated points are clearly factual. Petitioner is to be reminded of the basic rule that this Court is not a trier of
facts. Having lost the chance to fully ventilate his factual claims below, petitioner may no longer be accorded the same
opportunity in the absence of grave abuse of discretion on the part of the court below. Had he presented Judge
Pantanosas affidavit before the lower court, it would have strengthened his claim that the promissory note did not
reflect the correct amount of the loan.

Nor is there merit in petitioner's assertion that since the promissory note "is not a public deed with the formalities
prescribed by law but . . . a mere commercial paper which does not bear the signature of . . . attesting witnesses," parol
evidence may "overcome" the contents of the promissory note.9 The first paragraph of the parol evidence rule 10 states:

When the terms of an agreement have been reduced to writing, it is considered as containing all the
terms agreed upon and there can be, between the parties and their successors in interest, no evidence
of such terms other than the contents of the written agreement.

Clearly, the rule does not specify that the written agreement be a public document.

What is required is that the agreement be in writing as the rule is in fact founded on "long experience that written
evidence is so much more certain and accurate than that which rests in fleeting memory only, that it would be unsafe,
when parties have expressed the terms of their contract in writing, to admit weaker evidence to control and vary the
stronger and to show that the
parties intended a different contract from that expressed in the writing signed by them." 11 Thus, for the parol evidence
rule to apply, a written contract need not be in any particular form, or be signed by both parties. 12 As a general rule,
bills, notes and other instruments of a similar nature are not subject to be varied or contradicted by parol or extrinsic
evidence. 13
By alleging fraud in his answer, 14 petitioner was actually in the right direction towards proving that he and his co-makers
agreed to a loan of P5,000.00 only considering that, where a parol contemporaneous agreement was the inducing and
moving cause of the written contract, it may be shown by parol evidence. 15 However, fraud must be established by clear
and convincing evidence, mere preponderance of evidence, not even being adequate. 16Petitioner's attempt to prove
fraud must, therefore, fail as it was evidenced only by his own uncorroborated and, expectedly, self-serving testimony.

Petitioner also argues that the dismissal of the complaint against Naybe, the principal debtor, and against Pantanosas,
his co-maker, constituted a release of his obligation, especially because the dismissal of the case against Pantanosas was
upon the motion of private respondent itself. He cites as basis for his argument, Article 2080 of the Civil Code which
provides that:

The guarantors, even though they be solidary, are released from their obligation whenever by some act
of the creditor, they cannot be subrogated to the rights, mortgages, and preferences of the latter.

It is to be noted, however, that petitioner signed the promissory note as a solidary co-maker and not as a guarantor. This
is patent even from the first sentence of the promissory note which states as follows:

Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the
PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines the sum
of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency, together with interest . . . at the rate
of SIXTEEN (16) per cent per annum until fully paid.

A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor
is entitled to demand the whole obligation. 17 on the other hand, Article 2047 of the Civil Code states:

By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the
principal debtor in case the latter should fail to do so.

If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I
of this Book shall be observed. In such a case the contract is called a suretyship. (Emphasis supplied.)

While a guarantor may bind himself solidarily with the principal debtor, the liability of a guarantor is different
from that of a solidary debtor. Thus, Tolentino explains:

A guarantor who binds himself in solidum with the principal debtor under the provisions of the second
paragraph does not become a solidary co-debtor to all intents and purposes. There is a difference
between a solidary co-debtor and a fiador in solidum (surety). The latter, outside of the liability he
assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the
other rights, actions and benefits which pertain to him by reason of the fiansa; while a solidary co-
debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, Title I, Book IV of the
Civil Code. 18

Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several obligations. Under Art. 1207
thereof, when there are two or more debtors in one and the same obligation, the presumption is that the obligation is
joint so that each of the debtors is liable only for a proportionate part of the debt. There is a solidary liability only when
the obligation expressly so states, when the law so provides or when the nature of the obligation so requires. 19

Because the promissory note involved in this case expressly states that the three signatories therein are jointly and
severally liable, any one, some or all of them may be proceeded against for the entire obligation. 20 The choice is left to
the solidary creditor to determine against whom he will enforce collection. 21 Consequently, the dismissal of the case
against Judge Pontanosas may not be deemed as having discharged petitioner from liability as well. As regards Naybe,
suffice it to say that the court never acquired jurisdiction over him. Petitioner, therefore, may only have recourse against
his co-makers, as provided by law.

WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned decision of the Court of
Appeals is AFFIRMED. Costs against petitioner.

SO ORDERED.

Regalado, Puno, Mendoza and Torres, Jr., JJ., concur.