Transfer build his house with a 5% interest per month from March to May 1994
CASE NUMBER – Patrimonio v. Gutierrez (contract of loan).
Brion, J.
Petitioner issued pre-signed blank checks to Gutierrez to cover their
company’s expenses with the express instruction to get the former’s prior
approval before using said checks. Gutierrez did not listen and fooled
Marasigan, one of petitioner’s former teammates, to lend P200,000 to the
former. As security, Gutierrez issued one of the checks given by petitioner
without his prior approval. The check Marasigan had was dishonored because
the bank account had been closed for almost a year already. Marasigan sought
to collect from Gutierrez, but to no avail, so he demanded payment from
petitioner. Marasigan filed a BP 22 case against petitioner while the latter filed
a civil suit to nullify the loan contract. RTC and CA ruled IFO Marasigan, while
SC reversed it.
DOCTRINE
Section 14 of NIL applies to an incomplete but delivered instrument, wherein
the maker/drawer delivers a pre-signed blank paper to another person for the
purpose of converting it to a negotiable instrument, that person is deemed to
have prima facie authority to fill it up.
IMPORTANT PEOPLE
Alvin Patrimonio: Petitioner; professional basketball player
Napoleon Gutierrez: Respondent #1; well-known sports columnist
Octavio Marasigan III: Respondent #2; professional basketball player
FACTS
1. Petitioner Alvin Patrimonio pre-signed several blank checks (i.e. no
payee’s name, date, or amount) and delivered it to respondent Napoleon
Gutierrez to cover their business’1 expenses with the express
instruction to not fill it out without notice and approval from the
petitioner.
2. Without petitioner’s knowledge and consent, Gutierrez borrowed
P200,000 from Respondent Octavio Marasigan III, who was petitioner’s
former teammate under the pretense that petitioner needed money to
1Called Slam Dunk Corporation, which produced basketball mini-concerts and shows
2Sec. 14. Blanks; when may be filled. - Where the instrument is wanting in any
material particular, the person in possession thereof has a prima facie authority to
complete it by filling up the blanks therein. And a signature on a blank paper delivered
by the person making the signature in order that the paper may be converted into a
negotiable instrument operates as a prima facie authority to fill it up as such for any
amount. In order, however, that any such instrument when completed may be
a. As consideration, Gutierrez filled out one of the blank checks and
delivered it to Marasigan (negotiation of the check)..
b. Payee: Cash; Amount (in figures and in words): P200,000; Date:
May 23, 1994.
3. When Marasigan deposited the check, it was dishonored because the
petitioner’s account has been closed since May 28, 1993.
4. Marasigan sought to collect from Gutierrez, to no avail, so the former
demanded payment from petitioner.
5. Marasigan filed a B.P. 22 case against petitioner.
6. Petitioner filed a complaint for declaration of nullity of loan and
recovery for damages against respondents.
a. Only Marasigan filed his answer, while Gutierrez was declared in
default.
7. RTC ruled IFO Marasigan and ruled that
a. The issuance of a pre-signed blank check had the intention of
issuing a negotiable instrument;
b. Despite Gutierrez deliberately violated petitioner’s instruction, the
former had a prima facie authority to complete the checks by fillinf
up the blanks based on Section 14 of Negotiable Instruments
Law (NIL)2; and
c. Marasigan was considered to be a holder in due course (HDC),
so he was entitled to payment.
d. RTC ordered petitioner to pay Marasigan with a right to claim
reimbursement from Gutierrez.
e. RTC dismissed petitioner’s complaint.
8. CA affirmed RTC, but had a different ruling:
a. Marasigan was not a HDC because he did not receive the check
in good faith;
b. Gutierrez had strictly filled out the check in accordance with
petitioner’s authority; and
c. The loan may not be nullified because it was considered an
obligation arising from law.
9. Upon denial of MR, petitioner appealed to the SC, arguing that:
a. There was no loan between petitioner and Marasigan because he
never authorized the borrowing of the money nor the check’s
enforced against any person who became a party thereto prior to its completion, it
must be filled up strictly in accordance with the authority given and within a
reasonable time. But if any such instrument, after completion, is negotiated to a
holder in due course, it is valid and effectual for all purposes in his hands, and he may
enforce it as if it had been filled up strictly in accordance with the authority given and
within a reasonable time.
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 negotiation, so he is not privy to the contract of Gutierrez and
Marasigan;
b. Check was merely for security
c. Gutierrez had no special power of attorney (SPA) as required by
Article 1878 of NCC3 in order for one to borrow money;
d. Gutierrez did not strictly fill out the check in accordance with
petitioner’s instructions because the latter did not give his
approval;
e. Even if it was strictly filled out, Marasigan was not a HDC; and
f. He is entitled to damages because of the bad faith in the dealings.
ISSUE with HOLDING (skip to issue #2)
1. WON petitioner is liable under the contract of loan – NO, because
a. Gutierrez had no authority to enter into a loan contract.
i. Article 1868 (7) requires a SPA before an agent can
borrow money in behalf of the principal, but it does not
require that the said SPA must be in writing, as long as
the mandate is express and can be proven by competent
and convincing evidence.
ii. Gutierrez had no authority to borrow money in behalf of
petitioner and the act of pre-signing the blank checks did
not grant the former such authority to fill out the check and
contract the loan.
iii. The authority to enter into a loan can never be presumed.
iv. Since Gutierrez had no authority, the loan contract is null
and void.
b. Petitioner did not consent, so he is not privy to the loan contract.
i. Gutierrez never secured petitioner’s written/verbal
authority to enter into a loan contract.
ii. Petitioner’s signature in the check cannot be taken to be
as sufficient authorization and as consent to the loan
contract.
iii. A loan contract is still a contract, which requires consent
as one of its essential requisites provided by Article 1318,
NCC.
2. WON petitioner is liable under the instrument – NO.
a. Marasigan is not a HDC because he was in bad faith.
i. Section 52 of NIL4 provides one to be a HDC if one who
takes the instrument “in good faith and for value” and “at
3 Art. 1878. Special powers of attorney are necessary in the following cases:
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the
preservation of the things which are under administration
4 Sec. 52. What constitutes a holder in due course. - A holder in due course is a
holder who has taken the instrument under the following conditions
(a) That it is complete and regular upon its face;
the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person
negotiating it.”
ii. Acquisition in good faith means having no knowledge of
fact which would render it dishonest for him to take a
negotiable paper.
iii. Marasigan knew that petitioner wasn’t privy to the loan
contract based on his testimony during the trial wherein
he said that he knew that the check was petitioner’s, but
the loan was really for Gutierrez.
iv. Since Marasigan knew that the underlying obligation
wasn’t for petitioner, the presumption of being a HDC
does not apply.
b. The check was not completed strictly under the authority given by
petitioner.
i. Section 14 of NIL applies to an incomplete but delivered
instrument, wherein the maker/drawer delivers a pre-
signed blank paper to another person for the purpose of
converting it to a negotiable instrument, that person is
deemed to have prima facie authority to fill it up.
ii. The law presumes agency to fill up the blanks.
iii. Requisites for an incomplete but delivered instrument to
be enforced against a party prior to the instrument’s
completion:
1. The blanks must be filled strictly in accordance
with the authority given; and
2. It must be filled up within a reasonable time.
iv. Failure to meet said requisites allows the maker to avoid
liability. Said liability will be defeated if one is a HDC
because there is a presumption that the authority to fill it
up had been given and it was not in excess of authority.
v. Gutierrez had prima facie authority to complete the check,
but it does not extend to its use – subsequent transfer or
negotiation – once the check was completed.
DISPOSITIVE PORTION
Petition is granted. Reinstated petitioner’s complaint.
DIGESTER: Lulu Querido.
(b) That he became the holder of it before it was overdue, and without notice that it
has been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.
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