TRADERS ROYAL BANK, petitioner, vs.

COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and

CENTRAL BANK of the PHILIPPINES, respondents.

269 SCRA 15 – G.R. No. 93397 – March 3, 1997

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 Interpleader 6 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

10,
The petitioner assailed the decision of the trial court in the Court of Appeals 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 fro 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 a gainst 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.

 CALTEX (PHILIPPINES), INC., petitioner, vs. COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.
212 SCRA 448 – G.R. No. 97753 – August 10, 1992
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.
3
After trial, the court a quo rendered its decision dismissing the instant complaint.
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.
 PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. CONCEPCION MINING COMPANY, INC., ET AL., defendants-appellants.
5 SCRA 745 – G.R. No. L-16968 – July 31, 1962
DECISION
LABRADOR, J.:
Appeal from a judgment or decision of the Court of First Instance of Manila, Hon. Gustavo Victoriano, presiding, sentencing
defendants Concepcion Mining Company and Jose Sarte to pay jointly and severally to the plaintiff the amount of P7,197.26 with interest
up to September 29, 1959, plus a daily interest of P1.3698 thereafter up to the time the amount is fully paid, plus 10% of the amount as
attorney’s fees, and costs of this suit.
The present action was instituted by the plaintiff to recover from the defendants the face of a promissory note the pertinent part
of which reads as follows:
Manila, March 12, 1954
NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . . .
In case it is necessary to collect this note by or through an attorney-at-law, the makers and indorsers shall pay ten percent
(10%) of the amount due on the note as attorney’s fees, which in no case shall be less than P100.00 exclusive of all costs
and fees allowed by law as stipulated in the contract of real estate mortgage. Demand and Dishonor Waived. Holder may
accept partial payment reserving his right of recourse again each and all indorsers.
(Purpose — mining industry)
CONCEPCION MINING COMPANY, INC.,
By:
(Sgd.) VICENTE LEGARDA
President
(Sgd.) VICENTE LEGARDA
(Sgd.) JOSE S SARTE
“Please issue check to —
Mr. Jose S. Sarte”
Upon the filing of the complaint the defendants presented their answer in which they allege that the co-maker the promissory note
Don Vicente L. Legarda died on February 24, 1946 and his estate is in the process of judicial determination in Special Proceedings No.
29060 of the Court of First Instance of Manila. On the basis of this allegation it is prayed, as a special defense, that the estate of said
deceased Vicente L. Legarda be included as party-defendant. The court in its decision ruled that the inclusion of said defendant is
unnecessary and immaterial, in accordance with the provisions of Article 1216 of the Deny Civil Code and section 17 (g) of the Negotiable
Instruments Law.
A motion to reconsider this decision was denied and thereupon defendants presented a petition for relief, asking that the effects
of the judgment be suspended for the reason that the deceased Vicente L. Legarda should have been included as a party-defendant and
his liability should be determined in pursuance of the provisions of the promissory note. This motion for relief was also denied, hence
defendant appealed to this Court.
Section 17 (g) of the Negotiable Instruments Law provides as follows:
SEC. 17. Construction where instrument is ambiguous. — Where the language of the instrument is ambiguous or there are omissions
therein, the following rules of construction apply:
xxx xxx xxx
(g) Where an instrument containing the word “I promise to pay” is signed by two or more persons, they are deemed to be jointly and
severally liable thereon.
And Article 1216 of the Civil Code of the Philippines also provides as follows:
ART. 1216. The creditor may proceed against any one of the solidary debtors or some of them simultaneously. The demand made against
one of them shall not be an obstacle to those which may subsequently be directed against the others so long as the debt has not been
fully collected.
In view of the above quoted provisions, and as the promissory note was executed jointly and severally by the same parties,
namely, Concepcion Mining Company, Inc. and Vicente L. Legarda and Jose S. Sarte, the payee of the promissory note had the right to
hold any one or any two of the signers of the promissory note responsible for the payment of the amount of the note. This judgment of
the lower court should be affirmed.
Our attention has been attracted to the discrepancies in the printed record on appeal. We note, first, that the names of the
defendants, who are evidently the Concepcion Mining Co., Inc. and Jose S. Sarte, do not appear in the printed record on appeal. The
title of the complaint set forth in the record on appeal does not contain the name of Jose Sarte, when it should, as two defendants are
named in the complaint and the only defense of the defendants is the non-inclusion of the deceased Vicente L. Legarda as a defendant
in the action. We also note that the copy of the promissory note which is set forth in the record on appeal does not contain the name of
the third maker Jose S. Sarte. Fortunately, the brief of appellee on page 4 sets forth said name of Jose S. Sarte as one of the co-maker
of the promissory note. Evidently, there is an attempt to mislead the court into believing that Jose S. Sarte is no one of the co-makers.
The attorney for the defendants Atty. Jose S. Sarte himself and he should be held primarily responsible for the correctness of the record
on appeal. WE, THEREFORE, order the said Atty. Jose S. Sarte to explain why in his record on appeal his own name as one of the
defendants does not appear and neither does his name appear as one of the co-signers of the promissory note in question. SO
ORDERED.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Reyes, J.B.L., J., took no part.