G.R. No.

112392 February 29, 2000

BANK OF THE PHILIPPINE ISLANDS, petitioner,

vs.
COURT OF APPEALS and BENJAMIN C. NAPIZA, respondents.

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. CV No. 37392 affirming in toto that of the
Regional Trial Court of Makati, Branch 139,2 which dismissed the complaint filed by petitioner Bank of the Philippine Islands against
private respondent Benjamin C. Napiza for sum of money.

On September 3, 1987, private respondent deposited in Foreign Currency Deposit Unit (FCDU) Savings Account No. 028-1873 which
he maintained in petitioner bank's Buendia Avenue Extension Branch, Continental Bank Manager's Check No. 00014757 4 dated August
17, 1984, payable to "cash" in the amount of Two Thousand Five Hundred Dollars ($2,500.00) and duly endorsed by private respondent
on its dorsal side.5 It appears that the check belonged to a certain Henry who went to the office of private respondent and requested
him to deposit the check in his dollar account by way of accommodation and for the purpose of clearing the same. Private respondent
acceded, and agreed to deliver to Chan a signed blank withdrawal slip, with the understanding that as soon as the check is cleared,
both of them would go to the bank to withdraw the amount of the check upon private respondent's presentation to the bank of his
passbook.

Using the blank withdrawal slip given by private respondent to Chan, on October 23, 1984, one Ruben Gayon, Jr. was able to withdraw
the amount of $2,541.67 from FCDU Savings Account No. 028-187. Notably, the withdrawal slip shows that the amount was payable to
Ramon A. de Guzman and Agnes C. de Guzman and was duly initialed by the branch assistant manager, Teresita Lindo.6

On November 20, 1984, petitioner received communication from the Wells Fargo Bank International of New York that the said check
deposited by private respondent was a counterfeit check 7 because it was "not of the type or style of checks issued by Continental Bank
International."8 Consequently, Mr. Ariel Reyes, the manager of petitioner's Buendia Avenue Extension Branch, instructed one of its
employees, Benjamin D. Napiza IV, who is private respondent's son, to inform his father that the check bounced. 9 Reyes himself sent a
telegram to private respondent regarding the dishonor of the check. In turn, private respondent's son wrote to Reyes stating that the
check been assigned "for encashment" to Ramon A. de Guzman and/or Agnes C. de Guzman after it shall have been cleared upon
instruction of Chan. He also said that upon learning of the dishonor of the check, his father immediately tried to contact Chan but the
latter was out of town.10

Private respondent's son undertook to return the amount of $2,500.00 to petitioner bank. On December 18, 1984, Reyes reminded
private respondent of his son's promise and warned that should he fail to return that amount within seven (7) days, the matter would be
referred to the bank's lawyers for appropriate action to protect the bank's interest.11 This was followed by a letter of the bank's lawyer
dated April 8, 1985 demanding the return of the $2,500.00. 12

In reply, private respondent wrote petitioner's counsel on April 20, 1985 13 stating that he deposited the check "for clearing purposes"
only to accommodate Chan. He added:

Further, please take notice that said check was deposited on September 3, 1984 and withdrawn on October 23, 1984, or a
total period of fifty (50) days had elapsed at the time of withdrawal. Also, it may not be amiss to mention here that I merely
signed an authority to withdraw said deposit subject to its clearing, the reason why the transaction is not reflected in the
passbook of the account. Besides, I did not receive its proceeds as may be gleaned from the withdrawal slip under the
captioned signature of recipient.1âwphi1.nêt

If at all, my obligation on the transaction is moral in nature, which (sic) I have been and is (sic) still exerting utmost and
maximum efforts to collect from Mr. Henry Chan who is directly liable under the circumstances.

xxx xxx xxx

On August 12, 1986, petitioner filed a complaint against private respondent, praying for the return of the amount of $2,500.00 or the
prevailing peso equivalent plus legal interest from date of demand to date of full payment, a sum equivalent to 20% of the total amount
due as attorney's fees, and litigation and/or costs of suit.

Private respondent filed his answer, admitting that he indeed signed a "blank" withdrawal slip with the understanding that the amount
deposited would be withdrawn only after the check in question has been cleared. He likewise alleged that he instructed the party to
whom he issued the signed blank withdrawal slip to return it to him after the bank draft's clearance so that he could lend that party his
passbook for the purpose of withdrawing the amount of $2,500.00. However, without his knowledge, said party was able to withdraw
the amount of $2,541.67 from his dollar savings account through collusion with one of petitioner's employees. Private respondent
added that he had "given the Plaintiff fifty one (51) days with which to clear the bank draft in question." Petitioner should have
disallowed the withdrawal because his passbook was not presented. He claimed that petitioner had no one to blame except itself "for
being grossly negligent;" in fact, it had allegedly admitted having paid the amount in the check "by mistake" . . . "if not altogether due to
collusion and/or bad faith on the part of (its) employees." Charging petitioner with "apparent ignorance of routine bank procedures," by
way of counterclaim, private respondent prayed for moral damages of P100,000.00, exemplary damages of P50,000.00 and attorney's
fees of 30% of whatever amount that would be awarded to him plus an honorarium of P500.00 per appearance in court.

Private respondent also filed a motion for admission of a third party complaint against Chan. He alleged that "thru strategem and/or
manipulation," Chan was able to withdraw the amount of $2,500.00 even without private respondent's passbook. Thus, private
respondent prayed that third party defendant Chan be made to refund to him the amount withdrawn and to pay attorney's fees of
P5,000.00 plus P300.00 honorarium per appearance.

Petitioner filed a comment on the motion for leave of court to admit the third party complaint, whenever it asserted that per paragraph 2
of the Rules and Regulations governing BPI savings accounts, private respondent alone was liable "for the value of the credit given on
account of the draft or check deposited." It contended that private respondent was estopped from disclaiming liability because he
himself authorized the withdrawal of the amount by signing the withdrawal slip. Petitioner prayed for the denial of the said motion so as
not to unduly delay the disposition of the main case asserting that private respondent's claim could be ventilated in another case.

Private respondent replied that for the parties to obtain complete relief and to avoid multiplicity of suits, the motion to admit third party
complaint should be granted. Meanwhile, the trial court issued orders on August 25, 1987 and October 28, 1987 directing private
respondent to actively participate in locating Chan. After private respondent failed to comply, the trial court, on May 18, 1988, dismissed
the third party complaint without prejudice.

On November 4, 1991, a decision was rendered dismissing the complaint. The lower court held that petitioner could not hold private
respondent liable based on the check's face value alone. To so hold him liable "would render inutilethe requirement of "clearance" from
the drawee bank before the value of a particular foreign check or draft can be credited to the account of a depositor making such
deposit." The lower court further held that "it was incumbent upon the petitioner to credit the value of the check in question to the
account of the private respondent only upon receipt of the notice of final payment and should not have authorized the withdrawal from
the latter's account of the value or proceeds of the check." Having admitted that it committed a "mistake" in not waiting for the clearance
of the check before authorizing the withdrawal of its value or proceeds, petitioner should suffer the resultant loss.

On appeal, the Court of Appeals affirmed the lower court's decision. The appellate court held that petitioner committed "clears gross
negligence" in allowing Ruben Gayon, Jr. to withdraw the money without presenting private respondent's passbook and, before the
check was cleared and in crediting the amount indicated therein in private respondent's account. It stressed that the mere deposit of a
check in private respondent's account did not mean that the check was already private respondent's property. The check still had to be
cleared and its proceeds can only be withdrawn upon presentation of a passbook in accordance with the bank's rules and regulations.
Furthermore, petitioner's contention that private respondent warranted the check's genuineness by endorsing it is untenable for it would
render useless the clearance requirement. Likewise, the requirement of presentation of a passbook to ascertain the propriety of the
accounting reflected would be a meaningless exercise. After all, these requirements are designed to protect the bank from deception or
fraud.

The Court of Appeals cited the case of Roman Catholic Bishop of Malolos, Inc. v. IAC,14 where this Court stated that a personal check
is not legal tender or money, and held that the check deposited in this case must be cleared before its value could be properly
transferred to private respondent's account.

Without filing a motion for the reconsideration of the Court of Appeals' Decision, petitioner filed this petition for review on certiorari,
raising the following issues:

1. WHETHER OR NOT RESPONDENT NAPIZA IS LIABLE UNDER HIS WARRANTIES AS A GENERAL INDORSER.

2. WHETHER OR NOT A CONTRACT OF AGENCY WAS CREATED BETWEEN RESPONDENT NAPIZA AND RUBEN
GAYON.

3. WHETHER OR NOT PETITIONER WAS GROSSLY NEGLIGENT IN ALLOWING THE WITHDRAWAL.

Petitioner claims that private respondent, having affixed his signature at the dorsal side of the check, should be liable for the amount
stated therein in accordance with the following provision of the Negotiable Instruments Law (Act No. 2031):

Sec. 66. Liability of general indorser. — Every indorser who indorses without qualification, warrants to all subsequent holders
in due course —

(a) The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and

(b) That the instrument is at the time of his indorsement, valid and subsisting.

And, in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, according to
its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof
to the holder, or to any subsequent indorser who may be compelled to pay it.

Sec. 65, on the other hand, provides for the following warranties of a person negotiating an instrument by delivery or by qualified
indorsement: (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it, and (c) that all
prior parties had capacity to contract.15 In People v. Maniego,16 this Court described the liabilities of an indorser as follows:

Appellant's contention that as mere indorser, she may not be liable on account of the dishonor of the checks indorsed by her,
is likewise untenable. Under the law, the holder or last indorsee of a negotiable instrument has the right "to enforce payment of
the instrument for the full amount thereof against all parties liable thereon. Among the "parties liable thereon." Is an indorser of
the instrument, i.e., "a person placing his signature upon an instrument otherwise than as a maker, drawer or acceptor *
* unless he clearly indicated by appropriate words his intention to be bound in some other capacity." Such an indorser "who
indorses without qualification," inter alia "engages that on due presentment, * * (the instrument) shall be accepted or paid, or
both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be
duly taken, he will pay the amount thereof to the holder, or any subsequent indorser who may be compelled to pay it." Maniego
may also be deemed an "accommodation party" in the light of the facts, i.e., a person "who has signed the instrument as
maker, drawer, acceptor, or indorser, without receiving value thereof, and for the purpose of lending his name to some other
person." As such, she is under the law "liable on the instrument to a holder for value, notwithstanding such holder at the time
of taking the instrument knew * * (her) to be only an accommodation party," although she has the right, after paying the holder,
to obtain reimbursement from the party accommodated, "since the relation between them is in effect that of principal and
surety, the accommodation party being the surety.

It is thus clear that ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation
party.17 However, to hold private respondent liable for the amount of the check he deposited by the strict application of the law and
without considering the attending circumstances in the case would result in an injustice and in the erosion of the public trust in the
banking system. The interest of justice thus demands looking into the events that led to the encashment of the check.
Petitioner asserts that by signing the withdrawal slip, private respondent "presented the opportunity for the withdrawal of the amount in
question." Petitioner relied "on the genuine signature on the withdrawal slip, the personality of private respondent's son and the lapse of
more than fifty (50) days from date of deposit of the Continental Bank draft, without the same being returned yet." 18 We hold, however,
that the propriety of the withdrawal should be gauged by compliance with the rules thereon that both petitioner bank and its depositors
are duty-bound to observe.

In the passbook that petitioner issued to private respondent, the following rules on withdrawal of deposits appear:

4. Withdrawals must be made by the depositor personally but in some exceptional circumstances, the Bank may allow
withdrawal by another upon the depositor's written authority duly authenticated; and neither a deposit nor a withdrawal will be
permitted except upon the presentation of the depositor's savings passbook, in which the amount deposited withdrawn shall
be entered only by the Bank.

5. Withdrawals may be made by draft, mail or telegraphic transfer in currency of the account at the request of the depositor in
writing on the withdrawal slip or by authenticated cable. Such request must indicate the name of the payee/s, amount and the
place where the funds are to be paid. Any stamp, transmission and other charges related to such withdrawals shall be for the
account of the depositor and shall be paid by him/her upon demand. Withdrawals may also be made in the form of travellers
checks and in pesos. Withdrawals in the form of notes/bills are allowed subject however, to their (availability).

6. Deposits shall not be subject to withdrawal by check, and may be withdrawal only in the manner above provided, upon
presentation of the depositor's savings passbook and with the withdrawal form supplied by the Bank at the counter. 19

Under these rules, to be able to withdraw from the savings account deposit under the Philippine foreign currency deposit system, two
requisites must be presented to petitioner bank by the person withdrawing an amount: (a) a duly filled-up withdrawal slip, and (b) the
depositor's passbook. Private respondent admits he signed a blank withdrawal slip ostensibly in violation of Rule No. 6 requiring that
the request for withdrawal must name the payee, the amount to be withdrawn and the place where such withdrawal should be made.
That the withdrawal slip was in fact a blank one with only private respondent's two signatures affixed on the proper spaces is buttressed
by petitioner's allegation in the instant petition that had private respondent indicated therein the person authorized to receive the
money, then Ruben Gayon, Jr. could not have withdrawn any amount. Petitioner contends that "(I)n failing to do so (i.e., naming his
authorized agent), he practically authorized any possessor thereof to write any amount and to collect the same." 20

Such contention would have been valid if not for the fact that the withdrawal slip itself indicates a special instruction that the amount is
payable to "Ramon A. de Guzman &/or Agnes C. de Guzman." Such being the case, petitioner's personnel should have been duly
warned that Gayon, who was also employed in petitioner's Buendia Ave. Extension branch, 21 was not the proper payee of the proceeds
of the check. Otherwise, either Ramon or Agnes de Guzman should have issued another authority to Gayon for such withdrawal. Of
course, at the dorsal side of the withdrawal slip is an "authority to withdraw" naming Gayon the person who can withdraw the amount
indicated in the check. Private respondent does not deny having signed such authority. However, considering petitioner's clear
admission that the withdrawal slip was a blank one except for private respondent's signature, the unavoidable conclusion is that the
typewritten name of "Ruben C. Gayon, Jr." was intercalated and thereafter it was signed by Gayon or whoever was allowed by
petitioner to withdraw the amount. Under these facts, there could not have been a principal-agent relationship between private
respondent and Gayon so as to render the former liable for the amount withdrawn.

Moreover, the withdrawal slip contains a boxed warning that states: "This receipt must be signed and presented with the corresponding
foreign currency savings passbook by the depositor in person. For withdrawals thru a representative, depositor should accomplish the
authority at the back." The requirement of presentation of the passbook when withdrawing an amount cannot be given mere lip service
even though the person making the withdrawal is authorized by the depositor to do so. This is clear from Rule No. 6 set out by
petitioner so that, for the protection of the bank's interest and as a reminder to the depositor, the withdrawal shall be entered in the
depositor's passbook. The fact that private respondent's passbook was not presented during the withdrawal is evidenced by the entries
therein showing that the last transaction that he made with the bank was on September 3, 1984, the date he deposited the controversial
check in the amount of $2,500.00.22

In allowing the withdrawal, petitioner likewise overlooked another rule that is printed in the passbook. Thus:

2. All deposits will be received as current funds and will be repaid in the same manner; provided, however, that deposits of
drafts, checks, money orders, etc. will be accented as subject to collection only and credited to the account only upon receipt
of the notice of final payment. Collection charges by the Bank's foreign correspondent in effecting such collection shall be for
the account of the depositor. If the account has sufficient balance, the collection shall be debited by the Bank against the
account. If, for any reason, the proceeds of the deposited checks, drafts, money orders, etc., cannot be collected or if the Bank
is required to return such proceeds, the provisional entry therefor made by the Bank in the savings passbook and its records
shall be deemed automatically cancelled regardless of the time that has elapsed, and whether or not the defective items can
be returned to the depositor; and the Bank is hereby authorized to execute immediately the necessary corrections,
amendments or changes in its record, as well as on the savings passbook at the first opportunity to reflect such cancellation.
(Emphasis and underlining supplied.)

As correctly held by the Court of Appeals, in depositing the check in his name, private respondent did not become the outright owner of
the amount stated therein. Under the above rule, by depositing the check with petitioner, private respondent was, in a way, merely
designating petitioner as the collecting bank. This is in consonance with the rule that a negotiable instrument, such as a check, whether
a manager's check or ordinary check, is not legal tender. 23 As such, after receiving the deposit, under its own rules, petitioner shall
credit the amount in private respondent's account or infuse value thereon only after the drawee bank shall have paid the amount of the
check or the check has been cleared for deposit. Again, this is in accordance with ordinary banking practices and with this Court's
pronouncement that "the collecting bank or last endorser generally suffers the loss because has the duty to ascertain the genuineness
of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party
making the presentment has done its duty to ascertain the genuineness of the endorsements." 24 The rule finds more meaning in this
case where the check involved is drawn on a foreign bank and therefore collection is more difficult than when the drawee bank is a local
one even though the check in question is a manager's check. 25

In Banco Atlantico v. Auditor General,26 Banco Atlantico, a commercial bank in Madrid, Spain, paid the amounts represented in three
(3) checks to Virginia Boncan, the finance officer of the Philippine Embassy in Madrid. The bank did so without previously clearing the
checks with the drawee bank, the Philippine National Bank in New York, on account of the "special treatment" that Boncan received
from the personnel of Banco Atlantico's foreign department. The Court held that the encashment of the checks without prior clearance
is "contrary to normal or ordinary banking practice specially so where the drawee bank is a foreign bank and the amounts involved were
large." Accordingly, the Court approved the Auditor General's denial of Banco Atlantico's claim for payment of the value of the checks
that was withdrawn by Boncan.

Said ruling brings to light the fact that the banking business is affected with public interest. By the nature of its functions, a bank is
under obligation to treat the accounts of its depositors "with meticulous care, always having in mind the fiduciary nature of their
relationship."27 As such, in dealing with its depositors, a bank should exercise its functions not only with the diligence of a good father of
a family but it should do so with the highest degree of care. 28

In the case at bar, petitioner, in allowing the withdrawal of private respondent's deposit, failed to exercise the diligence of a good father
of a family. In total disregard of its own rules, petitioner's personnel negligently handled private respondent's account to petitioner's
detriment. As this Court once said on this matter:

Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate
the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do. The
seventy-eight (78)-year-old, yet still relevant, case of Picart v. Smith, provides that test by which to determine the existence of
negligence in a particular case which may be stated as follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty
of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the
discreetpater-familias of the Roman law. The existence of negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law considers what would be reckless, blameworthy, or
negligent in the man of ordinary intelligence and prudence and determines liability by that.29

Petitioner violated its own rules by allowing the withdrawal of an amount that is definitely over and above the aggregate amount of
private respondent's dollar deposits that had yet to be cleared. The bank's ledger on private respondent's account shows that before he
deposited $2,500.00, private respondent had a balance of only $750.00.30 Upon private respondent's deposit of $2,500.00 on
September 3, 1984, that amount was credited in his ledger as a deposit resulting in the corresponding total balance of $3,250.00. 31 On
September 10, 1984, the amount of $600.00 and the additional charges of $10.00 were indicated therein as withdrawn thereby leaving
a balance $2,640.00. On September 30, 1984, an interest of $11.59 was reflected in the ledger and on October 23, 1984, the amount of
$2,541.67 was entered as withdrawn with a balance of $109.92. 32 On November 19, 1984 the word "hold" was written beside the
balance of $109.92.33 That must have been the time when Reyes, petitioner's branch manager, was informed unofficially of the fact that
the check deposited was a counterfeit, but petitioner's Buendia Ave. Extension Branch received a copy of the communication thereon
from Wells Fargo Bank International in New York the following day, November 20, 1984.34 According to Reyes, Wells Fargo Bank
International handled the clearing of checks drawn against U.S. banks that were deposited with petitioner. 35

From these facts on record, it is at once apparent that petitioner's personnel allowed the withdrawal of an amount bigger than the
original deposit of $750.00 and the value of the check deposited in the amount of $2,500.00 although they had not yet received notice
from the clearing bank in the United States on whether or not the check was funded. Reyes' contention that after the lapse of the 35-
day period the amount of a deposited check could be withdrawn even in the absence of a clearance thereon, otherwise it could take a
long time before a depositor could make a withdrawal, 36 is untenable. Said practice amounts to a disregard of the clearance
requirement of the banking system.

While it is true that private respondent's having signed a blank withdrawal slip set in motion the events that resulted in the withdrawal
and encashment of the counterfeit check, the negligence of petitioner's personnel was the proximate cause of the loss that petitioner
sustained. Proximate cause, which is determined by a mixed consideration of logic, common sense, policy and precedent, is "that
cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which
the result would not have occurred."37 The proximate cause of the withdrawal and eventual loss of the amount of $2,500.00 on
petitioner's part was its personnel's negligence in allowing such withdrawal in disregard of its own rules and the clearing requirement in
the banking system. In so doing, petitioner assumed the risk of incurring a loss on account of a forged or counterfeit foreign check and
hence, it should suffer the resulting damage.1âwphi1.nêt

WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 37392 is
AFFIRMED.

SO ORDERED.

G.R. No. 158262 July 21, 2008

SPS. PEDRO AND FLORENCIA VIOLAGO, Petitioners,

vs.
BA FINANCE CORPORATION and AVELINO VIOLAGO, Respondents.

DECISION

VELASCO, JR., J.:

This is a Petition for Review on Certiorari of the August 20, 2002 Decision1 and May 15, 2003 Resolution2 of the Court of Appeals (CA)
in CA-G.R. CV No. 48489 entitled BA Finance Corporation, Plaintiff-Appellee v. Sps. Pedro and Florencia Violago, Defendants and
Third Party Plaintiffs-Appellants v. Avelino Violago, Third Party Defendant-Appellant. Petitioners-spouses Pedro and Florencia Violago
pray for the reversal of the appellate court’s ruling which held them liable to respondent BA Finance Corporation (BA Finance) under a
promissory note and a chattel mortgage. Petitioners likewise pray that respondent Avelino Violago be adjudged directly liable to BA
Finance.

The Facts

Sometime in 1983, Avelino Violago, President of Violago Motor Sales Corporation (VMSC), offered to sell a car to his cousin, Pedro F.
Violago, and the latter’s wife, Florencia. Avelino explained that he needed to sell a vehicle to increase the sales quota of VMSC, and
that the spouses would just have to pay a down payment of PhP 60,500 while the balance would be financed by respondent BA
Finance. The spouses would pay the monthly installments to BA Finance while Avelino would take care of the documentation and
approval of financing of the car. Under these terms, the spouses then agreed to purchase a Toyota Cressida Model 1983 from VMSC.3

On August 4, 1983, the spouses and Avelino signed a promissory note under which they bound themselves to pay jointly and severally
to the order of VMSC the amount of PhP 209,601 in 36 monthly installments of PhP 5,822.25 a month, the first installment to be due
and payable on September 16, 1983. Avelino prepared a Disclosure Statement of Loan/Credit Transportation which showed the net
purchase price of the vehicle, down payment, balance, and finance charges. VMSC then issued a sales invoice in favor of the spouses
with a detailed description of the Toyota Cressida car. In turn, the spouses executed a chattel mortgage over the car in favor of VMSC
as security for the amount of PhP 209,601. VMSC, through Avelino, endorsed the promissory note to BA Finance without recourse.
After receiving the amount of PhP 209,601, VMSC executed a Deed of Assignment of its rights and interests under the promissory note
and chattel mortgage in favor of BA Finance. Meanwhile, the spouses remitted the amount of PhP 60,500 to VMSC through Avelino.4

The sales invoice was filed with the Land Transportation Office (LTO)-Baliwag Branch, which issued Certificate of Registration No.
0137032 in the name of Pedro on August 8, 1983. The spouses were unaware that the same car had already been sold in 1982 to
Esmeraldo Violago, another cousin of Avelino, and registered in Esmeraldo’s name by the LTO-San Rafael Branch. Despite the
spouses’ demand for the car and Avelino’s repeated assurances, there was no delivery of the vehicle. Since VMSC failed to deliver the
car, Pedro did not pay any monthly amortization to BA Finance. 5

On March 1, 1984, BA Finance filed with the Regional Trial Court (RTC), Branch 116 in Pasay City a complaint for Replevin with
Damages against the spouses. The complaint, docketed as Civil Case No. 1628-P, prayed for the delivery of the vehicle in favor of BA
Finance or, if delivery cannot be effected, for the payment of PhP 199,049.41 plus penalty at the rate of 3% per month from February
15, 1984 until fully paid. BA Finance also asked for the payment of attorney’s fees, liquidated damages, replevin bond premium,
expenses in the seizure of the vehicle, and costs of suit. The RTC issued an Order of Replevin on March 28, 1984. The Violago
spouses, as defendants a quo, were declared in default for failing to file an answer. Eventually, the RTC rendered on December 3,
1984 a decision in favor of BA Finance. A writ of execution was thereafter issued on January 11, 1985, followed by an alias writ of
execution.6

In the meantime, Esmeraldo conveyed the vehicle to Jose V. Olvido who was then issued Certificate of Registration No. 0014830-4 by
the LTO-Cebu City Branch on April 29, 1985. On May 8, 1987, Jose executed a Chattel Mortgage over the vehicle in favor of Generoso
Lopez as security for a loan covered by a promissory note in the amount of PhP 260,664. This promissory note was later endorsed to
BA Finance, Cebu City branch.7

On August 21, 1989, the spouses Violago filed a Motion for Reconsideration and Motion to Quash Writ of Execution on the basis of lack
of a valid service of summons on them, among other reasons. The RTC denied the motions; hence, the spouses filed a petition for
certiorari under Rule 65 before the CA, docketed as CA G.R. No. 2002-SP. On May 31, 1991, the CA nullified the RTC’s order. This CA
decision became final and executory.

On January 28, 1992, the spouses filed their Answer before the RTC, alleging the following: they never received the vehicle from
VMSC; the vehicle was previously sold to Esmeraldo; BA Finance was not a holder in due course under Section 59 of the Negotiable
Instruments Law (NIL); and the recourse of BA Finance should be against VMSC. On February 25, 1995, the Violago spouses, with
prior leave of court, filed a Third Party Complaint against Avelino praying that he be held liable to them in the event that they be held
liable to BA Finance, as well as for damages. VMSC was not impleaded as third party defendant. In his Motion to Dismiss and Answer,
Avelino contended that he was not a party to the transaction personally, but VMSC. Avelino’s motion was denied and the third party
complaint against him was entertained by the trial court. Subsequently, the spouses belabored to prove that they affixed their
signatures on the promissory note and chattel mortgage in favor of VMSC in blank. 8

The RTC rendered a Decision on March 5, 1994, finding for BA Finance but against the Violago spouses. The RTC, however, declared
that they are entitled to be indemnified by Avelino. The dispositive portion of the RTC’s decision reads:

WHEREFORE, defendant-[third]-party plaintiffs spouses Pedro F. Violago and Florencia R. Violago are ordered to deliver to plaintiff BA
Finance Corporation, at its principal office the BAFC Building, Gamboa St., Legaspi Village, Makati, Metro Manila the Toyota Cressida
car, model 1983, bearing Engine No. 21R-02854117, and with Serial No. RX60-804614, covered by the deed of chattel mortgage dated
August 4, 1983; or if such delivery cannot be made, to pay, jointly and severally, to the plaintiff the sum of P198,003.06 together with
the penalty [thereon] at three percent (3%) a month, from March 1, 1984, until the amount is fully paid.

In either case, the defendant-third-party plaintiffs are required to pay, jointly and severally, to the plaintiff a sum equivalent to twenty-five
percent (25%) of P198,003.06 as attorney’s fees, and another amount also equivalent to twenty five percent (25%) of the said unpaid
balance, as liquidated damages. The defendant-third party-plaintiffs are also required to shoulder the litigation expenses and
costs.1awphil

As indemnification, third-party defendant Avelino Violago is ordered to deliver to defendants-third-party plaintiffs spouses Pedro F.
Violago and Florencia R. Violago the aforedescribed motor vehicle; or if such delivery is not possible, to pay to the said spouses the
sum of P198,003.06, together with the penalty thereon at three (3%) a month from March 1, 1984, until the amount is entirely paid.

In either case, the third-party defendant should pay to the defendant-third-party plaintiffs spouses a sum equivalent to twenty-five
percent (25%) of P198,003.06 as attorney’s fees, and another sum equivalent also to twenty-five percent (25%) of the said unpaid
balance, as liquidated damages.

Third-party defendant Avelino Violago is further ordered to return to the third-party plaintiffs the sum of P60,500.00 they paid to him as
down payment for the car; and to pay them P15,000.00 as moral damages; P10,000.00 as exemplary damages; and reimburse them
for all the expenses and costs of the suit.

The counterclaims of the defendants and third-party defendant, for lack of merit, are dismissed.9

The Ruling of the CA

Petitioners-spouses and Avelino appealed to the CA. The spouses argued that the promissory note is a negotiable instrument; hence,
the trial court should have applied the NIL and not the Civil Code. The spouses also asserted that since VMSC was not the owner of the
vehicle at the time of sale, the sale was null and void for the failure in the "cause or consideration" of the promissory note, which in this
case was the sale and delivery of the vehicle. The spouses also alleged that BA Finance was not a holder in due course of the note
since it knew, through its Cebu City branch, that the car was never delivered to the spouses. 10 On the other hand, Avelino prayed for
the dismissal of the complaint against him because he was not a party to the transaction, and for an order to the spouses to pay him
moral damages and costs of suit.

The appellate court ruled that the promissory note was a negotiable instrument and that BA Finance was a holder in due course,
applying Secs. 8, 24, and 52 of the NIL. The CA faulted petitioners for failing to implead VMSC, the seller of the vehicle and creditor in
the promissory note, as a party in their Third Party Complaint. Citing Salas v. Court of Appeals,11 the appellate court reasoned that
since VMSC is an indispensable party, any judgment will not bind it or be enforced against it. The absence of VMSC rendered the
proceedings in the RTC and the judgment in the Third Party Complaint "null and void, not only as to the absent party but also to the
present parties, namely the Defendants-Appellants (petitioners herein) and the Third-Party-Defendant-Appellant (Avelino Violago)." The
CA set aside the trial court’s order holding Avelino liable for damages to the spouses without prejudice to the action of the spouses
against VMSC and Avelino in a separate action.12

The dispositive portion of the August 20, 2002 CA Decision reads:

IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Plaintiffs-Appellants is DISMISSED. The appeal of the Third-Party-
Defendant-Appellant is GRANTED. The Decision of the Court a quo is AFFIRMED, with the modification that the Third-Party Complaint
against the Third-Party-Defendant-appellant is DISMISSED, without prejudice. The counterclaims of the Third-Party Defendant
Appellant against the Defendants-Appellants are DISMISSED, also without prejudice.13

The spouses Violago sought but were denied reconsideration by the CA per its Resolution of May 15, 2003.

The Issues

Petitioners raise the following issues:

WHETHER OR NOT THE HOLDER OF AN INVALID NEGOTIABLE PROMISSORY NOTE MAY BE CONSIDERED A
HOLDER IN DUE COURSE

WHETHER OR NOT A CHATTEL MORTGAGE SHOULD BE CONSIDERED VALID DESPITE VITIATION OF CONSENT OF,
AND THE FRAUD COMMITTED ON, THE MORTGAGORS BY AVELINO, AND THE CLEAR ABSENCE OF OBJECT
CERTAIN

WHETHER OR NOT THE VEIL OF CORPORATE ENTITY MAY BE INVOKED AND SUSTAINED DESPITE THE FRAUD
AND DECEPTION OF AVELINO

The Court’s Ruling

The ruling of the appellate court is set aside insofar as it dismissed, without prejudice, the third party complaint of petitioners against
Avelino thereby effectively absolving Avelino from any liability under the third party complaint.

In addressing the threshold issue of whether BA Finance is a holder in due course of the promissory note, we must determine whether
the note is a negotiable instrument and, hence, covered by the NIL. In their appeal to the CA, petitioners argued that the promissory
note is a negotiable instrument and that the provisions of the NIL, not the Civil Code, should be applied. In the present petition,
however, petitioners claim that Article 1318 of the Civil Code 14should be applied since their consent was vitiated by fraud, and, thus, the
promissory note does not carry any legal effect despite its negotiation. Either way, the petitioners’ arguments deserve no merit.

The promissory note is clearly negotiable. The appellate court was correct in finding all the requisites of a negotiable instrument
present. The NIL provides:

Section 1. Form of Negotiable Instruments. – An instrument to be negotiable must conform to the following requirements:

(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 promissory note signed by petitioners reads:

209,601.00 Makati, Metro Manila, Philippines, August 4, 1983

For value received, I/we, jointly and severally, promise to pay to the order of VIOLAGO MOTOR SALES CORPORATION, its office, the
principal sum of TWO HUNDRED NINE THOUSAND SIX HUNDRED ONE ONLY Pesos (P209,601.00), Philippines Currency, with
interest at the rate stipulated herein below, in installments as follows:
Thirty Six (36) successive monthly installments of P5,822.25, the first installment to be paid on 9-16-83, and the succeeding monthly
installments on the 16th day of each and every succeeding month thereafter until the account is fully paid, provided that the penalty
charge of three (3%) per cent per month or a fraction thereof shall be added on each unpaid installment from maturity thereof until fully
paid.

xxxx

Notice of demand, presentment, dishonor and protest are hereby waived.

(Sgd.) (Sgd.)
PEDRO F. VIOLAGO FLORENCIA R. VIOLAGO

763 Constancia St., Sampaloc, Manila same

(Address) (Address)

(Sgd.) (Sgd.)
Marivic Avaria Jesus Tuazon

(WITNESS) (WITNESS)

PAY TO THE ORDER OF BA FINANCE CORPORATION

WITHOUT RECOURSE

VIOLAGO MOTOR SALES CORPORATION

By: (Sgd.)
AVELINO A. VIOLAGO, Pres. 15

The promissory note clearly satisfies the requirements of a negotiable instrument under the NIL. It is in writing; signed by the Violago
spouses; has an unconditional promise to pay a certain amount, i.e., PhP 209,601, on specific dates in the future which could be
determined from the terms of the note; made payable to the order of VMSC; and names the drawees with certainty. The indorsement by
VMSC to BA Finance appears likewise to be valid and regular.

The more important issue now is whether or not BA Finance is a holder in due course. The resolution of this issue will determine
whether petitioners’ defense of fraud and nullity of the sale could validly be raised against respondent corporation. Sec. 52 of the NIL
provides:

Section 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;

(b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such
was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the
person negotiating it.

16
The law presumes that a holder of a negotiable instrument is a holder thereof in due course. In this case, the CA is correct in finding
that BA Finance meets all the foregoing requisites:

In the present recourse, on its face, (a) the "Promissory Note", Exhibit "A", is complete and regular; (b) the "Promissory Note" was
endorsed by the VMSC in favor of the Appellee; (c) the Appellee, when it accepted the Note, acted in good faith and for value; (d) the
Appellee was never informed, before and at the time the "Promissory Note" was endorsed to the Appellee, that the vehicle sold to the
Defendants-Appellants was not delivered to the latter and that VMSC had already previously sold the vehicle to Esmeraldo Violago.
Although Jose Olvido mortgaged the vehicle to Generoso Lopez, who assigned his rights to the BA Finance Corporation (Cebu
Branch), the same occurred only on May 8, 1987, much later than August 4, 1983, when VMSC assigned its rights over the "Chattel
Mortgage" by the Defendants-Appellants to the Appellee. Hence, Appellee was a holder in due course.17

In the hands of one other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-
negotiable.18 A holder in due course, however, holds the instrument free from any defect of title of prior parties and from defenses
available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof. 19 Since BA
Finance is a holder in due course, petitioners cannot raise the defense of non-delivery of the object and nullity of the sale against the
corporation. The NIL considers every negotiable instrument prima facie to have been issued for a valuable consideration.20 In Salas, we
held that a party holding an instrument may enforce payment of the instrument for the full amount thereof. As such, the maker cannot
set up the defense of nullity of the contract of sale.21 Thus, petitioners are liable to respondent corporation for the payment of the
amount stated in the instrument.

From the third party complaint to the present petition, however, petitioners pray that the veil of corporate fiction be set aside and Avelino
be adjudged directly liable to BA Finance. Petitioners likewise pray for damages for the fraud committed upon them.

In Concept Builders, Inc. v. NLRC, we held:

It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders and from other
corporations to which it may be connected. But, this separate and distinct personality of a corporation is merely a fiction created by law
for convenience and to promote justice. So, when the notion of separate juridical personality is used to defeat public convenience,
justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws, this separate personality of the corporation
may be disregarded or the veil of corporate fiction pierced. This is true likewise when the corporation is merely an adjunct, a business
conduit or an alter ego of another corporation.

xxxx

The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:

1. Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no
separate mind, will or existence of its own;

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or
other positive legal duty, or dishonest and unjust acts in contravention of plaintiffs legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. 22

This case meets the foregoing test. VMSC is a family-owned corporation of which Avelino was president. Avelino committed fraud in
selling the vehicle to petitioners, a vehicle that was previously sold to Avelino’s other cousin, Esmeraldo. Nowhere in the pleadings did
Avelino refute the fact that the vehicle in this case was already previously sold to Esmeraldo; he merely insisted that he cannot be held
liable because he was not a party to the transaction. The fact that Avelino and Pedro are cousins, and that Avelino claimed to have a
need to increase the sales quota, was likely among the factors which motivated the spouses to buy the car. Avelino, knowing fully well
that the vehicle was already sold, and with abuse of his relationship with the spouses, still proceeded with the sale and collected the
down payment from petitioners. The trial court found that the vehicle was not delivered to the spouses. Avelino clearly defrauded
petitioners. His actions were the proximate cause of petitioners’ loss. He cannot now hide behind the separate corporate personality of
VMSC to escape from liability for the amount adjudged by the trial court in favor of petitioners.

The fact that VMSC was not included as defendant in petitioners’ third party complaint does not preclude recovery by petitioners from
Avelino; neither would such non-inclusion constitute a bar to the application of the piercing-of-the-corporate-veil doctrine. We suggested
as much in Arcilla v. Court of Appeals, an appellate proceeding involving petitioner Arcilla’s bid to avoid the adverse CA decision on the
argument that he is not personally liable for the amount adjudged since the same constitutes a corporate liability which nevertheless
cannot even be enforced against the corporation which has not been impleaded as a party below. In that case, the Court found as well-
taken the CA’s act of disregarding the separate juridical personality of the corporation and holding its president, Arcilla, liable for the
obligations incurred in the name of the corporation although it was not a party to the collection suit before the trial court. An excerpt
from Arcilla:

x x x In short, even if We are to assume arguendo that the obligation was incurred in the name of the corporation, the petitioner [Arcilla]
would still be personally liable therefor because for all legal intents and purposes, he and the corporation are one and the same. Csar
Marine Resources, Inc. is nothing more than his business conduit and alter ego. The fiction of separate juridical personality conferred
upon such corporation by law should be disregarded. Significantly, petitioner does not seriously challenge the [CA’s] application of the
doctrine which permits the piercing of the corporate veil and the disregarding of the fiction of a separate juridical personality; this is
because he knows only too well that from the beginning, he merely used the corporation for his personal purposes. 23

WHEREFORE, the CA’s August 20, 2002 Decision and May 15, 2003 Resolution in CA-G.R. CV No. 48489 are SET ASIDE insofar as
they dismissed without prejudice the third party complaint of petitioners-spouses Pedro and Florencia Violago against respondent
Avelino Violago. The March 5, 1994 Decision of the RTC is REINSTATED and AFFIRMED. Costs against Avelino Violago.

SO ORDERED.

G.R. No. 129910 September 5, 2006

THE INTERNATIONAL CORPORATE BANK, INC., petitioner,

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

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 9 August 1994 Amended Decision2 and the 16 July 1997 Resolution3 of the Court
of Appeals in CA-G.R. CV No. 25209.

The Antecedent Facts

The case originated from an action for collection of sum of money filed on 16 March 1982 by the International Corporate Bank,
Inc.4 ("petitioner") against the Philippine National Bank ("respondent"). The case was raffled to the then Court of First Instance (CFI) of
Manila, Branch 6. The complaint was amended on 19 March 1982. The case was eventually re-raffled to the Regional Trial Court of
Manila, Branch 52 ("trial court").

The Ministry of Education and Culture issued 15 checks 5 drawn against respondent which petitioner accepted for deposit on various
dates. The checks are as follows:
 Check Number Date Payee Amount
7-3694621-4 7-20-81 Trade Factors, Inc. P 97,500.00
7-3694609-6 7-27-81 Romero D. Palmares 98,500.50
7-3666224-4 8-03-81 Trade Factors, Inc. 99,800.00
7-3528348-4 8-07-81 Trade Factors, Inc. 98,600.00
7-3666225-5 8-10-81 Antonio Lisan 98,900.00
7-3688945-6 8-10-81 Antonio Lisan 97,700.00
7-4535674-1 8-21-81 Golden City Trading 95,300.00
7-4535675-2 8-21-81 Red Arrow Trading 96,400.00
7-4535699-5 8-24-81 Antonio Lisan 94,200.00
7-4535700-6 8-24-81 Antonio Lisan 95,100.00
7-4697902-2 9-18-81 Ace Enterprises, Inc. 96,000.00
7-4697925-6 9-18-81 Golden City Trading 93,030.00
7-4697011-6 10-02-81 Wintrade Marketing 90,960.00
7-4697909-4 10-02-81 ABC Trading, Inc. 99,300.00
7-4697922-3 10-05-81 Golden Enterprises 96,630.00

The checks were deposited on the following dates for the following accounts:

Check Number Date Deposited Account Deposited

7-3694621-4 7-23-81 CA 0060 02360 3
7-3694609-6 7-28-81 CA 0060 02360 3
7-3666224-4 8-4-81 CA 0060 02360 3
7-3528348-4 8-11-81 CA 0060 02360 3
7-3666225-5 8-11-81 SA 0061 32331 7
7-3688945-6 8-17-81 CA 0060 30982 5
7-4535674-1 8-26-81 CA 0060 02360 3
7-4535675-2 8-27-81 CA 0060 02360 3
7-4535699-5 8-31-81 CA 0060 30982 5
7-4535700-6 8-24-81 SA 0061 32331 7
7-4697902-2 9-23-81 CA 0060 02360 3
7-4697925-6 9-23-81 CA 0060 30982 5
7-4697011-6 10-7-81 CA 0060 02360 3
7-4697909-4 10-7-81 CA 0060 30982 56

After 24 hours from submission of the checks to respondent for clearing, petitioner paid the value of the checks and allowed the
withdrawals of the deposits. However, on 14 October 1981, respondent returned all the checks to petitioner without clearing them on
the ground that they were materially altered. Thus, petitioner instituted an action for collection of sums of money against respondent to
recover the value of the checks.

The Ruling of the Trial Court

The trial court ruled that respondent is expected to use reasonable business practices in accepting and paying the checks presented to
it. Thus, respondent cannot be faulted for the delay in clearing the checks considering the ingenuity in which the alterations were
effected. The trial court observed that there was no attempt from petitioner to verify the status of the checks before petitioner paid the
value of the checks or allowed withdrawal of the deposits. According to the trial court, petitioner, as collecting bank, could have inquired
by telephone from respondent, as drawee bank, about the status of the checks before paying their value. Since the immediate cause of
petitioner’s loss was the lack of caution of its personnel, the trial court held that petitioner is not entitled to recover the value of the
checks from respondent.

The dispositive portion of the trial court’s Decision reads:

WHEREFORE, judgment is hereby rendered dismissing both the complaint and the counterclaim. Costs shall, however be
assessed against the plaintiff.

SO ORDERED.7

Petitioner appealed the trial court’s Decision before the Court of Appeals.

The Ruling of the Court of Appeals

In its 10 October 1991 Decision,8 the Court of Appeals reversed the trial court’s Decision. Applying Section 4(c) of Central Bank Circular
No. 580, series of 1977,9 the Court of Appeals held that checks that have been materially altered shall be returned within 24 hours after
discovery of the alteration. However, the Court of Appeals ruled that even if the drawee bank returns a check with material alterations
after discovery of the alteration, the return would not relieve the drawee bank from any liability for its failure to return the checks within
the 24-hour clearing period. The Court of Appeals explained:

Does this mean that, as long as the drawee bank returns a check with material alteration within 24 hour[s] after discovery of
such alteration, such return would have the effect of relieving the bank of any liability whatsoever despite its failure to return
the check within the 24- hour clearing house rule?

We do not think so.

 Obviously, such bank cannot be held liable for its failure to return the check in question not later than the next regular clearing.
However, this Court is of the opinion and so holds that it could still be held liable if it fails to exercise due diligence in verifying
the alterations made. In other words, such bank would still be expected, nay required, to make the proper verification before
the 24-hour regular clearing period lapses, or in cases where such lapses may be deemed inevitable, that the required
verification should be made within a reasonable time.

The implication of the rule that a check shall be returned within the 24-hour clearing period is that if the collecting bank paid
the check before the end of the aforesaid 24-hour clearing period, it would be responsible therefor such that if the said check is
dishonored and returned within the 24-hour clearing period, the drawee bank cannot be held liable. Would such an implication
apply in the case of materially altered checks returned within 24 hours after discovery? This Court finds nothing in the letter of
the above-cited C.B. Circular that would justify a negative answer. Nonetheless, the drawee bank could still be held liable in
certain instances. Even if the return of the check/s in question is done within 24 hours after discovery, if it can be shown that
the drawee bank had been patently negligent in the performance of its verification function, this Court finds no reason why the
said bank should be relieved of liability.

Although banking practice has it that the presumption of clearance is conclusive when it comes to the application of the 24-
hour clearing period, the same principle may not be applied to the 24-hour period vis-a-vis material alterations in the sense
that the drawee bank which returns materially altered checks within 24 hours after discovery would be conclusively relieved of
any liability thereon. This is because there could well be various intervening events or factors that could affect the rights and
obligations of the parties in cases such as the instant one including patent negligence on the part of the drawee bank resulting
in an unreasonable delay in detecting the alterations. While it is true that the pertinent proviso in C.B. Circular No. 580 allows
the drawee bank to return the altered check within the period "provided by law for filing a legal action", this does not mean that
this would entitle or allow the drawee bank to be grossly negligent and, inspite thereof, avail itself of the maximum period
allowed by the above-cited Circular. The discovery must be made within a reasonable time taking into consideration the facts
and circumstances of the case. In other words, the aforementioned C.B. Circular does not provide the drawee bank the license
to be grossly negligent on the one hand nor does it preclude the collecting bank from raising available defenses even if the
check is properly returned within the 24-hour period after discovery of the material alteration.10

The Court of Appeals rejected the trial court’s opinion that petitioner could have verified the status of the checks by telephone call since
such imposition is not required under Central Bank rules. The dispositive portion of the 10 October 1991 Decision reads:

PREMISES CONSIDERED, the decision appealed from is hereby REVERSED and the defendant-appellee Philippine National
Bank is declared liable for the value of the fifteen checks specified and enumerated in the decision of the trial court (page 3) in
the amount of P1,447,920.00

SO ORDERED.11

Respondent filed a motion for reconsideration of the 10 October 1991 Decision. In its 9 August 1994 Amended Decision, the Court of
Appeals reversed itself and affirmed the Decision of the trial court dismissing the complaint.

In reversing itself, the Court of Appeals held that its 10 October 1991 Decision failed to appreciate that the rule on the return of altered
checks within 24 hours from the discovery of the alteration had been duly passed by the Central Bank and accepted by the members of
the banking system. Until the rule is repealed or amended, the rule has to be applied.

Petitioner moved for the reconsideration of the Amended Decision. In its 16 July 1997 Resolution, the Court of Appeals denied the
motion for lack of merit.

Hence, the recourse to this Court.

The Issues

Petitioner raises the following issues in its Memorandum:

1. Whether the checks were materially altered;

2. Whether respondent was negligent in failing to recognize within a reasonable period the altered checks and in not returning
the checks within the period; and

3. Whether the motion for reconsideration filed by respondent was out of time thus making the 10 October 1991 Decision final
and executory.12

The Ruling of This Court

Filing of the Petition under both Rules 45 and 65

Respondent asserts that the petition should be dismissed outright since petitioner availed of a wrong mode of appeal. Respondent
cites Ybañez v. Court of Appeals13 where the Court ruled that "a petition cannot be subsumed simultaneously under Rule 45 and Rule
65 of the Rules of Court, and neither may petitioners delegate upon the court the task of determining under which rule the petition
should fall."

The remedies of appeal and certiorari are mutually exclusive and not alternative or successive.14 However, this Court may set aside
technicality for justifiable reasons. The petition before the Court is clearly meritorious. Further, the petition was filed on time both under
Rules 45 and 65.15 Hence, in accordance with the liberal spirit which pervades the Rules of Court and in the interest of justice,16 we will
treat the petition as having been filed under Rule 45.

Alteration of Serial Number Not Material

The alterations in the checks were made on their serial numbers.

Sections 124 and 125 of Act No. 2031, otherwise known as the Negotiable Instruments Law, provide:

SEC. 124. Alteration of instrument; effect of. ― Where a negotiable instrument is materially altered without the assent of all
parties liable thereon, it is avoided, except as against a party who has himself made, authorized, or assented to the alteration
and subsequent indorsers.

But when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration,
he may enforce payment thereof according to its original tenor.

SEC. 125. What constitutes a material alteration. ― Any alteration which changes:

(a) The date;

(b) The sum payable, either for principal or interest;

(c) The time or place of payment;

(d) The number or the relations of the parties;

(e) The medium or currency in which payment is to be made;

or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the
effect of the instrument in any respect, is a material alteration.

The question on whether an alteration of the serial number of a check is a material alteration under the Negotiable Instruments Law is
already a settled matter. In Philippine National Bank v. Court of Appeals, this Court ruled that the alteration on the serial number of a
check is not a material alteration. Thus:

An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument
that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other
change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which
changes the items which are required to be stated under Section 1 of the Negotiable Instrument[s] Law.

Section 1 of the Negotiable Instruments Law provides:

Section 1. ― Form of negotiable instruments. An instrument to be negotiable must conform to the following requirements:

(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.

In his book entitled "Pandect of Commercial Law and Jurisprudence," Justice Jose C. Vitug opines that "an innocent alteration
(generally, changes on items other than those required to be stated under Sec. 1, N.I.L.) and spoliation (alterations done by a
stranger) will not avoid the instrument, but the holder may enforce it only according to its original tenor.

xxxx

The case at the bench is unique in the sense that what was altered is the serial number of the check in question, an item
which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments
Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee
were not altered. The intended payee was the same. The sum of money due to the payee remained the same. x x x

xxxx

The check’s serial number is not the sole indication of its origin. As succinctly found by the Court of Appeals, the name of the
government agency which issued the subject check was prominently printed therein. The check’s issuer was therefore
sufficiently identified, rendering the referral to the serial number redundant and inconsequential. x x x

xxxx

Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number was altered, the same
being an immaterial or innocent one.17

Likewise, in the present case the alterations of the serial numbers do not constitute material alterations on the checks.
Incidentally, we agree with the petitioner’s observation that the check in the PNB case appears to belong to the same batch of checks
as in the present case. The check in the PNB case was also issued by the Ministry of Education and Culture. It was also drawn against
PNB, respondent in this case. The serial number of the check in the PNB case is 7-3666-223-3 and it was issued on 7 August 1981.

Timeliness of Filing of Respondent’s Motion for Reconsideration

Respondent filed its motion for reconsideration of the 10 October 1991 Decision on 6 November 1991. Respondent’s motion for
reconsideration states that it received a copy of the 10 October 1991 Decision on 22 October 1991. 18 Thus, it appears that the motion
for reconsideration was filed on time. However, the Registry Return Receipt shows that counsel for respondent or his agent received a
copy of the 10 October 1991 Decision on 16 October 1991, 19 not on 22 October 1991 as respondent claimed. Hence, the Court of
Appeals is correct when it noted that the motion for reconsideration was filed late. Despite its late filing, the Court of Appeals resolved to
admit the motion for reconsideration "in the interest of substantial justice."20

There are instances when rules of procedure are relaxed in the interest of justice. However, in this case, respondent did not proffer any
explanation for the late filing of the motion for reconsideration. Instead, there was a deliberate attempt to deceive the Court of Appeals
by claiming that the copy of the 10 October 1991 Decision was received on 22 October 1991 instead of on 16 October 1991. We find no
justification for the posture taken by the Court of Appeals in admitting the motion for reconsideration. Thus, the late filing of the motion
for reconsideration rendered the 10 October 1991 Decision final and executory.

The 24-Hour Clearing Time

The Court will not rule on the proper application of Central Bank Circular No. 580 in this case. Since there were no material alterations
on the checks, respondent as drawee bank has no right to dishonor them and return them to petitioner, the collecting bank. 21 Thus,
respondent is liable to petitioner for the value of the checks, with legal interest from the time of filing of the complaint on 16 March 1982
until full payment.22 Further, considering that respondent’s motion for reconsideration was filed late, the 10 October 1991 Decision,
which held respondent liable for the value of the checks amounting to P1,447,920, had become final and executory.

WHEREFORE, we SET ASIDE the 9 August 1994 Amended Decision and the 16 July 1997 Resolution of the Court of Appeals. We
rule that respondent Philippine National Bank is liable to petitioner International Corporate Bank, Inc. for the value of the checks
amounting to P1,447,920, with legal interest from 16 March 1982 until full payment. Costs against respondent.

SO ORDERED.

G.R. No. 176664 July 21, 2008

BANK OF THE PHILIPPINE ISLANDS, Petitioner,

vs.
SPOUSES REYNALDO AND VICTORIA ROYECA, Respondents.

DECISION

NACHURA, J.:

Bank of the Philippine Islands (BPI) seeks a review of the Court of Appeals (CA) Decision1 dated July 12, 2006, and Resolution2 dated
February 13, 2007, which dismissed its complaint for replevin and damages and granted the respondents’ counterclaim for damages.

The case stems from the following undisputed facts:

On August 23, 1993, spouses Reynaldo and Victoria Royeca (respondents) executed and delivered to Toyota Shaw, Inc. a Promissory
Note3 for ₱577,008.00 payable in 48 equal monthly installments of ₱12,021.00, with a maturity date of August 18, 1997. The
Promissory Note provides for a penalty of 3% for every month or fraction of a month that an installment remains unpaid.

To secure the payment of said Promissory Note, respondents executed a Chattel Mortgage 4 in favor of Toyota over a certain motor
vehicle, more particularly described as follows:

<
p>Make and Type 1993 Toyota Corolla 1.3 XL

Motor No. 2E-2649879

Serial No. EE100-9512571

Color D.B. Gray Met.

Toyota, with notice to respondents, executed a Deed of Assignment 5 transferring all its rights, title, and interest in the Chattel Mortgage
to Far East Bank and Trust Company (FEBTC).

Claiming that the respondents failed to pay four (4) monthly amortizations covering the period from May 18, 1997 to August 18, 1997,
FEBTC sent a formal demand to respondents on March 14, 2000 asking for the payment thereof, plus penalty.6 The respondents
refused to pay on the ground that they had already paid their obligation to FEBTC.

On April 19, 2000, FEBTC filed a Complaint for Replevin and Damages against the respondents with the Metropolitan Trial Court
(MeTC) of Manila praying for the delivery of the vehicle, with an alternative prayer for the payment of ₱48,084.00 plus interest and/or
late payment charges at the rate of 36% per annum from May 18, 1997 until fully paid. The complaint likewise prayed for the payment
of ₱24,462.73 as attorney’s fees, liquidated damages, bonding fees and other expenses incurred in the seizure of the vehicle. The
complaint was later amended to substitute BPI as plaintiff when it merged with and absorbed FEBTC. 7

In their Answer, respondents alleged that on May 20, 1997, they delivered to the Auto Financing Department of FEBTC eight (8)
postdated checks in different amounts totaling ₱97,281.78. The Acknowledgment Receipt, 8 which they attached to the Answer, showed
that FEBTC received the following checks:

DATE BANK CHECK NO. AMOUNT

26 May 97 Landbank #610945 ₱13,824.15
6 June 97 Head Office #610946 12,381.63
30 May 97 FEBTC #17A00-11550P 12,021.00
15 June 97 Shaw Blvd. #17A00-11549P 12,021.00
30 June 97 " #17A00-11551P 12,021.00
18 June 97 Landbank #610947 11,671.00
18 July 97 Head Office #610948 11,671.00
18 August 97 #610949 11,671.00

The respondents further averred that they did not receive any notice from the drawee banks or from FEBTC that these checks were
dishonored. They explained that, considering this and the fact that the checks were issued three years ago, they believed in good faith
that their obligation had already been fully paid. They alleged that the complaint is frivolous and plainly vexatious. They then prayed that
they be awarded moral and exemplary damages, attorney’s fees and costs of suit. 9

During trial, Mr. Vicente Magpusao testified that he had been connected with FEBTC since 1994 and had assumed the position of
Account Analyst since its merger with BPI. He admitted that they had, in fact, received the eight checks from the respondents.
However, two of these checks (Landbank Check No. 0610947 and FEBTC Check No. 17A00-11551P) amounting to ₱23,692.00 were
dishonored. He recalled that the remaining two checks were not deposited anymore due to the previous dishonor of the two checks. He
said that after deducting these payments, the total outstanding balance of the obligation was ₱48,084.00, which represented the last
four monthly installments.

On February 23, 2005, the MeTC dismissed the case and granted the respondents’ counterclaim for damages, thus:

WHEREFORE, judgment is hereby rendered dismissing the complaint for lack of cause of action, and on the counterclaim, plaintiff is
ordered to indemnify the defendants as follows:

a) The sum of PhP30,000.00 as and by way of moral damages;

b) The sum of PhP30,000.00 as and by way of exemplary damages;

c) The sum of PhP20,000.00 as and by way of attorney’s fees; and

d) To pay the costs of the suit.

SO ORDERED.10

On appeal, the Regional Trial Court (RTC) set aside the MeTC Decision and ordered the respondents to pay the amount claimed by the
petitioner. The dispositive portion of its Decision 11 dated August 11, 2005 reads:

WHEREFORE, premises considered, the Decision of the Metropolitan Trial Court, Branch 9 dated February 23, 2005 is REVERSED
and a new one entered directing the defendants-appellees to pay the plaintiff-appellant, jointly and severally,

1. The sum of ₱48,084.00 plus interest and/or late payment charges thereon at the rate of 36% per annum from May 18, 1997
until fully paid;

2. The sum of ₱10,000.00 as attorney’s fees; and

3. The costs of suit.

SO ORDERED.12

The RTC denied the respondents’ motion for reconsideration. 13

The respondents elevated the case to the Court of Appeals (CA) through a petition for review. They succeeded in obtaining a favorable
judgment when the CA set aside the RTC’s Decision and reinstated the MeTC’s Decision on July 12, 2006. 14 On February 13, 2007, the
CA denied the petitioner’s motion for reconsideration. 15

The issues submitted for resolution in this petition for review are as follows:

I. WHETHER OR NOT RESPONDENTS WERE ABLE TO PROVE FULL PAYMENT OF THEIR OBLIGATION AS ONE OF
THEIR AFFIRMATIVE DEFENSES.
 II. WHETHER OR NOT TENDER OF CHECKS CONSTITUTES PAYMENT.

III. WHETHER OR NOT RESPONDENTS ARE ENTITLED TO MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S
FEES.16

The petitioner insists that the respondents did not sufficiently prove the alleged payment. It avers that, under the law and existing
jurisprudence, delivery of checks does not constitute payment. It points out that this principle stands despite the fact that there was no
notice of dishonor of the two checks and the demand to pay was made three years after default.

On the other hand, the respondents postulate that they have established payment of the amount being claimed by the petitioner and,
unless the petitioner proves that the checks have been dishonored, they should not be made liable to pay the obligation again.17

The petition is partly meritorious.

In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence, or evidence which is more
convincing to the court as worthy of belief than that which is offered in opposition thereto. 18Thus, the party, whether plaintiff or
defendant, who asserts the affirmative of an issue has the onus to prove his assertion in order to obtain a favorable judgment. For the
plaintiff, the burden to prove its positive assertions never parts. For the defendant, an affirmative defense is one which is not a denial of
an essential ingredient in the plaintiff’s cause of action, but one which, if established, will be a good defense – i.e. an "avoidance" of the
claim.19

In Jimenez v. NLRC,20 cited by both the RTC and the CA, the Court elucidated on who, between the plaintiff and defendant, has the
burden to prove the affirmative defense of payment:

As a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the general
rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment. The debtor has the
burden of showing with legal certainty that the obligation has been discharged by payment.

When the existence of a debt is fully established by the evidence contained in the record, the burden of proving that it has been
extinguished by payment devolves upon the debtor who offers such a defense to the claim of the creditor. Where the debtor introduces
some evidence of payment, the burden of going forward with the evidence - as distinct from the general burden of proof - shifts to the
creditor, who is then under a duty of producing some evidence to show non-payment.21

In applying these principles, the CA and the RTC, however, arrived at different conclusions. While both agreed that the respondents
had the burden of proof to establish payment, the two courts did not agree on whether the respondents were able to present sufficient
evidence of payment — enough to shift the burden of evidence to the petitioner. The RTC found that the respondents failed to
discharge this burden because they did not introduce evidence of payment, considering that mere delivery of checks does not
constitute payment.22 On the other hand, the CA concluded that the respondents introduced sufficient evidence of payment, as
opposed to the petitioner, which failed to produce evidence that the checks were in fact dishonored. It noted that the petitioner could
have easily presented the dishonored checks or the advice of dishonor and required respondents to replace the dishonored checks but
none was presented. Further, the CA remarked that it is absurd for a bank, such as petitioner, to demand payment of a failed
amortization only after three years from the due date.

The divergence in this conflict of opinions can be narrowed down to the issue of whether the Acknowledgment Receipt was sufficient
proof of payment. As correctly observed by the RTC, this is only proof that respondents delivered eight checks in payment of the
amount due. Apparently, this will not suffice to establish actual payment.

Settled is the rule that payment must be made in legal tender. A check is not legal tender and, therefore, cannot constitute a valid
tender of payment.23 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. 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.24

To establish their defense, the respondents therefore had to present proof, not only that they delivered the checks to the petitioner, but
also that the checks were encashed. The respondents failed to do so. Had the checks been actually encashed, the respondents could
have easily produced the cancelled checks as evidence to prove the same. Instead, they merely averred that they believed in good faith
that the checks were encashed because they were not notified of the dishonor of the checks and three years had already lapsed since
they issued the checks.1avvphi1

Because of this failure of the respondents to present sufficient proof of payment, it was no longer necessary for the petitioner to prove
non-payment, particularly proof that the checks were dishonored. The burden of evidence is shifted only if the party upon whom it is
lodged was able to adduce preponderant evidence to prove its claim.25

To stress, the obligation to prove that the checks were not dishonored, but were in fact encashed, fell upon the respondents who would
benefit from such fact. That payment was effected through the eight checks was the respondents’ affirmative allegation that they had to
establish with legal certainty. If the petitioner were seeking to enforce liability upon the check, the burden to prove that a notice of
dishonor was properly given would have devolved upon it. 26 The fact is that the petitioner’s cause of action was based on the original
obligation as evidenced by the Promissory Note and the Chattel Mortgage, and not on the checks issued in payment thereof.

Further, it should be noted that the petitioner, as payee, did not have a legal obligation to inform the respondents of the dishonor of the
checks. A notice of dishonor is required only to preserve the right of the payee to recover on the check. It preserves the liability of the
drawer and the indorsers on the check. Otherwise, if the payee fails to give notice to them, they are discharged from their liability
thereon, and the payee is precluded from enforcing payment on the check. The respondents, therefore, cannot fault the petitioner for
not notifying them of the non-payment of the checks because whatever rights were transgressed by such omission belonged only to the
petitioner.

In all, we find that the evidence at hand preponderates in favor of the petitioner. The petitioner’s possession of the documents
pertaining to the obligation strongly buttresses its claim that the obligation has not been extinguished. The creditor’s possession of the
evidence of debt is proof that the debt has not been discharged by payment. 27 A promissory note in the hands of the creditor is a proof
of indebtedness rather than proof of payment. 28 In an action for replevin by a mortgagee, it is prima facie evidence that the promissory
note has not been paid.29 Likewise, an uncanceled mortgage in the possession of the mortgagee gives rise to the presumption that the
mortgage debt is unpaid.30

Finally, the respondents posit that the petitioner’s claim is barred by laches since it has been three years since the checks were issued.
We do not agree. Laches is a recourse in equity. Equity, however, is applied only in the absence, never in contravention, of statutory
law. Thus, laches cannot, as a rule, abate a collection suit filed within the prescriptive period mandated by the New Civil Code.31 The
petitioner’s action was filed within the ten-year prescriptive period provided under Article 1144 of the New Civil Code. Hence, there is no
room for the application of laches.

Nonetheless, the Court cannot ignore what the respondents have consistently raised — that they were not notified of the non-payment
of the checks. Reasonable banking practice and prudence dictates that, when a check given to a creditor bank in payment of an
obligation is dishonored, the bank should immediately return it to the debtor and demand its replacement or payment lest it causes any
prejudice to the drawer. In light of this and the fact that the obligation has been partially paid, we deem it just and equitable to reduce
the 3% per month penalty charge as stipulated in the Promissory Note to 12% per annum. 32 Although a court is not at liberty to ignore
the freedom of the parties to agree on such terms and conditions as they see fit, as long as they contravene no law, morals, good
customs, public order or public policy, a stipulated penalty, nevertheless, may be equitably reduced by the courts if it is iniquitous or
unconscionable, or if the principal obligation has been partly or irregularly complied with. 33

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated July 12, 2006, and
Resolution dated February 13, 2007, are REVERSED and SET ASIDE. The Decision of the Regional Trial Court, dated August 11,
2005, is REINSTATED with the MODIFICATION that respondents are ordered to deliver the possession of the subject vehicle, or in the
alternative, pay the petitioner ₱48,084.00 plus late penalty charges/interest thereon at the rate of 12% per annum from May 18, 1997
until fully paid.

SO ORDERED.

G.R. No. 138074 August 15, 2003

CELY YANG, Petitioner,

vs.
HON. COURT OF APPEALS, PHILIPPINE COMMERCIAL INTERNATIONAL BANK, FAR EAST BANK & TRUST CO., EQUITABLE
BANKING CORPORATION, PREM CHANDIRAMANI and FERNANDO DAVID, Respondents.

DECISION

QUISUMBING, J.:

For review on certiorari is the decision1 of the Court of Appeals, dated March 25, 1999, in CA-G.R. CV No. 52398, which affirmed with
modification the joint decision of the Regional Trial Court (RTC) of Pasay City, Branch 117, dated July 4, 1995, in Civil Cases Nos.
54792 and 5492.3 The trial court dismissed the complaint against herein respondents Far East Bank & Trust Company (FEBTC),
Equitable Banking Corporation (Equitable), and Philippine Commercial International Bank (PCIB) and ruled in favor of respondent
Fernando David as to the proceeds of the two cashier’s checks, including the earnings thereof pendente lite. Petitioner Cely Yang was
ordered to pay David moral damages of ₱100,000.00 and attorney’s fees also in the amount of ₱100,000.00.

The facts of this case are not disputed, to wit:

On or before December 22, 1987, petitioner Cely Yang and private respondent Prem Chandiramani entered into an agreement whereby
the latter was to give Yang a PCIB manager’s check in the amount of ₱4.2 million in exchange for two (2) of Yang’s manager’s checks,
each in the amount of ₱2.087 million, both payable to the order of private respondent Fernando David. Yang and Chandiramani agreed
that the difference of ₱26,000.00 in the exchange would be their profit to be divided equally between them.

Yang and Chandiramani also further agreed that the former would secure from FEBTC a dollar draft in the amount of US$200,000.00,
payable to PCIB FCDU Account No. 4195-01165-2, which Chandiramani would exchange for another dollar draft in the same amount to
be issued by Hang Seng Bank Ltd. of Hong Kong.

Accordingly, on December 22, 1987, Yang procured the following:

a) Equitable Cashier’s Check No. CCPS 14-009467 in the sum of ₱2,087,000.00, dated December 22, 1987, payable to the
order of Fernando David;

b) FEBTC Cashier’s Check No. 287078, in the amount of ₱2,087,000.00, dated December 22, 1987, likewise payable to the
order of Fernando David; and

c) FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New York, in the amount of US$200,000.00, dated December 22,
1987, payable to PCIB FCDU Account No. 4195-01165-2.

At about one o’clock in the afternoon of the same day, Yang gave the aforementioned cashier’s checks and dollar drafts to her business
associate, Albert Liong, to be delivered to Chandiramani by Liong’s messenger, Danilo Ranigo. Ranigo was to meet Chandiramani at
Philippine Trust Bank, Ayala Avenue, Makati City, Metro Manila where he would turn over Yang’s cashier’s checks and dollar draft to
Chandiramani who, in turn, would deliver to Ranigo a PCIB manager’s check in the sum of P4.2 million and a Hang Seng Bank dollar
draft for US$200,000.00 in exchange.

Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the two cashier’s checks and the dollar draft bought by
petitioner. Ranigo reported the alleged loss of the checks and the dollar draft to Liong at half past four in the afternoon of December 22,
1987. Liong, in turn, informed Yang, and the loss was then reported to the police.
It transpired, however, that the checks and the dollar draft were not lost, for Chandiramani was able to get hold of said instruments,
without delivering the exchange consideration consisting of the PCIB manager’s check and the Hang Seng Bank dollar draft.

At three o’clock in the afternoon or some two (2) hours after Chandiramani and Ranigo were to meet in Makati City, Chandiramani
delivered to respondent Fernando David at China Banking Corporation branch in San Fernando City, Pampanga, the following: (a)
FEBTC Cashier’s Check No. 287078, dated December 22, 1987, in the sum of ₱2.087 million; and (b) Equitable Cashier’s Check No.
CCPS 14-009467, dated December 22, 1987, also in the amount of ₱2.087 million. In exchange, Chandiramani got US$360,000.00
from David, which Chandiramani deposited in the savings account of his wife, Pushpa Chandiramani; and his mother, Rani Reynandas,
who held FCDU Account No. 124 with the United Coconut Planters Bank branch in Greenhills, San Juan, Metro Manila. Chandiramani
also deposited FEBTC Dollar Draft No. 4771, dated December 22, 1987, drawn upon the Chemical Bank, New York for US$200,000.00
in PCIB FCDU Account No. 4195-01165-2 on the same date.

Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost. Both banks complied
with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft No.
4771, thus enabling the holder of PCIB FCDU Account No. 4195-01165-2 to receive the amount of US$200,000.00.

On December 28, 1987, herein petitioner Yang lodged a Complaint 4 for injunction and damages against Equitable, Chandiramani, and
David, with prayer for a temporary restraining order, with the Regional Trial Court of Pasay City. The Complaint was docketed as Civil
Case No. 5479. The Complaint was subsequently amended to include a prayer for Equitable to return to Yang the amount of P2.087
million, with interest thereon until fully paid.5

On January 12, 1988, Yang filed a separate case for injunction and damages, with prayer for a writ of preliminary injunction against
FEBTC, PCIB, Chandiramani and David, with the RTC of Pasay City, docketed as Civil Case No. 5492. This complaint was later
amended to include a prayer that defendants therein return to Yang the amount of P2.087 million, the value of FEBTC Dollar Draft No.
4771, with interest at 18% annually until fully paid. 6

On February 9, 1988, upon the filing of a bond by Yang, the trial court issued a writ of preliminary injunction in Civil Case No. 5479. A
writ of preliminary injunction was subsequently issued in Civil Case No. 5492 also.

Meanwhile, herein respondent David moved for dismissal of the cases against him and for reconsideration of the Orders granting the
writ of preliminary injunction, but these motions were denied. David then elevated the matter to the Court of Appeals in a special civil
action for certiorari docketed as CA-G.R. SP No. 14843, which was dismissed by the appellate court.

As Civil Cases Nos. 5479 and 5492 arose from the same set of facts, the two cases were consolidated. The trial court then conducted
pre-trial and trial of the two cases, but the proceedings had to be suspended after a fire gutted the Pasay City Hall and destroyed the
records of the courts.

After the records were reconstituted, the proceedings resumed and the parties agreed that the money in dispute be invested in
Treasury Bills to be awarded in favor of the prevailing side. It was also agreed by the parties to limit the issues at the trial to the
following:

1. Who, between David and Yang, is legally entitled to the proceeds of Equitable Banking Corporation (EBC) Cashier’s Check
No. CCPS 14-009467 in the sum of ₱2,087,000.00 dated December 22, 1987, and Far East Bank and Trust Company
(FEBTC) Cashier’s Check No. 287078 in the sum of ₱2,087,000.00 dated December 22, 1987, together with the earnings
derived therefrom pendente lite?

2. Are the defendants FEBTC and PCIB solidarily liable to Yang for having allowed the encashment of FEBTC Dollar Draft No.
4771, in the sum of US$200,000.00 plus interest thereon despite the stop payment order of Cely Yang? 7

On July 4, 1995, the trial court handed down its decision in Civil Cases Nos. 5479 and 5492, to wit:

WHEREFORE, the Court renders judgment in favor of defendant Fernando David against the plaintiff Cely Yang and declaring the
former entitled to the proceeds of the two (2) cashier’s checks, together with the earnings derived therefrom pendente lite; ordering the
plaintiff to pay the defendant Fernando David moral damages in the amount of ₱100,000.00; attorney’s fees in the amount of
₱100,000.00 and to pay the costs. The complaint against Far East Bank and Trust Company (FEBTC), Philippine Commercial
International Bank (PCIB) and Equitable Banking Corporation (EBC) is dismissed. The decision is without prejudice to whatever action
plaintiff Cely Yang will file against defendant Prem Chandiramani for reimbursement of the amounts received by him from defendant
Fernando David.

SO ORDERED.8

In finding for David, the trial court ratiocinated:

The evidence shows that defendant David was a holder in due course for the reason that the cashier’s checks were complete on their
face when they were negotiated to him. They were not yet overdue when he became the holder thereof and he had no notice that said
checks were previously dishonored; he took the cashier’s checks in good faith and for value. He parted some $200,000.00 for the two
(2) cashier’s checks which were given to defendant Chandiramani; he had also no notice of any infirmity in the cashier’s checks or
defect in the title of the drawer. As a matter of fact, he asked the manager of the China Banking Corporation to inquire as to the
genuineness of the cashier’s checks (tsn, February 5, 1988, p. 21, September 20, 1991, pp. 13-14). Another proof that defendant David
is a holder in due course is the fact that the stop payment order on [the] FEBTC cashier’s check was lifted upon his inquiry at the head
office (tsn, September 20, 1991, pp. 24-25). The apparent reason for lifting the stop payment order was because of the fact that FEBTC
realized that the checks were not actually lost but indeed reached the payee defendant David. 9

Yang then moved for reconsideration of the RTC judgment, but the trial court denied her motion in its Order of September 20, 1995.

In the belief that the trial court misunderstood the concept of a holder in due course and misapprehended the factual milieu, Yang
seasonably filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 52398.
On March 25, 1999, the appellate court decided CA-G.R. CV No. 52398 in this wise:

WHEREFORE, this court AFFIRMS the judgment of the lower court with modification and hereby orders the plaintiff-appellant to pay
defendant-appellant PCIB the amount of Twenty-Five Thousand Pesos (₱25,000.00).

SO ORDERED.10

In affirming the trial court’s judgment with respect to herein respondent David, the appellate court found that:

In this case, defendant-appellee had taken the necessary precautions to verify, through his bank, China Banking Corporation, the
genuineness of whether (sic) the cashier’s checks he received from Chandiramani. As no stop payment order was made yet (at) the
time of the inquiry, defendant-appellee had no notice of what had transpired earlier between the plaintiff-appellant and Chandiramani.
All he knew was that the checks were issued to Chandiramani with whom he was he had (sic) a transaction. Further on, David received
the checks in question in due course because Chandiramani, who at the time the checks were delivered to David, was acting as Yang’s
agent.

David had no notice, real or constructive, cogent for him to make further inquiry as to any infirmity in the instrument(s) and defect of title
of the holder. To mandate that each holder inquire about every aspect on how the instrument came about will unduly impede
commercial transactions, Although negotiable instruments do not constitute legal tender, they often take the place of money as
a means of payment.

The mere fact that David and Chandiramani knew one another for a long time is not sufficient to establish that they connived with each
other to defraud Yang. There was no concrete proof presented by Yang to support her theory. 11

The appellate court awarded ₱25,000.00 in attorney’s fees to PCIB as it found the action filed by Yang against said bank to be "clearly
unfounded and baseless." Since PCIB was compelled to litigate to protect itself, then it was entitled under Article 2208 12 of the Civil
Code to attorney’s fees and litigation expenses.

Hence, the instant recourse wherein petitioner submits the following issues for resolution:

a - WHETHER THE CHECKS WERE ISSUED TO PREM CHANDIRAMANI BY PETITIONER;

b - WHETHER THE ALLEGED TRANSACTION BETWEEN PREM CHANDIRAMANI AND FERNANDO DAVID IS
LEGITIMATE OR A SCHEME BY BOTH PRIVATE RESPONDENTS TO SWINDLE PETITIONER;

c - WHETHER FERNANDO DAVID GAVE PREM CHANDIRAMANI US$360,000.00 OR JUST A FRACTION OF THE
AMOUNT REPRESENTING HIS SHARE OF THE LOOT;

d - WHETHER PRIVATE RESPONDENTS FERNANDO DAVID AND PCIB ARE ENTITLED TO DAMAGES AND
ATTORNEY’S FEES.13

At the outset, we must stress that this is a petition for review under Rule 45 of the 1997 Rules of Civil Procedure. It is basic that in
petitions for review under Rule 45, the jurisdiction of this Court is limited to reviewing questions of law, questions of fact are not
entertained absent a showing that the factual findings complained of are totally devoid of support in the record or are glaringly
erroneous.14 Given the facts in the instant case, despite petitioner’s formulation, we find that the following are the pertinent issues to be
resolved:

a) Whether the Court of Appeals erred in holding herein respondent Fernando David to be a holder in due course; and

b) Whether the appellate court committed a reversible error in awarding damages and attorney’s fees to David and PCIB.

On the first issue, petitioner Yang contends that private respondent Fernando David is not a holder in due course of the checks in
question. While it is true that he was named the payee thereof, David failed to inquire from Chandiramani about how the latter acquired
possession of said checks. Given his failure to do so, it cannot be said that David was unaware of any defect or infirmity in the title of
Chandiramani to the checks at the time of their negotiation. Moreover, inasmuch as the checks were crossed, then David should have,
pursuant to our ruling in Bataan Cigar & Cigarette Factory, Inc. v. Court of Appeals, G.R. No. 93048, March 3, 1994, 230 SCRA 643,
been put on guard that the checks were issued for a definite purpose and accordingly, made inquiries to determine if he received the
checks pursuant to that purpose. His failure to do so negates the finding in the proceedings below that he was a holder in due course.

Finally, the petitioner argues that there is no showing whatsoever that David gave Chandiramani any consideration of value in
exchange for the aforementioned checks.

Private respondent Fernando David counters that the evidence on record shows that when he received the checks, he verified their
genuineness with his bank, and only after said verification did he deposit them. David stresses that he had no notice of previous
dishonor or any infirmity that would have aroused his suspicions, the instruments being complete and regular upon their face. David
stresses that the checks in question were cashier’s checks. From the very nature of cashier’s checks, it is highly unlikely that he would
have suspected that something was amiss. David also stresses negotiable instruments are presumed to have been issued for valuable
consideration, and he who alleges otherwise must controvert the presumption with sufficient evidence. The petitioner failed to discharge
this burden, according to David. He points out that the checks were delivered to him as the payee, and he took them as holder and
payee thereof. Clearly, he concludes, he should be deemed to be their holder in due course.

We shall now resolve the first issue.

Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of
a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, 15meaning a "payee or indorsee of a bill or note,
who is in possession of it, or the bearer thereof."
In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that
a payee may be a holder in due course.16 Hence, the presumption that he is a prima facieholder in due course applies in his favor.
However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the
checks under the conditions provided for in Section 52 17 of the Negotiable Instruments Law. All the requisites provided for in Section 52
must concur in David’s case, otherwise he cannot be deemed a holder in due course.

We find that the petitioner’s challenge to David’s status as a holder in due course hinges on two arguments: (1) the lack of proof to
show that David tendered any valuable consideration for the disputed checks; and (2) David’s failure to inquire from Chandiramani as to
how the latter acquired possession of the checks, thus resulting in David’s intentional ignorance tantamount to bad faith. In sum,
petitioner posits that the last two requisites of Section 52 are missing, thereby preventing David from being considered a holder in due
course. Unfortunately for the petitioner, her arguments on this score are less than meritorious and far from persuasive.

First, with respect to consideration, Section 2418 of the Negotiable Instruments Law creates a presumption that every party to an
instrument acquired the same for a consideration 19 or for value.20 Thus, the law itself creates a presumption in David’s favor that he
gave valuable consideration for the checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of
the checks absent said consideration. In other words, the petitioner must present convincing evidence to overthrow the presumption.
Our scrutiny of the records, however, shows that the petitioner failed to discharge her burden of proof. The petitioner’s averment that
David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to
sustain it. Note that both the trial court and the appellate court found that David did not receive the checks gratis, but instead gave
Chandiramani US$360,000.00 as consideration for the said instruments. Factual findings of the Court of Appeals are conclusive on the
parties and not reviewable by this Court; they carry great weight when the factual findings of the trial court are affirmed by the appellate
court.21

Second, petitioner fails to point any circumstance which should have put David on inquiry as to the why and wherefore of the
possession of the checks by Chandiramani. David was not privy to the transaction between petitioner and Chandiramani. Instead,
Chandiramani and David had a separate dealing in which it was precisely Chandiramani’s duty to deliver the checks to David as payee.
The evidence shows that Chandiramani performed said task to the letter. Petitioner admits that David took the step of asking the
manager of his bank to verify from FEBTC and Equitable as to the genuineness of the checks and only accepted the same after being
assured that there was nothing wrong with said checks. At that time, David was not aware of any "stop payment" order. Under these
circumstances, David thus had no obligation to ascertain from Chandiramani what the nature of the latter’s title to the checks was, if
any, or the nature of his possession. Thus, we cannot hold him guilty of gross neglect amounting to legal absence of good faith, absent
any showing that there was something amiss about Chandiramani’s acquisition or possession of the checks. David did not close his
eyes deliberately to the nature or the particulars of a fraud allegedly committed by Chandiramani upon the petitioner, absent any
knowledge on his part that the action in taking the instruments amounted to bad faith.22

Belatedly, and we say belatedly since petitioner did not raise this matter in the proceedings below, petitioner now claims that David
should have been put on alert as the instruments in question were crossed checks. Pursuant to Bataan Cigar & Cigarette Factory, Inc.
v. Court of Appeals, David should at least have inquired as to whether he was acquiring said checks for the purpose for which they
were issued, according to petitioner’s submission.

Petitioner’s reliance on the Bataan Cigar case, however, is misplaced. The facts in the present case are not on all fours with Bataan
Cigar. In the latter case, the crossed checks were negotiated and sold at a discount by the payee, while in the instant case, the payee
did not negotiate further the checks in question but promptly deposited them in his bank account.

The Negotiable Instruments Law is silent with respect to crossed checks, although the Code of Commerce23 makes reference to such
instruments. Nonetheless, this Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left
hand corner means that it could only be deposited and not converted into cash. 24 The effects of crossing a check, thus, relates to the
mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named
therein. In Bataan Cigar, the rediscounting of the check by the payee knowingly violated the avowed intention of crossing the check.
Thus, in accepting the cross checks and paying cash for them, despite the warning of the crossing, the subsequent holder could not be
considered in good faith and thus, not a holder in due course. Our ruling in Bataan Cigar reiterates that in De Ocampo & Co. v.
Gatchalian.25

The factual circumstances in De Ocampo and in Bataan Cigar are not present in this case. For here, there is no dispute that the
crossed checks were delivered and duly deposited by David, the payee named therein, in his bank account. In other words, the purpose
behind the crossing of the checks was satisfied by the payee.

Proceeding to the issue of damages, petitioner merely argues that respondents David and PCIB are not entitled to damages, attorney’s
fees, and costs of suit as both acted in bad faith towards her, as shown by her version of the facts which gave rise to the instant case.

Respondent David counters that he was maliciously and unceremoniously dragged into this suit for reasons which have nothing to do
with him at all, but which arose from petitioner’s failure to receive her share of the profit promised her by
Chandiramani.1âwphi1 Moreover, in filing this suit which has lasted for over a decade now, the petitioner deprived David of the rightful
enjoyment of the two checks, to which he is entitled, under the law, compelled him to hire the services of counsel to vindicate his rights,
and subjected him to social humiliation and besmirched reputation, thus harming his standing as a person of good repute in the
business community of Pampanga. David thus contends that it is but proper that moral damages, attorney’s fees, and costs of suit be
awarded him.

For its part, respondent PCIB stresses that it was established by both the trial court and the appellate court that it was needlessly
dragged into this case. Hence, no error was committed by the appellate court in declaring PCIB entitled to attorney’s fees as it was
compelled to litigate to protect itself.

We have thoroughly perused the records of this case and find no reason to disagree with the finding of the trial court, as affirmed by the
appellate court, that:

[D]efendant David is entitled to [the] award of moral damages as he has been needlessly and unceremoniously dragged into this case
which should have been brought only between the plaintiff and defendant Chandiramani. 26
A careful reading of the findings of facts made by both the trial court and appellate court clearly shows that the petitioner, in including
David as a party in these proceedings, is barking up the wrong tree. It is apparent from the factual findings that David had no dealings
with the petitioner and was not privy to the agreement of the latter with Chandiramani. Moreover, any loss which the petitioner incurred
was apparently due to the acts or omissions of Chandiramani, and hence, her recourse should have been against him and not against
David. By needlessly dragging David into this case all because he and Chandiramani knew each other, the petitioner not only unduly
delayed David from obtaining the value of the checks, but also caused him anxiety and injured his business reputation while waiting for
its outcome. Recall that under Article 221727 of the Civil Code, moral damages include mental anguish, serious anxiety, besmirched
reputation, wounded feelings, social humiliation, and similar injury. Hence, we find the award of moral damages to be in order.

The appellate court likewise found that like David, PCIB was dragged into this case on unfounded and baseless grounds. Both were
thus compelled to litigate to protect their interests, which makes an award of attorney’s fees justified under Article 2208 (2)28 of the Civil
Code. Hence, we rule that the award of attorney’s fees to David and PCIB was proper.

WHEREFORE, the instant petition is DENIED. The assailed decision of the Court of Appeals, dated March 25, 1999, in CA-G.R. CV
No. 52398 is AFFIRMED. Costs against the petitioner.

SO ORDERED.

G.R. No. 126670 December 2, 1999

ERNESTO T. PACHECO and VIRGINIA O. PACHECO, petitioners,

vs.
HON. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

YNARES-SANTIAGO, J.:

Petitioner spouses are engaged in the construction business. Complainant Romualdo Vicencio was a former Judge and his wife, Luz
Vicencio, owns a pawnshop in Samar. On May 17, 1989, due to financial difficulties arising from the repeated delays in the payment of
their receivables for the construction projects from the DPWH, 1 petitioners were constrained to obtain a loan of P10,000.00 from Mrs.
Vicencio. The latter acceded. Instead of merely requiring a note of indebtedness, however, her husband Mr. Vicencio required
petitioners to issue an undated check as evidence of the loan which allegedly will not be presented to the bank. Despite being informed
by petitioners that their bank account no longer had any funds, Mrs. Vicencio insisted that issue the check, which according to her was
only a formality. Thus, petitioner Virginia Pacheco issued on May 17, 1989 an undated RCBC 2 check with number CT 101756 for
P10,000.00. However, she only received the amount of P9,000.00 as the 10% interest on the loan was already deducted. Mrs. Vicencio
also required Virginia's husband, herein petitioner Ernesto Pacheco, to sign the check on the same understanding that the check is not
to be encashed but merely intended as an evidence of indebtedness which cannot be negotiated.

On June 14, 1989, Virginia obtained another loan of P50,000.00 from Mrs. Vicencio. She received only P35,000.00 as the previous loan
of P10,000.00 as well as the 10% interest amounting to P5,000.00 on the new loan were deducted by the latter. With the payment of
the previous debt, Virginia asked for the return of the first check (RCBC check no. 101756) but Mrs. Vicencio told her that her filing clerk
was absent. Despite several demands for the return of the first check, Mrs. Vicencio told Virginia that they can no longer locate the
folder containing that check. For the new loan, she also required Virginia to issue three (3) more checks in various amounts — two
checks for P20,000.00 each and the third check for P10,000.00. Petitioners were not amendable to these requirements, but Mrs.
Vicencio insisted that they issue the same assuring them that the checks will not be presented to the banks but will merely serve as
guarantee for the loan since there was no promissory note required of them. Due to her dire financial needs, Virginia issued three
undated RCBC checks numbered 101783 and 101784 in the sum of P20,000.00 each and 101785 for P10,000.00, and again informed
Mrs. Vicencio that the cheeks cannot be encashed as the same were not funded. Petitioner Ernesto also signed the three checks as
required by Mrs. Vicencio on the same conditions as the first check.

On June 20 and July 21, 1989, petitioner Virginia obtained two more loans, one for P10,000.00 and another for P15,000.00. Again she
issued two more RCBC checks (No. 101768 for P10,000.00 and No. 101774 for P15,000.00) as required by Mrs. Vicencio with the
same assurance that the checks shall not be presented for payment but shall stand only as evidence of indebtedness in lieu of the
usual promissory note.

All the checks were undated at the time petitioners handed them to Mrs. Vicencio. The six checks represent a total obligation of
P85,000.00. However, since the loan of P10,000.00 under the first check was already paid when the amount thereof was deducted from
the proceeds of the second loan, the remaining account was only P75,000.00. Of this amount, petitioners were able to settle and pay in
cash P60,000.00 in July 1989. Petitioners never had any transaction nor ever dealt with Mrs. Vicencio's husband, the complainant
herein.

When the remaining balance of P15,000.00 on the loans became due and demandable, petitioners were not able to pay despite
demands to do so. On August 3, 1992, Mrs. Vicencio together with her husband and their daughter Lucille, went to petitioners'
residence to persuade Virginia to place the date "August 15, 1992" on checks nos. 101756 and 101774, although said checks were
respectively given undated to Mrs. Vicencio on May 17, 1989 and July 21, 1989. Check no. 101756 was required by Mrs. Vicencio to be
dated as additional guarantee for the P15,000.00 unpaid balance allegedly under check no. 101774. Despite being informed by
petitioner Virginia that their account with RCBC had been closed as early as August 17, 1989, Mrs. Vicencio and her daughter insisted
that she place a date on the checks allegedly so that it will become evidence of their indebtedness. The former reluctantly wrote the
date on the checks for fear that she might not be able to obtain future loans from Mrs. Vicencio.

Later, petitioners were surprised to receive on August 29, 1992 a demand letter from Mrs. Vicencio's spouse informing them that the
checks when presented for payment on August 25, 1992 were dishonored due to "Account Closed". Consequently, upon the complaint
of Mrs., Vicencio's husband with whom petitioners never had any transaction, two informations for estafa, defined in Article 315 (2) (d)
of the Revised Penal Code, were filed against them. The informations which were amended on April 1, 1993 alleged that petitioners
"through fraud and false pretenses and in payment of a diamond ring (gold necklace)" issued checks which when presented for
payment were dishonored due to account closed. 3 After entering a plea of not guilty during arraignment, petitioners were tried and
sentenced to suffer imprisonment and ordered to indemnify the complainant in the total amount of P25,000.00. 4 On appeal, the Court
of Appeals (CA) affirmed the decision of the court a quo. 5 Hence this petition.

Estafa may be committed in several ways. One of these is by postdating a check or issuing a check in payment of an obligation, as
provided in Article 315, paragraph 2(d) of the RPC, viz:

Art. 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned hereinbelow shall
be punished by:

xxx xxx xxx

2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with the
commission of the fraud:

xxx xxx xxx

(d) By postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank,
or his funds deposited therein were not sufficient to cover the amount of the check. The failure of the drawer of the
check to deposit the amount necessary to cover his check within three (3) days from receipt of notice from the bank
and/or the payee or holder that said check has been dishonored for lack or insufficiency of funds shall be prima
facie evidence of deceit constituting false pretense or fraudulent act.

The essential elements in order to sustain a conviction under the above paragraph are:

1. that the offender postdated or issued a check in payment of an payment obligation contracted at
the time the check was issued;

2. that such postdating or issuing a check was done when the offender had no funds in the bank, or
his funds deposited therein were not sufficient to cover the amount of the check;

3. deceit or damage to the payee thereof. 6

The first and third elements are not present in this case. A check has the character of negotiability and at the same time it constitutes
an evidence of indebtedness. By mutual agreement of the parties, the negotiable character of a check may be waived and the
instrument may be treated simply as proof of an obligation. There cannot be deceit on the part of the obligor, petitioners herein,
because they agreed with the obligee at the time of the issuance and postdating of the checks that the same shall not be encashed or
presented to the banks. As per assurance of the lender, the checks are nothing but evidence of the loan or security thereof in lieu of
and for the same purpose as a promissory note. By their own covenant, therefore, the checks became mere evidence of indebtedness.
It has been ruled that a drawer who issues a check as security or evidence of investment is not liable for estafa. 7 Mrs. Vicencio could
not have been deceived nor defrauded by petitioners in order to obtain the loans because she was informed that they no longer have
funds in their RCBC accounts. In 1992, when the Vicencio family asked Virginia to place a date on the check, the latter again informed
Mrs. Vicencio that their account with RCBC was already closed as early as August 1989. With the assurance, however, that the check
will only stand as a firm evidence of indebtedness, Virginia placed a date on the check. Under these circumstances, Mrs. Vicencio
cannot claim that she was deceived or defrauded by petitioners in obtaining the loan. In the absence of the essential element of
deceit, 8 no estafa was committed by petitioners.

Both courts below relied so much on the fact that Mrs. Vicencio's husband is a former Judge who knows the law. He should have
known, then, that he need not even ask the petitioners to place a date on the check, because as holder of the check, he could have
inserted the date pursuant to Section 13 of the Negotiable Instruments Law (NIL). 9Moreover, as stated in Section 14 thereof,
complainant, as the person in possession of the check, has prima facie authority to complete it by filling up the blanks therein. Besides,
pursuant to Section 12 of the same law, a negotiable instrument is not rendered invalid by reason only that it is antedated or
postdated. 10 Thus, the allegation of Mrs. Vicencio that the date to be placed by Virginia was necessary so as to make the check
evidence of indebtedness is nothing but a ploy. Petitioners openly disclosed and never hid the fact that they no longer have funds in the
bank as their bank account was already closed. Knowledge by the complainant that the drawer does not have sufficient funds in the
bank at the time it was issued to him does not give rise to a case for estafa through bouncing
checks. 11

Moreover, a check must be presented within a reasonable time from

issue. 12 By current banking practice, a check becomes stale after more than six (6) months. In fact a check long overdue for more than
two and one-half years is considered stale. 13 In this case, the checks were issued more than three years prior to their presentment. In
his complaint, complainant alleged that petitioners bought jewelry from him and that he would not have parted with his jewelry had not
petitioners issued the checks. The evidence on record, however, does not support the theory of the crime.

There were six checks given by petitioners to Mrs. Vicencio but only two were presented for encashment. If all were issued in payment
of the alleged jewelry, why were not all the checks presented? There was a deliberate choice of these two checks as the total amount
reflected therein is equivalent to the amount due under the unpaid obligation. The other checks, on the other hand, could not be used
as the amounts therein do not jibe with the amount of the unpaid balance. Following complainant's theory that he would not have sold
the jewelries had not petitioners issued "postdated" checks, still no estafa can be imputed to petitioners. It is clear that the checks were
not intended for encashment with the bank, but were delivered as mere security for the payment of the loan and under an agreement
that the checks would be redeemed with cash as they fell due. Hence, the checks were not intended by the parties to be modes of
payment but only as promissory notes. Since complainant and his wife were well aware of that fact, they cannot now complain there
was deception on the part of petitioners. Awareness by the complainant of the fictitious nature of the pretense cannot give rise to estafa
by means of deceit. 14 When the payee was informed by the by the drawer that the checks are not covered by adequate funds it does
not give rise to bad faith or estafa. 15

Moreover, complainant's allegations that the two subject checks were issued in 1992 as payment for the jewelry he allegedly sold to
petitioners is belied by the evidence on record. First, complainant is not engaged in the sale of jewelry. 16 Neither are petitioners. If the
pieces of jewelry were important to complainant considering that they were with him for more than twenty-five years already, 17 he
would not have easily parted with them in consideration for unfunded personal checks in favor of persons whose means of living or
source of income were unknown to him. 18Applicable here is the legal precept that persons are presumed to have taken care of their
business. 19

Second, petitioners' bank account with RCBC was opened on March 26, 1987 and was closed on April 17, 1989, during the span of
which they were issued 10 check booklets with the last booklet issued on April 6, 1984. This last booklet contains 50 checks
consecutively numbered from 101751 to 101800. The two subject checks came from this booklet. All the checks in this booklet were
issued in the year 1989 including the two subject checks, so that the complainants' theory that the jewelry were sold in 1992 cannot be
believed.

The rule that factual findings of the trial court bind this court is not absolute but admits of exceptions such as when the conclusion is a
finding grounded on speculation, surmise, and conjecture and when the findings of the lower court is premised on the absence of
evidence and is contradicted by the evidence on record. 20 Based on the foregoing discussions, this Court is constrained to depart from
the general rule. Equally applicable is what Vice-Chancellor Van Fleet once said: 21

Evidence to be believed must not only proceed from the mouth of a credible witness but must be credible in itself —
such as the common experience and observation of mankind can approve as probable under the circumstances. We
have no test of the truth of human testimony, except its conformity to our knowledge, observation and experience.
Whatever is repugnant to these belongs to the miraculous, and is outside of judicial cognizance.

Petitioners, however, are not without liability. An accused acquitted of a criminal charge may nevertheless be held civilly liable in the
same case where the facts established by the evidence so warrant. 22 Based on the records, they still have an outstanding obligation of
P15,000.00 in favor of Mrs. Vicencio. There was mention that the loan shall earn interests. However, an agreement as to payment of
interest must be in writing, otherwise it cannot be valid, 23although there was actual payment of interests by virtue of the advance
deductions from the loan. Once the judgment becomes final and executory, the amount due is deemed equivalent to a forbearance of
credit during the interim period from the finality of judgment until full payment, in which case it shall earn legal interest at the rate of
twelve per cent (12%) per annum pursuant to Central Bank (CB) Circular No. 416. 24

WHEREFORE, the assailed Decision is REVERSED and SET ASIDE. Petitioners are ACQUITTED of the charge of estafa but they are
ORDERED to pay Mrs. Vicencio the amount of P15,000.00 without interest. However, from the time this judgment becomes final and
executory, the amount due shall earn legal interest of twelve percent (12%)per annum until full payment.

SO ORDERED.

G.R. No. 154947 August 11, 2004

LEODEGARIO BAYANI, petitioner,

vs.
PEOPLE OF THE PHILIPPINES, respondent.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. CR No. 22861 affirming on appeal the
Decision2 of the Regional Trial Court of Lucena City, Branch 59, in Criminal Case No. 93-135 convicting the accused therein, now the
petitioner, for violation of Batas Pambansa (B.P.) Blg. 22.

On February 9, 1993, Leodegario Bayani was charged with violation of B.P. Blg. 22 in an Information which reads:

That on or about the 20th day of August 1992, in the Municipality of Candelaria, Province of Quezon, Philippines, and within
the jurisdiction of this Honorable Court, the above-named accused did then and there willfully, unlawfully and feloniously issue
and make out Check No. 054936 dated August 29, 1992, in the amount of FIFTY-FIVE THOUSAND PESOS (P55,000.00)
Philippine Currency, drawn against the PSBank, Candelaria Branch, Candelaria, Quezon, payable to "Cash" and give the said
check to one Dolores Evangelista in exchange for cash although the said accused knew fully well at the time of issuance of
said check that he did not have sufficient funds in or credit with the drawee bank for payment of said check in full upon
presentment; that upon presentation of said check to the bank for payment, the same was dishonored and refused payment
for the reason that the drawer thereof, the herein accused, had no sufficient fund therein, and that despite due notice, said
accused failed to deposit the necessary amount to cover said check or to pay in full the amount of said check, to the damage
and prejudice of said Dolores Evangelista in the aforesaid amount.

Contrary to law.3

The Case for the Prosecution

At about noon on August 20, 1992, Alicia Rubia arrived at the grocery store of Dolores Evangelista in Candelaria, Quezon, and asked
the latter to rediscount Philippine Savings Bank (PSBank) Check No. 054936 in the amount of P55,000.00. The check was drawn by
Leodegario Bayani against his account with the PSBank and postdated August 29, 1992. 4 Rubia told Evangelista that Bayani asked her
to rediscount the check for him because he needed the money. 5 Considering that Rubia and Bayani were long-time customers at the
store and she knew Bayani to be a good man, Evangelista agreed to rediscount the check. 6 After Rubia endorsed the check,
Evangelista gave her the amount of P55,000.00.7 However, when Evangelista deposited the check in her account with the Far East
Bank & Trust Company on September 11, 1992, it was dishonored by the drawee bank for the reason that on September 1, 1992,
Bayani closed his account with the PSBank.8 The reason for the dishonor of the check was stamped at its dorsal portion. As of August
27, 1992, the balance of Bayani’s account with the bank was P2,414.96.9 Evangelista then informed Rubia of the dishonor of the check
and demanded the return of her P55,000.00. Rubia replied that she was only requested by Bayani to have the check rediscounted and
advised Evangelista to see him. When Evangelista talked to Bayani, she was told that Rubia borrowed the check from him. 10

Thereafter, Evangelista, Rubia, Bayani and his wife, Aniceta, had a conference in the office of Atty. Emmanuel Velasco, Evangelista’s
lawyer. Later, in the Office of the Barangay Captain Nestor Baera, Evangelista showed Bayani a photocopy of the dishonored check
and demanded payment thereof. Bayani and Aniceta, on one hand, and Rubia, on the other, pointed to each other and denied liability
thereon. Aniceta told Rubia that she should be the one to pay since the P55,000.00 was with her, but the latter insisted that the said
amount was in payment of the pieces of jewelry Aniceta purchased from her. 11 Upon Atty. Velasco’s prodding, Evangelista suggested
Bayani and Rubio to pay P25,000.00 each. Still, Bayani and Rubio pointed to the other as the one solely liable for the amount of the
check.12 Rubia reminded Aniceta that she was given the check as payment of the pieces of jewelry Aniceta bought from her.

The Case for the Petitioner

Bayani testified that he was the proprietor of a funeral parlor in Candelaria, Quezon. He maintained an account with the PSBank in
Candelaria, Quezon, and was issued a checkbook which was kept by his wife, Aniceta Bayani. Sometime in 1992, he changed his
residence. In the process, his wife lost four (4) blank checks, one of which was Check No. 05493613 which formed part of the checks in
the checkbook issued to him by the PSBank.14 He did not report the loss to the police authorities. He reported such loss to the bank
after Evangelista demanded the refund of the P55,000.00 from his wife.15 He then closed his account with the bank on September 11,
1992, but was informed that he had closed his account much earlier. He denied ever receiving the amount of P55,000.00 from Rubia.16

Bayani further testified that his wife discovered the loss of the checks when he brought his wife to the office of Atty. Emmanuel
Velasco.17 He did not see Evangelista in the office of the lawyer, and was only later informed by his wife that she had a conference with
Evangelista. His wife narrated that according to Evangelista, Rubia had rediscounted a check he issued, which turned out to be the
check she (Aniceta) had lost. He was also told that Evangelista had demanded the refund of the amount of the check. 18 He later tried to
contact Rubia but failed. He finally testified that he could not recall having affixed his signature on the check. 19

Aniceta Bayani corroborated the testimony of her husband. She testified that she was invited to go to the office of Atty. Velasco where
she, Rubia and Evangelista had a conference. It was only then that she met Evangelista. Rubia admitted that she rediscounted the
complainant’s check with Evangelista. When Evangelista asked her to pay the amount of the check, she asked that the check be shown
to her, but Evangelista refused to do so. She further testified that her husband was not with her and was in their office at the time.

At the conclusion of the trial, the court rendered judgment finding Bayani guilty beyond reasonable doubt of violation of Section 1 of
B.P. Blg. 22. The decretal portion of the decision reads:

WHEREFORE, premises considered, the Court finds the accused Leodegario Bayani guilty beyond reasonable doubt of
violation of Section 1, Batas Pambansa Bilang 22 and hereby sentences him to suffer an imprisonment of ONE (1) YEAR, or
to pay a fine of ONE HUNDRED TEN THOUSAND PESOS (P110,000.00), to pay to complaining witness Dolores Evangelista
the sum of FIFTY-FIVE THOUSAND PESOS (P55,000.00), the value of the check and to pay the costs.

SO ORDERED.20

On appeal, the petitioner averred that the prosecution failed to adduce evidence that he affixed his signature on the check, or received
from Rubia the amount of P55,000.00, thus negating his guilt of the crime charged.

The petitioner asserts that even Teresita Macabulag, the bank manager of PSB who authenticated his specimen signatures on the
signature card he submitted upon opening his account with the bank, failed to testify that the signature on the check was his genuine
signature.

On January 30, 2002, the Court of Appeals rendered judgment 21 affirming the decision of the RTC with modification as to the penalty
imposed on the petitioner.

The petitioner asserts in the petition at bar that –

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH MODIFICATION THE CONVICTION OF
PETITIONER BY THE TRIAL COURT FOR ALLEGED VIOLATION OF BATAS PAMBANSA BLG. 22 NOTWITHSTANDING
THAT THE PROSECUTION MISERABLY FAILED TO PROVE THAT THE CHECK WAS ISSUED FOR A VALUABLE
CONSIDERATION.22

The petitioner contends that the prosecution failed to prove all the essential elements of the crime of violation of Section 1, B.P. Blg. 22.
He asserts that the prosecution failed to prove that he issued the check. He avers that even assuming that he issued the check, the
prosecution failed to prove that it was issued for valuable consideration, and that he received the amount of P55,000.00 from Rubia.
Hence, in light of the ruling of this Court in Magno vs. Court of Appeals,23 he is entitled to an acquittal on such grounds.

The petitioner further contends that Evangelista’s testimony, that Rubia told her that it was the petitioner who asked her to have the
check rediscounted, is hearsay and, as such, even if he did not object thereto is inadmissible in evidence against him. He avers that the
prosecution failed to present Rubia as a witness, depriving him of his right to cross-examine her. He contends that any declaration
made by Rubia to Evangelista is inadmissible in evidence against him.

The petition is denied.

We agree with the submission of the petitioner that Evangelista’s testimony, that Rubia told her that the petitioner requested that the
subject check be rediscounted, is hearsay. Evangelista had no personal knowledge of such request of the petitioner to Rubia. Neither is
the information relayed by Rubia to Evangelista as to the petitioner’s request admissible in evidence against the latter, because the
prosecution failed to present Rubia as a witness, thus, depriving the petitioner of his right of cross-examination.
However, the evidence belies the petitioner’s assertion that the prosecution failed to adduce evidence that he issued the subject check.
Evangelista testified that when she talked to the petitioner upon Rubia’s suggestion, the petitioner admitted that he gave the check to
Rubia, but claimed that the latter "borrowed" the check from him.

Q When this check in question was returned to you because of the closed account, what did you do, if you did anything?

A I talked to Alicia Rubia, Sir.

Q And what did Alicia Rubia tell you in connection with the check in question?

A Alicia Rubia told me that she was just requested by Leodegario Bayani, Sir.

Q And what else did she tell you?

A She advised me to go to Leodegario Bayani, Sir.

Q Did you go to Leodegario Bayani as per instruction of Alicia Rubia?

A Yes, Sir.

Q And what did Leodegario Bayani tell you in connection with this check?

A He told me that Alicia Rubia borrowed the check from him, Sir. 24

Evangelista testified that she showed to the petitioner and his wife, Aniceta, a photocopy of the subject check in the office of Atty.
Velasco, where they admitted to her that they owned the check:

ATTY. ALZAGA (TO WITNESS)

Q When you shown (sic) the check to Leodegario Bayani and his wife in the law office of Atty. Velasco, what did they tell you?

ATTY. VELASCO:

Misleading. The question is misleading because according to the question, Your Honor, he had shown the check but
that was not the testimony. The testimony was the xerox copy of the check was the one shown.

ATTY. ALZAGA

"The xerox copy of the check."

COURT

As modified, answer the question.

WITNESS

A They told me they owned the check but they were pointing to each other as to who will pay the amount, Sir.25

The petitioner cannot escape criminal liability by denying that he received the amount of P55,000.00 from Rubia after he issued the
check to her. As we ruled in Lozano vs. Martinez:26

The gravamen of the offense punished by BP 22 is the act of making and issuing a worthless check or a check that is
dishonored upon its presentation for payment. It is not the non-payment of an obligation which the law punishes. The law is not
intended or designed to coerce a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the
making of worthless checks and putting them in circulation. Because of its deleterious effects on the public interest, the
practice is proscribed by the law. The law punishes the act not as an offense against property, but an offense against public
order.27

The evidence on record shows that Evangelista rediscounted the check and gave P55,000.00 to Rubia after the latter endorsed the
same. As such, Evangelista is a holder of the check in due course. 28 Under Section 28 of the Negotiable Instruments Law (NIL),
absence or failure of consideration is a matter of defense only as against any person not a holder in due course, thus:

SECTION 28. Effect of want of consideration.— Absence or failure of consideration is a matter of defense as against any
person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an
ascertained and liquidated amount or otherwise.

Moreover, Section 24 of the NIL provides the presumption of consideration, viz:

SECTION 24. Presumption of consideration.— Every negotiable instrument is deemed prima facie to have been issued for a
valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.

Such presumption cannot be overcome by the petitioner’s bare denial of receipt of the amount of P55,000.00 from Rubia.
The petitioner cannot, likewise, seek refuge in the ruling of this Court in Magno vs. Court of Appeals29 because the facts and issues
raised therein are substantially different from those extant in this case. Indeed, the Court ruled in the said case that:

It is intriguing to realize that Mrs. Teng did not want the petitioner to know that it was she who "accommodated" petitioner’s
request for Joey Gomez, to source out the needed funds for the "warranty deposit." Thus, it unfolds the kind of transaction that
is shrouded with mystery, gimmickry and doubtful legality. It is in simple language, a scheme whereby Mrs. Teng as the
supplier of the equipment in the name of her corporation, Mancor, would be able to "sell or lease" its goods as in this case,
and at the same time, privately financing those who desperately need petty accommodations as this one. This modus operandi
has in so many instances victimized unsuspecting businessmen, who likewise need protection from the law, by availing of the
deceptively called "warranty deposit" not realizing that they also fall prey to leasing equipment under the guise of lease-
purchase agreement when it is a scheme designed to skim off business clients. 30

Equally futile is the petitioner’s contention that the prosecution failed to prove the crime charged. For the accused to be guilty of
violation of Section 1 of B.P. Blg. 22, the prosecution is mandated to prove the essential elements thereof, to wit:

1. That a person makes or draws and issues any check.

2. That the check is made or drawn and issued to apply on account or for value.

3. That the person who makes or draws and issues the check knows at the time of issue that he does not have sufficient funds
in or credit with the drawee bank for the payment of such check in full upon its presentment.

4. That the check is subsequently dishonored by the drawee bank for insufficiency of funds or credit, or would have been
dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment.31

In this case, the prosecution adduced documentary evidence that when the petitioner issued the subject check on or about August 20,
1992, the balance of his account with the drawee bank was only P2,414.96. During the conference in the office of Atty. Emmanuel
Velasco, Evangelista showed to the petitioner and his wife a photocopy of the subject check, with the notation at its dorsal portion that it
was dishonored for the reason "account closed." Despite Evangelista’s demands, the petitioner refused to pay the amount of the check
and, with his wife, pointed to Rubia as the one liable for the amount. The collective evidence of the prosecution points to the fact that at
the time the petitioner drew and issued the check, he knew that the residue of the funds in his account with the drawee bank was
insufficient to pay the amount of the check.

IN LIGHT OF ALL THE FOREOING, the petition is DENIED DUE COURSE. The decision of the Court of Appeals is AFFIRMED.

No costs.

G.R. No. 170325 September 26, 2008

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
ERLANDO T. RODRIGUEZ and NORMA RODRIGUEZ, Respondents.

DECISION

REYES, R.T., J.:

WHEN the payee of the check is not intended to be the true recipient of its proceeds, is it payable to order or bearer? What is the
fictitious-payee rule and who is liable under it? Is there any exception?

These questions seek answers in this petition for review on certiorari of the Amended Decision 1 of the Court of Appeals (CA) which
affirmed with modification that of the Regional Trial Court (RTC). 2

The Facts

The facts as borne by the records are as follows:

Respondents-Spouses Erlando and Norma Rodriguez were clients of petitioner Philippine National Bank (PNB), Amelia Avenue
Branch, Cebu City. They maintained savings and demand/checking accounts, namely, PNBig Demand Deposits (Checking/Current
Account No. 810624-6 under the account name Erlando and/or Norma Rodriguez), and PNBig Demand Deposit (Checking/Current
Account No. 810480-4 under the account name Erlando T. Rodriguez).

The spouses were engaged in the informal lending business. In line with their business, they had a discounting 3 arrangement with the
Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB employees. Naturally, PEMSLA was likewise
a client of PNB Amelia Avenue Branch. The association maintained current and savings accounts with petitioner bank.

PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to members
whenever the association was short of funds. As was customary, the spouses would replace the postdated checks with their own
checks issued in the name of the members.

It was PEMSLA’s policy not to approve applications for loans of members with outstanding debts. To subvert this policy, some PEMSLA
officers devised a scheme to obtain additional loans despite their outstanding loan accounts. They took out loans in the names of
unknowing members, without the knowledge or consent of the latter. The PEMSLA checks issued for these loans were then given to
the spouses for rediscounting. The officers carried this out by forging the indorsement of the named payees in the checks.
In return, the spouses issued their personal checks (Rodriguez checks) in the name of the members and delivered the checks to an
officer of PEMSLA. The PEMSLA checks, on the other hand, were deposited by the spouses to their account.

Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the named
payees. This was an irregular procedure made possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and
bank teller in the PNB Branch. It appears that this became the usual practice for the parties.

For the period November 1998 to February 1999, the spouses issued sixty nine (69) checks, in the total amount of P2,345,804.00.
These were payable to forty seven (47) individual payees who were all members of PEMSLA.4

Petitioner PNB eventually found out about these fraudulent acts. To put a stop to this scheme, PNB closed the current account of
PEMSLA. As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason "Account Closed."
The corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA savings account. The amounts were duly
debited from the Rodriguez account. Thus, because the PEMSLA checks given as payment were returned, spouses Rodriguez incurred
losses from the rediscounting transactions.

RTC Disposition

Alarmed over the unexpected turn of events, the spouses Rodriguez filed a civil complaint for damages against PEMSLA, the Multi-
Purpose Cooperative of Philnabankers (MCP), and petitioner PNB. They sought to recover the value of their checks that were
deposited to the PEMSLA savings account amounting to P2,345,804.00. The spouses contended that because PNB credited the
checks to the PEMSLA account even without indorsements, PNB violated its contractual obligation to them as depositors. PNB paid the
wrong payees, hence, it should bear the loss.

PNB moved to dismiss the complaint on the ground of lack of cause of action. PNB argued that the claim for damages should come
from the payees of the checks, and not from spouses Rodriguez. Since there was no demand from the said payees, the obligation
should be considered as discharged.

In an Order dated January 12, 2000, the RTC denied PNB’s motion to dismiss.

In its Answer,5 PNB claimed it is not liable for the checks which it paid to the PEMSLA account without any indorsement from the
payees. The bank contended that spouses Rodriguez, the makers, actually did not intend for the named payees to receive the
proceeds of the checks. Consequently, the payees were considered as "fictitious payees" as defined under the Negotiable Instruments
Law (NIL). Being checks made to fictitious payees which are bearer instruments, the checks were negotiable by mere delivery. PNB’s
Answer included its cross-claim against its co-defendants PEMSLA and the MCP, praying that in the event that judgment is rendered
against the bank, the cross-defendants should be ordered to reimburse PNB the amount it shall pay.

After trial, the RTC rendered judgment in favor of spouses Rodriguez (plaintiffs). It ruled that PNB (defendant) is liable to return the
value of the checks. All counterclaims and cross-claims were dismissed. The dispositive portion of the RTC decision reads:

WHEREFORE, in view of the foregoing, the Court hereby renders judgment, as follows:

1. Defendant is hereby ordered to pay the plaintiffs the total amount of P2,345,804.00 or reinstate or restore the amount
of P775,337.00 in the PNBig Demand Deposit Checking/Current Account No. 810480-4 of Erlando T. Rodriguez, and the
amount of P1,570,467.00 in the PNBig Demand Deposit, Checking/Current Account No. 810624-6 of Erlando T. Rodriguez
and/or Norma Rodriguez, plus legal rate of interest thereon to be computed from the filing of this complaint until fully paid;

2. The defendant PNB is hereby ordered to pay the plaintiffs the following reasonable amount of damages suffered by them
taking into consideration the standing of the plaintiffs being sugarcane planters, realtors, residential subdivision owners, and
other businesses:

(a) Consequential damages, unearned income in the amount of P4,000,000.00, as a result of their having incurred
great dificulty (sic) especially in the residential subdivision business, which was not pushed through and the
contractor even threatened to file a case against the plaintiffs;

(b) Moral damages in the amount of P1,000,000.00;

(c) Exemplary damages in the amount of P500,000.00;

(d) Attorney’s fees in the amount of P150,000.00 considering that this case does not involve very complicated issues;
and for the

(e) Costs of suit.

3. Other claims and counterclaims are hereby dismissed.6

CA Disposition

PNB appealed the decision of the trial court to the CA on the principal ground that the disputed checks should be considered as
payable to bearer and not to order.

In a Decision7 dated July 22, 2004, the CA reversed and set aside the RTC disposition. The CA concluded that the checks were
obviously meant by the spouses to be really paid to PEMSLA. The court a quo declared:
We are not swayed by the contention of the plaintiffs-appellees (Spouses Rodriguez) that their cause of action arose from the alleged
breach of contract by the defendant-appellant (PNB) when it paid the value of the checks to PEMSLA despite the checks being payable
to order. Rather, we are more convinced by the strong and credible evidence for the defendant-appellant with regard to the plaintiffs-
appellees’ and PEMSLA’s business arrangement – that the value of the rediscounted checks of the plaintiffs-appellees would be
deposited in PEMSLA’s account for payment of the loans it has approved in exchange for PEMSLA’s checks with the full value of the
said loans. This is the only obvious explanation as to why all the disputed sixty-nine (69) checks were in the possession of PEMSLA’s
errand boy for presentment to the defendant-appellant that led to this present controversy. It also appears that the teller who accepted
the said checks was PEMSLA’s officer, and that such was a regular practice by the parties until the defendant-appellant discovered the
scam. The logical conclusion, therefore, is that the checks were never meant to be paid to order, but instead, to PEMSLA. We thus find
no breach of contract on the part of the defendant-appellant.

According to plaintiff-appellee Erlando Rodriguez’ testimony, PEMSLA allegedly issued post-dated checks to its qualified members who
had applied for loans. However, because of PEMSLA’s insufficiency of funds, PEMSLA approached the plaintiffs-appellees for the latter
to issue rediscounted checks in favor of said applicant members. Based on the investigation of the defendant-appellant, meanwhile, this
arrangement allowed the plaintiffs-appellees to make a profit by issuing rediscounted checks, while the officers of PEMSLA and other
members would be able to claim their loans, despite the fact that they were disqualified for one reason or another. They were able to
achieve this conspiracy by using other members who had loaned lesser amounts of money or had not applied at all. x x x. 8 (Emphasis
added)

The CA found that the checks were bearer instruments, thus they do not require indorsement for negotiation; and that spouses
Rodriguez and PEMSLA conspired with each other to accomplish this money-making scheme. The payees in the checks were "fictitious
payees" because they were not the intended payees at all.

The spouses Rodriguez moved for reconsideration. They argued, inter alia, that the checks on their faces were unquestionably payable
to order; and that PNB committed a breach of contract when it paid the value of the checks to PEMSLA without indorsement from the
payees. They also argued that their cause of action is not only against PEMSLA but also against PNB to recover the value of the
checks.

On October 11, 2005, the CA reversed itself via an Amended Decision, the last paragraph and fallo of which read:

In sum, we rule that the defendant-appellant PNB is liable to the plaintiffs-appellees Sps. Rodriguez for the following:

1. Actual damages in the amount of P2,345,804 with interest at 6% per annum from 14 May 1999 until fully paid;

2. Moral damages in the amount of P200,000;

3. Attorney’s fees in the amount of P100,000; and

4. Costs of suit.

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by Us AFFIRMING WITH MODIFICATION the assailed
decision rendered in Civil Case No. 99-10892, as set forth in the immediately next preceding paragraph hereof, and SETTING ASIDE
Our original decision promulgated in this case on 22 July 2004.

SO ORDERED.9

The CA ruled that the checks were payable to order. According to the appellate court, PNB failed to present sufficient proof to defeat
the claim of the spouses Rodriguez that they really intended the checks to be received by the specified payees. Thus, PNB is liable for
the value of the checks which it paid to PEMSLA without indorsements from the named payees. The award for damages was deemed
appropriate in view of the failure of PNB to treat the Rodriguez account with the highest degree of care considering the fiduciary nature
of their relationship, which constrained respondents to seek legal action.

Hence, the present recourse under Rule 45.

Issues

The issues may be compressed to whether the subject checks are payable to order or to bearer and who bears the loss?

PNB argues anew that when the spouses Rodriguez issued the disputed checks, they did not intend for the named payees to receive
the proceeds. Thus, they are bearer instruments that could be validly negotiated by mere delivery. Further, testimonial and
documentary evidence presented during trial amply proved that spouses Rodriguez and the officers of PEMSLA conspired with each
other to defraud the bank.

Our Ruling

Prefatorily, amendment of decisions is more acceptable than an erroneous judgment attaining finality to the prejudice of innocent
parties. A court discovering an erroneous judgment before it becomes final may, motu proprio or upon motion of the parties, correct its
judgment with the singular objective of achieving justice for the litigants.10

However, a word of caution to lower courts, the CA in Cebu in this particular case, is in order. The Court does not sanction careless
disposition of cases by courts of justice. The highest degree of diligence must go into the study of every controversy submitted for
decision by litigants. Every issue and factual detail must be closely scrutinized and analyzed, and all the applicable laws judiciously
studied, before the promulgation of every judgment by the court. Only in this manner will errors in judgments be avoided.

Now to the core of the petition.

As a rule, when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is considered as a bearer
instrument. A check is "a bill of exchange drawn on a bank payable on demand." 11 It is either an order or a bearer instrument. Sections
8 and 9 of the NIL states:

SEC. 8. When payable to order. – The instrument is payable to order where it is drawn payable to the order of a specified person or to
him or his order. It may be drawn payable to the order of –

(a) A payee who is not maker, drawer, or drawee; or

(b) The drawer or maker; or

(c) The drawee; or

(d) Two or more payees jointly; or

(e) One or some of several payees; or

(f) The holder of an office for the time being.

Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty.

SEC. 9. When payable to bearer. – The instrument is payable to bearer –

(a) When it is expressed to be so payable; or

(b) When it is payable to a person named therein or bearer; or

(c) When it is payable to the order of a fictitious or non-existing person, and such fact is known to the person making it so
payable; or

(d) When the name of the payee does not purport to be the name of any person; or

(e) Where the only or last indorsement is an indorsement in blank. 12 (Underscoring supplied)

The distinction between bearer and order instruments lies in their manner of negotiation. Under Section 30 of the NIL, an order
instrument requires an indorsement from the payee or holder before it may be validly negotiated. A bearer instrument, on the other
hand, does not require an indorsement to be validly negotiated. It is negotiable by mere delivery. The provision reads:

SEC. 30. What constitutes negotiation. – An instrument is negotiated when it is transferred from one person to another in such manner
as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by
the indorsement of the holder completed by delivery.

A check that is payable to a specified payee is an order instrument. However, under Section 9(c) of the NIL, a check payable to a
specified payee may nevertheless be considered as a bearer instrument if it is payable to the order of a fictitious or non-existing person,
and such fact is known to the person making it so payable. Thus, checks issued to "Prinsipe Abante" or "Si Malakas at si Maganda,"
who are well-known characters in Philippine mythology, are bearer instruments because the named payees are fictitious and non-
existent.

We have yet to discuss a broader meaning of the term "fictitious" as used in the NIL. It is for this reason that We look elsewhere for
guidance. Court rulings in the United States are a logical starting point since our law on negotiable instruments was directly lifted from
the Uniform Negotiable Instruments Law of the United States. 13

A review of US jurisprudence yields that an actual, existing, and living payee may also be "fictitious" if the maker of the check did not
intend for the payee to in fact receive the proceeds of the check. This usually occurs when the maker places a name of an existing
payee on the check for convenience or to cover up an illegal activity. 14 Thus, a check made expressly payable to a non-fictitious and
existing person is not necessarily an order instrument. If the payee is not the intended recipient of the proceeds of the check, the payee
is considered a "fictitious" payee and the check is a bearer instrument.

In a fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the loss. When faced with a check
payable to a fictitious payee, it is treated as a bearer instrument that can be negotiated by delivery. The underlying theory is that one
cannot expect a fictitious payee to negotiate the check by placing his indorsement thereon. And since the maker knew this limitation, he
must have intended for the instrument to be negotiated by mere delivery. Thus, in case of controversy, the drawer of the check will bear
the loss. This rule is justified for otherwise, it will be most convenient for the maker who desires to escape payment of the check to
always deny the validity of the indorsement. This despite the fact that the fictitious payee was purposely named without any intention
that the payee should receive the proceeds of the check. 15

The fictitious-payee rule is best illustrated in Mueller & Martin v. Liberty Insurance Bank.16 In the said case, the corporation Mueller &
Martin was defrauded by George L. Martin, one of its authorized signatories. Martin drew seven checks payable to the German Savings
Fund Company Building Association (GSFCBA) amounting to $2,972.50 against the account of the corporation without authority from
the latter. Martin was also an officer of the GSFCBA but did not have signing authority. At the back of the checks, Martin placed the
rubber stamp of the GSFCBA and signed his own name as indorsement. He then successfully drew the funds from Liberty Insurance
Bank for his own personal profit. When the corporation filed an action against the bank to recover the amount of the checks, the claim
was denied.
The US Supreme Court held in Mueller that when the person making the check so payable did not intend for the specified payee to
have any part in the transactions, the payee is considered as a fictitious payee. The check is then considered as a bearer instrument to
be validly negotiated by mere delivery. Thus, the US Supreme Court held that Liberty Insurance Bank, as drawee, was authorized to
make payment to the bearer of the check, regardless of whether prior indorsements were genuine or not. 17

The more recent Getty Petroleum Corp. v. American Express Travel Related Services Company, Inc.18 upheld the fictitious-payee rule.
The rule protects the depositary bank and assigns the loss to the drawer of the check who was in a better position to prevent the loss in
the first place. Due care is not even required from the drawee or depositary bank in accepting and paying the checks. The effect is that
a showing of negligence on the part of the depositary bank will not defeat the protection that is derived from this rule.

However, there is a commercial bad faith exception to the fictitious-payee rule. A showing of commercial bad faith on the part of the
drawee bank, or any transferee of the check for that matter, will work to strip it of this defense. The exception will cause it to bear the
loss. Commercial bad faith is present if the transferee of the check acts dishonestly, and is a party to the fraudulent scheme. Said the
US Supreme Court in Getty:

Consequently, a transferee’s lapse of wary vigilance, disregard of suspicious circumstances which might have well induced a prudent
banker to investigate and other permutations of negligence are not relevant considerations under Section 3-405 x x x. Rather, there is a
"commercial bad faith" exception to UCC 3-405, applicable when the transferee "acts dishonestly – where it has actual knowledge of
facts and circumstances that amount to bad faith, thus itself becoming a participant in a fraudulent scheme. x x x Such a test finds
support in the text of the Code, which omits a standard of care requirement from UCC 3-405 but imposes on all parties an obligation to
act with "honesty in fact." x x x19 (Emphasis added)

Getty also laid the principle that the fictitious-payee rule extends protection even to non-bank transferees of the checks.

In the case under review, the Rodriguez checks were payable to specified payees. It is unrefuted that the 69 checks were payable to
specific persons. Likewise, it is uncontroverted that the payees were actual, existing, and living persons who were members of
PEMSLA that had a rediscounting arrangement with spouses Rodriguez.

What remains to be determined is if the payees, though existing persons, were "fictitious" in its broader context.

For the fictitious-payee rule to be available as a defense, PNB must show that the makers did not intend for the named payees to be
part of the transaction involving the checks. At most, the bank’s thesis shows that the payees did not have knowledge of the existence
of the checks. This lack of knowledge on the part of the payees, however, was not tantamount to a lack of intention on the part of
respondents-spouses that the payees would not receive the checks’ proceeds. Considering that respondents-spouses were transacting
with PEMSLA and not the individual payees, it is understandable that they relied on the information given by the officers of PEMSLA
that the payees would be receiving the checks.

Verily, the subject checks are presumed order instruments. This is because, as found by both lower courts, PNB failed to present
sufficient evidence to defeat the claim of respondents-spouses that the named payees were the intended recipients of the checks’
proceeds. The bank failed to satisfy a requisite condition of a fictitious-payee situation – that the maker of the check intended for the
payee to have no interest in the transaction.

Because of a failure to show that the payees were "fictitious" in its broader sense, the fictitious-payee rule does not apply. Thus, the
checks are to be deemed payable to order. Consequently, the drawee bank bears the loss. 20

PNB was remiss in its duty as the drawee bank. It does not dispute the fact that its teller or tellers accepted the 69 checks for deposit to
the PEMSLA account even without any indorsement from the named payees. It bears stressing that order instruments can only be
negotiated with a valid indorsement.

A bank that regularly processes checks that are neither payable to the customer nor duly indorsed by the payee is apparently grossly
negligent in its operations.21 This Court has recognized the unique public interest possessed by the banking industry and the need for
the people to have full trust and confidence in their banks. 22 For this reason, banks are minded to treat their customer’s accounts with
utmost care, confidence, and honesty.23

In a checking transaction, the drawee bank has the duty to verify the genuineness of the signature of the drawer and to pay the check
strictly in accordance with the drawer’s instructions, i.e., to the named payee in the check. It should charge to the drawer’s accounts
only the payables authorized by the latter. Otherwise, the drawee will be violating the instructions of the drawer and it shall be liable for
the amount charged to the drawer’s account.24

In the case at bar, respondents-spouses were the bank’s depositors. The checks were drawn against respondents-spouses’ accounts.
PNB, as the drawee bank, had the responsibility to ascertain the regularity of the indorsements, and the genuineness of the signatures
on the checks before accepting them for deposit. Lastly, PNB was obligated to pay the checks in strict accordance with the instructions
of the drawers. Petitioner miserably failed to discharge this burden.

The checks were presented to PNB for deposit by a representative of PEMSLA absent any type of indorsement, forged or otherwise.
The facts clearly show that the bank did not pay the checks in strict accordance with the instructions of the drawers, respondents-
spouses. Instead, it paid the values of the checks not to the named payees or their order, but to PEMSLA, a third party to the
transaction between the drawers and the payees.alf-ITC

Moreover, PNB was negligent in the selection and supervision of its employees. The trustworthiness of bank employees is
indispensable to maintain the stability of the banking industry. Thus, banks are enjoined to be extra vigilant in the management and
supervision of their employees. In Bank of the Philippine Islands v. Court of Appeals, 25 this Court cautioned thus:

Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of responsibility, care and
trustworthiness expected of their employees and officials is far greater than those of ordinary clerks and employees. For obvious
reasons, the banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees. 26
PNB’s tellers and officers, in violation of banking rules of procedure, permitted the invalid deposits of checks to the PEMSLA account.
Indeed, when it is the gross negligence of the bank employees that caused the loss, the bank should be held liable. 27

PNB’s argument that there is no loss to compensate since no demand for payment has been made by the payees must also fail.
Damage was caused to respondents-spouses when the PEMSLA checks they deposited were returned for the reason "Account
Closed." These PEMSLA checks were the corresponding payments to the Rodriguez checks. Since they could not encash the PEMSLA
checks, respondents-spouses were unable to collect payments for the amounts they had advanced.

A bank that has been remiss in its duty must suffer the consequences of its negligence. Being issued to named payees, PNB was duty-
bound by law and by banking rules and procedure to require that the checks be properly indorsed before accepting them for deposit
and payment. In fine, PNB should be held liable for the amounts of the checks.

One Last Note

We note that the RTC failed to thresh out the merits of PNB’s cross-claim against its co-defendants PEMSLA and MPC. The records
are bereft of any pleading filed by these two defendants in answer to the complaint of respondents-spouses and cross-claim of PNB.
The Rules expressly provide that failure to file an answer is a ground for a declaration that defendant is in default. 28 Yet, the RTC failed
to sanction the failure of both PEMSLA and MPC to file responsive pleadings. Verily, the RTC dismissal of PNB’s cross-claim has no
basis. Thus, this judgment shall be without prejudice to whatever action the bank might take against its co-defendants in the trial court.

To PNB’s credit, it became involved in the controversial transaction not of its own volition but due to the actions of some of its
employees. Considering that moral damages must be understood to be in concept of grants, not punitive or corrective in nature, We
resolve to reduce the award of moral damages to P50,000.00.29

WHEREFORE, the appealed Amended Decision is AFFIRMED with the MODIFICATION that the award for moral damages is reduced
to P50,000.00, and that this is without prejudice to whatever civil, criminal, or administrative action PNB might take against PEMSLA,
MPC, and the employees involved.

SO ORDERED.

G.R. No. 126568 April 30, 2003

QUIRINO GONZALES LOGGING CONCESSIONAIRE, QUIRINO GONZALES and EUFEMIA GONZALES,petitioners,

vs.
THE COURT OF APPEALS (CA) and REPUBLIC PLANTERS BANK, respondents.

CARPIO MORALES, J.:

In the expansion of its logging business, petitioner Quirino Gonzales Logging Concessionaire (QGLC), through its proprietor, general
manager — co-petitioner Quirino Gonzales, applied on October 15, 1962 for credit accommodations 1 with respondent Republic Bank
(the Bank), later known as Republic Planters Bank.

The Bank approved QGLC's application on December 21, 1962, granting it a credit line of P900,000.00 2 broken into an overdraft line of
P500,000.00 which was later reduced to P450,000.00 and a Letter of Credit (LC) line of P400,000.00.3

Pursuant to the grant, the Bank and petitioners QGLC and the spouses Quirino and Eufemia Gonzales executed ten documents: two
denominated "Agreement for Credit in Current Account,"4 four denominated "Application and Agreement for Commercial Letter of
Credit,"5 and four denominated "Trust Receipt."6

Petitioners' obligations under the credit line were secured by a real estate mortgage on four parcels of land: two in Pandacan, Manila,
one in Makati (then part of Rizal), and another in Diliman, Quezon City.7

In separate transactions, petitioners, to secure certain advances from the Bank in connection with QGLC's exportation of logs, executed
a promissory note in 1964 in favor of the Bank. They were to execute three more promissory notes in 1967.

In 1965, petitioners having long defaulted in the payment of their obligations under the credit line, the Bank foreclosed the mortgage
and bought the properties covered thereby, it being the highest bidder in the auction sale held in the same year. Ownership over the
properties was later consolidated in the Bank on account of which new titles thereto were issued to it. 8

On January 27, 1977, alleging non-payment of the balance of QGLC's obligation after the proceeds of the foreclosure sale were applied
thereto, and non-payment of the promissory notes despite repeated demands, the Bank filed a complaint for "sum of money" (Civil
Case No. 106635) against petitioners before the Regional Trial Court (RTC) of Manila.

The complaint listed ten causes of action. The first concerns the overdraft line under which the Bank claimed that petitioners withdrew
amounts (unspecified) at twelve percent per annum which were unpaid at maturity and that after it applied the proceeds of the
foreclosure sale to the overdraft debt, there remained an unpaid balance of P1,224,301.56.

The Bank's second to fifth causes of action pertain to the LC line under which it averred that on the strength of the LCs it issued, the
beneficiaries thereof drew and presented sight drafts to it which it all paid after petitioners' acceptance; and that it delivered the tractors
and equipment subject of the LCs to petitioners who have not paid either the full or part of the face value of the drafts.

Specifically with respect to its second cause of action, the Bank alleged that it issued LC No. 63-0055D on January 15, 1963 in favor of
Monark International Incorporated9 covering the purchase of a tractor10 on which the latter allegedly drew a sight draft with a face value
of P71,500.00,11 which amount petitioners have not, however, paid in full.
Under its third cause of action, the Bank charged that it issued LC No. 61-1110D on December 27, 1962 also in favor of Monark
International covering the purchase of another tractor and other equipment; 12 and that Monark International drew a sight draft with a
face value of P80,350.00,13 and while payments for the value thereof had been made by petitioners, a balance of P68,064.97 remained.

Under the fourth cause of action, the Bank maintained that it issued LC No. 63-0182D on February 11, 1963 in favor of J.B.L.
Enterprises, Inc.14 covering the purchase of two tractors,15 and J.B.L. Enterprises drew on February 13, 1963 a sight draft on said LC in
the amount of P155,000.00 but petitioners have not paid said amount.

On its fifth cause of action, the Bank alleged that it issued LC No. 63-0284D on March 14, 1963 in favor of Super Master Auto Supply
(SMAS) covering the purchase of "Eight Units GMC (G.I.) Trucks"; that on March 14, 1963, SMAS drew a sight draft with a face value
of P64,000.0016 on the basis of said LC; and that the payments made by petitioners for the value of said draft were deficient by
P45,504.74.

The Bank thus prayed for the settlement of the above-stated obligations at an interest rate of eleven percent per annum, and for the
award of trust receipt commissions, attorney's fees and other fees and costs of collection.

The sixth to ninth causes of action are anchored on the promissory notes issued by petitioners allegedly to secure certain advances
from the Bank in connection with the exportation of logs as reflected above. 17 The notes were payable 30 days after date and provided
for the solidary liability of petitioners as well as attorney's fees at ten percent of the total amount due 18 in the event of their non-payment
at maturity.

The note dated June 18, 1964, subject of the sixth cause of action, has a face value of P55,000.00 with interest rate of twelve
percent per annum;19 that dated July 7, 1967 subject of the seventh has a face value of P20,000.00; 20that dated July 18, 1967 subject
of the eighth has a face value of P38,000.00; 21 and that dated August 23, 1967 subject of the ninth has a face value of
P11,000.00.22 The interest rate of the last three notes is pegged at thirteen percent per annum.23

On its tenth and final cause of action, the Bank claimed that it has accounts receivable from petitioners in the amount of P120.48.

In their Answer24 of March 3, 1977, petitioners admit the following: having applied for credit accommodations totaling P900,000.00 to
secure which they mortgaged real properties; opening of the LC/Trust Receipt Line; the issuance by the Bank of the various LCs; and
the foreclosure of the real estate mortgage and the consolidation of ownership over the mortgaged properties in favor of the Bank. They
deny, however, having availed of the credit accommodations and having received the value of the promissory notes, as they do deny
having physically received the tractors and equipment subject of the LCs.

As affirmative defenses, petitioners assert that the complaint states no cause of action, and assuming that it does, the same is/are
barred by prescription or null and void for want of consideration.

By Order of March 10, 1977, Branch 36 of the Manila RTC attached the preferred shares of stocks of the spouses Quirino and Eufemia
Gonzales with the Bank with a total par value of P414,000.00.

Finding for petitioners, the trial court rendered its Decision of April 22, 1992 the dispositive portion of which reads:

WHEREFORE, judgment is rendered as follows:

1. All the claims of plaintiff particularly those described in the first to the tenth causes of action of its complaint are denied for
the reasons earlier mentioned in the body of this decision;

2. As regards the claims of defendants pertaining to their counterclaim (Exhibits "1", "2" and "3"), they are hereby given ten
(10) years from the date of issuance of the torrens title to plaintiff and before the transfer thereof in good faith to a third party
buyer within which to ask for the reconveyance of the real properties foreclosed by plaintiff,

3. The order of attachment which was issued against the preferred shares of stocks of defendants-spouses Quirino Gonzales
and Eufemia Gonzales with the Republic Bank now known as Republic Planters Bank dated March 21, 1977 is hereby
dissolved and/or lifted, and

4. Plaintiff is likewise ordered to pay the sum of P20,000.00, as and for attorney's fees, with costs against plaintiff.

SO ORDERED.

In finding for petitioners, the trial court ratiocinated: 25

Art. 1144 of the Civil Code states that an action upon a written contract prescribes in ten (10) years from the time the right of
action accrues. Art. 1150 states that prescription starts to run from the day the action may be brought. The obligations
allegedly created by the written contracts or documents supporting plaintiff's first to the sixth causes of action were
demandable at the latest in 1964. Thus when the complaint was filed on January 27, 1977 more than ten (10) years from 1964
[when the causes of action accrued] had already lapsed. The first to the sixth causes of action are thus barred by prescription.
...

As regards the seventh and eight causes of action, the authenticity of which documents were partly in doubt in the light of the
categorical and uncontradicted statements that in 1965, defendant Quirino Gonzales logging concession was terminated
based on the policy of the government to terminate logging concessions covering less than 20,000 hectares. If this is the case,
the Court is in a quandary why there were log exports in 1967? Because of the foregoing, the Court does not find any valid
ground to sustain the seventh and eight causes of action of plaintiff's complaint.

As regards the ninth cause of action, the Court is baffled why plaintiff extended to defendants another loan when defendants
according to plaintiff's records were defaulting creditors? The above facts and circumstances has (sic) convinced this Court to
 give credit to the testimony of defendants' witnesses that the Gonzales spouses signed the documents in question in blank
and that the promised loan was never released to them. There is therefore a total absence of consent since defendants did not
give their consent to loans allegedly procured, the proceeds of which were never received by the alleged debtors, defendants
herein. . . .

Plaintiff did not present evidence to support its tenth cause of action. For this reason, it must consequently be denied for lack
of evidence.

On the matter of [the] counterclaims of defendants, they seek the return of the real and personal properties which they have
given in good faith to plaintiff. Again, prescription may apply. The real properties of defendants acquired by plaintiff were
foreclosed in 1965 and consequently, defendants had one (1) year to redeem the property or ten (10) years from issuance of
title on the ground that the obligation foreclosed was fictitious.

xxx xxx xxx

On appeal,26 the Court of Appeals (CA) reversed the decision of the trial court by Decision 27 of June 28, 1996 which disposed as
follows:28

WHEREFORE, premises considered, the appealed decision (dated April 22, 1992) of the Regional Trial Court (Branch 36) in
Manila in Civil Case No. 82-4141 is hereby REVERSED — and let the case be remanded back to the court a quo for the
determination of the amount(s) to be awarded to the [the Bank]-appellant relative to its claims against the appellees.

SO ORDERED.

With regard to the first to sixth causes of action, the CA upheld the contention of the Bank that the notices of foreclosure sale were
"tantamount" to demand letters upon the petitioners which interrupted the running of the prescriptive period. 29

As regards the seventh to ninth causes of action, the CA also upheld the contention of the Bank that the written agreements-promissory
notes prevail over the oral testimony of petitioner Quirino Gonzales that the cancellation of their logging concession in 1967 made it
unbelievable for them to secure in 1967 the advances reflected in the promissory notes. 30

With respect to petitioners' counterclaim, the CA agreed with the Bank that: 31

Certainly, failure on the part of the trial court to pass upon and determine the authenticity and genuineness of [the Bank's]
documentary evidence [the trial court having ruled on the basis of prescription of the Bank's first to sixth causes of action]
makes it impossible for the trial court' to eventually conclude that the obligation foreclosed (sic) was fictitious. Needless to say,
the trial court's ruling averses (sic) the well-entrenched rule that 'courts must render verdict on their findings of facts." (China
Banking Co. vs. CA, 70 SCRA 398)

Furthermore, the defendants-appellees' [herein petitioners'] counterclaim is basically an action for the reconveyance of their
properties, thus, the trial court's earlier ruling that the defendants-appellees' counterclaim has prescribed is itself a ruling that
the defendants-appellees' separate action for reconveyance has also prescribed.

The CA struck down the trial court's award of attorney's fees for lack of legal basis.32

Hence, petitioners now press the following issues before this Court by the present petition for review on certiorari:

1. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT RESPONDENT-APPELLEES (SIC.)

REPUBLIC PLANTERS BANK['S] FIRST, SECOND, THIRD, FOURTH, FIFTH AND SIXTH CAUSES OF ACTION HAVE NOT
PRESCRIBED CONTRARY TO THE FINDINGS OF THE LOWER COURT, RTC BRANCH 36 THAT THE SAID CAUSES OF
ACTION HAVE ALREADY PRESCRIBED.

2. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT RESPODNENT-APPELLEES (SIC.)

REPUBLIC PLANTERS BANK['S] SEVENTH, EIGHT AND NINTH CAUSES OF ACTION APPEARS (SIC.) TO BE
IMPRESSED WITH MERIT CONTRARY TO THE FINDINGS OF THE LOWER COURT RTC BRANCH 36 THAT THE SAID
CAUSES HAVE NO VALID GROUND TO SUSTAIN [THEM] AND FOR LACK OF EVIDENCE.

3. WHETHER OR NOT RESPONDENT COURT [ERRED] IN REVERSING THE FINDINGS OF THE REGIONAL TRIAL
COURT BRANCH 36 OF MANILA THAT PETITIONERS-APPELLANT (SIC.) MAY SEEK THE RETURN OF THE REAL AND
PERSONAL PROPERTIES WHICH THEY MAY HAVE GIVEN IN GOOD FAITH AS THE SAME IS BARRED BY
PRESCRIPTION AND THAT PETITIONERS-APPELLANT (SIC.) HAD ONE (1) YEAR TO REDEEM THE PROPERTY OR
TEN (10) YEARS FROM ISSUANCE OF THE TITLE ON THE GROUND THAT THE OBLIGATION FORECLOSED WAS
FICTITIOUS.

4. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT PEITIONERS-APPELLANTS [SIC] ARE
NOT ENTITLED TO AN AWARD OF ATTORNEY'S FEES.

The petition is partly meritorious.

On the first issue. The Civil Code provides that an action upon written contract, an obligation created by law, and a judgment must be
brought within ten years from the time the right of action accrues. 33

The finding of the trial court that more than ten years had elapsed since the right to bring an action on the Bank's first to sixth causes
had arisen34 is not disputed. The Bank contends, however, that "the notices of foreclosure sale in the foreclosure proceedings of 1965
are tantamount to formal demands upon petitioners for the payment of their past due loan obligations with the Bank, hence, said notices
of foreclosure sale interrupted/forestalled the running of the prescriptive period." 35
The Bank's contention does not impress. Prescription of actions is interrupted when they are filed before the court, when there is a
written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor. 36

The law specifically requires a written extrajudicial demand by the creditors which is absent in the case at bar. The contention that the
notices of foreclosure are "tantamount" to a written extrajudicial demand cannot be appreciated, the contents of said notices not having
been brought to light.

But even assuming arguendo that the notices interrupted the running of the prescriptive period, the argument would still not lie for the
following reasons:

With respect to the first to the fifth causes of action, as gleaned from the complaint, the Bank seeks the recovery of the deficient amount
of the obligation after the foreclosure of the mortgage. Such suit is in the nature of a mortgage action because its purpose is precisely to
enforce the mortgage contract.37 A mortgage action prescribes after ten years from the time the right of action accrued. 38

The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in the sale of the property at public
auction and the outstanding obligation at the time of the foreclosure proceedings. 39 In the present case, the Bank, as mortgagee, had
the right to claim payment of the deficiency after it had foreclosed the mortgage in 1965.40 In other words, the prescriptive period started
to run against the Bank in 1965. As it filed the complaint only on January 27, 1977, more than ten years had already elapsed, hence,
the action on its first to fifth causes had by then prescribed. No other conclusion can be reached even if the suit is considered as one
upon a written contract or upon an obligation to pay the deficiency which is created by law, 41 the prescriptive period of both being also
ten years.42

As regards the promissory note subject of the sixth cause of action, its period of prescription could not have been interrupted by the
notices of foreclosure sale not only because, as earlier discussed, petitioners' contention that the notices of foreclosure are tantamount
to written extra-judicial demand cannot be considered absent any showing of the contents thereof, but also because it does not appear
from the records that the said note is covered by the mortgage contract.

Coming now to the second issue, petitioners seek to evade liability under the Bank's seventh to ninth causes of action by claiming that
petitioners Quirino and Eufemia Gonzales signed the promissory notes in blank; that they had not received the value of said notes, and
that the credit line thereon was unnecessary in view of their money deposits, they citing "Exhibits 2 to 2-B,"43 in, and unremitted
proceeds on log exports from, the Bank. In support of their claim, they also urge this Court to look at Exhibits "B" (the Bank's
recommendation for approval of petitioners' application for credit accommodations), "P" (the "Application and Agreement for
Commercial Letter of Credit" dated January 16, 1963) and "T" (the "Application and Agreement for Commercial Letter of Credit" dated
February 14, 1963).

The genuineness and due execution of the notes had, however, been deemed admitted by petitioners, they having failed to deny the
same under oath.44 Their claim that they signed the notes in blank does not thus lie.

Petitioners' admission of the genuineness and due execution of the promissory notes notwithstanding, they raise want of
consideration45 thereof. The promissory notes, however, appear to be negotiable as they meet the requirements of Section 1 46 of the
Negotiable Instruments Law. Such being the case, the notes are prima faciedeemed to have been issued for consideration.47 It bears
noting that no sufficient evidence was adduced by petitioners to show otherwise.

Exhibits "2" to "2-B" to which petitioners advert in support of their claim that the credit line on the notes was unnecessary because they
had deposits in, and remittances due from, the Bank deserve scant consideration. Said exhibits are merely claims by petitioners under
their then proposals for a possible settlement of the case dated February 3, 1978. Parenthetically, the proposals were not even signed
by petitioners but by certain Attorneys Osmundo R. Victoriano and Rogelio P. Madriaga.

In any case, it is no defense that the promissory notes were signed in blank as Section 14 48 of the Negotiable Instruments Law
concedes the prima facie authority of the person in possession of negotiable instruments, such as the notes herein, to fill in the blanks.

As for petitioners' reliance on Exhibits "B", "P" and "T," they have failed to show the relevance thereof to the seventh up to the ninth
causes of action of the Bank.

On the third issue, petitioners asseverate that with the trial court's dismissal of the Bank's complaint and the denial of its first to sixth
causes of action, it is but fair and just that the real properties which were mortgaged and foreclosed be returned to them. 49 Such,
however, does not lie. It is not disputed that the properties were foreclosed under Act No. 3135 (An Act to Regulate the Sale of Property
under Special Powers Inserted in or Annexed to Real Estate Mortgages), as amended. Though the Bank's action for deficiency is
barred by prescription, nothing irregular attended the foreclosure proceedings to warrant the reconveyance of the properties covered
thereby.

As for petitioners' prayer for moral and exemplary damages, it not having been raised as issue before the courts below, it can not now
be considered. Neither can the award of attorney's fees for lack of legal basis.

WHEREFORE, the CA Decision is hereby AFFIRMED with MODIFICATION.

Republic Bank's Complaint with respect to its first to sixth causes of action is hereby DISMISSED. Its complaint with respect to its
seventh to ninth causes of action is REMANDED to the court of origin, the Manila Regional Trial Court, Branch 36, for it to determine
the amounts due the Bank thereunder.

SO ORDERED.

G.R. No. 141181 April 27, 2007

SAMSON CHING, Petitioner,

vs.
CLARITA NICDAO and HON. COURT OF APPEALS, Respondents.
 DECISION

CALLEJO, SR., J.:

Before the Court is a petition for review on certiorari filed by Samson Ching of the Decision1 dated November 22, 1999 of the Court of
Appeals (CA) in CA-G.R. CR No. 23055. The assailed decision acquitted respondent Clarita Nicdao of eleven (11) counts of violation
of Batas Pambansa Bilang (BP) 22, otherwise known as "The Bouncing Checks Law." The instant petition pertains and is limited to the
civil aspect of the case as it submits that notwithstanding respondent Nicdao’s acquittal, she should be held liable to pay petitioner
Ching the amounts of the dishonored checks in the aggregate sum of ₱20,950,000.00.

Factual and Procedural Antecedents

On October 21, 1997, petitioner Ching, a Chinese national, instituted criminal complaints for eleven (11) counts of violation of BP 22
against respondent Nicdao. Consequently, eleven (11) Informations were filed with the First Municipal Circuit Trial Court (MCTC) of
Dinalupihan-Hermosa, Province of Bataan, which, except as to the amounts and check numbers, uniformly read as follows:

The undersigned accuses Clarita S. Nicdao of a VIOLATION OF BATAS PAMBANSA BILANG 22, committed as follows:

That on or about October 06, 1997, at Dinalupihan, Bataan, Philippines, and within the jurisdiction of this Honorable Court, the said
accused did then and there willfully and unlawfully make or draw and issue Hermosa Savings & Loan Bank, Inc. Check No. [002524]
dated October 06, 1997 in the amount of [₱20,000,000.00] in payment of her obligation with complainant Samson T.Y. Ching, the said
accused knowing fully well that at the time she issued the said check she did not have sufficient funds in or credit with the drawee bank
for the payment in full of the said check upon presentment, which check when presented for payment within ninety (90) days from the
date thereof, was dishonored by the drawee bank for the reason that it was drawn against insufficient funds and notwithstanding receipt
of notice of such dishonor the said accused failed and refused and still fails and refuses to pay the value of the said check in the
amount of [P20,000,000.00] or to make arrangement with the drawee bank for the payment in full of the same within five (5) banking
days after receiving the said notice, to the damage and prejudice of the said Samson T.Y. Ching in the aforementioned amount of
[P20,000,000.00], Philippine Currency.

CONTRARY TO LAW.

Dinalupihan, Bataan, October 21, 1997.

(Sgd.) SAMSON T.Y. CHING

Complainant

The cases were docketed as Criminal Cases Nos. 9433 up to 9443 involving the following details:

Check No. Amount Date Private Complainant Reason for the Dishonor

0025242 ₱ 20,000,000 Oct. 6, 1997 Samson T.Y. Ching DAIF*

0088563 150,000 Oct. 6, 1997 " "

0121424 100,000 Oct. 6, 1997 " "

0045315 50,000 Oct. 6, 1997 " "

0022546 100,000 Oct. 6, 1997 " "

0088757 100,000 Oct. 6, 1997 " "

0089368 50,000 Oct. 6, 1997 " "

0022739 50,000 Oct. 6, 1997 " "

00894810 150,000 Oct. 6, 1997 " "

00893511 100,000 Oct. 6, 1997 " "

01037712 100,000 Oct. 6, 1997 " "

At about the same time, fourteen (14) other criminal complaints, also for violation of BP 22, were filed against respondent Nicdao by
Emma Nuguid, said to be the common law spouse of petitioner Ching. Allegedly fourteen (14) checks, amounting to ₱1,150,000.00,
were issued by respondent Nicdao to Nuguid but were dishonored for lack of sufficient funds. The Informations were filed with the same
MCTC and docketed as Criminal Cases Nos. 9458 up to 9471.

At her arraignment, respondent Nicdao entered the plea of "not guilty" to all the charges. A joint trial was then conducted for Criminal
Cases Nos. 9433-9443 and 9458-9471.

For the prosecution in Criminal Cases Nos. 9433-9443, petitioner Ching and Imelda Yandoc, an employee of the Hermosa Savings &
Loan Bank, Inc., were presented to prove the charges against respondent Nicdao. On direct-examination,13 petitioner Ching
preliminarily identified each of the eleven (11) Hermosa Savings & Loan Bank (HSLB) checks that were allegedly issued to him by
respondent Nicdao amounting to ₱20,950,000.00. He identified the signatures appearing on the checks as those of respondent Nicdao.
He recognized her signatures because respondent Nicdao allegedly signed the checks in his presence. When petitioner Ching
presented these checks for payment, they were dishonored by the bank, HSLB, for being "DAIF" or "drawn against insufficient funds."
Petitioner Ching averred that the checks were issued to him by respondent Nicdao as security for the loans that she obtained from him.
Their transaction began sometime in October 1995 when respondent Nicdao, proprietor/manager of Vignette Superstore, together with
her husband, approached him to borrow money in order for them to settle their financial obligations. They agreed that respondent
Nicdao would leave the checks undated and that she would pay the loans within one year. However, when petitioner Ching went to see
her after the lapse of one year to ask for payment, respondent Nicdao allegedly said that she had no cash.

Petitioner Ching claimed that he went back to respondent Nicdao several times more but every time, she would tell him that she had no
money. Then in September 1997, respondent Nicdao allegedly got mad at him for being insistent and challenged him about seeing
each other in court. Because of respondent Nicdao's alleged refusal to pay her obligations, on October 6, 1997, petitioner Ching
deposited the checks that she issued to him. As he earlier stated, the checks were dishonored by the bank for being "DAIF." Shortly
thereafter, petitioner Ching, together with Emma Nuguid, wrote a demand letter to respondent Nicdao which, however, went unheeded.
Accordingly, they separately filed the criminal complaints against the latter.

On cross-examination,14 petitioner Ching claimed that he had been a salesman of the La Suerte Cigar and Cigarette Manufacturing for
almost ten (10) years already. As such, he delivered the goods and had a warehouse. He received salary and commissions. He could
not, however, state his exact gross income. According to him, it increased every year because of his business. He asserted that aside
from being a salesman, he was also in the business of extending loans to other people at an interest, which varied depending on the
person he was dealing with.

Petitioner Ching confirmed the truthfulness of the allegations contained in the eleven (11) Informations that he filed against respondent
Nicdao. He reiterated that, upon their agreement, the checks were all signed by respondent Nicdao but she left them undated.
Petitioner Ching admitted that he was the one who wrote the date, October 6, 1997, on those checks when respondent Nicdao refused
to pay him.

With respect to the ₱20,000,000.00 check (Check No. 002524), petitioner Ching explained that he wrote the date and amount thereon
when, upon his estimation, the money that he regularly lent to respondent Nicdao beginning October 1995 reached the said sum. He
likewise intimated that prior to 1995, they had another transaction amounting to ₱1,200,000.00 and, as security therefor, respondent
Nicdao similarly issued in his favor checks in varying amounts of ₱100,000.00 and ₱50,000.00. When the said amount was fully paid,
petitioner Ching returned the checks to respondent Nicdao.

Petitioner Ching maintained that the eleven (11) checks subject of Criminal Cases Nos. 9433-9443 pertained to respondent Nicdao’s
loan transactions with him beginning October 1995. He also mentioned an instance when respondent Nicdao’s husband and daughter
approached him at a casino to borrow money from him. He lent them ₱300,000.00. According to petitioner Ching, since this amount
was also unpaid, he included it in the other amounts that respondent Nicdao owed to him which totaled ₱20,000,000.00 and wrote the
said amount on one of respondent Nicdao’s blank checks that she delivered to him.

Petitioner Ching explained that from October 1995 up to 1997, he regularly delivered money to respondent Nicdao, in the amount of
₱1,000,000.00 until the total amount reached ₱20,000,000.00. He did not ask respondent Nicdao to acknowledge receiving these
amounts. Petitioner Ching claimed that he was confident that he would be paid by respondent Nicdao because he had in his
possession her blank checks. On the other hand, the latter allegedly had no cause to fear that he would fill up the checks with just any
amount because they had trust and confidence in each other. When asked to produce the piece of paper on which he allegedly wrote
the amounts that he lent to respondent Nicdao, petitioner Ching could not present it; he reasoned that it was not with him at that time.

It was also averred by petitioner Ching that respondent Nicdao confided to him that she told her daughter Janette, who was married to a
foreigner, that her debt to him was only between ₱3,000,000.00 and ₱5,000,000.00. Petitioner Ching claimed that he offered to
accompany respondent Nicdao to her daughter in order that they could apprise her of the amount that she owed him. Respondent
Nicdao refused for fear that it would cause disharmony in the family. She assured petitioner Ching, however, that he would be paid by
her daughter.

Petitioner Ching reiterated that after the lapse of one (1) year from the time respondent Nicdao issued the checks to him, he went to her
several times to collect payment. In all these instances, she said that she had no cash. Finally, in September 1997, respondent Nicdao
allegedly went to his house and told him that Janette was only willing to pay him between ₱3,000,000.00 and ₱5,000,000.00 because,
as far as her daughter was concerned, that was the only amount borrowed from petitioner Ching. On hearing this, petitioner Ching
angrily told respondent Nicdao that she should not have allowed her debt to reach ₱20,000,000.00 knowing that she would not be able
to pay the full amount.

Petitioner Ching identified the demand letter that he and Nuguid sent to respondent Nicdao. He explained that he no longer informed
her about depositing her checks on his account because she already made that statement about seeing him in court. Again, he
admitted writing the date, October 6, 1997, on all these checks.

Another witness presented by the prosecution was Imelda Yandoc, an employee of HSLB. On direct-examination,15she testified that
she worked as a checking account bookkeeper/teller of the bank. As such, she received the checks that were drawn against the bank
and verified if they were funded. On October 6, 1997, she received several checks issued by respondent Nicdao. She knew respondent
Nicdao because the latter maintained a savings and checking account with them. Yandoc identified the checks subject of Criminal
Cases Nos. 9433-9443 and affirmed that stamped at the back of each was the annotation "DAIF". Further, per the bank’s records, as of
October 8, 1997, only a balance of ₱300.00 was left in respondent Nicdao’s checking account and ₱645.83 in her savings account. On
even date, her account with the bank was considered inactive.

On cross-examination,16 Yandoc stated anew that respondent Nicdao’s checks bounced on October 7, 1997 for being "DAIF" and her
account was closed the following day, on October 8, 1997. She informed the trial court that there were actually twenty-five (25) checks
of respondent Nicdao that were dishonored at about the same time. The eleven (11) checks were purportedly issued in favor of
petitioner Ching while the other fourteen (14) were purportedly issued in favor of Nuguid. Yandoc explained that respondent Nicdao or
her employee would usually call the bank to inquire if there was an incoming check to be funded.

For its part, the defense proffered the testimonies of respondent Nicdao, Melanie Tolentino and Jocelyn Nicdao. On direct-
examination,17 respondent Nicdao stated that she only dealt with Nuguid. She vehemently denied the allegation that she had borrowed
money from both petitioner Ching and Nuguid in the total amount of ₱22,950,000.00. Respondent Nicdao admitted, however, that she
had obtained a loan from Nuguid but only for ₱2,100,000.00 and the same was already fully paid. As proof of such payment, she
presented a Planters Bank demand draft dated August 13, 1996 in the amount of ₱1,200,000.00. The annotation at the back of the said
demand draft showed that it was endorsed and negotiated to the account of petitioner Ching.

In addition, respondent Nicdao also presented and identified several cigarette wrappers 18 at the back of which appeared computations.
She explained that Nuguid went to the grocery store everyday to collect interest payments. The principal loan was ₱2,100,000.00 with
12% interest per day. Nuguid allegedly wrote the payments for the daily interests at the back of the cigarette wrappers that she gave to
respondent Nicdao.

The principal loan amount of ₱2,100,000.00 was allegedly delivered by Nuguid to respondent Nicdao in varying amounts of
₱100,000.00 and ₱150,000.00. Respondent Nicdao refuted the averment of petitioner Ching that prior to 1995, they had another
transaction.

With respect to the ₱20,000,000.00 check, respondent Nicdao admitted that the signature thereon was hers but denied that she issued
the same to petitioner Ching. Anent the other ten (10) checks, she likewise admitted that the signatures thereon were hers while the
amounts and payee thereon were written by either Jocelyn Nicdao or Melanie Tolentino, who were employees of Vignette Superstore
and authorized by her to do so.

Respondent Nicdao clarified that, except for the ₱20,000,000.00 check, the other ten (10) checks were handed to Nuguid on different
occasions. Nuguid came to the grocery store everyday to collect the interest payments. Respondent Nicdao said that she purposely left
the checks undated because she would still have to notify Nuguid if she already had the money to fund the checks.

Respondent Nicdao denied ever confiding to petitioner Ching that she was afraid that her daughter would get mad if she found out
about the amount that she owed him. What allegedly transpired was that when she already had the money to pay them (presumably
referring to petitioner Ching and Nuguid), she went to them to retrieve her checks. However, petitioner Ching and Nuguid refused to
return the checks claiming that she (respondent Nicdao) still owed them money. She demanded that they show her the checks in order
that she would know the exact amount of her debt, but they refused. It was at this point that she got angry and dared them to go to
court.

After the said incident, respondent Nicdao was surprised to be notified by HSLB that her check in the amount of ₱20,000,000.00 was
just presented to the bank for payment. She claimed that it was only then that she remembered that sometime in 1995, she was
informed by her employee that one of her checks was missing. At that time, she did not let it bother her thinking that it would eventually
surface when presented to the bank.

Respondent Nicdao could not explain how the said check came into petitioner Ching’s possession. She explained that she kept her
checks in an ordinary cash box together with a stapler and the cigarette wrappers that contained Nuguid’s computations. Her saleslady
had access to this box. Respondent Nicdao averred that it was Nuguid who offered to give her a loan as she would allegedly need
money to manage Vignette Superstore. Nuguid used to run the said store before respondent Nicdao’s daughter bought it from Nuguid’s
family, its previous owner. According to respondent Nicdao, it was Nuguid who regularly delivered the cash to respondent Nicdao or, if
she was not at the grocery store, to her saleslady. Respondent Nicdao denied any knowledge that the money loaned to her by Nuguid
belonged to petitioner Ching.

At the continuation of her direct-examination,19 respondent Nicdao said that she never dealt with petitioner Ching because it was
Nuguid who went to the grocery store everyday to collect the interest payments. When shown the ₱20,000,000.00 check, respondent
Nicdao admitted that the signature thereon was hers but she denied issuing it as a blank check to petitioner Ching. On the other hand,
with respect to the other ten (10) checks, she also admitted that the signatures thereon were hers and that the amounts thereon were
written by either Josie Nicdao or Melanie Tolentino, her employees whom she authorized to do so. With respect to the payee, it was
purposely left blank allegedly upon instruction of Nuguid who said that she would use the checks to pay someone else.

On cross-examination,20 respondent Nicdao explained that Josie Nicdao and Melanie Tolentino were caretakers of the grocery store
and that they manned it when she was not there. She likewise confirmed that she authorized them to write the amounts on the checks
after she had affixed her signature thereon. She stressed, however, that the ₱20,000,000.00 check was the one that was reported to
her as lost or missing by her saleslady sometime in 1995. She never reported the matter to the bank because she was confident that it
would just surface when it would be presented for payment.

Again, respondent Nicdao identified the cigarette wrappers which indicated the daily payments she had made to Nuguid. The latter
allegedly went to the grocery store everyday to collect the interest payments. Further, the figures at the back of the cigarette wrappers
were written by Nuguid. Respondent Nicdao asserted that she recognized her handwriting because Nuguid sometimes wrote them in
her presence. Respondent Nicdao maintained that she had already paid Nuguid the amount of ₱1,200,000.00 as evidenced by the
Planters Bank demand draft which she gave to the latter and which was subsequently negotiated and deposited in petitioner Ching’s
account. In connection thereto, respondent Nicdao refuted the prosecution’s allegation that the demand draft was payment for a
previous transaction that she had with petitioner Ching. She clarified that the payments that Nuguid collected from her everyday were
only for the interests due. She did not ask Nuguid to make written acknowledgements of her payments.

Melanie Tolentino was presented to corroborate the testimony of respondent Nicdao. On direct-examination,21Tolentino stated that she
worked at the Vignette Superstore and she knew Nuguid because her employer, respondent Nicdao, used to borrow money from her.
She knew petitioner Ching only by name and that he was the "husband" of Nuguid.

As an employee of the grocery store, Tolentino stated that she acted as its caretaker and was entrusted with the custody of respondent
Nicdao’s personal checks. Tolentino identified her own handwriting on some of the checks especially with respect to the amounts and
figures written thereon. She said that Nuguid instructed her to leave the space for the payee blank as she would use the checks to pay
someone else. Tolentino added that she could not recall respondent Nicdao issuing a check to petitioner Ching in the amount of
₱20,000,000.00. She confirmed that they lost a check sometime in 1995. When informed about it, respondent Nicdao told her that the
check could have been issued to someone else, and that it would just surface when presented to the bank.

Tolentino recounted that Nuguid came to the grocery store everyday to collect the interest payments of the loan. In some instances,
upon respondent Nicdao’s instruction, Tolentino handed to Nuguid checks that were already signed by respondent Nicdao. Sometimes,
Tolentino would be the one to write the amount on the checks. Nuguid, in turn, wrote the amounts on pieces of paper which were kept
by respondent Nicdao.
On cross-examination,22 Tolentino confirmed that she was authorized by respondent Nicdao to fill up the checks and hand them to
Nuguid. The latter came to the grocery store everyday to collect the interest payments. Tolentino claimed that in 1995, in the course of
chronologically arranging respondent Nicdao’s check booklets, she noticed that a check was missing. Respondent Nicdao told her that
perhaps she issued it to someone and that it would just turn up in the bank. Tolentino was certain that the missing check was the same
one that petitioner Ching presented to the bank for payment in the amount of ₱20,000,000.00.

Tolentino stated that she left the employ of respondent Nicdao sometime in 1996. After the checks were dishonored in October 1997,
Tolentino got a call from respondent Nicdao. After she was shown a fax copy thereof, Tolentino confirmed that the ₱20,000,000.00
check was the same one that she reported as missing in 1995.

Jocelyn Nicdao also took the witness stand to corroborate the testimony of the other defense witnesses. On direct-examination,23 she
averred that she was a saleslady at the Vignette Superstore from August 1994 up to April 1998. She knew Nuguid as well as petitioner
Ching.

Jocelyn Nicdao further testified that respondent Nicdao was indebted to Nuguid. Jocelyn Nicdao used to fill up the checks of respondent
Nicdao that had already been signed by her and give them to Nuguid. The latter came to the grocery store everyday to pick up the
interest payments. Jocelyn Nicdao identified the checks on which she wrote the amounts and, in some instances, the name of Nuguid
as payee. However, most of the time, Nuguid allegedly instructed her to leave as blank the space for the payee.

Jocelyn Nicdao identified the cigarette wrappers as the documents on which Nuguid acknowledged receipt of the interest payments.
She explained that she was the one who wrote the minus entries and they represented the daily interest payments received by Nuguid.

On cross-examination,24 Jocelyn Nicdao stated that she was a distant cousin of respondent Nicdao. She stopped working for her in
1998 because she wanted to take a rest. Jocelyn Nicdao reiterated that she handed the checks to Nuguid at the grocery store.

After due trial, on December 8, 1998, the MCTC rendered judgment in Criminal Cases Nos. 9433-9443 convicting respondent Nicdao of
eleven (11) counts of violation of BP 22. The MCTC gave credence to petitioner Ching’s testimony that respondent Nicdao borrowed
money from him in the total amount of ₱20,950,000.00. Petitioner Ching delivered ₱1,000,000.00 every month to respondent Nicdao
from 1995 up to 1997 until the sum reached ₱20,000,000.00. The MCTC also found that subsequent thereto, respondent Nicdao still
borrowed money from petitioner Ching. As security for these loans, respondent Nicdao issued checks to petitioner Ching. When the
latter deposited the checks (eleven in all) on October 6, 1997, they were dishonored by the bank for being "DAIF."

The MCTC explained that the crime of violation of BP 22 has the following elements: (a) the making, drawing and issuance of any
check to apply to account or for value; (b) the knowledge of the maker, drawer or issuer that at the time of issue he does not have
sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment; and (c) subsequent
dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer,
without any valid cause, ordered the bank to stop payment. 25

According to the MCTC, all the foregoing elements are present in the case of respondent Nicdao’s issuance of the checks subject of
Criminal Cases Nos. 9433-9443. On the first element, respondent Nicdao was found by the MCTC to have made, drawn and issued the
checks. The fact that she did not personally write the payee and date on the checks was not material considering that under Section 14
of the Negotiable Instruments Law, "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 x x x." Respondent Nicdao admitted that she authorized her employees to provide the details on the checks after she
had signed them.

The MCTC disbelieved respondent Nicdao’s claim that the ₱20,000,000.00 check was the same one that she lost in 1995. It observed
that ordinary prudence would dictate that a lost check would at least be immediately reported to the bank to prevent its unauthorized
endorsement or negotiation. Respondent Nicdao made no such report to the bank. Even if the said check was indeed lost, the MCTC
faulted respondent Nicdao for being negligent in keeping the checks that she had already signed in an unsecured box.

The MCTC further ruled that there was no evidence to show that petitioner Ching was not a holder in due course as to cause it (the
MCTC) to believe that the said check was not issued to him. Respondent Nicdao’s admission of indebtedness was sufficient to prove
that there was consideration for the issuance of the checks.

The second element was also found by the MCTC to be present as it held that respondent Nicdao, as maker, drawer or issuer, had
knowledge that at the time of issue she did not have sufficient funds in or credit with the drawee bank for the payment in full of the
checks upon their presentment.

As to the third element, the MCTC established that the checks were subsequently dishonored by the drawee bank for being "DAIF" or
drawn against insufficient funds. Stamped at the back of each check was the annotation "DAIF." The bank representative likewise
testified to the fact of dishonor.

Under the foregoing circumstances, the MCTC declared that the conviction of respondent Nicdao was warranted. It stressed that the
mere act of issuing a worthless check was malum prohibitum; hence, even if the checks were issued in the form of deposit or
guarantee, once dishonored, the same gave rise to the prosecution for and conviction of BP 22. 26 The decretal portion of the MCTC
decision reads:

WHEREFORE, in view of the foregoing, the accused is found guilty of violating Batas Pambansa Blg. 22 in 11 counts, and is hereby
ordered to pay the private complainant the amount of ₱20,950,000.00 plus 12% interest per annum from date of filing of the complaint
until the total amount had been paid. The prayer for moral damages is denied for lack of evidence to prove the same. She is likewise
ordered to suffer imprisonment equivalent to 1 year for every check issued and which penalty shall be served successively.

SO ORDERED.27
Incidentally, on January 11, 1999, the MCTC likewise rendered its judgment in Criminal Cases Nos. 9458-9471 and convicted
respondent Nicdao of the fourteen (14) counts of violation of BP 22 filed against her by Nuguid.

On appeal, the Regional Trial Court (RTC) of Dinalupihan, Bataan, Branch 5, in separate Decisions both dated May 10, 1999, affirmed
in toto the decisions of the MCTC convicting respondent Nicdao of eleven (11) and fourteen (14) counts of violation of BP 22 in Criminal
Cases Nos. 9433-9443 and 9458-9471, respectively.

Respondent Nicdao forthwith filed with the CA separate petitions for review of the two decisions of the RTC. The petition involving the
eleven (11) checks purportedly issued to petitioner Ching was docketed as CA-G.R. CR No. 23055 (assigned to the 13th Division). On
the other hand, the petition involving the fourteen (14) checks purportedly issued to Nuguid was docketed as CA-G.R. CR No. 23054
(originally assigned to the 7th Division but transferred to the 6th Division). The Office of the Solicitor General (OSG) filed its respective
comments on the said petitions. Subsequently, the OSG filed in CA-G.R. CR No. 23055 a motion for its consolidation with CA-G.R. CR
No. 23054. The OSG prayed that CA-G.R. CR No. 23055 pending before the 13th Division be transferred and consolidated with CA-
G.R. CR No. 23054 in accordance with the Revised Internal Rules of the Court of Appeals (RIRCA).

Acting on the motion for consolidation, the CA in CA-G.R. CR No. 23055 issued a Resolution dated October 19, 1999 advising the OSG
to file the motion in CA-G.R. CR No. 23054 as it bore the lowest number. Respondent Nicdao opposed the consolidation of the two
cases. She likewise filed her reply to the comment of the OSG in CA-G.R. CR No. 23055.

On November 22, 1999, the CA (13th Division) rendered the assailed Decision in CA-G.R. CR No. 23055 acquitting respondent Nicdao
of the eleven (11) counts of violation of BP 22 filed against her by petitioner Ching. The decretal portion of the assailed CA Decision
reads:

WHEREFORE, being meritorious, the petition for review is hereby GRANTED. Accordingly, the decision dated May 10, 1999, of the
Regional Trial Court, 3rd Judicial Region, Branch 5, Bataan, affirming the decision dated December 8, 1998, of the First Municipal
Circuit Trial Court of Dinalupihan-Hermosa, Bataan, convicting petitioner Clarita S. Nicdao in Criminal Cases No. 9433 to 9443 of
violation of B.P. Blg. 22 is REVERSED and SET ASIDE and another judgment rendered ACQUITTING her in all these cases, with costs
de oficio.

SO ORDERED.28

On even date, the CA issued an Entry of Judgment declaring that the above decision has become final and executory and is recorded
in the Book of Judgments.

In acquitting respondent Nicdao in CA-G.R. CR No. 23055, the CA made the following factual findings:

Petitioner [respondent herein] Clarita S. Nicdao, a middle-aged mother and housekeeper who only finished high school, has a daughter,
Janette Boyd, who is married to a wealthy expatriate.

Complainant [petitioner herein] Samson Ching is a Chinese national, who claimed he is a salesman of La Suerte Cigar and Cigarette
Factory.

Emma Nuguid, complainant’s live-in partner, is a CPA and formerly connected with Sycip, Gorres and Velayo. Nuguid used to own a
grocery store now known as the Vignette Superstore. She sold this grocery store, which was about to be foreclosed, to petitioner’s
daughter, Janette Boyd. Since then, petitioner began managing said store. However, since petitioner could not always be at the
Vignette Superstore to keep shop, she entrusted to her salesladies, Melanie Tolentino and Jocelyn Nicdao, pre-signed checks, which
were left blank as to amount and the payee, to cover for any delivery of merchandise sold at the store. The blank and personal checks
were placed in a cash box at Vignette Superstore and were filled up by said salesladies upon instruction of petitioner as to amount,
payee and date.

Soon thereafter, Emma Nuguid befriended petitioner and offered to lend money to the latter which could be used in running her newly
acquired store. Nuguid represented to petitioner that as former manager of the Vignette Superstore, she knew that petitioner would be
in need of credit to meet the daily expenses of running the business, particularly in the daily purchases of merchandise to be sold at the
store. After Emma Nuguid succeeded in befriending petitioner, Nuguid was able to gain access to the Vignette Superstore where
petitioner’s blank and pre-signed checks were kept.29

In addition, the CA also made the finding that respondent Nicdao borrowed money from Nuguid in the total amount of ₱2,100,000.00
secured by twenty-four (24) checks drawn against respondent Nicdao’s account with HSLB. Upon Nuguid’s instruction, the checks
given by respondent Nicdao as security for the loans were left blank as to the payee and the date. The loans consisted of (a)
₱950,000.00 covered by ten (10) checks subject of the criminal complaints filed by petitioner Ching (CA-G.R. CR No. 23055); and (b)
₱1,150,000.00 covered by fourteen (14) checks subject of the criminal complaints filed by Nuguid (CA-G.R. CR No. 23054). The loans
totaled ₱2,100,000.00 and they were transacted between respondent Nicdao and Nuguid only. Respondent Nicdao never dealt with
petitioner Ching.

Against the foregoing factual findings, the CA declared that, based on the evidence, respondent Nicdao had already fully paid the loans.
In particular, the CA referred to the Planters Bank demand draft in the amount of ₱1,200,000.00 which, by his own admission, petitioner
Ching had received. The appellate court debunked petitioner Ching’s allegation that the said demand draft was payment for a previous
transaction. According to the CA, petitioner Ching failed to adduce evidence to prove the existence of a previous transaction between
him and respondent Nicdao.

Apart from the demand draft, the CA also stated that respondent Nicdao made interest payments on a daily basis to Nuguid as
evidenced by the computations written at the back of the cigarette wrappers. Based on these computations, as of July 21, 1997,
respondent Nicdao had made a total of ₱5,780,000.00 payments to Nuguid for the interests alone. Adding up this amount and that of
the Planters Bank demand draft, the CA placed the payments made by respondent Nicdao to Nuguid as already amounting to
₱6,980,000.00 for the principal loan amount of only ₱2,100,000.00.
The CA negated petitioner Ching’s contention that the payments as reflected at the back of the cigarette wrappers could be applied only
to the interests due. Since the transactions were not evidenced by any document or writing, the CA ratiocinated that no interests could
be collected because, under Article 1956 of the Civil Code, "no interest shall be due unless it has been expressly stipulated in writing."

The CA gave credence to the testimony of respondent Nicdao that when she had fully paid her loans to Nuguid, she tried to retrieve her
checks. Nuguid, however, refused to return the checks to respondent Nicdao. Instead, Nuguid and petitioner Ching filled up the said
checks to make it appear that: (a) petitioner Ching was the payee in five checks; (b) the six checks were payable to cash; (c) Nuguid
was the payee in fourteen (14) checks. Petitioner Ching and Nuguid then put the date October 6, 1997 on all these checks and
deposited them the following day. On October 8, 1997, through a joint demand letter, they informed respondent Nicdao that her checks
were dishonored by HSLB and gave her three days to settle her indebtedness or else face prosecution for violation of BP 22.

With the finding that respondent Nicdao had fully paid her loan obligations to Nuguid, the CA declared that she could no longer be held
liable for violation of BP 22. It was explained that to be held liable under BP 22, it must be established, inter alia, that the check was
made or drawn and issued to apply on account or for value. According to the CA, the word "account" refers to a pre-existing obligation,
while "for value" means an obligation incurred simultaneously with the issuance of the check. In the case of respondent Nicdao’s
checks, the pre-existing obligations secured by them were already extinguished after full payment had been made by respondent
Nicdao to Nuguid. Obligations are extinguished by, among others, payment. 30 The CA believed that when petitioner Ching and Nuguid
refused to return respondent Nicdao’s checks despite her total payment of ₱6,980,000.00 for the loans secured by the checks,
petitioner Ching and Nuguid were using BP 22 to coerce respondent Nicdao to pay a debt which she no longer owed them.

With respect to the ₱20,000,000.00 check, the CA was not convinced by petitioner Ching’s claim that he delivered ₱1,000,000.00 every
month to respondent Nicdao until the amount reached ₱20,000,000.00 and, when she refused to pay the same, he filled up the check,
which she earlier delivered to him as security for the loans, by writing thereon the said amount. In disbelieving petitioner Ching, the CA
pointed out that, contrary to his assertion, he was never employed by the La Suerte Cigar and Cigarette Manufacturing per the letter of
Susan Resurreccion, Vice-President and Legal Counsel of the said company. Moreover, as admitted by petitioner Ching, he did not
own the house where he and Nuguid lived.

Moreover, the CA characterized as incredible and contrary to human experience that petitioner Ching would, as he claimed, deliver a
total sum of ₱20,000,000.00 to respondent Nicdao without any documentary proof thereof, e.g., written acknowledgment that she
received the same. On the other hand, it found plausible respondent Nicdao’s version of the story that the ₱20,000,000.00 check was
the same one that was missing way back in 1995. The CA opined that this missing check surfaced in the hands of petitioner Ching who,
in cahoots with Nuguid, wrote the amount ₱20,000,000.00 thereon and deposited it in his account. To the mind of the CA, the inference
that the check was stolen was anchored on competent circumstantial evidence. Specifically, Nuguid, as previous manager/owner of the
grocery store, had access thereto. Likewise applicable, according to the CA, was the presumption that the person in possession of the
stolen article was presumed to be guilty of taking the stolen article. 31

The CA emphasized that the ₱20,000,000.00 check was never delivered by respondent Nicdao to petitioner Ching. As such, the said
check without the details as to the date, amount and payee, was an incomplete and undelivered instrument when it was stolen and
ended up in petitioner Ching’s hands. On this point, the CA applied Sections 15 and 16 of the Negotiable Instruments Law:

SEC. 15. Incomplete instrument not delivered. – Where an incomplete instrument has not been delivered, it will not, if completed and
negotiated without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon
before delivery.

SEC. 16. Delivery; when effectual; when presumed. – Every contract on a negotiable instrument is incomplete and revocable until
delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and as regards a remote party other
than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making,
drawing, accepting or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a
special purpose only, and not for the purpose of transferring the property. But where the instrument is in the hands of a holder in due
course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the
instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is
presumed until the contrary is proved.

The CA held that the ₱20,000,000.00 check was filled up by petitioner Ching without respondent Nicdao’s authority. Further, it was
incomplete and undelivered. Hence, petitioner Ching did not acquire any right or interest therein and could not assert any cause of
action founded on the

stolen checks.32 Under these circumstances, the CA concluded that respondent could not be held liable for violation of BP 22.

The Petitioner’s Case

As mentioned earlier, the instant petition pertains and is limited solely to the civil aspect of the case as petitioner Ching argues that
notwithstanding respondent Nicdao’s acquittal of the eleven (11) counts of violation of BP 22, she should be held liable to pay petitioner
Ching the amounts of the dishonored checks in the aggregate sum of ₱20,950,000.00.

He urges the Court to review the findings of facts made by the CA as they are allegedly based on a misapprehension of facts and
manifestly erroneous and contradicted by the evidence. Further, the CA’s factual findings are in conflict with those of the RTC and
MCTC.

Petitioner Ching vigorously argues that notwithstanding respondent Nicdao’s acquittal by the CA, the Supreme Court has the
jurisdiction and authority to resolve and rule on her civil liability. He invokes Section 1, Rule 111 of the Revised Rules of Court which,
prior to its amendment, provided, in part:

SEC. 1. Institution of criminal and civil actions. – When a criminal action is instituted, the civil action for the recovery of civil liability is
impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his right to institute it separately,
or institutes the civil action prior to the criminal action.
Such civil action includes the recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34 and 2176 of
the Civil Code of the Philippines arising from the same act or omission of the accused. x x x

Supreme Court Circular No. 57-9733 dated September 16, 1997 is also cited as it provides in part:

1. The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to necessarily include the corresponding civil action,
and no reservation to file such civil action separately shall be allowed or recognized. x x x

Petitioner Ching theorizes that, under Section 1, Rule 111 of the Revised Rules of Court, the civil action for the recovery of damages
under Articles 32, 33, 34, and 2176 arising from the same act or omission of the accused is impliedly instituted with the criminal action.
Moreover, under the above-quoted Circular, the criminal action for violation of BP 22 necessarily includes the corresponding civil action,
which is the recovery of the amount of the dishonored check representing the civil obligation of the drawer to the payee.

In seeking to enforce the alleged civil liability of respondent Nicdao, petitioner Ching maintains that she had loan obligations to him
totaling ₱20,950,000.00. The existence of the same is allegedly established by his testimony before the MCTC. Also, he asks the Court
to take judicial notice that for a monetary loan secured by a check, the check itself is the evidence of indebtedness.

He insists that, contrary to her protestation, respondent Nicdao also transacted with him, not only with Nuguid. Petitioner Ching pointed
out that during respondent Nicdao’s testimony, she referred to her creditors in plural form, e.g. "[I] told them, most checks that I issued I
will inform them if I have money." Even respondent Nicdao’s employees allegedly knew him; they testified that Nuguid instructed them
at times to leave as blank the payee on the checks as they would be paid to someone else, who turned out to be petitioner Ching.

It was allegedly erroneous for the CA to hold that he had no capacity to lend ₱20,950,000.00 to respondent Nicdao. Petitioner Ching
clarified that what he meant when he testified before the MCTC was that he was engaged in dealership with La Suerte Cigar and
Cigarette Manufacturing, and not merely its sales agent. He stresses that he owns a warehouse and is also in the business of lending
money. Further, the CA’s reasoning that he could not possibly have lent ₱20,950,000.00 to respondent Nicdao since petitioner Ching
and Nuguid did not own the house where they live, is allegedly non sequitur.

Petitioner Ching maintains that, contrary to the CA’s finding, the Planters Bank demand draft for ₱1,200,000.00 was in payment for
respondent Nicdao’s previous loan transaction with him. Apart from the ₱20,000,000.00 check, the other ten (10) checks (totaling
₱950,000.00) were allegedly issued by respondent Nicdao to petitioner Ching as security for the loans that she obtained from him from
1995 to 1997. The existence of another loan obligation prior to the said period was allegedly established by the testimony of respondent
Nicdao’s own witness, Jocelyn Nicdao, who testified that when she started working in Vignette Superstore in 1994, she noticed that
respondent Nicdao was already indebted to Nuguid.

Petitioner Ching also takes exception to the CA’s ruling that the payments made by respondent Nicdao as reflected on the
computations at the back of the cigarette wrappers were for both the principal loan and interests. He insists that they were for the
interests alone. Even respondent Nicdao’s testimony allegedly showed that they were daily interest payments. Petitioner Ching further
avers that the interest payments totaling ₱5,780,000.00 can only mean that, contrary to respondent Nicdao’s claim, her loan obligations
amounted to much more than ₱2,100,000.00. Further, she is allegedly estopped from questioning the interests because she willingly
paid the same.

Petitioner Ching also harps on respondent Nicdao’s silence when she received his and Nuguid’s demand letter to her. Through the said
letter, they notified her that the twenty-five (25) checks valued at ₱22,100,000.00 were dishonored by the HSLB, and that she had three
days to settle her ndebtedness with them, otherwise, face prosecution. Respondent Nicdao’s silence, i.e., her failure to deny or protest
the same by way of reply, vis-à-vis the demand letter, allegedly constitutes an admission of the statements contained therein.

On the other hand, the MCTC’s decision, as affirmed by the RTC, is allegedly based on the evidence on record; it has been established
that the checks were respondent Nicdao’s personal checks, that the signatures thereon were hers and that she had issued them to
petitioner Ching. With respect to the ₱20,000,000.00 check, petitioner Ching assails the CA’s ruling that it was stolen and was never
delivered or issued by respondent Nicdao to him. The issue of the said check being stolen was allegedly not raised during trial. Further,
her failure to report the alleged theft to the bank to stop payment of the said lost or missing check is allegedly contrary to human
experience. Petitioner Ching describes respondent Nicdao’s defense of stolen or lost check as incredible and, therefore, false.

Aside from the foregoing substantive issues that he raised, petitioner Ching also faults the CA for not acting and ordering the
consolidation of CA-G.R. CR No. 23055 with CA-G.R. CR No. 23054. He informs the Court that latter case is still pending with the CA.

In fine, it is petitioner Ching’s view that the CA gravely erred in disregarding the findings of the MCTC, as affirmed by the RTC, and
submits that there is more than sufficient preponderant evidence to hold respondent Nicdao civilly liable to him in the amount of
₱20,950,000.00. He thus prays that the Court direct respondent Nicdao to pay him the said amount plus 12% interest per annum
computed from the date of written demand until the total amount is fully paid.

The Respondent’s Counter-Arguments

Respondent Nicdao urges the Court to deny the petition. She posits preliminarily that it is barred under Section 2(b), Rule 111 of the
Revised Rules of Court which states:

SEC. 2. Institution of separate of civil action. - Except in the cases provided for in Section 3 hereof, after the criminal action has been
commenced, the civil action which has been reserved cannot be instituted until final judgment in the criminal action.

xxxx

(b) Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a declaration in a final
judgment that the fact from which the civil might arise did not exist.

According to respondent Nicdao, the assailed CA decision has already made a finding to the effect that the fact upon which her civil
liability might arise did not exist. She refers to the ruling of the CA that the ₱20,000,000.00 check was stolen; hence, petitioner Ching
did not acquire any right or interest over the said check and could not assert any cause of action founded on the said check.
Consequently, the CA held that respondent Nicdao had no obligation to make good the stolen check and cannot be held liable for
violation of BP 22. She also refers to the CA’s pronouncement relative to the ten (10) other checks that they were not issued to apply on
account or for value, considering that the loan obligations secured by these checks had already been extinguished by her full payment
thereof.

To respondent Nicdao’s mind, these pronouncements are equivalent to a finding that the facts upon which her civil liability may arise do
not exist. The instant petition, which seeks to enforce her civil liability based on the eleven (11) checks, is thus allegedly already barred
by the final and executory decision acquitting her.

In any case, respondent Nicdao contends that the CA did not commit serious misapprehension of facts when it found that the
₱20,000,000.00 check was a stolen check and that she never made any transaction with petitioner Ching. Moreover, the other ten (10)
checks were not issued to apply on account or for value. These findings are allegedly supported by the evidence on record which
consisted of the respective testimonies of the defense witnesses to the effect that: respondent Nicdao had the practice of leaving pre-
signed checks placed inside an unsecured cash box in the Vignette Superstore; the salesladies were given the authority to fill up the
said checks as to the amount, payee and date; Nuguid beguiled respondent Nicdao to obtain loans from her; as security for the loans,
respondent Nicdao issued checks to Nuguid; when the salesladies gave the checks to Nuguid, she instructed them to leave blank the
payee and date; Nuguid had access to the grocery store; in 1995, one of the salesladies reported that a check was missing; in 1997,
when she had fully paid her loans to Nuguid, respondent Nicdao tried to retrieve her checks but Nuguid and petitioner Ching falsely told
her that she still owed them money; they then maliciously filled up the checks making it appear that petitioner Ching was the payee in
the five checks and the six others were payable to "cash"; and knowing fully well that these checks were not funded because
respondent Nicdao already fully paid her loans, petitioner Ching and Nuguid deposited the checks and caused them to be dishonored
by HSLB.

It is pointed out by respondent Nicdao that her testimony (that the ₱20,000,000.00 check was the same one that she lost sometime in
1995) was corroborated by the respective testimonies of her employees. Another indication that it was stolen was the fact that among
all the checks which ended up in the hands of petitioner Ching and Nuguid, only the ₱20,000,000.00 check was fully typewritten; the
rest were invariably handwritten as to the amounts, payee and date.

Respondent Nicdao defends the CA’s conclusion that the ₱20,000,000.00 check was stolen on the ground that an appeal in a criminal
case throws open the whole case to the appellate court’s scrutiny. In any event, she maintains that she had been consistent in her
theory of defense and merely relied on the disputable presumption that the person in possession of a stolen article is presumed to be
the author of the theft.

Considering that it was stolen, respondent Nicdao argues, the ₱20,000,000.00 check was an incomplete and undelivered instrument in
the hands of petitioner Ching and he did not acquire any right or interest therein. Further, he cannot assert any cause of action founded
on the said stolen check. Accordingly, petitioner Ching’s attempt to collect payment on the said check through the instant petition must
fail.

Respondent Nicdao describes as downright incredible petitioner Ching’s testimony that she owed him a total sum of ₱20,950,000.00
without any documentary proof of the loan transactions. She submits that it is contrary to human experience for loan transactions
involving such huge amounts of money to be devoid of any documentary proof. In relation thereto, respondent Nicdao underscores that
petitioner Ching lied about being employed as a salesman of La Suerte Cigar and Cigarette Manufacturing. It is underscored that he
has not adequately shown that he possessed the financial capacity to lend such a huge amount to respondent Nicdao as he so
claimed.

Neither could she be held liable for the ten (10) other checks (in the total amount of ₱950,000,000.00) because as respondent Nicdao
asseverates, she merely issued them to Nuguid as security for her loans obtained from the latter beginning October 1995 up to 1997.
As evidenced by the Planters Bank demand draft in the amount of ₱1,200,000.00, she already made payment in 1996. The said
demand draft was negotiated to petitioner Ching’s account and he admitted receipt thereof. Respondent Nicdao belies his claim that the
demand draft was payment for a prior existing obligation. She asserts that petitioner Ching was unable to present evidence of such a
previous transaction.

In addition to the Planters Bank demand draft, respondent Nicdao insists that petitioner Ching received, through Nuguid, cash
payments as evidenced by the computations written at the back of the cigarette wrappers. Nuguid went to the Vignette Superstore
everyday to collect these payments. The other defense witnesses corroborated this fact. Petitioner Ching allegedly never disputed the
accuracy of the accounts appearing on these cigarette wrappers; nor did he dispute their authenticity and accuracy.

Based on the foregoing evidence, the CA allegedly correctly held that, computing the amount of the Planters Bank demand draft
(₱1,200,000.00) and those reflected at the back of the cigarette wrappers (₱5,780,000.00), respondent Nicdao had already paid
petitioner Ching and Nuguid a total sum of ₱6,980,000.00 for her loan obligations totaling only ₱950,000.00, as secured by the ten (10)
HSLB checks excluding the stolen ₱20,000,000.00 check.

Respondent Nicdao rebuts petitioner Ching’s argument (that the daily payments were applied to the interests), and claims that this is
illegal. Petitioner Ching cannot insist that the daily payments she made applied only to the interests on the loan obligations, considering
that there is admittedly no document evidencing these loans, hence, no written stipulation for the payment of interests thereon. On this
point, she invokes Article 1956 of the Civil Code, which proscribes the collection of interest payments unless expressly stipulated in
writing.

Respondent Nicdao emphasizes that the ten (10) other checks that she issued to Nuguid as security for her loans had already been
discharged upon her full payment thereof. It is her belief that these checks can no longer be used to coerce her to pay a debt that she
does not owe.

On the CA’s failure to consolidate CA-G.R. CR No. 23055 and CA-G.R. CR No. 23054, respondent Nicdao proffers the explanation that
under the RIRCA, consolidation of the cases is not mandatory. In fine, respondent Nicdao urges the Court to deny the petition as it
failed to discharge the burden of proving her civil liability with the required preponderance of evidence. Moreover, the CA’s acquittal of
respondent Nicdao is premised on the finding that, apart from the stolen check, the ten (10) other checks were not made to apply to a
valid, due and demandable obligation. This, in effect, is a categorical ruling that the fact from which the civil liability of respondent
Nicdao may arise does not exist.
 The Court’s Rulings

The petition is denied for lack of merit.

Notwithstanding respondent Nicdao’s acquittal, petitioner Ching is entitled to appeal the civil aspect of the case within the reglementary
period

It is axiomatic that "every person criminally liable for a felony is also civilly liable." 34 Under the pertinent provision of the Revised Rules
of Court, the civil action is generally impliedly instituted with the criminal action. At the time of petitioner Ching’s filing of the Informations
against respondent Nicdao, Section 1,35 Rule 111 of the Revised Rules of Court, quoted earlier, provided in part:

SEC. 1. Institution of criminal and civil actions. – When a criminal action is instituted, the civil action for the recovery of civil liability is
impliedly instituted with the criminal action, unless the offended party waives the civil action, reserves his right to institute it separately,
or institutes the civil action prior to the criminal action.

Such civil action includes the recovery of indemnity under the Revised Penal Code, and damages under Articles 32, 33, 34 and 2176 of
the Civil Code of the Philippines arising from the same act or omission of the accused.

xxxx

As a corollary to the above rule, an acquittal does not necessarily carry with it the extinguishment of the civil liability of the accused.
Section 2(b)36 of the same Rule, also quoted earlier, provided in part:

(b) Extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a declaration in a final
judgment that the fact from which the civil might arise did not exist.

It is also relevant to mention that judgments of acquittal are required to state "whether the evidence of the prosecution absolutely failed
to prove the guilt of the accused or merely failed to prove his guilt beyond reasonable doubt. In either case, the judgment shall
determine if the act or omission from which the civil liability might arise did not exist." 37

In Sapiera v. Court of Appeals,38 the Court enunciated that the civil liability is not extinguished by acquittal: (a) where the acquittal is
based on reasonable doubt; (b) where the court expressly declares that the liability of the accused is not criminal but only civil in nature;
and (c) where the civil liability is not derived from or based on the criminal act of which the accused is acquitted. Thus, under Article 29
of the Civil Code –

ART. 29. When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved beyond reasonable
doubt, a civil action for damages for the same act or omission may be instituted. Such action requires only a preponderance of
evidence. Upon motion of the defendant, the court may require the plaintiff to file a bond to answer for damages in case the complaint
should be found to be malicious.

If in a criminal case the judgment of acquittal is based upon reasonable doubt, the court shall so declare. In the absence of any
declaration to that effect, it may be inferred from the text of the decision whether or not the acquittal is due to that ground.

The Court likewise expounded in Salazar v. People 39 the consequences of an acquittal on the civil aspect in this wise:

The acquittal of the accused does not prevent a judgment against him on the civil aspect of the criminal case where: (a) the acquittal is
based on reasonable doubt as only preponderance of evidence is required; (b) the court declared that the liability of the accused is only
civil; (c) the civil liability of the accused does not arise from or is not based upon the crime of which the accused is acquitted. Moreover,
the civil action based on the delict is extinguished if there is a finding in the final judgment in the criminal action that the act or omission
from which the civil liability may arise did not exist or where the accused did not commit the act or omission imputed to him.

If the accused is acquitted on reasonable doubt but the court renders judgment on the civil aspect of the criminal case, the prosecution
cannot appeal from the judgment of acquittal as it would place the accused in double jeopardy. However, the aggrieved party, the
offended party or the accused or both may appeal from the judgment on the civil aspect of the case within the period therefor.

From the foregoing, petitioner Ching correctly argued that he, as the offended party, may appeal the civil aspect of the case
notwithstanding respondent Nicdao’s acquittal by the CA. The civil action was impliedly instituted with the criminal action since he did
not reserve his right to institute it separately nor did he institute the civil action prior to the criminal action.

Following the long recognized rule that "the appeal period accorded to the accused should also be available to the offended party who
seeks redress of the civil aspect of the decision," the period to appeal granted to petitioner Ching is the same as that granted to the
accused.40 With petitioner Ching’s timely filing of the instant petition for review of the civil aspect of the CA’s decision, the Court thus
has the jurisdiction and authority to determine the civil liability of respondent Nicdao notwithstanding her acquittal.

In order for the petition to prosper, however, it must establish that the judgment of the CA acquitting respondent Nicdao falls under any
of the three categories enumerated in Salazar and Sapiera, to wit:

(a) where the acquittal is based on reasonable doubt as only preponderance of evidence is required;

(b) where the court declared that the liability of the accused is only civil; and

(c) where the civil liability of the accused does not arise from or is not based upon the crime of which the accused is acquitted.
Salazar also enunciated that the civil action based on the delict is extinguished if there is a finding in the final judgment in the criminal
action that the act or omission from which the civil liability may arise did not exist or where the accused did not commit the act or
omission imputed to him.

For reasons that will be discussed shortly, the Court holds that respondent Nicdao cannot be held civilly liable to petitioner Ching.

The acquittal of respondent Nicdao likewise effectively extinguished her civil liability

A painstaking review of the case leads to the conclusion that respondent Nicdao’s acquittal likewise carried with it the extinction of the
action to enforce her civil liability. There is simply no basis to hold respondent Nicdao civilly liable to petitioner Ching.

First, the CA’s acquittal of respondent Nicdao is not merely based on reasonable doubt. Rather, it is based on the finding that she did
not commit the act penalized under BP 22. In particular, the CA found that the ₱20,000,000.00 check was a stolen check which was
never issued nor delivered by respondent Nicdao to petitioner Ching. As such, according to the CA, petitioner Ching "did not acquire
any right or interest over Check No. 002524 and cannot assert any cause of action founded on said check," 41 and that respondent
Nicdao "has no obligation to make good the stolen check and cannot, therefore, be held liable for violation of B.P. Blg. 22." 42

With respect to the ten (10) other checks, the CA established that the loans secured by these checks had already been extinguished
after full payment had been made by respondent Nicdao. In this connection, the second element for the crime under BP 22, i.e., "that
the check is made or drawn and issued to apply on account or for value," is not present.

Second, in acquitting respondent Nicdao, the CA did not adjudge her to be civilly liable to petitioner Ching. In fact, the CA explicitly
stated that she had already fully paid her obligations. The CA computed the payments made by respondent Nicdao vis-à-vis her loan
obligations in this manner:

Clearly, adding the payments recorded at the back of the cigarette cartons by Emma Nuguid in her own handwriting totaling
₱5,780,000.00 and the ₱1,200,000.00 demand draft received by Emma Nuguid, it would appear that petitioner [respondent herein] had
already made payments in the total amount of ₱6,980,000.00 for her loan obligation of only ₱2,100,000.00 (₱950,000.00 in the case at
bar and ₱1,150,000.00 in CA-G.R. CR No. 23054).43

On the other hand, its finding relative to the ₱20,000,000.00 check that it was a stolen check necessarily absolved respondent Nicdao
of any civil liability thereon as well.

Third, while petitioner Ching attempts to show that respondent Nicdao’s liability did not arise from or was not based upon the criminal
act of which she was acquitted (ex delicto) but from her loan obligations to him (ex contractu), however, petitioner Ching miserably
failed to prove by preponderant evidence the existence of these unpaid loan obligations. Significantly, it can be inferred from the
following findings of the CA in its decision acquitting respondent Nicdao that the act or omission from which her civil liability may arise
did not exist. On the ₱20,000,000.00 check, the CA found as follows:

True, indeed, the missing pre-signed and undated check no. 002524 surfaced in the possession of complainant Ching who, in cahoots
with his paramour Emma Nuguid, filled up the blank check with his name as payee and in the fantastic amount of ₱20,000,000.00,
dated it October 6, 1997, and presented it to the bank on October 7, 1997, along with the other checks, for payment. Therefore, the
inference that the check was stolen is anchored on competent circumstantial evidence. The fact already established is that Emma
Nuguid , previous owner of the store, had access to said store. Moreover, the possession of a thing that was stolen , absent a credible
reason, as in this case, gives rise to the presumption that the person in possession of the stolen article is presumed to be guilty of
taking the stolen article (People v. Zafra, 237 SCRA 664).

As previously shown, at the time check no. 002524 was stolen, the said check was blank in its material aspect (as to the name of
payee, the amount of the check, and the date of the check), but was already pre-signed by petitioner. In fact, complainant Ching himself
admitted that check no. 002524 in his possession was a blank check (TSN, Jan. 7, 1998, pp. 24-27, Annex J, Petition).

Moreover, since it has been established that check no. 002524 had been missing since 1995 (TSN, Sept. 9, 1998, pp. 14-15, Annex
DD, Petition; TSN, Sept. 10, 1998, pp. 43-46, Annex EE, Petition), it is abundantly clear that said check was never delivered to
complainant Ching. Check no. 002524 was an incomplete and undelivered instrument when it was stolen and ended up in the hands of
complainant Ching. Sections 15 and 16 of the Negotiable Instruments Law provide:

xxxx

In the case of check no. 002524, it is admitted by complainant Ching that said check in his possession was a blank check and was
subsequently completed by him alone without authority from petitioner. Inasmuch as check no. 002524 was incomplete and undelivered
in the hands of complainant Ching, he did not acquire any right or interest therein and cannot, therefore, assert any cause of action
founded on said stolen check (Development Bank of the Philippines v. Sima We, 219 SCRA 736, 740).

It goes without saying that since complainant Ching did not acquire any right or interest over check no. 002524 and cannot assert any
cause of action founded on said check, petitioner has no obligation to make good the stolen check and cannot, therefore, be held liable
for violation of B.P. Blg. 22.44

Anent the other ten (10) checks, the CA made the following findings:

Evidence sufficiently shows that the loans secured by the ten (10) checks involved in the cases subject of this petition had already been
paid. It is not controverted that petitioner gave Emma Nuguid a demand draft valued at ₱1,200,000 to pay for the loans guaranteed by
said checks and other checks issued to her. Samson Ching admitted having received the demand draft which he deposited in his bank
account. However, complainant Samson Ching claimed that the said demand draft represents payment for a previous obligation
incurred by petitioner. However, complainant Ching failed to adduce any evidence to prove the existence of the alleged obligation of the
petitioner prior to those secured by the subject checks.
Apart from the payment to Emma Nuguid through said demand draft, it is also not disputed that petitioner made cash payments to
Emma Nuguid who collected the payments almost daily at the Vignette Superstore. As of July 21, 1997, Emma Nuguid collected cash
payments amounting to approximately ₱5,780,000.00. All of these cash payments were recorded at the back of cigarette cartons by
Emma Nuguid in her own handwriting, the authenticity and accuracy of which were never denied by either complainant Ching or Emma
Nuguid.

Clearly, adding the payments recorded at the back of the cigarette cartons by Emma Nuguid in her own handwriting totaling
₱5,780,000.00 and the ₱1,200,000.00 demand draft received by Emma Nuguid, it would appear that petitioner had already made
payments in the total amount of ₱6,980,000.00 for her loan in the total amount of ₱6,980,000.00 for her loan obligation of only
₱2,100,000.00 (₱950,000.00 in the case at bar and P1,150,000.00 in CA-G.R. CR No. 23054).45

Generally checks may constitute evidence of indebtedness. 46 However, in view of the CA’s findings relating to the eleven (11) checks -
that the ₱20,000,000.00 was a stolen check and the obligations secured by the other ten (10) checks had already been fully paid by
respondent Nicdao – they can no longer be given credence to establish respondent Nicdao’s civil liability to petitioner Ching. Such civil
liability, therefore, must be established by preponderant evidence other than the discredited checks.

After a careful examination of the records of the case, 47 the Court holds that the existence of respondent Nicdao’s civil liability to
petitioner Ching in the amount of ₱20,950,000.00 representing her unpaid obligations to the latter has not been sufficiently established
by preponderant evidence. Petitioner Ching mainly relies on his testimony before the MCTC to establish the existence of these unpaid
obligations. In gist, he testified that from October 1995 up to 1997, respondent Nicdao obtained loans from him in the total amount of
₱20,950,000.00. As security for her obligations, she issued eleven (11) checks which were invariably blank as to the date, amounts and
payee. When respondent Nicdao allegedly refused to pay her obligations despite his due demand, petitioner filled up the checks in his
possession with the corresponding amounts and date and deposited them in his account. They were subsequently dishonored by the
HSLB for being "DAIF" and petitioner Ching accordingly filed the criminal complaints against respondent Nicdao for violation of BP 22.

It is a basic rule in evidence that the burden of proof lies on the party who makes the allegations – Et incumbit probatio, qui dicit, non
qui negat; cum per rerum naturam factum negantis probatio nulla sit (The proof lies upon him who affirms, not upon him who denies;
since, by the nature of things, he who denies a fact cannot produce any proof). 48 In civil cases, the party having the burden of proof
must establish his case by a preponderance of evidence. Preponderance of evidence is the weight, credit, and value of the aggregate
evidence on either side and is usually considered to be synonymous with the term "greater weight of evidence" or "greater weight of the
credible evidence." Preponderance of evidence is a phrase which, in the last analysis, means probability of the truth. It is evidence
which is more convincing to the court as worthy of belief than that which is offered in opposition thereto.49Section 1, Rule 133 of the
Revised Rules of Court offers the guidelines in determining preponderance of evidence:

SEC. 1. Preponderance of evidence, how determined. – In civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the
court may consider all the facts and circumstances of the case, the witnesses’ manner of testifying, their intelligence, their means and
opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability
of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately appear upon
the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the greater number.

Unfortunately, petitioner Ching’s testimony alone does not constitute preponderant evidence to establish respondent Nicdao’s civil
liability to him amounting to ₱20,950,000.00. Apart from the discredited checks, he failed to adduce any other documentary evidence to
prove that respondent Nicdao still has unpaid obligations to him in the said amount. Bare allegations, unsubstantiated by evidence, are
not equivalent to proof under our Rules.50

In contrast, respondent Nicdao’s defense consisted in, among others, her allegation that she had already paid her obligations to
petitioner Ching through Nuguid. In support thereof, she presented the Planters Bank demand draft for ₱1,200,000.00. The said
demand draft was negotiated to petitioner Ching’s account and he admitted receipt of the value thereof. Petitioner Ching tried to
controvert this by claiming that it was payment for a previous transaction between him and respondent Nicdao. However, other than his
self-serving claim, petitioner Ching did not proffer any documentary evidence to prove the existence of the said previous transaction.
Considering that the Planters Bank demand draft was dated August 13, 1996, it is logical to conclude that, absent any evidence to the
contrary, it formed part of respondent Nicdao’s payment to petitioner Ching on account of the loan obligations that she obtained from
him since October 1995.

Additionally, respondent Nicdao submitted as evidence the cigarette wrappers at the back of which were written the computations of the
daily payments that she had made to Nuguid. The fact of the daily payments was corroborated by the other witnesses for the defense,
namely, Jocelyn Nicdao and Tolentino. As found by the CA, based on these computations, respondent Nicdao had made a total
payment of ₱5,780,000.00 to Nuguid as of July 21, 1997. 51Again, the payments made, as reflected at the back of these cigarette
wrappers, were not disputed by petitioner Ching. Hence, these payments as well as the amount of the Planters Bank demand draft
establish that respondent Nicdao already paid the total amount of ₱6,980,000.00 to Nuguid and petitioner Ching.

The Court agrees with the CA that the daily payments made by respondent Nicdao amounting to ₱5,780,000.00 cannot be considered
as interest payments only. Even respondent Nicdao testified that the daily payments that she made to Nuguid were for the interests
due. However, as correctly ruled by the CA, no interests could be properly collected in the loan transactions between petitioner Ching
and respondent Nicdao because there was no stipulation therefor in writing. To reiterate, under Article 1956 of the Civil Code, "no
interest shall be due unless it has been expressly stipulated in writing."

Neither could respondent Nicdao be considered to be estopped from denying the validity of these interests. Estoppel cannot give
validity to an act that is prohibited by law or one that is against public policy. 52 Clearly, the collection of interests without any stipulation
therefor in writing is prohibited by law. Consequently, the daily payments made by respondent Nicdao amounting to ₱5,780,000.00
were properly considered by the CA as applying to the principal amount of her loan obligations.

With respect to the ₱20,000,000.00 check, the defense of respondent Nicdao that it was stolen and that she never issued or delivered
the same to petitioner Ching was corroborated by the other defense witnesses, namely, Tolentino and Jocelyn Nicdao.

All told, as between petitioner Ching and respondent Nicdao, the requisite quantum of evidence - preponderance of evidence -
indubitably lies with respondent Nicdao. As earlier intimated, she cannot be held civilly liable to petitioner Ching for her acquittal; under
the circumstances which have just been discussed lengthily, such acquittal carried with it the extinction of her civil liability as well.
The CA committed no reversible error in not consolidating CA-G.R. CR No. 23055 and CA-G.R. CR No. 23054

During the pendency of CA-G.R. CR No. 23055 and CA-G.R. CR No. 23054 in the CA, the pertinent provision of the RIRCA on
consolidation of cases provided:

SEC. 7. Consolidation of Cases. – Whenever two or more allied cases are assigned to different Justices, they may be consolidated for
study and report to a single Justice.

(a) At the instance of any party or Justice to whom the case is assigned for study and report, and with the conformity of all the Justices
concerned, the consolidation may be allowed when the cases to be consolidated involve the same parties and/or related questions of
fact and/or law.53

The use of the word "may" denotes the permissive, not mandatory, nature of the above provision, Thus, no grave error could be
imputed to the CA when it proceeded to render its decision in CA-G.R. CR No. 23055, without consolidating it with CA-G.R. CR No.
23054.

WHEREFORE, premises considered, the Petition is DENIED for lack of merit.

SO ORDERED.