GSIS vs CA
Government Service Insurance System v. Court of Appeals
170 SCRA 533,
February 23, 1989
Facts:
Private respondents, Mr. and Mrs. Isabelo R. Racho, together with
spouses Mr. and Mrs Flaviano Lagasca, executed a deed of mortgage,
dated November 13, 1957, in favor of petitioner GSIS and subsequently,
another deed of mortgage, dated April 14, 1958, in connection with two
loans granted by the latter in the sums of P 11,500.00 and P 3,000.00,
respectively. A parcel of land covered by Transfer Certificate of Title
No. 38989 of the Register of Deed of Quezon City, co-owned by said
mortgagor spouses, was given as security under the two deeds. They
also executed a 'promissory note".
On July 11, 1961, the Lagasca spouses executed an instrument
denominated "Assumption of Mortgage," obligating themselves to
assume the said obligation to the GSIS and to secure the release of the
mortgage covering that portion of the land belonging to spouses Racho
and which was mortgaged to the GSIS. This undertaking was not
fulfilled. Upon failure of the mortgagors to comply with the conditions
of the mortgage, particularly the payment of the amortizations due,
GSIS extrajudicially foreclosed the mortgage and caused the
mortgaged property to be sold at public auction on December 3, 1962.
For more than two years, the spouses Racho filed a complaint against
the spouses Lagasca praying that the extrajudicial foreclosure "made
on, their property and all other documents executed in relation thereto
in favor of the Government Service Insurance System" be declared null
and void.
The trial court rendered judgment on February 25, 1968 dismissing the
complaint for failure to establish a cause of action. However, said
decision was reversed by the respondent Court of Appeals, stating that,
although formally they are co-mortgagors, the GSIS required their
consent to the mortgage of the entire parcel of land which was covered
with only one certificate of title, with full knowledge that the loans
secured were solely for the benefit of the appellant Lagasca spouses
who alone applied for the loan.
Issues:
Whether the respondent court erred in annulling the mortgage as it
affected the share of private respondents in the reconveyance of their
property?
Whether private respondents benefited from the loan, the mortgage and
the extrajudicial foreclosure proceedings are valid?
Held:
Both parties relied on the provisions of Section 29 of Act No. 2031,
otherwise known as the Negotiable Instruments Law, which provide
that an accommodation party is one who has signed an instrument as
maker, drawer, acceptor of indorser without receiving value therefor,
but is held liable on the instrument to a holder for value although the
latter knew him to be only an accommodation party.
The promissory note, as well as the mortgage deeds subject of this
case, are clearly not negotiable instruments. These documents do not
comply with the fourth requisite to be considered as such under
Section 1 of Act No. 2031 because they are neither payable to order nor
to bearer. The note is payable to a specified party, the GSIS. Absent the
aforesaid requisite, the provisions of Act No. 2031 would not apply;
governance shall be afforded, instead, by the provisions of the Civil
Code and special laws on mortgages.
As earlier indicated, the factual findings of respondent court are that
private respondents signed the documents "only to give their consent
to the mortgage as required by GSIS", with the latter having full
knowledge that the loans secured thereby were solely for the benefit of
the Lagasca spouses.
Contrary to the holding of the respondent court, it cannot be said that
private respondents are without liability under the aforesaid mortgage
contracts. The factual context of this case is precisely what is
contemplated in the last paragraph of Article 2085 of the Civil Code to
the effect that third persons who are not parties to the principal
obligation may secure the latter by pledging or mortgaging their own
property. So long as valid consent was given, the fact that the loans
were solely for the benefit of the Lagasca spouses would not invalidate
the mortgage with respect to private respondents' share in the
property.
The respondent court, erred in annulling the mortgage insofar as it
affected the share of private respondents or in directing reconveyance
of their property or the payment of the value.
Government Service Insurance System v. Court of Appeals 170 SCRA 533,
 February
23, 1989
Facts: Private respondents, Mr. and Mrs. Isabelo R. Racho,
together with spouses Mr. and Mrs Flaviano Lagasca, executed a
deed of mortgage, dated November 13, 1957, in favor of
petitioner GSIS and subsequently, another deed of mortgage,
dated April 14, 1958, in connection with two loans granted by
the latter in the sums of P 11,500.00 and P 3,000.00,
respectively. A parcel of land covered by Transfer Certificate
of Title No. 38989 of the Register of Deed of Quezon City, co-
owned by said mortgagor spouses, was given as security under
the two deeds. They also executed a 'promissory note".
On July 11, 1961, the Lagasca spouses executed an instrument
denominated "Assumption of Mortgage," obligating themselves to
assume the said obligation to the GSIS and to secure the
release of the mortgage covering that portion of the land
belonging to spouses Racho and which was mortgaged to the GSIS.
This undertaking was not fulfilled. Upon failure of the
mortgagors to comply with the conditions of the mortgage,
particularly the payment of the amortizations due, GSIS
extrajudicially foreclosed the mortgage and caused the
mortgaged property to be sold at public auction on December 3,
1962.
For more than two years, the spouses Racho filed a complaint
against the spouses Lagasca praying that the extrajudicial
foreclosure "made on, their property and all other documents
executed in relation thereto in favor of the Government Service
Insurance System" be declared null and void.
The trial court rendered judgment on February 25, 1968
dismissing the complaint for failure to establish a cause of
action. However, said decision was reversed by the respondent
Court of Appeals, stating that, although formally they are co-
mortgagors, the GSIS required their consent to the mortgage of
the entire parcel of land which was covered with only one
certificate of title, with full knowledge that the loans
secured were solely for the benefit of the appellant Lagasca
spouses who alone applied for the loan.
Issues:
Whether the respondent court erred in annulling the mortgage as
it affected the share of private respondents in the
reconveyance of their property?
Whether private respondents benefited from the loan, the
mortgage and the extrajudicial foreclosure proceedings are
valid?
Held:
Both parties relied on the provisions of Section 29 of Act No.
2031, otherwise known as the Negotiable Instruments Law, which
provide that an accommodation party is one who has signed an
instrument as maker, drawer, acceptor of indorser without
receiving value therefor, but is held liable on the instrument
to a holder for value although the latter knew him to be only
an accommodation party.
The promissory note, as well as the mortgage deeds subject of
this case, are clearly not negotiable instruments. These
documents do not comply with the fourth requisite to be
considered as such under Section 1 of Act No. 2031 because they
are neither payable to order nor to bearer. The note is payable
to a specified party, the GSIS. Absent the aforesaid requisite,
the provisions of Act No. 2031 would not apply; governance
shall be afforded, instead, by the provisions of the Civil Code
and special laws on mortgages.
As earlier indicated, the factual findings of respondent court
are that private respondents signed the documents "only to give
their consent to the mortgage as required by GSIS", with the
latter having full knowledge that the loans secured thereby
were solely for the benefit of the Lagasca spouses.
Contrary to the holding of the respondent court, it cannot be
said that private respondents are without liability under the
aforesaid mortgage contracts. The factual context of this case
is precisely what is contemplated in the last paragraph of
Article 2085 of the Civil Code to the effect that third persons
who are not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property. So long as
valid consent was given, the fact that the loans were solely
for the benefit of the Lagasca spouses would not invalidate the
mortgage with respect to private respondents' share in the
property.
The respondent court, erred in annulling the mortgage insofar
as it affected the share of private respondents or in directing
reconveyance of their property or the payment of the value.
UBAS v. CHAN G.R. No. 215910, February 06, 2017 J. PERLAS-BERNABE Complete but Undelivered Negotiable
Instrument
JUNE 20, 2019
FACTS:
Petitioner filed a Complaint against respondent, alleging that respondent, “doing business under the name and
style of UNIMASTER,” was indebted to him in the amount of P1,500,000.00, representing the price of
construction materials allegedly purchased by respondent from him for the construction of the Macagtas Dam
project.
He averred that respondent had issued three checks, payable to “CASH”, but when petitioner presented the
subject checks for encashment, the same were dishonored due to a stop payment order. Petitioner demanded
from respondent the value of the dishonored checks, but to no avail.
For his part, respondent admitted to having issued the subject checks. However, he claimed that they were not
issued to petitioner, but to the project engineer, who, however, lost the same.
The RTC ruled in favor of petitioner and ordered respondent to pay petitioner the amount of P1,500,000.00
representing the principal obligation plus legal interests.
On appeal, the CA reversed and set aside the RTC’s ruling, dismissing petitioner’s complaint.
Hence, the instant petition.
ISSUE:
Whether or not the CA erred in dismissing petitioner’s complaint for lack of cause of action.
RULING:
The petition is meritorious.
Jurisprudence holds that “in a suit for a recovery of sum of money, as here, the plaintiff-creditor [(petitioner in
this case)] has the burden of proof to show that defendant [(respondent in this case)] had not paid [him] the
amount of the contracted loan. However, it has also been long established that where the plaintiff-creditor
possesses and submits in evidence an instrument showing the indebtedness, a presumption that the credit has
not been satisfied arises in [his] favor.
This presumption stems from Section 24 of the NIL, which provides that:
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.
As mentioned, petitioner had presented in evidence the three dishonored checks which were undeniably signed
by respondent.
Besides, Section 16 of the NIL provides that when an instrument is no longer in the possession of the person
who signed it and it is complete in its terms, “a valid and intentional delivery by him is presumed until the
contrary is proved,” as in this case.
Although the checks were under the account name of Unimasters, it should be emphasized that the manner or
mode of payment does not alter the nature of the obligation.
Respondent was not able to overcome the presumption of consideration under Section 24 of the NIL and
establish any of his affirmative defenses. On the other hand, as the holder of the subject checks which are
presumed to have been issued for a valuable consideration, and having established his privity of contract with
respondent, petitioner has substantiated his cause of action by a preponderance of evidence. ” Consequently,
petitioner’s Complaint should be granted.
G.R. No. 215910 Ubas vs. Chan
Facts: Petitioner alleged that respondent, “doing business under the name and
style of UNIMASTER,” was indebted to him in the amount of ₱1,500,000.00,
representing the price of boulders, sand, gravel, and other construction
materials allegedly purchased by respondent from him for the construction of the
Macagtas Dam in Macagtas, Catarman, Northern Samar. Further, he averred that
respondent had issued three (3) bank checks, payable to “CASH” in the amount of
₱500,000.00 but when petitioner presented the subject checks for encashment, the
same were dishonored due to a stop payment order.
Respondent filed an Answer with Motion to Dismiss, seeking the dismissal of the
case on the following ground, among others: the complaint states no cause of
action, considering that the checks do not belong to him but to Unimasters
Conglomeration, Inc. (Unimasters).
The Regional Trial Court (RTC) ruled that petitioner had a cause of action
against respondent. At the outset, it observed that petitioner’s demand letter –
which clearly stated the serial numbers of the checks, including the dates and
amounts thereof – was not disputed by respondent.
The CA reversed and set aside the RTC’s ruling, dismissing petitioner’s complaint
on the ground of lack of cause of action. It held that respondent was not the
proper party defendant in the case, considering that the drawer of the subject
checks was Unimasters, which, as a corporate entity, has a separate and distinct
personality from respondent.
Issue: Whether or not the CA erred in dismissing petitioner’s complaint for lack
of cause of action.
Rulings:
Yes, the CA erred in dismissing petitioner’s complaint for lack of cause of
action.
Although the checks were under the account name of Unimasters, it should be
emphasized that the manner or mode of payment does not alter the nature of the
obligation. The source of obligation, as claimed by petitioner in this case,
stems from his contract with respondent. When they agreed upon the purchase of
the construction materials on credit for the amount of ₱1,500,000,00, the
contract between them was perfected. Therefore, even if corporate checks were
issued for the payment of the obligation, the fact remains that the juridical tie
between the two (2) parties was already established during the contract’s
perfection stage and, thus, does not preclude the creditor from proceeding
against the debtor during the contract’s consummation stage.
That a privity of contract exists between petitioner and respondent is a
conclusion amply supported by the averments and evidence on record in this case.
First, the Court observes that petitioner was consistent in his account that he
directly dealt with respondent in his personal and not merely his representative
capacity. Moreover, the demand letter, which was admitted by respondent, was
personally addressed to respondent and not to Unimasters as represented by the
latter. Also, petitioner explained that he delivered the construction materials
to respondent absent any written agreement due to his trust on the latter.s
Metropolitan Bank and Trust Company vs. Wilfred N. Chiok
(G.R. No. 172652; November 26, 2014)
Doctrine: While manager’s and cashier’s checks are still subject to clearing,
they cannot be countermanded for being drawn against a closed account, for
being drawn against insufficient funds, or for similar reasons such as a
condition not appearing on the face of the check.
Facts: On July 5, 1995, respondent Wilfred N. Chiok (Chiok) bought
US$1,022,288.50 dollars from Gonzalo B. Nuguid (Nuguid) where Chiok
deposited the three manager’s checks (Asian Bank MC Nos. 025935 and
025939, and Metrobank CC No. 003380), with an aggregate value
of ₱26,068,350.00 in Nuguid’s account with petitioner Bank of the Philippine
Islands (BPI). Nuguid, however, failed to deliver the dollar equivalent of the
three checks as agreed upon, prompting Chiok to request that payment on the
three checks be stopped. On the following day, July 6, 1995, Chiok filed a
Complaint for damages with application for ex parte restraining order and/or
preliminary injunction with the Regional Trial Court (RTC) of Quezon City
against the spouses Gonzalo and Marinella Nuguid, and the depositary banks,
Asian Bank and Metrobank. On July 25, 1995, the RTC issued an Order
directing the issuance of a writ of preliminary prohibitory injunction. When
checks were presented for payment, Asian Bank refused to honor MC Nos.
025935 and 025939 in deference to the TRO.
Issue: Whether or not payment of manager’s and cashier’s checks are subject
to the condition that the payee thereof should comply with his obligations to
the purchaser of the checks.
Held: No. A manager’s check, like a cashier’s check, is an order of the bank to
pay, drawn upon itself, committing in effect its total resources, integrity, and
honor behind its issuance. By its peculiar character and general use in
commerce, a manager’s check or a cashier’s check is regarded substantially to
be as good as the money it represents. While manager’s and cashier’s checks
are still subject to clearing, they cannot be countermanded for being drawn
against a closed account, for being drawn against insufficient funds, or for
similar reasons such as a condition not appearing on the face of the check.
Long standing and accepted banking practices do not countenance the
countermanding of manager’s and cashier’s checks on the basis of a mere
allegation of failure of the payee to comply with its obligations towards the
purchaser. Therefore, when Nuguid failed to deliver the agreed amount to
Chiok, the latter had a cause of action against Nuguid to ask for the rescission
of their contract; but, Chiok did not have a cause of action against Metrobank
and Global Bank that would allow him to rescind the contracts of sale of the
manager’s or cashier’s checks, which would have resulted in the crediting of
the amounts thereof back to his accounts.
Caltex (Philippines), Inc. vs Court of Appeals
FACTS: In 1982, Angel de la Cruz obtained certificates of time deposit
(CTDs) from Security Bank and Trust Company for the former’s deposit
with the said bank amounting to P1,120,000.00. The said CTDs are
couched in the following manner:
This is to Certify that B E A R E R has deposited in this Bank the sum
of _______ Pesos, Philippine Currency, repayable to said depositor
_____ days. after date, upon presentation and surrender of this
certificate, with interest at the rate of ___ % per cent per annum.
Angel de la Cruz subsequently delivered the CTDs to Caltex in
connection with the purchase of fuel products from Caltex. In March
1982, Angel de la Cruz advised Security Bank that he lost the CTDs. He
executed an affidavit of loss and submitted it to the bank. The bank
then issued another set of CTDs. In the same month, Angel de la Cruz
acquired a loan of P875,000.00 and he used his time deposits as
collateral. In November 1982, a representative from Caltex went to
Security Bank to present the CTDs (delivered by de la Cruz) for
verification. Caltex advised Security Bank that de la Cruz delivered
Caltex the CTDs as security for purchases he made with the latter.
Security Bank refused to accept the CTDs and instead required Caltex to
present documents proving the agreement made by de la Cruz with Caltex.
Caltex however failed to produce said documents. In April 1983, de la
Cruz’ loan with Security bank matured and no payment was made by de la
Cruz. Security Bank eventually set-off the time deposit to pay off the
loan. Caltex sued Security Bank to compel the bank to pay off the CTDs.
Security Bank argued that the CTDs are not negotiable instruments even
though the word “bearer” is written on their face because the word
“bearer” contained therein refer to depositor and only the depositor
can encash the CTDs and no one else.
ISSUE: Whether or not the certificates of time deposit are negotiable.
HELD: Yes. The CTDs indicate that they are payable to the bearer; that
there is an implication that the depositor is the bearer but as to who
the depositor is, no one knows. It does not say on its face that the
depositor is Angel de la Cruz. If it was really the intention of
respondent bank to pay the amount to Angel de la Cruz only, it could
have with facility so expressed that fact in clear and categorical
terms in the documents, instead of having the word “BEARER” stamped on
the space provided for the name of the depositor in each CTD. On the
wordings of the documents, therefore, the amounts deposited are
repayable to whoever may be the bearer thereof. Thus, de la Cruz is the
depositor “insofar as the bank is concerned,” but obviously other
parties not privy to the transaction between them would not be in a
position to know that the depositor is not the bearer stated in the
CTDs. However, Caltex may not encash the CTDs because although the CTDs
are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between Caltex and De la Cruz, requires both
delivery and indorsement. As discerned from the testimony of Caltex’
representative, the CTDs were delivered to them by de la Cruz merely
for guarantee or security and not as payment.
 If it was really the intention of respondent bank to pay the amount to
Angel de la Cruz only, it could have with facility so expressed that fact in
clear and categorical terms in the documents, instead of having the word
CALTEX V. CA 12 SCRA 448 "BEARER" stamped on the space provided for the name of the depositor in
each CTD. On the wordings of the documents, therefore, the amounts
FACTS:
 Security bank issued Certificates of Time Deposits to Angel dela deposited are repayable to whoever may be the bearer thereof. Thus,
petitioner's aforesaid witness merely declared that Angel de la Cruz is the
Cruz. The same were given by Dela Cruz to petitioner in connection to his
depositor "insofar as the bank is concerned," but obviously other parties
purchase of fuel products of the latter. On a later date, Dela Cruz
not privy to the transaction between them would not be in a position to
approached the bank manager, communicated the loss of the certificates
know that the depositor is not the bearer stated in the CTDs. Hence, the
and requested for a reissuance. Upon compliance with some formal
situation would require any party dealing with the CTDs to go behind the
requirements, he was issued replacements. Thereafter, he secured a loan
plain import of what is written thereon to unravel the agreement of the
from the bank where he assigned the certificates as security. Here comes
parties thereto through facts aliunde. This need for resort to extrinsic
the petitioner, averred that the certificates were not actually lost but were
evidence is what is sought to be avoided by the Negotiable Instruments
given as security for payment for fuel purchases. The bank demanded
Law and calls for the application of the elementary rule that the
some proof of the agreement but the petitioner failed to comply. The loan
interpretation of obscure words or stipulations in a contract shall not favor
matured and the time deposits were terminated and then applied to the
the party who caused the obscurity.
payment of the loan. Petitioner demands the payment of the certificates
but to no avail.
The next query is whether petitioner can rightfully recover on the CTDs.
This time, the answer is in the negative. The records reveal that Angel de
SECURITY BANK
 AND TRUST COMPANY
 6778 Ayala Ave., Makati No.
la Cruz, whom petitioner chose not to implead in this suit for reasons of its
90101 Metro Manila, Philippines SUCAT OFFICEP 4,000.00 CERTIFICATE
own, delivered the CTDs amounting to P1,120,000.00 to petitioner without
OF DEPOSIT Rate 16%
informing respondent bank thereof at any time. Unfortunately for
petitioner, although the CTDs are bearer instruments, a valid negotiation
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
thereof for the true purpose and agreement between it and De la Cruz, as
ultimately ascertained, requires both delivery and indorsement. For,
This is to Certify that B E A R E R has deposited in this Bank the sum of
although petitioner seeks to deflect this fact, the CTDs were in reality
PESOS: FOUR THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 &
delivered to it as a security for De la Cruz' purchases of its fuel products.
00 CTS Pesos, Philippine Currency, repayable to said depositor 731 days.
Any doubt as to whether the CTDs were delivered as payment for the fuel
after date, upon presentation and surrender of this certificate, with
products or as a security has been dissipated and resolved in favor of the
interest at the rate of 16% per cent per annum.
latter by petitioner's own authorized and responsible representative
(Sgd. Illegible) (Sgd. Illegible) —————————— ——————————— himself.
AUTHORIZED SIGNATURES
In a letter dated November 26, 1982 addressed to respondent Security
HELD:
 CTDs are negotiable instruments. The documents provide that the Bank, J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . . These
certificates of deposit were negotiated to us by Mr. Angel dela Cruz to
amounts deposited shall be repayable to the depositor. And who,
guarantee his purchases of fuel products." This admission is conclusive
according to the document, is the depositor? It is the "bearer." The
upon petitioner, its protestations notwithstanding. Under the doctrine of
documents do not say that the depositor is Angel de la Cruz and that the
estoppel, an admission or representation is rendered conclusive upon the
amounts deposited are repayable specifically to him. Rather, the amounts
person making it, and cannot be denied or disproved as against the person
are to be repayable to the bearer of the documents or, for that matter,
relying thereon
whosoever may be the bearer at the time of presentment.

Caltex Inc. v. Court of Appeals [G.R. No. 97753. August 10, 1992]
FACTS
On various dates, Security Bank and Trust Company (SBTC), through its Sucat Branch issued
280 certificates of time deposit (CTD) in favor of one Angel dela Cruz who later lost them.
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR
THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000& 00 CTS Pesos,
Philippine Currency, repayable to said depositor 731 days. after date, upon presentation and
surrender of this certificate, with interest at the rate of 16% per cent per annum.
(Sgd. Illegible)
Caltex (Phils.) Inc. went to the SBTCSucat branch and presented for verification the CTDs
declared lost by Angel dela Cruz alleging that the same were delivered to herein plaintiff “as
security for purchases made with Caltex Philippines, Inc.” by said depositor. SBTC rejected
Caltex’s demand and claim. Caltex sued SBTC but case was dismissed rationalizing that
CTD’s are non-negotiable instruments.
ISSUE
Whether or not Certificate of Time Deposit (CTD) is a negotiable instrument.
RULING
YES. The CTDs in question undoubtedly meet the requirements of the law for negotiability
under Section 1 of the Negotiable Instruments Law. The accepted rule is that the negotiability
or non-negotiability of an instrument is determined from the writing, that is, from the face of
the instrument itself. In the construction of a bill or note, the intention of the parties is to
control, if it can be legally ascertained. Here, if it was really the intention of respondent bank
to pay the amount to Angel de la Cruz only, it could have with facility so expressed that fact in
clear and categorical terms in the documents, instead of having the word “BEARER” stamped
on the space provided for the name of the depositor in each CTD.
While the writing may be read in the light of surrounding circumstances in order to more
perfectly understand the intent and meaning of the parties, yet as they have constituted the
writing to be the only outward and visible expression of their meaning, no other words are to
be added to it or substituted in its stead.
Negotiable Instruments Case Digest: Caltex (Phils.) Inc. V. CA And Security Bank And Trust Co.
(1992)
G.R. No. 97753 August 10, 1992
Lessons Applicable: Requisites of negotiability to antedated and postdated instruments
(Negotiable Instrument Law)
FACTS:
 Security Bank and Trust Company (Security Bank), a commercial banking institution,
through its Sucat Branch issued 280 certificates of time deposit (CTDs) in favor of
Angel dela Cruz who deposited with Security Bank the total amount of P1,120,000
 Angel delivered the CTDs to Caltex for his purchase of fuel products
 March 18, 1982: Angel informed Mr. Tiangco, the Sucat Branch Manager that he lost
all CTDs, submitted the required Affidavit of Loss and received the replacement
 March 25, 1982: Angel dela Cruz negotiated and obtained a loan from Security Bank
in the amount of P875,000 and executed a notarized Deed of Assignment of Time
Deposit
 November, 1982: Mr. Aranas, Credit Manager of Caltex went to the Sucat branch to
verify the CTDs declared lost by Angel
 November 26, 1982: Security Bank received a letter from Caltex formally informing
it of its possession of the CTDs in question and of its decision to pre-terminate the
same.
 December 8, 1982: Caltex was requested by Security Bank to furnish:
 a copy of the document evidencing the guarantee agreement with Mr. Angel dela
Cruz
 the details of Mr. Angel's obligation against which Caltex proposed to apply the time
deposits
 Security Bank rejected Caltex demand for payment bec. it failed to furnish a copy of
its agreement w/ Angel
 April 1983, the loan of Angel dela Cruz with Security Bank matured
 August 5, 1983: CTD were set-off w/ the matured loan
 Caltex filed a complaint praying the bank to pay 1,120,000 plus 16% interest
 CA affirmed RTC to dismiss complaint
ISSUE:
1. W/N the CTDs are negotiable
2. W/N Caltex as holder in due course can rightfully recover on the CTDs
HELD: Petition is Denied and appealed decision is affirmed.
1. YES.
Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates
the requisites for an instrument to become negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and -check
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
 The documents provide that the amounts deposited shall be repayable to the
depositor
 depositor = bearer
 If it was really the intention of respondent bank to pay the amount to Angel de la
Cruz only, it could have with facility so expressed that fact in clear and categorical
terms in the documents, instead of having the word "BEARER" stamped on the space
provided for the name of the depositor in each CTD
 negotiability or non-negotiability of an instrument is determined from the writing,
that is, from the face of the instrument itself
2. NO.
 although the CTDs are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between it and De la Cruz, as ultimately ascertained,
requires both delivery and indorsement
 CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel
products
 There was no negotiation in the sense of a transfer of the legal title to the CTDs in
favor of petitioner in which situation, for obvious reasons, mere delivery of the
bearer CTDs would have sufficed.
 Where the holder has a lien on the instrument arising from contract, he is deemed a
holder for value to the extent of his lien.
 As such holder of collateral security, he would be a pledgee but the requirements
therefor and the effects thereof, not being provided for by the Negotiable
Instruments Law, shall be governed by the Civil Code provisions on pledge of
incorporeal rights:
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be
pledged. The instrument proving the right pledged shall be delivered to the creditor, and
if negotiable, must be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the thing
pledged and the date of the pledge do not appear in a public instrument.
Art. 1625. An assignment of credit, right or action shall produce no effect as against third
persons, unless it appears in a public instrument, or the instrument is recorded in the
Registry of Property in case the assignment involves real property.
Caltex (Philippines) Inc. vs. CA
GR 97753, 10 August 1992
-negotiability
FACTS:
Security Bank and Trust Co. issued 280 certificates of time deposit (CTD) in favor of
one Mr. Angel dela Cruz who deposited with the bank P1.12 million. Dela Cruz
delivered the CTDs to Caltex in connection with his purchase of fuel products from the
latter. Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus
executed an affidavit of loss to facilitate the issuance of the replacement CTDs. When
Caltex presented said CTDs for verification with the bank and formally informed the
bank of its decision to preterminate the same, the bank rejected Caltex’ claim and
demand as Caltex failed to furnish copies of certain requested documents. In 1983,
dela Cruz’ loan matured and the bank set-off and applied the time deposits as payment
for the loan. Caltex filed a complaint which was dismissed on the ground that the subject
certificates of deposit are non-negotiable.
ISSUE:
Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.
RULING:
The CTDs in question are negotiable instruments as they meet the requirements of the
law for negotiability as provided for in Section 1 of the Negotiable Instruments Law. The
documents provide that the amounts deposited shall be repayable to the depositor. And
according to the document, the depositor is the "bearer." The documents do not say
that the depositor is Angel de la Cruz and that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of
presentment. However, petitioner cannot recover on the CTDs. Although the CTDs
are bearer instruments, a valid negotiation thereof for the true purpose and agreement
between it and dela Cruz, as ultimately ascertained, requires both delivery and
indorsement. In this case, there was no indorsement as the CTDs were delivered not
as payment but only as a security for dela Cruz' fuel purchases.
**The accepted rule is that the negotiability or non-negotiability of an instrument is determined
from the writing, that is, from the face of the instrument itself. The CTDs in question are
negotiable instruments as they meet the requirements of the law for negotiability as provided
for in Section 1 of the Negotiable Instruments Law. The documents provide that the amounts
deposited shall be repayable to the depositor. And according to the document, the depositor is
the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the
amounts deposited are repayable specifically to him. Rather, the amounts are to be repayable
to the bearer of the documents or, for that matter, whosoever may be the bearer at the time of
presentment.

HSBC vs. CIR, G.R. No. 166018, June 04, 2014
Full text
Facts: HSBC performs custodial services on behalf of its investor-clients with respect to their
passive investments in the Philippines, particularly investments in shares of stocks in domestic
corporations. As a custodian bank, HSBC serves as the collection/payment agent.
HSBC’s investor-clients maintain Philippine peso and/or foreign currency accounts, which are
managed by HSBC through instructions given through electronic messages. The said
instructions are standard forms known in the banking industry as SWIFT, or “Society for
Worldwide Interbank Financial Telecommunication.”
Pursuant to the electronic messages of its investor-clients, HSBC purchased and paid
Documentary Stamp Tax (DST) from September to December 1997 and also from January to
December 1998 amounting to P19,572,992.10 and P32,904,437.30, respectively.
BIR, thru its then Commissioner, issued BIR Ruling to the effect that instructions or advises from
abroad on the management of funds located in the Philippines which do not involve transfer of
funds from abroad are not subject to DST. A documentary stamp tax shall be imposed on any
bill of exchange or order for payment purporting to be drawn in a foreign country but payable in
the Philippines.
a. While the payor is residing outside the Philippines, he maintains a local and foreign currency
account in the Philippines from where he will draw the money intended to pay a named recipient.
The instruction or order to pay shall be made through an electronic message.
Consequently, there is no negotiable instrument to be made, signed or issued by the payee.
b. Such electronic instructions by the non-resident payor cannot be considered as a transaction
per se considering that the same do not involve any transfer of funds from abroad or from the
place where the instruction originates.
Under the Documentary Stamp Tax Law, the mere withdrawal of money from a bank deposit,
local or foreign currency account, is not subject to DST, unless the account so maintained is a
current or checking account, in which case, the issuance of the check or bank drafts is subject to
the documentary stamp tax.
c. Likewise, the receipt of funds from another bank in the Philippines for deposit to the payee’s
account and thereafter upon instruction of the non-resident depositor-payor, through an
electronic message, the depository bank to debit his account and pay a named recipient shall
not be subject to documentary stamp tax.
With the above BIR Ruling as its basis, HSBC filed on an administrative claim for the refund of
allegedly representing erroneously paid DST to the BIR
As its claims for refund were not acted upon by the BIR, HSBC subsequently brought the matter
to the CTA, which favored HSBC and ordered payment of refund or issuance of tax credit.
However, the CA reversed decisions of the CTA and ruled that the electronic messages of
HSBC’s investor-clients are subject to DST.
a. DST is levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the execution of specific
instruments, independently of the legal status of the transactions giving rise thereto.
ISSUE: Whether or not the electronic messages are considered transactions pertaining to
negotiable instruments that warrant the payment of DST.
HELD: NO.
The Court agrees with the CTA that the DST under Section 181 of the Tax Code is levied on the
acceptance or payment of “a bill of exchange purporting to be drawn in a foreign country but
payable in the Philippines” and that “a bill of exchange is an unconditional order in writing
addressed by one person to another, signed by the person giving it, requiring the person to
whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in
money to order or to bearer.”
The Court further agrees with the CTA that the electronic messages of HSBC’s investor-clients
containing instructions to debit their respective local or foreign currency accounts in the
Philippines and pay a certain named recipient also residing in the Philippines is not the
transaction contemplated under Section 181 of the Tax Code as such instructions are “parallel to
an automatic bank transfer of local funds from a savings account to a checking account
maintained by a depositor in one bank.” The Court favorably adopts the finding of the CTA that
the electronic messages “cannot be considered negotiable instruments as they lack the
feature of negotiability, which, is the ability to be transferred” and that the said electronic
messages are “mere memoranda” of the transaction consisting of the “actual debiting of
the [investor-client-payor’s] local or foreign currency account in the Philippines” and
“entered as such in the books of account of the local bank,” HSBC.
The instructions given through electronic messages that are subjected to DST in these cases
are not negotiable instruments as they do not comply with the requisites of negotiability under
Section 1 of the Negotiable Instruments Law.
The electronic messages are not signed by the investor-clients as supposed drawers of a bill of
exchange; they do not contain an unconditional order to pay a sum certain in money as the
payment is supposed to come from a specific fund or account of the investor-clients; and, they
are not payable to order or bearer but to a specifically designated third party. Thus, the
electronic messages are not bills of exchange. As there was no bill of exchange or order for the
payment drawn abroad and made payable here in the Philippines, there could have been no
acceptance or payment that will trigger the imposition of the DST under Section 181 of the Tax
Code.
Hongkong & Shanghai Banking Corp vs Commissioner
HONGKONG AND SHANGHAI BANKING
FACTS: From 1912-191 inclusive, Pujalte & Co was engaged in the business of lumbering CORPORATION LIMITED v. CECILIA DIEZ CATALAN.
in Mindanao. The company removed from the forest and milled at it a total of 6,087.54
cubic meters of timber. The forest charges amounted to P8,328.93. Puljate & Co executed G.R. No. 159590. October 18, 2004.
bonds in the aggregate sum of P2,000 to secure the payment of the forest charges due the FACTS:
government. Consequently, CIR permitted Pujalte & Co. to remove this timber from the
public forests for shipment without prior payment of the forest charges. From the timber so
removed by Pujalte & Co., railroad ties were manufactured. In February, 1915, the firm of Frederick Arthur Thomson drew 5 checks payable to defendant Cecilia.
Pujalte & Co. was indebted to the Hongkong and Shanghai Banking Corporation with a Catalan presented these checks to Hongkong and Shanghai Banking
large sum of money. Being unable to pay its debt, the company assigned to the bank a Corporation Limited (HSBANK). The checks were dishonored for having
large quantity of the railroad ties manufactured at its mills. The bank sold and disposed of
these ties at various times until in May 1916, there remained with it some 2,000 railroads
insufficient funds. Thomson demanded that the checks be made good
ties of the lot acquired. because he, in fact, had sufficient funds. Still, HSBANK did not accept the
checks.
The internal revenue charges on the forest products removed from the public forests by
Pujalte & Co. not having been paid, on May 2, 1916, the Collector of Internal Revenue Subsequently, Thomson died but Catalan was not paid yet. The account
caused delinquency proceedings to be commenced and had issued a distress warrant. was transferred to HSBC International Trustee Limited (TRUSTEE).
Later, on May 15, 1916, the CIR caused an additional distress levy to be made upon the Catalan then requested TRUSTEE to pay her but still refused and even
6,305 ties, which had been assigned by Pujalte & Co. to the Hongkong & Shanghai
Banking Corporation. Proceeding in accordance with this action, the CIR seized the 2,000 asked her to submit back to them the original checks for verification.
ties in the possession of the bank. Until the date last mentioned, the bank had no notice of
the tax. Catalan and her lawyer went to Hong Kong on their own expense to
personally submit the checks. They still were not honored, leading Catalan
ISSUE: Does the lien follow the property subject to the tax into the hands of a third party to file a suit against HSBC to collect the money.
when at the time of transfer, no demand for payment had been made and when the
purchaser had no notice of the existence of the lien?
ISSUE: Whether the check can be encashed.
RULING: NO. In order that the lien may follow the property into the hands of a third party, it
is further essential that the latter should have notice, either actual or constructive. The
RULING:
reason is the benevolence of our Constitution which prohibits the taking of property without
due process of law. Internal revenue laws are to be construed fairly for the government The SC held that the HSBC was being sued becasue of their evident failure
and justly for the citizen. They should receive a liberal construction to carry out the to heed the instructions of Thomson. HSBANK cited Sec. 189 of the NIL
purposes of their enactment. but the SC said that what is being sued is how they acted in relation to
Catalan's claim for payment despite repeated requests and not of the
The plaintiff was not of course personally liable for any part of the internal revenue taxes check's value.
due the Government from Pujalte & Co. On the date the railroad ties were transferred from
Pujalte & Co. to the Hongkong & Shanghai Banking Corporation no demand for payment
of the tax had been made. The bonds in favor of the Government were still presumably The reason was likewise the same towards TRUSTEE as Catalan even went
subsisting. No demand in fact was made until over a year later when distraint proceedings to Hong Kong to personally deliver the checks.
were initiated. When the Hongkong & Shanghai Banking Corporation purchased and
acquired these 2,000 ties in February, 1915, there was nothing to show that Pujalte & Co.
were delinquent tax payers. No public record could be consulted to protect the purchaser
from loss by reason of the existence of a secret lien. A businessman of ordinary prudence
could not be expected to foresee that the personal property which he had taken in
satisfaction of a debt was burdened by a tax. On this date, because no demand had been
made and because the plaintiff had no notice of the tax, there was no valid subsisting lien
upon the ties.
Rodrigo Rivera Vs. Spouses Salvador C. Chua and Violeta S. Chua/Spouses Salvador C. Chua
and Violeta S. Chua Vs. Rodrigo Rivera
G.R. Nos. 184458/184472. January 14, 2015
J. Perez (Commercial Law)
A negotiable promissory note within the meaning of this Act is an unconditional promise in
writing made by one person to another, signed by the maker, engaging to pay on demand, or at
a fixed or determinable future time, a sum certain in money to order or to bearer. Where a note
is drawn to the maker’s own order, it is not complete until indorsed by him.
FACTS:
Petitioner Rodrigo Rivera obtained a load from his friends Spouses Salvador and Violeta Chua:
PROMISSORY NOTE
120,000.00
FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses SALVADOR C. CHUA
and VIOLETA SY CHUA, the sum of One Hundred Twenty Thousand Philippine Currency
(-120,000.00) on December 31, 1995.
It is agreed and understood that failure on my part to pay the amount of (-120,000.00) One
Hundred Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum
equivalent to FIVE PERCENT (5%) interest monthly from the date of default until the entire
obligation is fully paid for.
xxxx
In October 1998, Rivera issued and delivered to the Spouses Chua, as payee, a check
numbered 012467, dated 30 December 1998, in the amount of -25,000.00 and on 21 December
1998, another check numbered 013224, duly signed and dated, but blank as to payee. The
second check was issued, as per understanding by the parties, n the amount of -133,454.00 with
“cash” as payee. Both checks were dishonored for the reason “account closed.”
Due to Rivera’s unjustified refusal to pay, respondents were constrained to file a suit on 11 June
1999.
In his Answer with Compulsory Counterclaim, Rivera countered, among others, that the subject
Promissory Note was forged and that here was no demand for payment of the amount of
-120,000.00 prior to the encashment of PCIB Check No. 0132224. Respondents presented
documentary and oral evidence of NBI Senior Document Examiner Antonio Magbojos who
concluded that the questioned signature appearing in the Promissory Note and the Rivera’s
specimen signatures on other documents written by one and the same person.
The MeTC ruled in Spouses Chua’s favor. On appeal, the RTC affirmed the MeTC decision but
deleted the award of attorney’s fees. The CA also affirmed Rivera’s liability under the Promissory
Note but reduced the imposition of interest on the loan from 60% to 12% per annum.
Both parties appealed before the SC. Respondent’s petition for review on certiorari was denied
for failure to show any reversible on the CA ruling concerning the correct rate of interest on
Rivera’s indebtnesses under the Promissory Note. Rivera continued to deny that he executed
the Promissory Note and alleged that the Spouses Chua “never demanded payment for the loan
nor interest thereof (sic) from [Rivera] for almost four (4) years from the time of the alleged
default in payment.
ISSUES:
1. Whether the CA erred in ruling that there was a valid promissory note.
2. Whether the promissory note is negotiable instrument, thus the Negotiable Instruments Law
(NIL) applies to this case.
3. Whether Rivera is still liable under the terms of the Promissory Note assuming that it is not a
negotiable instrument.
4. Whether the CA erred in reducing the interest rate from 60% to 12% per annum.
HELD:
1. Yes.
First, [the court] cannot give credence to such a naked claim of forgery over the testimony of the
National Bureau of Investigation (NBI) handwriting expert on the integrity of the promissory note.
Indeed, Rivera had the burden of proving the material allegations which he sets up in his Answer
to the plaintiff’s claim or cause of action, upon which issue is joined, whether they relate to the
whole case or only to certain issues in the case.
In this case, Rivera’s bare assertion is unsubstantiated and directly disputed by the testimony of
a handwriting expert from the NBI. While it is true that resort to experts is not mandatory or
indispensable to the examination or the comparison of handwriting, the trial courts in this case,
on its own, using the handwriting expert testimony only as an aid, found the disputed document
valid.
In all, Rivera’s evidence or lack thereof consisted only of a barefaced claim of forgery and a
discordant defense to assail the authenticity and validity of the Promissory Note. Although the
burden of proof rested on the Spouses Chua having instituted the civil case and after they
established a prima facie case against Rivera, the burden of evidence shifted to the latter to
establish his defense. Consequently, Rivera failed to discharge the burden of evidence, refute
the existence of the Promissory Note duly signed by him and subsequently, that he did not fail to
pay his obligation thereunder. On the whole, there was no question left on where the respective
evidence of the parties preponderated—in favor of plaintiffs, the Spouses Chua.
2. No. The subject promissory note is not a negotiable instrument and the provisions of the NIL
do not apply to this case. Section 1 of the NIL requires the concurrence of the following elements
to be a negotiable instrument:
(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
On the other hand, Section 184 of the NIL defines what negotiable promissory note is:
SECTION 184. Promissory Note, Defined. – A negotiable promissory note within the meaning of
this Act is an unconditional promise in writing made by one person to another, signed by the
maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in
money to order or to bearer. Where a note is drawn to the maker’s own order, it is not complete
until indorsed by him.
The Promissory Note in this case is made out to specific persons, herein respondents, the
Spouses Chua, and not to order or to bearer, or to the order of the Spouses Chua as payees.
3. Yes, even if Rivera’s Promissory Note is not a negotiable instrument and therefore outside the
coverage of Section 70 of the NIL which provides that presentment for payment is not necessary
to charge the person liable on the instrument, Rivera is still liable under the terms of the
Promissory Note that he issued.
The Promissory Note is unequivocal about the date when the obligation falls due and becomes
demandable—31 December 1995. As of 1 January 1996, Rivera had already incurred in delay
when he failed to pay the amount of -120,000.00 due to the Spouses Chua on 31 December
1995 under the Promissory Note
Article 1169 of the Civil Code explicitly provides:
Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the designation
of the time when the thing is to be delivered or the service is to be rendered was a controlling
motive for the establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to
perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready
to comply in a proper manner with what is incumbent upon him. From the moment one of the
parties fulfills his obligation, delay by the other begins.
There are four instances when demand is not necessary to constitute the debtor in default: (1)
when there is an express stipulation to that effect; (2) where the law so provides; (3) when the
period is the controlling motive or the principal inducement for the creation of the obligation; and
(4) where demand would be useless. In the first two paragraphs, it is not sufficient that the law or
obligation fixes a date for performance; it must further state expressly that after the period
lapses, default will commence.
The date of default under the Promissory Note is 1 January 1996, the day following 31
December 1995, the due date of the obligation. On that date, Rivera became liable for the
stipulated interest which the Promissory Note says is equivalent to 5% a month. In sum, until 31
December 1995, demand was not necessary before Rivera could be held liable for the principal
amount of -120,000.00. Thereafter, on 1 January 1996, upon default, Rivera became liable to
pay the Spouses Chua damages, in the form of stipulated interest.
The liability for damages of those who default, including those who are guilty of delay, in the
performance of their obligations is laid down on Article 1170 of the Civil Code.
Corollary thereto, Article 2209 solidifies the consequence of payment of interest as an indemnity
for damages when the obligor incurs in delay:
Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be the
payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which
is six percent per annum.
4. No.
At the time interest accrued from 1 January 1996, the date of default under the Promissory Note,
the then prevailing rate of legal interest was 12% per annum under Central Bank (CB) Circular
No. 416 in cases involving the loan or forbearance of money. Thus, the legal interest accruing
from the Promissory Note is 12% per annum from the date of default on 1 January 1996.
However, the 12% per annum rate of legal interest is only applicable until 30 June 2013, before
the advent and effectivity of Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of 2013
reducing the rate of legal interest to 6% per annum. Pursuant to our ruling in Nacar v. Gallery
Frames, BSP Circular No. 799 is prospectively applied from 1 July 2013. In short, the
applicable rate of legal interest from 1 January 1996, the date when Rivera defaulted, to date
when this Decision becomes final and executor is divided into two periods reflecting two rates of
legal interest: (1) 12% per annum from 1 January 1996 to 30 June 2013; and (2) 6% per annum
FROM 1 July 2013 to date when this Decision becomes final and executory.
People of the Phils. v. Gilbert Reyes Wagas, G.R. No.
157943, September 4, 2013
Full Text
Facts: Gilbert Wagas ordered from Alberto Ligaray 200 bags of rice
over the telephone. As payment, Wagas issued a check in favor of
Ligaray. When the check was deposited it was dishonored due to
insufficiency of funds. Ligaray notified Wagas and demanded payment
from the latter but Wagas refused and failed to pay the amount,
Ligaray filed a complaint for estafa before the RTC. RTC convicted
Wagas of estafa because the RTC believed that the prosecution had
proved that it was Wagas who issued the dishonored check, despite
the fact that Ligaray had never met Wagas in person. Hence, this
direct appeal.
Issue: Whether or not Wagas is guilty beyond reasonable doubt
Held: No. The Supreme Court acquitted Wagas. The check delivered
to Ligaray was made payable to cash. Under the Negotiable
Instruments Law, this type of check was payable to the bearer and
could be negotiated by mere delivery without the need of an
indorsement. This rendered it highly probable that Wagas had issued
the check not to Ligaray, but to somebody else like Cañada, his
brother-in-law, who then negotiated it to Ligaray.1wphi1 Relevantly,
Ligaray confirmed that he did not himself see or meet Wagas at the
time of the transaction and thereafter, and expressly stated that the
person who signed for and received the stocks of rice was Cañada.
It bears stressing that the accused, to be guilty of estafa as charged,
must have used the check in order to defraud the complainant. What
the law punishes is the fraud or deceit, not the mere issuance of the
worthless check. Wagas could not be held guilty of estafa simply
because he had issued the check used to defraud Ligaray. The proof
of guilt must still clearly show that it had been Wagas as the drawer
who had defrauded Ligaray by means of the check.
People v. Wagas; G.R. No. 157943, September 4, 2013 D ORIA, Arniebelle Mangaron
DOCTRINE/S:
● A check made payable to cash is payable to the bearer and could be
negotiated by mere delivery without the need of an indorsement. 

● In every criminal prosecution, such as that for estafa, the identity of the
offender, like the crime itself, must be established by proof beyond reasonable doubt.

 FACTS: 
 In this case, Gilbert R. Wagas appeals his conviction for estafa by the
RTC of Cebu. It was alleged that Wagas ordered 200 bags of rice from complainant
Alberto Ligaray. As payment, Wagas issued a postdated BPI check for P200,000,
payable to cash, in favor of Ligaray. However, when the check was deposited, it was
dishonored due to insufficiency of funds. When Wagas refused and failed to pay even
after notification and demand, Ligaray filed a complaint for estafa, of which the former
was convicted by the RTC. 
 On appeal, Wagas contended that he had never met
Ligaray in person and insists that it is highly unlikely for a businessman to enter into a
transaction involving a huge amount of money only over the telephone . Wagas also
pointed out that the delivery receipt was signed by one Robert Cañada and it indicated
that the goods had been "Ordered by Robert Cañada." In addition, there was no
showing that Cañada acted on his behalf. Wagas asserted that he had issued the
check to Cañada for a different transaction and that Cañada had merely negotiated
the check to Ligaray. 
 ISSUE/S: Whether Wagas was properly charged and
convicted of estafa? – NO HELD: 

While the prosecution may have established the elements of estafa, it had not proved that it was
Wagas who had defrauded Ligaray by issuing the check.
● Ligaray expressly admitted that he did not personally meet the person
with whom he was 
 transacting over the telephone, not even after the check was
dishonored. 

● Ligaray was delivered a check made payable to cash . Under the NIL ,
this type of check is payable 
 to the bearer and could be negotiated by mere delivery
without the need of an indorsement . 

○ It was highly probable that Wagas issued the check not to Ligaray, but to somebody else –
like Cañada, his brother-in-law, who then negotiated it to Ligaray.
 ● Ligaray admitted that it
was Cañada who received the rice and who delivered the check.
○ Records were bereft of any proof that Cañada was acting on behalf of Wagas.
 ● Ligaray’s
declaration that it was Wagas who he had transacted with over the telephone was not
reliable because he did not explain how he determined the latter’s identity.
The RPC punishes fraud or deceit in estafa, not the mere issuance of a worthless check. Wagas
could not be held guilty simply because he issued the check used to defraud Ligaray . It must be
proven that it was him who defrauded Ligaray. However, even though he was acquitted of
estafa, he may still be held civilly liable. Wagas, as the drawer, is legally liable to pay Ligaray, a
holder in due course.