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ALFREDO RIGOR,petitioner, vs. PEOPLE OF THE

PHILIPPINES, respondent.

D E C I S I O NAZCUNA, J.:

This is a petition for review on certiorariof the decision of the Court of

Appeals, in CA-G.R. CR No. 18855, which affirmed the decision of the

Reional Trial Court of !asi, "ranch 1#$, in Criminal Case No. 8#%&5,

convictin petitioner Alfredo Rior of violation of Batas Pambansa Blg. 22'the

"ouncin Chec(s )aw*, and imposin upon him the penalt+ of imprisonment

for si '#* months and orderin him to restitute to the Rural "an( of an uan

the sum of !5%%,%%% and to pa+ the costs.

The /nformation01aainst petitioner reads2

That on or about the 16 thday of November 1989 in the Municipality of San Juan,

Metro Manila, Philippines and ithin the !urisdiction of this "onorable #ourt, the

above$named accused, did then and there illfully, unlafully and feloniously ma%e

or dra and issue to &ural 'an% of San Juan, (nc) thru its loan officer #arlos N)

*arcia, a postdated chec% to apply on account or for value the chec% described belo+

#hec% No) + 16-.6

/ran a0ainst + ssociated 'an%, Tarlac 'ranch

(n the mount of + P22,222)22

/ated + 3ebruary 16, 1992

Payable to + &ural 'an% of San Juan

said accused ell %noin0 that at the time of issue on 16 November 1989, he has

already insufficient funds or credit ith the draee ban% for the payment in full of the

face amount of such chec% and that as of 4 3ebruary 1992 his ban% accounts ere

already closed and that chec% hen presented for payment from and after the date

thereof, as subse5uently dishonored for the reason ccount #losed7 and despite
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An May 4, 1992, ssociated 'an% chec% no) 16-.6 as deposited ith PS 'an%,

San Juan 'ranch) The chec% as later returned ith the ords closed

account7 stamped on its face) ssociated 'an% employee PS(AN declared that

appellant=s #urrent ccount No) 1244$22119.$9 ith ssociated 'an% had

been closed since 3ebruary 4, 1992) ppellant=s balance under the ban%=s statementof account as of November 16, 1989 as only P89) The most appellant had on his

account as P -2,222 recorded on November 19, 1989 :;h) B7)

'asan0an and *arcia, in Tarlac, advised appellant of the dishonor of his chec%)

ppellant rote tty) Joselito Cim, &'SJ #hairman of the 'oard, about the loan and

arran0ements as to the schedule of his payment) "is letter as referred to de

*u>man, ho, in turn, sent to him another demand letter dated September 1., 1992)

The letter informed him of the dishonor of his chec%) /e *u>man re5uired him to

ta%e the necessary step for the early settlement of his obli0ation) "e still refused topay)

ppellant denied the char0e) "e claimed that on November 16, 1989, 0apito ?y and

his sister 0nes n0eles proposed to him that he secure a loan from the &'SJ

for P22,222) P422,222 of it ill be for him and the P@22,222 ill 0o to ?y and to

his sister to pay unpaid loans of borroers in their side ban%in07 activities) 3or the

approval of his loan, ?y told him that appellant can put up his four$door Mercedes

'en> as collateral for the P422,222 loan) The P@22,222 ill have no collateral) ?y

also told him the he ?y has complete control of the ban% and his Mercedes 'en>

ill be enou0h collateral for the P22,222)

ppellant a0reed to the proposal) "e si0ned a blan% loan application form and a

promissory note plus a chattel mort0a0e for his Mercedes 'en>) Thereafter, he as

told to come bac% in to days) ?y 0ave him to Premiere 'an% chec%s

orthP122,222 each) "e 0ave one chec% to his brother :fren &i0or and the other to

his sister$in$la for encashment in Tarlac) "e issued to ?y a personal chec%

for P22,222 undated) This chec% as deposited in the ban% for encashment in the

later part of May, 1992 but it bounced) Dhen demand as made for him to pay his

loan, he told ?y to 0et his Mercedes 'en> as payment for P422,222 but ?y refused)

?y anted him to pay the hole amount of P22,222)0&

n ul+ 8, 1667, the trial court rendered udment aainst petitioner, the

dispositive portion of which reads2
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D":&:3A&:, fore0oin0 premises considered, this #ourt finds accused lfredo

&i0or 0uilty beyond reasonable doubt of the crime of Eiolation of Section 1 of 'atas

Pambansa 'l0) 44 and there bein0 no miti0atin0 or a00ravatin0 circumstance on

record, imposes upon him the penalty of imprisonment for si; 6 months and to

restitute to the &ural 'an% of San Juan the sum of P22,222)22 and to pay the costs) 0$

The trial court stated the reasons for petitioner9s conviction, thus2

(n the case at bar, accused admitted havin0 issued ssociated 'an% #hec% No) 16-.6

in the amount of P22,222)22) the chec% as undated hen issued) &ecords,

hoever, sho that it as issued on 16 November 1989 but as it appearFsG no it is

dated 16 3ebruary 1992) The probable reason must be because upon the maturity of

his loan on 16 /ecember 1989, accused as%ed for e;tension of to 4 months to pay

the same) nd the e;piration of that to 4 months period is 16 3ebruary 1992)Nevertheless, :;hibit B7 for the prosecution includin0 its submar%in0s sho that the

hi0hest outstandin0 amount in the current account of accused ith the ssociated

'an%, Tarlac 'ranch for the month of November 1989, the month &i0or issued

aforesaid chec%, is only about P-2,222)22) "ence, &i0or has no sufficient deposit in

the ban% to cover the amount of P22,222)22 hen he issued #hec% No) 16-.6)

Therefore, &i0or %noin0ly issued the same he havin0 no sufficient funds in or credit

ith the draee ban% in violation of section 1 of F')P)G 'l0) 44)

The defense of the accused that the amount of loan he secured from the &ural 'an% ofSan Juan is only P422,222)22 is of no moment) The fact is he admitted havin0 issued

ssociated 'an% #hec% No) 16-.6 in the amount of P22,222)22 and upon its

deposit for encashment, the same as dishonored for reason account closed) 07

!etitioner appealed his conviction to the Court of Appeals, which affirmed

the trial court9s decision. The dispositive portion of the appellate court9s

decision reads2

WHEREFORE, the appealed decision is AFFIRMEDith the modification that thereference to lac% of miti0atin0 or a00ravatin0 circumstances should be deleted and

disre0arded)05

:ence, this petition for review on certiorari.

!etitioner raises the followin2
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reason had not the drawer, without an+ valid cause, ordered the 4an( to stop

pa+ment. 0@

As found 4+ the Reional Trial Court and the Court of Appeals, all the

aforementioned elements are present in this case.

The evidence shows that on Novem4er 1#, 1686, petitioner applied 08for a

loan in the amount of !5%%,%%% with the Rural "an( of an uan and on the

same da+, he issued an undated Associated "an( Chec( No.

1#57@#06worth !5%%,%%% pa+a4le to Rural "an( of an uan in connection

with the loan, which chec( was later dated e4ruar+ 1#, 166%. 01%The chec(

was thus issued to appl+ for value. 011This shows the presence of the first

element of the offense.

The presence of the second element of the offense is shown 4+

petitioner9s admission01&that he (new of the insufficienc+ of his funds in the

drawee 4an( when he issued the chec( and he alleedl+ did not hide the fact

from the officials of the Rural "an( of an uan.

The Court of Appeals correctl+ ruled, thus2

; ; ;

Bnoled0e involves a state of mind difficult to establish) De hold that

appellant=s admission of the insufficiency of his fund at the time he issued the

chec% constitutes the very element of %noled0e7 contemplated in Sec) 1 of

'P 44) The prima facie presumption of %noled0e re5uired in Sec) 4, (bid),

does not apply because a the chec% as presented for payment only on May

4, 1992 or beyond the 92$day period, hich e;pired on May 16, 1992,

counted from the maturity date of the chec% on 3ebruary 16, 1992 and b an

actually admitted %noled0e of a fact needs no presumption)

Dhile it is true that if a chec% is presented beyond ninety 92 days from

its due date, there is no more presumption of %noled0e by the draer that at

the time of issue his chec% has no sufficient funds, the presumption in this case

is supplanted by appellant=s on admission that he did not hide the fact that he

had no sufficient funds for the chec%) (n fact, it appears that hen he
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authori>ed &'SJ to date his chec% on 3ebruary 16, 1992, his current account

as already closed to ee%s earlier, on 3ebruary 4, 1992) 01$

!etitioner, however, arues that since the officers of the 4an( (new that he

did not have sufficient funds, he has not violated Batas Pambansa Bilang 22.

Assumin arguendothat the pa+ee had (nowlede that he had insufficient

funds at the time he issued the chec(, such (nowlede 4+ the pa+ee is

immaterial as deceit is not an essential element of the offense underBatas

Pambansa Bilang 22.017 The ravamen of the offense is the issuance of a 4ad

chec(< hence, malice and intent in the issuance thereof are inconse;uential.015

?oreover, the cited case of Magno v. Court of Appeals,01#which resulted in

the ac;uittal of the accused therein, is inapplica4le to petitioner as the facts ofsaid case are different. /n Magno, the 4ounced chec(s were issued to cover a

warrant+ deposit in a lease contract, where the lessor-supplier was also the

financier of the deposit.01@/t was a modus operandiwhere4+ the supplier of the

oods is also a4le to sell or lease the same oods at the same time privatel+

financin those in desperate need so the+ ma+ 4e accommodated. 018The

Court therein held2

To char0e the petitioner for the refund of a arranty deposit7 hich he did not

ithdra as it as not his on account, it havin0 remained ith CS 3inance, is toeven ma%e him pay an un!ust debt,7 to say the least, since petitioner did not receive

the amount in 5uestion) ll the hile, said amount as in the safe%eepin0 of the

financin0 company, hich is mana0ed, supervised and operated by the corporation

officials and employees of CS 3inance) Petitioner did not even %no that the chec%s

he issued ere turned over by Joey *ome> to Mrs) Ten0, hose operation as %ept

from his %noled0e on her instruction) This fact alone evo%e suspicion that the

transaction is irre0ular and immoral per se, hence, she specifically re5uested *ome>

not to divul0e the source of the arrant deposit)7

(t is intri0uin0 to reali>e that Mrs) Ten0 did not ant the petitioner to %no that it as

she ho accommodated7 petitioner=s re5uest for Joey *ome>, to source out the

needed funds for the arranty deposit)7 Thus it unfolds the %ind of transaction that

is shrouded ith mystery, 0immic%ry and doubtful le0ality) (t is in simple lan0ua0e, a

scheme hereby Mrs) Ten0 as the supplier of the e5uipment in the name of her
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corporation, Mancor, ould be able to sell or lease7 its 0oods as in this case, and at

the same time, privately financin0 those ho desperately need petty accommodations

as this one) This modus operandihas in so many instances victimi>ed unsuspectin0

businessmen, ho li%eise need protection from the la, by availin0 of the

deceptively called arranty deposit7 not reali>in0 that they also fall prey to leasin0e5uipment under the 0uise of a lease purchase a0reement hen it is a scheme

desi0ned to s%im off business clients)016

This case, however, involves an ordinar+ loan transaction 4etween

petitioner and the Rural "an( of an uan wherein petitioner issued the chec(

certainl+ to 4e applied to the pa+ment of his loan since the chec( and the loan

have the same value of !5%%,%%%. 3hether petitioner areed to ive a

portion of the proceeds of his loan to Austin =+, an officer of complainant

4an(, to finance =+9s and his 'petitioner* sister9s alleed Bside-4an(inactivit+, such areement is immaterial to petitioner9s lia4ilit+ for issuin the

dishonored chec( under Batas Pambansa Bilang 22.

Lozano v. Martinez0&%states2

The 0ravamen of the offense punished by 'P 44 is the act of ma%in0 and issuin0 a

orthless chec% or a chec% that is dishonored upon its presentation for payment) (t is

not the non$payment of an obli0ation hich the la punishes) The la is not intended

or desi0ned to coerce a debtor to pay his debt) The thrust of the la is to prohibit,under pain of penal sanctions, the ma%in0 of orthless chec%s and puttin0 them in

circulation) 'ecause of its deleterious effects on the public interest, the practice is

proscribed by the la) The la punishes the act not as an offense a0ainst property, but

an offense a0ainst public order)

People v. Nitafan0&1held that to re;uire that the areement surroundin the

issuance of chec(s 4e first loo(ed into and thereafter eempt such issuance

from the provisions of Batas Pambansa Bilang 22on the 4asis of such

areement or understandin would frustrate the ver+ purpose for which the

law was enacted.

urther, the presence of the third element of the offense is shown 4+ the

fact that after the chec( was deposited for encashment, it was dishonored 4+

Associated "an( for reason of Bclosed account as evidenced 4+ its Chec(


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Return lip.0&& Despite receipt of a notice of dishonor from complainant 4an(,

petitioner failed to pa+ his o4liation.

!etitioner net contends that he did not receive a notice of dishonor, the

a4sence of which precludes criminal prosecution.

The contention is li(ewise of no merit.

The notice of dishonor of a chec( ma+ 4e sent to the drawer or ma(er 4+

the drawee 4an(, the holder of the chec(, or the offended part+ either 4+

personal deliver+ or 4+ reistered mail. 0&$The notice of dishonor to the ma(er

of a chec( must 4e in writin.0&7

/n this case, prosecution witness Edmarcos "asanan testified that after

petitioner9s chec( was dishonored, he and co-emplo+ee Carlos Garcia went to

petitioner9s residence in Tarlac to inform him a4out it. Thereafter, petitioner

wrote a letter dated une &8, 166% to Att+. oselito )im, R" chairman of the

"oard of Directors, proposin a manner of pa+in the loan. The letter was

referred to the 4an( manaer who sent petitioner another demand

letter0&5dated eptem4er 1@, 166% throuh reistered mail.0 aid letter

informed petitioner of the dishonor of his chec( for the reason of account

closed, and re;uired him to settle his o4liation, thus2

; ; ;

September 1., 1992

Mr) lfredo &i0or

Eictoria, Tarlac

/ear Mr) &i0or,

Please be informed that the chec% dated 3ebruary 16, 1992, that you

issued purportedly for the payment of your loan, hich has already become

due and demandable in the sum of P:SAS+ 3ive "undred Thousand Pesos

Anly P22,222)22 as dishonored on 3ebruary 16, 1992 should be May

4, 1992 for the reason ccount #losed #)
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De trust that you ill ta%e the necessary step for the early settlement

of your obli0ation to us)

Eery truly yours,

M:CH?:#:/:S /: *?IMN

The transcript of records0&@shows that petitioner admitted (nowlede of the

dishonor of his chec( throuh a demand letter sent to him. :ence, petitioner

cannot pretend that he did not receive a notice of dishonor of his chec(.

)astl+, petitioner contends that the Reional Trial Court of !asi had no

urisdiction over this case since no proof has 4een offered that his chec( was

issued, delivered, dishonored or that (nowlede of insufficienc+ of funds

occurred in the ?unicipalit+ of an uan, ?etro ?anila.

The contention is untena4le.

As reards venue of a criminal action, ection 15, pararaph 'a*, of Rule

11% of the &%%% Revised Rules of Criminal !rocedure, which reflects the old

rule,0&8 provides2

Sec) 1)Place where action is to be instituted)

a Sub!ect to e;istin0 las, the criminal action shall be instituted and tried in the

court of the municipality or territory here the offense as committed or here any

of its essential in0redients occurred) :mphasis supplied)

Fiolations of Batas Pambansa Bilang 22are cateori>ed as transitor+ or

continuin crimes.0&6/n such crimes, some acts material and essential to the

crimes and re;uisite to their consummation occur in one municipalit+ or

territor+ and some in another, in which event, the court of either has

urisdiction to tr+ the cases, it 4ein understood that the first court ta(in

coni>ance of the case ecludes the other.0$%:ence, a person chared with a

transitor+ crime ma+ 4e validl+ tried in an+ municipalit+ or territor+ where the

offense was in part committed. 0$1
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The evidence clearl+ shows that the undated chec( was issued and

delivered at the Rural "an( of an uan, ?etro ?anila 0$&on Novem4er 1#,

1686, and su4se;uentl+ the chec( was dated e4ruar+ 1#, 166% thereat. n

?a+ &5, 166%, the chec( was deposited with ! "an(, an uan "ranch,

?etro ?anila.0$$

Thus, the Court of Appeals correctl+ ruled2

Eiolations of ')P) 44 are cate0ori>ed as transitory or continuin0 crimes) suit on the

chec% can be filed in any of the places here any of the elements of the offense

occurred, that is, here the chec% is dran, issued, delivered or dishonored) ; ; ;

The information at bar effectively char0es San Juan as the place of drain0 and

issuin0) The !urisdiction of courts in criminal cases is determined by the alle0ations

of the complaint or information) lthou0h, the chec% as dishonored by the draee,

ssociated 'an%, in its Tarlac 'ranch, appellant has dran, issued and delivered it at&'SJ, San Juan) The place of issue and delivery as San Juan and %noled0e, as an

essential part of the offense, as also overtly manifested in San Juan) There is no

5uestion that crimes committed in November, 1989 in San Juan are triable by the &T#

stationed in Pasi0) (n short both alle0ation and proof in this case sufficiently vest

!urisdiction upon the &T# in Pasi0 #ity) 0$7

WHEREFORE, the petition is DEN/ED and the assailed Decision of the

Court of Appeals, in CA-G.R. CR No. 18855, is here4+ A/R?ED. Costs

aainst petitioner.

SO ORDERED.

ASSOCIATED BANK (Now WESTMONT BANK),petitioner,

vs. VICENTE HENRY TAN, respondent.

D E C I S I O N

PANGANIBAN, J.:


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3hile 4an(s are ranted 4+ law the riht to de4it the value of a dishonoredchec( from a depositor9s account, the+ must do so with the hihest deree ofcare, so as not to preudice the depositor undul+.

T! C"#!

"efore us is a !etition for Review 01under Rule 75 of the Rules of Court,assailin the anuar+ &@, &%%$ Decision0&of the Court of Appeals 'CA* in CA-GR CF No. 5#&6&. The CA disposed as follows2

WHEREFORE, premises considered, the /ecision dated /ecember @, 1996, of

the &e0ional Trial #ourt of #abanatuan #ity, Third Judicial &e0ion, 'ranch 46, in

#ivil #ase No) 894$3 is hereby AFFIRMED) #osts a0ainst the FpetitionerG)70$

T! F"$%#

The CA narrated the antecedents as follows2

Eicente "enry Tan hereafter TN is a businessman and a re0ular depositor$creditor

of the ssociated 'an% hereinafter referred to as the 'NB) Sometime in

September 1992, he deposited a postdated ?#P' chec% ith the said 'NB in the

amount of P121,222)22 issued to him by a certain Dilly #hen0 from Tarlac) The

chec% as duly entered in his ban% record thereby ma%in0 his balance in the amountof P49.,222)22, as of Actober 1, 1992, from his ori0inal deposit

ofP196,222)22) lle0edly, upon advice and instruction of the 'NB that

the P121,222)22 chec% as already cleared and bac%ed up by sufficient funds, TN,

on the same date, ithdre the sum of P4-2,222)22, leavin0 a balance

of P.,.9@)-) day after, TN deposited the amount of P2,222)22 ma%in0 his

e;istin0 balance in the amount of P12.,.9@)-, because he has issued several chec%s

to his business partners, to it+

#":#B N?M':&S /T: MA?NT

a) 1@881- Sept) 49, 1992 P9,222)22

b) 1@882- Act) 8, 1992 9,@2)22

c) [email protected]. Sept) @2, 1992 6,@62)22

d) 1@88-. Sept) 49, 1992 41,82)22

e) 16.2- Sept) 49, 1992 -,29@)-2

f) [email protected] K Sept) 49, 1992 @,-6)22
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0) [email protected] Act) 4, 1992 6,622)22

h) 16.2.4 Act) 12, 1992 9,928)22

i) 168824 Act) 12, 1992 @,62)22

"oever, his suppliers and business partners ent bac% to him alle0in0 that the

chec%s he issued bounced for insufficiency of funds) Thereafter, TN, thru hislayer, informed the 'NB to ta%e positive steps re0ardin0 the matter for he has

ade5uate and sufficient funds to pay the amount of the sub!ect chec%s) Nonetheless,

the 'NB did not bother nor offer any apolo0y re0ardin0 the incident) #onse5uently,

TN, as plaintiff, filed a #omplaint for /ama0es on /ecember 19, 1992, ith the

&e0ional Trial #ourt of #abanatuan #ity, Third Judicial &e0ion, doc%eted as #ivil

#ase No) 894$3, a0ainst the 'NB, as defendant)

(n his F#Gomplaint, FrespondentG maintained that he haFdG sufficient funds to pay the

sub!ect chec%s and alle0ed that his suppliers decreased in number for lac% of trust) s

he has been in the business community for 5uite a time and has established a 0oodrecord of reputation and probity, plaintiff claimed that he suffered embarrassment,

humiliation, besmirched reputation, mental an;ieties and sleepless ni0hts because of

the said unfortunate incident) F&espondentG further averred that he continuously lost

profits in the amount of P42,222)22) F&espondentG therefore prayed for e;emplary

dama0es and that FpetitionerG be ordered to pay him the sum of P1,222,222)22 by ay

of moral dama0es, P42,222)22 as lost profits, P2,222)22 as attorney=s fees plus 4ed that the 4an(in

4usiness is impressed with pu4lic interest. BConse;uentl+, the hihest dereeof dilience is epected, and hih standards of interit+ and performance areeven re;uired of it. "+ the nature of its functions, a 4an( is under o4liation totreat the accounts of its depositors with meticulous care.015

Also affirmin this lon standin doctrine, P!ilippine Ban" of Commerce v.Court of Appeals01#has held that Bthe deree of dilience re;uired of 4an(s ismore than that of a ood father of a famil+ where the fiduciar+ nature of theirrelationship with their depositors is concerned.01@/ndeed, the 4an(in4usiness is vested with the trust and confidence of the pu4lic< hence theBappropriate standard of dilience must 4e ver+ hih, if not the hihest, dereeof dilience.018The standard applies, reardless of whether the accountconsists of onl+ a few hundred pesos or of millions.016

The fiduciar+ nature of 4an(in, previousl+ imposed 4+ case law, 0&%is nowenshrined in Repu4lic Act No. 8@61 or the General "an(in )aw of&%%%. ection & of the law specificall+ sa+s that the tate reconi>es theBfiduciar+ nature of 4an(in that re;uires hih standards of interit+ andperformance.

Did petitioner treat respondent9s account with the hihest deree ofcare rom all indications, it did not.

/t is undisputed -- na+, even admitted -- that purportedl+ as an act ofaccommodation to a valued client, petitioner allowed the withdrawal of theface value of the deposited chec( prior to its clearin. That act certainl+disrearded the clearance re;uirement of the 4an(in s+stem. uch apractice is unusual, 4ecause a chec( is not leal tender or mone+< 0&1and itsvalue can properl+ 4e transferred to a depositor9s account onl+ after the chec(has 4een cleared 4+ the drawee 4an(. 0&&

=nder ordinar+ 4an(in practice, after receivin a chec( deposit, a

4an( eit!erimmediatel+ credit the amount to a depositor9s account< orinfusevalue to that account onl+ after the drawee 4an( shall have paid such amount.0&$"efore the chec( shall have 4een cleared for deposit, the collectin 4an(can onl+ Bassume at its own ris( -- as herein petitioner did -- that the chec(would 4e cleared and paid out.

Reasona4le 4usiness practice and prudence, moreover, dictated thatpetitioner should not have authori>ed the withdrawal 4+ respondent
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of !&7%,%%% on cto4er 1, 166%, as this amount was over and a4ove hisoutstandin cleared 4alance of !16#,@6$.75.0&7:ence, the lower courtscorrectl+ appreciated the evidence in his favor.

Obligation as!ollecting Agent

/ndeed, the 4an( deposit slip epressed this reservation2

(n receivin0 items on deposit, this 'an% obli0ates itself only as the /epositor=s

#ollectin0 a0ent, assumin0 no responsibility beyond carefulness in selectin0

correspondents, and until such time as actual payments shall have come to its

possession, this 'an% reserves the ri0ht to char0e bac% to the /epositor=s account any

amounts previously credited hether or not the deposited item is returned) ; ; ;)0&5

:owever, this reservation is not enouh to insulate the 4an( from an+lia4ilit+. /n the past, we have epressed dou4t a4out the 4indin force of suchconditions unilaterall+ imposed 4+ a 4an( without the consent of the depositor.0/t is indeed arua4le that Bin sinin the deposit slip, the depositor does soonl+ to identif+ himself and not to aree to the conditions set forth at the 4ac(of the deposit slip.0&@

urther, 4+ the epress terms of the stipulation, petitioner too( upon itselfcertain o4liations as respondent9s aent, consonant with the well-settled rule

that the relationship 4etween the pa+ee or holder of a commercial paper andthe collectin 4an( is that of principal and aent. 0&8=nder Article 16%60&6of theCivil Code, such 4an( could 4e held lia4le not onl+ for fraud, 4ut also fornelience.

As a eneral rule, a 4an( is lia4le for the wronful or tortuous acts anddeclarations of its officers or aents within the course and scope of theiremplo+ment.0$%Due to the ver+ nature of their 4usiness, 4an(s are epected toeercise the hihest deree of dilience in the selection and supervision oftheir emplo+ees.0$1urisprudence has esta4lished that the lac( of dilience of a

servant is imputed to the nelience of the emplo+er, when the nelient orwronful act of the former proimatel+ results in an inur+ to a third person< 0$&inthis case, the depositor.

The manaer of the 4an(9s Ca4anatuan 4ranch, Consorcia antiao,cateoricall+ admitted that she and the emplo+ees under her control had4reached 4an( policies. The+ admittedl+ 4reached those policies when,without clearance from the drawee 4an( in "auio, the+ allowed respondent
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to withdraw on cto4er 1, 166%, the amount of the chec(deposited. antiao testified that respondent Bwas not officiall+ informeda4out the de4itin of the !1%1,%%% from his eistin 4alance of !1@%,%%%on cto4er &, 166% .0$$

"ein the 4ranch manaer, antiao clearl+ acted within the scope of herauthorit+ in authori>in the withdrawal and the su4se;uent de4itin withoutnotice. Accordinl+, what remains to 4e determined is whether her actionsproimatel+ caused respondent9s inur+. !roimate cause is that which -- in anatural and continuous se;uence, un4ro(en 4+ an+ efficient intervenin cause--produces the inur+, and without which the result would not have occurred. 0$7

)et us o 4ac( to the facts as the+ unfolded. /t is undenia4le that the4an(9s premature authori>ation of the withdrawal 4+ respondent on cto4er 1,166%, triered -- in rapid succession and in a natural se;uence -- the de4itinof his account, the fall of his account 4alance to insufficient levels, and thesu4se;uent dishonor of his own chec(s for lac( of funds. The CA correctl+noted thus2

; ; ; FTGhe depositor ; ; ; ithdre his money upon the advice by FpetitionerG that

his money as already cleared) Dithout such advice, FrespondentG ould not have

ithdran the sum of P4-2,222)22) Therefore, it cannot be denied that it as

Fpetitioner=sG fault hich alloed FrespondentG to ithdra a hu0e sum hich he

believed as already his)

To emphasi>e, it is beyond cavil that FrespondentG had sufficient funds for the

chec%) "ad the P121,222)22 not FbeenG debited, the sub!ect chec%s ould not have

been dishonored) "ence, e can say that Frespondent=sG in!ury arose from the

dishonor of his ell$funded chec%s) ; ; ;)70$5

Aravatin matters, petitioner failed to show that it had immediatel+ anddul+ informed respondent of the de4itin of his account. Nonetheless, itarues that the ivin of notice was discerni4le from his act ofdepositin !5%,%%% on cto4er &, 166%, to aument his account and allow thede4itin. This arument deserves short shrift.

#irst, notice was proper and ouht to 4e epected. "+ the 4an( manaer9saccount, respondent was considered a Bvalued client whose chec(s hadalwa+s 4een sufficientl+ funded from 168@ to 166%, 0$#until the cto4erim4rolio. Thus, he deserved nothin less than an official notice of theprecarious condition of his account.

$econd, under the provisions of the Neotia4le /nstruments )aw reardinthe lia4ilit+ of a eneral indorser0$@and the procedure for a notice of dishonor,
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0$8it was incum4ent on the 4an( to ive proper notice to respondent. /n %ullasv. National Ban",0$6the Court emphasi>ed2

; ; ; FG 0eneral indorser of a ne0otiable instrument en0a0es that if the instrument

the chec% in this case is dishonored and the necessary proceedin0s for its dishonor

are duly ta%en, he ill pay the amount thereof to the holder Sec) 66 (t has been heldby a lon0 line of authorities that notice of dishonor is necessary to char0e an indorser

and that the ri0ht of action a0ainst him does not accrue until the notice is 0iven)

; ; ;) The fact e believe is undeniable that prior to the mailin0 of notice of

dishonor, and ithout aitin0 for any action by *ullas, the ban% made use of the

money standin0 in his account to ma%e 0ood for the treasury arrant) At this point

recall that Gullas was merely an indorser and had issued checks in good faith. As to

a depositor who has funds sufficient to meet payment of a check drawn by him in

favor of a third party, it has been held that he has a right of action against the bank

for its refusal to pay such a check in the absence of notice to him that the bank hasapplied the funds so deposited in extinguishment of past due claims held against

him.#allahan vs) 'an% of nderson F192-G, 4 nn) #as), 42@)However this may be,

as to an indorser the situation is different, and notice should actually have been given

him in order that he might protect his interests )707%

&!ird, reardin the deposit of !5%,%%% made 4+ respondent on cto4er&, 166%, we full+ su4scri4e to the CA9s o4servations that it was not unusual fora well-reputed 4usinessman li(e him, who Bordinaril+ ta(es note of the amountof mone+ he ta(es and releases, to immediatel+ deposit mone+ in his currentaccount to answer for the postdated chec(s he had issued. 071

Da"ages

/nasmuch as petitioner does not contest the 4asis for the award ofdamaes and attorne+9s fees, we will no loner address these matters.

WHEREFORE, the !etition is '(N(' and the assailed

DecisionA##)M('. Costs aainst petitioner.SO ORDERED.
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G.R. No. /0//12 3"&"4 //, /552

STATE INVESTMENT HOUSE, INC., petitioner,

vs.

COURT OF APPEALS "6 NORA B. MOULIC, respondents.

(scober, Alon * Associates for petitioner.

Martin '. Pantaleon for private respondents.

BELLOSILLO, J.:

The lia4ilit+ to a holder in due course of the drawer of chec(s issued to another merel+ as securit+,

and the riht of a real estate mortaee after etraudicial foreclosure to recover the 4alance of the

o4liation, are the issues in this !etition for Review of the Decision of respondent Court of Appeals.

!rivate respondent Nora ". ?oulic issued to Cora>on Fictoriano, as securit+ for pieces of ewelr+ to

4e sold on commission, two '&* post-dated E;uita4le "an(in Corporation chec(s in the amount of

ift+ Thousand !esos '!5%,%%%.%%* each, one dated $% Auust 16@6 and the other, $% eptem4er

16@6. Thereafter, the pa+ee neotiated the chec(s to petitioner tate /nvestment :ouse. /nc.

'TATE*.

?=)/C failed to sell the pieces of ewelr+, so she returned them to the pa+ee 4efore maturit+ of the

chec(s. The chec(s, however, could no loner 4e retrieved as the+ had alread+ 4een neotiated.

Conse;uentl+, 4efore their maturit+ dates, ?=)/C withdrew her funds from the drawee 4an(.

=pon presentment for pa+ment, the chec(s were dishonored for insufficienc+ of funds. n &%

Decem4er 16@6, TATE alleedl+ notified ?=)/C of the dishonor of the chec(s and re;uested that

it 4e paid in cash instead, althouh ?=)/C avers that no such notice was iven her.

n # cto4er 168$, TATE sued to recover the value of the chec(s plus attorne+Hs fees and

epenses of litiation.

/n her Answer, ?=)/C contends that she incurred no o4liation on the chec(s 4ecause the ewelr+

was never sold and the chec(s were neotiated without her (nowlede and consent. he also

instituted a Third-!art+ Complaint aainst Cora>on Fictoriano, who later assumed full responsi4ilit+

for the chec(s.

n ?a+ 1688, the trial court dismissed the Complaint as well as the Third-!art+ Complaint, and

ordered TATE to pa+ ?=)/C !$,%%%.%% for attorne+Hs fees.


22/51

TATE elevated the order of dismissal to the Court of Appeals, 4ut the appellate court affirmed the

trial court on the round that the Notice of Dishonor to ?=)/C was made 4e+ond the period

prescri4ed 4+ the Neotia4le /nstruments )aw and that even if TATE did serve such notice on

?=)/C within the relementar+ period it would 4e of no conse;uence as the chec(s should never

have 4een presented for pa+ment. The sale of the ewelr+ was never effected< the chec(s, therefore,

ceased to serve their purpose as securit+ for the ewelr+.

3e are not persuaded.

The neotia4ilit+ of the chec(s is not in dispute. /ndu4ita4l+, the+ were neotia4le. After all, at the

pre-trial, the parties areed to limit the issue to whether or not TATE was a holder of the chec(s in

due course./

/n this reard, ec. 5& of the Neotia4le /nstruments )aw provides I

ec. 5&. +!at constitutes a !older in due course. I A holder in due course is a

holder who has ta(en the instrument under the followin conditions2 'a* That it iscomplete and reular upon its face< '4* That he 4ecame the holder of it 4efore it was

overdue, and without notice that it was previousl+ dishonored, if such was the facton Fictoriano, 4efore their due

dates


23/51

ec. 116. nstrument !o- disc!arged. I A neotia4le instrument is dischared2 'a*

"+ pa+ment in due course 4+ or on 4ehalf of the principal de4tor< '4* "+ pa+ment in

due course 4+ the part+ accommodated, where the instrument is made or accepted

for his accommodation< 'c* "+ the intentional cancellation thereof 4+ the holder< 'd*

"+ an+ other act which will dischare a simple contract for the pa+ment of mone+< 'e*

3hen the principal de4tor 4ecomes the holder of the instrument at or after maturit+ inhis own riht.

4viousl+, ?=)/C ma+ onl+ invo(e pararaphs 'c* and 'd* as possi4le rounds for the dischare of

the instrument. "ut, the intentional cancellation contemplated under pararaph 'c* is that

cancellation effected 4+ destro+in the instrument either 4+ tearin it up, 94urnin it,1or writin the

word JcancelledJ on the instrument. The act of destro+in the instrument must also 4e made 4+ the holder

of the instrument intentionall+. ince ?=)/C failed to et 4ac( possession of the post-dated chec(s, the

intentional cancellation of the said chec(s is altoether impossi4le.

n the other hand, the acts which will dischare a simple contract for the pa+ment of mone+ under

pararaph 'd* are determined 4+ other eistin leislations since ec. 116 does not specif+ what

these acts are, e.., Art. 1&$1 of the Civil Codewhich enumerates the modes of etinuishin

o4liations. Aain, none of the modes outlined therein is applica4le in the instant case as ec. 116

contemplates of a situation where the holder of the instrument is the creditor while its drawer is the de4tor.

/n the present action, the pa+ee, Cora>on Fictoriano, was no loner ?=)/CHs creditor at the time the

ewelr+ was returned.

Correspondinl+, ?=)/C ma+ not unilaterall+ dischare herself from her lia4ilit+ 4+ the mere

epedienc+ of withdrawin her funds from the drawee 4an(. he is thus lia4le as she has no leal

4asis to ecuse herself from lia4ilit+ on her chec(s to a holder in due course.

?oreover, the fact that TATE failed to ive Notice of Dishonor to ?=)/C is of no moment. The

need for such notice is not a4solute< there are eceptions under ec. 117 of the Neotia4le

/nstruments )aw2

ec. 117. +!en notice need not be given to dra-er. I Notice of dishonor is not

re;uired to 4e iven to the drawer in the followin cases2 'a* 3here the drawer and

the drawee are the same person< '4* 3hen the drawee is a fictitious person or a

person not havin capacit+ to contract< 'c* 3hen the drawer is the person to whom

the instrument is presented for pa+ment2 'd* 3here the drawer has no riht to epect

or re;uire that the drawee or acceptor will honor the instrument< 'e* 3here the

drawer had countermanded pa+ment.

/ndeed, ?=)/CH actuations leave much to 4e desired. he did not retrieve the chec(s when she

returned the ewelr+. he simpl+ withdrew her funds from her drawee 4an( and transferred them to

another to protect herself. After withdrawin her funds, she could not have epected her chec(s to

4e honored. /n other words, she was responsi4le for the dishonor of her chec(s, hence, there was

no need to serve her Notice of Dishonor, which is simpl+ 4rinin to the (nowlede of the drawer or

indorser of the instrument, either ver4all+ or 4+ writin, the fact that a specified instrument, upon

proper proceedins ta(en, has not 4een accepted or has not 4een paid, and that the part+ notified is

epected to pa+ it.;


24/51

/n addition, the Neotia4le /nstruments )aw was enacted for the purpose of facilitatin, not hinderin

or hamperin transactions in commercial paper. Thus, the said statute should not 4e tampered with

hapha>ardl+ or lihtl+. Nor should it 4e 4rushed aside in order to meet the necessities in a sinle

case.5

The drawin and neotiation of a chec( have certain effects aside from the transfer of title or theincurrin of lia4ilit+ in reard to the instrument 4+ the transferor. The holder who ta(es the neotiated

paper ma(es a contract with the parties on the face of the instrument. There is an implied

representation that funds or credit are availa4le for the pa+ment of the instrument in the 4an( upon

which it is drawn./0Conse;uentl+, the withdrawal of the mone+ from the drawee 4an( to avoid lia4ilit+ on

the chec(s cannot preudice the rihts of holders in due course. /n the instant case, such withdrawal

renders the drawer, Nora ". ?oulic, lia4le to TATE, a holder in due course of the chec(s.

=nder the facts of this case, TATE could not epect pa+ment as ?=)/C left no funds with the

drawee 4an( to meet her o4liation on the chec(s,//so that Notice of Dishonor would 4e futile.

The Court of Appeals also held that allowin recover+ on the chec(s would constitute unust

enrichment on the part of TATE /nvestment :ouse, /nc. This is error.

The record shows that ?r. Romelito Caoili, an Account Assistant, testified that the o4liation of

Cora>on Fictoriano and her hus4and at the time their propert+ mortaed to TATE was

etraudiciall+ foreclosed amounted to !1.6 million< the 4id price at pu4lic auction was onl+ !1

million./7Thus, the value of the propert+ foreclosed was not even enouh to pa+ the de4t in full.

3here the proceeds of the sale are insufficient to cover the de4t in an etraudicial foreclosure of

mortae, the mortaee is entitled to claim the deficienc+ from the de4tor./2The step thus ta(en 4+

the mortaee-4an( in resortin to an etra-udicial foreclosure was merel+ to find a proceedin for the

sale of the propert+ and its action cannot 4e ta(en to mean a waiver of its riht to demand pa+ment for

the whole de4t./8or, while Act $1$5, as amended, does not discuss the mortaeeHs riht to recover

such deficienc+, it does not contain an+ provision either, epressl+ or impliedl+, prohi4itin recover+. /n this

urisdiction, when the leislature intends to foreclose the riht of a creditor to sue for an+ deficienc+

resultin from foreclosure of a securit+ iven to uarantee an o4liation, it so epressl+ provides. or

instance, with respect to pledes, Art. &115 of the Civil Code /9does not allow the creditor to recover the

deficienc+ from the sale of the thin pleded. )i(ewise, in the case of a chattel mortae, or a thin sold

on installment 4asis, in the event of foreclosure, the vendor Jshall have no further action aainst the

purchaser to recover an+ unpaid 4alance of the price. An+ areement to the contrar+ will 4e voidJ. /1

/t is clear then that in the a4sence of a similar provision in Act No. $1$5, as amended, it cannot 4e

concluded that the creditor loses his riht reconi>ed 4+ the Rules of Court to ta(e action for the

recover+ of an+ unpaid 4alance on the principal o4liation simpl+ 4ecause he has chosen toetraudiciall+ foreclose the real estate mortae pursuant to a pecial !ower of Attorne+ iven him

4+ the mortaor in the contract of mortae. /

The filin of the Complaint and the Third-!art+ Complaint to enforce the chec(s aainst ?=)/C

and the F/CTR/AN spouses, respectivel+, is ust another means of recoverin the unpaid 4alance

of the de4t of the F/CTR/ANs.


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/n fine, ?=)/C, as drawer, is lia4le for the value of the chec(s she issued to the holder in due

course, TATE, without preudice to an+ action for recompense she ma+ pursue aainst the

F/CTR/ANs as Third-!art+ Defendants who had alread+ 4een declared as in default.

3:ERERE, the petition is GRANTED. The decision appealed from is REFERED and a new

one entered declarin private respondent NRA ". ?=)/C lia4le to petitioner TATE/NFET?ENT :=E, /NC., for the value of E"C Chec(s Nos. $%%86#58 and $%%86##% in the total

amount of !1%%,%%%.%%, !$,%%%.%% as attorne+Hs fees, and the costs of suit, without preudice to an+

action for recompense she ma+ pursue aainst the F/CTR/ANs as Third-!art+ Defendants.

Costs aainst private respondent.

RDERED.

G.R. No#. L


26/51

the J3orld Current Events,J the printer, Encal !ress and !hoto Enravin, collected the cost of printin 4+

drawin a draft aainst the plaintiff, said draft 4ein sent later to the defendant for acceptance. As an

added securit+ for the pa+ment of the amounts advanced to Encal !ress and !hoto-Enravin, the

plaintiff 4an( also re;uired defendant Arueo to eecute a trust receipt in favor of said 4an( wherein said

defendant undertoo( to hold in trust for plaintiff the periodicals and to sell the same with the promise to

turn over to the plaintiff the proceeds of the sale of said pu4lication to answer for the pa+ment of all

o4liations arisin from the draft. ;

Arueo received a cop+ of the complaint toether with the summons on Decem4er &, 1656. 5n

Decem4er 17, 1656 defendant filed an urent motion for etension of time to plead, and set the hearin

on Decem4er 1#, 1656. /0At the hearin, the court denied defendantHs motion for etension. 3hereupon,

the defendant filed a motion to dismiss the complaint on Decem4er 1@, 1656 on the round that the

complaint states no cause of action 4ecause2

a* 3hen the various 4ills of echane were presented to the defendant as drawee for acceptance,

the amounts thereof had alread+ 4een paid 4+ the plaintiff to the drawer 'Encal !ress and !hoto

Enravin*, without (nowlede or consent of the defendant drawee.

4* /n the case of a 4ill of echane, li(e those involved in the case at 4ar, the defendant drawee is an

accommodatin part+ onl+ for the drawer 'Encal !ress and !hoto-Enravin* and win 4e lia4le in the

event that the accommodatin part+ 'drawer* fails to pa+ its o4liation to the plaintiff. //

The complaint was dismissed in an order dated Decem4er &&, 1656, cop+ of which was received 4+

the defendant on Decem4er &7, 1656. /7

n anuar+ 1$, 16#%, the plaintiff filed a motion for reconsideration. /2n ?arch @, 16#%, actin upon

the motion for reconsideration filed 4+ the plaintiff, the trial court set aside its order dismissin the

complaint and set the case for hearin on ?arch 15, 16#% at 82%% in the mornin. /8A cop+ of the order

settin aside the order of dismissal was received 4+ the defendant on ?arch 11, 16#% at 52%% oHcloc( inthe afternoon accordin to the affidavit of the deput+ sheriff of ?anila, ?amerto de la Cru>. n the

followin da+, ?arch 1&, 16#%, the defendant filed a motion to postpone the trial of the case on the round

that there havin 4een no answer as +et, the issues had not +et 4een oined. /9n the same date, the

defendant filed his answer to the complaint interposin the followin defenses2 That he sined the

document upon which the plaintiff sues in his capacit+ as !resident of the !hilippine Education

oundation< that his lia4ilit+ is onl+ secondar+< and that he 4elieved that he was sinin onl+ as an

accommodation part+. /1

n ?arch 15, 16#%, the plaintiff filed an e partemotion to declare the defendant in default on the

round that the defendant should have filed his answer on ?arch 11, 16#%. :e contends that 4+

filin his answer on ?arch 1&, 16#%, defendant was one da+ late.

/

n ?arch 16, 16#% the trial courtdeclared the defendant in default. /;The defendant learned of the order declarin him in default on ?arch

&1, 16#%. n ?arch &&, 16#% the defendant filed a motion to set aside the order of default allein that

althouh the order of the court dated ?arch @, 16#% was received on ?arch 11, 16#% at 52%% in the

afternoon, it could not have 4een reasona4l+ epected of the defendant to file his answer on the last da+

of the relementar+ period, ?arch 11, 16#%, within office hours, especiall+ 4ecause the order of the court

dated ?arch @, 16#% was 4rouht to the attention of counsel onl+ in the earl+ hours of ?arch 1&, 16#%.

The defendant also alleed that he has a ood and su4stantial defense. Attached to the motion are the

affidavits of deput+ sheriff ?amerto de la Cru> that he served the order of the court dated ?arch @, 16#%


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on ?arch 11, 16#%, at 52%% oHcloc( in the afternoon and the affidavit of the defendant Arueo that he has a

ood and su4stantial defense. /5The trial court denied the defendantHs motion on ?arch &5, 16#%. 70n

?a+ #, 16#%, the trial court rendered udment sentencin the defendant to pa+ to the plaintiff the sum of

!$5,777.$5 representin the total amount of his o4liation to the said plaintiff under the twent+-two '&&*

causes of action alleed in the complaint as of Novem4er 15, 165@ and the sum of !1%,%%%.%% as

attorne+Hs fees. 7/

n ?a+ 6, 16#% the defendant filed a notice of appeal from the order dated ?arch &5, 16#1 den+in

his motion to set aside the order declarin him in default, an appeal 4ond in the amount of !#%.%%,

and his record on appeal. The plaintiff filed his opposition to the approval of defendantHs record on

appeal on ?a+ 1$, 16#%. The followin da+, ?a+ 17, 16#%, the lower court dismissed defendantHs

appeal from the order dated ?arch &5, 16#% den+in his motion to set aside the order of

default. 77n ?a+ 16, 16#%, the defendant filed a motion for reconsideration of the trial courtHs order

dismissin his appeal. 72The plaintiff, on ?a+ &%, 16#%, opposed the defendantHs motion for

reconsideration of the order dismissin appeal. 78n ?a+ &1, 16#%, the trial court reconsidered its

previous order dismissin the appeal and approved the defendantHs record on appeal. 79n ?a+ $%,

16#%, the defendant received a cop+ of a notice from the Cler( of Court dated ?a+ , 16#%, informin

the defendant that the record on appeal filed ed 4+ the defendant was forwarded to the Cler( of Court ofAppeals. 71

n une 1, 16#% Arueo filed a motion to set aside the udment rendered after he was declared in

default reiteratin the same round previousl+ advanced 4+ him in his motion for relief from the order

of default. 7=pon opposition of the plaintiff filed on une $, 16#%, 7;the trial court denied the defendantHs

motion to set aside the udment 4+ default in an order of une 11, 16#%. 75n une &%, 16#%, the

defendant filed his notice of appeal from the order of the court den+in his motion to set aside the

udment 4+ default, his appeal 4ond, and his record on appeal. The defendantHs record on appeal was

approved 4+ the trial court on une &5, 16#%. 20Thus, the defendant had two appeals with the Court of

Appeals2 '1* Appeal from the order of the lower court den+in his motion to set aside the order of default

doc(eted as CA-G.R. N. &@@$7-R< '&* Appeal from the order den+in his motion to set aside theudment 4+ default doc(eted as CA-G.R. N. &@67%-R.

/n his 4rief, the defendant-appellant assined the followin errors2

/

T:E )3ER C=RT ERRED /N :)D/NG T:AT T:E DEENDANT 3A /N

DEA=)T.

//

T:E )3ER C=RT ERRED /N ENTERTA/N/NG T:E ?T/N T DEC)ARE

DEENDANT /N DEA=)T A)T:=G: AT T:E T/?E T:ERE 3A A)READ N

/)E AN AN3ER " :/? 3/T:=T /RT D/!/NG A/D AN3ER /N

AN A!!R!R/ATE ACT/N.

///


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T:E )3ER C=RT ERRED /N DEN/NG DEENDANTH !ET/T/N R

RE)/E RDER DEA=)T AND R? =DG?ENT " DEA=)T AGA/NT

DEENDANT. 2/

/t has 4een held that to entitle a part+ to relief from a udment ta(en aainst him throuh his

mista(e, inadvertence, surprise or ecusa4le nelect, he must show to the court that he has ameritorious defense. 27/n other words, in order to set aside the order of default, the defendant must not

onl+ show that his failure to answer was due to fraud, accident, mista(e or ecusa4le nelience 4ut also

that he has a meritorious defense.

The record discloses that Arueo received a cop+ of the complaint toether with the summons on

Decem4er &, 16#%< that on Decem4er 1@, 16#%, the last da+ for filin his answer, Arueo filed a

motion to dismiss< that on Decem4er &&, 16#% the lower court dismissed the complaint< that on

anuar+ &$, 16#%, the plaintiff filed a motion for reconsideration and on ?arch @, 16#%, actin upon

the motion for reconsideration, the trial court issued an order settin aside the order of dismissalon Cit+, "ranch 65, in Criminal Cases Nos. O-61-

&561% to 15, findin petitioner uilt+ 4e+ond reasona4le dou4t of violatin ".!.

"l. &&, the "ouncin Chec(s )aw.

The facts in this case, as culled from the records, are as follows2

n Auust &7, 1686, rancisco T. +cip areed to 4u+, on installment, from

rancel Realt+ Corporation 'RC*, a townhouse unit in the latterHs proect at

"acoor, Cavite.

=pon eecution of the contract to sell, +cip, as re;uired, issued to RC,

fort+-eiht '78* postdated chec(s, each in the amount of !6,$%7.%%, coverin

78 monthl+ installments.

After movin in his unit, +cip complained to RC reardin defects in the unit

and incomplete features of the townhouse proect. RC inored the complaint.

Dissatisfied, +cip served on RC two '&* notarial notices to the effect that he

was suspendin his installment pa+ments on the unit pendin compliance with

the proect plans and specifications, as approved 4+ the :ousin and )and

=se Reulator+ "oard ':)=R"*. +cip and 1& out of 17 unit 4u+ers then filed

a complaint with the :)=R". The complaint was dismissed as to the defects,

4ut RC was ordered 4+ the :)=R" to finish all incomplete features of its

townhouse proect. +cip appealed the dismissal of the complaint as to the

alleed defects.


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Notwithstandin the notarial notices, RC continued to present for

encashment +cipHs postdated chec(s in its possession. +cip sent Jstop

pa+ment ordersJ to the 4an(. 3hen RC continued to present the other

postdated chec(s to the 4an( as the due date fell, the 4an( advised +cip to

close his chec(in account to avoid pa+in 4an( chares ever+ time he madea Jstop pa+mentJ order on the forthcomin chec(s. Due to the closure of

petitionerHs chec(in account, the drawee 4an( dishonored si postdated

chec(s. RC filed a complaint aainst petitioner for violations of ".!. "l. &&

involvin said dishonored chec(s.

n Novem4er 8, 1661, the Oue>on Cit+ !rosecutorHs ffice filed with the RTC

of Oue>on Cit+ si /nformations doc(eted as Criminal Cases No. O-61-&561%

to O-61-&5615, charin petitioner for violation of ".!. "l. &&.

The accusative portion of the /nformation in Criminal Case No. O-61/&561%

reads2

JThat on or a4out the $%th da+ of cto4er 166% in Oue>on Cit+,

!hilippines and within the urisdiction of this :onora4le Court, the

said accused, did then and there, willfull+, unlawfull+ and

feloniousl+ ma(e, draw and issue in favor of rancel Realt+

Corporation a chec( 81$517 drawn aainst Citi4an(, a dul+

esta4lished domestic 4an(in institution in the amount of!6,$%7.%% !hilippine Currenc+ datedLpostdated cto4er $%, 166%

in pa+ment of an o4liation, (nowin full+ well at the time of issue

that sheLhe did not have an+ funds in the drawee 4an( of 'sic* the

pa+ment of such chec(< that upon presentation of said chec( to

said 4an( for pa+ment, the same was dishonored for the reason

that the drawer thereof, accused rancisco T. +cip, r. did not

have an+ funds therein, and despite notice of dishonor thereof,

accused failed and refused and still fails and refused 'sic* toredeem or ma(e ood said chec(, to the damae and preudice of

the said rancel Realt+ Corporation in the amount aforementioned

and in such other amount as ma+ 4e awarded under the

provisions of the Civil Code.

JCNTRAR T )A3.J01
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Criminal Cases No. O-61-&5611 to O-61-&5615, with /nformations similarl+

worded as in Criminal Case No. O-61-&561%, ecept for the dates, and chec(

num4ers0&were consolidated and ointl+ tried.

3hen arrained, petitioner pleaded JNot Guilt+J to each of the chares. Trialthen proceeded.

The prosecutionHs case, as summari>ed 4+ the trial court and adopted 4+ the

appellate court, is as follows2

JThe prosecution evidence esta4lished that on or a4out Auust

&7, 1686, at the office of the private complainant rancel Realt+

Corporation 'a private domestic corporation enaed in the real

estate 4usiness* at 8&& Oue>on Avenue, OC, accused rancisco+cip, r. drew, issued, and delivered to private complainant

rancel Realt+ Corporation 'RC hereinafter* si chec(s 'amon

a num4er of other chec(s*, each for !6,$%7.%% and drawn pa+ to

the order of RC and aainst ranciscoHs account no. 875515 with

Citi4an(, to wit2 Chec( No. 81$517 dated cto4er $%, 166% 'Eh.

C*, Chec( No. 81$515 dated Novem4er $%, 166% 'Eh. D*, Chec(

No. 81$518 dated e4ruar+ &8,1661 'Eh. E*, Chec( No. 81$51#

dated Decem4er $%, 166% 'Eh. *, Chec( No. 81$51@ dated

anuar+ $%, 1661 'Eh. G* and Chec( No. 81$516 dated ?arch$%, 1661 'Eh. :*, as and in partial pa+ment of the unpaid

4alance of the purchase price of the house and lot su4ect of the

written contract eecuted and entered into 4+ and 4etween RC

as seller and rancisco as 4u+er on said date of Auust &7, 1686

'Eh. ", also Eh. 1*. The total stipulated purchase price for the

house and lot was !751,@%%.%%, of which rancisco paid RC in

the sum of !1$5,%%%.%% as down pa+ment, with rancisco

areein and committin himself to pa+ the 4alance of!$1#,%%%.%% in 78 e;ual monthl+ installments of !6,$%7.%% 'which

sum alread+ includes interest on successive monthl+ 4alance*

effective eptem4er $%, 1686 and on the $%th da+ of each month

thereafter until the stipulated purchase price is paid in full. The

said si Citi4an( chec(s, Ehs. C thru :, as earlier indicated were

drawn, issued, and delivered 4+ rancisco in favor of RC as and


33/51

in partial pa+ment of the said 78 e;ual monthl+ installments under

their said contract 'Eh. ", also Eh. 1*. ometime in eptem4er

1686, the "uildin fficialHs certificate of occupanc+ for the su4ect

house -a residential townhouse -was issued 'Eh. N* and

rancisco too( possession and started in the use and occupanc+of the su4ect house and lot.

J3hen the su4ect si chec(s, Ehs. C thru :, were presented to

the Citi4an( for pa+ment on their respective due dates, the+ were

all returned to RC dishonored and unpaid for the reason2

account closed as indicated in the drawee 4an(Hs stamped

notations on the face and 4ac( of each chec(< in fact, as indicated

in the correspondin record of ranciscoHs account no. 815515

with Citi4an(, said account alread+ had a >ero 4alance as earl+ aseptem4er 17, 166% 'Eh. 1-5*. Notwithstandin the fact that

RC, first thru its eecutive vice president and proect manaer

and thereafter thru its counsel, had notified rancisco, orall+ and

in writin, of the chec(sH dishonor and demanded from him the

pa+ment of the amount thereof, still rancisco did not pa+or ma(e

ood an+ of the chec(s 'Ehs. / thru P*...J0$

The case for the defense, as summari>ed also 4+ the trial court and adopted

4+ the Court of Appeals, is as follows2

JThe defense evidence in sum is to the effect that after ta(in

possession and startin in the use and occupanc+ of the su4ect

townhouse unit, rancisco 4ecame aware of its various

construction defects< that he called the attention of RC, thru its

proect manaer, re;uestin that appropriate measures 4e

forthwith instituted, 4ut despite his several re;uests, RC did not

ac(nowlede, much less attend to them< that rancisco thusmailed to RC a verified letter dated une #, 166% 'Eh. &* in sum

ivin notice that effective une 166%, he will cease and desist

Hfrom pa+in m+ monthl+ amorti>ation of N/NE T:=AND

T:REE :=NDRED =R '!6,$%7.%%* !E towards the

settlement of m+ o4liation concernin m+ purchase of =nit No.

17 of RC Townhomes referred to a4ove, unless and until +our


34/51

ffice satisfactoril+ complete's* the construction, renovation

andLor repair of m+ townhouses 'sic* unit referred to a4ove9 and

that should RC Hpersist in inorin m+ aforesaid re;uests, / shall,

after five '5* da+s from +our receipt of this Ferified Notice,

forthwith petition the 0:)=R" for Declarator+ Relief andConsination to rant me provisional relief from m+ o4liation to

pa+ m+ monthl+ amorti>ation to +our ood ffice and allow me to

deposit said amorti>ations with 0:)=R" pendin +our completion

of RC Townhomes =nit in ;uestionH< that rancisco thru counsel

wrote RC, its president, and its counsel noticesLletters in sum to

the effect that rancisco and all other complainants in the

0:)=R" case aainst RC shall cease and desist from pa+in

their monthl+ amorti>ations unless and until RC satisfactoril+

completes the construction of their units in accordance with the

plans and specifications thereof as approved 4+ the 0:)=R" and

as warranted 4+ the RC in their contracts and that the dishonor

of the su4ect chec(s was a natural conse;uence of such

suspension of pa+ments, and also advisin RC not to encash or

deposit all other postdated chec(s issued 4+ rancisco and the

other complainants and still in RCHs possession 'Ehs. $ thru 5*o, an employee of the defendant :;hs) J and J$1, ho in turn

0ave the said chec% to Jen0 n0eles, a co$employee ho handles the account

of the plaintiff) The chec% remained in the custody of Jen0 n0eles) Mr)

&oberto Mani5ui>, head of the collection department of defendant as

formally informed of the postdated chec% about a ee% later) An November

48, 1989, defendant served plaintiff a letter by ordinary mail informin0 him of

the temporary suspension of the privile0es of his credit card and the inclusion

of his account number in their #aution Cist) "e as also told to refrain from

further use of his credit card to avoid any inconvenienceLembarrassment and

that unless he settles his outstandin0 account ith the defendant ithin days

from receipt of the letter, his membership ill be permanently cancelled :;h)

@) There is no shoin0 that the plaintiff received this letter before /ecember

8, 1989) #onfident that he had settled his account ith the issuance of thepostdated chec%, plaintiff invited some 0uests on /ecember 8, 1989 and

entertained them at #afO driatico) Dhen he presented his credit card to #afO

driatico for the bill amountin0 to P.@)@4, said card as dishonored) Ane of

his 0uests, Mary :llen &in0ler, paid the bill by usin0 her on credit card, a

?niban%ard :;hs) M, M$1 and M$4)

(n a letter addressed to the defendant dated /ecember 14, 1989, plaintiff

re5uested that he be sent the e;act billin0 due him as of /ecember 1, 1989, to

ithhold the deposit of his postdated chec% and that said chec% be returned tohim because he had already instructed his ban% to stop the payment thereof as

the defendant violated their a0reement that the plaintiff issue the chec% to the

defendant to cover his account amountin0 to only P8,98.)8- on the condition

that the defendant ill not suspend the effectivity of the card :;h) /)

letter dated /ecember 16, 1989 as sent by the plaintiff to the mana0er of


42/51

3:'T#, &amada 'ranch, Manila re5uestin0 the ban% to stop the payment of

the chec% :;hs) :, :$1) No reply as received by plaintiff from the

defendant to his letter dated /ecember 14, 1989) Plaintiff sent defendant

another letter dated March 14, 1992 remindin0 the latter that he had lon0

rescinded and cancelled hatever arran0ement he entered into ith defendantand re5uestin0 for his correct billin0, less the improper char0es and penalties,

and for an e;planation ithin five days from receipt thereof hy his card

as dishonored on /ecember 8, 1989 despite assurance to the contrary by

defendants personnel$in$char0e, otherise the necessary court action shall be

filed to hold defendant responsible for the humiliation and embarrassment

suffered by him :;h) 3) Plaintiff alle0ed further that after a fe days, a

certain tty) lbano, representin0 himself to be or%in0 ith office of tty)

Cope>, called him in5uirin0 as to ho the matter can be threshed out

e;tra!udicially but the latter said that such is a serious matter hich cannot be

discussed over the phone) The defendant served its final demand to the

plaintiff dated March 41, 1992 re5uirin0 him to pay in full his overdue

account, includin0 stipulated fees and char0es, ithin days from receipt

thereof or face court action also to replace the postdated chec% ith cash

ithin the same period or face criminal suit for violation of the 'ouncin0

#hec% Ca :;h) *L:;h) 1@) The plaintiff, in a reply letter dated pril ,

1992 :;h) ", demanded defendants compliance ith his re5uest in his first

letter dated March 14, 1992 ithin three @ days from receipt, otherise theplaintiff ill file a case a0ainst them, ; ; ;)F4G

Thus, on May ., 1992 private respondent filed a complaint for dama0es a0ainst petitioner

before the &e0ional Trial #ourt of Ma%ati, 'ranch 12, doc%eted as #ivil #ase No) 92$11.-)

fter trial, the trial court ruled for private respondent, findin0 that herein petitioner abused

its ri0ht in contravention of rticle 19 of the #ivil #ode)F@GThe dispositive portion of the decision

reads+

Dherefore, !ud0ment is hereby rendered orderin0 the defendant to pay plaintiffthe folloin0+

1) P122,222)22 as moral dama0es

4) P2,222)22 as e;emplary dama0es and
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@) P42,222)22 by ay of attorneys fees)

An the other hand, plaintiff is ordered to pay defendant its outstandin0

obli0ation in the amount of P1-,-@9)-1, amount due as of /ecember 1, 1989)F-G

The trial courts rulin0 as based on its findin0s and conclusions, to it+

There is no 5uestion that plaintiff had been in default in the payment of his

billin0s for more than to months, promptin0 defendant to call him and

reminded him of his obli0ation) ?nable to personally tal% ith him, this #ourt

is convinced that someho one or another employee of defendant called him

up more than once)

"oever, hile it is true that, as indicated in the terms and conditions of theapplication for 'P( credit card, upon failure of the cardholder to pay his

outstandin0 obli0ation for more than thirty @2 days, the defendant can

automatically suspend or cancel the credit card, that reserved ri0ht should not

have been abused, as it as in fact abused, in plaintiffs case) Dhat is more

peculiar here is that there have been admitted communications beteen

plaintiff and defendant prior to the suspension or cancellation of plaintiffs

credit card and his inclusion in the caution list) "oever, nohere in any of

these communications as there ever a hint 0iven to plaintiff that his card had

already been suspended or cancelled) (n fact, the #ourt observed that hile

defendant as tryin0 its best to persuade plaintiff to update its account and pay

its obli0ation, it had already ta%en steps to suspendLcancel plaintiffs card and

include him in the caution list) Dhile the #ourt admires defendants

diplomacy in dealin0 ith its clients, it cannot help but fron upon the

bac%handed ay defendant dealt ith plaintiffs case) 3or despite Tess

Coren>os denial, there is reason to believe that plaintiff as indeed assured by

defendant of the continued honorin0 of his credit card so lon0 as he pays his

obli0ation of P1,222)22) Dorst, upon receipt of the postdated chec%,defendant %ept the same until a fe days before it became due and said chec%

as presented to the head of the collection department, Mr) Mani5ui>, to ta%e

steps thereon, resultin0 to the embarrassin0 situation plaintiff found himself in

on /ecember 8, 1989) Moreover, Mr) Mani5ui> himself admitted that his
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44/51

re5uest for plaintiff to replace the chec% ith cash as not because it as a

postdated chec% but merely to tally the payment ith the account due)

Ci%eise, the #ourt is not persuaded by the seepin0 denials made by Tess

Coren>o and her claim that her only participation as to receive the sub!ectchec%) "er immediate superior, Mr) Mani5ui> testified that he had instructed

Coren>o to communicate ith plaintiff once or tice to re5uest the latter to

replace the 5uestioned chec% ith cash, thus 0ivin0 support to the testimony of

plaintiffs itness, /olores Hui>on, that it as one Tess Coren>o ho she had

tal%ed over the phone re0ardin0 plaintiffs account and plaintiffs on

statement that it as this oman ho assured him that his card has not yet

been and ill not be cancelledLsuspended if he ould pay defendant the sum

ofP1,222)22)

No, on the issue of hether or not upon receipt of the sub!ect chec%,

defendant had a0reed that the card shall remain effective, the #ourt ta%es note

of the folloin0+

1) n employee of defendant corporation unconditionally accepted the sub!ect chec%

upon its delivery, despite its bein0 a postdated one and the amount did not tally ith

plaintiffs obli0ation

4) /efendant did not deny nor controvert plaintiffs claim that all his payments eremade in chec%s

@) /efendants main itness, Mr) Mani5ui>, cate0orically stated that the re5uest for

plaintiff to replace his postdated chec% ith cash as merely for the purpose of

tallyin0 plaintiffs outstandin0 obli0ation ith his payment and not to 5uestion the

postdated chec%

-) That the card as suspended almost a ee% after receipt of the postdated chec%

) That despite the many instances that defendant could have informed plaintiff over

the phone of the cancellation or suspension of his credit card, it did not do so, hich

could have prevented the incident of /ecember 8, 1989, the notice alle0edly sent thru

ordinary mail is not only unreliable but ta%es a lon0 time) Such action as suspension

of credit card must be immediately relayed to the person affected so as to avoid

embarrassin0 situations)


45/51

6) nd that the postdated chec% as deposited on /ecember 42, 1989)

(n vie of the fore0oin0 observations, it is needless to say that there as

indeed an arran0ement beteen plaintiff and the defendant, as can be inferred

from the acts of the defendants employees, that the sub!ect credit card is still0ood and could still be used by the plaintiff as it ould be honored by the duly

accredited establishment of defendant)FG

Not satisfied ith the &e0ional Trial #ourts decision, petitioner appealed to the #ourt of

ppeals, hich, in a decision promul0ated on March 9, 199 ruled in its dispositive portion+

D":&:3A&:, premises considered, the decision appealed from is hereby

33(&M:/ ith the MA/(3(#T(AN that the defendant$appellant shall pay

the plaintiff$appellee the folloin0+ P2,222)22 as moral

dama0es P4,222)22 as e;emplary dama0es and P12,222)22 by ay of

attorneys fees)

SA A&/:&:/)F6G

"ence, the present petition on the folloin0 assi0nment of errors+

I

T": CAD:& #A?&T :&&:/ (N /:#C&(N* T"T T":&: DS(N/::/ N *&::M:NT A& &&N*:M:NT :NT:&:/ (NTA

':TD::N T": P&T(:S D":&:(N T": /:3:N/NT &:H?(&:/

T": PC(NT(33 TA (SS?: PAST/T:/ #":#B (N (TS 3EA& (N

T": MA?NT A3 P1,222)22 S PQM:NT 3A& "(S AE:&/?:

##A?NTS, D(T" T": #AN/(T(AN T"T T": PC(NT(33S #&:/(T

#&/ D(CC NAT ': S?SP:N/:/ A& #N#:CC:/)

II

T": CAD:& #A?&T :&&:/ (N "AC/(N* /:3:N/NT C('C: 3A&

/M*:S N/ TTA&N:QS 3::S &(S(N* A?T 3&AM T":

/(S"ANA& A3 T": PC(NT(33S #&:/(T #&/)F.G

De find the petition meritorious)
http://sc.judiciary.gov.ph/jurisprudence/1998/sep1998/120639.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/1998/sep1998/120639.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1998/sep1998/120639.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/1998/sep1998/120639.htm#_edn5http://sc.judiciary.gov.ph/jurisprudence/1998/sep1998/120639.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1998/sep1998/120639.htm#_edn7


46/51

The first issue to be resolved is hether petitioner had the ri0ht to suspend the credit card of

the private respondent)

?nder the terms and conditions of the credit card, si0ned by the private respondent, any card

ith outstandin0 balances after thirty @2 days from ori0inal billin0Lstatement shall

automatically be suspended, thus+

PQM:NT A3 #"&*:S $ ':## shall furnish the #ardholder a monthly

statement of account made throu0h the use of the #&/ and the #ardholder

a0rees that all char0es made throu0h the use of the #&/ shall be paid by the

#ardholder on or before the last day for payments, hich is tenty 42 days

from the date of the said statement of account, and such payment due date

may be chan0ed to an earlier date if the #ardholders account is considered

overdue andLor ith balances in e;cess of the approved credit limit or to such

other date as may be deemed proper by the #&/ issuer ith notice to the

#ardholder on the same monthly statement of account) (f the last day for

payment falls on a Saturday, Sunday or "oliday, the last day for payment

automatically becomes the last or%in0 day prior to said payment

date) "oever, notithstandin0 the absence or lac% of proof of service of the

statement of char0es to the #ardholder, the latter shall pay any or all char0es

made throu0h the use of the #&/ ithin thirty @2 days from the date or

dates thereof) 3ailure of #ardholder to pay any and all char0es made throu0h

the #&/ ithin the payment period as stated in the statement of char0es orithin thirty @2 days from actual date or dates hichever occur earlier, shall

render him in default ithout the necessity of demand from ':##, hich the

#ardholder e;pressly aives) These char0es or balance thereof remainin0

unpaid after the payment due date indicated on the monthly statement of

account shall bear interest at the rate of @< per month and an additional

penalty fee e5uivalent to another @< of the amount due for every month or a

fraction of a months delay) P&AE(/:/, that if there occurs any chan0e on

the prevailin0 mar%et rates) ':## shall have the option to ad!ust the rate of

interest andLor penalty fee due on the outstandin0 obli0ation ith prior notice

to the #ardholder)

;;; ;;; ;;;

ny #&/ ith outstandin0 balances unpaid after thirty @2 days from

ori0inal billin0Lstatement date shall automatically be suspended, and those


47/51

ith accounts unpaid after si;ty 62 days from said ori0inal billin0Lstatement

date shall automatically be cancelled, ithout pre!udice to ':##s ri0ht to

suspend or cancel any #&/ any time and for hatever reason) (n case of

default in his obli0ation as provided for in the precedin0 para0raph,

#ardholder shall surrender his #&/ to ':## and shall in addition to theinterest and penalty char0es aforementioned, pay the folloin0 li5uidated

dama0es andLor fees a a collection fee of 4< of the amount due if the

account is referred to a collection a0ency or attorney b a service fee of P122

for every dishonored chec% issued by the #ardholder in payment of his

account, ith pre!udice, hoever, to ':##s ri0ht of considerin0 #ardholders

obli0ation unpaid, cable cost for demandin0 payment or advisin0 cancellation

of membership shall also be for #ardholders account and c a final fee

e5uivalent to 4< of the unpaid balance, e;clusive of liti0ation e;penses and

!udicial costs, if the payment of the account is enforced throu0h court action)F8G

The afore5uoted provision of the credit card cannot be any clearer) 'y his on admission,

private respondent made no payment ithin thirty days for his ori0inal billin0Lstatement dated 4.

September 1989) Neither did he ma%e payment for his ori0inal billin0Lstatement dated 4.

Actober 1989) #onse5uently, as early as 48 Actober 1989, thirty days from the non$payment of

his billin0 dated 4. September 1989, petitioner corporation could automatically suspend his

credit card)

The ne;t issue is hether prior to the suspension of private respondents credit card on 48

November 1989, the parties entered into an a0reement hereby the card could still be used and

ould be du

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