Jurisprudence: G.R. No. 76788 January 22, 1990

THIRD DIVISION

 G.R. No. 76788 January 22, 1990

JUANITA SALAS, petitioner,
vs.
HON. COURT OF APPEALS and FIRST FINANCE & LEASING CORPORATION, respondents.

Arsenio C. Villalon, Jr. for petitioner.

Labaguis, Loyola, Angara & Associates for private respondent.



FERNAN, C.J.:

Assailed in this petition for review on certiorari is the decision of the Court of Appeals in C.A.-G.R. CV No. 00757 entitled "Filinvest Finance & Leasing Corporation v. Salas", which modified the decision of the Regional Trial Court of San Fernando, Pampanga in Civil Case No. 5915, a collection suit between the same parties.

Records disclose that on February 6, 1980, Juanita Salas (hereinafter referred to as petitioner) bought a motor vehicle from the Violago Motor Sales Corporation (VMS for brevity) for P58,138.20 as evidenced by a promissory note. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation (hereinafter referred to as private respondent) which financed the purchase.

Petitioner defaulted in her installments beginning May 21, 1980 allegedly due to a discrepancy in the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and deed of chattel mortgage, which fact she discovered when the vehicle figured in an accident on 9 May 1980.

This failure to pay prompted private respondent to initiate Civil Case No. 5915 for a sum of money against petitioner before the Regional Trial Court of San Fernando, Pampanga.

In its decision dated September 10, 1982, the trial court held, thus:

WHEREFORE, and in view of all the foregoing, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of P28,414.40 with interest thereon at the rate of 14% from October 2, 1980 until the said sum is fully paid; and the further amount of P1,000.00 as attorney's fees.

The counterclaim of defendant is dismissed.

With costs against defendant. 1

Both petitioner and private respondent appealed the aforesaid decision to the Court of Appeals.

Imputing fraud, bad faith and misrepresentation against VMS for having delivered a different vehicle to petitioner, the latter prayed for a reversal of the trial court's decision so that she may be absolved from the obligation under the contract.

On October 27, 1986, the Court of Appeals rendered its assailed decision, the pertinent portion of which is quoted hereunder:

The allegations, statements, or admissions contained in a pleading are conclusive as against the pleader. A party cannot subsequently take a position contradictory of, or inconsistent with his pleadings (Cunanan vs. Amparo, 80 Phil. 227). Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings, do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistake (Sec. 2, Rule 129, Revised Rules of Court; Sta. Ana vs. Maliwat, L-23023, Aug. 31, 1968, 24 SCRA 1018).

When an action or defense is founded upon a written instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denied them, and sets forth what he claims to be the facts (Sec. 8, Rule 8, Revised Rules of Court; Hibbered vs. Rohde and McMillian, 32 Phil. 476).

A perusal of the evidence shows that the amount of P58,138.20 stated in the promissory note is the amount assumed by the plaintiff in financing the purchase of defendant's motor vehicle from the Violago Motor Sales Corp., the monthly amortization of winch is Pl,614.95 for 36 months. Considering that the defendant was able to pay twice (as admitted by the plaintiff, defendant's account became delinquent only beginning May, 1980) or in the total sum of P3,229.90, she is therefore liable to pay the remaining balance of P54,908.30 at l4% per annum from October 2, 1980 until full payment.

WHEREFORE, considering the foregoing, the appealed decision is hereby modified ordering the defendant to pay the plaintiff the sum of P54,908.30 at 14% per annum from October 2, 1980 until full payment. The decision is AFFIRMED in all other respects. With costs to defendant. 2

Petitioner's motion for reconsideration was denied; hence, the present recourse.

In the petition before us, petitioner assigns twelve (12) errors which focus on the alleged fraud, bad faith and misrepresentation of Violago Motor Sales Corporation in the conduct of its business and which fraud, bad faith and misrepresentation supposedly released petitioner from any liability to private respondent who should instead proceed against VMS. 3

Petitioner argues that in the light of the provision of the law on sales by description 4 which she alleges is applicable here, no contract ever existed between her and VMS and therefore none had been assigned in favor of private respondent.

She contends that it is not necessary, as opined by the appellate court, to implead VMS as a party to the case before it can be made to answer for damages because VMS was earlier sued by her for "breach of contract with damages" before the Regional Trial Court of Olongapo City, Branch LXXII, docketed as Civil Case No. 2916-0. She cites as authority the decision therein where the court originally ordered petitioner to pay the remaining balance of the motor vehicle installments in the amount of P31,644.30 representing the difference between the agreed consideration of P49,000.00 as shown in the sales invoice and petitioner's initial downpayment of P17,855.70 allegedly evidenced by a receipt. Said decision was however reversed later on, with the same court ordering defendant VMS instead to return to petitioner the sum of P17,855.70. Parenthetically, said decision is still pending consideration by the First Civil Case Division of the Court of Appeals, upon an appeal by VMS, docketed as AC-G.R. No. 02922. 5

Private respondent in its comment, prays for the dismissal of the petition and counters that the issues raised and the allegations adduced therein are a mere rehash of those presented and already passed upon in the court below, and that the judgment in the "breach of contract" suit cannot be invoked as an authority as the same is still pending determination in the appellate court.

We see no cogent reason to disturb the challenged decision.

The pivotal issue in this case is whether the promissory note in question is a negotiable instrument which will bar completely all the available defenses of the petitioner against private respondent.

Petitioner's liability on the promissory note, the due execution and genuineness of which she never denied under oath is, under the foregoing factual milieu, as inevitable as it is clearly established.

The records reveal that involved herein is not a simple case of assignment of credit as petitioner would have it appear, where the assignee merely steps into the shoes of, is open to all defenses available against and can enforce payment only to the same extent as, the assignor-vendor.

Recently, in the case of Consolidated Plywood Industries Inc. v. IFC Leasing and Acceptance Corp., 6 this Court had the occasion to clearly distinguish between a negotiable and a non-negotiable instrument.

Among others, the instrument in order to be considered negotiable must contain the so-called "words of negotiability — i.e., must be payable to "order" or "bearer"". Under Section 8 of the Negotiable Instruments Law, there are only two ways by which an instrument may be made payable to order. There must always be a specified person named in the instrument and the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. Without the words "or order or "to the order of", the instrument is payable only to the person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument, but will merely "step into the shoes" of the person designated in the instrument and will thus be open to all defenses available against the latter. Such being the situation in the above-cited case, it was held that therein private respondent is not a holder in due course but a mere assignee against whom all defenses available to the assignor may be raised. 7

In the case at bar, however, the situation is different. Indubitably, the basis of private respondent's claim against petitioner is a promissory note which bears all the earmarks of negotiability.

The pertinent portion of the note reads:

PROMISSORY NOTE
(MONTHLY)

P58,138.20
San Fernando, Pampanga, Philippines
Feb. 11, 1980

For value received, I/We jointly and severally, promise to pay Violago Motor Sales Corporation or order, at its office in San Fernando, Pampanga, the sum of FIFTY EIGHT THOUSAND ONE HUNDRED THIRTY EIGHT & 201/100 ONLY (P58,138.20) Philippine currency, which amount includes interest at 14% per annum based on the diminishing balance, the said principal sum, to be payable, without need of notice or demand, in installments of the amounts following and at the dates hereinafter set forth, to wit: P1,614.95 monthly for "36" months due and payable on the 21st day of each month starting March 21, 1980 thru and inclusive of February 21, 1983. P_________ monthly for ______ months due and payable on the ______ day of each month starting _____198__ thru and inclusive of _____, 198________ provided that interest at 14% per annum shall be added on each unpaid installment from maturity hereof until fully paid.

xxx xxx xxx

Maker; Co-Maker:

(SIGNED) JUANITA SALAS _________________

Address:

____________________ ____________________

WITNESSES

SIGNED: ILLEGIBLE SIGNED: ILLEGIBLE
TAN # TAN #

PAY TO THE ORDER OF
FILINVEST FINANCE AND LEASING CORPORATION

VIOLAGO MOTOR SALES CORPORATION
BY: (SIGNED) GENEVEVA V. BALTAZAR
Cash Manager 8

A careful study of the questioned promissory note shows that it is a negotiable instrument, having complied with the requisites under the law as follows: [a] it is in writing and signed by the maker Juanita Salas; [b] it contains an unconditional promise to pay the amount of P58,138.20; [c] it is payable at a fixed or determinable future time which is "P1,614.95 monthly for 36 months due and payable on the 21 st day of each month starting March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is payable to Violago Motor Sales Corporation, or order and as such, [e] the drawee is named or indicated with certainty. 9

It was negotiated by indorsement in writing on the instrument itself payable to the Order of Filinvest Finance and Leasing Corporation 10 and it is an indorsement of the entire instrument. 11

Under the circumstances, there appears to be no question that Filinvest is a holder in due course, having taken the instrument under the following conditions: [a] it is complete and regular upon its face; [b] it became the holder thereof before it was overdue, and without notice that it had previously been dishonored; [c] it took the same in good faith and for value; and [d] when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation. 12

Accordingly, respondent corporation holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof. 13 This being so, petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS.

Even assuming for the sake of argument that there is an iota of truth in petitioner's allegation that there was in fact deception made upon her in that the vehicle she purchased was different from that actually delivered to her, this matter cannot be passed upon in the case before us, where the VMS was never impleaded as a party.

Whatever issue is raised or claim presented against VMS must be resolved in the "breach of contract" case.

Hence, we reach a similar opinion as did respondent court when it held:

We can only extend our sympathies to the defendant (herein petitioner) in this unfortunate incident. Indeed, there is nothing We can do as far as the Violago Motor Sales Corporation is concerned since it is not a party in this case. To even discuss the issue as to whether or not the Violago Motor Sales Corporation is liable in the transaction in question would amount, to denial of due process, hence, improper and unconstitutional. She should have impleaded Violago Motor Sales. 14

IN VIEW OF THE FOREGOING, the assailed decision is hereby AFFIRMED. With costs against petitioner.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortés, JJ., concur.

Insurance Case Digest: Verendia v CA G.R. No. 75605 January 22, 1993

G.R. No. 75605 January 22, 1993

Lessons Applicable: Exception to Ambiguous Provisions Interpreted Against Insurer (Insurance)

FACTS:

• Rafael (Rex) Verendia's residential building was insured with Fidelity and Surety Insurance Company, Country Bankers Insurance and Development Insurance with Monte de Piedad & Savings Bank as beneficiary
• December 28, 1980 early morning: the building was completely destroyed by fire
• Fidelity refused the claim stating that there was a misrepresentation since the lessee was not Roberto Garcia but Marcelo Garcia 
• trial court: favored Fidelity
• CA: reversed

ISSUE: W/N there was false declaration which would forfeit his benefits under Section 13 of the policy

HELD: YES.

• Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits under the policy shall be forfeited "If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy"
• Robert Garcia then executed an affidavit before the National Intelligence and Security Authority (NISA) to the effect that he was not the lessee of Verendia's house and that his signature on the contract of lease was a complete forgery.
• Worse yet, by presenting a false lease contract, Verendia, reprehensibly disregarded the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith 

Jurisprudence: G.R. No. 75605

THIRD DIVISION

G.R. No. 75605 January 22, 1993

RAFAEL (REX) VERENDIA, petitioner,
vs.
COURT OF APPEALS and FIDELITY & SURETY CO. OF THE PHILIPPINES, respondents.

G.R. No. 76399 January 22, 1993

FIDELITY & SURETY CO. OF THE PHILIPPINES, INC., petitioner,
vs.
RAFAEL VERENDIA and THE COURT OF APPEALS, respondents.

B.L. Padilla for petitioner.

Sabino Padilla, Jr. for Fidelity & Surety, Co.

MELO, J.:

The two consolidated cases involved herein stemmed from the issuance by Fidelity and Surety Insurance Company of the Philippines (Fidelity for short) of its Fire Insurance Policy No. F-18876 effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex) Verendia's residential building located at Tulip Drive, Beverly Hills, Antipolo, Rizal in the amount of P385,000.00. Designated as beneficiary was the Monte de Piedad & Savings Bank. Verendia also insured the same building with two other companies, namely, The Country Bankers Insurance for P56,000.00 under Policy No. PDB-80-1913 expiring on May 12, 1981, and The Development Insurance for P400,000.00 under Policy No. F-48867 expiring on June 30, 198l.

While the three fire insurance policies were in force, the insured property was completely destroyed by fire on the early morning of December 28, 1980. Fidelity was accordingly informed of the loss and despite demands, refused payment under its policy, thus prompting Verendia to file a complaint with the then Court of First Instance of Quezon City, praying for payment of P385,000.00, legal interest thereon, plus attorney's fees and litigation expenses. The complaint was later amended to include Monte de Piedad as an "unwilling defendant" (P. 16, Record).

Answering the complaint, Fidelity, among other things, averred that the policy was avoided by reason of over-insurance; that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on June 25, 1980 to a certain Roberto Garcia, when actually it was a Marcelo Garcia who was the lessee.

On May 24, 1983, the trial court rendered a decision, per Judge Rodolfo A. Ortiz, ruling in favor of Fidelity. In sustaining the defenses set up by Fidelity, the trial court ruled that Paragraph 3 of the policy was also violated by Verendia in that the insured failed to inform Fidelity of his other insurance coverages with Country Bankers Insurance and Development Insurance.

Verendia appealed to the then Intermediate Appellate Court and in a decision promulgated on March 31, 1986, (CA-G.R. No. CV No. 02895, Coquia, Zosa, Bartolome, and Ejercito (P), JJ.), the appellate court reversed for the following reasons: (a) there was no misrepresentation concerning the lease for the contract was signed by Marcelo Garcia in the name of Roberto Garcia; and (b) Paragraph 3 of the policy contract requiring Verendia to give notice to Fidelity of other contracts of insurance was waived by Fidelity as shown by its conduct in attempting to settle the claim of Verendia (pp. 32-33, Rollo of G.R. No. 76399).

Fidelity received a copy of the appellate court's decision on April 4, 1986, but instead of directly filing a motion for reconsideration within 15 days therefrom, Fidelity filed on April 21, 1986, a motion for extension of 3 days within which to file a motion for reconsideration. The motion for extension was not filed on April 19, 1986 which was the 15th day after receipt of the decision because said 15th day was a Saturday and of course, the following day was a Sunday (p. 14., Rollo of G.R. No. 75605). The motion for extension was granted by the appellate court on April 30, 1986 (p. 15. ibid.), but Fidelity had in the meantime filed its motion for reconsideration on April 24, 1986 (p. 16, ibid.).

Verendia filed a motion to expunge from the record Fidelity's motion for reconsideration on the ground that the motion for extension was filed out of time because the 15th day from receipt of the decision which fell on a Saturday was ignored by Fidelity, for indeed, so Verendia contended, the Intermediate Appellate Court has personnel receiving pleadings even on Saturdays.

The motion to expunge was denied on June 17, 1986 (p. 27, ibid.) and after a motion for reconsideration was similarly brushed aside on July 22, 1986 (p. 30, ibid .), the petition herein docketed as G.R. No. 75605 was initiated. Subsequently, or more specifically on October 21, 1986, the appellate court denied Fidelity's motion for reconsideration and account thereof. Fidelity filed on March 31, 1986, the petition for review on certiorarinow docketed as G.R. No. 76399. The two petitions, inter-related as they are, were consolidated
(p. 54, Rollo of G.R. No. 76399) and thereafter given due course.

Before we can even begin to look into the merits of the main case which is the petition for review oncertiorari, we must first determine whether the decision of the appellate court may still be reviewed, or whether the same is beyond further judicial scrutiny. Stated otherwise, before anything else, inquiry must be made into the issue of whether Fidelity could have legally asked for an extension of the 15-day reglementary period for appealing or for moving for reconsideration.

As early as 1944, this Court through Justice Ozaeta already pronounced the doctrine that the pendency of a motion for extension of time to perfect an appeal does not suspend the running of the period sought to be extended (Garcia vs. Buenaventura 74 Phil. 611 [1944]). To the same effect were the rulings in Gibbs vs. CFI of Manila (80 Phil. 160 [1948]) Bello vs. Fernando (4 SCRA 138 [1962]), and Joe vs. King (20 SCRA 1120 [1967]).

The above cases notwithstanding and because the Rules of Court do not expressly prohibit the filing of a motion for extension of time to file a motion for reconsideration in regard to a final order or judgment, magistrates, including those in the Court of Appeals, held sharply divided opinions on whether the period for appealing which also includes the period for moving to reconsider may be extended. The matter was not definitely settled until this Court issued its Resolution in Habaluyas Enterprises, Inc. vs. Japson (142 SCRA [1986]), declaring that beginning one month from the promulgation of the resolution on May 30, 1986 —

. . . the rule shall be strictly enforced that no motion for extension of time to file a motion for new trial or reconsideration shall be filed . . . (at p. 212.)

In the instant case, the motion for extension was filed and granted before June 30, 1986, although, of course, Verendia's motion to expunge the motion for reconsideration was not finally disposed until July 22, 1986, or after the dictum in Habaluyas had taken effect. Seemingly, therefore, the filing of the motion for extension came before its formal proscription under Habaluyas, for which reason we now turn our attention to G.R. No. 76399.

Reduced to bare essentials, the issues Fidelity raises therein are: (a) whether or not the contract of lease submitted by Verendia to support his claim on the fire insurance policy constitutes a false declaration which would forfeit his benefits under Section 13 of the policy and (b) whether or not, in submitting the subrogation receipt in evidence, Fidelity had in effect agreed to settle Verendia's claim in the amount stated in said receipt.¹

Verging on the factual, the issue of the veracity or falsity of the lease contract could have been better resolved by the appellate court for, in a petition for review on certiorari under Rule 45, the jurisdiction of this Court is limited to the review of errors of law. The appellate court's findings of fact are, therefore, conclusive upon this Court except in the following cases: (1) when the conclusion is a finding grounded entirely on speculation, surmises, or conjectures; (2) when the inference made is manifestly absurd, mistaken, or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the judgment is premised on a misapprehension of facts; (5) when the findings of fact are conflicting; and (6) when the Court of Appeals in making its findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee (Ronquillo v. Court of Appeals, 195 SCRA 433 [1991]). In view of the conflicting findings of the trial court and the appellate court on important issues in these consolidated cases and it appearing that the appellate court judgment is based on a misapprehension of facts, this Court shall review the evidence on record.

The contract of lease upon which Verendia relies to support his claim for insurance benefits, was entered into between him and one Robert Garcia, married to Helen Cawinian, on June 25, 1980 (Exh. "1"), a couple of days after the effectivity of the insurance policy. When the rented residential building was razed to the ground on December 28, 1980, it appears that Robert Garcia (or Roberto Garcia) was still within the premises. However, according to the investigation report prepared by Pat. Eleuterio M. Buenviaje of the Antipolo police, the building appeared to have "no occupant" and that Mr. Roberto Garcia was "renting on the otherside (sic) portion of said compound"
(Exh. "E"). These pieces of evidence belie Verendia's uncorroborated testimony that Marcelo Garcia, whom he considered as the real lessee, was occupying the building when it was burned (TSN, July 27, 1982, p.10).

Robert Garcia disappeared after the fire. It was only on October 9, 1981 that an adjuster was able to locate him. Robert Garcia then executed an affidavit before the National Intelligence and Security Authority (NISA) to the effect that he was not the lessee of Verendia's house and that his signature on the contract of lease was a complete forgery. Thus, on the strength of these facts, the adjuster submitted a report dated December 4, 1981 recommending the denial of Verendia's claim (Exh. "2").

Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed the lease contract. According to Verendia, it was signed by Marcelo Garcia, cousin of Robert, who had been paying the rentals all the while. Verendia, however, failed to explain why Marcelo had to sign his cousin's name when he in fact was paying for the rent and why he (Verendia) himself, the lessor, allowed such a ruse. Fidelity's conclusions on these proven facts appear, therefore, to have sufficient bases; Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee", inflated the value of the property by the alleged monthly rental of P6,500 when in fact, the Provincial Assessor of Rizal had assessed the property's fair market value to be only P40,300.00, insured the same property with two other insurance companies for a total coverage of around P900,000, and created a dead-end for the adjuster by the disappearance of Robert Garcia.

Basically a contract of indemnity, an insurance contract is the law between the parties (Pacific Banking Corporation vs. Court of Appeals 168 SCRA 1 [1988]). Its terms and conditions constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right to recovery from the insurer (Oriental Assurance Corporation vs. Court of Appeals, 200 SCRA 459 [1991], citing Perla Compania de Seguros, Inc. vs. Court of Appeals, 185 SCRA 741 [1991]). As it is also a contract of adhesion, an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it (Western Guaranty Corporation vs. Court of Appeals, 187 SCRA 652 [1980]).

Considering, however, the foregoing discussion pointing to the fact that Verendia used a false lease contract to support his claim under Fire Insurance Policy No. F-18876, the terms of the policy should be strictly construed against the insured. Verendia failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits under the policy shall be forfeited "If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy". Verendia, having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision (Pacific Banking Corporation vs. Court of Appeals, supra). Worse yet, by presenting a false lease contract, Verendia, reprehensibly disregarded the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith (Velasco vs. Apostol, 173 SCRA 228 [1989]).

There is also no reason to conclude that by submitting the subrogation receipt as evidence in court, Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142,685.77. While the said receipt appears to have been a filled-up form of Fidelity, no representative of Fidelity had signed it. It is even incomplete as the blank spaces for a witness and his address are not filled up. More significantly, the same receipt states that Verendia had received the aforesaid amount. However, that Verendia had not received the amount stated therein, is proven by the fact that Verendia himself filed the complaint for the full amount of P385,000.00 stated in the policy. It might be that there had been efforts to settle Verendia's claims, but surely, the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced. Thus, to interpret Fidelity's presentation of the subrogation receipt in evidence as indicative of its accession to its "terms" is not only wanting in rational basis but would be substituting the will of the Court for that of the parties.

WHEREFORE, the petition in G.R. No. 75605 is DISMISSED. The petition in G.R. No. 76399 is GRANTED and the decision of the then Intermediate Appellate Court under review is REVERSED and SET ASIDE and that of the trial court is hereby REINSTATED and UPHELD.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

Footnotes

1 Fidelity appears to have agreed with the appellate court that it had waived Verendia's failure to abide by policy condition No. 3 on disclosure of other insurance policies by its failure to assign it as an error in the petition in G.R. No. 76399. It must have likewise realized the futility of assigning it as an error because on the first page of the policy the following is typewritten: "Other insurances allowed, the amounts to be declared in the event of loss or when required."

Torts and Damages Case Digest: US v. Pineda (1918)

G.R. No. L-12858            January 22, 1918

Lessons Applicable: Experts and Professionals (Torts and Damages)

FACTS:

• Feliciano Santos, having some sick horses, presented a copy of a prescription obtained from Dr. Richardson, and which on other occasions Santos had given to his horses with good results, at Pineda's drug store for filling. (Santiago Pineda, the defendant, is a registered pharmacist)
• Under the supervision of Pineda, the prescription was prepared and returned to Santos in the form of 6 papers marked Botica Pineda
• Santos, under the belief that he had purchased the potassium chlorate which he had asked for, put two of the packages in water the doses to two of his sick horses. 
• Another package was mixed with water for another horse, but was not used. The two horses, to which had been given the preparation, died shortly afterwards. 
• Santos, thereupon, took the three remaining packages to the Bureau of Science for examination. Drs. Peña and Darjuan, of the Bureau of Science, on analysis found that the packages contained not potassium chlorate but barium chlorate. 
• At the instance of Santos, the two chemists also went to the drug store of the defendant and bought potassium chlorate, which when analyzed was found to be barium chlorate. (Barium chlorate, it should be noted, is a poison; potassium chlorate is not.) 
• Dr. Buencamino, a veterinarian, performed an autopsy on the horses, and found that death was the result of poisoning
• RTC: held Pineda liable

ISSUE: W/N Pineda should be liable for negligence

HELD: YES. The judgment of the lower court, sentencing the defendant to pay a fine of P100, with subsidiary imprisonment in case of insolvency, and to pay the costs, is affirmed with the cost of this instance against the appellant, without prejudice to any civil action which may be instituted

• Every pharmacist shall be responsible for the quality of all drugs, chemicals, medicines, and poisons he may sell or keep for sale; and it shall be unlawful for any person whomsoever to manufacture, prepare, sell, or administer any prescription, drug, chemical, medicine, or poison under any fraudulent name, direction, or pretense, or to adulterate any drug, chemical, medicine, or poison so used, sold or offered for sale. Any drug, chemical, medicine, or poison shall be held to be adulterated or deteriorated within the meaning of this section if it differs from the standard of quality or purity given in the United States Pharmacopoeia.
• The same section of the Pharmacy Law also contains the following penal provision: "Any person violating the provisions of this Act shall, upon conviction, be punished by a fine of not more than five hundred dollar." The Administrative Code, section 2676, changes the penalty somewhat by providing that: Any person engaging in the practice of pharmacy in the Philippine Islands contrary to any provision of the Pharmacy Law or violating any provisions of said law for which no specific penalty s provided shall, for each offense, be punished by a fine not to exceed two hundred pesos, or by imprisonment for not more than ninety days, or both, in the discretion of the court.
• As a pharmacist, he is made responsible for the quality of all drugs and poisons which he sells. And finally it is provided that it shall be unlawful for him to sell any drug or poison under any "fraudulent name." It is the one word "fraudulent" which has given the court trouble. What did the Legislature intend to convey by this restrictive adjective?
• Were we to adhere to the technical definition of fraud, which the appellant vigorously insists upon, it would be difficult, if not impossible, to convict any druggist of a violation of the law. The prosecution would have to prove to a reasonable degree of certainty that the druggist made a material representation; that it was false; that when he made it he knew that it was false or made it recklessly without any knowledge of its truth and as positive assertion; that he made it with the intention that it should be acted upon by the purchaser; that the purchaser acted in reliance upon it, and that the purchased thereby suffered injury.
• Under one conception, and it should not be forgotten that the case we consider are civil in nature, the question of negligence or ignorance is irrelevant. The druggist is responsible as an absolute guarantor of what he sells.  Instead of caveat emptor, it should be caveat venditor. 

Negotiable Instruments Case Digest: Salas v. CA (1990)

G.R. No. 76788 January 22,1990

Lessons Applicable: Introduction to Negotiable Instruments (Negotiable Instruments Law)

FACTS:

• February 6, 1980: Juanita Salas bought a motor vehicle from the Violago Motor Sales Corp. (VMS) for P58,138.20 as evidence by a promissory note
• This note was subsequently endorsed to Filinvest Finance &Leasing Corp. (FFLC) 
• May 21, 1980: Salas defaulted in her installments allegedly due to discrepancies in the engine and chassis number of the vehicle delivered and discovery of certificate of reg. and deed of mortgage
• VMS initiated for a sum of money at the RTC
• RTC: favored VMS
• CA: Affirmed

ISSUE: W/N the promissory note is a negotiable which will bar completely all defenses of Salas against VMS

HELD:  YES. Affirmed

• Requisites under the law (Sec. 1 of Negotiable Instruments Law)
1. it is in writing and signed by the maker (Salas)
2. it contains an unconditional promise to pay the amount P58,138.20
3. it is payable at a fixed or determinable future time which is P1,614.95 monthly for 36 months due and payable on the 21st day of each month starting March 21, 1980 thru and inclusive of Feb 21 1983
4. It is payable to VMS or order and as such
5. drawee is named or indicated with certainty
• Filinvest = holder in due course