Jurisprudence: G.R. No. 157833 October 15, 2007

FIRST DIVISION

BANK OF THE PHILIPPINE ISLANDS v. GREGORIO C. ROXAS,

 G.R. No. 157833  October 15, 2007

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DECISION





SANDOVAL-GUTIERREZ, J.:




For our resolution is the instant Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals (Fourth Division) dated February 13, 2003 in CA-G.R. CV No. 67980.

The facts of the case, as found by the trial court and affirmed by the Court of Appeals, are:

Gregorio C. Roxas, respondent, is a trader.  Sometime in March 1993, he delivered stocks of vegetable oil to spouses Rodrigo and Marissa Cawili. As payment therefor, spouses Cawili issued a personal check in the amount of P348,805.50.   However, when respondent tried to encash the check, it was dishonored by the drawee bank.   Spouses Cawili then assured him that they would replace the bounced check with a cashier’s check from the Bank of the Philippine Islands (BPI), petitioner.

On March 31, 1993, respondent and Rodrigo Cawili went to petitioner’s branch at Shaw Boulevard, Mandaluyong City where Elma Capistrano, the branch manager, personally attended to them.  Upon Elma’s instructions, Lita Sagun, the bank teller, prepared BPI Cashier’s Check No. 14428 in the amount of P348,805.50, drawn against the account of Marissa Cawili, payable to respondent.  Rodrigo then handed the check to respondent in the presence of Elma.

The following day, April 1, 1993, respondent returned to petitioner’s branch at Shaw Boulevard to encash the cashier’s check but it was dishonored.   Elma informed him that Marissa’s account was closed on that date.

Despite respondent’s insistence, the bank officers refused to encash the check and tried to retrieve it from respondent.   He then called his lawyer who advised him to deposit the check in his (respondent’s) account at Citytrust, Ortigas Avenue.   However, the check was dishonored on the ground “Account Closed.”

On September 23, 1993, respondent filed with the Regional Trial Court, Branch 263, Pasig City a complaint for sum of money against petitioner, docketed as Civil Case No. 63663.   Respondent prayed that petitioner be ordered to pay the amount of the check, damages and cost of the suit.

In its answer, petitioner specifically denied the allegations in the complaint, claiming that it issued the check by mistake in good faith; that its dishonor was due to lack of consideration; and that respondent’s remedy was to sue Rodrigo Cawili who purchased the check.  As a counterclaim, petitioner prayed that respondent be ordered to pay attorney’s fees and expenses of litigation. 

Petitioner filed a third-party complaint against spouses Cawili.  They were later declared in default for their failure to file their answer.

After trial, the RTC rendered a Decision, the dispositive portion of which reads:

         WHEREFORE, in view of the foregoing premises, this Court hereby renders judgment in favor of herein plaintiff and orders the defendant, Bank of the Philippine Islands, to pay Gerardo C. Roxas:



1)      The sum of P348,805.50, the face value of the cashier’s check, with legal interest thereon computed from April 1, 1993 until the amount is fully paid;

2)      The sum of P50,000.00 for moral damages;

3)      The sum of P50,000.00 as exemplary damages to serve as an example for the public good;

4)      The sum of P25,000.00 for and as attorney’s fees; and the

5)      Costs of suit.

As to the third-party complaint, third-party defendants Spouses Rodrigo and Marissa Cawili are hereby ordered to indemnify defendant Bank of the Philippine Islands such amount(s) adjudged and actually paid by it to herein plaintiff Gregorio C. Roxas, including the costs of suit.



SO ORDERED.





On appeal, the Court of Appeals, in its Decision, affirmed the trial court’s judgment.

Hence, this petition.

Petitioner ascribes to the Court of Appeals the following errors: (1) in finding that respondent is a holder in due course; and (2) in holding that it (petitioner) is liable to respondent for the amount of the cashier’s check.  

Section 52 of the Negotiable Instruments Law provides:

SEC. 52. What constitutes a holder in due course. – A holder in due course is a holder who has taken the instrument under the following conditions:

(a)    That it is complete and regular upon its face;

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

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

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

        

          As a general rule, under the above provision, every holder is presumed prima facie to be a holder in due course.  One who claims otherwise has the onus probandi to prove that one or more of the conditions required to constitute a holder in due course are lacking.   In this case, petitioner contends that the element of “value” is not present, therefore, respondent could not be a holder in due course.

          Petitioner’s contention lacks merit.  Section 25 of the same law  states:

         SEC. 25. Value, what constitutes. – Value is any consideration sufficient to support a simple contract.  An antecedent or pre-existing debt constitutes value; and is deemed as such whether the instrument is payable on demand or at a future time.











          In Walker Rubber Corp. v. Nederlandsch Indische & Handelsbank, N.V. and South Sea Surety & Insurance Co., Inc.,[2] this Court ruled that value “in general terms may be some right, interest, profit or benefit to the party who makes the contract or some forbearance, detriment, loan, responsibility, etc. on the other side.”   Here, there is no dispute that respondent received Rodrigo Cawili’s cashier’s check as payment for the former’s vegetable oil.   The fact that it was Rodrigo who purchased the cashier’s check from petitioner will not affect respondent’s status as a holder for value since the check was delivered to him as payment for the vegetable oil he sold to spouses Cawili.  Verily, the Court of Appeals did not err in concluding that respondent is a holder in due course of the cashier’s check.

          Furthermore, it bears emphasis that the disputed check is a cashier’s check.   In International Corporate Bank v. Spouses Gueco,[3] this Court held that a cashier’s check is really the bank’s own check and may be treated as a promissory note with the bank as the maker.   The check becomes the primary obligation of the bank which issues it and constitutes a written promise to pay upon demand.    In New Pacific Timber & Supply Co. Inc. v. Señeris,[4] this Court took judicial notice of the “well-known and accepted practice in the business sector that a cashier’s check is deemed as cash.”   This is because the mere issuance of a cashier’s check is considered acceptance thereof.

In view of the above pronouncements, petitioner bank became liable to respondent from the moment it issued the cashier’s check.   Having been accepted by respondent, subject to no condition whatsoever, petitioner should have paid the same upon presentment by the former.

          WHEREFORE, the petition is DENIED.   The assailed Decision of the Court of Appeals (Fourth Division) in CA-G.R. CV No. 67980 is AFFIRMED.    Costs against petitioner.

          SO ORDERED.

Jurisprudence: G.R. No. L-26767 February 22, 1968

EN BANC

G.R. No. L-26767             February 22, 1968

ANG TIONG, plaintiff-appellee,
vs.
LORENZO TING, doing business under the name and style of PRUNES PRESERVED MFG., and FELIPE ANG, defendants.
FELIPE ANG, defendant-appellant.

Chipeco & Alcaraz, Jr. for plaintiff-appellee.
Ang, Atienza & Tabora for defendant-appellant.

CASTRO, J.:

          On August 15, 1960 Lorenzo Ting issued Philippine Bank of Communications check K-81618, for the sum of P4,000, payable to "cash or bearer". With Felipe Ang's signature (indorsement in blank) at the back thereof, the instrument was received by the plaintiff Ang Tiong who thereafter presented it to the drawee bank for payment. The bank dishonored it. The plaintiff then made written demands on both Lorenzo Ting and Felipe Ang that they make good the amount represented by the check. These demands went unheeded; so he filed in the municipal court of Manila an action for collection of the sum of P4,000, plus P500 attorney's fees. On March 6, 1962 the municipal court adjudged for the plaintiff against the two defendants.

          Only Felipe Ang appealed to the Court of First Instance of Manila (civil case 50018), which rendered judgment on July 31, 1962, amended by an order dated August 9, 1962, directing him to pay to the plaintiff "the sum of P4,000, with interest at the legal rate from the date of the filing of the complaint, a further sum of P400 as attorney's fees, and costs."

          Felipe Ang then elevated the case to the Court of Appeals, which certified it to this Court because the issues raised are purely of law.

          The appellant imputes to the court a quo three errors, namely, (1) that it refused to apply article 2071 of the new Civil Code to the case at bar; (2) that it adjudged him a general indorser under the Negotiable Instruments Law (Act 2031); and (3) that it held that he "cannot obtain his release from the contract of suretyship or obtain security to protect himself against any proceedings on the part of the creditor and against the danger of insolvency of the principal debtor," because he is "jointly and severally liable on the instrument."

          This, appeal is absolutely without merit.

          1. The genuineness and due execution of the instrument are not controverted. That the appellee is a holder thereof for value is admitted.

          Having arisen from a bank check which is indisputably a negotiable instrument, the present case is, therefore, in so far as the indorsee is concerned vis-a-vis the indorser, governed solely plaintiff the Negotiable Instruments Law (see secs. 1 and 185). Article 2071 of the new Civil Code, invoked by the appellant, the pertinent portion of which states, "The guarantor, even before been paid, may proceed against the principal debtor; (1) when he is sued for the payment; . . . the action of the guarantor is to obtain release from the guaranty, to demand a security that shall protect him from any proceedings by the creditor . . .," is here completely irrelevant and can have no application whatsoever.

          We are in agreement with the trial judge that nothing in the check in question indicates that the appellant is not a general indorser within the purview of section 63 of the Negotiable Instruments Law which makes "a person placing his signature upon an instrument otherwise than as maker, drawer or acceptor" a general indorser, — "unless he clearly indicates plaintiff appropriate words his intention to be bound in some other capacity," which he did not do. And section 66 ordains that "every indorser who indorses without qualification, warrants to all subsequent holders in due course" (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it; (c) that all prior parties have capacity to contract; and (d) that the instrument is at the time of his indorsement valid and subsisting. In addition, "he engages that on due presentment, it shall be accepted or paid, or both, as the case may be, and that if it be dishonored, he will pay the amount thereof to the holder." 1

          2. Even on the assumption that the appellant is a mere accommodation party, as he professes to be, he is nevertheless, by the clear mandate of section 29 of the Negotiable Instruments Law, yet "liable on the instrument to a holder for value, notwithstanding that such holder at the time of taking the instrument knew him to be only an accommodation party." To paraphrase, the accommodation party is liable to a holder for value as if the contract was not for accommodation. It is not a valid defense that the accommodation party did not receive any valuable consideration when he executed the instrument. Nor is it correct to say that the holder for value is not a holder in due course merely because at the time he acquired the instrument, he knew that the indorser was only an accommodation party. 2

          3. That the appellant, again assuming him to be an accommodation indorser, may obtain security from the maker to protect himself against the danger of insolvency of the latter, cannot in any manner affect his liability to the appellee, as the said remedy is a matter of concern exclusively between accommodation indorser and accommodated party. So that the fact that the appellant stands only as a surety in relation to the maker, granting this to be true for the sake of argument, is immaterial to the claim of the appellee, and does not a whit diminish nor defeat the rights of the latter who is a holder for value. The liability of the appellant remains primary and unconditional. To sanction the appellant's theory is to give unwarranted legal recognition to the patent absurdity of a situation where an indorser, when sued on an instrument by a holder in due course and for value, can escape liability on his indorsement by the convenient expedient of interposing the defense that he is a mere accomodation indorser.

          ACCORDINGLY, the judgment a quo is affirmed in toto, at appellant's cost.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Angeles and Fernando, JJ., concur.

Jurisprudence: G.R. No. L-56169 June 26, 1992

THIRD DIVISION

G.R. No. L-56169 June 26, 1992

TRAVEL-ON, INC., petitioner,
vs.
COURT OF APPEALS and ARTURO S. MIRANDA, respondents.

R E S O L U T I O N

 FELICIANO, J.:

Petitioner Travel-On. Inc. ("Travel-On") is a travel agency selling airline tickets on commission basis for and in behalf of different airline companies. Private respondent Arturo S. Miranda had a revolving credit line with petitioner. He procured tickets from petitioner on behalf of airline passengers and derived commissions therefrom.

On 14 June 1972, Travel-On filed suit before the Court of First Instance ("CFI") of Manila to collect on six (6) checks issued by private respondent with a total face amount of P115,000.00. The complaint, with a prayer for the issuance of a writ of preliminary attachment and attorney's fees, averred that from 5 August 1969 to 16 January 1970, petitioner sold and delivered various airline tickets to respondent at a total price of P278,201.57; that to settle said account, private respondent paid various amounts in cash and in kind, and thereafter issued six (6) postdated checks amounting to P115,000.00 which were all dishonored by the drawee banks. Travel-On further alleged that in March 1972, private respondent made another payment of P10,000.00 reducing his indebtedness to P105,000.00. The writ of attachment was granted by the court a quo.

In his answer, private respondent admitted having had transactions with Travel-On during the period stipulated in the complaint. Private respondent, however, claimed that he had already fully paid and even overpaid his obligations and that refunds were in fact due to him. He argued that he had issued the postdated checks for purposes of accommodation, as he had in the past accorded similar favors to petitioner. During the proceedings, private respondent contested several tickets alleged to have been erroneously debited to his account. He claimed reimbursement of his alleged over payments, plus litigation expenses, and exemplary and moral damages by reason of the allegedly improper attachment of his properties.

In support of his theory that the checks were issued for accommodation, private respondent testified that he bad issued the checks in the name of Travel-On in order that its General Manager, Elita Montilla, could show to Travel-On's Board of Directors that the accounts receivable of the company were still good. He further stated that Elita Montilla tried to encash the same, but that these were dishonored and were subsequently returned to him after the accommodation purpose had been attained.

Travel-On's witness, Elita Montilla, on the other hand explained that the "accommodation" extended to Travel-On by private respondent related to situations where one or more of its passengers needed money in Hongkong, and upon request of Travel-On respondent would contact his friends in Hongkong to advance Hongkong money to the passenger. The passenger then paid Travel-On upon his return to Manila and which payment would be credited by Travel-On to respondent's running account with it.

In its decision dated 31 January 1975, the court a quo ordered Travel-On to pay private respondent the amount of P8,894.91 representing net overpayments by private respondent, moral damages of P10,000.00 for the wrongful issuance of the writ of attachment and for the filing of this case, P5,000.00 for attorney's fees and the costs of the suit.

The trial court ruled that private respondent's indebtedness to petitioner was not satisfactorily established and that the postdated checks were issued not for the purpose of encashment to pay his indebtedness but to accommodate the General Manager of Travel-On to enable her to show to the Board of Directors that Travel-On was financially stable.

Petitioner filed a motion for reconsideration that was, however, denied by the trial court, which in fact then increased the award of moral damages to P50,000.00.

On appeal, the Court of Appeals affirmed the decision of the trial court, but reduced the award of moral damages to P20,000.00, with interest at the legal rate from the date of the filing of the Answer on 28 August 1972.

Petitioner moved for reconsideration of the Court of Appeal's' decision, without success.

In the instant Petition for Review, it is urged that the postdated checks are per se evidence of liability on the part of private respondent. Petitioner further argues that even assuming that the checks were for accommodation, private respondent is still liable thereunder considering that petitioner is a holder for value.

Both the trial and appellate courts had rejected the checks as evidence of indebtedness on the ground that the various statements of account prepared by petitioner did not show that Private respondent had an outstanding balance of P115,000.00 which is the total amount of the checks he issued. It was pointed out that while the various exhibits of petitioner showed various accountabilities of private respondent, they did not satisfactorily establish the amount of the outstanding indebtedness of private respondent. The appellate court made much of the fact that the figures representing private respondent's unpaid accounts found in the "Schedule of Outstanding Account" dated 31 January 1970 did not tally with the figures found in the statement which showed private respondent's transactions with petitioner for the years 1969 and 1970; that there was no satisfactory explanation as to why the total outstanding amount of P278,432.74 was still used as basis in the accounting of 7 April 1972 considering that according to the table of transactions for the year 1969 and 1970, the total unpaid account of private respondent amounted to P239,794.57.

We have, however, examined the record and it shows that the 7 April 1972 Statement of Account had simply not been updated; that if we use as basis the figure as of 31 January 1970 which is P278,432.74 and from it deduct P38,638.17 which represents some of the payments subsequently made by private respondent, the figure — P239,794.57 will be obtained.

Also, the fact alone that the various statements of account had variances in figures, simply did not mean that private respondent had no more financial obligations to petitioner. It must be stressed that private respondent's account with petitioner was a running or open one, which explains the varying figures in each of the statements rendered as of a given date.

The appellate court erred in considering only the statements of account in determining whether private respondent was indebted to petitioner under the checks. By doing so, it failed to give due importance to the most telling piece of evidence of private respondent's indebtedness — the checks themselves which he had issued.

Contrary to the view held by the Court of Appeals, this Court finds that the checks are the all important evidence of petitioner's case; that these checks clearly established private respondent's indebtedness to petitioner; that private respondent was liable thereunder.

It is important to stress that a check which is regular on its face is deemed prima facie to have been issued for a valuable consideration and every person whose signature appears thereon is deemed to have become a party thereto for value. 1 Thus, the mere introduction of the instrument sued on in evidence prima facie entitles the plaintiff to recovery. Further, the rule is quite settled that a negotiable instrument is presumed to have been given or indorsed for a sufficient consideration unless otherwise contradicted and overcome by other competent evidence. 2

In the case at bar, the Court of Appeals, contrary to these established rules, placed the burden of proving the existence of valuable consideration upon petitioner. This cannot be countenanced; it was up to private respondent to show that he had indeed issued the checks without sufficient consideration. The Court considers that Private respondent was unable to rebut satisfactorily this legal presumption. It must also be noted that those checks were issued immediately after a letter demanding payment had been sent to private respondent by petitioner Travel-On.

The fact that all the checks issued by private respondent to petitioner were presented for payment by the latter would lead to no other conclusion than that these checks were intended for encashment. There is nothing in the checks themselves (or in any other document for that matter) that states otherwise.

We are unable to accept the Court of Appeals' conclusion that the checks here involved were issued for "accommodation" and that accordingly private respondent maker of those checks was not liable thereon to petitioner payee of those checks.

In the first place, while the Negotiable Instruments Law does refer to accommodation transactions, no such transaction was here shown. Section 29 of the Negotiable Instruments Law provides as follows:

Sec. 29. Liability of accommodation party. — An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party.

In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating party lends his credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a holder in due course, who gave full value therefor to the accommodated party. The latter, in other words, receives or realizes full value which the accommodated party then must repay to the accommodating party, unless of course the accommodating party intended to make a donation to the accommodated party. But the accommodating party is bound on the check to the holder in due course who is necessarily a third party and is not the accommodated party. Having issued or indorsed the check, the accommodating party has warranted to the holder in due course that he will pay the same according to its tenor. 3

In the case at bar, Travel-On was payee of all six (6) checks, it presented these checks for payment at the drawee bank but the checks bounced. Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced.

Travel-On was entitled to the benefit of the statutory presumption that it was a holder in due course, 4 that the checks were supported by valuable consideration. 5 Private respondent maker of the checks did not successfully rebut these presumptions. The only evidence aliunde that private respondent offered was his own self-serving uncorroborated testimony. He claimed that he had issued the checks to Travel-On as payee to "accommodate" its General Manager who allegedly wished to show those checks to the Board of Directors of Travel-On to "prove" that Travel-On's account receivables were somehow "still good." It will be seen that this claim was in fact a claim that the checks were merely simulated, that private respondent did not intend to bind himself thereon. Only evidence of the clearest and most convincing kind will suffice for that purpose; 6 no such evidence was submitted by private respondent. The latter's explanation was denied by Travel-On's General Manager; that explanation, in any case, appears merely contrived and quite hollow to us. Upon the other hand, the "accommodation" or assistance extended to Travel-On's passengers abroad as testified by petitioner's General Manager involved, not the accommodation transactions recognized by the NIL, but rather the circumvention of then existing foreign exchange regulations by passengers booked by Travel-On, which incidentally involved receipt of full consideration by private respondent.

Thus, we believe and so hold that private respondent must be held liable on the six (6) checks here involved. Those checks in themselves constituted evidence of indebtedness of private respondent, evidence not successfully overturned or rebutted by private respondent.

Since the checks constitute the best evidence of private respondent's liability to petitioner Travel-On, the amount of such liability is the face amount of the checks, reduced only by the P10,000.00 which Travel-On admitted in its complaint to have been paid by private respondent sometime in March 1992.

The award of moral damages to Private respondent must be set aside, for the reason that Petitioner's application for the writ of attachment rested on sufficient basis and no bad faith was shown on the part of Travel-On. If anyone was in bad faith, it was private respondent who issued bad checks and then pretended to have "accommodated" petitioner's General Manager by assisting her in a supposed scheme to deceive petitioner's Board of Directors and to misrepresent Travel-On's financial condition.

ACCORDINGLY, the Court Resolved to GRANT due course to the Petition for Review on Certiorari and to REVERSE and SET ASIDE the Decision dated 22 October 1980 and the Resolution of 23 January 1981 of the Court of Appeals, as well as the Decision dated 31 January 1975 of the trial court, and to enter a new decision requiring private respondent Arturo S. Miranda to pay to petitioner Travel-On the amount of P105,000.00 with legal interest thereon from 14 June 1972, plus ten percent (10%) of the total amount due as attorney's fees. Costs against Private respondent.

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

Negotiable Instruments Case Digest: Ang Tiong v. Ting (1968)

G.R. No. L-26767             February 22, 1968

Lessons Applicable: General Indorser (Negotiable Instrurments)

Laws Applicable: Section 63 of the Negotiable Instruments Law

FACTS:

• August 15, 1960: Lorenzo Ting issued Philippine Bank of Communications check K-81618, w/ sum of P4,000, payable to "cash or bearer"
• With Felipe Ang's signature (indorsement in blank) at the back thereof, the instrument was received by the Ang Tiong who presented it to the drawee bank for payment but it was dishonored
• Ting made a written demand to both Ting and Ang to no avail
• March 6, 1962: Municipal Court of Manila favored Tiong against Ting and Ang
•  CA: ordered Ang to pay with interest
• Ang contends that he is an accomodating indorser

ISSUE: W/N Ang is an accomodating indorser and not a general indorser a

HELD: NO. Affirmed

• Section 63 of the Negotiable Instruments Law: a person placing his signature upon an instrument otherwise than as maker, drawer or acceptor = a general indorser, — unless he clearly indicates plaintiff appropriate words his intention to be bound in some other capacity
• warrants: 
• (a) that the instrument is genuine and in all respects what it purports to be; 
• (b) that he has a good title to it; 
• (c) that all prior parties have capacity to contract; and 
• (d) that the instrument is at the time of his indorsement valid and subsisting
• Even on the assumption that the appellant is a mere accommodation party, as he professes to be, he is by the clear mandate of section 29 of the Negotiable Instruments Law, "liable on the instrument to a holder for value, notwithstanding that such holder at the time of taking the instrument knew him to be only an accommodation party." 
• It is not a valid defense that the accommodation party did not receive any valuable consideration when he executed the instrument.
• Nor is it correct to say that the holder for value is not a holder in due course merely because at the time he acquired the instrument, he knew that the indorser was only an accommodation party. 
• assuming him to be an accommodation indorser, may obtain security from the maker to protect himself against the danger of insolvency of the latter, cannot in any manner affect his liability to the Tiong, as the said remedy is a matter of concern exclusively between accommodation indorser and accommodated party. 
• The liability of the appellant remains primary and unconditional.