A.

Bonifacio Street
WESTERN LEYTE COLLEGE 6541 Ormoc City, Leyte
School of Law | Mercantile Law

Republic of the Philippines part of its sales receipts. The following day it deposited
SUPREME COURT the same with the Bank of America, and one day
Manila thereafter the latter cleared it with the Bureau of Posts and
received from the latter its face value of P200.00.
EN BANC
On September 27, 1961, appellee Mauricio A. Soriano,
G.R. No. L-22405 June 30, 1971 Chief of the Money Order Division of the Manila Post
Office, acting for and in behalf of his co-appellee,
PHILIPPINE EDUCATION CO., INC., plaintiff- Postmaster Enrico Palomar, notified the Bank of America
appellant, that money order No. 124688 attached to his letter had
vs. been found to have been irregularly issued and that, in
MAURICIO A. SORIANO, ET AL., defendant- view thereof, the amount it represented had been deducted
appellees. from the bank's clearing account. For its part, on August
2 of the same year, the Bank of America debited
Marcial Esposo for plaintiff-appellant. appellant's account with the same amount and gave it
advice thereof by means of a debit memo.
Office of the Solicitor General Arturo A. Alafriz,
Assistant Solicitor General Antonio G. Ibarra and On October 12, 1961 appellant requested the Postmaster
Attorney Concepcion Torrijos-Agapinan for General to reconsider the action taken by his office
defendants-appellees. deducting the sum of P200.00 from the clearing account
of the Bank of America, but his request was denied. So
was appellant's subsequent request that the matter be
DIZON, J.: referred to the Secretary of Justice for advice. Thereafter,
appellant elevated the matter to the Secretary of Public
An appeal from a decision of the Court of First Instance Works and Communications, but the latter sustained the
of Manila dismissing the complaint filed by the Philippine actions taken by the postal officers.
Education Co., Inc. against Mauricio A. Soriano, Enrico
Palomar and Rafael Contreras. In connection with the events set forth above, Montinola
was charged with theft in the Court of First Instance of
On April 18, 1958 Enrique Montinola sought to purchase Manila (Criminal Case No. 43866) but after trial he was
from the Manila Post Office ten (10) money orders of acquitted on the ground of reasonable doubt.
P200.00 each payable to E.P. Montinola withaddress at
Lucena, Quezon. After the postal teller had made out On January 8, 1962 appellant filed an action against
money ordersnumbered 124685, 124687-124695, appellees in the Municipal Court of Manila praying for
Montinola offered to pay for them with a private checks judgment as follows:
were not generally accepted in payment of money orders,
the teller advised him to see the Chief of the Money Order WHEREFORE, plaintiff prays that after hearing
Division, but instead of doing so, Montinola managed to defendants be ordered:
leave building with his own check and the ten(10) money
orders without the knowledge of the teller. (a) To countermand the notice given to the Bank of
America on September 27, 1961, deducting from the said
On the same date, April 18, 1958, upon discovery of the Bank's clearing account the sum of P200.00 represented
disappearance of the unpaid money orders, an urgent by postal money order No. 124688, or in the alternative
message was sent to all postmasters, and the following indemnify the plaintiff in the same amount with interest
day notice was likewise served upon all banks, instructing at 8-½% per annum from September 27, 1961, which is
them not to pay anyone of the money orders aforesaid if the rate of interest being paid by plaintiff on its overdraft
presented for payment. The Bank of America received a account;
copy of said notice three days later.
(b) To pay to the plaintiff out of their own personal
On April 23, 1958 one of the above-mentioned money funds, jointly and severally, actual and moral damages in
orders numbered 124688 was received by appellant as the amount of P1,000.00 or in such amount as will be

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School of Law | Mercantile Law

proved and/or determined by this Honorable Court: and operating a postal money order system, the
exemplary damages in the amount of P1,000.00, government is not engaging in commercial transactions
attorney's fees of P1,000.00, and the costs of action. but merely exercises a governmental power for the public
benefit.
Plaintiff also prays for such other and further relief as may
be deemed just and equitable. It is to be noted in this connection that some of the
restrictions imposed upon money orders by postal laws
On November 17, 1962, after the parties had submitted and regulations are inconsistent with the character of
the stipulation of facts reproduced at pages 12 to 15 of the negotiable instruments. For instance, such laws and
Record on Appeal, the above-named court rendered regulations usually provide for not more than one
judgment as follows: endorsement; payment of money orders may be withheld
under a variety of circumstances (49 C.J. 1153).
WHEREFORE, judgment is hereby rendered, ordering
the defendants to countermand the notice given to the Of particular application to the postal money order in
Bank of America on September 27, 1961, deducting from question are the conditions laid down in the letter of the
said Bank's clearing account the sum of P200.00 Director of Posts of October 26, 1948 (Exhibit 3) to the
representing the amount of postal money order No. Bank of America for the redemption of postal money
124688, or in the alternative, to indemnify the plaintiff in orders received by it from its depositors. Among others,
the said sum of P200.00 with interest thereon at the rate the condition is imposed that "in cases of adverse claim,
of 8-½% per annum from September 27, 1961 until fully the money order or money orders involved will be
paid; without any pronouncement as to cost and attorney's returned to you (the bank) and the, corresponding amount
fees. will have to be refunded to the Postmaster, Manila, who
reserves the right to deduct the value thereof from any
The case was appealed to the Court of First Instance of amount due you if such step is deemed necessary." The
Manila where, after the parties had resubmitted the same conditions thus imposed in order to enable the bank to
stipulation of facts, the appealed decision dismissing the continue enjoying the facilities theretofore enjoyed by its
complaint, with costs, was rendered. depositors, were accepted by the Bank of America. The
latter is therefore bound by them. That it is so is clearly
The first, second and fifth assignments of error discussed referred from the fact that, upon receiving advice that the
in appellant's brief are related to the other and will amount represented by the money order in question had
therefore be discussed jointly. They raise this main issue: been deducted from its clearing account with the Manila
that the postal money order in question is a negotiable Post Office, it did not file any protest against such action.
instrument; that its nature as such is not in anyway
affected by the letter dated October 26, 1948 signed by Moreover, not being a party to the understanding existing
the Director of Posts and addressed to all banks with a between the postal officers, on the one hand, and the Bank
clearing account with the Post Office, and that money of America, on the other, appellant has no right to assail
orders, once issued, create a contractual relationship of the terms and conditions thereof on the ground that the
debtor and creditor, respectively, between the letter setting forth the terms and conditions aforesaid is
government, on the one hand, and the remitters payees or void because it was not issued by a Department Head in
endorses, on the other. accordance with Sec. 79 (B) of the Revised
Administrative Code. In reality, however, said legal
It is not disputed that our postal statutes were patterned provision does not apply to the letter in question because
after statutes in force in the United States. For this reason, it does not provide for a department regulation but merely
ours are generally construed in accordance with the sets down certain conditions upon the privilege granted to
construction given in the United States to their own postal the Bank of Amrica to accept and pay postal money orders
statutes, in the absence of any special reason justifying a presented for payment at the Manila Post Office. Such
departure from this policy or practice. The weight of being the case, it is clear that the Director of Posts had
authority in the United States is that postal money orders ample authority to issue it pursuant to Sec. 1190 of the
are not negotiable instruments (Bolognesi vs. U.S. 189 Revised Administrative Code.
Fed. 395; U.S. vs. Stock Drawers National Bank, 30 Fed.
912), the reason behind this rule being that, in establishing

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WESTERN LEYTE COLLEGE 6541 Ormoc City, Leyte
School of Law | Mercantile Law

In view of the foregoing, We do not find it necessary to Pesos (P50,000.00) each, one dated 30 August 1979 and
resolve the issues raised in the third and fourth the other, 30 September 1979. Thereafter, the payee
assignments of error. negotiated the checks to petitioner State Investment
House. Inc. (STATE).
WHEREFORE, the appealed decision being in
accordance with law, the same is hereby affirmed with MOULIC failed to sell the pieces of jewelry, so she
costs. returned them to the payee before maturity of the checks.
The checks, however, could no longer be retrieved as they
had already been negotiated. Consequently, before their
maturity dates, MOULIC withdrew her funds from the
drawee bank.

Upon presentment for payment, the checks were

dishonored for insufficiency of funds. On 20 December
1979, STATE allegedly notified MOULIC of the
dishonor of the checks and requested that it be paid in cash
instead, although MOULIC avers that no such notice was
given her.
Republic of the Philippines
SUPREME COURT On 6 October 1983, STATE sued to recover the value of
Manila the checks plus attorney's fees and expenses of litigation.

FIRST DIVISION In her Answer, MOULIC contends that she incurred no

obligation on the checks because the jewelry was never
sold and the checks were negotiated without her
knowledge and consent. She also instituted a Third-Party
G.R. No. 101163 January 11, 1993 Complaint against Corazon Victoriano, who later
assumed full responsibility for the checks.
STATE INVESTMENT HOUSE, INC., petitioner,
vs. On 26 May 1988, the trial court dismissed the Complaint
COURT OF APPEALS and NORA B. MOULIC, as well as the Third-Party Complaint, and ordered STATE
respondents. to pay MOULIC P3,000.00 for attorney's fees.

Escober, Alon & Associates for petitioner. STATE elevated the order of dismissal to the Court of
Appeals, but the appellate court affirmed the trial court on
Martin D. Pantaleon for private respondents. the ground that the Notice of Dishonor to MOULIC was
made beyond the period prescribed by the Negotiable
Instruments Law and that even if STATE did serve such
BELLOSILLO, J.: notice on MOULIC within the reglementary period it
would be of no consequence as the checks should never
The liability to a holder in due course of the drawer of have been presented for payment. The sale of the jewelry
checks issued to another merely as security, and the right was never effected; the checks, therefore, ceased to serve
of a real estate mortgagee after extrajudicial foreclosure their purpose as security for the jewelry.
to recover the balance of the obligation, are the issues in
this Petition for Review of the Decision of respondent We are not persuaded.
Court of Appeals.
The negotiability of the checks is not in dispute.
Private respondent Nora B. Moulic issued to Corazon Indubitably, they were negotiable. After all, at the pre-
Victoriano, as security for pieces of jewelry to be sold on trial, the parties agreed to limit the issue to whether or not
commission, two (2) post-dated Equitable Banking STATE was a holder of the checks in due course.1
Corporation checks in the amount of Fifty Thousand

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WESTERN LEYTE COLLEGE 6541 Ormoc City, Leyte
School of Law | Mercantile Law

In this regard, Sec. 52 of the Negotiable Instruments Law payment in due course by the party accommodated, where
provides — the instrument is made or accepted for his
accommodation; (c) By the intentional cancellation
Sec. 52. What constitutes a holder in due course. — A thereof by the holder; (d) By any other act which will
holder in due course is a holder who has taken the discharge a simple contract for the payment of money; (e)
instrument under the following conditions: (a) That it is When the principal debtor becomes the holder of the
complete and regular upon its face; (b) That he became instrument at or after maturity in his own right.
the holder of it before it was overdue, and without notice
that it was previously dishonored, if such was the fact; (c) Obviously, MOULIC may only invoke paragraphs (c) and
That he took it in good faith and for value; (d) That at the (d) as possible grounds for the discharge of the
time it was negotiated to him he had no notice of any instrument. But, the intentional cancellation contemplated
infirmity in the instrument or defect in the title of the under paragraph (c) is that cancellation effected by
person negotiating it. destroying the instrument either by tearing it up,5 burning
it,6 or writing the word "cancelled" on the instrument. The
Culled from the foregoing, a prima facie presumption act of destroying the instrument must also be made by the
exists that the holder of a negotiable instrument is a holder holder of the instrument intentionally. Since MOULIC
in due course.2 Consequently, the burden of proving that failed to get back possession of the post-dated checks, the
STATE is not a holder in due course lies in the person intentional cancellation of the said checks is altogether
who disputes the presumption. In this regard, MOULIC impossible.
failed.
On the other hand, the acts which will discharge a simple
The evidence clearly shows that: (a) on their faces the contract for the payment of money under paragraph (d)
post-dated checks were complete and regular: (b) are determined by other existing legislations since Sec.
petitioner bought these checks from the payee, Corazon 119 does not specify what these acts are, e.g., Art. 1231
Victoriano, before their due dates;3 (c) petitioner took of the Civil Code7 which enumerates the modes of
these checks in good faith and for value, albeit at a extinguishing obligations. Again, none of the modes
discounted price; and, (d) petitioner was never informed outlined therein is applicable in the instant case as Sec.
nor made aware that these checks were merely issued to 119 contemplates of a situation where the holder of the
payee as security and not for value. instrument is the creditor while its drawer is the debtor. In
the present action, the payee, Corazon Victoriano, was no
Consequently, STATE is indeed a holder in due course. longer MOULIC's creditor at the time the jewelry was
As such, it holds the instruments free from any defect of returned.
title of prior parties, and from defenses available to prior
parties among themselves; STATE may, therefore, Correspondingly, MOULIC may not unilaterally
enforce full payment of the checks.4 discharge herself from her liability by the mere
expediency of withdrawing her funds from the drawee
MOULIC cannot set up against STATE the defense that bank. She is thus liable as she has no legal basis to excuse
there was failure or absence of consideration. MOULIC herself from liability on her checks to a holder in due
can only invoke this defense against STATE if it was course.
privy to the purpose for which they were issued and
therefore is not a holder in due course. Moreover, the fact that STATE failed to give Notice of
Dishonor to MOULIC is of no moment. The need for such
That the post-dated checks were merely issued as security notice is not absolute; there are exceptions under Sec. 114
is not a ground for the discharge of the instrument as of the Negotiable Instruments Law:
against a holder in due course. For the only grounds are
those outlined in Sec. 119 of the Negotiable Instruments Sec. 114. When notice need not be given to drawer. —
Law: Notice of dishonor is not required to be given to the
drawer in the following cases: (a) Where the drawer and
Sec. 119. Instrument; how discharged. — A the drawee are the same person; (b) When the drawee is a
negotiable instrument is discharged: (a) By payment in fictitious person or a person not having capacity to
due course by or on behalf of the principal debtor; (b) By contract; (c) When the drawer is the person to whom the

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WESTERN LEYTE COLLEGE 6541 Ormoc City, Leyte
School of Law | Mercantile Law

instrument is presented for payment: (d) Where the Victoriano and her husband at the time their property
drawer has no right to expect or require that the drawee or mortgaged to STATE was extrajudicially foreclosed
acceptor will honor the instrument; (e) Where the drawer amounted to P1.9 million; the bid price at public auction
had countermanded payment. was only P1 million.12 Thus, the value of the property
foreclosed was not even enough to pay the debt in full.
Indeed, MOULIC'S actuations leave much to be desired.
She did not retrieve the checks when she returned the Where the proceeds of the sale are insufficient to cover
jewelry. She simply withdrew her funds from her drawee the debt in an extrajudicial foreclosure of mortgage, the
bank and transferred them to another to protect herself. mortgagee is entitled to claim the deficiency from the
After withdrawing her funds, she could not have expected debtor.13 The step thus taken by the mortgagee-bank in
her checks to be honored. In other words, she was resorting to an extra-judicial foreclosure was merely to
responsible for the dishonor of her checks, hence, there find a proceeding for the sale of the property and its action
was no need to serve her Notice of Dishonor, which is cannot be taken to mean a waiver of its right to demand
simply bringing to the knowledge of the drawer or payment for the whole debt.14 For, while Act 3135, as
indorser of the instrument, either verbally or by writing, amended, does not discuss the mortgagee's right to
the fact that a specified instrument, upon proper recover such deficiency, it does not contain any provision
proceedings taken, has not been accepted or has not been either, expressly or impliedly, prohibiting recovery. In
paid, and that the party notified is expected to pay it.8 this jurisdiction, when the legislature intends to foreclose
the right of a creditor to sue for any deficiency resulting
In addition, the Negotiable Instruments Law was enacted from foreclosure of a security given to guarantee an
for the purpose of facilitating, not hindering or hampering obligation, it so expressly provides. For instance, with
transactions in commercial paper. Thus, the said statute respect to pledges, Art. 2115 of the Civil Code15 does not
should not be tampered with haphazardly or lightly. Nor allow the creditor to recover the deficiency from the sale
should it be brushed aside in order to meet the necessities of the thing pledged. Likewise, in the case of a chattel
in a single case.9 mortgage, or a thing sold on installment basis, in the event
of foreclosure, the vendor "shall have no further action
The drawing and negotiation of a check have certain against the purchaser to recover any unpaid balance of the
effects aside from the transfer of title or the incurring of price. Any agreement to the contrary will be void".16
liability in regard to the instrument by the transferor. The
holder who takes the negotiated paper makes a contract It is clear then that in the absence of a similar provision in
with the parties on the face of the instrument. There is an Act No. 3135, as amended, it cannot be concluded that the
implied representation that funds or credit are available creditor loses his right recognized by the Rules of Court
for the payment of the instrument in the bank upon which to take action for the recovery of any unpaid balance on
it is drawn.10 Consequently, the withdrawal of the money the principal obligation simply because he has chosen to
from the drawee bank to avoid liability on the checks extrajudicially foreclose the real estate mortgage pursuant
cannot prejudice the rights of holders in due course. In the to a Special Power of Attorney given him by the
instant case, such withdrawal renders the drawer, Nora B. mortgagor in the contract of mortgage.17
Moulic, liable to STATE, a holder in due course of the
checks. The filing of the Complaint and the Third-Party
Complaint to enforce the checks against MOULIC and the
Under the facts of this case, STATE could not expect VICTORIANO spouses, respectively, is just another
payment as MOULIC left no funds with the drawee bank means of recovering the unpaid balance of the debt of the
to meet her obligation on the checks,11 so that Notice of VICTORIANOs.
Dishonor would be futile.
In fine, MOULIC, as drawer, is liable for the value of the
The Court of Appeals also held that allowing recovery on checks she issued to the holder in due course, STATE,
the checks would constitute unjust enrichment on the part without prejudice to any action for recompense she may
of STATE Investment House, Inc. This is error. pursue against the VICTORIANOs as Third-Party
Defendants who had already been declared as in default.
The record shows that Mr. Romelito Caoili, an Account
Assistant, testified that the obligation of Corazon

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WESTERN LEYTE COLLEGE 6541 Ormoc City, Leyte
School of Law | Mercantile Law

WHEREFORE, the petition is GRANTED. The decision Petitioners-appellants Eduardo Montinola, Jr. and his
appealed from is REVERSED and a new one entered mother Angeles Montinola (Angeles) later filed separate
declaring private respondent NORA B. MOULIC liable claims against the estate, alleging that the deceased owed
to petitioner STATE INVESTMENT HOUSE, INC., for them P50,000.00 and P150,000.00, respectively.[2]
the value of EBC Checks Nos. 30089658 and 30089660
in the total amount of P100,000.00, P3,000.00 as By Order of February 12, 1991, Branch 28 of the Iloilo
attorney's fees, and the costs of suit, without prejudice to RTC to which the petition was raffled, appointed Melecia
any action for recompense she may pursue against the T. Sy, surviving spouse of the deceased, as administratrix
VICTORIANOs as Third-Party Defendants. of his estate, following which she was issued letters of
administration.[3]
Costs against private respondent.
During the hearing of the claims against the estate,
SO ORDERED. Sanson, Celedonia, and Jade Montinola, wife of claimant
Eduardo Montinola, Jr., testified on the transactions that
gave rise thereto, over the objection of the administratrix
who invoked Section 23, Rule 130 of the Revised Rules
of Court otherwise known as the Dead Mans Statute
which reads:

SEC. 23. Disqualification by reason of death or insanity

of adverse [Link] or assignors of parties to a case,
[G.R. No. 127745. April 22, 2003] or persons in whose behalf a case is prosecuted, against
an executor or administrator or other representative of a
FELICITO G. SANSON, CELEDONIA SANSON- deceased person, or against a person of unsound mind,
SAQUIN, ANGELES A. MONTINOLA, EDUARDO upon a claim or demand against the estate of such
A. MONTINOLA, JR., petitioners-appellants, vs. deceased person or against such person of unsound mind,
HONORABLE COURT OF APPEALS, FOURTH cannot testify as to any matter of fact occurring before the
DIVISION and MELECIA T. SY, as Administratrix death of such deceased person or before such person
of the Intestate Estate of the Late Juan Bon Fing Sy, became of unsound mind. (Emphasis supplied)
respondents-appellees.
Sanson, in support of the claim of his sister Celedonia,
DECISION testified that she had a transaction with the deceased
which is evidenced by six checks[4] issued by him before
CARPIO MORALES, J.: his death; before the deceased died, Celedonia tried to
enforce settlement of the checks from his (the deceaseds)
Before this Court is a petition for review on certiorari son Jerry who told her that his father would settle them
under Rule 45 of the Rules of Court assailing the Court of once he got well but he never did; and after the death of
Appeals Decision of May 31, 1996 and Resolution of the deceased, Celedonia presented the checks to the bank
December 9, 1996. for payment but were dishonored[5] due to the closure of
his account.[6]
On February 7, 1990, herein petitioner-appellant Felicito
G. Sanson (Sanson), in his capacity as creditor, filed Celedonia, in support of the claim of her brother Sanson,
before the Regional Trial Court (RTC) of Iloilo City a testified that she knew that the deceased issued five
petition, docketed as Special Proceedings No. 4497, for checks[7] to Sanson in settlement of a debt; and after the
the settlement of the estate of Juan Bon Fing Sy (the death of the deceased, Sanson presented the checks to the
deceased) who died on January 10, 1990. Sanson claimed bank for payment but were returned due to the closure of
that the deceased was indebted to him in the amount of his account.[8]
P603,000.00 and to his sister Celedonia Sanson-Saquin
(Celedonia) in the amount of P360,000.00.[1] Jade, in support of the claims of her husband Eduardo
Montinola, Jr. and mother-in-law Angeles, testified that
on separate occasions, the deceased borrowed P50,000

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WESTERN LEYTE COLLEGE 6541 Ormoc City, Leyte
School of Law | Mercantile Law

and P150,000 from her husband and mother-in-law, P315,000.00;[18] Angeles A. Montinola, in the amount of
respectively, as shown by three checks issued by the P150,000.00 and Eduardo Montinola, Jr., in the amount
deceased,[9] two to Angeles and the other[10] to Eduardo of P50,000.00, from the assets and/or properties of the
Montinola, Jr.; before the deceased died or sometime in above-entitled intestate estate.
August 1989, they advised him that they would be
depositing the checks, but he told them not to as he would On appeal by the administratrix upon the following
pay them cash, but he never did; and after the deceased assignment of errors:
died on January 10, 1990, they deposited the checks but
were dishonored as the account against which they were I.
drawn was closed,[11] hence, their legal counsel sent a
demand letter[12] dated February 6, 1990 addressed to the THE LOWER COURT ERRED IN NOT DISMISSING
deceaseds heirs Melicia, James, Mini and Jerry Sy, and THE CLAIM[S] FOR FAILURE TO PAY THE FILING
Symmels I & II but the checks have remained FEES THEREON
unsettled.[13]
II.
The administratrix, denying having any knowledge or
information sufficient to form a belief as to the truth of THE LOWER COURT ERRED IN NOT DISMISSING
the claims, nevertheless alleged that if they ever existed, THE CLAIM[S] BECAUSE [THEY ARE] ALREADY
they had been paid and extinguished, are usurious and BARRED BY THE LAW OF LIMITATIONS OR
illegal and are, in any event, barred by prescription.[14] STATUTE OF NON-CLAIMS
And she objected to the admission of the checks and check
return slips-exhibits offered in evidence by the claimants III.
upon the ground that the witnesses who testified thereon
are disqualified under the Dead Mans Statute. THE LOWER COURT ERRED IN NOT HOLDING
THAT CLAIMANT[S] EVIDENCE OF THE CLAIM IS
Specifically with respect to the checks-exhibits identified INCOMPETENT UNDER THE DEAD MANS
by Jade, the administratrix asserted that they are STATUTE, AND INADMISSIBLE
inadmissible because Jade is the daughter-in-law of
claimant Angeles and wife of claimant Eduardo IV.
Montinola, Jr., hence, she is covered by the above-said
rule on disqualification. THE ALLEGED CHECKS ARE INADMISSIBLE AS
PRIVATE DOCUMENTS,[19]
At all events, the administratrix denied that the checks-
exhibits were issued by the deceased and that the return the Court of Appeals set aside the December 8, 1993
slips were issued by the depository/clearing bank.[15] Order of the trial court, by Decision of May 31, 1996,
disposing as follows:
After the claimants rested their case, the administratrix
filed four separate manifestations informing the trial court WHEREFORE, the order appealed from is hereby set
that she was dispensing with the presentation of evidence aside and another order is entered dismissing the claims
against their claims.[16] of:

Finding that the Dead Mans Statute does not apply to the 1. Felicito G. Sanson, in the amount of P603,500.00;
witnesses who testified in support of the subject claims
against the estate, the trial court issued an Order of 2. Celdonia S. Saquin, in the amount of P315,000.00;[20]
December 8, 1993,[17] the dispositive portion of which
reads: 3. Angeles A. Montinola, in the amount of P150,000.00;
and
WHEREFORE, Judicial Administratrix Melecia T. Sy, is
hereby ordered, to pay, in due course of administration, 4. Eduardo Montinola, Jr., in the amount of P50,000.00
creditors-claimants Felicito G. Sanson, in the amount of against the estate of the deceased JUAN BON FING SY.
P603,500.00; Celedonia S. Saquin, in the amount of

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School of Law | Mercantile Law

No pronouncement as to costs. At most, closeness of relationship to a party, or bias, may

indicate the need for a little more caution in the
SO ORDERED. (Underscoring supplied) assessment of a witness testimony but is not necessarily a
negative element which should be taken as diminishing
The claimants Motion for Reconsideration[21] of the the credit otherwise accorded to it.[25]
Court of Appeals decision having been denied by
Resolution of December 9, 1996,[22] they filed the Jades testimony on the genuineness of the deceaseds
present petition anchored on the following assigned signature on the checks-exhibits of the Montinolas is
errors: clear:

FIRST ASSIGNED ERROR xxx

RESPONDENT COURT OF APPEALS, 4TH Q: Showing to you this check dated July 16, 1989, Far
DIVISION, ERRED IN FINDING THAT THE East Bank and Trust Company Check No. 84262, in the
TESTIMONY OF JADE MONTINOLA IS amount of P100,000.00, is this the check you are referring
INSUFFICIENT TO PROVE THE CLAIMS OF to?
CLAIMANTS ANGELES A. MONTINOLA AND
EDUARDO A. MONTINOLA, JR.. A: Yes, sir.

SECOND ASSIGNED ERROR Q: There appears a signature in the face of the check.
Whose signature is this?
RESPONDENT COURT OF APPEALS, 4TH
DIVISION, ERRED IN FINDING THAT CLAIMANT A: That is the signature of Mr. Sy.
FELICITO G. SANSON IS DISQUALIFIED TO
TESTIFY [ON] THE CLAIM OF CELEDONIA Q: Why do you know that this is the signature of Mr. Sy?
SANSON-SA[Q]UIN AND VI[C]E VERSA.
(Underscoring in the original)[23] A: Because he signed this check I was . . . I was present
when he signed this check.
With respect to the first assigned error, petitioners argue
that since the administratrix did not deny the testimony of xxx
Jade nor present any evidence to controvert it, and neither
did she deny the execution and genuineness of the checks Q: Showing to you this check dated September 8, 1989, is
issued by the deceased (as well as the check return slips this the check you are referring to?
issued by the clearing bank), it was error for the Court of
Appeals to find the evidence of the Montinolas A: Yes, sir.
insufficient to prove their claims.
Q: Why do you know that this is his signature?
The administratrix counters that the due execution and
authenticity of the checks-exhibits of the Montinolas were A: I was there when he signed the same.
not duly proven since Jade did not categorically state that
she saw the filling up and signing of the checks by the xxx
deceased, hence, her testimony is self-serving; besides, as
Jade had identical and unitary interest with her husband Q: Showing to you this Far East Bank and Trust Company
and mother-in-law, her testimony was a circumvention of Check No. 84262 dated July 6, 1989, in the amount of
the Dead Mans Statute.[24] P50,000.00, in the name of Eduardo Montinola, are you
referring to this check?
The administratrixs counter-argument does not lie.
Relationship to a party has never been recognized as an A: Yes, sir.
adverse factor in determining either the credibility of the
witness orsubject only to well recognized exceptions none Q: Whose signature is this appearing on the face of this
of which is here presentthe admissibility of the testimony. check?

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would be a dearth of evidence to prove the transactions.

A: Mr. Sys signature. In any event, as will be discussed later, independently of
the testimony of Jade, the claims of the Montinolas would
Q: Why do you know that it is his signature? still prosper on the basis of their documentary evidencethe
checks.
A: I was there when he signed the same.
As to the second assigned error, petitioners argue that the
x x x[26] (Emphasis supplied) testimonies of Sanson and Celedonia as witnesses to each
others claim against the deceased are not covered by the
The genuineness of the deceaseds signature having been Dead Mans Statute;[28] besides, the administratrix
shown, he is prima facie presumed to have become a party waived the application of the law when she cross-
to the check for value, following Section 24 of the examined them.
Negotiable Instruments Law which reads:
The administratrix, on the other hand, cites the ruling of
Section 24. Presumption of Consideration. Every the Court of Appeals in its decision on review, the
negotiable instrument is deemed prima facie to have been pertinent portion of which reads:
issued for a valuable consideration; and every person
whose signature appears thereon to have become a party The more logical interpretation is to prohibit parties to a
thereto for value. (Underscoring and italics in the original; case, with like interest, from testifying in each others
emphasis supplied), favor as to acts occurring prior to the death of the
deceased.
Since, with respect to the checks issued to the Montinolas,
the prima facie presumption was not rebutted or Since the law disqualifies parties to a case or assignors to
contradicted by the administratrix who expressly a case without distinguishing between testimony in his
manifested that she was dispensing with the presentation own behalf and that in behalf of others, he should be
of evidence against their claims, it has become conclusive. disqualified from testifying for his co-parties. The law
speaks of parties or assignors of parties to a case.
As for the administratrixs invocation of the Dead Mans Apparently, the testimonies of Sanson and Saquin on each
Statute, the same does not likewise lie. The rule renders others behalf, as co-parties to the same case, falls under
incompetent: 1) parties to a case; 2) their assignors; or 3) the prohibition. (Citation omitted; underscoring in the
persons in whose behalf a case is prosecuted. original and emphasis supplied)

xxx But Sansons and Celedonias claims against the same

estate arose from separate transactions. Sanson is a third
The rule is exclusive and cannot be construed to extend party with respect to Celedonias claim. And Celedonia is
its scope by implication so as to disqualify persons not a third party with respect to Sansons claim. One is not thus
mentioned therein. Mere witnesses who are not included disqualified to testify on the others transaction.
in the above enumeration are not prohibited from
testifying as to a conversation or transaction between the In any event, what the Dead Mans Statute proscribes is
deceased and a third person, if he took no active part the admission of testimonial evidence upon a claim which
therein. arose before the death of the deceased. The incompetency
is confined to the giving of testimony.[29] Since the
x x x[27] (Underscoring supplied) separate claims of Sanson and Celedonia are supported by
checks-documentary evidence, their claims can be
Jade is not a party to the case. Neither is she an assignor prosecuted on the bases of said checks.
nor a person in whose behalf the case is being prosecuted.
She testified as a witness to the transaction. In transactions This brings this Court to the matter of the authenticity of
similar to those involved in the case at bar, the witnesses the signature of the deceased appearing on the checks
are commonly family members or relatives of the parties. issued to Sanson and Celedonia. By Celedonias account,
Should their testimonies be excluded due to their apparent she knows the signature of the deceased.
interest as a result of their relationship to the parties, there

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xxx who believes it to be the handwriting of such person

because he has seen the person write, or has seen writing
Q: Showing to you these checks already marked as purporting to be his upon which the witness has acted or
Exhibit A to E, please go over these checks if you know been charged and has thus acquired knowledge of the
the signatures of the late Juan Bon Fing Sy? on these handwriting of such person. x x x,
checks?
not only did the administratrix fail to controvert the same;
A: Yes, sir. from a comparison[32] with the naked eye of the
deceaseds signature appearing on each of the checks-
Q: Insofar as the amount that he borrowed from you, he exhibits of the Montinolas with that of the checks-exhibits
also issued checks? of the Sanson siblings all of which checks were drawn
from the same account, they appear to have been affixed
A: Yes, sir. by one and the same hand.

Q: And therefore, you know his signature? In fine, as the claimants-herein petitioners have, by their
evidence, substantiated their claims against the estate of
A: Yes, sir. the deceased, the burden of evidence had shifted to the
administratrix who, however, expressly opted not to
x x x[30] discharge the same when she manifested that she was
dispensing with the presentation of evidence against the
Sanson testified too that he knows the signature of the claims.
deceased:
WHEREFORE, the impugned May 31, 1996 Decision of
xxx the Court of Appeals is hereby SET ASIDE and another
rendered ordering the intestate estate of the late Juan Bon
Q: I show you now checks which were already marked as Fing Sy, through Administratrix Melecia T. Sy, to pay:
Exhibit A to G-1 Saquin, please go over this if these are
the checks that you said was issued by the late Juan Bon 1) Felicito G. Sanson, the amount of P603,500.00;
Fing Sy in favor of your sister?
2) Celedonia S. Saquin, the amount of P315.000.00;[33]
A: Yes, these are the same che[c]ks.
3) Angeles Montinola, the amount of P150,000.00; and
Q: Do you know the signature of the late Juan Bon Fing
Sy? 4) Eduardo Montinola, Jr., the amount of P50,000.00.

A: Yes, sir. representing unsettled checks issued by the deceased.

Q: And these signatures are the same signatures that you SO ORDERED.
know?

A: Yes, sir.

x x x[31]

While the foregoing testimonies of the Sanson siblings

have not faithfully discharged the quantum of proof under
Section 22, Rule 132 of the Revised Rules on Evidence
which reads:

Section 22. How genuineness of handwriting proved. The

handwriting of a person may be proved by any witness

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THIRD DIVISION
On January 27, 1977, alleging non-payment of the
G.R. No. 126568 April 30, 2003 balance of QGLC's obligation after the proceeds of the
foreclosure sale were applied thereto, and non-payment of
QUIRINO GONZALES LOGGING the promissory notes despite repeated demands, the Bank
CONCESSIONAIRE, QUIRINO GONZALES and filed a complaint for "sum of money" (Civil Case No.
EUFEMIA GONZALES, petitioners, 106635) against petitioners before the Regional Trial
vs. Court (RTC) of Manila.
THE COURT OF APPEALS (CA) and REPUBLIC
PLANTERS BANK, respondents. The complaint listed ten causes of action. The first
concerns the overdraft line under which the Bank claimed
CARPIO MORALES, J.: that petitioners withdrew amounts (unspecified) at twelve
percent per annum which were unpaid at maturity and that
In the expansion of its logging business, petitioner after it applied the proceeds of the foreclosure sale to the
Quirino Gonzales Logging Concessionaire (QGLC), overdraft debt, there remained an unpaid balance of
through its proprietor, general manager — co-petitioner P1,224,301.56.
Quirino Gonzales, applied on October 15, 1962 for credit
accommodations1 with respondent Republic Bank (the The Bank's second to fifth causes of action pertain to the
Bank), later known as Republic Planters Bank. LC line under which it averred that on the strength of the
LCs it issued, the beneficiaries thereof drew and presented
The Bank approved QGLC's application on December 21, sight drafts to it which it all paid after petitioners'
1962, granting it a credit line of P900,000.002 broken into acceptance; and that it delivered the tractors and
an overdraft line of P500,000.00 which was later reduced equipment subject of the LCs to petitioners who have not
to P450,000.00 and a Letter of Credit (LC) line of paid either the full or part of the face value of the drafts.
P400,000.00.3
Specifically with respect to its second cause of action, the
Pursuant to the grant, the Bank and petitioners QGLC and Bank alleged that it issued LC No. 63-0055D on January
the spouses Quirino and Eufemia Gonzales executed ten 15, 1963 in favor of Monark International Incorporated9
documents: two denominated "Agreement for Credit in covering the purchase of a tractor10 on which the latter
Current Account,"4 four denominated "Application and allegedly drew a sight draft with a face value of
Agreement for Commercial Letter of Credit,"5 and four P71,500.00,11 which amount petitioners have not,
denominated "Trust Receipt."6 however, paid in full.

Petitioners' obligations under the credit line were secured Under its third cause of action, the Bank charged that it
by a real estate mortgage on four parcels of land: two in issued LC No. 61-1110D on December 27, 1962 also in
Pandacan, Manila, one in Makati (then part of Rizal), and favor of Monark International covering the purchase of
another in Diliman, Quezon City.7 another tractor and other equipment;12 and that Monark
International drew a sight draft with a face value of
In separate transactions, petitioners, to secure certain P80,350.00,13 and while payments for the value thereof
advances from the Bank in connection with QGLC's had been made by petitioners, a balance of P68,064.97
exportation of logs, executed a promissory note in 1964 remained.
in favor of the Bank. They were to execute three more
promissory notes in 1967. Under the fourth cause of action, the Bank maintained that
it issued LC No. 63-0182D on February 11, 1963 in favor
In 1965, petitioners having long defaulted in the payment of J.B.L. Enterprises, Inc.14 covering the purchase of two
of their obligations under the credit line, the Bank tractors,15 and J.B.L. Enterprises drew on February 13,
foreclosed the mortgage and bought the properties 1963 a sight draft on said LC in the amount of
covered thereby, it being the highest bidder in the auction P155,000.00 but petitioners have not paid said amount.
sale held in the same year. Ownership over the properties
was later consolidated in the Bank on account of which On its fifth cause of action, the Bank alleged that it issued
new titles thereto were issued to it.8 LC No. 63-0284D on March 14, 1963 in favor of Super

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Master Auto Supply (SMAS) covering the purchase of does, the same is/are barred by prescription or null and
"Eight Units GMC (G.I.) Trucks"; that on March 14, void for want of consideration.
1963, SMAS drew a sight draft with a face value of
P64,000.0016 on the basis of said LC; and that the By Order of March 10, 1977, Branch 36 of the Manila
payments made by petitioners for the value of said draft RTC attached the preferred shares of stocks of the spouses
were deficient by P45,504.74. Quirino and Eufemia Gonzales with the Bank with a total
par value of P414,000.00.
The Bank thus prayed for the settlement of the above-
stated obligations at an interest rate of eleven percent per Finding for petitioners, the trial court rendered its
annum, and for the award of trust receipt commissions, Decision of April 22, 1992 the dispositive portion of
attorney's fees and other fees and costs of collection. which reads:

The sixth to ninth causes of action are anchored on the WHEREFORE, judgment is rendered as follows:
promissory notes issued by petitioners allegedly to secure
certain advances from the Bank in connection with the 1. All the claims of plaintiff particularly those
exportation of logs as reflected above.17 The notes were described in the first to the tenth causes of action of its
payable 30 days after date and provided for the solidary complaint are denied for the reasons earlier mentioned in
liability of petitioners as well as attorney's fees at ten the body of this decision;
percent of the total amount due18 in the event of their
non-payment at maturity. 2. As regards the claims of defendants pertaining to
their counterclaim (Exhibits "1", "2" and "3"), they are
The note dated June 18, 1964, subject of the sixth cause hereby given ten (10) years from the date of issuance of
of action, has a face value of P55,000.00 with interest rate the torrens title to plaintiff and before the transfer thereof
of twelve percent per annum;19 that dated July 7, 1967 in good faith to a third party buyer within which to ask for
subject of the seventh has a face value of P20,000.00;20 the reconveyance of the real properties foreclosed by
that dated July 18, 1967 subject of the eighth has a face plaintiff,
value of P38,000.00;21 and that dated August 23, 1967
subject of the ninth has a face value of P11,000.00.22 The 3. The order of attachment which was issued against
interest rate of the last three notes is pegged at thirteen the preferred shares of stocks of defendants-spouses
percent per annum.23 Quirino Gonzales and Eufemia Gonzales with the
Republic Bank now known as Republic Planters Bank
On its tenth and final cause of action, the Bank claimed dated March 21, 1977 is hereby dissolved and/or lifted,
that it has accounts receivable from petitioners in the and
amount of P120.48.
4. Plaintiff is likewise ordered to pay the sum of
In their Answer24 of March 3, 1977, petitioners admit the P20,000.00, as and for attorney's fees, with costs against
following: having applied for credit accommodations plaintiff.
totaling P900,000.00 to secure which they mortgaged real
properties; opening of the LC/Trust Receipt Line; the SO ORDERED.
issuance by the Bank of the various LCs; and the
foreclosure of the real estate mortgage and the In finding for petitioners, the trial court ratiocinated:25
consolidation of ownership over the mortgaged properties
in favor of the Bank. They deny, however, having availed Art. 1144 of the Civil Code states that an action upon a
of the credit accommodations and having received the written contract prescribes in ten (10) years from the time
value of the promissory notes, as they do deny having the right of action accrues. Art. 1150 states that
physically received the tractors and equipment subject of prescription starts to run from the day the action may be
the LCs. brought. The obligations allegedly created by the written
contracts or documents supporting plaintiff's first to the
As affirmative defenses, petitioners assert that the sixth causes of action were demandable at the latest in
complaint states no cause of action, and assuming that it 1964. Thus when the complaint was filed on January 27,
1977 more than ten (10) years from 1964 [when the causes

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of action accrued] had already lapsed. The first to the sixth to the court a quo for the determination of the amount(s)
causes of action are thus barred by prescription. . . . to be awarded to the [the Bank]-appellant relative to its
claims against the appellees.
As regards the seventh and eight causes of action, the
authenticity of which documents were partly in doubt in SO ORDERED.
the light of the categorical and uncontradicted statements
that in 1965, defendant Quirino Gonzales logging With regard to the first to sixth causes of action, the CA
concession was terminated based on the policy of the upheld the contention of the Bank that the notices of
government to terminate logging concessions covering foreclosure sale were "tantamount" to demand letters
less than 20,000 hectares. If this is the case, the Court is upon the petitioners which interrupted the running of the
in a quandary why there were log exports in 1967? prescriptive period.29
Because of the foregoing, the Court does not find any
valid ground to sustain the seventh and eight causes of As regards the seventh to ninth causes of action, the CA
action of plaintiff's complaint. also upheld the contention of the Bank that the written
agreements-promissory notes prevail over the oral
As regards the ninth cause of action, the Court is baffled testimony of petitioner Quirino Gonzales that the
why plaintiff extended to defendants another loan when cancellation of their logging concession in 1967 made it
defendants according to plaintiff's records were defaulting unbelievable for them to secure in 1967 the advances
creditors? The above facts and circumstances has (sic) reflected in the promissory notes.30
convinced this Court to give credit to the testimony of
defendants' witnesses that the Gonzales spouses signed With respect to petitioners' counterclaim, the CA agreed
the documents in question in blank and that the promised with the Bank that:31
loan was never released to them. There is therefore a total
absence of consent since defendants did not give their Certainly, failure on the part of the trial court to pass upon
consent to loans allegedly procured, the proceeds of and determine the authenticity and genuineness of [the
which were never received by the alleged debtors, Bank's] documentary evidence [the trial court having
defendants herein. . . . ruled on the basis of prescription of the Bank's first to
sixth causes of action] makes it impossible for the trial
Plaintiff did not present evidence to support its tenth cause court' to eventually conclude that the obligation
of action. For this reason, it must consequently be denied foreclosed (sic) was fictitious. Needless to say, the trial
for lack of evidence. court's ruling averses (sic) the well-entrenched rule that
'courts must render verdict on their findings of facts."
On the matter of [the] counterclaims of defendants, they (China Banking Co. vs. CA, 70 SCRA 398)
seek the return of the real and personal properties which
they have given in good faith to plaintiff. Again, Furthermore, the defendants-appellees' [herein
prescription may apply. The real properties of defendants petitioners'] counterclaim is basically an action for the
acquired by plaintiff were foreclosed in 1965 and reconveyance of their properties, thus, the trial court's
consequently, defendants had one (1) year to redeem the earlier ruling that the defendants-appellees' counterclaim
property or ten (10) years from issuance of title on the has prescribed is itself a ruling that the defendants-
ground that the obligation foreclosed was fictitious. appellees' separate action for reconveyance has also
prescribed.
xxx xxx xxx
The CA struck down the trial court's award of attorney's
On appeal,26 the Court of Appeals (CA) reversed the fees for lack of legal basis.32
decision of the trial court by Decision27 of June 28, 1996
which disposed as follows:28 Hence, petitioners now press the following issues before
this Court by the present petition for review on certiorari:
WHEREFORE, premises considered, the appealed
decision (dated April 22, 1992) of the Regional Trial 1. WHETHER OR NOT RESPONDENT COURT
Court (Branch 36) in Manila in Civil Case No. 82-4141 is ERRED IN SO HOLDING THAT RESPONDENT-
hereby REVERSED — and let the case be remanded back APPELLEES (SIC.) REPUBLIC PLANTERS BANK['S]

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FIRST, SECOND, THIRD, FOURTH, FIFTH AND notices of foreclosure sale interrupted/forestalled the
SIXTH CAUSES OF ACTION HAVE NOT running of the prescriptive period."35
PRESCRIBED CONTRARY TO THE FINDINGS OF
THE LOWER COURT, RTC BRANCH 36 THAT THE The Bank's contention does not impress. Prescription of
SAID CAUSES OF ACTION HAVE ALREADY actions is interrupted when they are filed before the court,
PRESCRIBED. when there is a written extrajudicial demand by the
creditors, and when there is any written acknowledgment
2. WHETHER OR NOT RESPONDENT COURT of the debt by the debtor.36
ERRED IN SO HOLDING THAT RESPODNENT-
APPELLEES (SIC.) REPUBLIC PLANTERS BANK['S] The law specifically requires a written extrajudicial
SEVENTH, EIGHT AND NINTH CAUSES OF demand by the creditors which is absent in the case at bar.
ACTION APPEARS (SIC.) TO BE IMPRESSED WITH The contention that the notices of foreclosure are
MERIT CONTRARY TO THE FINDINGS OF THE "tantamount" to a written extrajudicial demand cannot be
LOWER COURT RTC BRANCH 36 THAT THE SAID appreciated, the contents of said notices not having been
CAUSES HAVE NO VALID GROUND TO SUSTAIN brought to light.
[THEM] AND FOR LACK OF EVIDENCE.
But even assuming arguendo that the notices interrupted
3. WHETHER OR NOT RESPONDENT COURT the running of the prescriptive period, the argument would
[ERRED] IN REVERSING THE FINDINGS OF THE still not lie for the following reasons:
REGIONAL TRIAL COURT BRANCH 36 OF
MANILA THAT PETITIONERS-APPELLANT (SIC.) With respect to the first to the fifth causes of action, as
MAY SEEK THE RETURN OF THE REAL AND gleaned from the complaint, the Bank seeks the recovery
PERSONAL PROPERTIES WHICH THEY MAY of the deficient amount of the obligation after the
HAVE GIVEN IN GOOD FAITH AS THE SAME IS foreclosure of the mortgage. Such suit is in the nature of
BARRED BY PRESCRIPTION AND THAT a mortgage action because its purpose is precisely to
PETITIONERS-APPELLANT (SIC.) HAD ONE (1) enforce the mortgage contract.37 A mortgage action
YEAR TO REDEEM THE PROPERTY OR TEN (10) prescribes after ten years from the time the right of action
YEARS FROM ISSUANCE OF THE TITLE ON THE accrued.38
GROUND THAT THE OBLIGATION FORECLOSED
WAS FICTITIOUS. The law gives the mortgagee the right to claim for the
deficiency resulting from the price obtained in the sale of
4. WHETHER OR NOT RESPONDENT COURT the property at public auction and the outstanding
ERRED IN SO HOLDING THAT PEITIONERS- obligation at the time of the foreclosure proceedings.39 In
APPELLANTS [SIC] ARE NOT ENTITLED TO AN the present case, the Bank, as mortgagee, had the right to
AWARD OF ATTORNEY'S FEES. claim payment of the deficiency after it had foreclosed the
mortgage in 1965.40 In other words, the prescriptive
The petition is partly meritorious. period started to run against the Bank in 1965. As it filed
the complaint only on January 27, 1977, more than ten
On the first issue. The Civil Code provides that an action years had already elapsed, hence, the action on its first to
upon written contract, an obligation created by law, and a fifth causes had by then prescribed. No other conclusion
judgment must be brought within ten years from the time can be reached even if the suit is considered as one upon
the right of action accrues.33 a written contract or upon an obligation to pay the
deficiency which is created by law,41 the prescriptive
The finding of the trial court that more than ten years had period of both being also ten years.42
elapsed since the right to bring an action on the Bank's
first to sixth causes had arisen34 is not disputed. The Bank As regards the promissory note subject of the sixth cause
contends, however, that "the notices of foreclosure sale in of action, its period of prescription could not have been
the foreclosure proceedings of 1965 are tantamount to interrupted by the notices of foreclosure sale not only
formal demands upon petitioners for the payment of their because, as earlier discussed, petitioners' contention that
past due loan obligations with the Bank, hence, said the notices of foreclosure are tantamount to written extra-
judicial demand cannot be considered absent any showing

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of the contents thereof, but also because it does not appear As for petitioners' reliance on Exhibits "B", "P" and "T,"
from the records that the said note is covered by the they have failed to show the relevance thereof to the
mortgage contract. seventh up to the ninth causes of action of the Bank.

Coming now to the second issue, petitioners seek to evade On the third issue, petitioners asseverate that with the trial
liability under the Bank's seventh to ninth causes of action court's dismissal of the Bank's complaint and the denial of
by claiming that petitioners Quirino and Eufemia its first to sixth causes of action, it is but fair and just that
Gonzales signed the promissory notes in blank; that they the real properties which were mortgaged and foreclosed
had not received the value of said notes, and that the credit be returned to them.49 Such, however, does not lie. It is
line thereon was unnecessary in view of their money not disputed that the properties were foreclosed under Act
deposits, they citing "Exhibits 2 to 2-B,"43 in, and No. 3135 (An Act to Regulate the Sale of Property under
unremitted proceeds on log exports from, the Bank. In Special Powers Inserted in or Annexed to Real Estate
support of their claim, they also urge this Court to look at Mortgages), as amended. Though the Bank's action for
Exhibits "B" (the Bank's recommendation for approval of deficiency is barred by prescription, nothing irregular
petitioners' application for credit accommodations), "P" attended the foreclosure proceedings to warrant the
(the "Application and Agreement for Commercial Letter reconveyance of the properties covered thereby.
of Credit" dated January 16, 1963) and "T" (the
"Application and Agreement for Commercial Letter of As for petitioners' prayer for moral and exemplary
Credit" dated February 14, 1963). damages, it not having been raised as issue before the
courts below, it can not now be considered. Neither can
The genuineness and due execution of the notes had, the award of attorney's fees for lack of legal basis.
however, been deemed admitted by petitioners, they
having failed to deny the same under oath.44 Their claim WHEREFORE, the CA Decision is hereby AFFIRMED
that they signed the notes in blank does not thus lie. with MODIFICATION.

Petitioners' admission of the genuineness and due Republic Bank's Complaint with respect to its first to sixth
execution of the promissory notes notwithstanding, they causes of action is hereby DISMISSED. Its complaint
raise want of consideration45 thereof. The promissory with respect to its seventh to ninth causes of action is
notes, however, appear to be negotiable as they meet the REMANDED to the court of origin, the Manila Regional
requirements of Section 146 of the Negotiable Trial Court, Branch 36, for it to determine the amounts
Instruments Law. Such being the case, the notes are prima due the Bank thereunder.
facie deemed to have been issued for consideration.47 It
bears noting that no sufficient evidence was adduced by SO ORDERED.
petitioners to show otherwise.

Exhibits "2" to "2-B" to which petitioners advert in

support of their claim that the credit line on the notes was
unnecessary because they had deposits in, and remittances
due from, the Bank deserve scant consideration. Said
exhibits are merely claims by petitioners under their then
proposals for a possible settlement of the case dated
February 3, 1978. Parenthetically, the proposals were not
even signed by petitioners but by certain Attorneys [G.R. No. 138074. August 15, 2003]
Osmundo R. Victoriano and Rogelio P. Madriaga.
CELY YANG, petitioner, vs. HON. COURT OF
In any case, it is no defense that the promissory notes were APPEALS, PHILIPPINE COMMERCIAL
signed in blank as Section 1448 of the Negotiable INTERNATIONAL BANK, FAR EAST BANK &
Instruments Law concedes the prima facie authority of the TRUST CO., EQUITABLE BANKING
person in possession of negotiable instruments, such as CORPORATION, PREM CHANDIRAMANI and
the notes herein, to fill in the blanks. FERNANDO DAVID, respondents.

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DECISION c) FEBTC Dollar Draft No. 4771, drawn on Chemical

Bank, New York, in the amount of US$200,000.00, dated
QUISUMBING, J.: December 22, 1987, payable to PCIB FCDU Account No.
4195-01165-2.
For review on certiorari is the decision[1] of the Court of
Appeals, dated March 25, 1999, in CA-G.R. CV No. At about one oclock in the afternoon of the same day,
52398, which affirmed with modification the joint Yang gave the aforementioned cashiers checks and dollar
decision of the Regional Trial Court (RTC) of Pasay City, drafts to her business associate, Albert Liong, to be
Branch 117, dated July 4, 1995, in Civil Cases Nos. delivered to Chandiramani by Liongs messenger, Danilo
5479[2] and 5492.[3] The trial court dismissed the Ranigo. Ranigo was to meet Chandiramani at Philippine
complaint against herein respondents Far East Bank & Trust Bank, Ayala Avenue, Makati City, Metro Manila
Trust Company (FEBTC), Equitable Banking where he would turn over Yangs cashiers checks and
Corporation (Equitable), and Philippine Commercial dollar draft to Chandiramani who, in turn, would deliver
International Bank (PCIB) and ruled in favor of to Ranigo a PCIB managers check in the sum of P4.2
respondent Fernando David as to the proceeds of the two million and a Hang Seng Bank dollar draft for
cashiers checks, including the earnings thereof pendente US$200,000.00 in exchange.
lite. Petitioner Cely Yang was ordered to pay David moral
damages of P100,000.00 and attorneys fees also in the Chandiramani did not appear at the rendezvous and
amount of P100,000.00. Ranigo allegedly lost the two cashiers checks and the
dollar draft bought by petitioner. Ranigo reported the
The facts of this case are not disputed, to wit: alleged loss of the checks and the dollar draft to Liong at
half past four in the afternoon of December 22, 1987.
On or before December 22, 1987, petitioner Cely Yang Liong, in turn, informed Yang, and the loss was then
and private respondent Prem Chandiramani entered into reported to the police.
an agreement whereby the latter was to give Yang a PCIB
managers check in the amount of P4.2 million in exchange It transpired, however, that the checks and the dollar draft
for two (2) of Yangs managers checks, each in the amount were not lost, for Chandiramani was able to get hold of
of P2.087 million, both payable to the order of private said instruments, without delivering the exchange
respondent Fernando David. Yang and Chandiramani consideration consisting of the PCIB managers check and
agreed that the difference of P26,000.00 in the exchange the Hang Seng Bank dollar draft.
would be their profit to be divided equally between them.
At three oclock in the afternoon or some two (2) hours
Yang and Chandiramani also further agreed that the after Chandiramani and Ranigo were to meet in Makati
former would secure from FEBTC a dollar draft in the City, Chandiramani delivered to respondent Fernando
amount of US$200,000.00, payable to PCIB FCDU David at China Banking Corporation branch in San
Account No. 4195-01165-2, which Chandiramani would Fernando City, Pampanga, the following: (a) FEBTC
exchange for another dollar draft in the same amount to Cashiers Check No. 287078, dated December 22, 1987, in
be issued by Hang Seng Bank Ltd. of Hong Kong. the sum of P2.087 million; and (b) Equitable Cashiers
Check No. CCPS 14-009467, dated December 22, 1987,
Accordingly, on December 22, 1987, Yang procured the also in the amount of P2.087 million. In exchange,
following: Chandiramani got US$360,000.00 from David, which
Chandiramani deposited in the savings account of his
a) Equitable Cashiers Check No. CCPS 14-009467 in the wife, Pushpa Chandiramani; and his mother, Rani
sum of P2,087,000.00, dated December 22, 1987, payable Reynandas, who held FCDU Account No. 124 with the
to the order of Fernando David; United Coconut Planters Bank branch in Greenhills, San
Juan, Metro Manila. Chandiramani also deposited
b) FEBTC Cashiers Check No. 287078, in the amount of FEBTC Dollar Draft No. 4771, dated December 22, 1987,
P2,087,000.00, dated December 22, 1987, likewise drawn upon the Chemical Bank, New York for
payable to the order of Fernando David; and US$200,000.00 in PCIB FCDU Account No. 4195-
01165-2 on the same date.

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Meanwhile, Yang requested FEBTC and Equitable to stop prevailing side. It was also agreed by the parties to limit
payment on the instruments she believed to be lost. Both the issues at the trial to the following:
banks complied with her request, but upon the
representation of PCIB, FEBTC subsequently lifted the 1. Who, between David and Yang, is legally entitled to
stop payment order on FEBTC Dollar Draft No. 4771, the proceeds of Equitable Banking Corporation (EBC)
thus enabling the holder of PCIB FCDU Account No. Cashiers Check No. CCPS 14-009467 in the sum of
4195-01165-2 to receive the amount of US$200,000.00. P2,087,000.00 dated December 22, 1987, and Far East
Bank and Trust Company (FEBTC) Cashiers Check No.
On December 28, 1987, herein petitioner Yang lodged a 287078 in the sum of P2,087,000.00 dated December 22,
Complaint[4] for injunction and damages against 1987, together with the earnings derived therefrom
Equitable, Chandiramani, and David, with prayer for a pendente lite?
temporary restraining order, with the Regional Trial Court
of Pasay City. The Complaint was docketed as Civil Case 2. Are the defendants FEBTC and PCIB solidarily liable
No. 5479. The Complaint was subsequently amended to to Yang for having allowed the encashment of FEBTC
include a prayer for Equitable to return to Yang the Dollar Draft No. 4771, in the sum of US$200,000.00 plus
amount of P2.087 million, with interest thereon until fully interest thereon despite the stop payment order of Cely
paid.[5] Yang?[7]

On January 12, 1988, Yang filed a separate case for On July 4, 1995, the trial court handed down its decision
injunction and damages, with prayer for a writ of in Civil Cases Nos. 5479 and 5492, to wit:
preliminary injunction against FEBTC, PCIB,
Chandiramani and David, with the RTC of Pasay City, WHEREFORE, the Court renders judgment in favor of
docketed as Civil Case No. 5492. This complaint was later defendant Fernando David against the plaintiff Cely Yang
amended to include a prayer that defendants therein return and declaring the former entitled to the proceeds of the
to Yang the amount of P2.087 million, the value of two (2) cashiers checks, together with the earnings
FEBTC Dollar Draft No. 4771, with interest at 18% derived therefrom pendente lite; ordering the plaintiff to
annually until fully paid.[6] pay the defendant Fernando David moral damages in the
amount of P100,000.00; attorneys fees in the amount of
On February 9, 1988, upon the filing of a bond by Yang, P100,000.00 and to pay the costs. The complaint against
the trial court issued a writ of preliminary injunction in Far East Bank and Trust Company (FEBTC), Philippine
Civil Case No. 5479. A writ of preliminary injunction was Commercial International Bank (PCIB) and Equitable
subsequently issued in Civil Case No. 5492 also. Banking Corporation (EBC) is dismissed. The decision is
without prejudice to whatever action plaintiff Cely Yang
Meanwhile, herein respondent David moved for dismissal will file against defendant Prem Chandiramani for
of the cases against him and for reconsideration of the reimbursement of the amounts received by him from
Orders granting the writ of preliminary injunction, but defendant Fernando David.
these motions were denied. David then elevated the matter
to the Court of Appeals in a special civil action for SO ORDERED.[8]
certiorari docketed as CA-G.R. SP No. 14843, which was
dismissed by the appellate court. In finding for David, the trial court ratiocinated:

As Civil Cases Nos. 5479 and 5492 arose from the same The evidence shows that defendant David was a holder in
set of facts, the two cases were consolidated. The trial due course for the reason that the cashiers checks were
court then conducted pre-trial and trial of the two cases, complete on their face when they were negotiated to him.
but the proceedings had to be suspended after a fire gutted They were not yet overdue when he became the holder
the Pasay City Hall and destroyed the records of the thereof and he had no notice that said checks were
courts. previously dishonored; he took the cashiers checks in
good faith and for value. He parted some $200,000.00 for
After the records were reconstituted, the proceedings the two (2) cashiers checks which were given to defendant
resumed and the parties agreed that the money in dispute Chandiramani; he had also no notice of any infirmity in
be invested in Treasury Bills to be awarded in favor of the the cashiers checks or defect in the title of the drawer. As

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School of Law | Mercantile Law

a matter of fact, he asked the manager of the China that each holder inquire about every aspect on how the
Banking Corporation to inquire as to the genuineness of instrument came about will unduly impede commercial
the cashiers checks (tsn, February 5, 1988, p. 21, transactions, Although negotiable instruments do not
September 20, 1991, pp. 13-14). Another proof that constitute legal tender, they often take the place of money
defendant David is a holder in due course is the fact that as a means of payment.
the stop payment order on [the] FEBTC cashiers check
was lifted upon his inquiry at the head office (tsn, The mere fact that David and Chandiramani knew one
September 20, 1991, pp. 24-25). The apparent reason for another for a long time is not sufficient to establish that
lifting the stop payment order was because of the fact that they connived with each other to defraud Yang. There was
FEBTC realized that the checks were not actually lost but no concrete proof presented by Yang to support her
indeed reached the payee defendant David.[9] theory.[11]

Yang then moved for reconsideration of the RTC The appellate court awarded P25,000.00 in attorneys fees
judgment, but the trial court denied her motion in its Order to PCIB as it found the action filed by Yang against said
of September 20, 1995. bank to be clearly unfounded and baseless. Since PCIB
was compelled to litigate to protect itself, then it was
In the belief that the trial court misunderstood the concept entitled under Article 2208[12] of the Civil Code to
of a holder in due course and misapprehended the factual attorneys fees and litigation expenses.
milieu, Yang seasonably filed an appeal with the Court of
Appeals, docketed as CA-G.R. CV No. 52398. Hence, the instant recourse wherein petitioner submits the
following issues for resolution:
On March 25, 1999, the appellate court decided CA-G.R.
CV No. 52398 in this wise: a - WHETHER THE CHECKS WERE ISSUED TO
PREM CHANDIRAMANI BY PETITIONER;
WHEREFORE, this court AFFIRMS the judgment of the
lower court with modification and hereby orders the b - WHETHER THE ALLEGED TRANSACTION
plaintiff-appellant to pay defendant-appellant PCIB the BETWEEN PREM CHANDIRAMANI AND
amount of Twenty-Five Thousand Pesos (P25,000.00). FERNANDO DAVID IS LEGITIMATE OR A SCHEME
BY BOTH PRIVATE RESPONDENTS TO SWINDLE
SO ORDERED.[10] PETITIONER;

In affirming the trial courts judgment with respect to c - WHETHER FERNANDO DAVID GAVE PREM
herein respondent David, the appellate court found that: CHANDIRAMANI US$360,000.00 OR JUST A
FRACTION OF THE AMOUNT REPRESENTING HIS
In this case, defendant-appellee had taken the necessary SHARE OF THE LOOT;
precautions to verify, through his bank, China Banking
Corporation, the genuineness of whether (sic) the cashiers d - WHETHER PRIVATE RESPONDENTS
checks he received from Chandiramani. As no stop FERNANDO DAVID AND PCIB ARE ENTITLED TO
payment order was made yet (at) the time of the inquiry, DAMAGES AND ATTORNEYS FEES.[13]
defendant-appellee had no notice of what had transpired
earlier between the plaintiff-appellant and Chandiramani. At the outset, we must stress that this is a petition for
All he knew was that the checks were issued to review under Rule 45 of the 1997 Rules of Civil
Chandiramani with whom he was he had (sic) a Procedure. It is basic that in petitions for review under
transaction. Further on, David received the checks in Rule 45, the jurisdiction of this Court is limited to
question in due course because Chandiramani, who at the reviewing questions of law, questions of fact are not
time the checks were delivered to David, was acting as entertained absent a showing that the factual findings
Yangs agent. complained of are totally devoid of support in the record
or are glaringly erroneous.[14] Given the facts in the
David had no notice, real or constructive, cogent for him instant case, despite petitioners formulation, we find that
to make further inquiry as to any infirmity in the the following are the pertinent issues to be resolved:
instrument(s) and defect of title of the holder. To mandate

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a) Whether the Court of Appeals erred in holding herein We shall now resolve the first issue.
respondent Fernando David to be a holder in due course;
and Every holder of a negotiable instrument is deemed prima
facie a holder in due course. However, this presumption
b) Whether the appellate court committed a reversible arises only in favor of a person who is a holder as defined
error in awarding damages and attorneys fees to David in Section 191 of the Negotiable Instruments Law,[15]
and PCIB. meaning a payee or indorsee of a bill or note, who is in
possession of it, or the bearer thereof.
On the first issue, petitioner Yang contends that private
respondent Fernando David is not a holder in due course In the present case, it is not disputed that David was the
of the checks in question. While it is true that he was payee of the checks in question. The weight of authority
named the payee thereof, David failed to inquire from sustains the view that a payee may be a holder in due
Chandiramani about how the latter acquired possession of course.[16] Hence, the presumption that he is a prima
said checks. Given his failure to do so, it cannot be said facie holder in due course applies in his favor. However,
that David was unaware of any defect or infirmity in the said presumption may be rebutted. Hence, what is vital to
title of Chandiramani to the checks at the time of their the resolution of this issue is whether David took
negotiation. Moreover, inasmuch as the checks were possession of the checks under the conditions provided
crossed, then David should have, pursuant to our ruling in for in Section 52[17] of the Negotiable Instruments Law.
Bataan Cigar & Cigarette Factory, Inc. v. Court of All the requisites provided for in Section 52 must concur
Appeals, G.R. No. 93048, March 3, 1994, 230 SCRA 643, in Davids case, otherwise he cannot be deemed a holder
been put on guard that the checks were issued for a in due course.
definite purpose and accordingly, made inquiries to
determine if he received the checks pursuant to that We find that the petitioners challenge to Davids status as
purpose. His failure to do so negates the finding in the a holder in due course hinges on two arguments: (1) the
proceedings below that he was a holder in due course. lack of proof to show that David tendered any valuable
consideration for the disputed checks; and (2) Davids
Finally, the petitioner argues that there is no showing failure to inquire from Chandiramani as to how the latter
whatsoever that David gave Chandiramani any acquired possession of the checks, thus resulting in
consideration of value in exchange for the aforementioned Davids intentional ignorance tantamount to bad faith. In
checks. sum, petitioner posits that the last two requisites of
Section 52 are missing, thereby preventing David from
Private respondent Fernando David counters that the being considered a holder in due course. Unfortunately for
evidence on record shows that when he received the the petitioner, her arguments on this score are less than
checks, he verified their genuineness with his bank, and meritorious and far from persuasive.
only after said verification did he deposit them. David
stresses that he had no notice of previous dishonor or any First, with respect to consideration, Section 24[18] of the
infirmity that would have aroused his suspicions, the Negotiable Instruments Law creates a presumption that
instruments being complete and regular upon their face. every party to an instrument acquired the same for a
David stresses that the checks in question were cashiers consideration[19] or for value.[20] Thus, the law itself
checks. From the very nature of cashiers checks, it is creates a presumption in Davids favor that he gave
highly unlikely that he would have suspected that valuable consideration for the checks in question. In
something was amiss. David also stresses negotiable alleging otherwise, the petitioner has the onus to prove
instruments are presumed to have been issued for valuable that David got hold of the checks absent said
consideration, and he who alleges otherwise must consideration. In other words, the petitioner must present
controvert the presumption with sufficient evidence. The convincing evidence to overthrow the presumption. Our
petitioner failed to discharge this burden, according to scrutiny of the records, however, shows that the petitioner
David. He points out that the checks were delivered to him failed to discharge her burden of proof. The petitioners
as the payee, and he took them as holder and payee averment that David did not give valuable consideration
thereof. Clearly, he concludes, he should be deemed to be when he took possession of the checks is unsupported,
their holder in due course. devoid of any concrete proof to sustain it. Note that both
the trial court and the appellate court found that David did

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not receive the checks gratis, but instead gave The Negotiable Instruments Law is silent with respect to
Chandiramani US$360,000.00 as consideration for the crossed checks, although the Code of Commerce[23]
said instruments. Factual findings of the Court of Appeals makes reference to such instruments. Nonetheless, this
are conclusive on the parties and not reviewable by this Court has taken judicial cognizance of the practice that a
Court; they carry great weight when the factual findings check with two parallel lines in the upper left hand corner
of the trial court are affirmed by the appellate court.[21] means that it could only be deposited and not converted
into cash.[24] The effects of crossing a check, thus, relates
Second, petitioner fails to point any circumstance which to the mode of payment, meaning that the drawer had
should have put David on inquiry as to the why and intended the check for deposit only by the rightful person,
wherefore of the possession of the checks by i.e., the payee named therein. In Bataan Cigar, the
Chandiramani. David was not privy to the transaction rediscounting of the check by the payee knowingly
between petitioner and Chandiramani. Instead, violated the avowed intention of crossing the check. Thus,
Chandiramani and David had a separate dealing in which in accepting the cross checks and paying cash for them,
it was precisely Chandiramanis duty to deliver the checks despite the warning of the crossing, the subsequent holder
to David as payee. The evidence shows that Chandiramani could not be considered in good faith and thus, not a
performed said task to the letter. Petitioner admits that holder in due course. Our ruling in Bataan Cigar reiterates
David took the step of asking the manager of his bank to that in De Ocampo & Co. v. Gatchalian.[25]
verify from FEBTC and Equitable as to the genuineness
of the checks and only accepted the same after being The factual circumstances in De Ocampo and in Bataan
assured that there was nothing wrong with said checks. At Cigar are not present in this case. For here, there is no
that time, David was not aware of any stop payment order. dispute that the crossed checks were delivered and duly
Under these circumstances, David thus had no obligation deposited by David, the payee named therein, in his bank
to ascertain from Chandiramani what the nature of the account. In other words, the purpose behind the crossing
latters title to the checks was, if any, or the nature of his of the checks was satisfied by the payee.
possession. Thus, we cannot hold him guilty of gross
neglect amounting to legal absence of good faith, absent Proceeding to the issue of damages, petitioner merely
any showing that there was something amiss about argues that respondents David and PCIB are not entitled
Chandiramanis acquisition or possession of the checks. to damages, attorneys fees, and costs of suit as both acted
David did not close his eyes deliberately to the nature or in bad faith towards her, as shown by her version of the
the particulars of a fraud allegedly committed by facts which gave rise to the instant case.
Chandiramani upon the petitioner, absent any knowledge
on his part that the action in taking the instruments Respondent David counters that he was maliciously and
amounted to bad faith.[22] unceremoniously dragged into this suit for reasons which
have nothing to do with him at all, but which arose from
Belatedly, and we say belatedly since petitioner did not petitioners failure to receive her share of the profit
raise this matter in the proceedings below, petitioner now promised her by Chandiramani. Moreover, in filing this
claims that David should have been put on alert as the suit which has lasted for over a decade now, the petitioner
instruments in question were crossed checks. Pursuant to deprived David of the rightful enjoyment of the two
Bataan Cigar & Cigarette Factory, Inc. v. Court of checks, to which he is entitled, under the law, compelled
Appeals, David should at least have inquired as to whether him to hire the services of counsel to vindicate his rights,
he was acquiring said checks for the purpose for which and subjected him to social humiliation and besmirched
they were issued, according to petitioners submission. reputation, thus harming his standing as a person of good
repute in the business community of Pampanga. David
Petitioners reliance on the Bataan Cigar case, however, is thus contends that it is but proper that moral damages,
misplaced. The facts in the present case are not on all attorneys fees, and costs of suit be awarded him.
fours with Bataan Cigar. In the latter case, the crossed
checks were negotiated and sold at a discount by the For its part, respondent PCIB stresses that it was
payee, while in the instant case, the payee did not established by both the trial court and the appellate court
negotiate further the checks in question but promptly that it was needlessly dragged into this case. Hence, no
deposited them in his bank account. error was committed by the appellate court in declaring

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School of Law | Mercantile Law

PCIB entitled to attorneys fees as it was compelled to [G.R. No. 136729. September 23 ,2003]
litigate to protect itself.
ASTRO ELECTRONICS CORP. and PETER
We have thoroughly perused the records of this case and ROXAS, petitioner, vs. PHILIPPINE EXPORT AND
find no reason to disagree with the finding of the trial FOREIGN LOAN GUARANTEE CORPORATION,
court, as affirmed by the appellate court, that: respondent.

[D]efendant David is entitled to [the] award of moral DECISION

damages as he has been needlessly and unceremoniously
dragged into this case which should have been brought AUSTRIA-MARTINEZ, J.:
only between the plaintiff and defendant
Chandiramani.[26] Assailed in this petition for review on certiorari under
Rule 45 of the Rules of Court is the decision of the Court
A careful reading of the findings of facts made by both of Appeals in CA-G.R. CV No. 41274,[1] affirming the
the trial court and appellate court clearly shows that the decision of the Regional Trial Court (Branch 147) of
petitioner, in including David as a party in these Makati, then Metro Manila, whereby petitioners Peter
proceedings, is barking up the wrong tree. It is apparent Roxas and Astro Electronics Corp. (Astro for brevity)
from the factual findings that David had no dealings with were ordered to pay respondent Philippine Export and
the petitioner and was not privy to the agreement of the Foreign Loan Guarantee Corporation (Philguarantee),
latter with Chandiramani. Moreover, any loss which the jointly and severally, the amount of P3,621,187.52 with
petitioner incurred was apparently due to the acts or interests and costs.
omissions of Chandiramani, and hence, her recourse
should have been against him and not against David. By The antecedent facts are undisputed.
needlessly dragging David into this case all because he
and Chandiramani knew each other, the petitioner not Astro was granted several loans by the Philippine Trust
only unduly delayed David from obtaining the value of Company (Philtrust) amounting to P3,000,000.00 with
the checks, but also caused him anxiety and injured his interest and secured by three promissory notes: PN NO.
business reputation while waiting for its outcome. Recall PFX-254 dated December 14, 1981 for P600,000.00, PN
that under Article 2217[27] of the Civil Code, moral No. PFX-258 also dated December 14, 1981 for
damages include mental anguish, serious anxiety, P400,000.00 and PN No. 15477 dated August 27, 1981
besmirched reputation, wounded feelings, social for P2,000,000.00. In each of these promissory notes, it
humiliation, and similar injury. Hence, we find the award appears that petitioner Roxas signed twice, as President of
of moral damages to be in order. Astro and in his personal capacity.[2] Roxas also signed a
Continuing Surety ship Agreement in favor of Philtrust
The appellate court likewise found that like David, PCIB Bank, as President of Astro and as surety.[3]
was dragged into this case on unfounded and baseless
grounds. Both were thus compelled to litigate to protect Thereafter, Philguarantee, with the consent of Astro,
their interests, which makes an award of attorneys fees guaranteed in favor of Philtrust the payment of 70% of
justified under Article 2208 (2)[28] of the Civil Code. Astros loan,[4] subject to the condition that upon payment
Hence, we rule that the award of attorneys fees to David by Philguanrantee of said amount, it shall be
and PCIB was proper. proportionally subrogated to the rights of Philtrust against
Astro.[5]
WHEREFORE, the instant petition is DENIED. The
assailed decision of the Court of Appeals, dated March 25, As a result of Astros failure to pay its loan obligations,
1999, in CA-G.R. CV No. 52398 is AFFIRMED. Costs despite demands, Philguarantee paid 70% of the
against the petitioner. guaranteed loan to Philtrust. Subsequently, Philguarantee
filed against Astro and Roxas a complaint for sum of
SO ORDERED. money with the RTC of Makati.

In his Answer, Roxas disclaims any liability on the

instruments, alleging, inter alia, that he merely signed the

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same in blank and the phrases in his personal capacity and its tenor.[11] Thus, even without the phrase personal
in his official capacity were fraudulently inserted without capacity, Roxas will still be primarily liable as a joint and
his knowledge.[6] several debtor under the notes considering that his
intention to be liable as such is manifested by the fact that
After trial, the RTC rendered its decision in favor of he affixed his signature on each of the promissory notes
Philguarantee with the following dispositive portion: twice which necessarily would imply that he is
undertaking the obligation in two different capacities,
WHEREFORE, in view of all the foregoing, the Court official and personal.
hereby renders judgment in favor or (sic) the plaintiff and
against the defendants Astro Electronics Corporation and Unnoticed by both the trial court and the Court of
Peter T. Roxas, ordering the then (sic) to pay, jointly and Appeals, a closer examination of the signatures affixed by
severally, the plaintiff the sum of P3,621.187.52 Roxas on the promissory notes, Exhibits A-4 and 3-A and
representing the total obligation of defendants in favor of B-4 and 4-A readily reveals that portions of his signatures
plaintiff Philguarantee as of December 31, 1984 with covered portions of the typewritten words personal
interest at the stipulated rate of 16% per annum and capacity indicating with certainty that the typewritten
stipulated penalty charges of 16% per annum computed words were already existing at the time Roxas affixed his
from January 1, 1985 until the amount is fully paid. With signatures thus demolishing his claim that the typewritten
costs. words were just inserted after he signed the promissory
notes. If what he claims is true, then portions of the
SO ORDERED.[7] typewritten words would have covered portions of his
signatures, and not vice versa.
The trial court observed that if Roxas really intended to
sign the instruments merely in his capacity as President of As to the third promissory note, Exhibit C-4 and 5-A, the
Astro, then he should have signed only once in the copy submitted is not clear so that this Court could not
promissory note.[8] discern the same observations on the notes, Exhibits A-4
and 3-A and B-4 and 4-A.
On appeal, the Court of Appeals affirmed the RTC
decision agreeing with the trial court that Roxas failed to Nevertheless, the following discussions equally apply to
explain satisfactorily why he had to sign twice in the all three promissory notes.
contract and therefore the presumption that private
transactions have been fair and regular must be The three promissory notes uniformly provide: FOR
sustained.[9] VALUE RECEIVED, I/We jointly, severally and
solidarily, promise to pay to PHILTRUST BANK or
In the present petition, the principal issue to be resolved order...[12] An instrument which begins with I, We, or
is whether or not Roxas should be jointly and severally Either of us promise to pay, when signed by two or more
liable (solidary) with Astro for the sum awarded by the persons, makes them solidarily liable.[13] Also, the
RTC. phrase joint and several binds the makers jointly and
individually to the payee so that all may be sued together
The answer is in the affirmative. for its enforcement, or the creditor may select one or more
as the object of the suit.[14] Having signed under such
Astros loan with Philtrust Bank is secured by three terms, Roxas assumed the solidary liability of a debtor and
promissory notes. These promissory notes are valid and Philtrust Bank may choose to enforce the notes against
binding against Astro and Roxas. As it appears on the him alone or jointly with Astro.
notes, Roxas signed twice: first, as president of Astro and
second, in his personal capacity. In signing his name aside Roxas claim that the phrases in his personal capacity and
from being the President of Asro, Roxas became a co- in his official capacity were inserted on the notes without
maker of the promissory notes and cannot escape any his knowledge was correctly disregarded by the RTC and
liability arising from it. Under the Negotiable Instruments the Court of Appeals. It is not disputed that Roxas does
Law, persons who write their names on the face of not deny that he signed the notes twice. As aptly found by
promissory notes are makers,[10] promising that they will both the trial and appellate court, Roxas did not offer any
pay to the order of the payee or any holder according to explanation why he did so. It devolves upon him to

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School of Law | Mercantile Law

overcome the presumptions that private transactions are the guarantor who pays is subrogated by virtue thereof to
presumed to be fair and regular[15] and that a person takes all the rights which the creditor had against the debtor.[23]
ordinary care of his concerns.[16] Aside from his self-
serving allegations, Roxas failed to prove the truth of such WHEREFORE, finding no error with the decision of the
allegations. Thus, said presumptions prevail over his Court of Appeals dated December 10, 1998, the same is
claims. Bare allegations, when unsubstantiated by hereby AFFIRMED in toto.
evidence, documentary or otherwise, are not equivalent to
proof under our Rules of Court.[17] SO ORDERED.

Roxas is the President of Astro and reasonably, a

businessman who is presumed to take ordinary care of his
concerns. Absent any countervailing evidence, it cannot
be gainsaid that he will not sign document without first
informing himself of its contents and consequences.
Clearly, he knew the nature of the transactions and
documents involved as he not only executed these notes [G.R. No. 154127. December 8, 2003]
on two different dates but he also executed, and again,
signed twice, a continuing Surety ship Agreement ROMEO C. GARCIA, petitioner, vs. DIONISIO V.
notarized on July 31, 1981, wherein he guaranteed, jointly LLAMAS, respondent.
and severally with Astro the repayment of P3,000,000.00
due to Philtrust. Such continuing suretyship agreement DECISION
even re-enforced his solidary liability Philtrust because as
a surety, he bound himself jointly and severally with PANGANIBAN, J.:
Astros obligation.[18] Roxas cannot now avoid liability
by hiding under the convenient excuse that he merely Novation cannot be presumed. It must be clearly shown
signed the notes in blank and the phrases in personal either by the express assent of the parties or by the
capacity and in his official capacity were fraudulently complete incompatibility between the old and the new
inserted without his knowledge. agreements. Petitioner herein fails to show either
requirement convincingly; hence, the summary judgment
Lastly, Philguarantee has all the right to proceed against holding him liable as a joint and solidary debtor stands.
petitioner, it is subrogated to the rights of Philtrust to
demand for and collect payment from both Roxas and The Case
Astro since it already paid the value of 70% of roxas and
Astro Electronics Corp.s loan obligation. In compliance Before us is a Petition for Review[1] under Rule 45 of the
with its contract of Guarantee in favor of Philtrust. Rules of Court, seeking to nullify the November 26, 2001
Decision[2] and the June 26, 2002 Resolution[3] of the
Subrogation is the transfer of all the rights of the creditor Court of Appeals (CA) in CA-GR CV No. 60521. The
to a third person, who substitutes him in all his rights.[19] appellate court disposed as follows:
It may either be legal or conventional. Legal subrogation
is that which takes place without agreement but by UPON THE VIEW WE TAKE OF THIS CASE, THUS,
operation of law because of certain acts.[20] Instances of the judgment appealed from, insofar as it pertains to
legal subrogation are those provided in Article 1302 of the [Petitioner] Romeo Garcia, must be, as it hereby is,
Civil Code. Conventional subrogation, on the other hand, AFFIRMED, subject to the modification that the award
is that which takes place by agreement of the parties.[21] for attorneys fees and cost of suit is DELETED. The
portion of the judgment that pertains to x x x Eduardo de
Roxas acquiescence is not necessary for subrogation to Jesus is SET ASIDE and VACATED. Accordingly, the
take place because the instant case is one of the legal case against x x x Eduardo de Jesus is REMANDED to
subrogation that occurs by operation of law, and without the court of origin for purposes of receiving ex parte
need of the debtors knowledge.[22] Further, [Respondent] Dionisio Llamas evidence against x x x
Philguarantee, as guarantor, became the transferee of all Eduardo de Jesus.[4]
the rights of Philtrust as against Roxas and Astro because

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School of Law | Mercantile Law

The challenged Resolution, on the other hand, denied is, for January and February 1997; that[,] in fact[,] he paid
petitioners Motion for Reconsideration. the sum of P120,000.00 by way of interests; that this was
made when [respondents] daughter, one Nits Llamas-
The Antecedents Quijencio, received from the Central Police District
Command at Bicutan, Taguig, Metro Manila (where x x x
The antecedents of the case are narrated by the CA as de Jesus worked), the sum of P40,000.00, representing the
follows: peso equivalent of his accumulated leave credits, another
P40,000.00 as advance interest, and still another
This case started out as a complaint for sum of money and P40,000.00 as interest for the months of March and April
damages by x x x [Respondent] Dionisio Llamas against 1997; that he had difficulty in paying the loan and had
x x x [Petitioner] Romeo Garcia and Eduardo de Jesus. asked [respondent] for an extension of time; that
Docketed as Civil Case No. Q97-32-873, the complaint [respondent] acted in bad faith in instituting the case,
alleged that on 23 December 1996[,] [petitioner and de [respondent] having agreed to accept the benefits he (de
Jesus] borrowed P400,000.00 from [respondent]; that, on Jesus) would receive for his retirement, but [respondent]
the same day, [they] executed a promissory note wherein nonetheless filed the instant case while his retirement was
they bound themselves jointly and severally to pay the being processed; and that, in defense of his rights, he
loan on or before 23 January 1997 with a 5% interest per agreed to pay his counsel P20,000.00 [as] attorneys fees,
month; that the loan has long been overdue and, despite plus P1,000.00 for every court appearance.
repeated demands, [petitioner and de Jesus] have failed
and refused to pay it; and that, by reason of the[ir] During the pre-trial conference, x x x de Jesus and his
unjustified refusal, [respondent] was compelled to engage lawyer did not appear, nor did they file any pre-trial brief.
the services of counsel to whom he agreed to pay 25% of Neither did [Petitioner] Garcia file a pre-trial brief, and
the sum to be recovered from [petitioner and de Jesus], his counsel even manifested that he would no [longer]
plus P2,000.00 for every appearance in court. Annexed to present evidence. Given this development, the trial court
the complaint were the promissory note above-mentioned gave [respondent] permission to present his evidence ex
and a demand letter, dated 02 May 1997, by [respondent] parte against x x x de Jesus; and, as regards [Petitioner]
addressed to [petitioner and de Jesus]. Garcia, the trial court directed [respondent] to file a
motion for judgment on the pleadings, and for [Petitioner]
Resisting the complaint, [Petitioner Garcia,] in his Garcia to file his comment or opposition thereto.
[Answer,] averred that he assumed no liability under the
promissory note because he signed it merely as an Instead, [respondent] filed a [M]otion to declare
accommodation party for x x x de Jesus; and, [Petitioner] Garcia in default and to allow him to present
alternatively, that he is relieved from any liability arising his evidence ex parte. Meanwhile, [Petitioner] Garcia
from the note inasmuch as the loan had been paid by x x filed a [M]anifestation submitting his defense to a
x de Jesus by means of a check dated 17 April 1997; and judgment on the pleadings. Subsequently, [respondent]
that, in any event, the issuance of the check and filed a [M]anifestation/[M]otion to submit the case for
[respondents] acceptance thereof novated or superseded judgement on the pleadings, withdrawing in the process
the note. his previous motion. Thereunder, he asserted that
[petitioners and de Jesus] solidary liability under the
[Respondent] tendered a reply to [Petitioner] Garcias promissory note cannot be any clearer, and that the check
answer, thereunder asserting that the loan remained issued by de Jesus did not discharge the loan since the
unpaid for the reason that the check issued by x x x de check bounced.[5]
Jesus bounced, and that [Petitioner] Garcias answer was
not even accompanied by a certificate of non-forum On July 7, 1998, the Regional Trial Court (RTC) of
shopping. Annexed to the reply were the face of the check Quezon City (Branch 222) disposed of the case as
and the reverse side thereof. follows:

For his part, x x x de Jesus asserted in his [A]nswer with WHEREFORE, premises considered, judgment on the
[C]ounterclaim that out of the supposed P400,000.00 pleadings is hereby rendered in favor of [respondent] and
loan, he received only P360,000.00, the P40,000.00 against [petitioner and De Jesus], who are hereby ordered
having been advance interest thereon for two months, that

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School of Law | Mercantile Law

to pay, jointly and severally, the [respondent] the

following sums, to wit: Whether or not the Honorable Court of Appeals gravely
erred in not holding that novation applies in the instant
1) P400,000.00 representing the principal amount plus 5% case as x x x Eduardo de Jesus had expressly assumed sole
interest thereon per month from January 23, 1997 until the and exclusive liability for the loan obligation he obtained
same shall have been fully paid, less the amount of from x x x Respondent Dionisio Llamas, as clearly
P120,000.00 representing interests already paid by x x x evidenced by:
de Jesus;
a) Issuance by x x x de Jesus of a check in payment of the
2) P100,000.00 as attorneys fees plus appearance fee of full amount of the loan of P400,000.00 in favor of
P2,000.00 for each day of [c]ourt appearance, and; Respondent Llamas, although the check subsequently
bounced[;]
3) Cost of this suit.[6]
b) Acceptance of the check by the x x x respondent x x x
Ruling of the Court of Appeals which resulted in [the] substitution by x x x de Jesus or
[the superseding of] the promissory note;
The CA ruled that the trial court had erred when it
rendered a judgment on the pleadings against De Jesus. c) x x x de Jesus having paid interests on the loan in the
According to the appellate court, his Answer raised total amount of P120,000.00;
genuinely contentious issues. Moreover, he was still
required to present his evidence ex parte. Thus, d) The fact that Respondent Llamas agreed to the proposal
respondent was not ipso facto entitled to the RTC of x x x de Jesus that due to financial difficulties, he be
judgment, even though De Jesus had been declared in given an extension of time to pay his loan obligation and
default. The case against the latter was therefore that his retirement benefits from the Philippine National
remanded by the CA to the trial court for the ex parte Police will answer for said obligation.
reception of the formers evidence.
II
As to petitioner, the CA treated his case as a summary
judgment, because his Answer had failed to raise even a Whether or not the Honorable Court of Appeals seriously
single genuine issue regarding any material fact. erred in not holding that the defense of petitioner that he
was merely an accommodation party, despite the fact that
The appellate court ruled that no novation -- express or the promissory note provided for a joint and solidary
implied -- had taken place when respondent accepted the liability, should have been given weight and credence
check from De Jesus. According to the CA, the check was considering that subsequent events showed that the
issued precisely to pay for the loan that was covered by principal obligor was in truth and in fact x x x de Jesus, as
the promissory note jointly and severally undertaken by evidenced by the foregoing circumstances showing his
petitioner and De Jesus. Respondents acceptance of the assumption of sole liability over the loan obligation.
check did not serve to make De Jesus the sole debtor
because, first, the obligation incurred by him and III
petitioner was joint and several; and, second, the check --
which had been intended to extinguish the obligation -- Whether or not judgment on the pleadings or summary
bounced upon its presentment. judgment was properly availed of by Respondent Llamas,
despite the fact that there are genuine issues of fact, which
Hence, this Petition.[7] the Honorable Court of Appeals itself admitted in its
Decision, which call for the presentation of evidence in a
Issues full-blown trial.[8]

Petitioner submits the following issues for our Simply put, the issues are the following: 1) whether there
consideration: was novation of the obligation; 2) whether the defense
that petitioner was only an accommodation party had any
I basis; and 3) whether the judgment against him -- be it a

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School of Law | Mercantile Law

judgment on the pleadings or a summary judgment -- was the obligation; thus, the consent of these three persons are
proper. necessary.[11] Both modes of substitution by the debtor
require the consent of the creditor.[12]
The Courts Ruling
Novation may also be extinctive or modificatory. It is
The Petition has no merit. extinctive when an old obligation is terminated by the
creation of a new one that takes the place of the former. It
First Issue: is merely modificatory when the old obligation subsists to
the extent that it remains compatible with the amendatory
Novation agreement.[13] Whether extinctive or modificatory,
novation is made either by changing the object or the
Petitioner seeks to extricate himself from his obligation as principal conditions, referred to as objective or real
joint and solidary debtor by insisting that novation took novation; or by substituting the person of the debtor or
place, either through the substitution of De Jesus as sole subrogating a third person to the rights of the creditor, an
debtor or the replacement of the promissory note by the act known as subjective or personal novation.[14] For
check. Alternatively, the former argues that the original novation to take place, the following requisites must
obligation was extinguished when the latter, who was his concur:
co-obligor, paid the loan with the check.
1) There must be a previous valid obligation.
The fallacy of the second (alternative) argument is all too
apparent. The check could not have extinguished the 2) The parties concerned must agree to a new contract.
obligation, because it bounced upon presentment. By
law,[9] the delivery of a check produces the effect of 3) The old contract must be extinguished.
payment only when it is encashed.
4) There must be a valid new contract.[15]
We now come to the main issue of whether novation took
place. Novation may also be express or implied. It is express
when the new obligation declares in unequivocal terms
Novation is a mode of extinguishing an obligation by that the old obligation is extinguished. It is implied when
changing its objects or principal obligations, by the new obligation is incompatible with the old one on
substituting a new debtor in place of the old one, or by every point.[16] The test of incompatibility is whether the
subrogating a third person to the rights of the creditor.[10] two obligations can stand together, each one with its own
Article 1293 of the Civil Code defines novation as independent existence.[17]
follows:
Applying the foregoing to the instant case, we hold that
Art. 1293. Novation which consists in substituting a new no novation took place.
debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but The parties did not unequivocally declare that the old
not without the consent of the creditor. Payment by the obligation had been extinguished by the issuance and the
new debtor gives him rights mentioned in articles 1236 acceptance of the check, or that the check would take the
and 1237. place of the note. There is no incompatibility between the
promissory note and the check. As the CA correctly
In general, there are two modes of substituting the person observed, the check had been issued precisely to answer
of the debtor: (1) expromision and (2) delegacion. In for the obligation. On the one hand, the note evidences the
expromision, the initiative for the change does not come loan obligation; and on the other, the check answers for it.
from -- and may even be made without the knowledge of Verily, the two can stand together.
-- the debtor, since it consists of a third persons
assumption of the obligation. As such, it logically requires Neither could the payment of interests -- which, in
the consent of the third person and the creditor. In petitioners view, also constitutes novation[18] -- change
delegacion, the debtor offers, and the creditor accepts, a the terms and conditions of the obligation. Such payment
third person who consents to the substitution and assumes

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School of Law | Mercantile Law

was already provided for in the promissory note and, like It must be noted that in a solidary obligation, the creditor
the check, was totally in accord with the terms thereof. is entitled to demand the satisfaction of the whole
obligation from any or all of the debtors.[26] It is up to
Also unmeritorious is petitioners argument that the the former to determine against whom to enforce
obligation was novated by the substitution of debtors. In collection.[27] Having made himself jointly and severally
order to change the person of the debtor, the old one must liable with De Jesus, petitioner is therefore liable[28] for
be expressly released from the obligation, and the third the entire obligation.[29]
person or new debtor must assume the formers place in
the relation.[19] Well-settled is the rule that novation is Second Issue:
never presumed.[20] Consequently, that which arises
from a purported change in the person of the debtor must Accommodation Party
be clear and express.[21] It is thus incumbent on petitioner
to show clearly and unequivocally that novation has Petitioner avers that he signed the promissory note merely
indeed taken place. as an accommodation party; and that, as such, he was
released as obligor when respondent agreed to extend the
In the present case, petitioner has not shown that he was term of the obligation.
expressly released from the obligation, that a third person
was substituted in his place, or that the joint and solidary This reasoning is misplaced, because the note herein is not
obligation was cancelled and substituted by the solitary a negotiable instrument. The note reads:
undertaking of De Jesus. The CA aptly held:
PROMISSORY NOTE
x x x. Plaintiffs acceptance of the bum check did not result
in substitution by de Jesus either, the nature of the P400,000.00
obligation being solidary due to the fact that the
promissory note expressly declared that the liability of RECEIVED FROM ATTY. DIONISIO V. LLAMAS, the
appellants thereunder is joint and [solidary.] Reason: sum of FOUR HUNDRED THOUSAND PESOS,
under the law, a creditor may demand payment or Philippine Currency payable on or before January 23,
performance from one of the solidary debtors or some or 1997 at No. 144 K-10 St. Kamias, Quezon City, with
all of them simultaneously, and payment made by one of interest at the rate of 5% per month or fraction thereof.
them extinguishes the obligation. It therefore follows that
in case the creditor fails to collect from one of the solidary It is understood that our liability under this loan is jointly
debtors, he may still proceed against the other or others. x and severally [sic].
x x [22]
Done at Quezon City, Metro Manila this 23rd day of
Moreover, it must be noted that for novation to be valid December, 1996.[30]
and legal, the law requires that the creditor expressly
consent to the substitution of a new debtor.[23] Since By its terms, the note was made payable to a specific
novation implies a waiver of the right the creditor had person rather than to bearer or to order[31] -- a requisite
before the novation, such waiver must be express.[24] It for negotiability under Act 2031, the Negotiable
cannot be supposed, without clear proof, that the present Instruments Law (NIL). Hence, petitioner cannot avail
respondent has done away with his right to exact himself of the NILs provisions on the liabilities and
fulfillment from either of the solidary debtors.[25] defenses of an accommodation party. Besides, a non-
negotiable note is merely a simple contract in writing and
More important, De Jesus was not a third person to the is evidence of such intangible rights as may have been
obligation. From the beginning, he was a joint and created by the assent of the parties.[32] The promissory
solidary obligor of the P400,000 loan; thus, he can be note is thus covered by the general provisions of the Civil
released from it only upon its extinguishment. Code, not by the NIL.
Respondents acceptance of his check did not change the
person of the debtor, because a joint and solidary obligor Even granting arguendo that the NIL was applicable, still,
is required to pay the entirety of the obligation. petitioner would be liable for the promissory note. Under
Article 29 of Act 2031, an accommodation party is liable

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School of Law | Mercantile Law

for the instrument to a holder for value even if, at the time judgment on the pleadings. His Answer[40] apparently
of its taking, the latter knew the former to be only an raised several issues -- that he signed the promissory note
accommodation party. The relation between an allegedly as a mere accommodation party, and that the
accommodation party and the party accommodated is, in obligation was extinguished by either payment or
effect, one of principal and surety -- the accommodation novation. However, these are not factual issues requiring
party being the surety.[33] It is a settled rule that a surety trial. We quote with approval the CAs observations:
is bound equally and absolutely with the principal and is
deemed an original promissor and debtor from the Although Garcias [A]nswer tendered some issues, by way
beginning. The liability is immediate and direct.[34] of affirmative defenses, the documents submitted by
[respondent] nevertheless clearly showed that the issues
Third Issue: so tendered were not valid issues. Firstly, Garcias claim
that he was merely an accommodation party is belied by
Propriety of Summary Judgment the promissory note that he signed. Nothing in the note
indicates that he was only an accommodation party as he
or Judgment on the Pleadings claimed to be. Quite the contrary, the promissory note
bears the statement: It is understood that our liability
The next issue illustrates the usual confusion between a under this loan is jointly and severally [sic]. Secondly, his
judgment on the pleadings and a summary judgment. claim that his co-defendant de Jesus already paid the loan
Under Section 3 of Rule 35 of the Rules of Court, a by means of a check collapses in view of the dishonor
summary judgment may be rendered after a summary thereof as shown at the dorsal side of said check.[41]
hearing if the pleadings, supporting affidavits, depositions
and admissions on file show that (1) except as to the From the records, it also appears that petitioner himself
amount of damages, there is no genuine issue regarding moved to submit the case for judgment on the basis of the
any material fact; and (2) the moving party is entitled to a pleadings and documents. In a written Manifestation,[42]
judgment as a matter of law. he stated that judgment on the pleadings may now be
rendered without further evidence, considering the
A summary judgment is a procedural device designed for allegations and admissions of the parties.[43]
the prompt disposition of actions in which the pleadings
raise only a legal, not a genuine, issue regarding any In view of the foregoing, the CA correctly considered as
material fact.[35] Consequently, facts are asserted in the a summary judgment that which the trial court had issued
complaint regarding which there is yet no admission, against petitioner.
disavowal or qualification; or specific denials or
affirmative defenses are set forth in the answer, but the WHEREFORE, this Petition is hereby DENIED and the
issues are fictitious as shown by the pleadings, assailed Decision AFFIRMED. Costs against petitioner.
depositions or admissions.[36] A summary judgment may
be applied for by either a claimant or a defending SO ORDERED.
party.[37]

On the other hand, under Section 1 of Rule 34 of the Rules

of Court, a judgment on the pleadings is proper when an
answer fails to render an issue or otherwise admits the
material allegations of the adverse partys pleading. The
essential question is whether there are issues generated by
the pleadings.[38] A judgment on the pleadings may be
sought only by a claimant, who is the party seeking to
recover upon a claim, counterclaim or cross-claim; or to
obtain a declaratory relief. [39]

Apropos thereto, it must be stressed that the trial courts

judgment against petitioner was correctly treated by the
appellate court as a summary judgment, rather than as a

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