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G.R. No. 184458, January 14, 2015

RODRIGO RIVERA, Petitioner , v. SPOUSES

SALVADOR CHUA AND S. VIOLETA

CHUA,Respondents.

[G.R. NO. 184472]

SPS. SALVADOR CHUA AND VIOLETA S.

CHUA, Petitioners, v. RODRIGO RIVERA, Respondent .

D E C I S I O N

PEREZ, J.:

Before us are consolidated Petitions for Review

on Certiorari under Rule 45 of the Rules of Court

assailing the Decision1

of the Court of Appeals in CA-G.R. SP No. 90609 which affirmed with modification

the separate rulings of the Manila City trial courts,

the Regional Trial Court, Branch 17 in Civil Case No.

02-1052562 and the Metropolitan Trial Court

(MeTC), Branch 30, in Civil Case No. 163661,3 a case

for collection of a sum of money due a promissory

note. While all three (3) lower courts upheld the

validity and authenticity of the promissory note as

duly signed by the obligor, Rodrigo Rivera (Rivera),

petitioner in G.R. No. 184458, the appellate court

modified the trial courts’ consistent awards: (1) the

stipulated interest rate of sixty percent (60%)

reduced to twelve percent (12%) per

annum computed from the date of judicial or

extrajudicial demand, and (2) reinstatement of the

award of attorney’s fees also in a reduced amount of

P50,000.00.

In G.R. No. 184458, Rivera persists in his contention

that there was no valid promissory note and

questions the entire ruling of the lower courts. On

the other hand, petitioners in G.R. No. 184472,

Spouses Salvador and Violeta Chua (Spouses Chua),

take exception to the appellate court’s reduction of

the stipulated interest rate of sixty percent (60%) totwelve percent (12%) per annum.

We proceed to the facts.

The parties were friends of long standing having

known each other since 1973: Rivera and Salvador

are kumpadres, the former is the godfather of the

Spouses Chua’s son.

On 24 February 1995, Rivera obtained a loan from

the Spouses Chua:

PROMISSORY NOTE

120,000.00

FOR VALUE RECEIVED, I, RODRIGO RIVERA promise

to pay spouses SALVADOR C. CHUA and VIOLETA SY

CHUA, the sum of One Hundred Twenty Thousand

Philippine Currency (P120,000.00) on December 31,

1995.

It is agreed and understood that failure on my part

to pay the amount of (P120,000.00) One Hundred

Twenty Thousand Pesos on December 31, 1995. (sic)

I agree to pay the sum equivalent to FIVE PERCENT

(5%) interest monthly from the date of default until

the entire obligation is fully paid for.

Should this note be referred to a lawyer for

collection, I agree to pay the further sum equivalent

to twenty percent (20%) of the total amount due

and payable as and for attorney’s fees which in no

case shall be less than P5,000.00 and to pay in

addition the cost of suit and other incidental

litigation expense.

Any action which may arise in connection with this

note shall be brought in the proper Court of the City

of Manila.

Manila, February 24, 1995[.]

(SGD.) RODRIGO RIVERA4

In October 1998, almost three years from the date of

payment stipulated in the promissory note, Rivera,

as partial payment for the loan, issued and delivered

to the Spouses Chua, as payee, a check numbered

012467, dated 30 December 1998, drawn against

Rivera’s current account with the Philippine

Commercial International Bank (PCIB) in the amount

of P25,000.00.

On 21 December 1998, the Spouses Chua received

another check presumably issued by Rivera, likewise

drawn against Rivera’s PCIB current account,

numbered 013224, duly signed and dated, but blank

as to payee and amount. Ostensibly, as per

understanding by the parties, PCIB Check No.

013224 was issued in the amount of P133,454.00



with “cash” as payee. Purportedly, both checks were

simply partial payment for Rivera’s loan in the

principal amount of P120,000.00.

Upon presentment for payment, the two checks

were dishonored for the reason “account closed.”

As of 31 May 1999, the amount due the Spouses

Chua was pegged at P366,000.00 covering the

principal of P120,000.00 plus five percent (5%)

interest per month from 1 January 1996 to 31 May

1999.

The Spouses Chua alleged that they have repeatedly

demanded payment from Rivera to no avail. Because

of Rivera’s unjustified refusal to pay, the Spouses

Chua were constrained to file a suit on 11 June 1999.

The case was raffled before the MeTC, Branch 30,

Manila and docketed as Civil Case No. 163661.

In his Answer with Compulsory Counterclaim, Rivera

countered that: (1) he never executed the subject

Promissory Note; (2) in all instances when he

obtained a loan from the Spouses Chua, the loans

were always covered by a security; (3) at the time of

the filing of the complaint, he still had an existing

indebtedness to the Spouses Chua, secured by a real

estate mortgage, but not yet in default; (4) PCIB

Check No. 132224 signed by him which he delivered

to the Spouses Chua on 21 December 1998, should

have been issued in the amount of only P1,300.00,

representing the amount he received from theSpouses Chua’s saleslady; (5) contrary to the

supposed agreement, the Spouses Chua presented

the check for payment in the amount of

P133,454.00; and (6) there was no demand for

payment of the amount of P120,000.00 prior to the

encashment of PCIB Check No.

0132224.5chanRoblesvirtualLawlibrary

In the main, Rivera claimed forgery of the subject

Promissory Note and denied his indebtedness

thereunder.

The MeTC summarized the testimonies of both

parties’ respective

witnesses:chanroblesvirtuallawlibrary

[The spouses Chua’s] evidence include[s]

documentary evidence and oral evidence (consisting

of the testimonies of [the spouses] Chua and NBI

Senior Documents Examiner Antonio Magbojos). x x

x

x x x x

Witness Magbojos enumerated his credentials as

follows: joined the NBI (1987); NBI document

examiner (1989); NBI Senior Document Examiner

(1994 to the date he testified); registeredcriminologist; graduate of 18th Basic Training Course

[i]n Questioned Document Examination conducted

by the NBI; twice attended a seminar on US Dollar

Counterfeit Detection conducted by the US Embassy

in Manila; attended a seminar on Effective

Methodology in Teaching and Instructional design

conducted by the NBI Academy; seminar lecturer on

Questioned Documents, Signature Verification

and/or Detection; had examined more than a

hundred thousand questioned documents at the

time he testified.

Upon [order of the MeTC], Mr. Magbojos examined

the purported signature of [Rivera] appearing in the

Promissory Note and compared the signature

thereon with the specimen signatures of [Rivera]

appearing on several documents. After a thorough

study, examination, and comparison of the signature

on the questioned document (Promissory Note) and

the specimen signatures on the documents

submitted to him, he concluded that the questioned

signature appearing in the Promissory Note and the

specimen signatures of [Rivera] appearing on the

other documents submitted were written by one

and the same person. In connection with hisfindings, Magbojos prepared Questioned Documents

Report No. 712-1000 dated 8 January 2001, with the

following conclusion: “The questioned and the

standard specimen signatures RODGRIGO RIVERA

were written by one and the same person.”

[Rivera] testified as follows: he and [respondent]

Salvador are “kumpadres;” in May 1998, he obtained

a loan from [respondent] Salvador and executed a

real estate mortgage over a parcel of land in favor of

[respondent Salvador] as collateral; aside from this

loan, in October, 1998 he borrowed P25,000.00 from

Salvador and issued PCIB Check No. 126407 dated 30

December 1998; he expressly denied execution of

the Promissory Note dated 24 February 1995 and

alleged that the signature appearing thereon was

not his signature; [respondent Salvador’s] claim that

PCIB Check No. 0132224 was partial payment for the

Promissory Note was not true, the truth being that

he delivered the check to [respondent Salvador] with

the space for amount left blank as he and



[respondent] Salvador had agreed that the latter was

to fill it in with the amount of ?1,300.00 which

amount he owed [the spouses Chua]; however, on

29 December 1998 [respondent] Salvador called him

and told him that he had written P133,454.00

instead of P1,300.00; x x x. To rebut the testimony of

NBI Senior Document Examiner Magbojos, [Rivera]reiterated his averment that the signature appearing

on the Promissory Note was not his signature and

that he did not execute the Promissory Note.6

After trial, the MeTC ruled in favor of the Spouses

Chua:chanroblesvirtuallawlibrary

WHEREFORE, [Rivera] is required to pay [the spouses

Chua]: P120,000.00 plus stipulated interest at the

rate of 5% per month from 1 January 1996, and legal

interest at the rate of 12% percent per annum from

11 June 1999, as actual and compensatory damages;

20% of the whole amount due as attorney’s fees.7

On appeal, the Regional Trial Court, Branch 17,

Manila affirmed the Decision of the MeTC, but

deleted the award of attorney’s fees to the Spouses

Chua:chanroblesvirtuallawlibrary

WHEREFORE, except as to the amount of attorney’s

fees which is hereby deleted, the rest of the Decision

dated October 21, 2002 is hereby AFFIRMED.8

Both trial courts found the Promissory Note as

authentic and validly bore the signature of Rivera.

Undaunted, Rivera appealed to the Court of Appeals

which affirmed Rivera’s liability under the

Promissory Note, reduced the imposition of interest

on the loan from 60% to 12% per annum, and

reinstated the award of attorney’s fees in favor of

the Spouses Chua:chanroblesvirtuallawlibrary

WHEREFORE, the judgment appealed from is

hereby AFFIRMED, subject to

theMODIFICATION that the interest rate of 60% per

annum is hereby reduced to 12% per annum and the

award of attorney’s fees is reinstated at the reduced

amount of P50,000.00 Costs against [Rivera].9

Hence, these consolidated petitions for review

on certiorari of Rivera in G.R. No. 184458 and the

Spouses Chua in G.R. No. 184472, respectively

raising the following

issues:chanroblesvirtuallawlibrary

A. In G.R. No. 184458

1. WHETHER OR NOT THE HONORABLE COURT OF

APPEALS ERRED IN UPHOLDING THE RULING OF THE

RTC AND M[e]TC THAT THERE WAS A VALID

PROMISSORY NOTE EXECUTED BY [RIVERA].


APPEALS ERRED IN HOLDING THAT DEMAND IS NO

LONGER NECESSARY AND IN APPLYING THE

PROVISIONS OF THE NEGOTIABLE INSTRUMENTS

LAW.


APPEALS ERRED IN AWARDING ATTORNEY’S FEES

DESPITE THE FACT THAT THE SAME HAS NO BASIS IN

FACT AND IN LAW AND DESPITE THE FACT THAT

[THE SPOUSES CHUA] DID NOT APPEAL FROM THE

DECISION OF THE RTC DELETING THE AWARD OF

ATTORNEY’S FEES.10chanRoblesvirtualLawlibrary

B. In G.R. No. 184472

[WHETHER OR NOT] THE HONORABLE COURT OF

APPEALS COMMITTED GROSS LEGAL ERROR WHEN

IT MODIFIED THE APPEALED JUDGMENT BY

REDUCING THE INTEREST RATE FROM 60% PER

ANNUM TO 12% PER ANNUM IN SPITE OF THE FACT

THAT RIVERA NEVER RAISED IN HIS ANSWER THE

DEFENSE THAT THE SAID STIPULATED RATE OF

INTEREST IS EXORBITANT, UNCONSCIONABLE,

UNREASONABLE, INEQUITABLE, ILLEGAL, IMMORALOR VOID.

11

As early as 15 December 2008, we already disposed

of G.R. No. 184472 and denied the petition, via a

Minute Resolution, for failure to sufficiently show

any reversible error in the ruling of the appellate

court specifically concerning the correct rate of

interest on Rivera’s indebtedness under the

Promissory Note.12

chanRoblesvirtualLawlibrary

On 26 February 2009, Entry of Judgment was made

in G.R. No. 184472.

Thus, what remains for our disposition is G.R. No.

184458, the appeal of Rivera questioning the entire

ruling of the Court of Appeals in CA-G.R. SP No.

90609.

Rivera continues to deny that he executed the

Promissory Note; he claims that given his friendship

with the Spouses Chua who were money lenders, he



has been able to maintain a loan account with them.

However, each of these loan transactions was

respectively “secured by checks or sufficient

collateral.”

Rivera points out that the Spouses Chua “never

demanded payment for the loan nor interest thereof(sic) from [Rivera] for almost four (4) years from the

time of the alleged default in payment [ i.e., after

December 31, 1995].”13


On the issue of the supposed forgery of the

promissory note, we are not inclined to depart from

the lower courts’ uniform rulings that Rivera indeed

signed it.

Rivera offers no evidence for his asseveration that

his signature on the promissory note was forged,

only that the signature is not his and varies from his

usual signature. He likewise makes a confusing

defense of having previously obtained loans from

the Spouses Chua who were money lenders and who

had allowed him a period of “almost four (4) years”

before demanding payment of the loan under the

Promissory Note.

First, we cannot give credence to such a naked claim

of forgery over the testimony of the National Bureau

of Investigation (NBI) handwriting expert on the

integrity of the promissory note.

On that score, the appellate court aptly disabledRivera’s contention:chanroblesvirtuallawlibrary

[Rivera] failed to adduce clear and convincing

evidence that the signature on the promissory note

is a forgery. The fact of forgery cannot be presumed

but must be proved by clear, positive and convincing

evidence. Mere variance of signatures cannot be

considered as conclusive proof that the same was

forged. Save for the denial of Rivera that the

signature on the note was not his, there is nothing in

the records to support his claim of forgery. And

while it is true that resort to experts is not

mandatory or indispensable to the examination of

alleged forged documents, the opinions of

handwriting experts are nevertheless helpful in the

court’s determination of a document’s authenticity.

To be sure, a bare denial will not suffice to overcome

the positive value of the promissory note and the

testimony of the NBI witness. In fact, even a

perfunctory comparison of the signatures offered in

evidence would lead to the conclusion that the

signatures were made by one and the same person.

It is a basic rule in civil cases that the party having

the burden of proof must establish his case by

preponderance of evidence, which simply means

“evidence which is of greater weight, or moreconvincing than that which is offered in opposition

to it.”

Evaluating the evidence on record, we are convinced

that [the Spouses Chua] have established a prima

facie case in their favor, hence, the burden of

evidence has shifted to [Rivera] to prove his

allegation of forgery. Unfortunately for [Rivera], he

failed to substantiate his defense.14

Well-entrenched in jurisprudence is the rule that

factual findings of the trial court, especially when

affirmed by the appellate court, are accorded the

highest degree of respect and are considered

conclusive between the parties.15

A review of such

findings by this Court is not warranted except upon a

showing of highly meritorious circumstances, such

as: (1) when the findings of a trial court are

grounded entirely on speculation, surmises or

conjectures; (2) when a lower court's inference from

its factual findings is manifestly mistaken, absurd or

impossible; (3) when there is grave abuse of

discretion in the appreciation of facts; (4) when the

findings of the appellate court go beyond the issues

of the case, or fail to notice certain relevant factswhich, if properly considered, will justify a different

conclusion; (5) when there is a misappreciation of

facts; (6) when the findings of fact are conclusions

without mention of the specific evidence on which

they are based, are premised on the absence of

evidence, or are contradicted by evidence on

record.16

None of these exceptions obtains in this

instance. There is no reason to depart from the

separate factual findings of the three (3) lower

courts on the validity of Rivera’s signature reflected

in the Promissory Note.

Indeed, Rivera had the burden of proving the

material allegations which he sets up in his Answer

to the plaintiff’s claim or cause of action, upon which

issue is joined, whether they relate to the whole

case or only to certain issues in the

case.17


In this case, Rivera’s bare assertion is

unsubstantiated and directly disputed by the



testimony of a handwriting expert from the NBI.

While it is true that resort to experts is not

mandatory or indispensable to the examination or

the comparison of handwriting, the trial courts in

this case, on its own, using the handwriting expert

testimony only as an aid, found the disputed

document valid.18


Hence, the MeTC ruled

that:chanroblesvirtuallawlibrary

[Rivera] executed the Promissory Note after

consideration of the following: categorical statement

of [respondent] Salvador that [Rivera] signed the

Promissory Note before him, in his ([Rivera’s])

house; the conclusion of NBI Senior Documents

Examiner that the questioned signature (appearing

on the Promissory Note) and standard specimen

signatures “Rodrigo Rivera” “were written by one

and the same person”; actual view at the hearing of

the enlarged photographs of the questioned

signature and the standard specimen signatures.19

Specifically, Rivera insists that: “[i]f that promissory

note indeed exists, it is beyond logic for a money

lender to extend another loan on May 4, 1998

secured by a real estate mortgage, when he was

already in default and has not been paying any

interest for a loan incurred in February

1995.”20


We disagree.

It is likewise likely that precisely because of the long

standing friendship of the parties as “kumpadres,”

Rivera was allowed another loan, albeit this time

secured by a real estate mortgage, which will cover

Rivera’s loan should Rivera fail to pay. There is

nothing inconsistent with the Spouses Chua’s two (2)

and successive loan accommodations to Rivera: one,

secured by a real estate mortgage and the other,

secured by only a Promissory Note.

Also completely plausible is that given the

relationship between the parties, Rivera was allowed

a substantial amount of time before the Spouses

Chua demanded payment of the obligation due

under the Promissory Note.

In all, Rivera’s evidence or lack thereof consisted

only of a barefaced claim of forgery and a discordant

defense to assail the authenticity and validity of the

Promissory Note. Although the burden of proof

rested on the Spouses Chua having instituted the

civil case and after they established a prima

facie case against Rivera, the burden of evidence

shifted to the latter to establish his

defense.21

Consequently, Rivera failed to discharge

the burden of evidence, refute the existence of the

Promissory Note duly signed by him andsubsequently, that he did not fail to pay his

obligation thereunder. On the whole, there was no

question left on where the respective evidence of

the parties preponderated—in favor of plaintiffs, the

Spouses Chua.

Rivera next argues that even assuming the validity of

the Promissory Note, demand was still necessary in

order to charge him liable thereunder. Rivera argues

that it was grave error on the part of the appellate

court to apply Section 70 of the Negotiable

Instruments Law (NIL).22


We agree that the subject promissory note is not a

negotiable instrument and the provisions of the NIL

do not apply to this case. Section 1 of the NIL

requires the concurrence of the following elements

to be a negotiable

instrument:chanroblesvirtuallawlibrary

(a) It must be in writing and signed by the maker or

drawer;

(b) Must contain an unconditional promise or order

to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed ordeterminable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee,

he must be named or otherwise indicated therein

with reasonable certainty.

On the other hand, Section 184 of the NIL defines

what negotiable promissory note

is:chanroblesvirtuallawlibrary

SECTION 184. Promissory Note, Defined. – A

negotiable promissory note within the meaning of

this Act is an unconditional promise in writing made

by one person to another, signed by the maker,

engaging to pay on demand, or at a fixed or

determinable future time, a sum certain in money to

order or to bearer. Where a note is drawn to the

maker’s own order, it is not complete until indorsed

by him.

The Promissory Note in this case is made out to



specific persons, herein respondents, the Spouses

Chua, and not to order or to bearer, or to the order

of the Spouses Chua as payees.

However, even if Rivera’s Promissory Note is not a

negotiable instrument and therefore outside the

coverage of Section 70 of the NIL which providesthat presentment for payment is not necessary to

charge the person liable on the instrument, Rivera is

still liable under the terms of the Promissory Note

that he issued.

The Promissory Note is unequivocal about the date

when the obligation falls due and becomes

demandable—31 December 1995. As of 1 January

1996, Rivera had already incurred in delay when he

failed to pay the amount of P120,000.00 due to the

Spouses Chua on 31 December 1995 under the

Promissory Note.

Article 1169 of the Civil Code explicitly

provides:chanroblesvirtuallawlibrary

Art. 1169. Those obliged to deliver or to do

something incur in delay from the time the obligee

judicially or extrajudicially demands from them the

fulfillment of their obligation.

However, the demand by the creditor shall not be

necessary in order that delay may exist:

(1) When the obligation or the law expressly so

declare; or(2) When from the nature and the circumstances of

the obligation it appears that the designation of the

time when the thing is to be delivered or the service

is to be rendered was a controlling motive for the

establishment of the contract; or

(3) When demand would be useless, as when the

obligor has rendered it beyond his power to

perform.

In reciprocal obligations, neither party incurs in delay

if the other does not comply or is not ready to

comply in a proper manner with what is incumbent

upon him. From the moment one of the parties

fulfills his obligation, delay by the other begins.

(Emphasis supplied)

There are four instances when demand is not

necessary to constitute the debtor in default: (1)

when there is an express stipulation to that effect;

(2) where the law so provides; (3) when the period is

the controlling motive or the principal inducement

for the creation of the obligation; and (4) where

demand would be useless. In the first two

paragraphs, it is not sufficient that the law or

obligation fixes a date for performance; it must

further state expressly that after the period lapses,

default will commence.

We refer to the clause in the Promissory Notecontaining the stipulation of

interest:chanroblesvirtuallawlibrary

It is agreed and understood that failure on my part

to pay the amount of (P120,000.00) One Hundred

Twenty Thousand Pesos on December 31, 1995. (sic)

I agree to pay the sum equivalent to FIVE PERCENT

(5%) interest monthly from the date of default until

the entire obligation is fully paid for.23

which expressly requires the debtor (Rivera) to pay a

5% monthly interest from the “date of default” until

the entire obligation is fully paid for. The parties

evidently agreed that the maturity of the obligation

at a date certain, 31 December 1995, will give rise to

the obligation to pay interest. The Promissory Note

expressly provided that after 31 December 1995,

default commences and the stipulation on payment

of interest starts.

The date of default under the Promissory Note is 1

January 1996, the day following 31 December 1995,

the due date of the obligation. On that date, Rivera

became liable for the stipulated interest which the

Promissory Note says is equivalent to 5% a month. Insum, until 31 December 1995, demand was not

necessary before Rivera could be held liable for the

principal amount of P120,000.00. Thereafter, on 1

January 1996, upon default, Rivera became liable to

pay the Spouses Chua damages, in the form of

stipulated interest.

The liability for damages of those who default,

including those who are guilty of delay, in the

performance of their obligations is laid down on

Article 117024

of the Civil Code.

Corollary thereto, Article 2209 solidifies the

consequence of payment of interest as an indemnity

for damages when the obligor incurs in

delay:chanroblesvirtuallawlibrary

Art. 2209. If the obligation consists in the payment

of a sum of money, and the debtor incurs in delay,

the indemnity for damages, there being no

stipulation to the contrary, shall be the payment of



the interest agreed upon, and in the absence of

stipulation, the legal interest, which is six percent

per annum. (Emphasis supplied)

Article 2209 is specifically applicable in this instance

where: (1) the obligation is for a sum of money; (2)

the debtor, Rivera, incurred in delay when he failedto pay on or before 31 December 1995; and (3) the

Promissory Note provides for an indemnity for

damages upon default of Rivera which is the

payment of a 5% monthly interest from the date of

default.

We do not consider the stipulation on payment of

interest in this case as a penal clause although

Rivera, as obligor, assumed to pay additional 5%

monthly interest on the principal amount of

P120,000.00 upon default.

Article 1226 of the Civil Code

provides:chanroblesvirtuallawlibrary

Art. 1226. In obligations with a penal clause, the

penalty shall substitute the indemnity for damages

and the payment of interests in case of

noncompliance, if there is no stipulation to the

contrary. Nevertheless, damages shall be paid if the

obligor refuses to pay the penalty or is guilty of fraud

in the fulfillment of the obligation.

The penalty may be enforced only when it is

demandable in accordance with the provisions ofthis Code.

The penal clause is generally undertaken to insure

performance and works as either, or both,

punishment and reparation. It is an exception to the

general rules on recovery of losses and damages. As

an exception to the general rule, a penal clause must

be specifically set forth in the

obligation.25


In high relief, the stipulation in the Promissory Note

is designated as payment of interest, not as a penal

clause, and is simply an indemnity for damages

incurred by the Spouses Chua because Rivera

defaulted in the payment of the amount of

P120,000.00. The measure of damages for the

Rivera’s delay is limited to the interest stipulated in

the Promissory Note. In apt instances, in default of

stipulation, the interest is that provided by

law.26


In this instance, the parties stipulated that in case of

default, Rivera will pay interest at the rate of 5% a

month or 60% per annum. On this score, the

appellate court ruled:chanroblesvirtuallawlibrary

It bears emphasizing that the undertaking based on

the note clearly states the date of payment to be 31December 1995. Given this circumstance, demand

by the creditor is no longer necessary in order that

delay may exist since the contract itself already

expressly so declares. The mere failure of [Spouses

Chua] to immediately demand or collect payment of

the value of the note does not exonerate [Rivera]

from his liability therefrom. Verily, the trial court

committed no reversible error when it imposed

interest from 1 January 1996 on the ratiocination

that [Spouses Chua] were relieved from making

demand under Article 1169 of the Civil Code.

x x x x

As observed by [Rivera], the stipulated interest of 5%

per month or 60% per annum in addition to legal

interests and attorney’s fees is, indeed, highly

iniquitous and unreasonable. Stipulated interest

rates are illegal if they are unconscionable and the

Court is allowed to temper interest rates when

necessary. Since the interest rate agreed upon is

void, the parties are considered to have no

stipulation regarding the interest rate, thus, the rate

of interest should be 12% per annum computed

from the date of judicial or extrajudicialdemand.

[27chanRoblesvirtualLawlibrary

The appellate court found the 5% a month or

60% per annum interest rate, on top of the legal

interest and attorney’s fees, steep, tantamount to it

being illegal, iniquitous and unconscionable.

Significantly, the issue on payment of interest has

been squarely disposed of in G.R. No. 184472

denying the petition of the Spouses Chua for failure

to sufficiently show any reversible error in the ruling

of the appellate court, specifically the reduction of

the interest rate imposed on Rivera’s indebtedness

under the Promissory Note. Ultimately, the denial of

the petition in G.R. No. 184472 isres judicata in its

concept of “bar by prior judgment” on whether the

Court of Appeals correctly reduced the interest rate

stipulated in the Promissory Note.

Res judicata applies in the concept of “bar by prior

judgment” if the following requisites concur: (1) the



former judgment or order must be final; (2) the

judgment or order must be on the merits; (3) the

decision must have been rendered by a court having

jurisdiction over the subject matter and the parties;

and (4) there must be, between the first and the

second action, identity of parties, of subject matter

and of causes ofaction.

28chanRoblesvirtualLawlibrary

In this case, the petitions in G.R. Nos. 184458 and

184472 involve an identity of parties and subject

matter raising specifically errors in the Decision of

the Court of Appeals. Where the Court of Appeals’

disposition on the propriety of the reduction of the

interest rate was raised by the Spouses Chua in G.R.

No. 184472, our ruling thereon affirming the Court

of Appeals is a “bar by prior judgment.”

At the time interest accrued from 1 January 1996,

the date of default under the Promissory Note, the

then prevailing rate of legal interest was 12% per

annum under Central Bank (CB) Circular No. 416 in

cases involving the loan or forbearance of

money.29

Thus, the legal interest accruing from the

Promissory Note is 12% per annum from the date of

default on 1 January 1996.

However, the 12% per annum rate of legal interest is

only applicable until 30 June 2013, before the advent

and effectivity of Bangko Sentral ng Pilipinas (BSP)

Circular No. 799, Series of 2013 reducing the rate of

legal interest to 6% per annum. Pursuant to ourruling in Nacar v. Gallery Frames,

30 BSP Circular No.

799 is prospectively applied from 1 July 2013. In

short, the applicable rate of legal interest from 1

January 1996, the date when Rivera defaulted, to

date when this Decision becomes final and executor

is divided into two periods reflecting two rates of

legal interest: (1) 12% per annumfrom 1 January

1996 to 30 June 2013; and (2) 6% per annum FROM

1 July 2013 to date when this Decision becomes final

and executory.

As for the legal interest accruing from 11 June 1999,

when judicial demand was made, to the date when

this Decision becomes final and executory, such is

likewise divided into two periods: (1) 12% per

annum from 11 June 1999, the date of judicial

demand to 30 June 2013; and (2) 6% per annumfrom

1 July 2013 to date when this Decision becomes final

and executor.31

We base this imposition of interest

on interest due earning legal interest on Article

2212 of the Civil Code which provides that “interest

due shall earn legal interest from the time it is

judicially demanded, although the obligation may be

silent on this point.”

From the time of judicial demand, 11 June 1999, the

actual amount owed by Rivera to the Spouses Chua

could already be determined with reasonablecertainty given the wording of the Promissory

Note.32


We cite our recent ruling in Nacar v. Gallery

Frames:33


I. When an obligation, regardless of its source, i.e.,

law, contracts, quasi-contracts, delicts or quasi-

delicts is breached, the contravenor can be held

liable for damages. The provisions under Title XVIII

on “Damages” of the Civil Code govern in

determining the measure of recoverable damages.

II. With regard particularly to an award of interest in

the concept of actual and compensatory damages,

the rate of interest, as well as the accrual thereof, is

imposed, as follows:ChanRoblesVirtualawlibrary

1. When the obligation is breached, and it

consists in the payment of a sum of

money, i.e., a loan or forbearance of

money, the interest due should be that

which may have been stipulated in writing.

Furthermore, the interest due shall itself

earn legal interest from the time it is judicially demanded. In the absence of

stipulation, the rate of interest shall be 6%

per annum to be computed from default,

i.e., from judicial or extrajudicial demand

under and subject to the provisions of

Article 1169 of the Civil Code.

2.

When an obligation, not constituting a loan

or forbearance of money, is breached, an

interest on the amount of damages

awarded may be imposed at the discretion

of the court at the rate of 6% per annum.

No interest, however, shall be adjudged on

unliquidated claims or damages, except

when or until the demand can be

established with reasonable certainty.

Accordingly, where the demand is

established with reasonable certainty, the

interest shall begin to run from the time the

claim is made judicially or extrajudicially



(Art. 1169, Civil Code), but when such

certainty cannot be so reasonably

established at the time the demand is

made, the interest shall begin to run only

from the date the judgment of the court is

made (at which time the quantification of

damages may be deemed to have beenreasonably ascertained). The actual base for

the computation of legal interest shall, in

any case, be on the amount finally

adjudged.

3.

When the judgment of the court awarding a

sum of money becomes final and executory,

the rate of legal interest, whether the case

falls under paragraph 1 or paragraph 2,

above, shall be 6% per annum from such

finality until its satisfaction, this interim

period being deemed to be by then an

equivalent to a forbearance of credit.

And, in addition to the above, judgments

that have become final and executory prior

to July 1, 2013, shall not be disturbed and

shall continue to be implemented applying

the rate of interest fixed therein. (Emphasis

supplied)

On the reinstatement of the award of attorney’s fees

based on the stipulation in the Promissory Note, we

agree with the reduction thereof but not theratiocination of the appellate court that the

attorney’s fees are in the nature of liquidated

damages or penalty. The interest imposed in the

Promissory Note already answers as liquidated

damages for Rivera’s default in paying his obligation.

We award attorney’s fees, albeit in a reduced

amount, in recognition that the Spouses Chua were

compelled to litigate and incurred expenses to

protect their interests.34

Thus, the award of

P50,000.00 as attorney’s fees is proper.

For clarity and to obviate confusion, we chart the

breakdown of the total amount owed by Rivera to

the Spouses Chua:

The total amount owing to the Spouses Chua set

forth in this Decision shall further earn legal interest

at the rate of 6% per annum computed from its

finality until full payment thereof, the interim period

being deemed to be a forbearance of

credit.chanrobleslaw

WHEREFORE, the petition in G.R. No. 184458

is DENIED. The Decision of the Court of Appeals in

CA-G.R. SP No. 90609 is MODIFIED. Petitioner

Rodrigo Rivera is ordered to pay respondents Spouse

Salvador and Violeta Chua thefollowing:chanroblesvirtuallawlibrary

(1) the principal amount of P120,000.00;

(2) legal interest of 12% per annum of the principal

amount of P120,000.00 reckoned from 1 January

1996 until 30 June 2013;

(3) legal interest of 6% per annum of the principal

amount of P120,000.00 form 1 July 2013 to date

when this Decision becomes final and executory;

(4) 12% per annum applied to the total of

paragraphs 2 and 3 from 11 June 1999, date of

judicial demand, to 30 June 2013, as interest due

earning legal interest;

(5) 6% per annum applied to the total amount of

paragraphs 2 and 3 from 1 July 2013 to date

when this Decision becomes final and executor,

as interest due earning legal interest;

(6) Attorney’s fees in the amount of P50,000.00; and

(7) 6% per annum interest on the total of the

monetary awards from the finality of this

Decision until full payment thereof.

Costs against petitioner Rodrigo Rivera.

SO ORDERED

Sereno, C.J., (Chairperson), Leonardo-De Castro,

Bersamin, and Perlas-Bernabe, JJ., concur.



State Investment House Inc. vs. CA

GR No. 101163 January 11, 1993

Bellosillo, J.:

Facts: Nora Moulic issued to Corazon Victoriano,

as security for pieces of jewellery to be sold on

commission, two postdated checks in the amount of

fifty thousand each. Thereafter, Victoriano

negotiated the checks to State Investment House,

Inc. When Moulic failed to sell the jewellry, she

returned it to Victoriano before the maturity of the

checks. However, the checks cannot be retrieved as

they have been negotiated. Before the maturity date

Moulic withdrew her funds from the bank contesting

that she incurred no obligation on the checks

because the jewellery was never sold and the checks

are negotiated without her knowledge and consent.

Upon presentment of for payment, the checks were

dishonoured for insufficiency of funds.

Issues:

1. Whether or not State Investment House inc. was a

holder of the check in due course

2. Whether or not Moulic can set up against the

petitioner the defense that there was failure or

absence of consideration

Held:

Yes, Section 52 of the NIL provides what constitutes

a holder in due course. The evidence shows that: on

the faces of the post dated checks were complete

and regular; that State Investment House Inc. bought

the checks from Victoriano before the due dates;

that it was taken in good faith and for value; and

there was no knowledge with regard that the checks

were issued as security and not for value. A prima

facie presumption exists that a holder of a

negotiable instrument is a holder in due course.

Moulic failed to prove the contrary.

No, Moulic can only invoke this defense against the

petitioner if it was a privy to the purpose for which

they were issued and therefore is not a holder in due

course.

No, Section 119 of NIL provides how an instruments

be discharged. Moulic can only invoke paragraphs c

and d as possible grounds for the discharge of the

instruments. Since Moulic failed to get back the

possession of the checks as provided by paragraph c,

intentional cancellation of instrument is impossible.

As provided by paragraph d, the acts which will

discharge a simple contract of payment of money

will discharge the instrument. Correlating Article

1231 of the Civil Code which enumerates the modes

of extinguishing obligation, none of those modesoutlined therein is applicable in the instant

case. Thus, Moulic may not unilaterally discharge

herself from her liability by mere expediency of

withdrawing her funds from the drawee bank. She is

thus liable as she has no legal basis to excuse herself

from liability on her check to a holder in due course.

Moreover, the fact that the petitioner failed to give

notice of dishonor is of no moment. The need for

such notice is not absolute; there are exceptions

provided by Sec 114 of NIL.



GSIS vs Court of Appeals and Mr. & Mrs. Racho, GR

No. L-40824 February 23, 1989

(Negotiable Instruments – payable to order or to

bearer)

Facts: Spouses Racho together with Spouses Lagasca

executed a deed of mortgage in favor of GSIS in

connection with 2 loans granted by the latter in the

sums of p11,500.00 and p3,000.00, respectively. A

parcel of land co-owned by the mortgagor spouses

was govern as security under the aforesaid deeds

and executed a promissory note promising to pay

the said amounts to GSIS jointly, severally and

solidarily.

The Lagasca spouses executed an instrument

obligating themselves in the assumption of theaforesaid obligation and to secure the release of the

mortgage.

Failing to comply with the conditions of the

mortgage, GSIS extrajudicially foreclosed the

mortgage and caused the property to be sold at

public auction.

More than 2 years after, Spouses Racho filed a

complaint against GSIS and Spouses Lagasca praying

that the extrajudicial foreclosure be declared null

and void. They allege that they signed the mortgage

contracts not as sureties for the Lagasca spouses but

merely as accommodation party

Issue: WON the promissory note and mortgage

deeds are negotiable.

Held: No. Section 29 of the NIL provides that an

accommodation party is one who has signed an

instrument as maker, drawer, acceptor of indorser

without receiving value therefore, but is held liable

on the instrument to a holder for value although the

latter knew him to be only an accommodation party.

Both parties appears to be misdirected and their

reliance misplaced. The promissory note, as well as

the mortgage deeds subject of this case, are clearly

not negotiable instrument because it did not comply

with the fourth requisite to be considered as such

under Sec. 1 of the NIL – they are neither payable toorder nor to bearer. The note is payable to a

specified party, the GSIS.



Metropolitan Bank & Trust Company vs. Court of

Appeals

G.R. No. 88866 February, 18, 1991

Cruz, J.:

Facts: Eduardo Gomez opened an account with

Golden Savings and deposited 38 treasury warrants.

All warrants were subsequently indorsed by Gloria

Castillo as Cashier of Golden Savings and deposited

to its Savings account in Metrobank branch in

Calapan, Mindoro. They were sent for clearance.

Meanwhile, Gomez is not allowed to withdraw from

his account, later, however, “exasperated” over

Floria repeated inquiries and also as an

accommodation for a “valued” client Metrobank

decided to allow Golden Savings to withdraw fromproceeds of the warrants. In turn, Golden Savings

subsequently allowed Gomez to make withdrawals

from his own account. Metrobank informed Golden

Savings that 32 of the warrants had been dishonored

by the Bureau of Treasury and demanded the refund

by Golden Savings of the amount it had previously

withdrawn, to make up the deficit in its account. The

demand was rejected. Metrobank then sued Golden

Savings.

Issue:1. Whether or not Metrobank can demand

refund agaist Golden Savings with regard to the

amount withdraws to make up with the deficit as a

result of the dishonored treasury warrants.

2. Whether or not treasury warrants are

negotiable instruments

Held:

No. Metrobank is negligent in giving Golden

Savings the impression that the treasury warrants

had been cleared and that, consequently, it was safeto allow Gomez to withdraw. Without such

assurance, Golden Savings would not have allowed

the withdrawals. Indeed, Golden Savings might even

have incurred liability for its refusal to return the

money that all appearances belonged to the

depositor, who could therefore withdraw it anytime

and for any reason he saw fit.

It was, in fact, to secure the clearance of the

treasury warrants that Golden Savings deposited

them to its account with Metrobank. Golden Savings

had no clearing facilities of its own. It relied on

Metrobank to determine the validity of the warrants

through its own services. The proceeds of thewarrants were withheld from Gomez until

Metrobank allowed Golden Savings itself to

withdraw them from its own deposit.

Metrobank cannot contend that by indorsing the

warrants in general, Golden Savings assumed that

they were genuine and in all respects what they

purport to be,” in accordance with Sec. 66 of NIL.

The simple reason that NIL is not applicable to non

negotiable instruments, treasury warrants.

No. The treasury warrants are not negotiableinstruments. Clearly stamped on their face is the

word: non negotiable.” Moreover, and this is equal

significance, it is indicated that they are payable

from a particular fund, to wit, Fund 501. An

instrument to be negotiable instrument must

contain an unconditional promise or orders to pay a

sum certain in money. As provided by Sec 3 of NIL an

unqualified order or promise to pay is unconditional

though coupled with: 1st

, an indication of a particular

fund out of which reimbursement is to be made or a

particular account to be debited with the amount; or2

nd, a statement of the transaction which give rise to

the instrument. But an order to promise to pay out

of particular fund is not unconditional. The

indication of Fund 501 as the source of the payment

to be made on the treasury warrants makes the

order or promise to pay “not conditional” and the

warrants themselves non-negotiable. There should

be no question that the exception on Section 3 of

NIL is applicable in the case at bar.



Negotiable Instrument as a Money Substitute

Lozano v. Martinez

Petitioners, charged with Batas Pambansa Bilang 22

(BP 22 for short), popularly known as the Bouncing

Check Law, assail the law's constitutionality.

BP 22 punishes a person "who makes or draws and

issues any check on account or for value, knowing at

the time of issue that he does not have sufficient

funds in or credit with the draweebank for the

payment of said check in full upon presentment,

which check is subsequently dishonored by

the drawee bank for insufficiency of funds or credit

or would have been dishonored for the same reason

had not the drawer, without any valid reason,

ordered the bank to stop payment." The penalty

prescribed for the offense is imprisonment of not

less than 30 days nor more than one year or a fine or

not less than the amount of the check nor more than

double said amount, but in no case to exceed

P200,000.00, or both such fine and imprisonment at

the discretion of the court.

The statute likewise imposes the same penalty on

"any person who, having sufficient funds in or credit

with the drawee bank when he makes or draws and

issues a check, shall fail to keep sufficient funds or to

maintain a credit to cover the full amount of the

check if presented within a period of ninety (90) days

from the date appearing thereon, for which reason itis dishonored by the drawee bank.

An essential element of the offense is "knowledge"

on the part of the maker or drawer of the check of

the insufficiency of his funds in or credit with the

bank to cover the check upon its presentment. Since

this involves a state of mind difficult to establish, the

statute itself creates aprima facie presumption of

such knowledge where payment of the check "is

refused by thedrawee because of insufficient funds

in or credit with such bank when presented within

ninety (90) days from the date of the check. To

mitigate the harshness of the law in its application,

the statute provides that such presumption shall not

arise if within five (5) banking days from receipt of

the notice of dishonor, the maker or drawer makes

arrangements for payment of the check by the bank

or pays the holder the amount of the check.

Another provision of the statute, also in the nature

of a rule of evidence, provides that the introduction

in evidence of the unpaid and dishonored check with

the drawee bank's refusal to pay "stamped or

written thereon or attached thereto, giving the

reason therefor, "shall constitute primafacie proof of

"the making or issuance of said check, and the due

presentment to the drawee for payment and the

dishonor thereof ... for the reason written, stampedor attached by the drawee on such dishonored

check."

The presumptions being merely prima facie, it is

open to the accused of course to present proof to

the contrary to overcome the said presumptions.

ISSUE: Whether or not (W/N) BP 22 violates the

constitutional provision forbidding imprisonment for

debt.

HELD: No.

The gravamen of the offense punished by BP 22 is

the act of making and issuing a worthless check or a

check that is dishonored upon its presentation for

payment. It is not the non-payment of an obligation

which the law punishes. The law is not intended or

designed to coerce a debtor to pay his debt. The

thrust of the law is to prohibit, under pain of penal

sanctions, the making of worthless checks and

putting them in circulation. Because of its

deleterious effects on the public interest, the

practice is proscribed by the law. The law punishes

the act not as an offense against property, but an

offense against public order.

The effects of the issuance of a worthless check

transcends the private interests of the parties

directly involved in the transaction and touches the

interests of the community at large. The mischief it

creates is not only a wrong to the payee or holder,

but also an injury to the public. The harmful practice

of putting valueless commercial papers in

circulation, multiplied a thousand fold, can very wen

pollute the channels of trade and commerce, injure

the banking system and eventually hurt the welfare

of society and the public interest.

The enactment of BP 22 is a declaration by the

legislature that, as a matter of public policy, the

making and issuance of a worthless check is deemed

public nuisance to be abated by the imposition of

penal sanctions.

ISSUE: W/N BP 22 impairs the freedom to contract.

HELD: No. The freedom of contract which is



constitutionally protected is freedom to enter into

"lawful" contracts. Contracts which contravene

public policy are not lawful. Besides, we must bear in

mind that checks can not be categorized as mere

contracts. It is a commercial instrument which, in

this modem day and age, has become a convenient

substitute for money; it forms part of the bankingsystem and therefore not entirely free from the

regulatory power of the state.

ISSUE: W/N it violates the equal protection clause.

HELD: No. Petitioners contend that the payee is just

as responsible for the crime as the drawer of the

check, since without the indispensable participation

of the payee by his acceptance of the check there

would be no crime. This argument is tantamount to

saying that, to give equal protection, the law should

punish both the swindler and the swindled.

Moreover, the clause does not preclude

classification of individuals, who may be accorded

different treatment under the law as long as the

classification is no unreasonable or arbitrary.

G.R. No. 175851 July 4, 2012

EMILIA LIM, Petitioner,

vs.

MINDANAO WINES & LIQUOR GALLERIA, a Single

Proprietorship Business Outfit Owned by Evelyn S.

Valdevieso, Respondent.

D E C I S I O N

DEL CASTILLO, J.:

Acquittal from a crime does not necessarily mean

absolution from civil liability.

Despite her acquittal from the charges of violation of

Batas Pambansa Bilang 22 (BP 22) or the Bouncing

Checks Law, the lower courts still found petitioner

Emilia Lim (Emilia) civilly liable and ordered her topay the value of the bounced checks, a ruling which

was upheld by the Court of Appeals (CA) in its June

30, 2006 Decision1 and November 9, 2006

Resolution2 in CA-G.R. SP No. 64897.

In this Petition for Review on Certiorari, Emilia prays

for the reversal and setting aside of the said rulings

of the CA. She contends that since her acquittal was

based on insuffiency of evidence, it should then

follow that the civil aspect of the criminal cases filed

against her be likewise dismissed. Hence, there is no

basis for her adjudged civil liability.

Factual Antecedents

Sales Invoice No. 17113 dated November 24, 1995,

as well as Statement of Accounts No. 0764 indicate

that respondent Mindanao Wines and Liquor

Galleria (Mindanao Wines) delivered several cases of

liquors to H & E Commercial owned by Emilia, for

which the latter issued four Philippine National Bank

(PNB) postdated checks worth P25,000.00 each.

When two of these checks, particularly PNB Check

Nos. 9514535 and 951454

6 dated October 10, 1996

and October 20, 1996, respectively, bounced for the

reasons ‘ACCOUNT CLOSED’ and ‘DRAWN AGAINST

INSUFFICIENT FUNDS’, Mindanao Wines, thru its

proprietress Evelyn Valdevieso, demanded from H &

E Commercial the payment of their value through

two separate letters both dated November 18,

1996.7 When the demands went unheeded,

Mindanao Wines filed before Branch 2 of the

http://www.lawphil.net/judjuris/juri2012/jul2012/gr_175851_2012.html#fnt1




























Municipal Trial Court in Cities (MTCC) of Davao City

Criminal Case Nos. 68,309-B-98 and 68,310-B-98

against Emilia for violations of BP 22.8

During trial, the prosecution presented its sole

witness, Nieves Veloso

(Nieves), accountant and officer-in-charge of

Mindanao Wines. She testified that Emilia has been

a customer of Mindanao Wines who purchased from

it assorted liquors. In fact, Sales Invoice No. 1711

covered the orders made by Emilia from Mindanao

Wines and these orders were delivered by the

latter’s salesman Marcelino Bersaluna9(Marcelino)

to H & E Commercial in San Francisco, Agusan del

Sur. For the same, Marcelino received the four PNB

checks and accordingly endorsed them to Mindanao

Wines. Out of these four PNB checks, two were

already paid, i.e., one was collected while the otherredeemed in court.10

With regard to the bounced PNB Check Nos. 951453

and 951454, Nieves claimed that upon her

instructions Marcelino went to H & E Commercial

more than 10 times to collect their value. But since

his efforts were in vain, two demand letters were

thus sent to Emilia which were duly received by her

as the same were ‘signed by the recipient of the

letters’.11

On cross, Nieves admitted that she neither saw

Emilia issue the checks nor accompanied Marcelino

in delivering the orders to H & E Commercial or in

collecting the unpaid checks.12

Asked about the

corresponding sales order covering Sales Invoice No.

1711, she acknowledged that the sales order was

unsigned and explained that sales orders of

customers are handled by the Credit and Collection

Department of Mindanao Wines.13

After the prosecution rested its case, Emilia filed a

Demurrer to Evidence14

claiming insufficiency of

evidence. She asserted that not one of the elements

of BP 22 was proven because the witness merelyrelied upon the reports of the salesman; that the

purchases covered by Sales Invoice No. 1711 were

unauthorized because the corresponding job order

was unsigned; and that it was never established that

the bank dishonored the checks or that she was even

sent a notice of dishonor.

Ruling of the Municipal Trial Court in Cities

In its December 10, 1999 Order,15

the MTCC granted

the Demurrer to Evidence. It ruled that while Emilia

did issue the checks for value, the prosecution

nevertheless miserably failed to prove one essential

element that consummates the crime of BP 22, i.e.,

the fact of dishonor of the two subject checks. It

noted that other than the checks, no bankrepresentative testified about presentment and

dishonor. Hence, the MTCC acquitted Emilia of the

criminal charges. However, the MTCC still found her

civilly liable because when she redeemed one of the

checks during the pendency of the criminal cases,

the MTCC considered the same as an

acknowledgement on her part of her obligation with

Mindanao Wines. Pertinent portions of the MTCC

Order read:

The elements of B.P. Blg. 22 must concur before one

can be convicted of this offense. Since one element

is wanting, it is believed that the guilt of the accused

has not been established beyond reasonable doubt.

The Court, however, opines that the accused is civilly

liable. There is evidence on record that an account

was contracted. She should, therefore, pay.

WHEREFORE, the demurrer to evidence is granted

and these cases are ordered DISMISSED.

Accused, however, is adjudged to pay complainant

the total amounts of the 2 checks which

is P50,000.00, with interest at the rate of 12% per

annum to be computed from the date of notice

which is November 18, 1996 until the amount is paid

in full; to reimburse complainant of the expenses

incurred in filing these cases in the amount

ofP1,245.00, and to pay attorney’s fees

of P10,000.00.

SO ORDERED.16

Ruling of the Regional Trial Court

Dissatisfied that her acquittal did not carry with it

her exoneration from civil liability, Emilia appealedto the Regional Trial Court (RTC) of Davao City,

Branch 13. Emilia contended that since the MTCC

dismissed the criminal cases ‘on the ground of

insufficient evidence,’ the civil aspect of the criminal

cases should likewise be automatically dismissed.

She argued that the court may only award damages

for the civil aspect of BP 22 if the criminal cases have





































been dismissed on ‘reasonable doubt’ upon proof of

preponderance of evidence.

The RTC was not persuaded by Emilia’s contentions.

The RTC clarified that the MTCC dismissed the

criminal cases based on ‘reasonable doubt’ and not

on ‘insufficiency of evidence.’ And while theprosecution failed to prove criminal liability beyond

reasonable doubt, Emilia’s indebtedness was

nonetheless proven by preponderance of evidence,

the quantum of evidence required to prove the

same. Thus, the RTC declared in its January 5, 2001

Order17

that:

The prosecution however had established that the

accused had issued the checks subject of these

cases. The accused had impliedly admitted that she

was the maker of the checks subject of [these]

case[s] when she redeemed a third check from thecomplainant. In fact, the accused had never

categorically denied having issued the checks subject

of these cases. When the accused filed the Demurrer

to Evidence, she had hypothetically admitted the

evidence presented by the prosecution to be true,

and this includes the allegation of the prosecution

that the accused issued the checks subject of these

cases for value.18

Thus, it dismissed the appeal, viz:

WHEREFORE, in view of the foregoing, the appeal of

the accused in these cases is hereby DISMISSED, and

the decision appealed from is hereby AFFIRMED IN

TOTO.

SO ORDERED.19

Ruling of the Court of Appeals

Undeterred, Emilia filed before the CA a Petition for

Review20

still insisting that the MTCC’s dismissal was

based on ‘insufficiency of evidence’ and that same

pertains to both the criminal and civil aspects of BP

22. She reiterated that there was no basis for the

civil award made by the MTCC since the prosecution

failed to show evidence of her civil liability and that a

court can only award civil liability in cases of

acquittals based on reasonable doubt and not on

insufficiency of evidence.

In its June 30, 2006 Decision, the CA emphasized

that even if acquitted, an accused may still be held

civilly liable if a) the acquittal was based on

reasonable doubt or b) the court declared that the

liability of the accused is only civil. Just like the RTC,

the CA ruled that the dismissal of the criminal cases

against Emilia was expressly based on reasonabledoubt, hence, she is not free from civil liability

because the same is not automatically extinguished

by acquittal based on said ground. The CA further

declared that even granting that her acquittal was

f or ‘insufficiency of evidence,’ the same is still akin

to a dismissal based on reasonable doubt.

Respecting the factual conclusions of the lower

courts anent Emilia’s civil liability, the CA noted that

Emilia had never denied issuing the subject checks

for value which, in themselves constituted evidence

of indebtedness. Moreover, she failed to refute the

prosecution’s evidence when she filed a Demurrer to

Evidence. The CA therefore affirmed the assailed

Order of the RTC except that it deleted the award of

attorney’s fees, thus:

WHEREFORE, premises considered, the assailed

Order of the Regional Trial Court (RTC), Br. 13, Davao

City, affirming in toto the Order of the Municipal

Trial Court in Cities (MTCC), Br. 2, Davao City as to

the civil liability of Emilia Lim, is hereby AFFIRMED

with the sole modification that the award of

attorney’s fees in favor of the Respondent is

DELETED.

SO ORDERED. 21

On Motion for Reconsideration,22

Emilia asserted

that by granting her Demurrer to Evidence based on

insufficiency of evidence, the MTCC acknowledged

that there is absolutely no case against her. She

alleged that the ‘preponderance of evidence’

required in determining civil liability does not apply

to her as she never presented any evidence at all,

implying that in such a determination, both parties

should have presented their respective evidence forthe purpose of ascertaining as to which of the

evidence presented is superior.

The CA, however, rejected the motion in its

Resolution23

dated November 9, 2006. It held that

‘insufficiency’ does not mean the ‘total absence of

evidence,’ but that ‘evidence is lacking of what is

necessary or required to make out her case.’ The CA





























explained that the MTCC acquitted Emilia because

the quantum of evidence required for a finding of

guilt beyond reasonable doubt was insufficient to

convict her of BP 22. However, the extinction of the

civil aspect does not necessarily follow such

acquittal. The CA also disregarded Emilia’s argument

that a ‘preponderance of evidence’ should be acomparison of evidence of the opposing parties as

such interpretation would lead to absurdity because

by simply refusing to present evidence, a defendant

can then be easily absolved from a civil suit.

Hence, this petition raising the following assignment

of errors:

1) THE HONORABLE COURT OF APPEALS

GRAVELY ERRED IN NOT HOLDING THAT

THE AWARD OF CIVIL LIABILITY IN FAVOR

OF THE RESPONDENT AND AGAINST THEPETITIONER IS A NULLITY FOR LACK OF DUE

PROCESS, APART FROM THE FACT THAT THE

COMPLAINANT IS NOT A JURIDICAL PERSON

OR IS NOT THE REAL PARTY IN INTEREST.



BECAUSE THE GROUND FOR THE DISMISSAL

WAS FOR "INSUFFICIENCY OF EVIDENCE"

AND NOT ON "REASONABLE DOUBT," THE

DISMISSAL OF THE CRIMINAL CASES

CARRIES WITH IT THE DISMISSAL OF THE

CIVIL CASES DEEMED INSTITUTED THEREIN.


GRAVELY ERRED IN ITS APPLICATION OF

THE CONCEPT OF "PREPONDERANCE OF

EVIDENCE."



THERE IS NO PIECE OF "ADMISSIBLE

EVIDENCE" PRESENTED THAT MAY BE

TAKEN INTO ACCOUNT TO PROVE CIVIL

LIABILITY.24

In sum, the core issue in this petition is whether the

dismissal of Emilia’s BP 22 cases likewise includes

the dismissal of their civil aspect.

Our Ruling

The petition lacks merit.

Emilia’s allegations that she was denied due process

and that Mindanao Wines is not the real party in

interest do not merit our attention as these were

never raised for resolution before the courts below.

Emilia claims that she was deprived of due process

when the courts below declared her civilly liable. In

support of this, she cites Salazar v. People25

wherein

it was held that a court cannot rule upon the civil

aspect of the case should it grant a demurrer to

evidence with leave of court since the accused is

entitled to adduce controverting evidence on the

civil liability. Emilia likewise contends that Mindanao

Wines is not a juridical person, it being a single

proprietorship only and thus, not the real party in

interest in this case.

We note, however, that Emilia had never invoked

before the courts below the ruling in

Salazar.1âwphi1 Neither did she specify in her

pleadings filed therein whether her demurrer was

filed with or without leave of court. It is only now

that Emilia is claiming that the same was filed with

leave of court in an apparent attempt to conform

the facts of this case with that in Salazar. The same

goes true with regard to the questioned locus standi

of Mindanao Wines. Emilia likewise did not raise in

her pleadings filed with the RTC or the CA that the

civil aspect is dismissible for lack of cause of action

because Mindanao Wines is not a juridical person

and thus not a real party in interest. In fact, the

courts below all along considered Mindanao Wines

as the plaintiff and the trial proceeded as such.

Obviously, these new issues are mere

afterthoughts.1âwphi1 They were raised only for the

first time in this petition for review on certiorari.

Never were they presented before the RTC and the

CA for resolution. To allow Emilia to wage a legal

blitzkrieg and blindside Mindanao Wines is a

violation of the latter’s due process rights:

It is well-settled that no question will be entertained

on appeal unless it has been raised in the

proceedings below. Points of law, theories, issues

and arguments not brought to the attention of the

lower court, administrative agency or quasi-judicial

body, need not be considered by a reviewing court,

as they cannot be raised for the first time at that late

stage. Basic considerations of fairness and due











process impel this rule. Any issue raised for the first

time on appeal is barred by estoppel.26

For this reason, the said issues do not merit the

Court’s consideration.

Notwithstanding her acquittal, Emilia is civilly liable.

"The extinction of the penal action does not carry

with it the extinction of the civil liability where x x x

the acquittal is based on reasonable doubt as only

preponderance of evidence is required"27

in civil

cases. On this basis, Emilia insists that the MTCC

dismissed the BP 22 cases against her not on the

ground of reasonable doubt but on insufficiency of

evidence. Hence, the civil liability should likewise be

extinguished. Emilia’s Demurrer to Evidence,

however, betrays this claim. Asserting insufficiency

of evidence as a ground for granting said demurrer,Emilia herself argued therein that the prosecution

has not proven [her] guilt beyond reasonable

doubt.28

And in consonance with such assertion, the

MTCC in its judgment expressly stated that her guilt

was indeed not established beyond reasonable

doubt, hence the acquittal.29

In any case, even if the Court treats the subject

dismissal as one based on insufficiency of evidence

as Emilia wants to put it, the same is still tantamount

to a dismissal based on reasonable doubt. As may be

recalled, the MTCC dismissed the criminal cases

because one essential element of BP 22 was missing,

i.e., the fact of the bank’s dishonor. The evidence

was insufficient to prove said element of the crime

as no proof of dishonor of the checks was presented

by the prosecution. This, however, only means that

the trial court cannot convict Emilia of the crime

since the prosecution failed to prove her guilt

beyond reasonable doubt, the quantum of evidence

required in criminal cases. Conversely, the lack of

such proof of dishonor does not mean that Emilia

has no existing debt with Mindanao Wines, a civil

aspect which is proven by another quantum of

evidence, a mere preponderance of evidence.

Emilia also avers that a court’s determination of

preponderance of evidence necessarily entails the

presentation of evidence of both parties. She thus

believes that she should have been first required to

present evidence to dispute her civil liability before

the lower courts could determine preponderance of

evidence.

We disagree.

"Preponderance of evidence is [defined as] the

weight, credit, and value of the aggregate evidence

on either side and is usually considered to be

synonymous with the term ‘greater weight of the

evidence’ or ‘greater weight of the credibleevidence’. It is evidence which is more convincing to

the court as worthy of belief than that which is

offered in opposition thereto."30

Contrary to Emilia’s

interpretation, a determination of this quantum of

evidence does not need the presentation of

evidence by both parties. As correctly reasoned out

by the CA, Emilia’s interpretation is absurd as this

will only encourage defendants to waive their

presentation of evidence in order for them to be

absolved from civil liability for lack of preponderance

of evidence. Besides, Emilia should note that even

when a respondent does not present evidence, a

complainant in a civil case is nevertheless burdened

to substantiate his or her claims by preponderance

of evidence before a court may rule on the reliefs

prayed for by the latter. Settled is the principle that

"parties must rely on the strength of their own

evidence, not upon the weakness of the defense

offered by their opponent."31

Lastly, we see no reason to disturb the ruling of the

CA anent Emilia’s civil liability. As may be recalled,

the CA affirmed the lower courts’ factual findings on

the matter. Factual findings of the trial court, when

affirmed by the CA, will not be disturbed.32 Also, "[i]tis a settled rule that in a petition for review on

certiorari under Rule 45 of the Rules of [Court], only

questions of law may be raised by the parties and

passed upon by this Court."33

Moreover, "it is well to

remember that a check may be evidence of

indebtedness. A check, the entries of which are in

writing, could prove a loan transaction."34

While

Emilia is acquitted of violations of BP 22, she should

nevertheless pay the debt she owes.

WHEREFORE, the petition for review on certiorari is

DENIED. The challenged June 30, 2006 Decision andNovember 9, 2006 Resolution of the Court of

Appeals in CA-G.R. SP No. 64897 are hereby

AFFIRMED in toto.

SO ORDERED.







































CHUA-GAW vs. CHUA

G.R. No. 160855 April 16, 2008

Facts:

Spouses Chua Chin and Chan Chi were the founders

of three business enterprises[3] namely: Hagonoy

Lumber, Capitol Sawmill Corporation, and Columbia

Wood Industries. At the time of Chua Chin’s death,

the net worth of Hagonoy Lumber was P415,487.20.

The heirs executed a Deed of Extra-Judicial Partition

and Renunciation of Hereditary Rights in Favor of a

Co-Heir, wherein the heirs settled their interest in

Hagonoy Lumber as follows: one-half (1/2) thereof

will pertain to the surviving spouse, Chan Chi, as her

share in the conjugal partnership; and the other half

will be divided among Chan Chi and the seven

children in equal pro indiviso shares equivalent to

P25K each. Chan Chi and the six children likewise

agreed to voluntarily renounce and waive their

shares over Hagonoy Lumber in favor of their co-

heir, Chua Sioc Huan.

Concepcion Chua Gaw and her husband, Antonio

Gaw, asked respondent, Suy Ben Chua, to lend them

P200,000.00 which they will use for the construction

of their house in Marilao, Bulacan. The parties

agreed that the loan will be payable within six (6)

months without interest. Chua issued in their favor

China Banking Corporation Check No. 240810 for

P200,000.00 which he delivered to the couple’s

house in Marilao, Bulacan. Antonio Gaw later

encashed the check.

Spouses Gaw failed to pay the amount they

borrowed from respondent within the designated

period. Chua sent the couple a demand letter

requesting them to settle their obligation with the

warning that he will be constrained to take the

appropriate legal action if they fail to do so. Failing

to heed his demand, Chua filed a Complaint for Sum

of Money against the spouses Gaw with the RTC.

Defense of Gaw: Spouses Gaw contended that the

P200,000.00 was not a loan but petitioner’s share in

the profits of Hagonoy Lumber, one of her family’s

businesses. According to the spouses, when they

transferred residence to Marilao, Bulacan, petitioner

asked respondent for an accounting, and payment of

her share in the profits, of Capital Sawmills

Corporation, Columbia Wood Industries Corporation,

and Hagonoy Lumber. They claimed that respondent

persuaded petitioner to temporarily forego her

demand as it would offend their mother who still

wanted to remain in control of the family

businesses. To insure that she will defer her demand,

respondent allegedly gave her P200,000.00 as her

share in the profits of Hagonoy Lumber.

According to Chua, Gaw did not demand from him

an accounting of Capitol Sawmills Corporation,

Columbia Wood Industries, and Hagonoy Lumber. He

asserted that the spouses Gaw, in fact, have no right

whatsoever in these businesses that would entitle

them to an accounting thereof. His sister, Chua Sioc

Huan, became the sole owner of Hagonoy Lumber

when the heirs executed the Deed of Partition on

December 8, 1986. In turn, he became the sole

owner of Hagonoy Lumber when he bought it from

Chua Sioc Huan, as evidenced by the Deed of Sale.

RTC held in favour of respondent Chua. It noted that

respondent personally issued Check No. 240810 to



petitioner and her husband upon their request to

lend them the aforesaid amount. The trial court

concluded that the P200,000.00 was a loan

advanced by the respondent from his own funds and

not remunerations for services rendered to Hagonoy

Lumber nor petitioner’s advance share in the profits

of their parents’ businesses.

CA affirmed.

Issue: WON the P200 was a loan obligation and not

profits from the lumber business which Gaw was

entitled to?

Held:

Yes. RTC’s finding that the P200,000.00 was given to

the petitioner and her husband as a loan is

supported by the evidence on record. On the issue

of whether the P200,000.00 was really a loan, it is

well to remember that a check may be evidence of

indebtedness. A check, the entries of which are in

writing, could prove a loan transaction. It is pure

naiveté to insist that an entrepreneur who has

several sources of income and has access to

considerable bank credit, no longer has any reason

to borrow any amount.

The petitioner’s allegation that the P200,000.00 was

advance on her share in the profits of Hagonoy

Lumber is implausible. It is true that Hagonoy

Lumber was originally owned by the parents of

petitioner and respondent. However, on December

8, 1986, the heirs freely renounced and waived in

favor of their sister Chua Sioc Huan all their

hereditary shares and interest therein, as shown by

the Deed of Partition which the petitioner herself

signed. By virtue of this deed, Chua Sioc Huan

became the sole owner and proprietor of Hagonoy

Lumber. When Chua delivered the check for

P200,000.00 to the petitioner on June 7, 1988, Chua

Sioc Huan was already the sole owner of Hagonoy

Lumber. At that time, both petitioner and

respondent no longer had any interest in the

business enterprise; neither had a right to demand a

share in the profits of the business.

Even assuming, arguendo, that the check was an

advance on the petitioner’s share in the profits of

the business, it was highly unlikely that the

respondent would deliver a check drawn against his

personal, and not against the business enterprise’s

account.



Traders Royal Bank v CA (Negotiable Instruments

Law)

TRADERS ROYAL BANK V CA G.R. No. 93397 March 3,

1997

FACTS:

Filriters registered owner of Central Bank Certificate

of Indebtedness (CBCI). Filriters transferred it to

Philfinance by one of its officers without

authorization from the company. Subsequently,

Philfinance transferred same CBCI to Traders Royal

Bank (TRB) under a repurchase agreement. When

Philfinance failed to do so, The TRB tried to register

in its name in the CBCI. The Central Bank did not

want to recognize the transfer.

Docketed as Civil Case No. 83-17966 in the Regional

Trial Court of Manila, Branch 32, the action was

originally filed as a Petition for Mandamus 5 under

Rule 65 of the Rules of Court, to compel the Central

Bank of the Philippines to register the transfer of the

subject CBCI to petitioner Traders Royal Bank (TRB).

DECISION OF LOWER COURTS: * RTC: transfer is null

and void. * CA: The appellate court ruled that the

subject CBCI is not a negotiable instrument.

Philfinance acquired no title or rights under CBCI No.

D891 which it could assign or transfer to Traders

Royal Bank and which the latter can register with the

Central Bank. Thus, the transfer of the instrumentfrom Philfinance to TRB was merely an assignment,

and is not governed by the negotiable instruments

law.

APPLICABLE LAWS:

Under section 1 of Act no. 2031 an instrument to be

negotiable must conform to the following

requirements: (a) It must be in writing and signed by

the maker or drawer; (b) Must contain an

unconditional promise or order to pay a sum certain

in money; (c) Must be payable on demand, or at a

fixed or determinable future time; (d) Must be

payable to order or to bearer; and (e) Where the

instrument is addressed to a drawee, he must be

named or otherwise indicated therein with

reasonable certainty.

Under section 3, Article V of Rules and Regulations

Governing Central Bank Certificates of Indebtedness

states that the assignment of registered certificates

shall not be valid unless made at the office where

the same have been issued and registered or at the

Securities Servicing Department, Central Bank of the

Philippines, and by the registered owner thereof, in

person or by his representative, duly authorized in

writing. For this purpose, the transferee may bedesignated as the representative of the registered

owner. ISSUES & RULING: 1. Whether the CBCI is

negotiable instrument or not.

The pertinent portions of the subject CBCI read:

xxx xxx xxx

The Central Bank of the Philippines (the Bank) for

value received, hereby promises to pay bearer, of if

this Certificate of indebtedness be registered, to

FILRITERS GUARANTY ASSURANCE CORPORATION,

the registered owner hereof, the principal sum of

FIVE HUNDRED THOUSAND PESOS.

NO. The CBCI is not a negotiable instrument, since

the instrument clearly stated that it was payable to

Filriters, and the certificate lacked the words of

negotiability which serve as an expression of consent

that the instrument may be transferred by

negotiation.

Before the instruments become negotiable

instruments, the instrument must conform to the

requirements under the Negotiable Instrument Law.Otherwise instrument shall not bind the parties.

2. Whether the Assignment of registered certificate

is valid or null and void.

IT'S NULL AND VOID. Obviously the Assignment of

certificate from Filriters to Philfinance was null and

void. One of officers who signed the deed of

assignment in behalf of Filriters did not have the

necessary written authorization from the Board of

Directors of Filriters. For lack of such authority the

assignment is considered null and void.

Clearly shown in the record is the fact that

Philfinance's title over CBCI is defective since it a

cquired the instrument from Filriters fictitiously.

Under 1409 of the Civil Code those contracts which

are absolutely simulated or fictitious are considered

void and inexistent from the beginning.



Petitioner knew that Philfinance is not registered

owner of the CBCI No. D891. The fact that a non-

owner was disposing of the registered CBCI owned

by another entity was a good reason for petitioner

to verify of inquire as to the title Philfinance to

dispose to the CBCI.

OTHER NOTES:

1. the mere ownership by a single stockholder or by

another corporation of all or nearly all of the capital

stock of a corporation is not of itself a sufficient

reason for disregarding the fiction of separate

corporate personalities.

G.R. No. 166018 June 4, 2014

THE HONGKONG AND SHANGHAI BANKING

CORPORATION LIMITED-PHILIPPINE

BRANCHES, Petitioner,

vs.

COMMISSIONER OF INTERNALREVENUE, Respondent;

x - - - - - - - - - - - - - - - - - - - - - - - x

G.R. No. 167728

THE HONGKONG AND SHANGHAI BANKING

CORPORATION LIMITED-PHILIPPINE

BRANCHES, Petitioner,

vs.

COMMISSIONER OF INTERNAL

REVENUE, Respondent.

D E C I S I O N

LEONARDO-DE CASTRO, J.:

These petitions for review on certiorari1 assail the

Decision2 and Resolution dated July 8, 2004 and

October 25, 2004, respectively, of the Court of

Appeals in CA-G.R. SP No. 77580, as well as the

Decision3 and Resolution dated September 2, 2004

and April 4, 2005, respectively, of the Court of

Appeals in CA-G.R. SP No. 70814. The respectiveDecisions in the said cases similarly reversed and set

aside the decisions of the Court of Tax Appeals (CTA)

in CTA Case Nos. 59514 and 6009,

5 respectively, and

dismissed the petitions of petitioner Hongkong and

Shanghai Banking Corporation Limited-Philippine

Branches (HSBC). The corresponding Resolutions, on

the other hand, denied the respective motions for

reconsideration of the said Decisions.

HSBC performs, among others, custodial services on

behalf of its investor-clients, corporate and

individual, resident or non-resident of the

Philippines, with respect to their passive investments

in the Philippines, particularly investments in shares

of stocks in domestic corporations. As a custodian

bank, HSBC serves as the collection/payment agent

with respect to dividends and other income derived

from its investor-clients’ passive investments.6

http://www.lawphil.net/judjuris/juri2014/jun2014/gr_166018_2014.html#fnt1
























HSBC’s investor-clients maintain Philippine peso

and/or foreign currency accounts, which are

managed by HSBC through instructions given

through electronic messages. The said instructions

are standard forms known in the banking industry as

SWIFT, or "Society for Worldwide Interbank Financial

Telecommunication." In purchasing shares of stockand other investment in securities, the investor-

clients would send electronic messages from abroad

instructing HSBC to debit their local or foreign

currency accounts and to pay the purchase price

therefor upon receipt of the securities.7

Pursuant to the electronic messages of its investor-

clients, HSBC purchased and paid Documentary

Stamp Tax (DST) from September to December 1997

and also from January to December 1998 amounting

to P19,572,992.10 and P32,904,437.30, respectively,

broken down as follows:

On August 23, 1999, the Bureau of Internal Revenue

(BIR), thru its then Commissioner, Beethoven Rualo,

issued BIR Ruling No. 132-99 to the effect that

instructions or advises from abroad on the

management of funds located in the Philippines

which do not involve transfer of funds from abroad

are not subject to DST. BIR Ruling No. 132-99 reads:

Date: August 23, 1999

FERRY TOLEDO VICTORINO GONZAGA

& ASSOCIATES

G/F AFC Building, Alfaro St.

Salcedo Village, Makati

Metro Manila

Attn: Atty. Tomas C. Toledo

Tax Counsel

Gentlemen:

This refers to your letter dated July 26, 1999

requesting on behalf of your clients, the CITIBANK &

STANDARD CHARTERED BANK, for a ruling as to

whether or not the electronic instructions involving

the following transactions of residents and non-

residents of the Philippines with respect to their

local or foreign currency accounts are subject to

documentary stamp tax under Section 181 of the

1997 Tax Code, viz:

A. Investment purchase transactions:

An overseas client sends instruction to its bank in

the Philippines to either:

(i) debit its local or foreign

currency account and to pay anamed recipient in the Philippines;

or

(ii) receive funds from another

bank in the Philippines for deposit

into its account and to pay a

named recipient in the

Philippines."

The foregoing transactions are carried out under

instruction from abroad and [do] not involve actual

fund transfer since the funds are already in thePhilippine accounts. The instructions are in the form

of electronic messages (i.e., SWIFT MT100 or MT 202

and/or MT 521). In both cases, the payment is

against the delivery of investments purchased. The

purchase of investments and the payment comprise

one single transaction. DST has already been paid

under Section 176 for the investment purchase.

B. Other transactions:

An overseas client sends an instruction to its bank in

the Philippines to either:

(i) debit its local or foreign

currency account and to pay a

named recipient, who may be

another bank, a corporate entity or

an individual in the Philippines; or

(ii) receive funds from another

bank in the Philippines for deposit

to its account and to pay a named

recipient, who may be another

bank, a corporate entity or an

individual in the Philippines."

The above instruction is in the form of an electronic

message (i.e., SWIFT MT 100 or MT 202) or tested

cable, and may not refer to any particular

transaction.







The opening and maintenance by a non-resident of

local or foreign currency accounts with a bank in the

Philippines is permitted by the Bangko Sentral ng

Pilipinas, subject to certain conditions.

In reply, please be informed that pursuant to Section

181 of the 1997 Tax Code, which provides that –

SEC. 181. Stamp Tax Upon Acceptance of Bills of

Exchange and Others. – Upon any acceptance or

payment of any bill of exchange or order for the

payment of money purporting to be drawn in a

foreign country but payable in the Philippines, there

shall be collected a documentary stamp tax of Thirty

centavos (P0.30) on each Two hundred pesos (P200),

or fractional part thereof, of the face value of any

such bill of exchange, or order, or Philippine

equivalent of such value, if expressed in foreign

currency. (Underscoring supplied.)

a documentary stamp tax shall be imposed on any

bill of exchange or order for payment purporting to

be drawn in a foreign country but payable in the

Philippines.

Under the foregoing provision, the documentary

stamp tax shall be levied on the instrument, i.e., a

bill of exchange or order for the payment of money,

which purports to draw money from a foreign

country but payable in the Philippines. In the instant

case, however, while the payor is residing outside

the Philippines, he maintains a local and foreign

currency account in the Philippines from where he

will draw the money intended to pay a named

recipient. The instruction or order to pay shall be

made through an electronic message, i.e., SWIFT MT

100 or MT 202 and/or MT 521. Consequently, there

is no negotiable instrument to be made, signed or

issued by the payee. In the meantime, such

electronic instructions by the non-resident payor

cannot be considered as a transaction per se

considering that the same do not involve any

transfer of funds from abroad or from the place

where the instruction originates. Insofar as the localbank is concerned, such instruction could be

considered only as a memorandum and shall be

entered as such in its books of accounts. The actual

debiting of the payor’s account, local or foreign

currency account in the Philippines, is the actual

transaction that should be properly entered as such.

Under the Documentary Stamp Tax Law, the mere

withdrawal of money from a bank deposit, local or

foreign currency account, is not subject to DST,

unless the account so maintained is a current or

checking account, in which case, the issuance of the

check or bank drafts is subject to the documentary

stamp tax imposed under Section 179 of the 1997Tax Code. In the instant case, and subject to the

physical impossibility on the part of the payor to be

present and prepare and sign an instrument

purporting to pay a certain obligation, the

withdrawal and payment shall be made in cash. In

this light, the withdrawal shall not be subject to

documentary stamp tax. The case is parallel to an

automatic bank transfer of local funds from a savings

account to a checking account maintained by a

depositor in one bank.

Likewise, the receipt of funds from another bank in

the Philippines for deposit to the payee’s account

and thereafter upon instruction of the non-resident

depositor-payor, through an electronic message, the

depository bank to debit his account and pay a

named recipient shall not be subject to documentary

stamp tax.

It should be noted that the receipt of funds from

another local bank in the Philippines by a local

depository bank for the account of its client residing

abroad is part of its regular banking transaction

which is not subject to documentary stamp tax.

Neither does the receipt of funds makes therecipient subject to the documentary stamp tax. The

funds are deemed to be part of the deposits of the

client once credited to his account, and which,

thereafter can be disposed in the manner he wants.

The payor-client’s further instruction to debit his

account and pay a named recipient in the Philippines

does not involve transfer of funds from abroad.

Likewise, as stated earlier, such debit of local or

foreign currency account in the Philippines is not

subject to the documentary stamp tax under the

aforementioned Section 181 of the Tax Code.

In the light of the foregoing, this Office hereby holds

that the instruction made through an electronic

message by non-resident payor-client to debit his

local or foreign currency account maintained in the

Philippines and to pay a certain named recipient also

residing in the Philippines is not the transaction

contemplated under Section 181 of the 1997 Tax

Code. Such being the case, such electronic



instruction purporting to draw funds from a local

account intended to be paid to a named recipient in

the Philippines is not subject to documentary stamp

tax imposed under the foregoing Section.

This ruling is being issued on the basis of the

foregoing facts as represented. However, if uponinvestigation it shall be disclosed that the facts are

different, this ruling shall be considered null and

void.

Very truly yours,

(Sgd.) BEETHOVEN L. RUALO

Commissioner of Internal Revenue8

With the above BIR Ruling as its basis, HSBC filed on

October 8, 1999 an administrative claim for the

refund of the amount of P19,572,992.10 allegedlyrepresenting erroneously paid DST to the BIR for the

period covering September to December 1997.

Subsequently, on January 31, 2000, HSBC filed

another administrative claim for the refund of the

amount ofP32,904,437.30 allegedly representing

erroneously paid DST to the BIR for the period

covering January to December 1998.

As its claims for refund were not acted upon by the

BIR, HSBC subsequently brought the matter to the

CTA as CTA Case Nos. 5951 and 6009, respectively, inorder to suspend the running of the two-year

prescriptive period.

The CTA Decisions dated May 2, 2002 in CTA Case

No. 6009 and dated December 18, 2002 in CTA Case

No. 5951 favored HSBC. Respondent Commissioner

of Internal Revenue was ordered to refund or issue a

tax credit certificate in favor of HSBC in the reduced

amounts of P30,360,570.75 in CTA Case No. 6009

and P16,436,395.83 in CTA Case No. 5951,

representing erroneously paid DST that have been

sufficiently substantiated with documentary

evidence. The CTA ruled that HSBC is entitled to a

tax refund or tax credit because Sections 180 and

181 of the 1997 Tax Code do not apply to electronic

message instructions transmitted by HSBC’s non-

resident investor-clients:

The instruction made through an electronic message

by a nonresident investor-client, which is to debit his

local or foreign currency account in the Philippines

and pay a certain named recipient also residing in

the Philippines is not the transaction contemplated

in Section 181 of the Code. In this case, the

withdrawal and payment shall be made in cash. It is

parallel to an automatic bank transfer of local funds

from a savings account to a checking accountmaintained by a depositor in one bank. The act of

debiting the account is not subject to the

documentary stamp tax under Section 181. Neither

is the transaction subject to the documentary stamp

tax under Section 180 of the same Code. These

electronic message instructions cannot be

considered negotiable instruments as they lack the

feature of negotiability, which, is the ability to be

transferred (Words and Phrases).

These instructions are considered as mere

memoranda and entered as such in the books of

account of the local bank, and the actual debiting of

the payor’s local or foreign currency account in the

Philippines is the actual transaction that should be

properly entered as such.9

The respective dispositive portions of the Decisions

dated May 2, 2002 in CTA Case No. 6009 and dated

December 18, 2002 in CTA Case No. 5951 read:

II. CTA Case No. 6009

WHEREFORE, in the light of all the foregoing, the

instant Petition for Review is PARTIALLY GRANTED.

Respondent is hereby ORDERED to REFUND or ISSUE

A TAX CREDIT CERTIFICATE in favor of Petitioner the

amount of P30,360,570.75 representing erroneous

payment of documentary stamp tax for the taxable

year 1998.10

II. CTA Case No. 5951

WHEREFORE, in the light of the foregoing, the

instant petition is hereby partially granted.

Accordingly, respondent is hereby ORDERED to

REFUND, or in the alternative, ISSUE A TAX CREDITCERTIFICATE in favor of the petitioner in the reduced

amount of P16,436,395.83 representing erroneously

paid documentary stamp tax for the months of

September 1997 to December 1997.11

However, the Court of Appeals reversed both

decisions of the CTA and ruled that the electronic


















messages of HSBC’s investor-clients are subject to

DST. The Court of Appeals explained:

At bar, [HSBC] performs custodial services in behalf

of its investor-clients as regards their passive

investments in the Philippines mainly involving

shares of stocks in domestic corporations. Theseinvestor-clients maintain Philippine peso and/or

foreign currency accounts with [HSBC]. Should they

desire to purchase shares of stock and other

investments securities in the Philippines, the

investor-clients send their instructions and advises

via electronic messages from abroad to [HSBC] in the

form of SWIFT MT 100, MT 202, or MT 521 directing

the latter to debit their local or foreign currency

account and to pay the purchase price upon receipt

of the securities (CTA Decision, pp. 1-2; Rollo, pp. 41-

42). Pursuant to Section 181 of the NIRC, [HSBC] was

thus required to pay [DST] based on its acceptance

of these electronic messages – which, as [HSBC]

readily admits in its petition filed before the [CTA],

were essentially orders to pay the purchases of

securities made by its client-investors (Rollo, p. 60).

Appositely, the BIR correctly and legally assessed

and collected the [DST] from [HSBC] considering that

the said tax was levied against the acceptances and

payments by [HSBC] of the subject electronic

messages/orders for payment. The issue of whether

such electronic messages may be equated as a

written document and thus be subject to tax is

beside the point. As We have already stressed,Section 181 of the law cited earlier imposes the

[DST] not on the bill of exchange or order for

payment of money but on the acceptance or

payment of the said bill or order. The acceptance of

a bill or order is the signification by the drawee of its

assent to the order of the drawer to pay a given sum

of money while payment implies not only the assent

to the said order of the drawer and a recognition of

the drawer’s obligation to pay such aforesaid sum,

but also a compliance with such obligation

(Philippine National Bank vs. Court of Appeals, 25

SCRA 693 [1968]; Prudential Bank vs. IntermediateAppellate Court, 216 SCRA 257 [1992]). What is vital

to the valid imposition of the [DST] under Section

181 is the existence of the requirement of

acceptance or payment by the drawee (in this case,

[HSBC]) of the order for payment of money from its

investor-clients and that the said order was drawn

from a foreign country and payable in the

Philippines. These requisites are surely present here.

It would serve the parties well to understand the

nature of the tax being imposed in the case at bar. In

Philippine Home Assurance Corporation vs. Court of

Appeals (301 SCRA 443 [1999]), the Supreme Court

ruled that [DST is] levied on the exercise by persons

of certain privileges conferred by law for the

creation, revision, or termination of specific legalrelationships through the execution of specific

instruments, independently of the legal status of the

transactions giving rise thereto. In the same case,

the High Court also declared – citing Du Pont vs.

United States (300 U.S. 150, 153 [1936])

The tax is not upon the business transacted but is an

excise upon the privilege, opportunity, or facility

offered at exchanges for the transaction of the

business. It is an excise upon the facilities used in the

transaction of the business separate and apart from

the business itself. x x x.

To reiterate, the subject [DST] was levied on the

acceptance and payment made by [HSBC] pursuant

to the order made by its client-investors as

embodied in the cited electronic messages, through

which the herein parties’ privilege and opportunity

to transact business respectively as drawee and

drawers was exercised, separate and apart from the

circumstances and conditions related to such

acceptance and subsequent payment of the sum of

money authorized by the concerned drawers. Stated

another way, the [DST] was exacted on [HSBC’s]

exercise of its privilege under its drawee-drawerrelationship with its client-investor through the

execution of a specific instrument which, in the case

at bar, is the acceptance of the order for payment of

money. The acceptance of a bill or order for

payment may be done in writing by the drawee in

the bill or order itself, or in a separate instrument

(Prudential Bank vs. Intermediate Appellate Court,

supra.)Here, [HSBC]’s acceptance of the orders for

the payment of money was veritably ‘done in writing

in a separate instrument’ each time it debited the

local or foreign currency accounts of its client-

investors pursuant to the latter’s instructions andadvises sent by electronic messages to [HSBC]. The

[DST] therefore must be paid upon the execution of

the specified instruments or facilities covered by the

tax – in this case, the acceptance by [HSBC] of the

order for payment of money sent by the client-

investors through electronic messages. x x x.12

Hence, these petitions.







HSBC asserts that the Court of Appeals committed

grave error when it disregarded the factual and legal

conclusions of the CTA. According to HSBC, in the

absence of abuse or improvident exercise of

authority, the CTA’s ruling should not have been

disturbed as the CTA is a highly specialized court

which performs judicial functions, particularly for thereview of tax cases. HSBC further argues that the

Commissioner of Internal Revenue had already

settled the issue on the taxability of electronic

messages involved in these cases in BIR Ruling No.

132-99 and reiterated in BIR Ruling No. DA-280-

2004.13

The Commissioner of Internal Revenue, on the other

hand, claims that Section 181 of the 1997 Tax Code

imposes DST on the acceptance or payment of a bill

of exchange or order for the payment of money. The

DST under Section 18 of the 1997 Tax Code is levied

on HSBC’s exercise of a privilege which is specifically

taxed by law. BIR Ruling No. 132-99 is inconsistent

with prevailing law and long standing administrative

practice, respondent is not barred from questioning

his own revenue ruling. Tax refunds like tax

exemptions are strictly construed against the

taxpayer.14

The Court finds for HSBC.

The Court agrees with the CTA that the DST under

Section 181 of the Tax Code is levied on the

acceptance or payment of "a bill of exchange

purporting to be drawn in a foreign country but

payable in the Philippines" and that "a bill of

exchange is an unconditional order in writing

addressed by one person to another, signed by the

person giving it, requiring the person to whom it is

addressed to pay on demand or at a fixed or

determinable future time a sum certain in money to

order or to bearer." A bill of exchange is one of two

general forms of negotiable instruments under the

Negotiable Instruments Law.15

The Court further agrees with the CTA that theelectronic messages of HSBC’s investor-clients

containing instructions to debit their respective local

or foreign currency accounts in the Philippines and

pay a certain named recipient also residing in the

Philippines is not the transaction contemplated

under Section 181 of the Tax Code as such

instructions are "parallel to an automatic bank

transfer of local funds from a savings account to a

checking account maintained by a depositor in one

bank." The Court favorably adopts the finding of the

CTA that the electronic messages "cannot be

considered negotiable instruments as they lack the

feature of negotiability, which, is the ability to be

transferred" and that the said electronic messages

are "mere memoranda" of the transaction consistingof the "actual debiting of the [investor-client-

payor’s] local or foreign currency account in the

Philippines" and "entered as such in the books of

account of the local bank," HSBC.16

More fundamentally, the instructions given through

electronic messages that are subjected to DST in

these cases are not negotiable instruments as they

do not comply with the requisites of negotiability

under Section 1 of the Negotiable Instruments Law,

which provides:

Sec. 1. Form of negotiable instruments. – An

instrument to be negotiable must conform to the

following requirements:

(a) It must be in writing and signed by the

maker or drawer;

(b) Must contain an unconditional promise

or order to pay a sum certain in money;

(c) Must be payable on demand, or at a

fixed or determinable future time;

(d) Must be payable to order or to bearer;

and

(e) Where the instrument is addressed to a

drawee, he must be named or otherwise

indicated therein with reasonable certainty.

The electronic messages are not signed by the

investor-clients as supposed drawers of a bill of

exchange; they do not contain an unconditional

order to pay a sum certain in money as the payment

is supposed to come from a specific fund or account

of the investor-clients; and, they are not payable to

order or bearer but to a specifically designated third

party. Thus, the electronic messages are not bills of

exchange. As there was no bill of exchange or order

for the payment drawn abroad and made payable

here in the Philippines, there could have been no

acceptance or payment that will trigger the



















imposition of the DST under Section 181 of the Tax

Code.

Section 181 of the 1997 Tax Code, which governs

HSBC’s claim for tax refund for taxable year 1998

subject of G.R. No. 167728, provides:






shall be collected a documentary stamp tax of Thirty

centavos (P0.30) on each Two hundred pesos (P200),

or fractional part thereof, of the face value of any

such bill of exchange, or order, or the Philippine

equivalent of such value, if expressed in foreign

currency. (Emphasis supplied.)

Section 230 of the 1977 Tax Code, as amended,

which governs HSBC’s claim for tax refund for DST

paid during the period September to December 1997

and subject of G.R. No. 166018, is worded exactly

the same as its counterpart provision in the 1997 Tax

Code quoted above.

The origin of the above provision is Section 117 of

the Tax Code of 1904,17

which provided: SECTION

117. The acceptor or acceptors of any bill of

exchange or order for the payment of any sum of

money drawn or purporting to be drawn in any

foreign country but payable in the Philippine Islands,

shall, before paying or accepting the same, place

thereupon a stamp in payment of the tax upon such

document in the same manner as is required in this

Act for the stamping of inland bills of exchange or

promissory notes, and no bill of exchange shall be

paid nor negotiated until such stamp shall have been

affixed thereto.18

(Emphasis supplied.)

It then became Section 30(h) of the 1914 Tax Code19

:

SEC. 30. Stamp tax upon documents and papers. –

Upon documents, instruments, and papers, andupon acceptances, assignments, sales, and transfers

of the obligation, right, or property incident thereto

documentary taxes for and in respect of the

transaction so had or accomplished shall be paid as

hereinafter prescribed, by the persons making,

signing, issuing, accepting, or transferring the same,

and at the time such act is done or transaction had:

x x x x

(h) Upon any acceptance or payment upon

acceptance of any bill of exchange or order for the


foreign country but payable in the Philippine Islands,

on each two hundred pesos, or fractional partthereof, of the face value of any such bill of

exchange or order, or the Philippine equivalent of

such value, if expressed in foreign currency, two

centavos[.] (Emphasis supplied.)

It was implemented by Section 46 in relation to

Section 39 of Revenue Regulations No. 26,20

as

amended:

SEC. 39. A Bill of Exchange is one that "denotes

checks, drafts, and all other kinds of orders for the

payment of money, payable at sight or on demand,or after a specific period after sight or from a stated

date."

SEC. 46. Bill of Exchange, etc. – When any bill of

exchange or order for the payment of money drawn

in a foreign country but payable in this country

whether at sight or on demand or after a specified

period after sight or from a stated date, is presented

for acceptance or payment, there must be affixed

upon acceptance or payment of documentary stamp

equal to P0.02 for each P200 or fractional part

thereof. (Emphasis supplied.)

It took its present form in Section 218 of the Tax

Code of 1939,21

which provided:






shall be collected a documentary stamp tax of four

centavos on each two hundred pesos, or fractional

part thereof, of the face value of any such bill of

exchange or order, or the Philippine equivalent ofsuch value, if expressed in foreign currency.


It then became Section 230 of the 1977 Tax

Code,22

as amended by Presidential Decree Nos.

1457 and 1959,which, as stated earlier, was worded

exactly as Section 181 of the current Tax Code:


























SEC. 230. Stamp tax upon acceptance of bills of

exchange and others. – Upon any acceptance or




shall be collected a documentary stamp tax of thirty

centavos on each two hundred pesos, or fractionalpart thereof, of the face value of any such bill of

exchange, or order, or the Philippine equivalent of

such value, if expressed in foreign currency.


The pertinent provision of the present Tax Code has

therefore remained substantially the same for the

past one hundred years.1âwphi1 The identical text

and common history of Section 230 of the 1977 Tax

Code, as amended, and the 1997 Tax Code, as

amended, show that the law imposes DST on either

(a) the acceptance or (b) the payment of a foreign

bill of exchange or order for the payment of money

that was drawn abroad but payable in the

Philippines.

DST is an excise tax on the exercise of a right or

privilege to transfer obligations, rights or properties

incident thereto.23

Under Section 173 of the 1997

Tax Code, the persons primarily liable for the

payment of the DST are those (1) making, (2) signing,

(3) issuing, (4) accepting, or (5) transferring the

taxable documents, instruments or papers.24

In general, DST is levied on the exercise by persons

of certain privileges conferred by law for the

creation, revision, or termination of specific legal

relationships through the execution of specific

instruments. Examples of such privileges, the

exercise of which, as effected through the issuance

of particular documents, are subject to the payment

of DST are leases of lands, mortgages, pledges and

trusts, and conveyances of real property.25

As stated above, Section 230 of the 1977 Tax Code,

as amended, now Section 181 of the 1997 Tax Code,

levies DST on either (a) the acceptance or (b) thepayment of a foreign bill of exchange or order for

the payment of money that was drawn abroad but

payable in the Philippines. In other words, it levies

DST as an excise tax on the privilege of the drawee

to accept or pay a bill of exchange or order for the

payment of money, which has been drawn abroad

but payable in the Philippines, and on the

corresponding privilege of the drawer to have

acceptance of or payment for the bill of exchange or

order for the payment of money which it has drawn

abroad but payable in the Philippines.

Acceptance applies only to bills of

exchange.26

Acceptance of a bill of exchange has a

very definite meaning in law.27

In particular, Section132 of the Negotiable Instruments Law provides:

Sec. 132. Acceptance; how made, by and so forth. –

The acceptance of a bill [of exchange28

] is the

signification by the drawee of his assent to the order

of the drawer. The acceptance must be in writing

and signed by the drawee. It must not express that

the drawee will perform his promise by any other

means than the payment of money.

Under the law, therefore, what is accepted is a bill of

exchange, and the acceptance of a bill of exchange isboth the manifestation of the drawee’s consent to

the drawer’s order to pay money and the expression

of the drawee’s promise to pay. It is "the act by

which the drawee manifests his consent to comply

with the request contained in the bill of exchange

directed to him and it contemplates an engagement

or promise to pay."29

Once the drawee accepts, he

becomes an acceptor.30

As acceptor, he engages to

pay the bill of exchange according to the tenor of his

acceptance.31

Acceptance is made upon presentment of the bill of

exchange, or within 24 hours after such

presentment.32

Presentment for acceptance is the

production or exhibition of the bill of exchange to

the drawee for the purpose of obtaining his

acceptance.33

Presentment for acceptance is necessary only in the

instances where the law requires it.34

In the

instances where presentment for acceptance is not

necessary, the holder of the bill of exchange can

proceed directly to presentment for payment.

Presentment for payment is the presentation of theinstrument to the person primarily liable for the

purpose of demanding and obtaining payment

thereof .35

Thus, whether it be presentment for acceptance or

presentment for payment, the negotiable

instrument has to be produced and shown to the























































drawee for acceptance or to the acceptor for

payment.

Revenue Regulations No. 26 recognizes that the

acceptance or payment (of bills of exchange or

orders for the payment of money that have been

drawn abroad but payable in the Philippines) that issubjected to DST under Section 181 of the 1997 Tax

Code is done after presentment for acceptance or

presentment for payment, respectively. In other

words, the acceptance or payment of the subject bill

of exchange or order for the payment of money is

done when there is presentment either for

acceptance or for payment of the bill of exchange or

order for the payment of money.

Applying the above concepts to the matter subjected

to DST in these cases, the electronic messages

received by HSBC from its investor-clients abroadinstructing the former to debit the latter's local and

foreign currency accounts and to pay the purchase

price of shares of stock or investment in securities

do not properly qualify as either presentment for

acceptance or presentment for payment. There

being neither presentment for acceptance nor

presentment for payment, then there was no

acceptance or payment that could have been

subjected to DST to speak of.

Indeed, there had been no acceptance of a bill of

exchange or order for the payment of money on the

part of HSBC. To reiterate, there was no bill of

exchange or order for the payment drawn abroad

and made payable here in the Philippines. Thus,

there was no acceptance as the electronic messages

did not constitute the written and signed

manifestation of HSBC to a drawer's order to pay

money. As HSBC could not have been an acceptor,

then it could not have made any payment of a bill of

exchange or order for the payment of money drawn

abroad but payable here in the Philippines. In other

words, HSBC could not have been held liable for DST

under Section 230 of the 1977 Tax Code, as

amended, and Section 181 of the 1997 Tax Code as itis not "a person making, signing, issuing, accepting,

or, transferring" the taxable instruments under the

said provision. Thus, HSBC erroneously paid DST on

the said electronic messages for which it is entitled

to a tax refund.

WHEREFORE, the petitions are hereby GRANTED and

the Decisions dated May 2, 2002 in CTA Case No.

6009 and dated December 18, 2002 in CT A Case No.

5951 of the Court of Tax Appeals are REINSTATED.

SO ORDERED.



Citibank NA vs. Sabeniano

Facts: Respondent Modesta R. Sabeniano was a

client of both petitioners Citibank and FNCB Finance.

Respondent filed a complaint to recover substantial

deposits and money market placements with

petitioner. Petitioners admitted them however when

respondent failed to pay her loans with FNCB

Finance despite repeated demands by petitioner

Citibank, the latter exercised its right to off-set. In

support of respondent’s assertion that she had

already paid whatever loans she may have had with

petitioner Citibank, she presented as evidence

provisional receipts for the acceptance of the checks.

Issue: Whether or not petitioner the provisional

receipts upon acceptance of checks evidenced the

payment.

Held: Since a negotiable instrument is only a

substitute for money and not money, the delivery of

such an instrument does not, by itself, operate as

payment. A check, whether a manager’s check or

ordinary check, is not legal tender, and an offer of a

check in payment of a debt is not a valid tender of

payment and may be refused receipt by the obligee

or creditor. Mere delivery of checks does not

discharge the obligation under a judgment. The

obligation is not extinguished and remains

suspended until the payment by commercial

document is actually realized. Since the provisional

receipt was issued for the the receipt of the check,

the same cannot be considered as evidence of

payment hence the loan still subsist.

Far East Bank and Trust Co. (FEBTC) vs. Querimit

[G.R. No. 148582, Jan. 16, 2002]

Facts: Respondent Estrella Querimit opened a dollar

savings account in FEBTC for which she was issued 4

Certificates of Deposit. In 1989, respondent

accompanied her husband to the US for medical

treatment. In 1993, her husband died and Estrella

Querimit returned to the Philippines. She went to

petitioner FEBTC to withdraw her deposit but she

was told that her husband had withdrawn the

money in deposit. Respondent demanded payment

including interests earned. Respondent filed a

complaint upon refusal of petitioner to pay.

The trial court rendered its judgment in favor of

respondent. Petitioner appealed but the CA affirmed

the trial court’s decision. It ruled that FEBTC failed to

prove that the certificates of deposit had been paidout of its funds.

Issue: Whether or not petitioner bank is liable in

paying the certificates of deposit without the

production of such certificates.

Held: Yes. A certificate of deposit is defined as a

written acknowledgement by a bank or banker of

the receipt of a sum of money on deposit which the

bank or banker promises to pay to the depositor, to

the order of the depositor, or to some other person

or his order, whereby the relation of debtor and

creditor between the bank and the depositor is

created. The principle that payment, in order to

discharge a debt, must be made to someone

authorized to receive it is applicable to the payment

of certificates of deposit.

In this case, the certificates of deposit were clearly

marked payable to “bearer”, which means – to the

“person in possession of an instrument, document of

title or security payable to bearer or indorsed in

blank”. Petitioner should not have paid respondent’s

husband or any third party without requiring the

surrender of the certificates of deposit. The subjectcertificates of deposit until now remain unendorsed,

undelivered and unwithdrawn by respondent

Estrella Querimit.

Petitioner FEBTC thus failed to exercise that degree

of diligence required by the nature of its business.

http://coffeeafficionado.blogspot.com/2012/02/far-east-bank-and-trust-co-febtc-vs.html




I. Introduction Cases

Documents

Transcript of I. Introduction Cases