De La Victoria v. Judge Burgos [G.R. No. 111190. June 27, 1995]

20APRFACTS

Private respondent filed a complaint for damages against certain Fiscal Mabanto, Jr., whose judgment is favorable to the former. The decision became final and executory and notice of garnishment was served on petitioner to withhold Mabantos salary checks.

ISSUES

(a) Whether or not a check in the hands of the drawer is already owned by the payee.

(b) Whether or not an undelivered salary check may already transfer title to the payee.

RULING

(a) NO. Section 16 of the Negotiable Instruments Law is clear that where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved. Proof to the contrary is its own finding that the checks were in the custody of petitioner. In this case, as said checks had not yet been delivered to Mabanto, Jr., they did not belong to him and still had the character of public funds.

(b) NO. Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means the transfer of the possession of the instrument by the maker or drawer with intent to transfer title to the payee and recognize him as the holder thereof. Here, there is no delivery to speak of as the salary check is not yet in the hands of Mabanto Jr. as the holder.De La Victoria vs. BurgosG.R. No. 111190. June 27, 1995Bellosillo, J.AssistantCityFiscal Bienvenido N. Mabanto was ordered to pay herein private respondent Raul Sesbreo P11,000.00 as damages. A notice of garnishment was served on herein petitioner Loreto D. de la Victoria as City Fiscal of Mandaue City where Mabanto was detailed. V was directed not to disburse,transfer, release or convey to any other person except to the deputy sheriff concerned the salary checks or other checks, monies, or cash due or belonging to Mabanto, Jr., under penalty of law. Later, V was directed to submit his report showing the amount of the garnished salaries. V moved to quash the notice of garnishment claiming that he was not in possession of any money, funds, credit, property or anything of value belonging to Mabanto, Jr., except his salary and RATA checks, but that said checks were not yet properties of Mabanto, Jr., until delivered to him. He further claimed that, as such, they were still public funds which could not be subject to garnishment.ISSUE: W/N a check still in the hands of the maker or its duly authorized representative is owned by the payee before physical delivery to the latter.RULING:As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He receives his compensation in the form of checks from the DOJ through V as City Fiscal of Mandaue City and head of office. Under Sec. 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and revocable untildeliveryof the instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means the transfer of the possession of the instrument by the maker or drawerwith intent to transfer title to the payee and recognize him as the holder thereof.Inasmuch as said checks had not yet been delivered to Mabanto, Jr., theydid not belong to himand still had the character of public funds. The salary check of a government officer or employee does not belong to him before it is physically delivered to him. Until that time the check belongs to the government. Accordingly, before there is actual delivery of the check, the payee has no power over it; he cannot assign it without the consent of the Government. Being public fund, the checks may not be garnished to satisfy the judgment in consideration of public policy.Casabuena v. Court of Appeals [G.R. No. 115410. February 27,1988]20APRFACTSTo secure debt, spouses Urdaneta ceded their rights over the land through a deed of assignment.ISSUEWhether or not a deed of assignment transfer ownership of property to assignee.RULINGNO. The act of assignment could not have operated to efface liens or restrictions burdening the right assigned,because an assignee cannot acquire a greater right than that pertaining to the assignor.At most, an assignee can only acquire rights duplicating those which his assignor is entitled by law to exercise. In the case at bar, the Casabuenas merely stepped into Benins shoes, who was not so much an owner as a mere assignee of the rights of her debtors. Not having acquired any right over the land in question, it follows that Benin conveyed nothing to defendants with respect to the property.JUAN CASABUENA,petitioner, vs.HON. COURT OF APPEALS and SPOUSES CIRIACO URDANETA AND OFELIA IPIL-URDANETA,respondents.D E C I S I O NROMERO,J.:A one hundred square meter (100 sq.m.) lot located at the NDC Compound in Santa Mesa, Manila is coveted by two hopeful parties in this Petition for Review onCertiorari.The rivals are the spouses Ciriaco and Ofelia-Ipil Urdaneta, beneficiaries of the Land of the Landless Program of the City of Manila, and Juan Casabuena, transferee of the right, title and interest of Ciriacos assignee, Arsenia Benin.Urdaneta is one of the fortunate grantees of a parcel of land purchased by the City of Manila and conveyed to its less privileged inhabitants, through its land reform program.[1]On August 12, 1965, Urdaneta assigned his rights and interests in one-half (1/2) of the lot to Arsenia Benin covering full payment of his indebtedness in the amount of five hundred pesos (P500.00).[2]A deed of sale with mortgage[3]was executed, with Urdaneta undertaking to pay the City the amount of five thousand five hundred pesos (P5,500.00) for a period of forty years in 480 equal installments. On February 16, 1967, after having incurred additional indebtedness in the amount of two thousand pesos (P2,000.00), Ciriaco executed another deed of assignment[4]involving the wholelot, with assignee Benin agreeing to shoulder all obligations including the payment of amortization to the City, in accordance with the contract between it and Urdaneta.[5]The parties verbally agreed that Urdaneta could redeem the property upon payment of the loan within three (3) years from the date of assignment; failure to pay would transfer physical possession of the lot to Benin for a period of fifteen (15) years, without actual transfer of title and ownership thereto.[6]A Transfer Certificate of Title was issued in the name of Urdaneta, married to Ofelia Ipil.[7]Meanwhile, the administration of the property was assigned to brothers Candido and Juan Casabuena,[8]to whom Benin had transferred her right, title and interest for a consideration of seven thousand five hundred pesos (P7,500.00). Notwithstanding this assignment, Benin constructed a two-door apartment on the lot separately occupied by Jose Abejero and Juan Casabuena, who collected rentals from the former.After the lot was fully paid for by the Urdanetas, a Release of Mortgage was executed on February 7, 1984, under which deed the period of non-alienation of the land was extended from five (5) years to twenty (20) years.[9]From 1973 to 1976, Juan Casabuena was Benins rental collector.[10]Their relationship soured, however, compelling the latter to name as administrator Angel Tanjuakio, who filed a complaint for ejectment against petitioner, alleging that the latter stopped paying rentals on June 15, 1980 and ignored a demand letter to him. For his part, petitioner asserted that he did not receive copies of the receipts issued by Tanjuakio because the tenor of the writings therein made him appear as a tenant of the premises paying rentals and not paying for monthly amortizations for the construction cost of the building.[11]Finding that the receipts issued by Tanjuakio were insufficient to prove his ownership over the property, thereby depriving him of a better right of possession over the premises than the defendant (petitioner herein), the city court[12]dismissed the complaint.Affirmed by the Regional Trial Court of Manila,[13]the decision was again affirmed by the appellate court.[14]His motion for reconsideration having been denied,[15]Tanjuakio appealed to this Court armed with a petition for review oncertiorariwhich, to his disappointment, was denied.Upon learning of the litigation between petitioner and Benin, Urdaneta asked them to vacate the property and surrender to him possession thereof within fifteen (15) days from notice.Petitioners adamant refusal to comply with such demand resulted in a complaint for ejectment and recovery of possession of property filed by Urdaneta against him (Casabuena), Benin and Tanjuakio.[16]For lack of jurisdiction, the complaint was dismissed by the city court. The Urdaneta spouses then entered into an agreement with Benin whereby the latter would surrender to them the property with the duplex constructed thereon.On November 3, 1987, they filed a complaint for recovery of possession of the property with damages against petitioner and Thelma Casabuena, representing the heirs of Candido Casabuena.Amid the sprouting controversies involving the lot, the Urdaneta spouses succeeded in having the Court declare them as its true and lawful owners with the deed of assignment to Benin merely serving as evidence of Ciriacos indebtedness to her in view of the prohibition against the sale of the land imposed by the City government.On appeal, the appellate court affirmed[17]the findings of the lower court.A motion for reconsideration was denied.Unfazed by the protracted litigious process, petitioner files this petition for review on certiorari, arguing that the assignment by Benin was made in her capacity as creditor of the spouses, thus allowing her to transfer ownership of the property to her assignees.Can a deed of assignment transfer ownership of the property to the assignee?At the bottom of this controversy is the undisputed fact that Ciriaco Urdaneta was indebted to Benin, to secure which debt the spouses ceded their rights over the land through a deed of assignment.An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, transfers his credit and its accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor.[18]Stated simply, it is the process of transferring the right of the assignor to the assignee, who would then be allowed to proceed against the debtor.[19]The assignment involves no transfer of ownership but merely effects the transfer of rights which the assignor has at the time, to the assignee.Benin having been deemed subrogated to the rights and obligations of the spouses, she was bound by exactly the same conditions to which the latter were bound.[20]This being so, she and the Casabuenas were bound to respect the prohibition against selling the property within the five-year period imposed by the City government.The act of assignment could not have operated to efface liens or restrictions burdening the right assigned,[21]because an assignee cannot acquire a greater right than that pertaining to the assignor.[22]At most, an assignee can only acquire rights duplicating those which his assignor is entitled by law to exercise.In the case at bar, the Casabuenas merely stepped into Benins shoes, who was not so much an owner as a mere assignee of the rights of her debtors.Not having acquired any right over the land in question, it follows that Benin conveyed nothing to defendants with respect to the property.While it is true that theduplexis owned by Benin, the Casabuenas mistakenly believed that the deed included cession of rights of ownership over the landas well.The encumbrance of the property may be deemed as an exercise of their right of ownership over the property considering that, under the law, only owners of certain properties may mortgage the same.[23]By mortgaging a piece of property, a debtor merely subjects it to a lien but ownership thereof is not parted with.[24]As a result, notwithstanding the encumbrance of the Bulacan lot through a deed of assignment in favor of Benin, the spouses Urdaneta remain its owners, to the exclusion of petitioner.WHEREFORE,considering the foregoing, the decision isAFFIRMED.No costs.SO ORDERED.

SESBRENO VS CAFACTS:Fifty-two employees sued the Province of Cebu and Governor Rene Espina for reinstatement and backwages imploring Atty. Pacquiao as counsel who was later replaced by Atty. Sesbreno. The employees and Atty. Sesbreno agreed that he is to be paid 30% as attorneys fees and 20% as expenses taken from their back salaries. Trial court decided in favor of the employees and ordered the Province of Cebu to reinstate them and pay them back salaries. The same was affirmed in toto by the Court of Appeals and ultimately the Supreme Court. A compromise agreement was entered into by the parties in April 1979. The former employees waived their right to reinstatement among others. The Province of Cebu released P2,300,000.00 to the petitioning employees through Atty. Sesbreno as Partial Satisfaction of Judgment. The amount represented back salaries, terminal leave pay and gratuity pay due to the employees. Ten employees filed manifestations before the trial court asserting that they agreed to pay Atty. Sesbreno 40% to be taken only from their back salaries. The lower court issued two orders, with which petitioner complied, requiring him to release P10,000.00 to each of the ten private respondents and to retain 40% of the back salaries pertaining to the latter out of the P2,300,000.00 released to him. On March 28, 1980, the trial court fixed the attorneys fees a total of 60% of all monies paid to the employees. However, trial court modified the award after noting that petitioners attorneys lien was inadvertently placed as 60% when it should have been only 50%. Atty. Sesbreno appealed to the Court of Appeals claiming additional fees for legal services but was even further reduced to 20%.ISSUE:Whether the Court of Appeals had the authority to reduce the amount of attorneys fees awarded to petitioner Atty. Raul H. Sesbreo, notwithstanding the contract for professional services signed by private respondentsHELD: Yes. The Supreme Court noted that the contract of professional services entered into by the parties 6 authorized petitioner to take a total of 50% from the employees back salaries only. The trial court, however, fixed the lawyers fee on the basis of all monies to be awarded to private respondents. Fifty per cent of all monies which private respondents may receive from the provincial government, according to the Court of Appeals, is excessive and unconscionable, not to say, contrary to the contract of professional services. What a lawyer may charge and receive as attorneys fees is always subject to judicial control. A stipulation on a lawyers compensation in a written contract for professional services ordinarily controls the amount of fees that the contracting lawyer may be allowed, unless the court finds such stipulated amount unreasonable unconscionable. A contingent fee arrangement is valid in this jurisdiction and is generally recognized as valid and binding but must be laid down in an express contract. if the attorneys fees are found to be excessive, what is reasonable under the circumstances. Quantum meruit, meaning as much as he deserves, is used as the basis for determining the lawyers professional fees in the absence of a contract. The Supreme Court averred that in balancing the allocation of the monetary award, 50% of all monies to the lawyer and the other 50% to be allocated among all his 52 clients, is too lop-sided in favor of the lawyer. The ratio makes the practice of law a commercial venture, rather than a noble profession. It would, verily be ironic if the counsel whom they had hired to help would appropriate for himself 50% or even 60% of the total amount collectible by these employees. 20% is a fair settlement.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.83-17966in 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 instrument from 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 be designated 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 acquired 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.FACTSFilriters Guaranty Assurance Corporation (Filriters) executed a Detached Assignment . . ., unto Philippine Underwriters Finance Corporation (Philfinance) all its rights and title to Central Bank Certificates of Indebtedness.ISSUEWhether or not the Certificates of Indebtedness may be negotiated.RULINGNO. The instrument is not negotiable but assignable. The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchtone relating to the protection of holders in due course, and the freedom of negotiability is the foundation for the protection which the law throws around a holder in due course.Manuel Lim v CAFacts:Manuel Lim and Rosita Lim are the officers of the Rigi Bilt Industries, Inc. (RIGI). RIGI had been transacting business with Linton Commercial Company, Inc. The Lims ordered 100 pieces of mild steel plates from Linton and were delivered to the Lims place of business which was in Caloocan. To pay Linton, the Lims issued a postdated check for P51,800.00. On a different date, the Lims also ordered another 65 pcs of mild steel plates and were delivered in the place of business. They again issued another postdated check. On that same day, they also ordered purlins worth P241,800 which were delivered to them on various dates. The Lims issued 7 checks for this.When the 7 checks were presented to the drawee bank (Solidbank), it was dishonored because payment for the checks had been stopped and/or insufficiency of funds. So the Lims were charged with 7 counts of violation of Bouncing Checks Law.The Malabon trial court held that the Lims were guilty of estafa and violation of BP 22. They went to CA on appeal.The CA acquitted the Lims of estafa, on the ground that the checks were not made in payment of an obligation contracted at the time of their issuance. However, the CA affirmed the finding that they were guilty of violation for BP 22. Motion for Reconsideration to SC.

Issue:Whether or not the issue was within the jurisdiction of the Malabon Trial Court

Held:Yes. The venue of jurisdiction lies either in the RTC Caloocan or Malabon Trial Court.BP 22 is a continuing crime. A person charged with a transitory crime may be validly tried in any municipality or territory where the offense was partly committed. In determining the proper venue, the ff. must be considered. 1) 7 checks were issued to Linton in its place of business in Navotas. 2) The checks were delivered Linton in the same place. 3) The checks were dishonored in Caloocan 4) The Lims had knowledge of their insufficiency of funds.

Under sec 191 of the Negotiable Instruments Law:ISSUE = 1ST delivery of the instrument complete in form to a person who takes it as a holderHOLDER = payee or indorsee of a bill/note who is in possession of it or the bearer

The place where the bills were written, signed or dated does not necessarily fix or determine the place where they were executed. It is the delivery that is important. It is the final act essential to its consummation of an obligation. An undelivered bill is unoperative. The issuance and delivery of the check must be to a person who takes it as a holder.Although Linton sent a collector who received the checks fr. The Lims at their place of business, the checks were actually issued and delivered to Linton in Navotas. The collector is not a holder or an agent, he was just an employee.

*SC affirms conviction of the Lims for violation of BP 22 and the decision of CAMONTINOLA V. PNB88 PHIL 178FACTS:Ramos, as a disbursing officer of an army division of the USAFE, made cash advancements w/ the Provincial Treasurer of Lanao. In exchange, the Provl Treasurer of Lanao gave him a P500,000 check. Thereafter, Ramos presented the check to Laya for encashment. Laya in his capacity as Provincial Treasurer of Misamis Oriental as drawer, issued a check to Ramos in the sum of P100000, on the Philippines National Bank as drawee; the P400000 value of the check was paid in military notes.

Ramos was unable to encash the said check for he was captured by the Japanese. But after his release, he sold P30000 of the check to Montinola for P90000 Japanese Military notes, of which only P45000 was paid by the latter. The writing made by Ramos at the back of the check was to the effect that he was assigning only P30000 of the value of the document with an instruction to the bank to pay P30000 to Montinola and to deposit the balance to Ramos's credit. This writing was, however, mysteriously obliterated and in its place, a supposed indorsement appearing on the back of the check was made for the whole amount of the check. At the time of the transfer of this check to Montinola, the check was long overdue by about 2-1/2 years.

Montinola instituted an action against the PNB and the Provincial Treasurer of Misamis Oriental to collect the sum of P100,000, the amount of the aforesaid check. There now appears on the face of said check the words in parenthesis "Agent, Phil. National Bank" under the signature of Laya purportedly showing that Laya issued the check as agent of the Philippine National Bank.HELD:The words "Agent, Phil. National Bank" now appearing on the face of the check were added or placed in the instrument after it was issued by the Provincial Treasurer Laya to Ramos. The check was issued by only as Provincial Treasurer and as an official of the Government, which was under obligation to provide the USAFE with advance funds, and not as agent of the bank, which had no such obligation. The addition of those words was made after the check had been transferred by Ramos to Montinola. The insertion of the words "Agent, Phil. National Bank," which converts the bank from a mere drawee to a drawer and therefore changes its liability, constitutes a material alteration of the instrument without the consent of the parties liable thereon, and so discharges the instrument.88 Phil 178 Commercial Law NegotiableInstrumentsLaw Alteration Assignee Partial IndorsementIn May 1942, Ubaldo Laya, as provincial treasurer of Misamis Oriental issued a P100,000.00 Philippine National Bank (PNB) check to Mariano Ramos. The said check was to be used by Ramos, as disbursing officer of the US forces at that time, for military purposes. Before Ramos can encash the check, he was made a prisoner of war by the invading Japanese forces. When he got free in December 1944, he needed some cash for himself and so he went to a certain Enrique Montinola and made arrangements.On the back of the check, Ramos wrote:Pay to the order of Enrique P. Montinola P30,000 only. The balance to be deposited in the Philippine National Bank to the credit of M. V. Ramos.In consideration thereof, Montinola promised to pay 85,000 in Japanese notes (that time peso notes are valued higher). However, he was only able to pay 45k in Japanese notes to Ramos.Later, Montinola sought to have the check encashed but PNB dishonored the check. It appears that there was an insertion made. Under the signature of Laya, the words Agent, Philippine National Bank was inserted, thus making it appear that Laya disbursed the check as an agent of PNB and not as provincial treasurer of Misamis Oriental (NOTE: at that time, a provincial treasurer is an ex officio agent of the governments bank).ISSUE:Whether or not the subject check is a negotiable instrument.HELD:No. It was not negotiated according to the NegotiableInstrumentsLaw (NIL) hence it is not a negotiable instrument. There was only a partial indorsement and not a negotiation contemplated under the NIL. Only P30k of the P100k amount of the check was indorsed. This merely make Montinola a mere assignee and this is the clear intent of Ramos. Ramos was merely assigning P30k to Montinola. Montinola may therefore not be regarded as an indorsee and PNB has all the right to dishonor the check. As mere assignee, he is subject to all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos.Anent the issue of alteration, the apparent purpose of which is to make the drawee (PNB) the drawer against which Montinola can recover from directly. Such material alteration which was done by Montinola without the consent of the parties liable thereon discharges the instrument, pursuant to Sec. 124 of the NIL.Montinola cannot be said to be a holder. He is an assignee. And even if he is a holder, he is not in good faith because he did not pay the full amount of the consideration for which the P30k was issued to him he only paid 45k Japanese notes out of the 90k Japanese notes consideration.At any rate, even assuming that there is proper negotiation, Montinola can no longer encash said check because when he sought to have it encashed in January 1945, it is already stale there being two and half years passing since its time of issuanceG.R. No. 102967 February 10, 2000BIBIANO V. BAAS, JR.,petitioner,vs.COURT OF APPEALS, AQUILINO T. LARIN, RODOLFO TUAZON AND PROCOPIO TALON,respondents.QUISUMBING,J.:For review is the Decision of the Court of Appeals in CA-C.R. CV No. 17251 promulgated on November 29, 1991. It affirmedin totothe judgment of the Regional Trial Court (RTC), Branch 39, Manila, in Civil Case No. 82-12107. Said judgment disposed as follows:FOR ALL THE FOREGOING CONSIDERATIONS, this Court hereby renders judgment DISMISSING the complaint against all the defendants and ordering plaintiff [herein petitioner] to pay defendant Larin the amount of P200,000.00 (Two Hundred Thousand Pesos) as actual and compensatory damages; P200,000.00 as moral damages; and P50,000.00 as exemplary damages and attorneys fees of P100,000.00.1The facts, which we find supported by the records, have been summarized by the Court of Appeals as follows:On February 20, 1976, petitioner, Bibiano V. Baas Jr. sold to Ayala Investment Corporation (AYALA), 128,265 square meters of land located at Bayanan, Muntinlupa, for two million, three hundred eight thousand, seven hundred seventy (P2,308,770.00) pesos. The Deed of Sale provided that upon the signing of the contract AYALA shall pay four hundred sixty-one thousand, seven hundred fifty-four (P461,754.00) pesos. The balance of one million, eight hundred forty-seven thousand and sixteen (P1,847,016.00) pesos was to be paid in four equal consecutive annual installments, with twelve (12%) percent interestper annumon the outstanding balance. AYALA issued one promissory note covering four equal annual installments. Each periodic payment of P461,754.00 pesos shall be payable starting on February 20, 1977, and every year thereafter, or until February 20, 1980.The same day, petitioner discounted the promissory note with AYALA, for its face value of P1,847,016.00, evidenced by a Deed of Assignment signed by the petitioner and AYALA. AYALA issued nine (9) checks to petitioner, all dated February 20, 1976, drawn against Bank of the Philippine Islands with the uniform amount of two hundred five thousand, two hundred twenty-four (P205,224.00) pesos.In his 1976 Income Tax Return, petitioner reported the P461,754 initial payment as income from disposition of capital asset.2Selling Price of LandP2,308,770.00

Less Initial Payment461,754.003

Unrealized GainP1,847,016.00

1976 Declaration of Income on Disposition of Capital Asset subject to Tax:

Initial PaymentP461,754.00

Less: Cost of land and other incidental Expenses( 76,547.90)

IncomeP385,206.10

Income subject to tax (P385,206. 10 x 50%)P192,603.65

In the succeeding years, until 1979, petitioner reported a uniform income of two hundred thirty thousand, eight hundred seventy-seven (P230,877.00) pesos4as gain from sale of capital asset. In his 1980 income tax amnesty return, petitioner also reported the same amount of P230,877.00 as the realized gain on disposition of capital asset for the year.On April 11, 1978, then Revenue Director Mauro Calaguio authorized tax examiners, Rodolfo Tuazon and Procopio Talon to examine the books and records of petitioner for the year 1976. They discovered that petitioner had no outstanding receivable from the 1976 land sale to AYALA and concluded that the sale was cash and the entire profit should have been taxable in 1976 since the income was wholly derived in 1976.Tuazon and Talon filed their audit report and declared a discrepancy of two million, ninety-five thousand, nine hundred fifteen (P2,095,915.00) pesos in petitioner's 1976 net income. They recommended deficiency tax assessment for two million, four hundred seventy-three thousand, six hundred seventy-three (P2,473,673.00) pesos.Meantime, Aquilino Larin succeeded Calaguio as Regional Director of Manila Region IV-A. After reviewing the examiners' report, Larin directed the revision of the audit report, with instruction to consider the land as capital asset. The tax due was only fifty (50%) percent of the total gain from sale of the property held by the taxpayer beyond twelve months pursuant to Section 345of the 1977 National Internal Revenue Code (NIRC). The deficiency tax assessment was reduced to nine hundred thirty six thousand, five hundred ninety-eight pesos and fifty centavos (P936,598.50), inclusive of surcharges and penalties for the year 1976.On June 27, 1980, respondent Larin sent a letter to petitioner informing of the income tax deficiency that must be settled him immediately.On September 26, 1980, petitioner acknowledged receipt of the letter but insisted that the sale of his land to AYALA was on installment.On June 8, 1981, the matter was endorsed to the Acting Chief of the Legal Branch of the National Office of the BIR. The Chief of the Tax Fraud Unit recommended the prosecution of a criminal case for conspiring to file false and fraudulent returns, in violation of Section 51 of the Tax Code against petitioner and his accountants, Andres P. Alejandre and Conrado Baas.On June 17, 1981, Larin filed a criminal complaint for tax evasion against the petitioner.On July 1, 1981, news items appeared in the now defunct Evening Express with the headline: "BIR Charges Realtor" and another in the defunct Evening Post with a news item: "BIR raps Realtor, 2 accountants." Another news item also appeared in the July 2, 1981, issue of the Bulletin Today entitled: "3-face P1-M tax evasion raps." All news items mentioned petitioner's false income tax return concerning the sale of land to AYALA.On July 2, 1981, petitioner filed an Amnesty Tax Return under P.D. 1740 and paid the amount of forty-one thousand, seven hundred twenty-nine pesos and eighty-one centavos (P41,729.81). On November 2, 1981, petitioner again filed an Amnesty Tax Return under P.D. 1840 and paid an additional amount of one thousand, five hundred twenty-five pesos and sixty-two centavos (P1,525.62). In both, petitioner did not recognize that his sale of land to AYALA was on cash basis.Reacting to the complaint for tax evasion and the news reports, petitioner filed with the RTC of Manila an action6for damages against respondents Larin, Tuazon and Talon for extortion and malicious publication of the BIR's tax audit report. He claimed that the filing of criminal complaints against him for violation of tax laws were improper because he had already availed of two tax amnesty decrees, Presidential Decree Nos. 1740 and 1840.The trial court decided in favor of the respondents and awarded Larin damages, as already stated. Petitioner seasonably appealed to the Court of Appeals. In its decision of November 29, 1991, the respondent court affirmed the trial court's decision, thus:The finding of thecourt a quothat plaintiff-appellant's actions against defendant-appellee Larin were unwarranted and baseless and as a result thereof, defendant-appellee Larin was subjected to unnecessary anxiety and humiliation is therefore supported by the evidence on record.1wphi1.ntDefendant-appellee Larin acted only in pursuance of the authority granted to him. In fact, the criminal charges filed against him in the Tanodbayan and in the City Fiscal's Office were all dismissed.WHEREFORE, the appealed judgment is hereby AFFIRMEDin toto.7Hence this petition, wherein petitioner raises before us the following queries:I. WHETHER THE COURT OF APPEALS ERRED IN ITS INTERPRETATION OF PERTINENT TAX LAWS, THUS IT FAILED TO APPRECIATE THE CORRECTNESS AND ACCURACY OF PETITIONER'S RETURN OF THE INCOME DERIVED FROM THE SALE OF THE LAND TO AYALA.II. WHETHER THE RESPONDENT COURT ERRED IN NOT FINDING THAT THERE WAS AN ALLEGED ATTEMPT TO EXTORT [MONEY FROM] PETITIONER BY PRIVATE RESPONDENTS.III. WHETHER THE RESPONDENT COURT ERRED IN ITS INTERPRETATION OF PRESIDENTIAL DECREE NOS. 1740 AND 1840, AMONG OTHERS, PETITIONER'S IMMUNITY FROM CRIMINAL PROSECUTION.IV. WHETHER THE RESPONDENT COURT ERRED IN ITS INTERPRETATION OF WELL-ESTABLISHED DOCTRINES OF THIS HONORABLE COURT AS REGARDS THE AWARD OF ACTUAL, MORAL AND EXEMPLARY DAMAGES IN FAVOR OF RESPONDENT LARIN.In essence, petitioner asks the Court to resolveseriatimthe following issues:1. Whether respondent court erred in ruling that there was no extortion attempt by BIR officials;2. Whether respondent court erred in holding that P.D. 1740 and 1840 granting tax amnesties did not grant immunity from tax suits;3. Whether respondent court erred in finding that petitioner's income from the sale of land in 1976 should be declared as a cash transaction in his tax return for the same year (because the buyer discounted the promissory note issued to the seller on future installment payments of the sale, on the same day of the sale);4. Whether respondent court erred and committed grave abuse of discretion in awarding damages to respondent Larin.The first issue, on whether the Court of Appeals erred in finding that there was no extortion, involves a determination of fact. The Court of Appeals observed,The only evidence to establish the alleged extortion attempt by defendants-appellees is the plaintiff-appellant's self serving declarations.As found by the courta quo, "said attempt was known to plaintiff-appellant's son-in-law and counsel on record, yet, said counsel did not take the witness stand to corroborate the testimony of plaintiff."8As repeatedly held, findings of fact by the Court of Appeals especially if they affirm factual findings of the trial court will not be disturbed by this Court, unless these findings are not supported by evidence.9Similarly, neither should we disturb a finding of the trial court and appellate court that an allegation is not supported by evidence on record. Thus, we agree with the conclusion of respondent court that herein private respondents, on the basis of evidence, could not be held liable for extortion.On the second issue of whether P.D. Nos. 1740 and 1840 which granted tax amnesties also granted immunity from criminal prosecution against tax offenses, the pertinent sections of these laws state:P.D. No. 1740. CONDONING PENALTIES FOR CERTAIN VIOLATIONS OF THE INCOME TAX LAW UPON VOLUNTARY DISCLOSURE OF UNDECLARED INCOME FOR INCOME TAX PURPOSES AND REQUIRING PERIODIC SUBMISSION OF NET WORTH STATEMENT.x x x x x x x x xSec. 1.Voluntary Disclosure of Correct Taxable Income. Any individual who, for any or all of the taxable years 1974 to 1979, had failed to file a return is hereby, allowed to file a return for each of the aforesaid taxable years and accurately declare therein the true and correct income, deductions and exemptions and pay the income tax due per return. Likewise, any individual who filed a false or fraudulent return for any taxable year in the period mentioned above may amend his return and pay the correct amount of tax due after deducting the taxes already paid, if any, in the original declaration. (emphasis ours)x x x x x x x x xSec. 5.Immunity from Penalties. Any individual who voluntarily files a return under this Decree and pays the income tax due thereon shall be immune from the penalties, civil or criminal, under the National Internal Revenue Code arising from failure to pay the correct income tax with respect to the taxable years from which an amended return was filed or for which an original return was filed in cases where no return has been filed for any of the taxable years 1974 to 1979:Provided,however, That these immunities shall not apply in cases where the amount of net taxable income declared under this Decree is understated to the extent of 25% or more of the correct net taxable income. (emphasis ours)P.D. NO. 1840 GRANTING A TAX AMNESTY ON UNTAXED INCOME AND/OR WEALTH EARNED OR ACQUIRED DURING THE TAXABLE YEARS 1974 TO 1980 AND REQUIRING THE FILING OF THE STATEMENT OF ASSETS, LIABILITIES, AND NET WORTH.Sec. 1.Coverage. In case of voluntary disclosure of previously untaxed income and/or wealth such as earnings, receipts, gifts, bequests or any other acquisition from any source whatsoever, realized here or abroad, by any individual taxpayer, which are taxable under the National Internal Revenue Code, as amended, the assessment and collection of all internal revenue taxes, including the increments or penalties on account of non-payment, as well as all civil, criminal or administrative liabilities arising from or incident thereto under the National Internal Revenue Code, are hereby condoned provided that the individual taxpayer shall pay. (emphasis ours) . . .Sec. 2.Conditions for Immunity. The immunity granted under Section one of this Decree shall apply only under the following conditions:a) Such previously untaxed income and/or wealth must have been earned or realized in any of the years 1974 to 1980;b) The taxpayer must file an amnesty return on or before November 30, 1981, and fully pay the tax due thereon;c) The amnesty tax paid by the taxpayer under this Decree shall not be less than P1,000.00 per taxable year; andd) The taxpayer must file a statement of assets, liabilities and net worth as of December 31, 1980, as required under Section 6 hereof. (emphasis ours)It will be recalled that petitioner entered into a deed of sale purportedly on installment. On the same day, he discounted the promissory note covering the future installments. The discounting seems questionable because ordinarily, when a bill is discounted, the lender (e.g.banks, financial institution) charges or deducts a certain percentage from the principal value as its compensation. Here, the discounting was done by the buyer. On July 2, 1981, two weeks after the filing of the tax evasion complaint against him by respondent Larin on June 17, 1981, petitioner availed of the tax amnesty under P.D. No. 1740. His amended tax return for the years 1974 - 1979 was filed with the BIR office of Valenzuela, Bulacan, instead of Manila where the petitioner's principal office was located. He again availed of the tax amnesty under P.D. No. 1840. His disclosure, however, did not include the income from his sale of land to AYALA on cash basis. Instead he insisted that such sale was on installment. He did not amend his income tax return. He did not pay the tax which was considerably increased by the income derived from the discounting. He did not meet the twin requirements of P.D. 1740 and 1840, declaration of his untaxed income and full payment of tax due thereon. Clearly, the petitioner is not entitled to the benefits of P.D. Nos. 1740 and 1840. The mere filing of tax amnesty return under P.D. 1740 and 1840 does notipso factoshield him from immunity against prosecution. Tax amnesty is a general pardon to taxpayers who want to start a clean tax slate. It also gives the government a chance to collect uncollected tax from tax evaders without having to go through the tedious process of a tax case. To avail of a tax amnesty granted by the government, and to be immune from suit on its delinquencies, the tax payer must have voluntarily disclosed his previously untaxed income and must have paid the corresponding tax on such previously untaxed income.10It also bears noting that a tax amnesty, much like a tax exemption, is never favored nor presumed in law and if granted by statute, the terms of the amnesty like that of a tax exemption must be construed strictly against the taxpayer and liberally in favor of the taxing authority.11Hence, on this matter, it is our view that petitioner's claim of immunity from prosecution under the shield of availing tax amnesty is untenable.On the third issue, petitioner asserts that his sale of the land to AYALA was not on cash basis but on installment as clearly specified in the Deed of Sale which states:That for and in consideration of the sum of TWO MILLION THREE HUNDRED EIGHT THOUSAND SEVEN HUNDRED SEVENTY (P2,308,770.00) PESOS Philippine Currency, to be paid as follows:1. P461,754.00, upon the signing of the Deed of Sale; and,2. The balance of P1,847,016.00, to be paid in four (4) equal, consecutive, annual installments with interest thereon at the rate of twelve percent (12%)per annum, beginning on February 20, 1976, said installments to be evidenced by four (4) negotiable promissory notes.12Petitioner resorts to Section 43 of the NIRC and Sec. 175 of Revenue Regulation No. 2 to support his claim.Sec. 43 of the 1977 NIRC states,Installment basis. (a) Dealers in personal property. . . .(b)Sales of realty and casual sales of personalty In the case (1) of a casual sale or other casual disposition of personal property (other than property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year), for a price exceeding one thousand pesos, or (2) of a sale or other disposition of real property if in either case the initial payments do not exceed twenty-fivepercentumof the selling price, the income may, under regulations prescribed by the Minister of Finance, be returned on the basis and in the manner above prescribed in this section. As used in this section the term "initial payment" means the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made. . . . (emphasis ours)Revenue Regulation No. 2, Section 175 provides,Sale of real property involving deferred payments. Under section 43 deferred-payment sales of real property include (1) agreements of purchase and sale which contemplate that a conveyance is not to be made at the outset, but only after all or a substantial portion of the selling price has been paid, and (b) sales in which there is an immediate transfer of title, the vendor being protected by a mortgage or other lien as to deferred payments. Such sales either under (a) or (b), fall into two classes when considered with respect to the terms of sale, as follows:(1) Sales of property on the installment plan, that is, sales in which the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable year in which the sale is made do not exceed 25 per cent of the selling price;(2) Deferred-payment sales not on the installment plan, that is sales in which the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable year in which the sale is made exceed 25 per cent of the selling price;In the sale of mortgaged property the amount of the mortgage, whether the property is merely taken subject to the mortgage or whether the mortgage is assumed by the purchaser, shall be included as a part of the "selling price" but the amount of the mortgage, to the extent it does not exceed the basis to the vendor of the property sold, shall not be considered as a part of the "initial payments" or of the "total contract price," as those terms are used in section 43 of the Code, in sections 174 and 176 of these regulations, and in this section. The term "initial payments" does not include amounts received by the vendor in the year of sale from the disposition to a third person of notes given by the vendee as part of the purchase price which are due and payable in subsequent years. Commissions and other selling expenses paid or incurred by the vendor are not to be deducted or taken into account in determining the amount of the "initial payments," the "total contract price," or the "selling price." The term "initial payments" contemplates at least one other payment in addition to the initial payment. If the entire purchase price is to be paid in a lump sum in a later year, there being no payment during the year, the income may not be returned on the installment basis. Income may not be returned on the installment basis where no payment in cash or property, other than evidences of indebtedness of the purchaser, is received during the first year, the purchaser having promised to make two or more payments, in later years.Petitioner asserts that Sec. 43 allows him to return as income in the taxable years involved, the respective installments as provided by the deed of sale between him and AYALA. Consequently, he religiously reported his yearly income from sale of capital asset, subject to tax, as follows:Year 1977 (50% of P461,754)P230,877.00

1978230,877.00

1979230,877.00

1980230,877.00

Petitioner says that his tax declarations are acceptable modes of payment under Section 175 of the Revenue Regulations (RR) No. 2. The term "initial payment", he argues, does not include amounts received by the vendor which are part of the complete purchase price, still due and payable in subsequent years. Thus, the proceeds of the promissory notes, not yet due which he discounted to AYALA should not be included as income realized in 1976. Petitioner states that the original agreement in the Deed of Sale should not be affected by the subsequent discounting of the bill.On the other hand, respondents assert that taxation is a matter of substance and not of form. Returns are scrutinized to determine if transactions are what they are and not declared to evade taxes. Considering the progressive nature of our income taxation, when income is spread over several installment payments through the years, the taxable income goes down and the tax due correspondingly decreases. When payment is in lump sum the tax for the year proportionately increases. Ultimately, a declaration that a sale is on installment diminishes government taxes for the year of initial installment as against a declaration of cash sale where taxes to the government is larger.As a general rule, the whole profit accruing from a sale of property is taxable as income in the year the sale is made. But, if not all of the sale price is received during such year, and a statute provides that income shall be taxable in the year in which it is "received," the profit from an installment sale is to be apportioned between or among the years in which such installments are paid and received.13Sec. 43 and Sec. 175 says that among the entities who may use the above-mentioned installment method is a seller of real property who disposes his property on installment, provided that the initial payment does not exceed 25% of the selling price. They also state what may be regarded as installment payment and what constitutes initial payment. Initial payment means the payment received in cash or property excluding evidences of indebtedness due and payable in subsequent years, like promissory notes or mortgages, given of the purchaser during the taxable year of sale. Initial payment does not include amounts received by the vendor in the year of sale from the disposition to a third person of notes given by the vendee as part of the purchase price which are due and payable in subsequent years.14Such disposition or discounting of receivable is material only as to the computation of the initial payment. If the initial payment is within 25% of total contract price, exclusive of the proceeds of discounted notes, the sale qualifies as an installment sale, otherwise it is a deferred sale.15Although the proceed of a discounted promissory note is not considered part of the initial payment, it is still taxable income for the year it was converted into cash. The subsequent payments or liquidation of certificates of indebtedness is reported using the installment method in computing the proportionate income16to be returned, during the respective year it was realized. Non-dealer sales of real or personal property may be reported as income under the installment method provided that the obligation is still outstanding at the close of that year. If the seller disposes the entire installment obligation by discounting the bill or the promissory note, he necessarily must report the balance of the income from the discounting not only income from the initial installment payment.Where an installment obligation is discounted at a bank or finance company, a taxable disposition results, even if the seller guarantees its payment, continues to collect on the installment obligation, or handles repossession of merchandise in case of default.17This rule prevails in the United States.18Since our income tax laws are of American origin,19interpretations by American courts an our parallel tax laws have persuasive effect on the interpretation of these laws.20Thus, by analogy, all the more would a taxable disposition result when the discounting of the promissory note is done by the seller himself. Clearly, the indebtedness of the buyer is discharged, while the seller acquires money for the settlement of his receivables. Logically then, the income should be reported at the time of the actual gain. For income tax purposes, income is an actual gain or an actual increase of wealth.21Although the proceeds of a discounted promissory note is not considered initial payment, still it must be included as taxable income on the year it was converted to cash. When petitioner had the promissory notes covering the succeeding installment payments of the land issued by AYALA, discounted by AYALA itself, on the same day of the sale, he lost entitlement to report the sale as a sale on installment since, a taxable disposition resulted and petitioner was required by law to report in his returns the income derived from the discounting. What petitioner did is tantamount to an attempt to circumvent the rule on payment of income taxes gained from the sale of the land to AYALA for the year 1976.Lastly, petitioner questions the damages awarded to respondent Larin.Any person who seeks to be awarded actual or compensatory damages due to acts of another has the burden of proving said damages as well as the amount thereof.22Larin says the extortion cases filed against him hampered his immediate promotion, caused him strong anxiety and social humiliation. The trial court awarded him two hundred thousand (P200,000,00) pesos as actual damages. However, the appellate court stated that, despite pendency of this case, Larin was given a promotion at the BIR. Said respondent court:We find nothing on record, aside from defendant-appellee Larin's statements (TSN, pp. 6-7, 11 December 1985), to show that he suffered loss of seniority that allegedly barred his promotion. In fact, he was promoted to his present position despite the pendency of the instant case (TSN, pp. 35-39, 04 November 1985).23Moreover, the records of the case contain no statement whatsoever of the amount of the actual damages sustained by the respondents. Actual damages cannot be allowed unless supported by evidence on the record.24The court cannot rely on speculation, conjectures or guesswork as to the fact and amount of damages.25To justify a grant of actual or compensatory damages, it is necessary to prove with a reasonable degree of certainty, the actual amount of loss.26Since we have no basis with which to assess, with certainty, the actual or compensatory damages counter-claimed by respondent Larin, the award of such damages should be deleted.Moral damages may be recovered in cases involving acts referred to in Article 2127of the Civil Code.28As a rule, a public official may not recover damages for charges of falsehood related to his official conduct unless he proves that the statement was made with actual malice. InBabst,et.al.vs.National Intelligence Board,et.al., 132 SCRA 316, 330 (1984), we reiterated the test for actual malice as set forth in the landmark American case ofNew York Times vs.Sullivan,29which we have long adopted, in defamation and libel cases,viz.:. . . with knowledge that it was false or with reckless disregard of whether it was false or not.We appreciate petitioner's claim that he filed his 1976 return in good faith and that he had honestly believed that the law allowed him to declare the sale of the land, in installment. We can further grant that the pertinent tax laws needed construction, as we have earlier done. That petitioner was offended by the headlines alluding to him as tax evader is also fully understandable. All these, however, do not justify what amounted to a baseless prosecution of respondent Larin. Petitioner presented no evidence to prove Larin extorted money from him. He even admitted that he never met nor talked to respondent Larin. When the tax investigation against the petitioner started, Larin was not yet the Regional Director of BIR Region IV-A, Manila. On respondent Larin's instruction, petitioner's tax assessment was considered one involving a sale of capital asset, the income from which was subjected to only fifty percent (50%) assessment, thus reducing the original tax assessment by half. These circumstances may be taken to show that Larin's involvement in extortion was not indubitable. Yet, petitioner went on to file the extortion cases against Larin in different fora. This is where actual malice could attach on petitioner's part. Significantly, the trial court did not err in dismissing petitioner's complaints, a ruling affirmed by the Court of Appeals.Keeping all these in mind, we are constrained to agree that there is sufficient basis for the award of moral and exemplary damages in favor of respondent Larin. The appellate court believed respondent Larin when he said he suffered anxiety and humiliation because of the unfounded charges against him. Petitioner's actions against Larin were found "unwarranted and baseless," and the criminal charges filed against him in the Tanodbayan and City Fiscal's Office were all dismissed.30Hence, there is adequate support for respondent court's conclusion that moral damages have been proved.Now, however, what would be a fair amount to be paid as compensation for moral damages also requires determination. Each case must be governed by its own peculiar circumstances.31On this score,Del Rosario vs.Court of Appeals,32cites several cases where no actual damages were adjudicated, and where moral and exemplary damages were reduced for being "too excessive," thus:In the case ofPNB v.C.A., [256 SCRA 309 (1996)], this Court quoted with approval the following observation fromRCPI v.Rodriguez,viz:** **. Nevertheless, we find the award of P100,000.00 as moral damages in favor of respondent Rodriguez excessive and unconscionable. In the case ofPrudenciado v.Alliance Transport System,Inc. (148 SCRA 440 [1987]) we said: . . . [I]t is undisputed that the trial courts are given discretion to determine the amount of moral damages (Alcantara v. Surro, 93 Phil. 472) and that the Court of Appeals can only modify or change the amount awarded when they are palpably and scandalously excessive "so as to indicate that it was the result of passion, prejudice or corruption on the part of the trial court" (Gellada v. Warner Barnes & Co., Inc., 57 O.G. [4] 7347, 7358; Sadie v. Bacharach Motors Co., Inc., 57 O.G. [4] 636 and Adone v. Bacharach Motor Co., Inc., 57 O.G. 656). But in more recent cases where the awards of moral and exemplary damages are far too excessive compared to the actual loses sustained by the aggrieved party, this Court ruled that they should be reduced to more reasonable amounts. . . . . (Emphasis ours.)In other words, the moral damages awarded must be commensurate with the loss or injury suffered.In the same case (PNB v. CA), this Court found the amount of exemplary damages required to be paid (P1,000,000,00) "too excessive" and reduced it to an "equitable level" (P25,000.00).It will be noted that in above cases, the parties who were awarded moral damages were not public officials. Considering that here, the award is in favor of a government official in connection with his official function, it is with caution that we affirm granting moral damages, for it might open the floodgates for government officials counter-claiming damages in suits filed against them in connection with their functions. Moreover, we must be careful lest the amounts awarded make citizens hesitate to expose corruption in the government, for fear of lawsuits from vindictive government officials. Thus, conformably with our declaration that moral damages are not intended to enrich anyone,33we hereby reduce the moral damages award in this case from two hundred thousand (P200,000.00) pesos to seventy five thousand (P75,000.00) pesos, while the exemplary damage is set at P25,000.00 only.The law allows the award of attorney's fees when exemplary damages are awarded, and when the party to a suit was compelled to incur expenses to protect his interest.34Though government officers are usually represented by the Solicitor General in cases connected with the performance of official functions, considering the nature of the charges, herein respondent Larin was compelled to hire a private lawyer for the conduct of his defense as well as the successful pursuit of his counterclaims. In our view, given the circumstances of this case, there is ample ground to award in his favor P50,000,00 as reasonable attorney's fees.WHEREFORE, the assailed decision of the Court of Appeals dated November 29, 1991, is hereby AFFIRMED with MODIFICATION so that the award of actual damages are deleted; and that petitioner is hereby ORDERED to pay to respondent Larin moral damages in the amount of P75,000.00, exemplary damages in the amount of P25,000.00, and attorney's fees in the amount of P50,000.00 only.1wphi1.Chan wan vs tan kimFACTSChecks payable to cash or bearer were drawn by defendant Tan Kim and were all presented for payment by Chan Wan to the drawee bank, but they were all dishonored. Defendant argued that plaintiff is a holder not in due course.ISSUEWhether or not a holder not in due course is barred from collecting the value of checks issued to him.RULINGNO. It does not that simply because he was not a holder in due course Chan Wan could not recover on the checks. The Negotiable Instruments Law does not provide that a holderwho is not a holder in due course, may not in any case, recover on the instrument. The only disadvantage of holder who is not a holder in due course is that the negotiable instrument is subject to defense as if it were non- negotiable.Tan Kim and her husband (Chen So) issued 11 checks payable to cash or bearer to be drawn against their account with the EquitableBanking Corporation. The checks were negotiated to the White House Shoe Supply (company). White House then deposited the checks to their China Bank account. China Bank then presented the checks to Equitable Bank but the checks were returned because Equitable Bank then had no funds to cover the checks. China Bank then stamped the checks with Account Closed and Non negotiable China Bank Corporation.But somehow,ChanWan got hold of these checks (ChanWan was not able to explain in court how he got hold of the checks).ChanWan now wants to encash the checks but Equitable Bank refused accept the said checks.ISSUE:Whether or notChanWan is a holder in due course.HELD:No. As a general rule, a dishonored check/instrument may still be negotiated either by indorsement or delivery and the holder may be a holder in due course provided that he received no notice regarding the dishonor of the instrument. In this case, the checks were already crossed on their face henceChanWan was properly notified of the dishonor of the checks at the time of his acquisition.But mayChanWan still recover?Yes. The Negotiable Instruments Law does not provide that a holderwho is not a holder in due course, may not in any case, recover on the instrument. The holder may recover directly from the drawee, in this case Tan Kim and Chen So, unless the drawees have a valid excuse in refusing payment. The only disadvantage of a holder who is not a holder in due course is that the negotiable instrument is subject to defense as if it were non- negotiable. The case was remanded to the lower court for a proper determination as to howChanWan acquired the checks and to determine if he is indeed entitled to payment based on some other transactions involving those checks.

ATRIUM MGMT VS CAIn 1981, Hi-Cement Corporation through Lourdes De Leon (its Treasurer) and Antonio De Las Alas (its Chairman, now deceased) issued four postdated checks to E.T. Henry and Co. The checks amount to P2 million. The checks are crossed checks and are only made payable to E.T. Henrys account. However, E.T. Henry still indorsed the checks to Atrium Management Corporation (AMC). AMC then made sure that the checks were validly issued by requesting E.T. Henry to get someconfirmationfrom Atrium. Interestingly, De Leon confirmed the checks and advised that the checks are okay to be rediscounted by AMC notwithstanding the fact that the checks are crossed checks payable to no other accounts but that of E.T. Henry. So when AMC presented the check, it was dishonored because Hi-Cement stopped payment. Eventually, AMC sued Hi-Cement, E.T. Henry, and De Leon. The trial court ruled in favor of AMC and made all the respondents liable.On appeal, Hi-Cement averred that De Leons act in signing the check was ultra vires hence De Leon should be personally liable for the check. De Leon, on the other hand, insisted that the checks wereauthorizedby the corporation.ISSUE:Whether or not De Leons act of signing the check constitutes an ultra vires act hence making her personally liable.HELD:No, the act is not ultra vires but De Leon is still personally liable. The act is not ultra vires because the act of issuing the checks was well within the ambit of a valid corporate act. De Leon as treasurer isauthorizedto sign checks. When the checks were issued, Hi-Cement has sufficient funds to cover the P2 million.As a rule, there are four instances that will make a corporate director, trustee or officer along (although not necessarily) with the corporation personally liable to certain obligations. They are:1. He assents (a) to a patently unlawful act of the corporation, or (b)for bad faith or gross negligence in directing its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons;2. He consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto;3. He agrees to hold himself personally and solidarily liable with the corporation; or4. He is made, by a specific provision of law, to personally answer for his corporate action.In the case at bar, De Leon is negligent. She was aware that the checks were only payable to E.T. Henrys account yet she sent aconfirmationto Atrium to the effect that the checks can be negotiated to them (Atrium) by E.T. Henry. Therefore, she may be held personally liable along with E.T. Henry (but not with Hi-Cement where she is an officer).

Mesina vs IAC

Marcelo A. Mesina vs. Intermediate Appellate CourtG.R. No. 70145 November 13, 1986,145 SCRA 497--holder in due course

FACTS:Jose Go purchased from Associated Bank a cashier's check for P800,000.00. Unfortunately, he left said check on the top of the desk of the bank manager when he left the bank. The bank manager entrusted the check for safekeeping to a bank official, a certain Albert Uy.While Uy went to the men's room, the check was stolen by his visitor in the person of Alexander Lim.Upon discovering that the check was lost, Jose Go accomplisheda "STOP PAYMENT" order.Two days later, Associated Bank received the lost check for clearing from Prudential Bank.After dishonoring the same check twice, Associated Bank received summons and copy of a complaint for damages of Marcelo Mesina who was in possession of the lost check and is demanding payment.Petitioner claims that a cashier's check cannot be countermanded in the hands of a holder in due course.

ISSUE:Whether or not petitioner can collect on the stolen check on the ground that he is a holder in due course.

RULING:No.Petitioner failed to substantiate his claim that he is a holder in due course and for consideration or value as shown by the established facts of the case. Admittedly, petitioner became the holder of the cashier's check as endorsed by Alexander Lim who stole the check. He refused to say how and why it was passed to him. He had therefore notice of the defect of his title over the check from the start. The holder of a cashier's check who is not a holder in due course cannot enforce such check against the issuing bank which dishonors the same.FACTS:Jose Go maintains an account with Associated Bank. He needed to transfer P800,000.00 from Associated Bank to another bank but he realized that he does not want to be carrying that cash so he bought a cashiers check from Associated Bank worth P800,000.00. Associated Bank then issued the check but Jose Go forgot to get the check so it was left on top of the desk of the bank manager. The bank manager, when he found the check, entrusted it to Albert Uy for the later to safe keep it. The check was however stolen from Uy by a certain Alexander Lim.

Jose Go learned that the check was stolen son he made a stop payment order against the check. Meanwhile, Associated Bank received the subject check from Prudential Bank for clearing. Apparently, the check was presented by a certain Marcelo Mesina for payment. Associated Bank dishonored the check.

When asked how Mesina got hold of the check, he merely stated that Alfredo Lim, whos already at large, paid the check to him for a certain transaction.

ISSUE:Whether or not Mesina is a holder in due course.

HELD:No. Admittedly, Mesina became the holder of the cashiers check as endorsed by Alexander Lim who stole the check. Mesina however refused to say how and why it was passed to him. Mesina had therefore notice of the defect of his title over the check from the start. The holder of a cashiers check who is not a holder in due course cannot enforce such check against the issuing bank which dishonors the same. The check in question suffers from the infirmity of not having been properly negotiated and for value by Jose Go who is the real owner of said instrument.

Equitable Banking Corp. v. Special Steel Products and Pardo SSPI a private domestic corporation sellingsteel products. Pardo SSPIs President and majoritystockholder Interco regular customer Uy son-in-law of its majority stockholder Equitable depository bank of Interco and of UyFacts: SSPI sold welding electrodes to Interco, as evidenced by sales invoices. It is due on March 16 1991 (for thefirst sales invoice_ and May 11 1991 (for others). It also provided that Interco would pay interest at the rate of 36% per annum in case of delay. In payment of for the products, Interco issued 3 checks payable to the order of SSPI. Each check was crossed with the notation account payee only and was drawn against Equitable. The records do not identify the signatory for the checks, or explain how Uy came in possession of these checks. Heclaimed that he had good title thereto. He demanded the deposits in his personal accounts in Equitable. Thebank did so relying on Uys status as a valued client and as son-in-law of Intercos majority stockholder. SSPI reminded Interco of the unpaid welding electrodes, explaining that its immediate need for paymentas it was experiencing some financial crisis of its own. It replied that it has already issued 3 checks payable toSSPI and drawn against Equitable, which was denied by SSPI.Later on it was discovered that it was Uy, not SSPI, who received the proceeds of 3 checks. Interco finally paidthe value of 3 checks to SSPI plus portion of accrued interests. Interco refused to pay entire accrued interest onthe ground that it was not responsible for the delay. Hence, Pardo filed a complaint for damages against Uy andEquitable Bank alleging that the 3 crossed checks, all payable to order of SSPI could be deposited and encashedby SSPI only. Trial Court rendered decision in favor of Pardo which was affirmed by CA.Issue: What is the nature of crossed check?Whether SSPI has a cause of action against Equitable for quasi-delict, whereby it can recover actual damagesfrom Equitable?Held: SSPIs cause of action based on quasi-delist. SSPI does not ask Equitable or Uy to deliever to it theproceeds of the checks as the rightful payee. The courts below correctly ruled that SSPI has a cause of action forquasi-delict.The checks that Interco issued in favor of SSPI were all crossed, made payable to SSPIs order and contained thenotation account payee only. This creates a reasonable expectation that the payee alone would receive theproceeds of the checks and that diversion of the checks would be averted. This expectation arises from theaccepted banking practice that crossed checks are intended for deposit in the named payees account onlyandno other. At the very least, crossed checks should place a bank on notice that it should exercise more caution orexpend more than a cursory inquiry, to ascertain whether the payee on the check has authorized the holder todeposit the same in different account.A crossed check with the notation account payee only can only be deposited in the named payees account.It is gross negligence for a bank to ignore this rule solely on the basis of a third partys oral representations of having a good title there to.[G.R. No. 168842 : August 11, 2010]

VICENTE GO, PETITIONER, VS. METROPOLITAN BANK AND TRUST CO., RESPONDENT.

D E C I S I O N

NACHURA,J.:

Before the Court is a petition for review oncertiorariunder Rule 45 of the Rules of Court, assailing the Decision[1]dated May 27, 2005 and the Resolution[2]dated August 31, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 63469.The Facts

The facts of the case are as follows:

Petitioner filed two separate cases before the Regional Trial Court (RTC) of Cebu. Civil Case No. CEB-9713 was filed by petitioner against Ma. Teresa Chua (Chua) and Glyndah Tabaag (Tabaag) for a sum of money with preliminary attachment. Civil Case No. CEB-9866 was filed by petitioner for a sum of money with damages against herein respondent Metropolitan Bank and Trust Company (Metrobank) and Chua.[3]

In both cases, petitioner alleged that he was doing business under the name "Hope Pharmacy" which sells medicine and other pharmaceutical products in the City of Cebu. Petitioner had in his employ Chua as his pharmacist and trustee or caretaker of the business; Tabaag, on the other hand, took care of the receipts and invoices and assisted Chua in making deposits for petitioner's accounts in the business operations of Hope Pharmacy.[4]

In CEB-9713, petitioner claimed that there were unauthorized deposits and encashments made by Chua and Tabaag in the total amount of One Hundred Nine Thousand Four Hundred Thirty-three Pesos and Thirty Centavos (P109,433.30). He questioned particularly the following:(1) FEBTC Check No. 251111 dated April 29, 1990 in the amount of P22,635.00 which was issued by plaintiff's [petitioner's] customer Loy Libron in payment of the stocks purchased was deposited under Metrobank Savings Account No. 420-920-6 belonging to the defendant Ma. Teresa Chua;

(2) RCBC Checks Nos. 330958 and 294515, which were in blank but pre-signed by him (plaintiff [petitioner] Vicente Go) for convenience and intended for payment to plaintiff's [petitioner's] suppliers, were filled up and dated September 22, 1990 and September 7, 1990 in the amount of P30,000.00 and P50,000.00 respectively, and were deposited with defendant Chua's aforestated account with Metrobank;

(3) PBC Check No. 005874, drawn by Elizabeth Enriquez payable to the Hope Pharmacy in the amount of P6,798.30 was encashed by the defendant Glyndah Tabaag;

(4) There were unauthorized deposits and encashments in the total sum of P109,433.30;[5]

In CEB-9866, petitioner averred that there were thirty-two (32) checks with Hope Pharmacy as payee, for varying sums, amounting to One Million Four Hundred Ninety-Two Thousand Five Hundred Ninety-Five Pesos and Six Centavos (P1,492,595.06), that were not endorsed by him but were deposited under the personal account of Chua with respondent bank,[6]and these are the following:CHECK NO.DATEAMOUNT

FEBTC 2511665-23-90P 65,214.88

FEBTC 2393995-08-9024,917.75

FEBTC 2513507-24-90212,326.56

PBC 2798876-27-902,000.00

PBC 162387 1-24-906,300.00

PBC 16231712-22-893,300.00

PBC 279881 6-23-907,650.00

PBC 009005 7-21-893,584.00

PBC 279771 5-14-903,600.00

PBC 2797264-25-902,000.00

PBC 168004 3-22-902,800.00

PBC 167963 3-07-901,700.00

FEBTC 2677938-20-9080,085.66

FEBTC 2677617-21-9045,304.63

FEBTC 2512526-03-9064,000.00

FEBTC 2677988-15-9040,078.67

PBC 367292 8-06-902,100.00

PBC 3764459-26-901,125.00

PBC 0090568-07-892,500.00

PBC 3764029-12-9012,105.40

BPI 1970747-17-905,240.00

BPI 1970517-06-901,350.00

BPI 204358 9-19-905,402.60

BPI 2042527-31-906,715.60

FEBTC 2511716-27-9083,175.54

FEBTC 2511656-28-90231,936.10

FEBTC 2512516-30-9047,087.25

FEBTC 2511636-21-90170,600.85

FEBTC 2511705-23-9016,440.00

FEBTC 2511125-31-90211,592.69

FEBTC 2394006-15-9047,664.03

FEBTC 2511626-22-90 82,697.85

P1,492,595.06[7]

Petitioner claimed that the said checks were crossed checks payable to Hope Pharmacy only; and that without the participation and connivance of respondent bank, the checks could not have been accepted for deposit to any other account, except petitioner's account.[8]

Thus, in CEB-9866, petitioner prayed that Chua and respondent bank be ordered, jointly and severally, to pay the principal amount of P1,492,595.06, plus interest at 12% from the dates of the checks, until the obligation shall have been fully paid; moral damages of Five Hundred Thousand Pesos (P500,000.00); exemplary damages of P500,000.00; and attorney's fees and costs in the amount of P500,000.00.[9]

On February 23, 1995, the RTC rendered a Joint Decision,[10]the dispositive portion of which reads:WHEREFORE, premises considered, the Court hereby renders judgment dismissing plaintiff Vicente Go's complaint against the defendant Ma. Teresa Chua and Glyndah Tabaag in Civil Case No. CEB-9713, as well as plaintiff's complaint against the same defendant Ma. Teresa Chua in Civil Case No. CEB-9866.

Plaintiff Vicente Go is moreover sentenced to pay P50,000.00 in attorney's fees and litigation expenses to the defendants Ma. Teresa Chua and Glyndah Tabaag in Civil Case No. CEB-9713.

Defendant Metrobank in Civil Case No. CEB-9866 is hereby condemned to pay unto plaintiff Vicente Go/Hope Pharmacy the amount of P50,000.00 as moral damages, and attorney's fees and litigation expenses in the aggregate sum of P25,000.00.

The defendant Metrobank's crossclaim against its co-defendant Ma. Teresa Chua in Civil Case No. CEB-9866 is dismissed for lack of merit.

No special pronouncement as to costs in both instances.

SO ORDERED.[11]

In striking down the complaint of the petitioner against Chua and Tabaag in CEB-9713, the RTC made the following findings:(1) FEBTC Check No. 251111, dated April 29, 1990, in the amount of P22,635.00 payable to cash, was drawn by Loy Libron in payment of her purchases of medicines and other drugs which Ma. Teresa Chua was selling side by side with the medicines and drugs of the Hope Pharmacy, for which she (Maritess) was granted permission by its owner, Mr. Vicente Chua. These medicines and drugs from Thailand were Maritess' sideline, and were segregated from the stocks of Hope Pharmacy; x x x.

(2) RCBC Check Nos. 294519 and 330958 were checks belonging to plaintiff Vicente Go payable to cash x x x; these checks were replacements of the sums earlier advanced by Ma. Teresa Chua, but which were deposited in the account of Vicente Go with RCBC, as shown by the deposit slips x x x, and confirmed by the statement of account of Vicente Go with RCBC.

(3) Check No. PCIB 005374 drawn by Elizabeth Enriquez payable to Hope Pharmacy/Cash in the amount of P6,798.30 dated September 6, 1990, was admittedly encashed by the defendant, Glyndah Tabaag. As per instruction by Vicente Go, Glyndah requested the drawer to insert the word "Cash," so that she could encash the same with PCIB, to meet the Hope Pharmacy's overdraft.

The listings x x x, made by Glyndah Tabaag and Flor Ouano will show that the corresponding amounts covered thereby were in fact deposited to the account of Mr. Vicente Go with RCBC; the Bank Statement of Mr. Go x x x, confirms defendants' claim independently of the deposit slip[s] x x x.[12]

The trial court absolved Chua in CEB-9866 because of the finding that the subject checks in CEB-9866 were payments of petitioner for his loans or borrowings from the parents of Ma. Teresa Chua, through Ma. Teresa, who was given the total discretion by petitioner to transfer money from the offices of Hope Pharmacy to pay the advances and other obligations of the drugstore; she was also given the full discretion where to source the funds to cover the daily overdrafts, even to the extent of borrowing money with interest from other persons.[13]

While the trial court exonerated Chua in CEB-9866, it however declared respondent bank liable for being negligent in allowing the deposit of crossed checks without the proper indorsement.

Petitioner filed an appeal before the CA. On May 27, 2005, the CA rendered a Decision,[14]thefalloof which reads:WHEREFORE, except for the award of attorney's fees and litigation expenses in favor of defendants Chua and Tabaag which is hereby deleted, the decision of the lower court is herebyAFFIRMED.

SO ORDERED.[15]

Hence, this petition.The Issue

Petitioner presented this sole issue for resolution:The Court of Appeals Erred In Not Holding Metrobank Liable For Allowing The Deposit, Of Crossed Checks Which Were Issued In Favor Of And Payable To Petitioner And Without Being Indorsed By The Petitioner, To The Account Of Maria Teresa Chua.[16]

The Ruling of the Court

A check is a bill of exchange drawn on a bank payable on demand.[17]There are different kinds of checks. In this case, crossed checks are the subject of the controversy. A crossed check is one where two parallel lines are drawn across its face or across the corner thereof. It may be crossed generally or specially.[18]

A check is crossed specially when the name of a particular banker or a company is written between the parallel lines drawn. It is crossed generally when only the words "and company" are written or nothing is written at all between the parallel lines, as in this case. It may be issued so that presentment can be made only by a bank.[19]

In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a check has the following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once -- to one who has an account with a bank; and (c) the act of crossing the check serves as warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course.[20]

The Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and not converted into cash. The effect of crossing a check, thus, relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person,i.e., the payee named therein.[21]The crossing of a check is a warning that the check should be deposited only in the account of the payee. Thus, it is the duty of the collecting bank to ascertain that the check be deposited to the payee's account only.[22]

In the instant case, there is no dispute that the subject 32 checks with the total amount of P1,492,595.06 were crossed checks with petitioner as the named payee. It is the submission of petitioner that respondent bank should be held accountable for the entire amount of the checks because it accepted the checks for deposit under Chua's account despite the fact that the checks were crossed and that the payee named therein was not Chua.

In its defense, respondent bank countered that petitioner is not entitled to reimbursement of the total sum of P1,492,595.06 from either Maria Teresa Chua or respondent bank because petitioner was not damaged thereby.[23]

Respondent bank's contention is meritorious. Respondent bank should not be held liable for the entire amount of the checks considering that, as found by the RTC and affirmed by the CA, the checks were actually given to Chua as payments by petitioner for loans obtained from the parents of Chua. Furthermore, petitioner's non-inclusion of Chua and Tabaag in the petition before this Court is, in effect, an admission by the petitioner that Chua, in representation of her parents, had rightful claim to the proceeds of the checks, as payments by petitioner for money he borrowed from the parents of Chua. Therefore, petitioner suffered no pecuniary loss in the deposit of the checks to the account of Chua.

However, we affirm the finding of the RTC that respondent bank was negligent in permitting the deposit and encashment of the crossed checks without the proper indorsement. An indorsement is necessary for the proper negotiation of checks specially if the payee named therein or holder thereof is not the one depositing or encashing it. Knowing fully well that the subject checks were crossed, that the payee was not the holder and that the checks contained no indorsement, respondent bank should have taken reasonable steps in order to determine the validity of the representations made by Chua. Respondent bank was amiss in its duty as an agent of the payee. Prudence dictates that respondent bank should not have merely relied on the assurances given by Chua.

Respondent presented Jonathan Davis as its witness in the trial before the RTC. He was the officer-in-charge and ranked second to the assistant vice president of the bank at the time material to this case. Davis' testimony was summarized by the RTC as follows:Davis also testified that he allowed Ma. Teresa Chua to deposit the checks subject of this litigation which were payable to Hope Pharmacy. According to him, it was a privilege given to valued customers on a highly selective case to case basis, for marketing purposes, based on trust and confidence, because Ma. Teresa [Chua] told him that those checks belonged to her as payment for the advances she extended to Mr. Go/Hope Pharmacy. x x x

Davis stressed that Metrobank granted the privilege to Ma. Teresa Chua that for every check she deposited with Metrobank, the same would be credited outright to her account, meaning that she could immediately make use of the amount credited; this arrangement went on for about three years, without any complaint from Mr. Go/Hope Pharmacy, and Ma. Teresa Chua made warranty that she would reimburse Metrobank if Mr. Go complained. He did not however call or inform Mr. Go about this arrangement, because their bank being a Chinese bank, transactions are based on trust and confidence, and for him to inform Mr. Vicente Go about it, was tantamount to questioning the integrity of their client, Ma. Teresa Chua. Besides, this special privilege or arrangement would not bring any monetary gain to the bank.[24]

Negligence was committed by respondent bank in accepting for deposit the crossed checks without indorsement and in not verifying the authenticity of the negotiation of the checks. The law imposes a duty of extraordinary diligence on the collecting bank to scrutinize checks deposited with it, for the purpose of determining their genuineness and regularity.[25]As a business affected with public interest and because of the nature of its functions, the banks are under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of the relationship.[26] The fact that this arrangement had b