Republic of the Philippines liquidated damages or penalty from May 5,

SUPREME COURT 1983 until fully paid; plus 10% of the total
Manila amount due for expenses of litigation and
attorney's fees; and to pay the costs.
SECOND DIVISION
The counterclaim, as well as the cross claim, are
dismissed for lack of merit.

G.R. No. 96405 June 26, 1996 SO ORDERED.

BALDOMERO INCIONG, JR., petitioner, Petitioner's liability resulted from the promissory note in the
vs. amount of P50,000.00 which he signed with Rene C. Naybe
COURT OF APPEALS and PHILIPPINE BANK OF and Gregorio D. Pantanosas on February 3, 1983, holding
COMMUNICATIONS, respondents. themselves jointly and severally liable to private respondent
Philippine Bank of Communications, Cagayan de Oro City
branch. The promissory note was due on May 5, 1983.

ROMERO, J.:p Said due date expired without the promissors having paid their
obligation. Consequently, on November 14, 1983 and on June
This is a petition for review on certiorari of the decision of the 8, 1984, private respondent sent petitioner telegrams
Court of Appeals affirming that of the Regional Trial Court of demanding payment thereof.2 On December 11, 1984 private
Misamis Oriental, Branch 18,1 which disposed of Civil Case respondent also sent by registered mail a final letter of demand
No. 10507 for collection of a sum of money and damages, as to Rene C. Naybe. Since both obligors did not respond to the
follows: demands made, private respondent filed on January 24, 1986 a
complaint for collection of the sum of P50,000.00 against the
WHEREFORE, defendant BALDOMERO L. three obligors.
INCIONG, JR. is adjudged solidarily liable and
ordered to pay to the plaintiff Philippine Bank On November 25, 1986, the complaint was dismissed for
of Communications, Cagayan de Oro City, the failure of the plaintiff to prosecute the case. However, on
amount of FIFTY THOUSAND PESOS January 9, 1987, the lower court reconsidered the dismissal
(P50,000.00), with interest thereon from May 5, order and required the sheriff to serve the summonses. On
1983 at 16% per annum until fully paid; and January 27, 1987, the lower court dismissed the case against
6% per annum on the total amount due, as defendant Pantanosas as prayed for by the private respondent
herein. Meanwhile, only the summons addressed to petitioner promissory note, his supposed obligation in the amount of
was served as the sheriff learned that defendant Naybe had P5,000.00 only. Finally, the lower court held that, even
gone to Saudi Arabia. granting that said limited amount had actually been agreed
upon, the same would have been merely collateral between him
In his answer, petitioner alleged that sometime in January and Naybe and, therefore, not binding upon the private
1983, he was approached by his friend, Rudy Campos, who respondent as creditor-bank.
told him that he was a partner of Pio Tio, the branch manager
of private respondent in Cagayan de Oro City, in the falcata The lower court also noted that petitioner was a holder of a
logs operation business. Campos also intimated to him that Bachelor of Laws degree and a labor consultant who was
Rene C. Naybe was interested in the business and would supposed to take due care of his concerns, and that, on the
contribute a chainsaw to the venture. He added that, although witness stand, Pio Tio denied having participated in the alleged
Naybe had no money to buy the equipment, Pio Tio had business venture although he knew for a fact that the falcata
assured Naybe of the approval of a loan he would make with logs operation was encouraged by the bank for its export
private respondent. Campos then persuaded petitioner to act as potential.
a "co-maker" in the said loan. Petitioner allegedly acceded but
with the understanding that he would only be a co-maker for Petitioner appealed the said decision to the Court of Appeals
the loan of P50,000.00. which, in its decision of August 31, 1990, affirmed that of the
lower court. His motion for reconsideration of the said decision
Petitioner alleged further that five (5) copies of a blank having been denied, he filed the instant petition for review
promissory note were brought to him by Campos at his office. on certiorari.
He affixed his signature thereto but in one copy, he indicated
that he bound himself only for the amount of P5,000.00. Thus, On February 6, 1991, the Court denied the petition for failure
it was by trickery, fraud and misrepresentation that he was of petitioner to comply with the Rules of Court and paragraph 2
made liable for the amount of P50,000.00. of Circular
No. 1-88, and to sufficiently show that respondent court had
In the aforementioned decision of the lower court, it noted that committed any reversible error in its questioned decision.4 His
the typewritten figure "-- 50,000 --" clearly appears directly motion for the reconsideration of the denial of his petition was
below the admitted signature of the petitioner in the promissory likewise denied with finality in the Resolution of April 24,
note. 3 Hence, the latter's uncorroborated testimony on his 1991.5 Thereafter, petitioner filed a motion for leave to file a
limited liability cannot prevail over the presumed regularity second motion for reconsideration which, in the Resolution of
and fairness of the transaction, under Sec. 5 (q) of Rule 131. May 27, 1991, the Court denied. In the same Resolution, the
The lower court added that it was "rather odd" for petitioner to Court ordered the entry of judgment in this case.6
have indicated in a copy and not in the original, of the
Unfazed, petitioner filed a notion for leave to file a motion for consent was vitiated by fraud as, contrary to their agreement
clarification. In the latter motion, he asserted that he had that the loan was only for the amount of P5,000.00, the
attached Registry Receipt No. 3268 to page 14 of the petition promissory note stated the amount of P50,000.00.
in compliance with Circular No. 1-88. Thus, on August 7,
1991, the Court granted his prayer that his petition be given The above-stated points are clearly factual. Petitioner is to be
due course and reinstated the same.7 reminded of the basic rule that this Court is not a trier of facts.
Having lost the chance to fully ventilate his factual claims
Nonetheless, we find the petition unmeritorious. below, petitioner may no longer be accorded the same
opportunity in the absence of grave abuse of discretion on the
Annexed to the petition is a copy of an affidavit executed on part of the court below. Had he presented Judge Pantanosas
May 3, 1988, or after the rendition of the decision of the lower affidavit before the lower court, it would have strengthened his
court, by Gregorio Pantanosas, Jr., an MTCC judge and claim that the promissory note did not reflect the correct
petitioner's co-maker in the promissory note. It supports amount of the loan.
petitioner's allegation that they were induced to sign the
promissory note on the belief that it was only for P5,000.00, Nor is there merit in petitioner's assertion that since the
adding that it was Campos who caused the amount of the loan promissory note "is not a public deed with the formalities
to be increased to P50,000.00. prescribed by law but . . . a mere commercial paper which does
not bear the signature of . . . attesting witnesses," parol
The affidavit is clearly intended to buttress petitioner's evidence may "overcome" the contents of the promissory
contention in the instant petition that the Court of Appeals note.9 The first paragraph of the parol evidence rule 10 states:
should have declared the promissory note null and void on the
following grounds: (a) the promissory note was signed in the When the terms of an agreement have been
office of Judge Pantanosas, outside the premises of the bank; reduced to writing, it is considered as containing
(b) the loan was incurred for the purpose of buying a second- all the terms agreed upon and there can be,
hand chainsaw which cost only P5,000.00; (c) even a new between the parties and their successors in
chainsaw would cost only P27,500.00; (d) the loan was not interest, no evidence of such terms other than
approved by the board or credit committee which was the the contents of the written agreement.
practice, as it exceeded P5,000.00; (e) the loan had no
collateral; (f) petitioner and Judge Pantanosas were not present Clearly, the rule does not specify that the written
at the time the loan was released in contravention of the bank agreement be a public document.
practice, and (g) notices of default are sent simultaneously and
separately but no notice was validly sent to him.8 Finally, What is required is that the agreement be in writing as the rule
petitioner contends that in signing the promissory note, his is in fact founded on "long experience that written evidence is
so much more certain and accurate than that which rests in subrogated to the rights, mortgages, and
fleeting memory only, that it would be unsafe, when parties preferences of the latter.
have expressed the terms of their contract in writing, to admit
weaker evidence to control and vary the stronger and to show It is to be noted, however, that petitioner signed the promissory
that the note as a solidary co-maker and not as a guarantor. This is
parties intended a different contract from that expressed in the patent even from the first sentence of the promissory note
writing signed by them." 11 Thus, for the parol evidence rule to which states as follows:
apply, a written contract need not be in any particular form, or
be signed by both parties. 12 As a general rule, bills, notes and Ninety one (91) days after date, for value
other instruments of a similar nature are not subject to be received, I/we, JOINTLY and SEVERALLY
varied or contradicted by parol or extrinsic evidence. 13 promise to pay to the PHILIPPINE BANK OF
COMMUNICATIONS at its office in the City
By alleging fraud in his answer, 14 petitioner was actually in the of Cagayan de Oro, Philippines the sum of
right direction towards proving that he and his co-makers FIFTY THOUSAND ONLY (P50,000.00)
agreed to a loan of P5,000.00 only considering that, where a Pesos, Philippine Currency, together with
parol contemporaneous agreement was the inducing and interest . . . at the rate of SIXTEEN (16) per
moving cause of the written contract, it may be shown by parol cent per annum until fully paid.
evidence. 15 However, fraud must be established by clear and
convincing evidence, mere preponderance of evidence, not A solidary or joint and several obligation is one in which each
even being adequate. 16Petitioner's attempt to prove fraud must, debtor is liable for the entire obligation, and each creditor is
therefore, fail as it was evidenced only by his own entitled to demand the whole obligation. 17 on the other hand,
uncorroborated and, expectedly, self-serving testimony. Article 2047 of the Civil Code states:

Petitioner also argues that the dismissal of the complaint By guaranty a person, called the guarantor,
against Naybe, the principal debtor, and against Pantanosas, his binds himself to the creditor to fulfill the
co-maker, constituted a release of his obligation, especially obligation of the principal debtor in case the
because the dismissal of the case against Pantanosas was upon latter should fail to do so.
the motion of private respondent itself. He cites as basis for his
argument, Article 2080 of the Civil Code which provides that: If a person binds himself solidarily with the
principal debtor, the provisions of Section 4,
The guarantors, even though they be solidary, Chapter 3, Title I of this Book shall be observed.
are released from their obligation whenever by In such a case the contract is called a suretyship.
some act of the creditor, they cannot be (Emphasis supplied.)
 While a guarantor may bind himself solidarily with the collection. 21 Consequently, the dismissal of the case against
principal debtor, the liability of a guarantor is different Judge Pontanosas may not be deemed as having discharged
from that of a solidary debtor. Thus, Tolentino explains: petitioner from liability as well. As regards Naybe, suffice it to
say that the court never acquired jurisdiction over him.
A guarantor who binds himself in solidum with Petitioner, therefore, may only have recourse against his co-
the principal debtor under the provisions of the makers, as provided by law.
second paragraph does not become a solidary
co-debtor to all intents and purposes. There is a WHEREFORE, the instant petition for review on certiorari is
difference between a solidary co-debtor and hereby DENIED and the questioned decision of the Court of
a fiador in solidum (surety). The latter, outside Appeals is AFFIRMED. Costs against petitioner.
of the liability he assumes to pay the debt before
the property of the principal debtor has been SO ORDERED.
exhausted, retains all the other rights, actions
and benefits which pertain to him by reason of
the fiansa; while a solidary co-debtor has no
other rights than those bestowed upon him in
Section 4, Chapter 3, Title I, Book IV of the
Civil Code. 18

Section 4, Chapter 3, Title I, Book IV of the Civil Code states

the law on joint and several obligations. Under Art. 1207
thereof, when there are two or more debtors in one and the
same obligation, the presumption is that the obligation is joint
so that each of the debtors is liable only for a proportionate part
of the debt. There is a solidary liability only when the
obligation expressly so states, when the law so provides or
when the nature of the obligation so requires. 19

Because the promissory note involved in this case expressly

states that the three signatories therein are jointly and severally
liable, any one, some or all of them may be proceeded against
for the entire obligation. 20 The choice is left to the solidary
creditor to determine against whom he will enforce
Republic of the Philippines computation and sketches, contract drawing and technical
SUPREME COURT specifications of all engineering phases of the project designed
Manila by O. A. Kalalo and Associates bill of quantities and cost
estimate, and consultation and advice during construction
EN BANC relative to the work. The fees agreed upon were percentages of
the architect's fee, to wit: structural engineering, 12-½%;
G.R. No. L-27782 July 31, 1970 electrical engineering, 2-½%. The agreement was subsequently
supplemented by a "clarification to letter-proposal" which
OCTAVIO A. KALALO, plaintiff-appellee, provided, among other things, that "the schedule of engineering
vs. fees in this agreement does not cover the following: ... D.
ALFREDO J. LUZ, defendant-appellant. Foundation soil exploration, testing and evaluation; E. Projects
that are principally engineering works such as industrial plants,
Amelia K. del Rosario for plaintiff-appellee. ..." and "O. A. Kalalo and Associates reserve the right to
increase fees on projects ,which cost less than P100,000
Pelaez, Jalandoni & Jamir for defendant-appellant. ...."2 Pursuant to said agreement, appellee rendered engineering
services to appellant in the following projects:

(a) Fil-American Life Insurance Building at

ZALDIVAR, J.: Legaspi City;

Appeal from the decision, dated, February 10, 1967, of the (b) Fil-American Life Insurance Building at
Court of First Instance of Rizal (Branch V, Quezon City) in its Iloilo City;
Civil Case No. Q-6561.
(c) General Milling Corporation Flour Mill at
On November 17, 1959, plaintiff-appellee Octavio A. Kalalo Opon Cebu;
hereinafter referred to as appellee), a licensed civil engineer
doing business under the firm name of O. A. Kalalo and (d) Menzi Building at Ayala Blvd., Makati,
Associates, entered into an agreement (Exhibit A )1 with Rizal;
defendant-appellant Alfredo J . Luz (hereinafter referred to
as appellant), a licensed architect, doing business under firm (e) International Rice Research Institute,
name of A. J. Luz and Associates, whereby the former was to Research center Los Baños, Laguna;
render engineering design services to the latter for fees, as
stipulated in the agreement. The services included design (f) Aurelia's Building at Mabini, Ermita, Manila;
 (g) Far East Bank's Office at Fil-American Life excluding interests, of which sums only P69,323.21 had been
Insurance Building at Isaac Peral Ermita, paid, thus leaving unpaid the $28,000.00 and the balance of
Manila; P30,881.25. In the second cause of action, appellee claimed
P17,000.00 as consequential and moral damages; in the third
(h) Arthur Young's residence at Forbes Park, cause of action claimed P55,000.00 as moral damages,
Makati, Rizal; attorney's fees and expenses of litigation; and in the fourth
cause of action he claimed P25,000.00 as actual damages, and
(i) L & S Building at Dewey Blvd., Manila; and also for attorney's fees and expenses of litigation.

(j) Stanvac Refinery Service Building at Limay, In his answer, appellant admitted that appellee rendered
Bataan. engineering services, as alleged in the first cause of action, but
averred that some of appellee's services were not in accordance
On December 1 1, '1961, appellee sent to appellant a statement with the agreement and appellee's claims were not justified by
of account (Exhibit "1"),3 to which was attached an itemized the services actually rendered, and that the aggregate amount
statement of defendant-appellant's account (Exh. "1-A"), actually due to appellee was only P80,336.29, of which
according to which the total engineering fee asked by appellee P69,475.21 had already been paid, thus leaving a balance of
for services rendered amounted to P116,565.00 from which only P10,861.08. Appellant denied liability for any damage
sum was to be deducted the previous payments made in the claimed by appellee to have suffered, as alleged in the second,
amount of P57,000.00, thus leaving a balance due in the third and fourth causes of action. Appellant also set up
amount of P59,565.00. affirmative and special defenses, alleging that appellee had no
cause of action, that appellee was in estoppel because of certain
On May 18, 1962 appellant sent appellee a resume of fees due acts, representations, admissions and/or silence, which led
to the latter. Said fees, according to appellant. amounted to appellant to believe certain facts to exist and to act upon said
P10,861.08 instead of the amount claimed by the appellee. On facts, that appellee's claim regarding the Menzi project was
June 14, 1962 appellant sent appellee a check for said amount, premature because appellant had not yet been paid for said
which appellee refused to accept as full payment of the balance project, and that appellee's services were not complete or were
of the fees due him. performed in violation of the agreement and/or otherwise
unsatisfactory. Appellant also set up a counterclaim for actual
On August 10, 1962, appellee filed a complaint against and moral damages for such amount as the court may deem fair
appellant, containing four causes of action. In the first cause of to assess, and for attorney's fees of P10,000.00.
action, appellee alleged that for services rendered in connection
with the different projects therein mentioned there was due him Inasmuch as the pleadings showed that the appellee's right to
fees in sum s consisting of $28,000 (U.S.) and P100,204.46, certain fees for services rendered was not denied, the only
question being the assessment of the proper fees and the of the payment of this judgment, as certified to
balance due to appellee after deducting the admitted payments by the Central Bank of the Philippines, from
made by appellant, the trial court, upon agreement of the which shall be deducted the sum of P69,475.46,
parties, authorized the case to be heard before a Commissioner. which the defendant had paid the plaintiff, and
The Commissioner rendered a report which, in resume, states the legal rate of interest thereon from the filing
that the amount due to appellee was $28,000.00 (U.S.) as his of the complaint in the case until fully paid for;
fee in the International Research Institute Project which was by ordering the defendant to pay to plaintiff the
twenty percent (20%) of the $140,000.00 that was paid to further sum of P8,000.00 by way of attorney's
appellant, and P51,539.91 for the other projects, less the sum of fees which the Court finds to be reasonable in
P69,475.46 which was already paid by the appellant. The the premises, with costs against the defendant.
Commissioner also recommended the payment to appellee of The counterclaim of the defendant is ordered
the sum of P5,000.00 as attorney's fees. dismissed.

At the hearing on the Report of the Commissioner, the From the decision, this appeal was brought, directly to this
respective counsel of the parties manifested to the court that Court, raising only questions of law.
they had no objection to the findings of fact of the
Commissioner contained in the Report, and they agreed that the During the pendency of this appeal, appellee filed a petition for
said Report posed only two legal issues, namely: (1) whether the issuance of a writ of attachment under Section 1 (f) of Rule
under the facts stated in the Report, the doctrine of estoppel 57 of the Rules of Court upon the ground that appellant is
would apply; and (2) whether the recommendation in the presently residing in Canada as a permanent resident thereof.
Report that the payment of the amount. due to the plaintiff in On June 3, 1969, this Court resolved, upon appellee's posting a
dollars was legally permissible, and if not, at what rate of bond of P10,000.00, to issue the writ of attachment, and
exchange it should be paid in pesos. After the parties had ordered the Provincial Sheriff of Rizal to attach the estate, real
submitted their respective memorandum on said issues, the trial and personal, of appellant Alfredo J. Luz within the province,
court rendered its decision dated February 10, 1967, the to the value of not less than P140,000.00.
dispositive portion of which reads as follows:
The appellant made the following assignments of errors:
WHEREFORE, judgment is rendered in favor of
plaintiff and against the defendant, by ordering I. The lower court erred in not declaring and
the defendant to pay plaintiff the sum of holding that plaintiff-appellee's letter dated
P51,539.91 and $28,000.00, the latter to be December 11, 1961 (Exhibit "1") and the
converted into the Philippine currency on the statement of account (Exhibit "1-A") therein
basis of the current rate of exchange at the time enclosed, had the effect, cumulatively or
 alternatively, of placing plaintiff-appellee in December 11, 1961, sent by appellee to appellant, appellee
estoppel from thereafter modifying the specified the various projects for which he claimed engineering
representations made in said exhibits, or of fees, the precise amount due on each particular engineering
making plaintiff-appellee otherwise bound by service rendered on each of the various projects, and the total
said representations, or of being of decisive of his claims; that such a statement barred appellee from
weight in determining the true intent of the asserting any claim contrary to what was stated therein, or from
parties as to the nature and extent of the taking any position different from what he asserted therein with
engineering services rendered and/or the amount respect to the nature of the engineering services rendered; and
of fees due. consequently the trial court could not award fees in excess of
what was stated in said statement of accounts. Appellant argues
II. The lower court erred in declaring and that for estoppel to apply it is not necessary, contrary to the
holding that the balance owing from defendant- ruling of the trial court, that the appellant should
appellant to plaintiff-appellee on the IRRI have actually relied on the representation, but that it is
Project should be paid on the basis of the rate of sufficient that the representations were intended to make the
exchange of the U.S. dollar to the Philippine defendant act there on; that assuming arguendo that Exhibit 1-
peso at the time of payment of judgment. . A did not put appellee in estoppel, the said Exhibit 1-A
nevertheless constituted a formal admission that would be
III. The lower court erred in not declaring and binding on appellee under the law on evidence, and would not
holding that the aggregate amount of the balance only belie any inconsistent claim but also would discredit any
due from defendant-appellant to plaintiff- evidence adduced by appellee in support of any claim
appellee is only P15,792.05. inconsistent with what appears therein; that, moreover, Exhibit
1-A, being a statement of account, establishes prima facie the
IV. The lower court erred in awarding attorney's accuracy and correctness of the items stated therein and its
fees in the sum of P8,000.00, despite the correctness can no longer be impeached except for fraud or
commissioner's finding, which plaintiff-appellee mistake; that Exhibit 1-A furthermore, constitutes appellee's
has accepted and has not questioned, that said own interpretation of the contract between him and appellant,
fee be only P5,000.00; and and hence, is conclusive against him.

V. The lower court erred in not granting On the other hand, appellee admits that Exhibit 1-A itemized
defendant-appellant relief on his counter-claim. the services rendered by him in the various construction
projects of appellant and that the total engineering fees charged
1. In support of his first assignment of error appellant argues therein was P116,565.00, but maintains that he was not in
that in Exhibit 1-A, which is a statement of accounts dated estoppel: first, because when he prepared Exhibit 1-A he was
laboring under an innocent mistake, as found by the trial court; conduct of the person sought to be estopped, and this element
second, because appellant was not ignorant of the services is wanting in the instant case. In Cristobal vs. Gomez,5 this
actually rendered by appellee and the fees due to the latter Court held that no estoppel based on a document can be
under the original agreement, Exhibit "A." invoked by one who has not been mislead by the false
statements contained therein. And in Republic of the
We find merit in the stand of appellee. Philippines vs. Garcia, et al.,6 this Court ruled that there is no
estoppel when the statement or action invoked as its basis did
The statement of accounts (Exh. 1-A) could not estop appellee, not mislead the adverse party-Estoppel has been characterized
because appellant did not rely thereon as found by the as harsh or odious and not favored in law.7 When misapplied,
Commissioner, from whose Report we read: estoppel becomes a most effective weapon to accomplish an
injustice, inasmuch as it shuts a man's mouth from speaking the
While it is true that plaintiff vacillated in his truth and debars the truth in a particular case.8 Estoppel cannot
claim, yet, defendant did not in anyway rely or be sustained by mere argument or doubtful inference: it must
believe in the different claims asserted by the be clearly proved in all its essential elements by clear,
plaintiff and instead insisted on a claim that convincing and satisfactory evidence.9 No party should be
plaintiff was only entitled to P10,861.08 as per a precluded from making out his case according to its truth
separate resume of fees he sent to the plaintiff unless by force of some positive principle of law, and,
on May 18, 1962 (See Exhibit 6).4 consequently, estoppel in pains must be applied strictly and
should not be enforced unless substantiated in every
The foregoing finding of the Commissioner, not disputed by particular. 1 0
appellant, was adopted by the trial court in its decision. Under
article 1431 of the Civil Code, in order that estoppel may apply The essential elements of estoppel in pais may be considered in
the person, to whom representations have been made and who relation to the party sought to be estopped, and in relation to
claims the estoppel in his favor must have relied or acted on the party invoking the estoppel in his favor. As related to the
such representations. Said article provides: party to be estopped, the essential elements are: (1) conduct
amounting to false representation or concealment of material
Art. 1431. Through estoppel an admission or facts or at least calculated to convey the impression that the
representation is rendered conclusive upon the facts are otherwise than, and inconsistent with, those which the
person making it, and cannot be denied or party subsequently attempts to assert; (2) intent, or at least
disproved as against the person relying thereon. expectation that his conduct shall be acted upon by, or at least
influence, the other party; and (3) knowledge, actual or
An essential element of estoppel is that the person invoking it constructive, of the real facts. As related to the party claiming
has been influenced and has relied on the representations or the estoppel, the essential elements are (1) lack of knowledge
and of the means of knowledge of the truth as the facts in Appellant, however, insists that if Exhibit 1-A did not put
questions; (2) (reliance, in good faith, upon the conduct or appellee in estoppel, it at least constituted an admission binding
statements of the party to be estopped; (3) action or inaction upon the latter. In this connection, it cannot be gainsaid that
based thereon of such character as To change the position or Exhibit 1-A is not a judicial admission. Statements which are
status of the party claiming the estoppel, to his injury, not estoppels nor judicial admissions have no quality of
detriment or prejudice. 1 1 conclusiveness, and an opponent. whose admissions have been
offered against him may offer any evidence which serves as an
The first essential element in relation to the party sought to be explanation for his former assertion of what he now denies as a
estopped does not obtain in the instant case, for, as appears in fact. This may involve the showing of a mistake. Accordingly,
the Report of the Commissioner, appellee testified "that when in Oas vs. Roa, 1 6 it was held that when a party to a suit has
he wrote Exhibit 1 and prepared Exhibit 1-A, he had not yet made an admission of any fact pertinent to the issue involved,
consulted the services of his counsel and it was only upon the admission can be received against him; but such an
advice of counsel that the terms of the contract were interpreted admission is not conclusive against him, and he is entitled to
to him resulting in his subsequent letters to the defendant present evidence to overcome the effect of the admission.
demanding payments of his fees pursuant to the contract Appellee did explain, and the trial court concluded, that Exhibit
Exhibit A." 1 2 This finding of the Commissioner was adopted 1-A was based on either his ignorance or innocent mistake and
by the trial court. 1 3 It is established , therefore, that Exhibit 1- he, therefore, is not bound by it.
A was written by appellee through ignorance or mistake. Anent
this matter, it has been held that if an act, conduct or Appellant further contends that Exhibit 1-A being a statement
misrepresentation of the party sought to be estopped is due to of account, establishes prima facie the accuracy and
ignorance founded on innocent mistake, estoppel will not correctness of the items stated therein. If prima facie, as
arise. 1 4 Regarding the essential elements of estoppel in contended by appellant, then it is not absolutely conclusive
relation to the party claiming the estoppel, the first element upon the parties. An account stated may be impeached for
does not obtain in the instant case, for it cannot be said that fraud, mistake or error. In American Decisions, Vol. 62, p. 95,
appellant did not know, or at least did not have the means of cited as authority by appellant himself. we read thus:
knowing, the services rendered to him by appellee and the fees
due thereon as provided in Exhibit A. The second element is An account stated or settled is a mere admission
also wanting, for, as adverted to, appellant did not rely on that the account is correct. It is not an estoppel.
Exhibit 1-A but consistently denied the accounts stated therein. The account is still open to impeachment for
Neither does the third element obtain, for appellant did not act mistakes or errors. Its effect is to
on the basis of the representations in Exhibit 1-A, and there establish, prima facie, the accuracy of the items
was no change in his position, to his own injury or prejudice. without other proof; and the party seeking to
impeach it is bound to show affirmatively the
 mistake or error alleged. The force of the 2. In support of the second assignment of error, that the lower
admission and the strength of the evidence court erred in holding that the balance from appellant on the
necessary to overcome it will depend upon the IRRI project should be paid on the basis of the rate of exchange
circumstances of the case. of the U.S. dollar to the Philippine peso at the time of payment
of the judgment, appellant contends: first, that the official rate
In the instant case, it is Our view that the ignorance mistake at the time appellant received his architect's fees for the IRRI
that attended the writing of Exhibit 1-A by appellee was project, and correspondingly his obligation to appellee's fee on
sufficient to overcome the prima facie evidence of correctness August 25, 1961, was P2.00 to $1.00, and cites in support
and accuracy of said Exhibit 1-A. thereof Section 1612 of the Revised Administrative Code,
Section 48 of Republic Act 265 and Section 6 of
Appellant also urges that Exhibit 1-A constitutes appellee's Commonwealth Act No. 699; second, that the lower court's
own interpretation of the contract, and is, therefore, conclusive conclusion that the rate of exchange to be applied in the
against him. Although the practical construction of the contract conversion of the $28,000.00 is the current rate of exchange at
by one party, evidenced by his words or acts, can be used the time the judgment shall be satisfied was based solely on a
against him in behalf of the other party, 1 7 yet, if one of the mere presumption of the trial court that the defendant did not
parties carelessly makes a wrong interpretation of the words of convert, there being no showing to that effect, the dollars into
his contract, or performs more than the contract requires (as Philippine currency at the official rate, when the legal
reasonably interpreted independently of his performance), as presumption should be that the dollars were converted at the
happened in the instant case, he should be entitled to a official rate of $1.00 to P2.00 because on August 25, 1961,
restitutionary remedy, instead of being bound to continue to his when the IRRI project became due and payable, foreign
erroneous interpretation or his erroneous performance and "the exchange controls were in full force and effect, and partial
other party should not be permitted to profit by such mistake decontrol was effected only afterwards, during the Macapagal
unless he can establish an estoppel by proving a material administration; third, that the other ground advanced by the
change of position made in good faith. The rule as to practical lower court for its ruling, to wit, that appellant committed a
construction does not nullify the equitable rules with respect to breach of his obligation to turn over to the appellee the
performance by mistake." 1 8 In the instant case, it has been engineering fees received in U.S. dollars for the IRRI project,
shown that Exhibit 1-A was written through mistake by cannot be upheld, because there was no such breach, as proven
appellee and that the latter is not estopped by it. Hence, even if by the fact that appellee never claimed in Exhibit 1-A that he
said Exhibit 1-A be considered as practical construction of the should be paid in dollars; and there was no provision in the
contract by appellee, he cannot be bound by such erroneous basic contract (Exh. "A") that he should be paid in dollars; and,
interpretation. It has been held that if by mistake the parties finally, even if there were such provision, it would have no
followed a practice in violation of the terms of the agreement, binding effect under the provision of Republic Act 529; that,
the court should not perpetuate the error. 1 9 moreover, it cannot really be said that no payment was made
on that account for appellant had already paid P57,000.00 to (a) Export Proceeds, U.S. Government
appellee, and under Article 125 of the Civil Code, said Expenditures invisibles other than those
payment could be said to have been applied to the fees due specifically mentioned below.
from the IRRI project, this project being the biggest and this ................................................ 25 75
debt being the most onerous.
(b) Foreign Investments, Gold Proceeds,
In refutation of appellant's argument in support of the second Tourists and Inward Remittances of Veterans
assignment of error, appellee argues that notwithstanding and Filipino Citizens; and Personal Expenses of
Republic Act 529, appellant can be compelled to pay the Diplomatic Per personnel .................................
appellee in dollars in view of the fact that appellant received 100"2 1
his fees in dollars, and appellee's fee is 20% of appellant's fees;
and that if said amount is be converted into Philippine The amount of $140,000.00 received by appellant foil the
Currency, the rate of exchange should be that at the time of the International Rice Research Institute project is not within the
execution of the judgment. 2 0 scope of sub-paragraph (a) of paragraph No. 1 of Circular No.
121. Appellant has not shown that 25% of said amount had to
We have taken note of the fact that on August 25, 1961, the be surrendered to the Central Bank at the preferred rate because
date when appellant said his obligation to pay appellee's fees it was either export proceeds, or U.S. Government
became due, there was two rates of exchange, to wit: the expenditures, or invisibles not included in sub-paragraph (b).
preferred rate of P2.00 to $1.00, and the free market rate. It was Hence, it cannot be said that the trial court erred in presuming
so provided in Circular No. 121 of the Central Bank of the that appellant converted said amount at the free market rate. It
Philippines, dated March 2, 1961. amending an earlier Circular is hard to believe that a person possessing dollars would
No. 117, and in force until January 21, 1962 when it was exchange his dollars at the preferred rate of P2.00 to $1.00,
amended by Circular No. 133, thus: when he is not obligated to do so, rather than at the free market
rate which is much higher. A person is presumed to take
1. All foreign exchange receipts shall be ordinary care of his concerns, and that the ordinary course of
surrendered to the Central Bank of those business has been
authorized to deal in foreign exchange as followed. 2 2
follows:
Under the agreement, Exhibit A, appellee was entitled to 20%
Percentage of Total to be surrendered at of $140,000.00, or the amount of $28,000.00. Appellee,
however, cannot oblige the appellant to pay him in dollars,
Preferred: Free Market Rate: Rate: even if appellant himself had received his fee for the IRRI
project in dollars. This payment in dollars is prohibited by
Republic Act 529 which was enacted on June 16, 1950. Said the Government of the Philippines shall be legal
act provides as follows: tender for all debts, public and private.

SECTION 1. Every provision contained in, or Under the above-quoted provision of Republic Act 529, if the
made with respect to, any obligation which obligation was incurred prior to the enactment of the Act and
provision purports to give the obligee the right require payment in a particular kind of coin or currency other
to require payment in gold or in a particular kind than the Philippine currency the same shall be discharged in
of coin or currency other than Philippine Philippine currency measured at the prevailing rate of
currency or in an amount of money of the exchange at the time the obligation was incurred. As We have
Philippines measured thereby, be as it is hereby adverted to, Republic Act 529 was enacted on June 16, 1950.
declared against public policy, and null, void In the case now before Us the obligation of appellant to pay
and of no effect, and no such provision shall be appellee the 20% of $140,000.00, or the sum of $28,000.00,
contained in, or made with respect to, any accrued on August 25, 1961, or after the enactment of Republic
obligation hereafter incurred. Every obligation Act 529. It follows that the provision of Republic Act 529
heretofore or here after incurred, whether or not which requires payment at the prevailing rate of exchange
any such provision as to payment is contained when the obligation was incurred cannot be applied. Republic
therein or made with respect thereto, shall be Act 529 does not provide for the rate of exchange for the
discharged upon payment in any coin or payment of obligation incurred after the enactment of said Act.
currency which at the time of payment is legal The logical Conclusion, therefore, is that the rate of exchange
tender for public and private debts: Provided, should be that prevailing at the time of payment. This view
That, ( a) if the obligation was incurred prior to finds support in the ruling of this Court in the case of Engel vs.
the enactment of this Act and required payment Velasco & Co. 2 3 where this Court held that even if the
in a particular kind of coin or currency other obligation assumed by the defendant was to pay the plaintiff a
than Philippine currency, it shall be discharged sum of money expressed in American currency, the indemnity
in Philippine currency measured at the to be allowed should be expressed in Philippine currency at the
prevailing rate of exchange at the time the rate of exchange at the time of judgment rather than at the rate
obligation was incurred, (b) except in case of a of exchange prevailing on the date of defendant's breach. This
loan made in a foreign currency stipulated to be is also the ruling of American court as follows:
payable in the same currency in which case the
rate of exchange prevailing at the time of the The value in domestic money of a payment
stipulated date of payment shall prevail. All coin made in foreign money is fixed with respect to
and currency, including Central Bank notes, the rate of exchange at the time of payment. (70
heretofore or hereafter issued and declared by CJS p. 228)
 According to the weight of authority the amount At the hearing on the Report of the
of recovery depends upon the current rate of Commissioner on February 15, 1966, the
exchange, and not the par value of the particular counsels for both parties manifested to the court
money involved. (48 C.J. 605-606) that they have no objection to the findings of
facts of the Commissioner in his report; and
The value in domestic money of a payment agreed that the said report only poses two
made in foreign money is fixed in reference to (2)legal issues, namely: (1) whether under the
the rate of exchange at the time of such facts stated in the Report, the doctrine of
payment. (48 C.J. 605) estoppel will apply; and (2) whether the
recommendation in the Report that the payment
It is Our considered view, therefore, that appellant should pay of amount due to the plaintiff in dollars is
the appellee the equivalent in pesos of the $28,000.00 at the permissible under the law, and, if not, at what
free market rate of exchange at the time of payment. And so the rate of exchange should it be paid in pesos
trial court did not err when it held that herein appellant should (Philippine currency) .... 2 5
pay appellee $28,000.00 "to be converted into the Philippine
currency on the basis of the current rate of exchange at the time In the Commissioner's report, it is spetifically recommended
of payment of this judgment, as certified to by the Central that the appellant be ordered to pay the plaintiff the sum of
Bank of the Philippines, ...." 24 "$28,000. 00 or its equivalent as the fee of the plaintiff under
Exhibit A on the IRRI project." It is clear from this report of
Appellant also contends that the P57,000.00 that he had paid to the Commissioner that no payment for the account of this
appellee should have been applied to the due to the latter on the $28,000.00 had been made. Indeed, it is not shown in the
IRRI project because such debt was the most onerous to record that the peso equivalent of the $28,000.00 had been
appellant. This contention is untenable. The Commissioner fixed or agreed upon by the parties at the different times when
who was authorized by the trial court to receive evidence in the appellant had made partial payments to the appellee.
this case, however, reports that the appellee had not been paid
for the account of the $28,000.00 which represents the fees of 3. In his third assignment of error, appellant contends that the
appellee equivalent to 20% of the $140,000.00 that the lower court erred in not declaring that the aggregate amount
appellant received as fee for the IRRI project. This is a finding due from him to appellee is only P15,792.05. Appellant
of fact by the Commissioner which was adopted by the trial questions the propriety or correctness of most of the items of
court. The parties in this case have agreed that they do not fees that were found by the Commissioner to be due to appellee
question the finding of fact of the Commissioner. Thus, in the for services rendered. We believe that it is too late for the
decision appealed from the lower court says: appellant to question the propriety or correctness of those items
in the present appeal. The record shows that after the
Commissioner had submitted his report the lower court, on the sum of '$28,000.00 (U.S.) or its equivalent
February 15, 1966, issued the following order: as the fee of the plaintiff under Exhibit 'A' in the
IRRI project.'
When this case was called for hearing today on
the report of the Commissioner, the counsels of More specifically this Memorandum proposes to
the parties manifested that they have no demonstrate the affirmative of three legal
objection to the findings of facts in the report. issues posed, namely:
However, the report poses only legal issues,
namely: (1) whether under the facts stated in the First: Whether or not plaintiff's letter dated
report, the doctrine of estoppel will apply; and December 11, 1961 (Exhibit 'I') and/or
(2) whether the recommendation in the report Statement of Account (Exhibit '1-A') therein
that the alleged payment of the defendant be enclosed has the effect of placing plaintiff in
made in dollars is permissible by law and, if not, estoppel from thereafter modifying
in what rate it should be paid in pesos the representations made in said letter and
(Philippine Currency). For the purpose of Statement of Account or of making plaintiff
resolving these issues the parties prayed that otherwise bound thereby; or of being decisive or
they be allowed to file their respective great weight in determining the true intent of the
memoranda which will aid the court in the parties as to the amount of the engineering fees
determination of said issues. 2 6 owing from defendant to plaintiff;

In consonance with the afore-quoted order of the trial court, the Second: Whether or not defendant can be
appellant submitted his memorandum which opens with the compelled to pay whatever balance is owing to
following statements: plaintiff on the IRRI (International Rice and
Research Institute) project in United States
As previously manifested, this Memorandum dollars; and
shall be confined to:
Third: Whether or not in case the ruling of this
(a) the finding in the Commissioner's Report Honorable Court be that defendant cannot be
that defendant's defense of estoppel will not lie compelled to pay plaintiff in United States
(pp. 17-18, Report); and dollars, the dollar-to-peso convertion rate for
determining the peso equivalent of whatever
(b) the recommendation in the Commissioner's balance is owing to plaintiff in connection with
Report that defendant be ordered to pay plaintiff
 the IRRI project should be the 2 to 1 official rate Appellee contends that while the parties had not objected to the
and not any other rate. 2 7 findings of the Commissioner, the assessment of attorney's fees
is always subject to the court's appraisal, and in increasing the
It is clear, therefore, that what was submitted by appellant to recommended fees from P5,000.00 to P8,000.00 the trial court
the lower court for resolution did not include the question of must have taken into consideration certain circumstances which
correctness or propriety of the amounts due to appellee in warrant the award of P8,000.00 for attorney's fees.
connection with the different projects for which the appellee
had rendered engineering services. Only legal questions, as We believe that the trial court committed no error in this
above enumerated, were submitted to the trial court for connection. Section 12 of Rule 33 of the Rules of Court, on
resolution. So much so, that the lower court in another portion which the fourth assignment of error is presumably based,
of its decision said, as follows: provides that when the parties stipulate that a commissioner's
findings of fact shall be final, only questions of law arising
The objections to the Commissioner's Report from the facts mentioned in the report shall thereafter be
embodied in defendant's memorandum of considered. Consequently, an agreement by the parties to abide
objections, dated March 18, 1966, cannot by the findings of fact of the commissioner is equivalent to an
likewise be entertained by the Court because at agreement of facts binding upon them which the court cannot
the hearing of the Commissioner's Report the disregard. The question, therefore, is whether or not the
parties had expressly manifested that they had estimate of the reasonable fees stated in the report of the
no objection to the findings of facts embodied Commissioner is a finding of fact.
therein.
The report of the Commissioner on this matter reads as
We, therefore hold that the third assignment of error of the follows:
appellant has no merit.
As regards attorney's fees, under the provisions of Art 2208,
4. In his fourth assignment of error, appellant questions the par (11), the same may be awarded, and considering the
award by the lower court of P8,000.00 for attorney's fees. number of hearings held in this case, the nature of the case
Appellant argues that the Commissioner, in his report, fixed the (taking into account the technical nature of the case and the
sum of P5,000.00 as "just and reasonable" attorney's fees, to voluminous exhibits offered in evidence), as well as the way
which amount appellee did not interpose any objection, and by the case was handled by counsel, it is believed, subject to the
not so objecting he is bound by said finding; and that, Court's appraisal of the matter, that the sum of P5,000.00 is
moreover, the lower court gave no reason in its decision for just and reasonable as attorney's fees." 28
increasing the amount to P8,000.00.
It is thus seen that the estimate made by the Commissioner was in the report, the trial court must have considered that the
an expression of belief, or an opinion. An opinion is different reasonable attorney's fees should be P8,000.00. Considering
from a fact. The generally recognized distinction between a that the judgment against the appellant would amount to more
statement of "fact" and an expression of "opinion" is that than P100,000.00, We believe that the award of P8,000.00 for
whatever is susceptible of exact knowledge is a matter of fact, attorney's fees is reasonable.
while that not susceptible of exact knowledge is generally
regarded as an expression of opinion. 2 9 It has also been said 5. In his fifth assignment of error appellant urges that he is
that the word "fact," as employed in the legal sense includes entitled to relief on his counterclaim. In view of what We have
"those conclusions reached by the trior from shifting testimony, stated in connection with the preceding four assignments of
weighing evidence, and passing on the credit of the witnesses, error, We do not consider it necessary to dwell any further on
and it does not denote those inferences drawn by the trial court this assignment of error.
from the facts ascertained and settled by it. 3 0 In the case at
bar, the estimate made by the Commissioner of the attorney's WHEREFORE, the decision appealed from is affirmed, with
fees was an inference from the facts ascertained by him, and is, costs against the defendant-appellant. It is so ordered. Republic
therefore, not a finding of facts. The trial court was, of the Philippines
consequently, not bound by that estimate, in spite of the
manifestation of the parties that they had no objection to the
findings of facts of the Commissioner in his report. Moreover,
under Section 11 of Rule 33 of the Rules of Court, the court
may adopt, modify, or reject the report of the commissioner, in
whole or in part, and hence, it was within the trial court's
authority to increase the recommended attorney's fees of
P5,000.00 to P8,000.00. It is a settled rule that the amount of
attorney's fees is addressed to the sound discretion of the
court. 3 1

It is true, as appellant contends, that the trial court did not state
in the decision the reasons for increasing the attorney's fees.
The trial court, however, had adopted the report of the
Commissioner, and in adopting the report the trial court is
deemed to have adopted the reasons given by the
Commissioner in awarding attorney's fees, as stated in the
above-quoted portion of the report. Based on the reasons stated
SUPREME COURT his (complainant's) office, at 1217 Herran, Paco, Manila, and
Manila asked him to exchange Exhibit A — which he (appellant) then
brought with him — with cash alleging that he needed badly
EN BANC the sum of P4,000 represented by the check, but could not
withdraw it from the bank, it being then already closed; that in
G.R. No. L-2516 September 25, 1950 view of this request and relying upon appellant's assurance that
he had sufficient funds in the blank to meet Exhibit A, and
ANG TEK LIAN, petitioner, because they used to borrow money from each other, even
vs. before the war, and appellant owns a hotel and restaurant
THE COURT OF APPEALS, respondent. known as the North Bay Hotel, said complainant delivered to
him, on the same date, the sum of P4,000 in cash; that despite
Laurel, Sabido, Almario and Laurel for petitioner. repeated efforts to notify him that the check had been
Office of the Solicitor General Felix Bautista Angelo and dishonored by the bank, appellant could not be located any-
Solicitor Manuel Tomacruz for respondent. where, until he was summoned in the City Fiscal's Office in
view of the complaint for estafa filed in connection therewith;
BENGZON, J.: and that appellant has not paid as yet the amount of the check,
or any part thereof."
For having issued a rubber check, Ang Tek Lian was convicted
of estafa in the Court of First Instance of Manila. The Court of Inasmuch as the findings of fact of the Court of Appeals are
Appeals affirmed the verdict. final, the only question of law for decision is whether under the
facts found, estafa had been accomplished.
It appears that, knowing he had no funds therefor, Ang Tek
Lian drew on Saturday, November 16, 1946, the check Exhibits Article 315, paragraph (d), subsection 2 of the Revised Penal
A upon the China Banking Corporation for the sum of P4,000, Code, punishes swindling committed "By post dating a check,
payable to the order of "cash". He delivered it to Lee Hua Hong or issuing such check in payment of an obligation the offender
in exchange for money which the latter handed in act. On knowing that at the time he had no funds in the bank, or the
November 18, 1946, the next business day, the check was funds deposited by him in the bank were not sufficient to cover
presented by Lee Hua Hong to the drawee bank for payment, the amount of the check, and without informing the payee of
but it was dishonored for insufficiency of funds, the balance of such circumstances".
the deposit of Ang Tek Lian on both dates being P335 only.
We believe that under this provision of law Ang Tek Lian was
The Court of Appeals believed the version of Lee Huan Hong properly held liable. In this connection, it must be stated that,
who testified that "on November 16, 1946, appellant went to as explained in People vs. Fernandez (59 Phil., 615), estafa is
committed by issuing either a postdated check or an ordinary A check payable to the order of cash is a bearer
check to accomplish the deceit. instrument. Bacal vs. National City Bank of New York
(1933), 146 Misc., 732; 262 N. Y. S., 839;
It is argued, however, that as the check had been made payable Cleary vs. De Beck Plate Glass Co. (1907), 54 Misc.,
to "cash" and had not been endorsed by Ang Tek Lian, the 537; 104 N. Y. S., 831; Massachusetts Bonding &
defendant is not guilty of the offense charged. Based on the Insurance Co. vs. Pittsburgh Pipe & Supply Co. (Tex.
proposition that "by uniform practice of all banks in the Civ. App., 1939), 135 S. W. (2d), 818. See also H.
Philippines a check so drawn is invariably dishonored," the Cook & Son vs. Moody (1916), 17 Ga. App., 465; 87 S.
following line of reasoning is advanced in support of the E., 713.
argument:
Where a check is made payable to the order of "cash",
. . . When, therefore, he (the offended party ) accepted the word cash "does not purport to be the name of any
the check (Exhibit A) from the appellant, he did so with person", and hence the instrument is payable to bearer.
full knowledge that it would be dishonored upon The drawee bank need not obtain any indorsement of
presentment. In that sense, the appellant could not be the check, but may pay it to the person presenting it
said to have acted fraudulently because the without any indorsement. . . . (Zollmann, Banks and
complainant, in so accepting the check as it was drawn, Banking, Permanent Edition, Vol. 6, p. 494.)
must be considered, by every rational consideration, to
have done so fully aware of the risk he was running Of course, if the bank is not sure of the bearer's identity or
thereby." (Brief for the appellant, p. 11.) financial solvency, it has the right to demand identification and
/or assurance against possible complications, — for instance,
We are not aware of the uniformity of such practice. Instances (a) forgery of drawer's signature, (b) loss of the check by the
have undoubtedly occurred wherein the Bank required the rightful owner, (c) raising of the amount payable, etc. The bank
indorsement of the drawer before honoring a check payable to may therefore require, for its protection, that the indorsement
"cash." But cases there are too, where no such requirement had of the drawer — or of some other person known to it — be
been made . It depends upon the circumstances of each obtained. But where the Bank is satisfied of the identity and /or
transaction. the economic standing of the bearer who tenders the check for
collection, it will pay the instrument without further question;
Under the Negotiable Instruments Law (sec. 9 [d], a check and it would incur no liability to the drawer in thus acting.
drawn payable to the order of "cash" is a check payable to
bearer, and the bank may pay it to the person presenting it for A check payable to bearer is authority for payment to
payment without the drawer's indorsement. holder. Where a check is in the ordinary form, and is
payable to bearer, so that no indorsement is required, a
 bank, to which it is presented for payment, need not Moran, C. J., Ozaeta, Paras, Pablo, Tuason, and Reyes,
have the holder identified, and is not negligent in falling JJ., concur.
to do so. . . . (Michie on Banks and Banking, Permanent
Edition, Vol. 5, p. 343.)

. . . Consequently, a drawee bank to which a bearer

check is presented for payment need not necessarily
have the holder identified and ordinarily may not be
charged with negligence in failing to do so. See
Opinions 6C:2 and 6C:3 If the bank has no reasonable
cause for suspecting any irregularity, it will be
protected in paying a bearer check, "no matter what
facts unknown to it may have occurred prior to the
presentment." 1 Morse, Banks and Banking, sec. 393.

Although a bank is entitled to pay the amount of a

bearer check without further inquiry, it is entirely
reasonable for the bank to insist that holder give
satisfactory proof of his identity. . . . (Paton's Digest,
Vol. I, p. 1089.)

Anyway, it is significant, and conclusive, that the form of the

check Exhibit A was totally unconnected with its dishonor. The
Court of Appeals declared that it was returned
unsatisfied because the drawer had insufficient funds— not
because the drawer's indorsement was lacking.

Wherefore, there being no question as to the correctness of the

penalty imposed on the appellant, the writ of certiorari is
denied and the decision of the Court of Appeals is hereby
affirmed, with costs.
 Republic of the Philippines 1. On various dates, defendant, a commercial
SUPREME COURT banking institution, through its Sucat Branch
Manila issued 280 certificates of time deposit (CTDs) in
favor of one Angel dela Cruz who deposited
SECOND DIVISION with herein defendant the aggregate amount of
P1,120,000.00, as follows: (Joint Partial
Stipulation of Facts and Statement of Issues,
Original Records, p. 207; Defendant's Exhibits 1
G.R. No. 97753 August 10, 1992 to 280);

CALTEX (PHILIPPINES), INC., petitioner, CTD CTD

vs. Dates Serial Nos. Quantity Amount
COURT OF APPEALS and SECURITY BANK AND
TRUST COMPANY, respondents. 22 Feb. 82 90101 to 90120 20 P80,000
26 Feb. 82 74602 to 74691 90 360,000
Bito, Lozada, Ortega & Castillo for petitioners. 2 Mar. 82 74701 to 74740 40 160,000
4 Mar. 82 90127 to 90146 20 80,000
Nepomuceno, Hofileña & Guingona for private. 5 Mar. 82 74797 to 94800 4 16,000
5 Mar. 82 89965 to 89986 22 88,000
5 Mar. 82 70147 to 90150 4 16,000
8 Mar. 82 90001 to 90020 20 80,000
REGALADO, J.: 9 Mar. 82 90023 to 90050 28 112,000
9 Mar. 82 89991 to 90000 10 40,000
This petition for review on certiorari impugns and seeks the 9 Mar. 82 90251 to 90272 22 88,000
reversal of the decision promulgated by respondent court on ——— ————
March 8, 1991 in CA-G.R. CV No. 23615 1 affirming with Total 280 P1,120,000
modifications, the earlier decision of the Regional Trial Court ===== ========
of Manila, Branch XLII, 2 which dismissed the complaint filed
therein by herein petitioner against respondent bank. 2. Angel dela Cruz delivered the said certificates
of time (CTDs) to herein plaintiff in connection
The undisputed background of this case, as found by the with his purchased of fuel products from the
court a quo and adopted by respondent court, appears of latter (Original Record, p. 208).
record:
3. Sometime in March 1982, Angel dela Cruz 6. Sometime in November, 1982, Mr. Aranas,
informed Mr. Timoteo Tiangco, the Sucat Credit Manager of plaintiff Caltex (Phils.) Inc.,
Branch Manger, that he lost all the certificates went to the defendant bank's Sucat branch and
of time deposit in dispute. Mr. Tiangco advised presented for verification the CTDs declared
said depositor to execute and submit a notarized lost by Angel dela Cruz alleging that the same
Affidavit of Loss, as required by defendant were delivered to herein plaintiff "as security for
bank's procedure, if he desired replacement of purchases made with Caltex Philippines, Inc."
said lost CTDs (TSN, February 9, 1987, pp. 48- by said depositor (TSN, February 9, 1987, pp.
50). 54-68).

4. On March 18, 1982, Angel dela Cruz 7. On November 26, 1982, defendant received a
executed and delivered to defendant bank the letter (Defendant's Exhibit 563) from herein
required Affidavit of Loss (Defendant's Exhibit plaintiff formally informing it of its possession
281). On the basis of said affidavit of loss, 280 of the CTDs in question and of its decision to
replacement CTDs were issued in favor of said pre-terminate the same.
depositor (Defendant's Exhibits 282-561).
8. On December 8, 1982, plaintiff was requested
5. On March 25, 1982, Angel dela Cruz by herein defendant to furnish the former "a
negotiated and obtained a loan from defendant copy of the document evidencing the guarantee
bank in the amount of Eight Hundred Seventy agreement with Mr. Angel dela Cruz" as well as
Five Thousand Pesos (P875,000.00). On the "the details of Mr. Angel dela Cruz" obligation
same date, said depositor executed a notarized against which plaintiff proposed to apply the
Deed of Assignment of Time Deposit (Exhibit time deposits (Defendant's Exhibit 564).
562) which stated, among others, that he (de la
Cruz) surrenders to defendant bank "full control 9. No copy of the requested documents was
of the indicated time deposits from and after furnished herein defendant.
date" of the assignment and further authorizes
said bank to pre-terminate, set-off and "apply 10. Accordingly, defendant bank rejected the
the said time deposits to the payment of plaintiff's demand and claim for payment of the
whatever amount or amounts may be due" on value of the CTDs in a letter dated February 7,
the loan upon its maturity (TSN, February 9, 1983 (Defendant's Exhibit 566).
1987, pp. 60-62).
 11. In April 1983, the loan of Angel dela Cruz SECURITY BANK
with the defendant bank matured and fell due AND TRUST COMPANY
and on August 5, 1983, the latter set-off and 6778 Ayala Ave., Makati No. 90101
applied the time deposits in question to the Metro Manila, Philippines
payment of the matured loan (TSN, February 9, SUCAT OFFICEP 4,000.00
1987, pp. 130-131). CERTIFICATE OF DEPOSIT
Rate 16%
12. In view of the foregoing, plaintiff filed the
instant complaint, praying that defendant bank Date of Maturity FEB. 23, 1984 FEB 22,
be ordered to pay it the aggregate value of the 1982, 19____
certificates of time deposit of P1,120,000.00
plus accrued interest and compounded interest This is to Certify that B E A R E
therein at 16% per annum, moral and exemplary R has deposited in this Bank the
damages as well as attorney's fees. sum of PESOS: FOUR
THOUSAND ONLY,
After trial, the court a quo rendered its decision SECURITY BANK SUCAT
dismissing the instant complaint. 3 OFFICE P4,000 & 00
CTS Pesos, Philippine Currency,
On appeal, as earlier stated, respondent court affirmed the repayable to said depositor 731
lower court's dismissal of the complaint, hence this petition days. after date, upon
wherein petitioner faults respondent court in ruling (1) that the presentation and surrender of this
subject certificates of deposit are non-negotiable despite being certificate, with interest at the
clearly negotiable instruments; (2) that petitioner did not rate of 16% per cent per annum.
become a holder in due course of the said certificates of
deposit; and (3) in disregarding the pertinent provisions of the (Sgd. Illegible) (Sgd. Illegible)
Code of Commerce relating to lost instruments payable to
bearer. 4 —————————— —————————
——
The instant petition is bereft of merit.
AUTHORIZED SIGNATURES 5
A sample text of the certificates of time deposit is reproduced
below to provide a better understanding of the issues involved Respondent court ruled that the CTDs in question are non-
in this recourse. negotiable instruments, nationalizing as follows:
 . . . While it may be true that the word "bearer" (d) Must be payable to order or to bearer; and
appears rather boldly in the CTDs issued, it is
important to note that after the word "BEARER" (e) Where the instrument is addressed to a
stamped on the space provided supposedly for drawee, he must be named or otherwise
the name of the depositor, the words "has indicated therein with reasonable certainty.
deposited" a certain amount follows. The
document further provides that the amount The CTDs in question undoubtedly meet the requirements of
deposited shall be "repayable to said depositor" the law for negotiability. The parties' bone of contention is with
on the period indicated. Therefore, the text of regard to requisite (d) set forth above. It is noted that Mr.
the instrument(s) themselves manifest with Timoteo P. Tiangco, Security Bank's Branch Manager way
clarity that they are payable, not to whoever back in 1982, testified in open court that the depositor reffered
purports to be the "bearer" but only to the to in the CTDs is no other than Mr. Angel de la Cruz.
specified person indicated therein, the depositor.
In effect, the appellee bank acknowledges its xxx xxx xxx
depositor Angel dela Cruz as the person who
made the deposit and further engages itself to Atty. Calida:
pay said depositor the amount indicated thereon
at the stipulated date. 6 q In other words Mr. Witness,
you are saying that per books of
We disagree with these findings and conclusions, and hereby the bank, the depositor referred
hold that the CTDs in question are negotiable instruments. (sic) in these certificates states
Section 1 Act No. 2031, otherwise known as the Negotiable that it was Angel dela Cruz?
Instruments Law, enumerates the requisites for an instrument to
become negotiable, viz: witness:

(a) It must be in writing and signed by the a Yes, your Honor, and we have
maker or drawer; the record to show that Angel
dela Cruz was the one who cause
(b) Must contain an unconditional promise or (sic) the amount.
order to pay a sum certain in money;
Atty. Calida:
(c) Must be payable on demand, or at a fixed or
determinable future time;
 q And no other person or entity of the court in such case is to ascertain, not what the parties
or company, Mr. Witness? may have secretly intended as contradistinguished from what
their words express, but what is the meaning of the words they
witness: have used. What the parties meant must be determined by what
they said. 11
a None, your Honor. 7
Contrary to what respondent court held, the CTDs are
xxx xxx xxx negotiable instruments. The documents provide that the
amounts deposited shall be repayable to the depositor. And
Atty. Calida: who, according to the document, is the depositor? It is the
"bearer." The documents do not say that the depositor is Angel
q Mr. Witness, who is the de la Cruz and that the amounts deposited are repayable
depositor identified in all of these specifically to him. Rather, the amounts are to be repayable to
certificates of time deposit the bearer of the documents or, for that matter, whosoever may
insofar as the bank is concerned? be the bearer at the time of presentment.

witness: If it was really the intention of respondent bank to pay the

amount to Angel de la Cruz only, it could have with facility so
a Angel dela Cruz is the expressed that fact in clear and categorical terms in the
depositor. 8 documents, instead of having the word "BEARER" stamped on
the space provided for the name of the depositor in each CTD.
xxx xxx xxx On the wordings of the documents, therefore, the amounts
deposited are repayable to whoever may be the bearer thereof.
On this score, the accepted rule is that the negotiability or non- Thus, petitioner's aforesaid witness merely declared that Angel
negotiability of an instrument is determined from the writing, de la Cruz is the depositor "insofar as the bank is concerned,"
that is, from the face of the instrument itself.9 In the but obviously other parties not privy to the transaction between
construction of a bill or note, the intention of the parties is to them would not be in a position to know that the depositor is
control, if it can be legally ascertained. 10 While the writing not the bearer stated in the CTDs. Hence, the situation would
may be read in the light of surrounding circumstances in order require any party dealing with the CTDs to go behind the plain
to more perfectly understand the intent and meaning of the import of what is written thereon to unravel the agreement of
parties, yet as they have constituted the writing to be the only the parties thereto through facts aliunde. This need for resort to
outward and visible expression of their meaning, no other extrinsic evidence is what is sought to be avoided by the
words are to be added to it or substituted in its stead. The duty Negotiable Instruments Law and calls for the application of the
elementary rule that the interpretation of obscure words or or omission, intentionally and deliberately led another to
stipulations in a contract shall not favor the party who caused believe a particular thing true, and to act upon such belief, he
the obscurity. 12 cannot, in any litigation arising out of such declaration, act, or
omission, be permitted to falsify it. 16
The next query is whether petitioner can rightfully recover on
the CTDs. This time, the answer is in the negative. The records If it were true that the CTDs were delivered as payment and not
reveal that Angel de la Cruz, whom petitioner chose not to as security, petitioner's credit manager could have easily said
implead in this suit for reasons of its own, delivered the CTDs so, instead of using the words "to guarantee" in the letter
amounting to P1,120,000.00 to petitioner without informing aforequoted. Besides, when respondent bank, as defendant in
respondent bank thereof at any time. Unfortunately for the court below, moved for a bill of particularity
petitioner, although the CTDs are bearer instruments, a valid therein 17 praying, among others, that petitioner, as plaintiff, be
negotiation thereof for the true purpose and agreement between required to aver with sufficient definiteness or particularity (a)
it and De la Cruz, as ultimately ascertained, requires both the due date or dates of payment of the alleged indebtedness of
delivery and indorsement. For, although petitioner seeks to Angel de la Cruz to plaintiff and (b) whether or not it issued a
deflect this fact, the CTDs were in reality delivered to it as a receipt showing that the CTDs were delivered to it by De la
security for De la Cruz' purchases of its fuel products. Any Cruz as payment of the latter's alleged indebtedness to it,
doubt as to whether the CTDs were delivered as payment for plaintiff corporation opposed the motion. 18 Had it produced
the fuel products or as a security has been dissipated and the receipt prayed for, it could have proved, if such truly was
resolved in favor of the latter by petitioner's own authorized the fact, that the CTDs were delivered as payment and not as
and responsible representative himself. security. Having opposed the motion, petitioner now labors
under the presumption that evidence willfully suppressed
In a letter dated November 26, 1982 addressed to respondent would be adverse if produced. 19
Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager, wrote:
". . . These certificates of deposit were negotiated to us by Mr. Under the foregoing circumstances, this disquisition
Angel dela Cruz to guarantee his purchases of fuel products" in Intergrated Realty Corporation, et al. vs. Philippine
(Emphasis ours.) 13 This admission is conclusive upon National Bank, et al. 20 is apropos:
petitioner, its protestations notwithstanding. Under the doctrine
of estoppel, an admission or representation is rendered . . . Adverting again to the Court's
conclusive upon the person making it, and cannot be denied or pronouncements in Lopez, supra, we quote
disproved as against the person relying thereon. 14 A party may therefrom:
not go back on his own acts and representations to the
prejudice of the other party who relied upon them. 15 In the law The character of the transaction
of evidence, whenever a party has, by his own declaration, act, between the parties is to be
determined by their intention, ownership, in the absence of
regardless of what language was clear and unambiguous language
used or what the form of the or other circumstances excluding
transfer was. If it was intended to an intent to pledge.
secure the payment of money, it
must be construed as a pledge; Petitioner's insistence that the CTDs were negotiated to it begs
but if there was some other the question. Under the Negotiable Instruments Law, an
intention, it is not a pledge. instrument is negotiated when it is transferred from one person
However, even though a transfer, to another in such a manner as to constitute the transferee the
if regarded by itself, appears to holder thereof, 21 and a holder may be the payee or indorsee of
have been absolute, its object and a bill or note, who is in possession of it, or the bearer
character might still be qualified thereof. 22 In the present case, however, there was no
and explained by negotiation in the sense of a transfer of the legal title to the
contemporaneous writing CTDs in favor of petitioner in which situation, for obvious
declaring it to have been a reasons, mere delivery of the bearer CTDs would have
deposit of the property as sufficed. Here, the delivery thereof only as security for the
collateral security. It has been purchases of Angel de la Cruz (and we even disregard the fact
said that a transfer of property by that the amount involved was not disclosed) could at the most
the debtor to a creditor, even if constitute petitioner only as a holder for value by reason of his
sufficient on its face to make an lien. Accordingly, a negotiation for such purpose cannot be
absolute conveyance, should be effected by mere delivery of the instrument since, necessarily,
treated as a pledge if the debt the terms thereof and the subsequent disposition of such
continues in inexistence and is security, in the event of non-payment of the principal
not discharged by the transfer, obligation, must be contractually provided for.
and that accordingly the use of
the terms ordinarily importing The pertinent law on this point is that where the holder has a
conveyance of absolute lien on the instrument arising from contract, he is deemed a
ownership will not be given that holder for value to the extent of his lien. 23 As such holder of
effect in such a transaction if collateral security, he would be a pledgee but the requirements
they are also commonly used in therefor and the effects thereof, not being provided for by the
pledges and mortgages and Negotiable Instruments Law, shall be governed by the Civil
therefore do not unqualifiedly Code provisions on pledge of incorporeal rights, 24 which
indicate a transfer of absolute inceptively provide:
 Art. 2095. Incorporeal rights, evidenced by or the instrument is recorded in the Registry of
negotiable instruments, . . . may also be pledged. Property in case the assignment involves real
The instrument proving the right pledged shall property.
be delivered to the creditor, and if negotiable,
must be indorsed. Respondent bank duly complied with this statutory
requirement. Contrarily, petitioner, whether as purchaser,
Art. 2096. A pledge shall not take effect against assignee or lien holder of the CTDs, neither proved the amount
third persons if a description of the thing of its credit or the extent of its lien nor the execution of any
pledged and the date of the pledge do not appear public instrument which could affect or bind private
in a public instrument. respondent. Necessarily, therefore, as between petitioner and
respondent bank, the latter has definitely the better right over
Aside from the fact that the CTDs were only delivered but not the CTDs in question.
indorsed, the factual findings of respondent court quoted at the
start of this opinion show that petitioner failed to produce any Finally, petitioner faults respondent court for refusing to delve
document evidencing any contract of pledge or guarantee into the question of whether or not private respondent observed
agreement between it and Angel de la Cruz. 25 Consequently, the requirements of the law in the case of lost negotiable
the mere delivery of the CTDs did not legally vest in petitioner instruments and the issuance of replacement certificates
any right effective against and binding upon respondent bank. therefor, on the ground that petitioner failed to raised that issue
The requirement under Article 2096 aforementioned is not a in the lower court. 28
mere rule of adjective law prescribing the mode whereby proof
may be made of the date of a pledge contract, but a rule of On this matter, we uphold respondent court's finding that the
substantive law prescribing a condition without which the aspect of alleged negligence of private respondent was not
execution of a pledge contract cannot affect third persons included in the stipulation of the parties and in the statement of
adversely. 26 issues submitted by them to the trial court. 29 The issues agreed
upon by them for resolution in this case are:
On the other hand, the assignment of the CTDs made by Angel
de la Cruz in favor of respondent bank was embodied in a 1. Whether or not the CTDs as worded are
public instrument. 27 With regard to this other mode of transfer, negotiable instruments.
the Civil Code specifically declares:
2. Whether or not defendant could legally apply
Art. 1625. An assignment of credit, right or the amount covered by the CTDs against the
action shall produce no effect as against third depositor's loan by virtue of the assignment
persons, unless it appears in a public instrument, (Annex "C").
 3. Whether or not there was legal compensation issues at a pre-trial conference bars the consideration of other
or set off involving the amount covered by the questions on appeal. 32
CTDs and the depositor's outstanding account
with defendant, if any. To accept petitioner's suggestion that respondent bank's
supposed negligence may be considered encompassed by the
4. Whether or not plaintiff could compel issues on its right to preterminate and receive the proceeds of
defendant to preterminate the CTDs before the the CTDs would be tantamount to saying that petitioner could
maturity date provided therein. raise on appeal any issue. We agree with private respondent
that the broad ultimate issue of petitioner's entitlement to the
5. Whether or not plaintiff is entitled to the proceeds of the questioned certificates can be premised on a
proceeds of the CTDs. multitude of other legal reasons and causes of action, of which
respondent bank's supposed negligence is only one. Hence,
6. Whether or not the parties can recover petitioner's submission, if accepted, would render a pre-trial
damages, attorney's fees and litigation expenses delimitation of issues a useless exercise. 33
from each other.
Still, even assuming arguendo that said issue of negligence was
As respondent court correctly observed, with appropriate raised in the court below, petitioner still cannot have the odds
citation of some doctrinal authorities, the foregoing in its favor. A close scrutiny of the provisions of the Code of
enumeration does not include the issue of negligence on the Commerce laying down the rules to be followed in case of lost
part of respondent bank. An issue raised for the first time on instruments payable to bearer, which it invokes, will reveal that
appeal and not raised timely in the proceedings in the lower said provisions, even assuming their applicability to the CTDs
court is barred by estoppel. 30 Questions raised on appeal must in the case at bar, are merely permissive and not mandatory.
be within the issues framed by the parties and, consequently, The very first article cited by petitioner speaks for itself.
issues not raised in the trial court cannot be raised for the first
time on appeal. 31 Art 548. The dispossessed owner, no matter for
what cause it may be, may apply to the judge or
Pre-trial is primarily intended to make certain that all issues court of competent jurisdiction, asking that the
necessary to the disposition of a case are properly raised. Thus, principal, interest or dividends due or about to
to obviate the element of surprise, parties are expected to become due, be not paid a third person, as well
disclose at a pre-trial conference all issues of law and fact as in order to prevent the ownership of the
which they intend to raise at the trial, except such as may instrument that a duplicate be issued him.
involve privileged or impeaching matters. The determination of (Emphasis ours.)
 xxx xxx xxx

The use of the word "may" in said provision shows that it is not
mandatory but discretionary on the part of the "dispossessed
owner" to apply to the judge or court of competent jurisdiction
for the issuance of a duplicate of the lost instrument. Where the
provision reads "may," this word shows that it is not mandatory
but discretional. 34 The word "may" is usually permissive, not
mandatory. 35 It is an auxiliary verb indicating liberty,
opportunity, permission and possibility. 36

Moreover, as correctly analyzed by private

respondent, 37 Articles 548 to 558 of the Code of Commerce,
on which petitioner seeks to anchor respondent bank's
supposed negligence, merely established, on the one hand, a
right of recourse in favor of a dispossessed owner or holder of
a bearer instrument so that he may obtain a duplicate of the
same, and, on the other, an option in favor of the party liable
thereon who, for some valid ground, may elect to refuse to
issue a replacement of the instrument. Significantly, none of
the provisions cited by petitioner categorically restricts or
prohibits the issuance a duplicate or replacement
instrument sans compliance with the procedure outlined
therein, and none establishes a mandatory precedent
requirement therefor.

WHEREFORE, on the modified premises above set forth, the

petition is DENIED and the appealed decision is hereby
AFFIRMED.

SO ORDERED.
 Republic of the Philippines delivered to the Philippine National Bank, a written instrument
SUPREME COURT reading as follows:
Manila
RENEWAL.
EN BANC P61,000.00

G.R. No. L-18103 June 8, 1922 MANILA, P.I., May 8, 1920.

PHILIPPINE NATIONAL BANK, plaintiff-appellee, On demand after date we promise to pay to the
vs. order of the Philippine National Bank sixty-one
MANILA OIL REFINING & BY-PRODUCTS thousand only pesos at Philippine National
COMPANY, INC., defendant-appellant. Bank, Manila, P.I.

Antonio Gonzalez for appellant. Without defalcation, value received; and to

Roman J. Lacson for appellee. hereby authorize any attorney in the Philippine
Hartigan and Welch; Fisher and De Witt; Perkins and Islands, in case this note be not paid at maturity,
Kincaid; Gibbs, Mc Donough and Johnson; Julian Wolfson; to appear in my name and confess judgment for
Ross and Lawrence; Francis B. Mahoney, and Jose A. Espiritu, the above sum with interest, cost of suit and
amici curiae. attorney's fees of ten (10) per cent for collection,
a release of all errors and waiver of all rights to
MALCOLM, J.: inquisition and appeal, and to the benefit of all
laws exempting property, real or personal, from
The question of first impression raised in this case concerns the levy or sale. Value received. No. ____ Due ____
validity in this jurisdiction of a provision in a promissory note
whereby in case the same is not paid at maturity, the maker MANILA OIL REFINING & BY-PRODUCTS
authorizes any attorney to appear and confess judgment thereon CO., INC.,
for the principal amount, with interest, costs, and attorney's
fees, and waives all errors, rights to inquisition, and appeal, and (Sgd.) VICENTE SOTELO,
all property exceptions. Manager.

On May 8, 1920, the manager and the treasurer of the Manila MANILA OIL REFINING & BY-PRODUCTS
Oil Refining & By-Products Company, Inc., executed and CO., INC.,
 (Sgd.) RAFAEL LOPEZ, Neither the Code of Civil Procedure nor any other remedial
Treasurer statute expressly or tacitly recognizes a confession of judgment
commonly called a judgment note. On the contrary, the
The Manila Oil Refining and By-Products Company, Inc. provisions of the Code of Civil Procedure, in relation to
failed to pay the promissory note on demand. The Philippine constitutional safeguards relating to the right to take a man's
National Bank brought action in the Court of First Instance of property only after a day in court and after due process of law,
Manila, to recover P61,000, the amount of the note, together contemplate that all defendants shall have an opportunity to be
with interest and costs. Mr. Elias N. Rector, an attorney heard. Further, the provisions of the Code of Civil Procedure
associated with the Philippine National Bank, entered his pertaining to counter claims argue against judgment notes,
appearance in representation of the defendant, and filed a especially as the Code provides that in case the defendant or his
motion confessing judgment. The defendant, however, in a assignee omits to set up a counterclaim, he cannot afterwards
sworn declaration, objected strongly to the unsolicited maintain an action against the plaintiff therefor. (Secs. 95, 96,
representation of attorney Recto. Later, attorney Antonio 97.) At least one provision of the substantive law, namely, that
Gonzalez appeared for the defendant and filed a demurrer, and the validity and fulfillment of contracts cannot be left to the
when this was overruled, presented an answer. The trial judge will of one of the contracting parties (Civil Code, art. 1356),
rendered judgment on the motion of attorney Recto in the terms constitutes another indication of fundamental legal purposes.
of the complaint.
The attorney for the appellee contends that the Negotiable
The foregoing facts, and appellant's three assignments of error, Instruments Law (Act No. 2031) expressly recognizes
raise squarely the question which was suggested in the judgment notes, and that they are enforcible under the regular
beginning of this opinion. In view of the importance of the procedure. The Negotiable Instruments Law, in section 5,
subject to the business community, the advice of prominent provides that "The negotiable character of an instrument
attorneys-at-law with banking connections, was solicited. otherwise negotiable is not affected by a provision which ". . .
These members of the bar responded promptly to the request of (b) Authorizes a confession of judgment if the instrument be
the court, and their memoranda have proved highly useful in not paid at maturity." We do not believe, however, that this
the solution of the question. It is to the credit of the bar that provision of law can be taken to sanction judgments by
although the sanction of judgement notes in the Philippines confession, because it is a portion of a uniform law which
might prove of immediate value to clients, every one of the merely provides that, in jurisdiction where judgment notes are
attorneys has looked upon the matter in a big way, with the recognized, such clauses shall not affect the negotiable
result that out of their independent investigations has come a character of the instrument. Moreover, the same section of the
practically unanimous protest against the recognition in this Negotiable Instruments. Law concludes with these words: "But
jurisdiction of judgment notes.1 nothing in this section shall validate any provision or
stipulation otherwise illegal."
The court is thus put in the position of having to determine the any court of record in the State of Missouri, or elsewhere, to
validity in the absence of statute of a provision in a note waive the issuing and service of process, and to confess
authorizing an attorney to appear and confess judgment against judgement in favor of the First National Bank of Kansas City
the maker. This situation, in reality, has its advantages for it for the amount that might then be due thereon, with interest at
permits us to reach that solution which is best grounded in the the rate therein mentioned and the costs of suit, together with
solid principles of the law, and which will best advance the an attorney's fee of 10 per cent and also to waive and release all
public interest. errors in said proceedings and judgment, and all proceedings,
appeals, or writs of error thereon. Plaintiff filed a petition in the
The practice of entering judgments in debt on warrants of Circuit Court to which was attached the above-mentioned
attorney is of ancient origin. In the course of time a warrant of instrument. An attorney named Denham appeared pursuant to
attorney to confess judgement became a familiar common law the authority given by the note sued on, entered the appearance
security. At common law, there were two kinds of judgments of the defendant, and consented that judgement be rendered in
by confession; the one a judgment by cognovit actionem, and favor of the plaintiff as prayed in the petition. After the Circuit
the other by confession relicta verificatione. A number of Court had entered a judgement, the defendants, through
jurisdictions in the United States have accepted the common counsel, appeared specially and filed a motion to set it aside.
law view of judgments by confession, while still other The Supreme Court of Missouri, speaking through Mr. Justice
jurisdictions have refused to sanction them. In some States, Graves, in part said:
statutes have been passed which have either expressly
authorized confession of judgment on warrant of attorney, But going beyond the mere technical question in our
without antecedent process, or have forbidden judgments of preceding paragraph discussed, we come to a question
this character. In the absence of statute, there is a conflict of urged which goes to the very root of this case, and
authority as to the validity of a warrant of attorney for the whilst new and novel in this state, we do not feel that
confession of judgement. The weight of opinion is that, unless the case should be disposed of without discussing and
authorized by statute, warrants of attorney to confess judgment passing upon that question.
are void, as against public policy.
xxx xxx xxx
Possibly the leading case on the subject is First National Bank
of Kansas City vs. White ([1909], 220 Mo., 717; 16 Ann. Cas., And if this instrument be considered as security for a
889; 120 S. W., 36; 132 Am. St. Rep., 612). The record in this debt, as it was by the common law, it has never so
case discloses that on October 4, 1990, the defendant executed found recognition in this state. The policy of our law
and delivered to the plaintiff an obligation in which the has been against such hidden securities for debt. Our
defendant authorized any attorney-at-law to appear for him in Recorder's Act is such that instruments intended as
an action on the note at any time after the note became due in security for debt should find a place in the public
records, and if not, they have often been viewed with a stipulation in a contract that a party who breaks it may
suspicion, and their bona fides often questioned. not be sued, to an agreement designating a person to be
sued for its breach who is nowise liable and prohibiting
Nor do we thing that the policy of our law is such as to action against any but him, to a provision in a lease that
thus place a debtor in the absolute power of his creditor. the landlord shall have the right to take immediate
The field for fraud is too far enlarged by such an judgment against the tenant in case of a default on his
instrument. Oppression and tyranny would follow the part, without giving the notice and demand for
footsteps of such a diversion in the way of security for possession and filing the complaint required by statute,
debt. Such instruments procured by duress could shortly to a by-law of a benefit association that the decisions of
be placed in judgment in a foreign court and much its officers on claim shall be final and conclusive, and
distress result therefrom. to many other agreements of a similar tendency. In
some courts, any agreement as to the time for suing
Again, under the law the right to appeal to this court or different from time allowed by the statute of limitations
some other appellate court is granted to all persons within which suit shall be brought or the right to sue be
against whom an adverse judgment is rendered, and this barred is held void.
statutory right is by the instrument stricken down. True
it is that such right is not claimed in this case, but it is a xxx xxx xxx
part of the bond and we hardly know why this pound of
flesh has not been demanded. Courts guard with jealous We shall not pursue this question further. This contract,
eye any contract innovations upon their jurisdiction. in so far as it goes beyond the usual provisions of a
The instrument before us, considered in the light of a note, is void as against the public policy of the state, as
contract, actually reduces the courts to mere clerks to such public policy is found expressed in our laws and
enter and record the judgment called for therein. By our decisions. Such agreements are iniquitous to the
statute (Rev. St. 1899, sec. 645) a party to a written uttermost and should be promptly condemned by the
instrument of this character has the right to show a courts, until such time as they may receive express
failure of consideration, but this right is brushed to the statutory recognition, as they have in some states.
wind by this instrument and the jurisdiction of the court
to hear that controversy is by the whose object is to oust xxx xxx xxx
the jurisdiction of the courts are contrary to public
policy and will not be enforced. Thus it is held that any From what has been said, it follows that the Circuit
stipulation between parties to a contract distinguishing Court never had jurisdiction of the defendant, and the
between the different courts of the country is contrary judgement is reversed.
to public policy. The principle has also been applied to
The case of Farquhar and Co. vs. Dehaven ([1912], 70 W. Va., xxx xxx xxx
738; 40 L.R.A. [N. S.], 956; 75 S.E., 65; Ann. Cas. [1914-A],
640), is another well-considered authority. The notes referred It is contended, however, that the old legal maxim, qui
to in the record contained waiver of presentment and protest, facit per alium, facit per se, is as applicable here as in
homestead and exemption rights real and personal, and other other cases. We do not think so. Strong reasons exist, as
rights, and also the following material provision: "And we do we have shown, for denying its application, when
hereby empower and authorize the said A. B. Farquhar Co. holders of contracts of this character seek the aid of the
Limited, or agent, or any prothonotary or attorney of any Court courts and of their execution process to enforce them,
of Record to appear for us and in our name to confess defendant having had no day in court or opportunity to
judgement against us and in favor of said A. B. Farquhar Co., be heard. We need not say in this case that a debtor may
Limited, for the above named sum with costs of suit and not, by proper power of attorney duly executed,
release of all errors and without stay of execution after the authorize another to appear in court, and by proper
maturity of this note." The Supreme Court of West Virginia, on endorsement upon the writ waive service of process,
consideration of the validity of the judgment note above and confess judgement. But we do not wish to be
described, speaking through Mr. Justice Miller, in part said: understood as approving or intending to countenance
the practice employing in this state commercial paper of
As both sides agree the question presented is one of the character here involved. Such paper has heretofore
first impression in this State. We have no statutes, as had little if any currency here. If the practice is adopted
has Pennsylvania and many other states, regulating the into this state it ought to be, we think, by act of the
subject. In the decision we are called upon to render, we Legislature, with all proper safeguards thrown around
must have recourse to the rules and principles of the it, to prevent fraud and imposition. The policy of our
common law, in force here, and to our statute law, law is, that no man shall suffer judgment at the hands of
applicable, and to such judicial decisions and practices our courts without proper process and a day to be heard.
in Virginia, in force at the time of the separation, as are To give currency to such paper by judicial
properly binding on us. It is pertinent to remark in this pronouncement would be to open the door to fraud and
connection, that after nearly fifty years of judicial imposition, and to subject the people to wrongs and
history this question, strong evidence, we think, that injuries not heretofore contemplated. This we are
such notes, if at all, have never been in very general use unwilling to do.
in this commonwealth. And in most states where they
are current the use of them has grown up under statutes A case typical of those authorities which lend support to
authorizing them, and regulating the practice of judgment notes is First National Bank of Las Cruces vs. Baker
employing them in commercial transactions. ([1919], 180 Pac., 291). The Supreme Court of New Mexico, in
a per curiam decision, in part, said:
In some of the states the judgments upon warrants of jurisdiction in an action to be brought upon said note;
attorney are condemned as being against public policy. that our cognovit statute does not cover the same field
(Farquhar and Co. vs. Dahaven, 70 W. Va., 738; 75 as that occupied by the common-law practice of taking
S.E., 65; 40 L.R.A. [N. S.], 956; Ann. Cas. [1914 A]. judgments upon warrant of attorney, and does not
640, and First National Bank of Kansas City vs. White, impliedly or otherwise abrogate such practice; and that
220 Mo., 717; 120 S. W., 36; 132 Am. St. Rep., 612; 16 the practice of taking judgments upon warrants of
Ann. Cas., 889, are examples of such holding.) By just attorney as it was pursued in this case is not against any
what course of reasoning it can be said by the courts public policy of the state, as declared by its laws.
that such judgments are against public policy we are
unable to understand. It was a practice from time With reference to the conclusiveness of the decisions here
immemorial at common law, and the common law mentioned, it may be said that they are based on the practice of
comes down to us sanctioned as justified by the reason the English-American common law, and that the doctrines of
and experience of English-speaking peoples. If the common law are binding upon Philippine courts only in so
conditions have arisen in this country which make the far as they are founded on sound principles applicable to local
application of the common law undesirable, it is for the conditions.
Legislature to so announce, and to prohibit the taking of
judgments can be declared as against the public policy Judgments by confession as appeared at common law were
of the state. We are aware that the argument against considered an amicable, easy, and cheap way to settle and
them is that they enable the unconscionable creditor to secure debts. They are a quick remedy and serve to save the
take advantage of the necessities of the poor debtor and court's time. They also save the time and money of the litigants
cut him off from his ordinary day in court. On the other and the government the expenses that a long litigation entails.
hand, it may be said in their favor that it frequently In one sense, instruments of this character may be considered
enables a debtor to obtain money which he could by no as special agreements, with power to enter up judgments on
possibility otherwise obtain. It strengthens his credit, them, binding the parties to the result as they themselves
and may be most highly beneficial to him at times. In viewed it.
some of the states there judgments have been
condemned by statute and of course in that case are not On the other hand, are disadvantages to the commercial world
allowed. which outweigh the considerations just mentioned. Such
warrants of attorney are void as against public policy, because
Our conclusion in this case is that a warrant of attorney they enlarge the field for fraud, because under these
given as security to a creditor accompanying a instruments the promissor bargains away his right to a day in
promissory note confers a valid power, and authorizes a court, and because the effect of the instrument is to strike down
confession of judgment in any court of competent the right of appeal accorded by statute. The recognition of such
a form of obligation would bring about a complete
reorganization of commercial customs and practices, with
reference to short-term obligations. It can readily be seen that
judgement notes, instead of resulting to the advantage of
commercial life in the Philippines might be the source of abuse
and oppression, and make the courts involuntary parties
thereto. If the bank has a meritorious case, the judgement is
ultimately certain in the courts.

We are of the opinion that warrants of attorney to confess

judgment are not authorized nor contemplated by our law. We
are further of the opinion that provisions in notes authorizing
attorneys to appear and confess judgments against makers
should not be recognized in this jurisdiction by implication and
should only be considered as valid when given express
legislative sanction.

The judgment appealed from is set aside, and the case is

remanded to the lower court for further proceedings in
accordance with this decision. Without special finding as to
costs in this instance, it is so ordered.

Araullo, C.J., Avanceña, Villamor, Ostrand, Johns and

Romualdez, JJ., concur.
 Republic of the Philippines City where defendant Mabanto, Jr., was then detailed. The
SUPREME COURT notice directed petitioner not to disburse, transfer, release or
Manila convey to any other person except to the deputy sheriff
concerned the salary checks or other checks, monies, or cash
FIRST DIVISION due or belonging to Mabanto, Jr., under penalty of law. 1 On 10
March 1992 private respondent filed a motion before the trial
court for examination of the garnishees.

G.R. No. 111190 June 27, 1995 On 25 May 1992 the petition pending before the Court of
Appeals was dismissed. Thus the trial court, finding no more
LORETO D. DE LA VICTORIA, as City Fiscal of legal obstacle to act on the motion for examination of the
Mandaue City and in his personal capacity as garnishees, directed petitioner on 4 November 1992 to submit
garnishee, petitioner, his report showing the amount of the garnished salaries of
vs. Mabanto, Jr., within fifteen (15) days from receipt 2 taking into
HON. JOSE P. BURGOS, Presiding Judge, RTC, Br. XVII, consideration the provisions of Sec. 12, pars. (f) and (i), Rule
Cebu City, and RAUL H. SESBREÑO, respondents. 39 of the Rules of Court.

On 24 November 1992 private respondent filed a motion to

require petitioner to explain why he should not be cited in
BELLOSILLO, J.: contempt of court for failing to comply with the order of 4
November 1992.
RAUL H. SESBREÑO filed a complaint for damages against
Assistant City Fiscals Bienvenido N. Mabanto, Jr., and Dario On the other hand, on 19 January 1993 petitioner moved to
D. Rama, Jr., before the Regional Trial Court of Cebu City. quash the notice of garnishment claiming that he was not in
After trial judgment was rendered ordering the defendants to possession of any money, funds, credit, property or anything of
pay P11,000.00 to the plaintiff, private respondent herein. The value belonging to Mabanto, Jr., except his salary and RATA
decision having become final and executory, on motion of the checks, but that said checks were not yet properties of
latter, the trial court ordered its execution. This order was Mabanto, Jr., until delivered to him. He further claimed that, as
questioned by the defendants before the Court of Appeals. such, they were still public funds which could not be subject to
However, on 15 January 1992 a writ of execution was issued. garnishment.

On 4 February 1992 a notice of garnishment was served on On 9 March 1993 the trial court denied both motions and
petitioner Loreto D. de la Victoria as City Fiscal of Mandaue ordered petitioner to immediately comply with its order of 4
November 1992. 3 It opined that the checks of Mabanto, Jr., Petitioner raises the following relevant issues: (1) whether a
had already been released through petitioner by the Department check still in the hands of the maker or its duly authorized
of Justice duly signed by the officer concerned. Upon service representative is owned by the payee before physical delivery
of the writ of garnishment, petitioner as custodian of the checks to the latter: and, (2) whether the salary check of a government
was under obligation to hold them for the judgment creditor. official or employee funded with public funds can be subject to
Petitioner became a virtual party to, or a forced intervenor in, garnishment.
the case and the trial court thereby acquired jurisdiction to bind
him to its orders and processes with a view to the complete Petitioner reiterates his position that the salary checks were not
satisfaction of the judgment. Additionally, there was no owned by Mabanto, Jr., because they were not yet delivered to
sufficient reason for petitioner to hold the checks because they him, and that petitioner as garnishee has no legal obligation to
were no longer government funds and presumably delivered to hold and deliver them to the trial court to be applied to
the payee, conformably with the last sentence of Sec. 16 of the Mabanto, Jr.'s judgment debt. The thesis of petitioner is that the
Negotiable Instruments Law. salary checks still formed part of public funds and therefore
beyond the reach of garnishment proceedings.
With regard to the contempt charge, the trial court was not
morally convinced of petitioner's guilt. For, while his Petitioner has well argued his case.
explanation suffered from procedural infirmities nevertheless
he took pains in enlightening the court by sending a written Garnishment is considered as a species of attachment for
explanation dated 22 July 1992 requesting for the lifting of the reaching credits belonging to the judgment debtor owing to him
notice of garnishment on the ground that the notice should have from a stranger to the litigation. 6 Emphasis is laid on the
been sent to the Finance Officer of the Department of Justice. phrase "belonging to the judgment debtor" since it is the focal
Petitioner insists that he had no authority to segregate a portion point in resolving the issues raised.
of the salary of Mabanto, Jr. The explanation however was not
submitted to the trial court for action since the stenographic As Assistant City Fiscal, the source of the salary of Mabanto,
reporter failed to attach it to the record. 4 Jr., is public funds. He receives his compensation in the form
of checks from the Department of Justice through petitioner as
On 20 April 1993 the motion for reconsideration was denied. City Fiscal of Mandaue City and head of office. Under Sec. 16
The trial court explained that it was not the duty of the of the Negotiable Instruments Law, every contract on a
garnishee to inquire or judge for himself whether the issuance negotiable instrument is incomplete and revocable
of the order of execution, writ of execution and notice of until delivery of the instrument for the purpose of giving effect
garnishment was justified. His only duty was to turn over the thereto. As ordinarily understood, delivery means the transfer
garnished checks to the trial court which issued the order of of the possession of the instrument by the maker or drawer with
execution. 5
intent to transfer title to the payee and recognize him as the As a necessary consequence of being public fund, the checks
holder thereof.7 may not be garnished to satisfy the judgment. 9 The rationale
behind this doctrine is obvious consideration of public policy.
According to the trial court, the checks of Mabanto, Jr., were The Court succinctly stated in Commissioner of Public
already released by the Department of Justice duly signed by Highways v. San Diego 10 that —
the officer concerned through petitioner and upon service of the
writ of garnishment by the sheriff petitioner was under The functions and public services rendered by
obligation to hold them for the judgment creditor. It recognized the State cannot be allowed to be paralyzed or
the role of petitioner as custodian of the checks. At the same disrupted by the diversion of public funds from
time however it considered the checks as no longer government their legitimate and specific objects, as
funds and presumed delivered to the payee based on the last appropriated by law.
sentence of Sec. 16 of the Negotiable Instruments Law which
states: "And where the instrument is no longer in the In denying petitioner's motion for reconsideration, the trial
possession of a party whose signature appears thereon, a valid court expressed the additional ratiocination that it was not the
and intentional delivery by him is presumed." Yet, the duty of the garnishee to inquire or judge for himself whether
presumption is not conclusive because the last portion of the the issuance of the order of execution, the writ of execution,
provision says "until the contrary is proved." However this and the notice of garnishment was justified, citing our ruling
phrase was deleted by the trial court for no apparent reason. in Philippine Commercial Industrial Bank v. Court of
Proof to the contrary is its own finding that the checks were in Appeals. 11 Our precise ruling in that case was that "[I]t is not
the custody of petitioner. Inasmuch as said checks had not yet incumbent upon the garnishee to inquire or to judge for itself
been delivered to Mabanto, Jr., they did not belong to him and whether or not the order for the advance execution of a
still had the character of public funds. In Tiro judgment is valid." But that is invoking only the general rule.
v. Hontanosas 8 we ruled that — We have also established therein the compelling reasons, as
exceptions thereto, which were not taken into account by the
The salary check of a government officer or trial court, e.g., a defect on the face of the writ or actual
employee such as a teacher does not belong to knowledge by the garnishee of lack of entitlement on the part
him before it is physically delivered to him. of the garnisher. It is worth to note that the ruling referred to
Until that time the check belongs to the the validity of advance execution of judgments, but a careful
government. Accordingly, before there is actual scrutiny of that case and similar cases reveals that it was
delivery of the check, the payee has no power applicable to a notice of garnishment as well. In the case at
over it; he cannot assign it without the consent bench, it was incumbent upon petitioner to inquire into the
of the Government. validity of the notice of garnishment as he had actual
knowledge of the non-entitlement of private respondent to the
checks in question. Consequently, we find no difficulty
concluding that the trial court exceeded its jurisdiction in
issuing the notice of garnishment concerning the salary checks
of Mabanto, Jr., in the possession of petitioner.

WHEREFORE, the petition is GRANTED. The orders of 9

March 1993 and 20 April 1993 of the Regional Trial Court of
Cebu City, Br. 17, subject of the petition are SET ASIDE. The
notice of garnishment served on petitioner dated 3 February
1992 is ordered DISCHARGED.

SO ORDERED.

Quiason and Kapunan, JJ., concur.

 Republic of the Philippines On July 6, 1986, the Development Bank of Rizal (petitioner
SUPREME COURT Bank for brevity) filed a complaint for a sum of money against
Manila respondents Sima Wei and/or Lee Kian Huat, Mary Cheng Uy,
Samson Tung, Asian Industrial Plastic Corporation (Plastic
SECOND DIVISION Corporation for short) and the Producers Bank of the
Philippines, on two causes of action:

(1) To enforce payment of the balance of

G.R. No. 85419 March 9, 1993 P1,032,450.02 on a promissory note executed by
respondent Sima Wei on June 9, 1983; and
DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,
vs. (2) To enforce payment of two checks executed
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG by Sima Wei, payable to petitioner, and drawn
UY, SAMSON TUNG, ASIAN INDUSTRIAL PLASTIC against the China Banking Corporation, to pay
CORPORATION and PRODUCERS BANK OF THE the balance due on the promissory note.
PHILIPPINES, defendants-respondents.
Except for Lee Kian Huat, defendants filed their separate
Yngson & Associates for petitioner. Motions to Dismiss alleging a common ground that the
complaint states no cause of action. The trial court granted the
Henry A. Reyes & Associates for Samso Tung & Asian defendants' Motions to Dismiss. The Court of Appeals affirmed
Industrial Plastic Corporation. this decision, * to which the petitioner Bank, represented by its
Legal Liquidator, filed this Petition for Review by Certiorari,
Eduardo G. Castelo for Sima Wei. assigning the following as the alleged errors of the Court of
Appeals:1
Monsod, Tamargo & Associates for Producers Bank.
(1) THE COURT OF APPEALS ERRED IN
Rafael S. Santayana for Mary Cheng Uy. HOLDING THAT THE PLAINTIFF-
PETITIONER HAS NO CAUSE OF ACTION
AGAINST DEFENDANTS-RESPONDENTS
HEREIN.
CAMPOS, JR., J.:
(2) THE COURT OF APPEALS ERRED IN
HOLDING THAT SECTION 13, RULE 3 OF
 THE REVISED RULES OF COURT ON indorsement of the latter. Hence, petitioner filed the complaint
ALTERNATIVE DEFENDANTS IS NOT as aforestated.
APPLICABLE TO HEREIN DEFENDANTS-
RESPONDENTS. The main issue before Us is whether petitioner Bank has a
cause of action against any or all of the defendants, in the
The antecedent facts of this case are as follows: alternative or otherwise.

In consideration for a loan extended by petitioner Bank to A cause of action is defined as an act or omission of one party
respondent Sima Wei, the latter executed and delivered to the in violation of the legal right or rights of another. The essential
former a promissory note, engaging to pay the petitioner Bank elements are: (1) legal right of the plaintiff; (2) correlative
or order the amount of P1,820,000.00 on or before June 24, obligation of the defendant; and (3) an act or omission of the
1983 with interest at 32% per annum. Sima Wei made partial defendant in violation of said legal right.2
payments on the note, leaving a balance of P1,032,450.02. On
November 18, 1983, Sima Wei issued two crossed checks The normal parties to a check are the drawer, the payee and the
payable to petitioner Bank drawn against China Banking drawee bank. Courts have long recognized the business custom
Corporation, bearing respectively the serial numbers 384934, of using printed checks where blanks are provided for the date
for the amount of P550,000.00 and 384935, for the amount of of issuance, the name of the payee, the amount payable and the
P500,000.00. The said checks were allegedly issued in full drawer's signature. All the drawer has to do when he wishes to
settlement of the drawer's account evidenced by the promissory issue a check is to properly fill up the blanks and sign it.
note. These two checks were not delivered to the petitioner- However, the mere fact that he has done these does not give
payee or to any of its authorized representatives. For reasons rise to any liability on his part, until and unless the check is
not shown, these checks came into the possession of delivered to the payee or his representative. A negotiable
respondent Lee Kian Huat, who deposited the checks without instrument, of which a check is, is not only a written evidence
the petitioner-payee's indorsement (forged or otherwise) to the of a contract right but is also a species of property. Just as a
account of respondent Plastic Corporation, at the Balintawak deed to a piece of land must be delivered in order to convey
branch, Caloocan City, of the Producers Bank. Cheng Uy, title to the grantee, so must a negotiable instrument be
Branch Manager of the Balintawak branch of Producers Bank, delivered to the payee in order to evidence its existence as a
relying on the assurance of respondent Samson Tung, President binding contract. Section 16 of the Negotiable Instruments
of Plastic Corporation, that the transaction was legal and Law, which governs checks, provides in part:
regular, instructed the cashier of Producers Bank to accept the
checks for deposit and to credit them to the account of said Every contract on a negotiable instrument is
Plastic Corporation, inspite of the fact that the checks were incomplete and revocable until delivery of the
crossed and payable to petitioner Bank and bore no
 instrument for the purpose of giving effect Notwithstanding the above, it does not necessarily follow that
thereto. . . . the drawer Sima Wei is freed from liability to petitioner Bank
under the loan evidenced by the promissory note agreed to by
Thus, the payee of a negotiable instrument acquires no interest her. Her allegation that she has paid the balance of her loan
with respect thereto until its delivery to him.3Delivery of an with the two checks payable to petitioner Bank has no merit
instrument means transfer of possession, actual or constructive, for, as We have earlier explained, these checks were never
from one person to another.4 Without the initial delivery of the delivered to petitioner Bank. And even granting, without
instrument from the drawer to the payee, there can be no admitting, that there was delivery to petitioner Bank, the
liability on the instrument. Moreover, such delivery must be delivery of checks in payment of an obligation does not
intended to give effect to the instrument. constitute payment unless they are cashed or their value is
impaired through the fault of the creditor.6 None of these
The allegations of the petitioner in the original complaint show exceptions were alleged by respondent Sima Wei.
that the two (2) China Bank checks, numbered 384934 and
384935, were not delivered to the payee, the petitioner herein. Therefore, unless respondent Sima Wei proves that she has
Without the delivery of said checks to petitioner-payee, the been relieved from liability on the promissory note by some
former did not acquire any right or interest therein and cannot other cause, petitioner Bank has a right of action against her for
therefore assert any cause of action, founded on said checks, the balance due thereon.
whether against the drawer Sima Wei or against the Producers
Bank or any of the other respondents. However, insofar as the other respondents are concerned,
petitioner Bank has no privity with them. Since petitioner Bank
In the original complaint, petitioner Bank, as plaintiff, sued never received the checks on which it based its action against
respondent Sima Wei on the promissory note, and the said respondents, it never owned them (the checks) nor did it
alternative defendants, including Sima Wei, on the two checks. acquire any interest therein. Thus, anything which the
On appeal from the orders of dismissal of the Regional Trial respondents may have done with respect to said checks could
Court, petitioner Bank alleged that its cause of action was not not have prejudiced petitioner Bank. It had no right or interest
based on collecting the sum of money evidenced by the in the checks which could have been violated by said
negotiable instruments stated but on quasi-delict — a claim for respondents. Petitioner Bank has therefore no cause of action
damages on the ground of fraudulent acts and evident bad faith against said respondents, in the alternative or otherwise. If at
of the alternative respondents. This was clearly an attempt by all, it is Sima Wei, the drawer, who would have a cause of
the petitioner Bank to change not only the theory of its case but action against her
the basis of his cause of action. It is well-settled that a party co-respondents, if the allegations in the complaint are found to
cannot change his theory on appeal, as this would in effect be true.
deprive the other party of his day in court.5
With respect to the second assignment of error raised by
petitioner Bank regarding the applicability of Section 13, Rule
3 of the Rules of Court, We find it unnecessary to discuss the
same in view of Our finding that the petitioner Bank did not
acquire any right or interest in the checks due to lack of
delivery. It therefore has no cause of action against the
respondents, in the alternative or otherwise.

In the light of the foregoing, the judgment of the Court of

Appeals dismissing the petitioner's complaint is AFFIRMED
insofar as the second cause of action is concerned. On the first
cause of action, the case is REMANDED to the trial court for a
trial on the merits, consistent with this decision, in order to
determine whether respondent Sima Wei is liable to the
Development Bank of Rizal for any amount under the
promissory note allegedly signed by her.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Nocon, JJ., concur.