Great Asian Sales Center Corporation vs. Court of Appeals: VOL. 381, APRIL 25, 2002 557

11/1/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 381
VOL. 381, APRIL 25, 2002 557

Great Asian Sales Center Corporation vs. Court of Appeals
*
G.R. No. 105774. April 25, 2002.
GREAT ASIAN SALES CENTER CORPORATION and TAN

CHONG LIN, petitioners, vs. THE COURT OF APPEALS and
BANCASIA FINANCE AND INVESTMENT CORPORATION,
respondents.
Corporation Law; The exercise of the corporate powers of the

corporation rested in the board of directors save in those instances where
the Corporation Code requires stockholders’ approval for certain specific
acts.—The Corporation Code of the Philippines vests in the board of
directors the exercise of the corporate powers of the corporation, save in
those instances where the Code requires stockholders’ approval for certain
specific acts. In the ordinary course of business, a corporation can borrow
funds or dispose of assets of the corporation only on authority of the board
of directors. The board of directors normally designates one or more
corporate officers to sign loan documents or deeds of assignment for the
corporation.
Commercial Law; Negotiable Instruments Law; Meaning of
“Discounting Line.”—In the financing industry, the term “discounting line”
means a credit facility with a financing company or bank, which allows a
business entity to sell, on a continuing basis, its accounts receivable at a
discount. The term “discount” means the sale of a receivable at less than its
face value. The purpose of a discounting line is to enable a business entity to
generate instant cash out of its receivables which are still to mature at future
dates. The financing company or bank which buys the receivables makes its
profit out of the difference between the face value of the receivable and the
discounted price.
Same; Same; Under the Negotiable Instruments Law, notice of
dishonor is not required if the drawer has no right to expect or require the
bank to honor the check, or if the drawer has countermanded payment.—
Under the Negotiable Instruments Law, notice of dishonor is not required if
the drawer has no right to expect or require the bank to honor the check, or
if the drawer has countermanded payment. In the instant case, all the checks
were dishonored for any of the following reasons: “account closed,”
“account under garnishment,” “insufficiency of funds,” or “payment
stopped.” In the first three instances, the drawers had no right to expect or
require the bank to honor the checks, and in the last instance, the drawers
had countermanded payment.
central.com.ph/sfsreader/session/0000016e2563248861119a51003600fb002c009e/t/?o=False 1/25
______________
* THIRD DIVISION.
558
558 SUPREME COURT REPORTS ANNOTATED
Same; Same; Same; Delay in notice of dishonor, where such notice is

required, discharges the drawer only to the extent of the loss caused by the
delay.—Under common law, delay in notice of dishonor, where such notice
is required, discharges the drawer only to the extent of the loss caused by
the delay. This rule finds application in this jurisdiction pursuant to Section
196 of the Negotiable Instruments Law which states, “Any case not
provided for in this Act shall be governed by the provisions of existing
legislation, or in default thereof, by the rules of the Law Merchant.” Under
Section 186 of the Negotiable Instruments Law, delay in the presentment of
checks discharges the drawer. However, Section 186 refers only to delay in
presentment of checks but is silent on delay in giving notice of dishonor.
Consequently, the common law or Law Merchant can supply this gap in
accordance with Section 196 of the Negotiable Instruments Law.
Same; Same; Distinction between a Discounting Line and a Loan
Accommodation.—At any rate, there is indeed a fine distinction between a
discounting line and a loan accommodation. If the accounts receivable, like
postdated checks, are sold for a consideration less than their face value, the
transaction is one of discounting, and is subject to the provisions of the
Financing Company Act. The assignee is immediately subrogated as
creditor of the accounts receivable. However, if the accounts receivable are
merely used as collateral for the loan, the transaction is only a simple loan,
and the lender is not subrogated as creditor until there is a default and the
collateral is foreclosed.
PETITION for review on certiorari of a decision of the Court of

Appeals.
The facts are stated in the opinion of the Court.

Antonio H. Garces for petitioners.
Balgos & Perez for private respondent.
Angelito Chua for Bancasia Finance & Investment
Corporation.
CARPIO, J.:
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the

Revised Rules on Civil Procedure assailing the June 9, 1992
559
VOL. 381, APRIL 25, 2002 559

1 2
Decision of the Court of Appeals in CA-G.R. CV No. 20167. The
3
Court of Appeals affirmed the January 26, 1988 4
Decision of the
Regional Trial Court of Manila, Branch 52, ordering petitioners
Great Asian Sales Center Corporation (“Great Asian” for brevity)
and Tan Chong Lin to pay, solidarily, respondent Bancasia Finance
and Investment Corporation (“Bancasia” for brevity) the amount of
P1,042,005.00. The Court of Appeals affirmed the trial court’s
award of interest and costs of suit but deleted the award of attorney’s
fees.
The Facts
Great Asian is engaged in the business of buying and selling general

merchandise, in particular household appliances. On March 17,
1981, the board of directors of Great Asian approved a resolution
authorizing its Treasurer and General Manager, Arsenio Lim Piat, Jr.
(“Arsenio” for brevity) to secure a loan from Bancasia in an amount
not to exceed P1.0 million. The board resolution also authorized
Arsenio to sign all papers, documents or promissory notes necessary
to secure the loan. On February 10, 1982, the board of directors of
Great Asian approved a second resolution authorizing Great Asian
to secure a discounting line with Bancasia in an amount not
exceeding P2.0 million. The second board resolution also designated
Arsenio as the authorized signatory to sign all instruments,
documents and checks necessary to secure the discounting line.
On March 4, 1981, Tan Chong Lin signed a Surety Agreement in
favor of Bancasia to guarantee, solidarily, the debts of Great Asian
to Bancasia. On January 29, 1982, Tan Chong Lin signed a
Comprehensive and Continuing Surety Agreement in favor of
Bancasia to guarantee, solidarily, the debts of Great Asian to
Bancasia. Thus, Tan Chong Lin signed two surety agreements
(“Surety Agreements” for brevity) in favor of Bancasia.
______________
1 Rollo, pp. 38-58.

2 Eleventh Division composed of Justices Nathanael P. De Pano, Jr. (ponente),
Jesus M. Elbinias and Angelina S. Gutierrez (now a member of this Court).
3 Rollo, pp. 144-157.
4 Penned by Judge Maximo A. Savellano, Jr.
560
Great Asian, through its Treasurer and General Manager Arsenio,

signed four (4) Deeds of Assignment of Receivables (“Deeds of
Assignment” for brevity), assigning to Bancasia fifteen (15) post-
dated checks. Nine of the checks were payable to Great Asian, three
were payable to “New Asian Emp.,” and the last three were payable
to cash. Various customers of Great Asian issued these postdated
checks in payment for appliances and other merchandise.
Great Asian and Bancasia signed the first Deed of Assignment on
January 12, 1982 covering four postdated checks with a total face
value of P244,225.82, with maturity dates not later than March 17,
1982. Of these four postdated checks, two were dishonored. Great
Asian and Bancasia signed the second Deed of Assignment also on
January 12, 1982 covering four postdated checks with a total face
value of P312,819.00, with maturity dates not later than April 1,
1982. All these four checks were dishonored. Great Asian and
Bancasia signed the third Deed of Assignment on February 11, 1982
covering eight postdated checks with a total face value of
P344,475.00, with maturity dates not later than April 30, 1982. All
these eight checks were dishonored. Great Asian and Bancasia
signed the fourth Deed of Assignment on March 5, 1982 covering
one postdated check with a face value of P200,000.00, with maturity
date on March 18, 1982. This last check was also dishonored. Great
Asian assigned the postdated checks to Bancasia at a discount rate of
less than 24% of the face value of the checks.
Arsenio endorsed all the fifteen dishonored checks by signing his
name at the back of the checks. Eight of the dishonored checks bore
the endorsement of Arsenio below the stamped name of “Great
Asian Sales Center,” while the rest of the dishonored checks just
bore the signature of Arsenio. The drawee banks dishonored the
fifteen checks on maturity when deposited for collection by
Bancasia, with any of the following as reason for the dishonor:
“account closed,” “payment stopped,” “account under garnishment,”
and “insufficiency of funds.” The total amount of the fifteen
dishonored checks is P1,042,005.00. Below is a table of the fifteen
dishonored checks:
561
VOL. 381, APRIL 25, 2002 561

Drawee Bank Check No. Amount Maturity Date

1st Deed
Solid Bank C- P137,500.00 March 16,
A097480 1982
Pacific Banking Corp. 23950 P47,211.00 March 17,
1982
Drawee Bank Check No. Amount Maturity Date
2nd Deed
Metrobank 030925 P68,722.00 March 19,
1982
030926 P45,230.00 March 19,
1982
Solidbank C- P140,000.00 March 23,
A097478 1982
Pacific Banking Corp. CC P58,867.00 April 1, 1982
769910
3rd Deed
Phil. Trust Company 060835 P21,228.00 April 21, 1982
060836 P22,187.00 April 28, 1982
Allied Banking Corp. 11251624 P41,773.00 April 22, 1982
11251625 P38,592.00 April 29, 1982
Pacific Banking Corp. 237984 P37,886.00 April 23, 1982
237988 P47,385.00 April 28, 1982
237985 P46,748.00 April 30, 1982
Security Bank & Trust 22061 P88,676.00 April 30, 1982
Co.
4th Deed
Pacific Banking Corp. 860178 P200,000.00 March 18,
1982
After the drawee bank dishonored Check No. 097480 dated March
16, 1982, Bancasia referred the matter to its lawyer, Atty. Eladia
Reyes, who sent by registered mail to Tan Chong Lin a letter dated
March 18, 1982, notifying him of the dishonor and demanding
payment from him. Subsequently, Bancasia sent by personal
delivery a letter dated June 16, 1982 to Tan Chong Lin, notifying
him of the dishonor of the fifteen checks and demanding payment
from him. Neither Great Asian nor Tan Chong Lin paid Bancasia the
dishonored checks.
On May 21, 1982, Great Asian filed with the then Court of First
Instance of Manila a petition for insolvency, verified under oath by
its Corporate Secretary, Mario Tan. Attached to the verified petition
was a “Schedule and Inventory of Liabilities and Creditors of Great
Asian Sales Center Corporation,” listing Bancasia as one of the
creditors of Great Asian in the amount of P1,243,632.00.
On June 23, 1982, Bancasia filed a complaint for collection of a
sum of money against Great Asian and Tan Chong Lin. Bancasia
562

impleaded Tan Chong Lin because of the Surety Agreements he

signed in favor of Bancasia. In its answer, Great Asian denied the
material allegations of the complaint claiming it was unfounded,
malicious, baseless, and unlawfully instituted since there was
already a pending insolvency proceedings, although Great Asian
subsequently withdrew its petition for voluntary insolvency. Great
Asian further raised the alleged lack of authority of Arsenio to sign
the Deeds of Assignment as well as the absence of consideration and
consent of all the parties to the Surety Agreements signed by Tan
Chong Lin.
Ruling of the Trial Court
The trial court rendered its decision on January 26, 1988 with the
following findings and conclusions:
“From the foregoing facts and circumstances, the Court finds that the
plaintiff has established its causes of action against the defendants. The
Board Resolution (Exh. “T”), dated March 17, 1981, authorizing Arsenio
Lim Piat, Jr., general manager and treasurer of the defendant Great Asian to
apply and negotiate for a loan accommodation or credit line with the
plaintiff Bancasia in an amount not exceeding One Million Pesos
(P1,000,000.00), and the other Board Resolution approved on February 10,
1982, authorizing Arsenio Lim Piat, Jr., to obtain for defendant Asian
Center a discounting line with Bancasia at prevailing discounting rates in an
amount not to exceed Two Million Pesos (P2,000,000.00), both of which
were intended to secure money from the plaintiff financing firm to finance
the business operations of defendant Great Asian, and pursuant to which
Arsenio Lim Piat, Jr. was able to have the aforementioned fifteen (15)
checks totaling P1,042,005.00 discounted with the plaintiff, which
transactions were obviously known by the beneficiary thereof, defendant
Great Asian, as in fact, in its aforementioned Schedule and Inventory of
Liabilities and Creditors (Exh. “DD”, “DD-1”) attached to its Verified
Petition for Insolvency, dated May 12, 1982 (pp. 50-56), the defendant
Great Asian admitted an existing liability to the plaintiff, in the amount of
P1,243,632.00, secured by it, by way of ‘financing accommodation,’ from
the said financing institution Bancasia Finance and Investment Corporation,
plaintiff herein, sufficiently establish the liability of the defendant Great
Asian to the plaintiff for the amount of P1,042,005.00 sought to be
5
recovered by the latter in this case.
______________
5 Rollo, pp. 154-155.
563
VOL. 381, APRIL 25, 2002 563
xxx
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the two (2) defendants ordering the latter, jointly and severally, to
pay the former:
(a) The amount of P1,042,005.00, plus interest thereon at the legal rate
from the filing of the complaint until the same is fully paid;
(b) Attorney’s fees equivalent to twenty percent (20%) of the total
amount due; and
(c) The costs of suit.
6
SO ORDERED.”
Ruling of the Court of Appeals
On appeal, the Court of Appeals sustained the decision of the lower

court, deleting only the award of attorney’s fees, as follows:
“As against appellants’ bare denial of it, the Court is more inclined to accept
the appellee’s version, to the effect that the subject deeds of assignment are
but individual transactions which—being collectively evidentiary of the
loan accommodation and/or credit line it granted the appellant corporation
—should not be taken singly and distinct therefrom. In addition to its
plausibility, the proposition is, more importantly, adequately backed by the
documentary evidence on record. Aside from the aforesaid Deeds of
Assignment (Exhs. “A,” “D,” “I,” and “R”) and the Board Resolutions of
the appellant corporation’s Board of Directors (Exhs. “T,” “U” and “V”), the
appellee—consistent with its theory—interposed the Surety Agreements the
appellant Tan Chong Lin executed (Exhs. “W” and “X”), as well as the
demand letters it served upon the latter as surety (Exhs. “Y” and “Z”). It
bears emphasis that the second Resolution of the appellant corporation’s
Board of Directors (Exh. “V”) even closely coincides with the execution of
the February 11, 1982 and March 5, 1982 Deeds of Assignment (Exhs. “I”
and “R”). Were the appellants’ posturings true, it seems rather strange that
the appellant Tan Chong Lin did not even protest or, at least, make known to
the appellee what he—together with the appellant corporation—represented
to be a corporate larceny to which all of them supposedly fell prey. In the
petition for voluntary insolvency it filed, the appellant corporation, instead,
indirectly acknowledged its indebtedness in terms of financing
accommodations to the appellee, in an amount which,
______________
6 Ibid., pp. 156-157.
564
while not exactly matching the sum herein sought to be collected,

7
approximates the same (Exhs. “CC,” “DD” and “DD-1”).
xxx
The appellants contend that the foregoing warranties enlarged or
increased the surety’s risk, such that appellant Tan Chong Lin should be
released from his liabilities (pp. 37-44, Appellant’s Brief). Without saying
more, the appellants'’ position is, however, soundly debunked by the
undertaking expressed in the Comprehensive and Continuing Surety
Agreements (Exhs. “W” and “X”), to the effect that the “x x x surety/ies,
jointly and severally among themselves and likewise with the principal,
hereby agree/s and bind/s himself to pay at maturity all the notes, drafts,
bills of exchange, overdrafts and other obligations which the principal may
now or may hereafter owe the creditor x x x.” With the possible exception
of the fixed ceiling for the amount of loan obtainable, the surety undertaking
in the case at bar is so comprehensive as to contemplate each and every
condition, term or warranty which the principal parties may have or may be
minded to agree on. Having affixed his signature thereto, the appellant Tan
Chong Lin is expected to have, at least, read and understood the same.
xxx
With the foregoing disquisition, the Court sees little or no reason to go
into the appellants’ remaining assignments of error, save the matter of
attorney’s fees. For want of a statement of the rationale therefore in the body
of the challenged decision, the trial court’s award of attorney’s fees should
be deleted and disallowed (Abrogar vs. Intermediate Appellate Court, 157
SCRA 57).
WHEREFORE, the decision appealed from is MODIFIED, to delete the
trial court’s award of attorney’s fees. The rest is AFFIRMED in toto.
8
SO ORDERED.”
The Issues
The petition is anchored on the following assigned errors:
“1. The respondent Court erred in not holding that the proper
parties against whom this action for collection should be
brought are the drawers and indorser of the checks in
question, being the real parties in interest, and not the
herein petitioners.
______________
7 Ibid., pp. 76-77.

8 Ibid., pp. 79-81.
565
VOL. 381, APRIL 25, 2002 565

2. The respondent Court erred in not holding that the

petitioner-corporation is discharged from liability for failure
of the private respondent to comply with the provisions of
the Negotiable Instruments Law on the dishonor of the
checks.
3. The respondent Court erred in its appreciation and
interpretation of the effect and legal consequences of the
signing of the deeds of assignment and the subsequent
indorsement of the checks by Arsenio Lim Piat, Jr. in his
individual and personal capacity and without stating or
indicating the name of his supposed principal.
4. The respondent Court erred in holding that the assignment
of the checks is a loan accommodation or credit line
accorded by the private respondent to petitioner-
corporation, and not a purchase and sale thereof.
5. The respondent Court erred in not holding that there was a
material alteration of the risk assumed by the petitioner-
surety under his surety agreement by the terms, conditions,
warranties and obligations assumed by the assignor Arsenio
Lim Piat, Jr. under the deeds of assignment or receivables.
6. The respondent Court erred in holding that the petitioner-
corporation impliedly admitted its liability to private
respondent when the former included the latter as one of its
creditors in its petition for voluntary insolvency, although
no claim was filed and proved by the private respondent in
the insolvency court.
7. The respondent Court erred in holding the petitioners liable
9
to private respondent on the transactions in question.”
The issues to be resolved in this petition can be summarized into

three:
1. WHETHER ARSENIO HAD AUTHORITY TO

EXECUTE THE DEEDS OF ASSIGNMENT AND THUS
BIND GREAT ASIAN;
2. WHETHER GREAT ASIAN IS LIABLE TO BANCASIA
UNDER THE DEEDS OF ASSIGNMENT FOR BREACH
OF CONTRACT PURSUANT TO THE CIVIL CODE,
INDEPENDENT OF THE NEGOTIABLE
INSTRUMENTS LAW;
3. WHETHER TAN CHONG LIN IS LIABLE TO GREAT
ASIAN UNDER THE SURETY AGREEMENTS.
______________
9 Rollo, pp. 13-15.
566
The Court’s Ruling
The petition is bereft of merit.
First Issue: Authority of Arsenio to Sign the Deeds of Assignment
Great Asian asserts that Arsenio signed the Deeds of Assignment

and indorsed the checks in his personal capacity. The primordial
question that must be resolved is whether Great Asian authorized
Arsenio to sign the Deeds of Assignment. If Great Asian so
authorized Arsenio, then Great Asian is bound by the Deeds of
Assignment and must honor its terms.
The Corporation Code of the Philippines vests in the board of
directors the exercise of the corporate powers of the corporation,
save in those instances where the Code requires stockholders’
approval for certain specific acts. Section 23, of the Code provides:
“SEC. 23. The Board of Directors or Trustees.—Unless otherwise provided

in this Code, the corporate powers of all corporations formed under this
Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees x x x.”
In the ordinary course of business, a corporation can borrow funds

or dispose of assets of the corporation only on authority of the board
of directors. The board of directors normally designates one or more
corporate officers to sign loan documents or deeds of assignment for
the corporation.
To secure a credit accommodation from Bancasia, the board of
directors of Great Asian adopted two board resolutions on different
dates, the first on March 17, 1981, and the second on February 10,
1982. These two board resolutions, as certified under oath by Great
Asian’s Corporate Secretary Mario K. Tan, state:
First Board Resolution
“RESOLVED, that the Treasurer of the corporation, Mr. Arsenio Lim Piat,
Jr., be authorized as he is authorized to apply for and negotiate for a loan
accommodation or credit line in the amount not to exceed ONE MILLION
PESOS (P1,000,000.00), with Bancasia Finance and Investment
Corporation, and likewise to sign any and all papers, documents, and/or
567
VOL. 381, APRIL 25, 2002 567

promissory notes in connection with said loan accommodation or credit line,
including the power to mortgage such properties of the corporation as may
10
be needed to effectuate the same.” (Emphasis supplied)
Second Board Resolution
“RESOLVED that Great Asian Sales Center Corp. obtain a discounting

line with BANCASIA FINANCE & INVESTMENT CORPORATION, at
prevailing discounting rates, in an amount not to exceed** TWO MILLION
PESOS ONLY (P2,000,000),** Philippine Currency.
RESOLVED FURTHER, that the corporation secure such other forms of
credit lines with BANCASIA FINANCE & INVESTMENT
CORPORATION in an amount not to exceed** TWO MILLION PESOS
ONLY (P2,000,000.00),** PESOS, under such terms and conditions as the
signatories may deem fit and proper.
RESOLVED FURTHER, that the following persons be authorized
individually, jointly or collectively to sign, execute and deliver any and all
instruments, documents, checks, sureties, etc. necessary or incidental to
secure any of the foregoing obligation:
(signed)
Specimen Signature
1. ARSENIO LIM PIAT, JR.

2. ________________
3. ________________
4. ________________
PROVIDED FINALLY that this authority shall be valid, binding and

effective until revoked by the Board of Directors in the manner prescribed
by law, and that BANCASIA FINANCE & INVESTMENT
CORPORATION shall not be bound by any such revocation until such time
11
as it is noticed in writing of such revocation.” (Emphasis supplied)
The first board resolution expressly authorizes Arsenio, as Treasurer

of Great Asian, to apply for a “loan accommodation or credit line”
with Bancasia for not more than P1.0 million. Also, the first
resolution explicitly authorizes Arsenio to sign any document, paper
or promissory note, including mortgage deeds over properties of
Great Asian, to secure the loan or credit line from Bancasia.
______________
10 Plaintiff ’s Evidence, p. 15.

11 Plaintiff ’s Evidence, p. 16.
568

The second board resolution expressly authorizes Great Asian to

secure a “discounting line” from Bancasia for not more than P2.0
million. The second board resolution also expressly empowers
Arsenio, as the authorized signatory of Great Asian, “to sign,
execute and deliver any and all documents, checks xxx necessary or
incidental to secure” the discounting line. The second board
resolution specifically authorizes Arsenio to secure the discounting
line “under such terms and conditions as (he) xxx may deem fit and
proper.”
As plain as daylight, the two board resolutions clearly authorize
Great Asian to secure a loan or discounting line from Bancasia. The
two board resolutions also categorically designate Arsenio as the
authorized signatory to sign and deliver all the implementing
documents, including checks, for Great Asian. There is no iota of
doubt whatsoever about the purpose of the two board resolutions,
and about the authority of Arsenio to act and sign for Great Asian.
The second board resolution even gave Arsenio full authority to
agree with Bancasia on the terms and conditions of the discounting
line. Great Asian adopted the correct and proper board resolutions to
secure a loan or discounting line from Bancasia, and Bancasia had a
right to rely on the two board resolutions of Great Asian.
Significantly, the two board resolutions specifically refer to Bancasia
as the financing institution from whom Great Asian will secure the
loan accommodation or discounting line.
Armed with the two board resolutions, Arsenio signed the Deeds
of Assignment selling, and endorsing, the fifteen checks of Great
Asian to Bancasia. On the face of the Deeds of Assignment, the
contracting parties are indisputably Great Asian and Bancasia as the
names of these entities are expressly mentioned therein as the
assignor and assignee, respectively. Great Asian claims that Arsenio
signed the Deeds of Assignment in his personal capacity because
Arsenio signed above his printed name, below which was the word
“Assignor,” thereby making Arsenio the assignor. Great Asian
conveniently omits to state that the first paragraph of the Deeds
expressly contains the following words: “the ASSIGNOR, Great
Asian Sales Center, a domestic corporation x x x herein represented
by its Treasurer Arsenio Lim Piat, Jr.” The assignor is undoubtedly
Great Asian, represented by its Treasurer, Arsenio. The only issue to
determine is whether the Deeds of Assignment are
569
VOL. 381, APRIL 25, 2002 569

indeed the transactions the board of directors of Great Asian

authorized Arsenio to sign under the two board resolutions.
Under the Deeds of Assignment, Great Asian sold fifteen
postdated checks at a discount, over three months, to Bancasia. The
Deeds of Assignment uniformly state that Great Asian,—
“x x x for valuable consideration received, does hereby SELL, TRANSFER,
CONVEY, and ASSIGN, unto the ASSIGNEE, BANCASIA FINANCE &
INVESTMENT CORP., a domestic corporation x x x, the following
ACCOUNTS RECEIVABLES due and payable to it, having an aggregate
face value of x x x.”
The Deeds of Assignment enabled Great Asian to generate instant

cash from its fifteen checks, which were still not due and
demandable then. In short, instead of waiting for the maturity dates
of the fifteen postdated checks, Great Asian sold the checks to
Bancasia at less than the total face value of the checks. In exchange
for receiving an amount less than the face value of the checks, Great
Asian obtained immediately much needed cash. Over three months,
Great Asian entered into four transactions of this nature with
Bancasia, showing that Great Asian availed of a discounting line
with Bancasia.
In the financing industry, the term “discounting line” means a
credit facility with a financing company or bank, which allows a
business entity to sell, on a continuing basis, its accounts receivable
12
at a discount. The term “discount” means the sale of a re-
______________
12 The following entry on “discount” in Simon & Schuster New Millennium

Encyclopedia (2000 CD Version) explains the meaning of a discounting line: “In
finance, discounts are premiums or considerations given on the purchase of
promissory notes, bills of exchange, or other forms of negotiable commercial paper in
advance of their maturity dates. Such discounts make up deductions from the face
value of the discounted paper and are made at the time of purchase. The principal
agencies engaged in discounting commercial paper are commercial banks and, in a
few countries, financial institutions that specialize in that practice. When discounted
paper is again put into circulation by a bank or discount house and is discounted
again, it is said to be rediscounted.
When discounted paper matures, the holders of such bills and notes receive the full
face value of the commercial paper they present for pay
570

ceivable at less than its face value. The purpose of a discounting line
is to enable a business entity to generate instant cash out of its
receivables which are still to mature at future dates. The financing
company or bank which buys the receivables makes its profit out of
the difference between the face value of the receivable and the
discounted price. Thus, Section 3 (a) of the Financing Company Act
of 1998 provides:
“Financing companies” are corporations x x x primarily organized for the

purpose of extending credit facilities to consumers and to industrial,
commercial or agricultural enterprises by discounting or factoring
commercial papers or accounts receivable, or by buying and selling
contracts, leases, chattel mortgages, or other evidences of indebtedness, or
by financial leasing of movable as well as immovable property.” (Emphasis
supplied)
This definition of “financing companies” is substantially the same

13
definition as in the old Financing Company Act (R.A. No. 5980).
Moreover, Section 1 (h) of the New Rules and Regulations
adopted by the Securities and Exchange Commission to implement
the Financing Company Act of 1998 states:
“Discounting” is a type of receivables financing whereby evidences of

indebtedness of a third party, such as installment contracts, promissory
______________
ment; therefore, the practice of discounting bills and notes is, in effect, a means of extending
credit in the form of loans; the discounts are regarded as advance collections of interest on the
loans. Rates for discounting and rediscounting commercial paper are established by
commercial banks and discount houses in accordance with the relative supply of money
available for commercial loans. In countries in which the banking system is organized on a
centralized basis, discount and rediscount rates are determined in large part by the central
banks; in the U.S., these rates are established in part by the Federal Reserve System to control
the volume of credit and thus stimulate or slow the economy.”
13 Section 3 (a) of R.A. No. 5980 stated as follows: “Financing companies,” hereinafter
called companies, are corporations x x x which are primarily organized for the purpose of
extending credit facilities to consumers and to industrial, commercial, or agricultural
enterprises, either by discounting or factoring commercial papers or accounts receivable, or by
buying and selling contracts, leases, chattel mortgages, or other evidences of indebtedness, x x
x.”
571
VOL. 381, APRIL 25, 2002 571

notes and similar instruments, are purchased by, or assigned to, a financing
company in an amount or for a consideration less than their face value.”
(Emphasis supplied)
Likewise, this definition of “discounting” is an exact reproduction of

the definition of “discounting” in the implementing rules of the old
Finance Company Act.
Clearly, the discounting arrangements entered into by Arsenio
under the Deeds of Assignment were the very transactions
envisioned in the two board resolutions of Great Asian to raise funds
for its business. Arsenio acted completely within the limits of his
authority under the two board resolutions. Arsenio did exactly what
the board of directors of Great Asian directed and authorized him to
do.
Arsenio had all the proper and necessary authority from the board
of directors of Great Asian to sign the Deeds of Assignment and to
endorse the fifteen postdated checks. Arsenio signed the Deeds of
Assignment as agent and authorized signatory of Great Asian under
an authority expressly granted by its board of directors. The
signature of Arsenio on the Deeds of Assignment is effectively also
the signature of the board of directors of Great Asian, binding on the
board of directors and on Great Asian itself. Evidently, Great Asian
shows its bad faith in disowning the Deeds of Assignment signed by
its own Treasurer, after receiving valuable consideration for the
checks assigned under the Deeds.
Second Issue: Breach of Contract by Great Asian
Bancasia’s complaint against Great Asian is founded on the latter’s

breach of contract under the Deeds of Assignment. The Deeds of
14
Assignment uniformly stipulate as follows:
“If for any reason the receivables or any part thereof cannot be paid by the
obligor/s, the ASSIGNOR unconditionally and irrevocably agrees to pay the
same, assuming the liability to pay, by way of penalty three per cent (3%) of
the total amount unpaid, for the period of delay until the same is fully paid.
______________
14 Plaintiff ’s Evidence, Exhs. “A,” “D,” “I,” “R,” pp. 1, 3, 6 and 11-12.
572

In case of any litigation which the ASSIGNEE may institute to enforce the
terms of this agreement, the ASSIGNOR shall be liable for all the costs,
plus attorney’s fees equivalent to twenty-five (25%) per cent of the total
amount due. Further thereto, the ASSIGNOR agrees that any and all actions
which may be instituted relative hereto shall be filed before the proper
courts of the City of Manila, all other appropriate venues being hereby
waived.
15
The last Deed of Assignment contains the following added
stipulation:
“x x x Likewise, it is hereby understood that the warranties which the

ASSIGNOR hereby made are deemed part of the consideration for this
transaction, such that any violation of any one, some, or all of said
warranties shall be deemed as deliberate misrepresentation on the part of the
ASSIGNOR. In such event, the monetary obligation herein conveyed unto
the ASSIGNEE shall be conclusively deemed defaulted, giving rise to the
immediate responsibility on the part of the ASSIGNOR to make good said
obligation, and making the ASSIGNOR liable to pay the penalty stipulated
hereinabove as if the original obligor/s of the receivables actually defaulted.
x x x”
Obviously, there is one vital suspensive condition in the Deeds of

Assignment. That is, in case the drawers fail to pay the checks on
maturity, Great Asian obligated itself to pay Bancasia the full face
value of the dishonored checks, including penalty and attorney’s
fees. The failure of the drawers to pay the checks is a suspensive
16
condition, the happening of which gives rise to Bancasia’s right to
demand payment from Great Asian. This conditional obligation of
Great Asian arises from its written contracts with Bancasia as
embodied in the Deeds of Assignment. Article 1157 of the Civil
Code provides that—
“Obligations arise from:
(1) Law;
______________
15 Plaintiff ’s Evidence, Exh. “R,” pp. 11-12.

16 Article 1181 of the Civil Code provides as follows: “In conditional obligations,
the acquisition of rights, as well as the extinguishment or loss of those already
acquired shall depend upon the happening of the event which constitutes the
condition.”
573
VOL. 381, APRIL 25, 2002 573

(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts.”
By express provision in the Deeds of Assignment, Great Asian

unconditionally obligated itself to pay Bancasia the full value of the
dishonored checks. In short, Great Asian sold the postdated checks
on with recourse basis against itself. This is an obligation that Great
Asian is bound to faithfully comply because it has the force of law
as between Great Asian and Bancasia. Article 1159 of the Civil
Code further provides that—
“Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.”
Great Asian and Bancasia agreed on this specific with recourse

stipulation, despite the fact that the receivables were negotiable
instruments with the endorsement of Arsenio. The contracting
parties had the right to adopt the with recourse stipulation which is
separate and distinct from the warranties of an endorser under the

Negotiable Instruments Law. Article 1306 of the Civil Code
provides that—
“The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy.”
The explicit with recourse stipulation against Great Asian effectively

enlarges, by agreement of the parties, the liability of Great Asian
beyond that of a mere endorser of a negotiable instrument. Thus,
whether or not Bancasia gives notice of dishonor to Great Asian, the
latter remains liable to Bancasia because of the with recourse
stipulation which is independent of the warranties of an endorser
under the Negotiable Instruments Law.
There is nothing in the Negotiable Instruments Law or in the
Financing Company Act (old or new), that prohibits Great Asian and
Bancasia parties from adopting the with recourse stipulation
uniformly found in the Deeds of Assignment. Instead of being ne-
574

17
gotiated, a negotiable instrument may be assigned. Assignment of a
negotiable instrument is actually the principal mode of conveying
accounts receivable under the Financing Company Act. Since in
discounting of receivables the assignee is subrogated as creditor of
the receivable, the endorsement of the negotiable instrument
becomes necessary to enable the assignee to collect from the drawer.
This is particularly true with checks because collecting banks will
not accept checks unless endorsed by the payee. The purpose of the
endorsement is merely to facilitate collection of the proceeds of the
checks.
The purpose of the endorsement is not to make the assignee
finance company a holder in due course because policy
considerations militate against according finance companies the
18
rights of a holder in due course. Otherwise, consumers who
purchase appliances on installment, giving their promissory notes or
checks to the seller, will have no defense against the finance
company should the appliances later turn out to be defective. Thus,
the endorsement does not operate to make the finance company a
holder in due course. For its own protection, therefore, the finance
company usually requires the assignor, in a separate and distinct
contract, to pay the finance company in the event of dishonor of the
notes or checks.
As endorsee of Great Asian, Bancasia had the option to proceed
against Great Asian under the Negotiable Instruments Law. Had it so
proceeded, the Negotiable Instruments Law would have governed
Bancasia’s cause of action. Bancasia, however, did not choose this
route. Instead, Bancasia decided to sue Great Asian for breach of

contract under the Civil Code, a right that Bancasia had under the
express with recourse stipulation in the Deeds of Assignment.
The exercise by Bancasia of its option to sue for breach of
contract under the Civil Code will not leave Great Asian holding an
empty bag. Great Asian, after paying Bancasia, is subrogated back
as creditor of the receivables. Great Asian can then proceed against
the drawers who issued the checks. Even if Bancasia failed to give
______________
17 Sesbreño vs. Court of Appeals, 222 SCRA 466 (1993).

18 See Campos & Campos, p. 128, Notes and Selected Cases on Negotiable
Instruments Law (1971).
575
VOL. 381, APRIL 25, 2002 575

timely notice of dishonor, still there would be no prejudice whatever

to Great Asian. Under the Negotiable Instruments Law, notice of
dishonor is not required if the drawer has no right to expect or
require the bank to honor the check, or if the drawer has
19
countermanded payment. In the instant case, all the checks were
dishonored for any of the following reasons: “account closed,”
“account under garnishment,” “insufficiency of funds,” or “payment
stopped.” In the first three instances, the drawers had no right to
expect or require the bank to honor the checks, and in the last
instance, the drawers had countermanded payment.
Moreover, under common law, delay in notice of dishonor, where
such notice is required, discharges the drawer only to the extent of
20
the loss caused by the delay. This rule finds application in this
jurisdiction pursuant to Section 196 of the Negotiable Instruments
Law which states, “Any case not provided for in this Act shall be
governed by the provisions of existing legislation, or in default
thereof, by the rules of the Law Merchant.” Under Section 186 of
the Negotiable Instruments Law, delay in the presentment of checks
discharges the drawer. However, Section 186 refers only to delay in
presentment of checks but is silent on delay in giving notice of
dishonor. Consequently, the common law or Law Merchant can
supply this gap in accordance with Section 196 of the Negotiable
Instruments Law.
One other issue raised by Great Asian, that of lack of
consideration for the Deeds of Assignment, is completely
unsubstantiated. The Deeds of Assignment uniformly provide that
the fifteen post-dated checks were assigned to Bancasia “for
valuable consideration.” Moreover, Article 1354 of the Civil Code
states that, “Although the cause is not stated in the contract, it is
presumed that it exists and is lawful, unless the debtor proves the
contrary.” The record is devoid of any showing on the part of Great

Asian rebut-
______________
19 Section 114 (d) and (e) of the Negotiable Instruments Law provides as follows:
“When notice need not be given to drawer.—Notice of dishonor is not required to be
given to the drawer in either of the following cases: (a) x x x; (d) Where the drawer
has no right to expect or require that the drawee or acceptor will honor the instrument;
(e) Where the drawer has countermanded payment.”
20 Campos & Campos, p. 516, supra., Note 18.
576

ting this presumption. On the other hand, Bancasia’s Loan Section

Manager, Cynthia Maclan, testified that Bancasia paid Great Asian a
consideration at the discount rate of less than 24% of the face value
21
of the postdated checks. Moreover, in its verified petition for
voluntary insolvency, Great Asian admitted its debt to Bancasia
when it listed Bancasia as one of its creditors, an extrajudicial
admission that Bancasia proved when it formally offered in evidence
22
the verified petition for insolvency. The Insolvency Law requires
the petitioner to submit a schedule of debts that must “contain a full
23
and true statement of all his debts and liabilities.” The Insolvency
Law even requires the petitioner to state in his verification that the
schedule of debts contains “a full, correct and true discovery of all
24
my debts and liabilities x x x.” Great Asian cannot now claim that
the listing of Bancasia as a creditor was not an admission of its debt
to Bancasia but merely an acknowledgment that Bancasia had sent a
demand letter to Great Asian.
Great Asian, moreover, claims that the assignment of the checks
is not a loan accommodation but a sale of the checks. With the sale,
ownership of the checks passed to Bancasia, which must now,
according to Great Asian, sue the drawers and indorser of the check
who are the parties primarily liable on the checks. Great Asian
forgets that under the Deeds of Assignment, Great Asian expressly
undertook to pay the full value of the checks in case of dishonor.
Again, we reiterate that this obligation of Great Asian is separate
and distinct from its warranties as indorser under the Negotiable
Instruments Law.
Great Asian is, however, correct in saying that the assignment of
the checks is a sale, or more properly a discounting, of the checks
and not a loan accommodation. However, it is precisely because the
transaction is a sale or a discounting of receivables, embodied in
separate Deeds of Assignment, that the relevant provisions of the
Civil Code are applicable and not the Negotiable Instruments Law.
______________
21 TSN, May 7, 1984, p. 9.

22 Original Records, Exhibits “DD,” “DD-1,” pp. 238-244.
23 Act No. 1956, Section 15.
24 Ibid., Section 17.
577
VOL. 381, APRIL 25, 2002 577

At any rate, there is indeed a fine distinction between a discounting

line and a loan accommodation. If the accounts receivable, like
postdated checks, are sold for a consideration less than their face
value, the transaction is one of discounting, and is subject to the
provisions of the Financing Company Act. The assignee is
immediately subrogated as creditor of the accounts receivable.
However, if the accounts receivable are merely used as collateral for
the loan, the transaction is only a simple loan, and the lender is not
subrogated as creditor until there is a default and the collateral is
foreclosed.
In summary, Great Asian’s four contracts assigning its fifteen
postdated checks to Bancasia expressly stipulate the suspensive
condition that in the event the drawers of the checks fail to pay,
Great Asian itself will pay Bancasia. Since the common condition in
the contracts had transpired, an obligation on the part of Great Asian
arose from the four contracts, and that obligation is to pay Bancasia
the full value of the checks, including the stipulated penalty and
attorney’s fees.
Third Issue: The liability of surety Tan Chong Lin
Tan Chong Lin, the President of Great Asian, is being sued in his
personal capacity based on the Surety Agreements he signed
wherein he solidarily held himself liable with Great Asian for the
payment of its debts to Bancasia. The Surety Agreements contain
the following common condition:
“Upon failure of the Principal to pay at maturity, with or without demand,

any of the obligations above mentioned or in case of the Principal’s failure
promptly to respond to any other lawful demand made by the Creditor, its
successors, administrators or assigns, both the Principal and the Surety/ies
shall be considered in default and the Surety/ies agree/s to pay jointly and
severally to the Creditor all outstanding obligations of the Principal, whether
due or not due, and whether held by the Creditor as Principal or agent, and it
is agreed that a certified statement by the Creditor as to the amount due from
the Principal shall be accepted by the Surety/ies as correct and final for all
legal intents and purposes.”
Indisputably, Tan Chong Lin explicitly and unconditionally bound

himself to pay Bancasia, solidarily with Great Asian, if the draw-
578

ers of the checks fail to pay on due date. The condition on which
Tan Chong Lin’s obligation hinged had happened. As surety,
TanChong Lin automatically became liable for the entire obligation
tothe same extent as Great Asian.
Tan Chong Lin, however, contends that the following warranties
in the Deeds of Assignment enlarge or increase his risks under the
Surety Agreements:
“The ASSIGNOR warrants:
1. the soundness of the receivables herein assigned;

2. that said receivables are duly noted in its books and are supported
by appropriate documents;
3. that said receivables are genuine, valid and subsisting;
4. that said receivables represent bona fide sale of goods,
merchandise, and/or services rendered in the ordinary course of its
business transactions;
5. that the obligors of the receivables herein assigned are solvent;
6. that it has valid and genuine title to and indefeasible right to
dispose of said accounts;
7. that said receivables are free from all liens and encumbrances;
8. that the said receivables are freely and legally transferable, and that
the obligor/s therein will not interpose any objection to this
assignment, and has in fact given his/their consent hereto.”
Tan Chong Lin maintains that these warranties in the Deeds of

Assignment materially altered his obligations under the Surety
Agreements, and therefore he is released from any liability to
Bancasia. Under Article 1215 of the Civil Code, what releases a
solidary debtor is a “novation, compensation, confusion or remission
of the debt” made by the creditor with any of the solidary debtors.
These warranties, however, are the usual warranties made by one
who discounts receivables with a financing company or bank. The
Surety Agreements, written on the letter head of “Bancasia Finance
& Investment Corporation,” uniformly state that “Great Asian Sales
Center x x x has obtained and/or desires to obtain loans, overdrafts,
discounts and/or other forms of credits from” Bancasia. Tan Chong
Lin was clearly on notice that he was holding himself as surety of
Great Asian which was discounting postdated
579
VOL. 381, APRIL 25, 2002 579
checks issued by its buyers of goods and merchandise. Moreover,

Tan Chong Lin, as President of Great Asian, cannot feign ignorance
of Great Asian’s business activities or discounting transactions with
Bancasia. Thus, the warranties do not increase or enlarge the risks of
Tan Chong Lin under the Surety Agreements. There is, moreover, no
novation of the debt of Great Asian that would warrant release of the
surety.
In any event, the provisions of the Surety Agreements are broad
enough to include the obligations of Great Asian to Bancasia under
the warranties. The first Surety Agreement states that:
“x x x herein Surety/ies, jointly and severally among themselves and

likewise with principal, hereby agree/s and bind/s himself/themselves to pay
at maturity all the notes, drafts, bills of exchange, overdraft and other
obligations of every kind which the Principal may now or may hereafter owe
the Creditor, including extensions or renewals thereof in the sum *** ONE
MILLION ONLY*** PESOS (P1,000,000.00), Philippine Currency, plus
stipulated interest thereon at the rate of sixteen percent (16%) per annum, or
at such increased rate of interest which the Creditor may charge on the
Principal’s obligations or renewals or the reduced amount thereof, plus all
the costs and expenses which the Creditor may incur in connection
therewith.
xxx
Upon failure of the Principal to pay at maturity, with or without demand,
any of the obligations above mentioned, or in case of the Principal’s failure
promptly to respond to any other lawful demand made by the Creditor, its
successors, administrators or assigns, both the Principal and the Surety/ies
shall be considered in default and the Surety/ies agree/s to pay jointly and
severally to the Creditor all outstanding obligations of the Principal,
whether due or not due, and whether held by the Creditor as Principal or
agent, and it is agreed that a certified statement by the Creditor as to the
amount due from the Principal shall be accepted by the Surety/ies as correct
and final for all legal intents and purposes. (Emphasis supplied)
The second Surety Agreement contains the following provisions:
“x x x herein Surety/ies, jointly and severally among themselves and

likewise with PRINCIPAL, hereby agree and bind themselves to pay at
maturity all the notes, drafts, bills of exchange, overdraft and other
obligations of every kind which the PRINCIPAL may now or may hereafter
owe
580

the Creditor, including extensions and/or renewals thereof in the principal
sum not to exceed TWO MILLION (P2,000,000.00) PESOS, Philippine
Currency, plus stipulated interest thereon, or such increased or decreased
rate of interest which the Creditor may charge on the principal sum
outstanding pursuant to the rules and regulations which the Monetary Board
may from time to time promulgate, together with all the cost and expenses
which the CREDITOR may incur in connection therewith.
If for any reason whatsoever, the PRINCIPAL should fail to pay at
maturity any of the obligations or amounts due to the CREDITOR, or if for
any reason whatsoever the PRINCIPAL fails to promptly respond to and
comply with any other lawful demand made by the CREDITOR, or if for
any reason whatsoever any obligation of the PRINCIPAL in favor of any
person or entity should be considered as defaulted, then both the
PRINCIPAL and the SURETY/IES shall be considered in default under the
terms of this Agreement. Pursuant thereto, the SURETY/IES agree/s to pay
jointly and severally with the PRINCIPAL, all outstanding obligations of the
CREDITOR, whether due or not due, and whether owing to the PRINCIPAL
in its personal capacity or as agent of any person, endorsee, assignee or
transferee. x x x. (Emphasis supplied)
Article 1207 of the Civil Code provides, “x x x There is a solidary

liability only when the obligation expressly so states, or when the
law or nature of the obligation requires solidarity.” The stipulations
in the Surety Agreements undeniably mandate the solidary liability
of Tan Chong Lin with Great Asian. Moreover, the stipulations in
the Surety Agreements are sufficiently broad, expressly
encompassing “all the notes, drafts, bills of exchange, overdraft and
other obligations of every kind which the PRINCIPAL may now or
may hereafter owe the Creditor.” Consequently, Tan Chong Lin
must be held solidarily liable with Great Asian for the nonpayment
of the fifteen dishonored checks, including penalty and attorney’s
fees in accordance with the Deeds of Assignment.
The Deeds of Assignment stipulate that in case of suit Great
Asian shall pay attorney’s fees equivalent to 25% of the outstanding
25
debt. The award of attorney’s fees in the instant case is justified,
not only because of such stipulation, but also because Great Asian
and Tan Chong Lin acted in gross and evident bad faith in refusing
to pay Bancasia’s plainly valid, just and demandable
______________
25 Article 2208 of the Civil Code.
581
VOL. 381, APRIL 25, 2002 581

claim. We deem it just and equitable that the stipulated attorney’s fee
should be awarded to Bancasia.
The Deeds of Assignment also provide for a 3% penalty on the

total amount due in case of failure to pay, but the Deeds are silent on
whether this penalty is a running monthly or annual penalty. Thus,
the 3% penalty can only be considered as a one-time penalty.
Moreover, the Deeds of Assignment do not provide for interest if
Great Asian fails to pay. We can only award Bancasia legal interest
at 12% interest per annum, and only from the time it filed the
complaint because the records do not show that Bancasia made a
26
written demand on Great Asian prior to filing the complaint.
Bancasia made an extrajudicial demand on Tan Chong Lin, the
surety, but not on the principal debtor, Great Asian.
WHEREFORE, the assailed Decision of the Court of Appeals in
CA-G.R.CV No. 20167 is AFFIRMED with MODIFICATION.
Petitioners are ordered to pay, solidarily, private respondent the
following amounts: (a) P1,042,005.00 plus 3% penalty thereon, (b)
interest on the total outstanding amount in item (a) at the legal rate
of 12% per annum from the filing of the complaint until the same is
fully paid, (c) attorney’s fees equivalent to 25% of the total amount
in item (a), including interest at 12% per annum on the outstanding
amount of the attorney’s fees from the finality of this judgment until
the same is fully paid, and (c) costs of suit.
SO ORDERED.
Vitug (Acting Chairman) and Panganiban, JJ., concur.

Melo (Chairman), J., On leave.
Sandoval-Gutierrez, J., No part.
Judgment affirmed with modification.
Note.—Under the Corporation Code, unless otherwise provided

by said Code, corporate powers such as the power to enter into
contracts are exercised by the Board of Directors. However, the
______________
26 Eastern Shipping Lines, Inc. vs. Court of Appeals, 234 SCRA 78 (1994).
582

Philippine Sinter Corporation vs. Cagayan Electric Power and
Light Co., Inc.
Board may delegate such powers to either an executive committee or

officials or contracted managers. (ABS-CBN Broadcasting
Corporation vs. Court of Appeals, 301 SCRA 575 [1999])
——o0o——
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11/1/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 381

VOL. 381, APRIL 25, 2002 557

GREAT ASIAN SALES CENTER CORPORATION and TAN

Corporation Law; The exercise of the corporate powers of the

558 SUPREME COURT REPORTS ANNOTATED

Great Asian Sales Center Corporation vs. Court of Appeals

Same; Same; Same; Delay in notice of dishonor, where such notice is

PETITION for review on certiorari of a decision of the Court of

The facts are stated in the opinion of the Court.

Before us is a Petition for Review on Certiorari under Rule 45 of the

VOL. 381, APRIL 25, 2002 559

Great Asian is engaged in the business of buying and selling general

1 Rollo, pp. 38-58.

560 SUPREME COURT REPORTS ANNOTATED

Great Asian, through its Treasurer and General Manager Arsenio,

VOL. 381, APRIL 25, 2002 561

Drawee Bank Check No. Amount Maturity Date

562 SUPREME COURT REPORTS ANNOTATED

Great Asian Sales Center Corporation vs. Court of Appeals

impleaded Tan Chong Lin because of the Surety Agreements he

Ruling of the Trial Court

5 Rollo, pp. 154-155.

VOL. 381, APRIL 25, 2002 563

Ruling of the Court of Appeals

On appeal, the Court of Appeals sustained the decision of the lower

6 Ibid., pp. 156-157.

564 SUPREME COURT REPORTS ANNOTATED

while not exactly matching the sum herein sought to be collected,

The petition is anchored on the following assigned errors:

7 Ibid., pp. 76-77.

VOL. 381, APRIL 25, 2002 565

2. The respondent Court erred in not holding that the

The issues to be resolved in this petition can be summarized into

1. WHETHER ARSENIO HAD AUTHORITY TO

9 Rollo, pp. 13-15.

The Court’s Ruling

The petition is bereft of merit.

First Issue: Authority of Arsenio to Sign the Deeds of Assignment

Great Asian asserts that Arsenio signed the Deeds of Assignment

“SEC. 23. The Board of Directors or Trustees.—Unless otherwise provided

In the ordinary course of business, a corporation can borrow funds

First Board Resolution

VOL. 381, APRIL 25, 2002 567

Second Board Resolution

“RESOLVED that Great Asian Sales Center Corp. obtain a discounting

1. ARSENIO LIM PIAT, JR.

PROVIDED FINALLY that this authority shall be valid, binding and

The ﬁrst board resolution expressly authorizes Arsenio, as Treasurer

10 Plaintiff ’s Evidence, p. 15.

568 SUPREME COURT REPORTS ANNOTATED

The second board resolution expressly authorizes Great Asian to

VOL. 381, APRIL 25, 2002 569

indeed the transactions the board of directors of Great Asian

The Deeds of Assignment enabled Great Asian to generate instant

12 The following entry on “discount” in Simon & Schuster New Millennium

570 SUPREME COURT REPORTS ANNOTATED

“Financing companies” are corporations x x x primarily organized for the

This deﬁnition of “ﬁnancing companies” is substantially the same

“Discounting” is a type of receivables ﬁnancing whereby evidences of