LUPO L. LUPANGCO v. CA GR No.

77372, Apr 29, 1988

GANCAYCO, J.
Is the Regional Trial Court of the same category as the Professional
Regulation Commission so that it cannot pass upon the validity of the
administrative acts of the latter? Can this Commission lawfully prohibit the
examinees from attending review classes, receiving handout materials, tips
or the like three (3) days before the date of examination? These are the
issues presented to the court by this petition for certiorari to review the
decision of the Court of Appeals promulgated on January 13, 1987, in CA-
G.R. SP No. 10591,** declaring null and void the Order dated October 21,
1986 issued by the Regional Trial Court of Manila, Branch 32 in Civil Case
No. 86-37950 entitled "Lupo L. Lupangco, et al. vs. Professional Regulation
Commission."

The records show the following undisputed facts:

On or about October 6, 1986, herein respondent Professional Regulation

Commission (PRC) issued Resolution No. 105 as part of its "Additional
Instructions to Examinees," to all those applying for admission to take the
licensure examinations in accountancy. The resolution embodied the
following pertinent provisions:

"No examinee shall attend any review class, briefing, conference or the like
conducted by, or shall receive any hand-out, review material, or any tip from
any school, college or university, or any review center or the like or any
reviewer, lecturer, instructor official or employee of any of the
aforementioned or similar institutions during the three days immediately
preceding every examination day including the examination day.

"Any examinee violating this instruction shall be subject to the sanctions

prescribed by Sec. 8, Art. Ill of the Rules and Regulations of the
Commission."[1]
On October 16, 1986, herein petitioners, all reviewees preparing to take the
licensure examinations in accountancy scheduled on October 25 and
November 2 of the same year, filed in their own behalf and in behalf of all
others similarly situated like them, with the Regional Trial Court of Manila,
Branch XXXII, a complaint for injunction with a prayer for the issuance of a
writ of preliminary injunction against respondent PRC to restrain the latter
from enforcing the above-mentioned resolution and to declare the same
unconstitution.

Respondent PRC filed a motion to dismiss on October 21, 1987 on the

ground that the lower court had no jurisdiction to review and to enjoin the
enforcement of its resolution. In an Order of October 21, 1987, the lower
court declared that it had jurisdiction to try the case and enjoined the
respondent commission from enforcing and giving effect to Resolution No.
105 which it found to be unconstitutional.

Not satisfied therewith, respondent PRC, on November 10, 1986, filed with
the Court of Appeals a petition for the nullification of the above Order of the
lower court. Said petition was granted in the Decision of the Court of Appeals
promulgated on January 13, 1987, to wit:
"WHEREFORE, finding the petition meritorious the same is hereby GRANTED
and the order dated October 21,1986 issued by respondent court is declared
null and void. The respondent court is further directed to dismiss with
prejudice Civil Case No. 86-37950 for want of jurisdiction over the subject
matter thereof. No costs in this instance.

SO ORDERED."[2]
Hence, this petition.

The Court of Appeals, in deciding that the Regional Trial Court of Manila had
no jurisdiction to entertain the case and to enjoin the enforcement of
Resolution No. 105, stated as its basis its conclusion that the Professional
Regulation Commission and the Regional Trial Court are co-equal bodies.
Thus it held

"That the petitioner Professional Regulatory Commission is at least a co-

equal body with the Regional Trial Court is beyond question, and co-equal
bodies have no power to control each other or interfere with each other's
acts."[3]
To strengthen its position, the Court of Appeals relied heavily on National
Electrification Administration vs. Mendoza,[4] which cites Pineda vs.
Lantin[5] and Philippine Pacific Fishing, Inc. vs. Luna, [6] where this Court held
that a Court of First Instance cannot interfere with the orders of the
Securities and Exchange Commission, the two being co-equal bodies.

After a close scrutiny of the facts and the record of this case, We rule in
favor of the petitioner.

The cases cited by respondent court are not in point. It is glaringly apparent
that the reason why this Court ruled that the Court of First Instance could
not interfere with the orders of the Securities and Exchange Commission was
that this was so provided for by the law. In Pineda vs. Lantin, We explained
that whenever a party is aggrieved by or disagrees with an order or ruling of
the Securities and Exchange Commission, he cannot seek relief from courts
of general jurisdiction since under the Rules of Court and Commonwealth Act
No. 83, as amended by Republic Act No. 635, creating and setting forth the
powers and functions of the old Securities and Exchange Commission, his
remedy is to go to the Supreme Court on a petition for review. Likewise,
in Philippine Pacific Fishing Co., Inc. vs. Luna, it was stressed that if an order
of the Securities and Exchange Commission is erroneous, the appropriate
remedy to take is first, within the Commission itself, then, to the Supreme
Court as mandated in Presidential Decree No. 902-A, the law creating the
new Securities and Exchange Commission. Nowhere in the said cases was it
held that a Court of First Instance has no jurisdiction over all other
government agencies. On the contrary, the ruling was specifically limited to
the Securities and Exchange Commission.

The respondent court erred when it placed the Securities and Exchange
Commission and the Professional Regulation Commission in the same
category. As already mentioned, with respect to the Securities and Exchange
Commission, the laws cited explicitly provide for the procedure that need be
taken when one is aggrieved by its order or ruling. Upon the other hand,
there is no law providing for the next course of action for a party who wants
to question a ruling or order of the Professional Regulation Commission.
Unlike Commonwealth Act No. 83 and Presidential Decree No. 902-A, there
is no provision in Presidential Decree No. 223, the law creating the
Professional Regulation Commission, that orders or resolutions of the
Commission are appealable either to the Court of Appeals or to the Supreme
Court. Consequently, Civil Case No. 86-37950, which was filed in order to
enjoin the enforcement of a resolution of the respondent Professional
Regulation Commission alleged to be unconstitutional, should fall within the
general jurisdiction of the Court of First Instance, now the Regional Trial
Court.[7]

What is clear from Presidential Decree No. 223 is that the Professional
Regulation Commission is attached to the Office of the President for general
direction and coordination.[8] Well settled in our jurisprudence is the view
that even acts of the Office of the President may be reviewed by the Court of
First Instance (now the Regional Trial Court). In Medalla vs. Sayo,[9] this rule
was thoroughly propounded on, to wit:

"In so far as jurisdiction of the Court below to review by Certiorari decisions

and/or resolutions of the Civil Service Commission and of the Presidential
Executive Assistant is concerned, there should be no question but that the
power of judicial review should be upheld. The following rulings buttress this
conclusion:

'The objection to a judicial review of a Presidential act arises from a failure

to recognize the most important principle in our system of government, i.e.,
the separation of powers into three co-equal departments, the executives,
the legislative and the judicial, each supreme within its own assigned powers
and duties. When a presidential act is challenged before the courts of justice,
it is not to be implied therefrom that the Executive is being made subject
and subordinate to the courts. The legality of his acts are under judicial
review, not because the Executive is inferior to the courts, but because the
law is above the Chief Executive himself, and the courts seek only to
interpret, apply or implement it (the law). A judicial review of the President's
decision on a case of an employee decided by the Civil Service Board of
Appeals should be viewed in this light and the bringing of the case to the
Courts should be governed by the same principles as govern the judicial
review of all administrative acts of all administrative officers."[10]
Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II,[11] is another
case in point. Here, "the Executive Office" of the Department of Education
and Culture issued Memorandum Order No. 93 under the authority of then
Secretary of Education Juan Manuel. As in this case, a complaint for
injunction was filed with the Court of First Instance of Lanao del Norte
because, allegedly, the enforcement of the circular would impair some
contracts already entered into by public school teachers. It was the
contention of petitioner therein that "the Court of First Instance is not
empowered to amend, reverse and modify what is otherwise the clear and
explicit provision of the memorandum circular issued by the Executive Office
which has the force and effect of law." In resolving the issue, We held:

"xxx, We definitely state that respondent Court lawfully acquired jurisdiction

in Civil Case No. 11-240 (8) because the plaintiff therein asked the lower
court for relief, in the form of injunction, in defense of a legal right (freedom
to enter into contracts) . . . Hence there is a clear infringement of private
respondent's constitutional right to enter into agreements not contrary to
law, which might ran the risk of being violated by the threatened
implementation of Executive Office Memorandum Circular No. 93, dated
February 5,1968, which prohibits, with certain exceptions, cashiers and
disbursing officers from honoring special powers of attorney executed by the
payee employees. The respondent Court is not only right but duty bound to
take cognizance of cases of this nature wherein a constitutional and
statutory right is allegedly infringed by the administrative action of a
government office. Courts of First Instance have original jurisdiction over all
civil actions in which the subject of the litigation is not capable of pecuniary
estimation (Sec. 44, Republic Act 296, as amended)."[12] (Italics supplied.)
In San Miguel Corporation vs. Avelino,[13] We ruled that a judge of the Court
of First Instance has the authority to decide on the validity of a city tax
ordinance even after its validity had been contested before the Secretary of
Justice and an opinion thereon had been rendered.

In view of the foregoing, We find no cogent reason why Resolution No. 105,
issued by the respondent Professional Regulation Commission, should be
exempted from the general jurisdiction of the Regional Trial Court.

Respondent PRC, on the other hand, contends that under Section 9,

paragraph 3 of B.P. Big. 129, it is the Court of Appeals which has jurisdiction
over the case. The said law provides:

"SEC. 9. Jurisdiction. The Intermediate Appellate Court shall exercise:

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions,

resolutions, orders, or awards of Regional Trial Courts and quasi-
judicial agencies, instrumentalities, boards or commissions, except those
falling within the appellate jurisdiction of the Supreme Court in accordance
with the Constitution, the provisions of this Act, and of subparagraph (1) of
the third paragraph and subparagraph (4) of the fourth paragraph of Section
17 of the Judiciary Act of 1948."
The contention is devoid of merit.

In order to invoke the exclusive appellate jurisdiction of the Court of Appeals

as provided for in Section 9, paragraph 3 of B.P. Big. 129, there has to be a
final order or ruling which resulted from proceedings wherein the
administrative body involved exercised its quasi-judicial functions. In Black's
Law Dictionary, quasi-judicial is defined as a term applied to the action,
discretion, etc., of public administrative officers or bodies required to
investigate facts, or ascertain the existence of facts, hold hearings, and draw
conclusions from them, as a basis for their official action, and to exercise
discretion of a judicial nature. To expound thereon, quasi-
judicial adjudication would mean a determination of rights, privileges and
duties resulting in a decision or order which applies to a specific situation.
[14]
 This does not cover rules and regulations of general applicability issued
by the administrative body to implement its purely administrative policies
and functions like Resolution No. 105 which was adopted by the respondent
PRC as a measure to preserve the integrity of licensure examinations.

The above rule was adhered to in Filipinas Engineering and Machine Shop
vs. Ferrer[15] In this case, the issue presented was whether or not the Court
of First Instance had jurisdiction over a case involving an order of the
Commission on Elections awarding a contract to a private party which
originated from an invitation to bid. The said issue came about because
under the laws then in force, final awards, judgments, decisions or orders of
the Commission on Elections fall within the exclusive jurisdiction of the
Supreme Court by way of certiorari. Hence, it has been consistently held
that "it is the Supreme Court, not the Court of First Instance, which has
exclusive jurisdiction to review on certiorari final decisions, orders, or rulings
of the Commission on Elections relative to the conduct of elections and the
enforcement of election laws."[16]

As to whether or not the Court of First Instance had jurisdiction in said case,
We said:

"We are however, far from convinced that an order of the COMELEC
awarding a contract to a private party, as a result of its choice among
various proposals submitted in response to its invitation to bid comes within
the purview of a 'final order' which is exclusively and directly appealable to
this court on certiorari. What is contemplated by the term 'final orders,
rulings and decisions' of the COMELEC reviewable by certiorari by the
Supreme Court as provided by law are those rendered in actions or
proceedings before the COMELEC and taken cognizance of by the said body
in the exercise of its adjudicatory or quasi-judicial powers. (Italics supplied.)

xxx xxx xxx

"We agree with petitioner's contention that the order of the Commission
granting the award to a bidder is not an order rendered in a legal
controversy before it wherein the parties filed their respective pleadings and
presented evidence after which the questioned order was issued; and that
this order of the commission was issued pursuant to its authority to enter
into contracts in relation to election purposes. In short, the COMELEC
resolution awarding the contract in favor of Acme was not issued pursuant
to its quasi-judicial functions But merely as an incident of its inherent
administrative functions over the conduct of elections, and hence, the said
resolution may not be deemed as a 'final order' reviewable by certiorari by
the Supreme Court. Being non-judicial in character, no contempt order may
be imposed by the COMELEC from said order, and no direct and exclusive
appeal by certiorari to this Tribunal be from such order. Any question arising
from said order may be well taken in an ordinary civil action before the trial
courts. (Italics supplied)[17]
One other case that should be mentioned in this regard is Salud vs. Central
Bank of the Philippines.[18] Here, petitioner Central Bank, like respondent in
this case, argued that under Section 9, paragraph 3 of B.P. Big. 129, orders
of the Monetary Board are appealable only to the Intermediate Appellate
Court. Thus:

"The Central Bank and its Liquidator also postulate, for the very first time,
that the Monetary Board is among the "quasi-judicial xxx boards' whose
judgments are within the exclusive appellate jurisdiction of the IAC; hence,
it.is only said Court, 'to the exclusion of the Regional Trial Courts,' that may
review the Monetary Board's resolutions."[19]
Anent the posture of the Central Bank, We made the following
pronouncement:

"The contention is utterly devoid of merit. The IAC has no appellate

jurisdiction over resolutions or orders of the Monetary Board. No law
prescribes any mode of appeal from the Monetary Board to the IAC." [20]
In view of the foregoing, We hold that the Regional Trial Court has
jurisdiction to entertain Civil Case No. 86-37950 and enjoin the respondent
PRC from enforcing its resolution.
Although We have finally settled the issue of jurisdiction, We find it
imperative to decide once and for all the validity of Resolution No. 105 so as
to provide the much awaited relief to those who are and will be affected by
it.

Of course, We realize that the questioned resolution was adopted for a

commendable purpose which is "to preserve the integrity and purity of the
licensure examinations." However, its good aim cannot be a cloak to conceal
its constitutional infirmities. On its face, it can be readily seen that it is
unreasonable in that an examinee cannot even attend any review class,
briefing, conference or the like, or receive any hand-out, review material, or
any tip from any school, college or university, or any review center or the
like or any reviewer, lecturer, instructor, official or employee of any of the
aforementioned or similar institutions xxx.[21]

The unreasonableness is more obvious in that one who is caught committing

the prohibited acts even without any ill motives will be barred from taking
future examinations conducted by the respondent PRC. Furthermore, it is
inconceivable how the Commission can manage to have a watchful eye on
each and every examinee during the three days before the examination
period.

It is an axiom in administrative law that administrative authorities should

not act arbitrarily and capriciously in the issuance of rules and regulations.
To be valid, such rules and regulations must be reasonable and fairly
adapted to secure the end in view. If shown to bear no reasonable relation
to the purposes for which they are authorized to be issued, then they must
be held to be invalid.[22]

Resolution No. 105 is not only unreasonable and arbitrary, it also infringes
on the examinees' right to liberty guaranteed by the Constitution.
Respondent PRC has no authority to dictate on the reviewees as to how they
should prepare themselves for the licensure examinations. They cannot be
restrained from taking all the lawful steps needed to assure the fulfillment of
their ambition to become public accountants. They have every right to make
use of their faculties in attaining success in their endeavors. They should be
allowed to enjoy their freedom to acquire useful knowledge that will promote
their personal growth. As defined in a decision of the United States Supreme
Court:

"The term 'liberty' means more than mere freedom from physical restraint or
the bounds of a prison. It means freedom to go where one may choose and
to act in such a manner not inconsistent with the equal rights of others, as
his judgment may dictate for the promotion of his happiness, to pursue such
callings and vocations as may be most suitable to develop his capacities, and
give to them their highest enjoyment."[23]
Another evident objection to Resolution No. 105 is that it violates the
academic freedom of the schools concerned. Respondent PRC cannot
interfere with the conduct of review that review schools and centers believe
would best enable their enrolees to meet the standards required before
becoming a full-pledged public accountant. Unless the means or methods of
instruction are clearly found to be inefficient, impractical, or riddled with
corruption, review schools and centers may not be stopped from helping out
their students. At this juncture, We call attention to Our pronouncement
in Garcia vs. The Faculty Admission Committee, Loyola School of Theology,
[24]
 regarding academic freedom, to wit:
x x x It would follow then that the school or college itself is possessed of
such a right. It decides for itself its aims and objectives and how best to
attain them. It is free from outside coercion or interference save possibly
when the overriding public welfare calls for some restraint. It has a wide
spread of autonomy certainly extending to the choice of students. This
constitutional provision is not to be construed in a niggardly manner or in a
grudging fashion."

Needless to say, the enforcement of Resolution No. 105 is not a guarantee

that the alleged leakages in the licensure examinations will be eradicated or
at least minimized. Making the examinees suffer by depriving them of
legitimate means of review or preparation on those last three precious days-
when they should be refreshing themselves with all that they have learned in
the review classes and preparing their mental and psychological make-up for
the examination day itself would be like uprooting the tree to get ride of a
rotten branch. What is needed to be done by the respondent is to find out
the source of such leakages and stop it right there. If corrupt officials or
personnel should be terminated from their loss, then so be it. Fixers or
swindlers should be flushed out. Strict guidelines to be observed by
examiners should be set up and if violations are committed, then licenses
should be suspended or revoked. These are all within the powers of the
respondent commission as provided for in Presidential Decree No. 223. But
by all means the right and freedom of the examinees to avail of all
legitimate means to prepare for the examinations should not be curtailed.

In the light of the above, We hereby REVERSE and SET ASIDE, the decision
of the Court of Appeals in CA-G.R. SP No. 10591 and another judgment is
hereby rendered declaring Resolution No. 105 null and void and of no force
and effect for being unconstitutional. This decision is immediately executory.
No costs.

SO ORDERED.
 YANG vs CA G.R. No. 138074, August 15, 2003

QUISUMBING, J.:

For review on certiorari is the decision 1 of the Court of Appeals, dated

March 25, 1999, in CA-G.R. CV No. 52398, which affirmed with modification
the joint decision of the Regional Trial Court (RTC) of Pasay City, Branch
117, dated July 4, 1995, in Civil Cases Nos. 5479 2 and 5492. 3 The trial
court dismissed the complaint against herein respondents Far East Bank &
Trust Company (FEBTC), Equitable Banking Corporation (Equitable), and
Philippine Commercial International Bank (PCIB) and ruled in favor of
respondent Fernando David as to the proceeds of the two cashier’s checks,
including the earnings thereof pendente lite. Petitioner Cely Yang was
ordered to pay David moral damages of P100,000.00 and attorney’s fees
also in the amount of P100,000.00.chanrob1es virtua1 1aw 1ibrary

The facts of this case are not disputed, to wit:

On or before December 22, 1987, petitioner Cely Yang and private

respondent Prem Chandiramani entered into an agreement whereby the
latter was to give Yang a PCIB manager’s check in the amount of P4.2
million in exchange for two (2) of Yang’s manager’s checks, each in the
amount of P2.087 million, both payable to the order of private respondent
Fernando David. Yang and Chandiramani agreed that the difference of
P26,000.00 in the exchange would be their profit to be divided equally
between them.

Yang and Chandiramani also further agreed that the former would secure
from FEBTC a dollar draft in the amount of US$200,000.00, payable to PCIB
FCDU Account No. 4195-01165-2, which Chandiramani would exchange for
another dollar draft in the same amount to be issued by Hang Seng Bank
Ltd. of Hong Kong.

Accordingly, on December 22, 1987, Yang procured the

following:chanrob1es virtual 1aw library

a) Equitable Cashier’s Check No. CCPS 14-009467 in the sum of

P2,087,000.00, dated December 22, 1987, payable to the order of Fernando
David;

b) FEBTC Cashier’s Check No. 287078, in the amount of P2,087,000.00,

dated December 22, 1987, likewise payable to the order of Fernando David;
and

c) FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New York, in the
amount of US$200,000.00, dated December 22, 1987, payable to PCIB
FCDU Account No. 4195-01165-2.

At about one o’clock in the afternoon of the same day, Yang gave the
aforementioned cashier’s checks and dollar drafts to her business associate,
Albert Liong, to be delivered to Chandiramani by Liong’s messenger, Danilo
Ranigo. Ranigo was to meet Chandiramani at Philippine Trust Bank, Ayala
Avenue, Makati City, Metro Manila where he would turn over Yang’s cashier’s
checks and dollar draft to Chandiramani who, in turn, would deliver to
Ranigo a PCIB manager’s check in the sum of P4.2 million and a Hang Seng
Bank dollar draft for US$200,000.00 in exchange.
Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the
two cashier’s checks and the dollar draft bought by petitioner. Ranigo
reported the alleged loss of the checks and the dollar draft to Liong at half
past four in the afternoon of December 22, 1987. Liong, in turn, informed
Yang, and the loss was then reported to the police.

It transpired, however, that the checks and the dollar draft were not lost, for
Chandiramani was able to get hold of said instruments, without delivering
the exchange consideration consisting of the PCIB manager’s check and the
Hang Seng Bank dollar draft.

At three o’clock in the afternoon or some two (2) hours after Chandiramani
and Ranigo were to meet in Makati City, Chandiramani delivered to
respondent Fernando David at China Banking Corporation branch in San
Fernando City, Pampanga, the following: (a) FEBTC Cashier’s Check No.
287078, dated December 22, 1987, in the sum of P2.087 million; and (b)
Equitable Cashier’s Check No. CCPS 14-009467, dated December 22, 1987,
also in the amount of P2.087 million. In exchange, Chandiramani got
US$360,000.00 from David, which Chandiramani deposited in the savings
account of his wife, Pushpa Chandiramani; and his mother, Rani Reynandas,
who held FCDU Account No. 124 with the United Coconut Planters Bank
branch in Greenhills, San Juan, Metro Manila. Chandiramani also deposited
FEBTC Dollar Draft No. 4771, dated December 22, 1987, drawn upon the
Chemical Bank, New York for US$200,000.00 in PCIB FCDU Account No.
4195-01165-2 on the same date.

Meanwhile, Yang requested FEBTC and Equitable to stop payment on the

instruments she believed to be lost. Both banks complied with her request,
but upon the representation of PCIB, FEBTC subsequently lifted the stop
payment order on FEBTC Dollar Draft No. 4771, thus enabling the holder of
PCIB FCDU Account No. 4195-01165-2 to receive the amount of
US$200,000.00.

On December 28, 1987, herein petitioner Yang lodged a Complaint 4 for

injunction and damages against Equitable, Chandiramani, and David, with
prayer for a temporary restraining order, with the Regional Trial Court of
Pasay City. The Complaint was docketed as Civil Case No. 5479. The
Complaint was subsequently amended to include a prayer for Equitable to
return to Yang the amount of P2.087 million, with interest thereon until fully
paid. 5

On January 12, 1988, Yang filed a separate case for injunction and damages,
with prayer for a writ of preliminary injunction against FEBTC, PCIB,
Chandiramani and David, with the RTC of Pasay City, docketed as Civil Case
No. 5492. This complaint was later amended to include a prayer that
defendants therein return to Yang the amount of P2.087 million, the value of
FEBTC Dollar Draft No. 4771, with interest at 18% annually until fully paid. 6

On February 9, 1988, upon the filing of a bond by Yang, the trial court
issued a writ of preliminary injunction in Civil Case No. 5479. A writ of
preliminary injunction was subsequently issued in Civil Case No. 5492 also.

Meanwhile, herein respondent David moved for dismissal of the cases

against him and for reconsideration of the Orders granting the writ of
preliminary injunction, but these motions were denied. David then elevated
the matter to the Court of Appeals in a special civil action
for certiorari docketed as CA-G.R. SP No. 14843, which was dismissed by the
appellate court.

As Civil Cases Nos. 5479 and 5492 arose from the same set of facts, the two
cases were consolidated. The trial court then conducted pre-trial and trial of
the two cases, but the proceedings had to be suspended after a fire gutted
the Pasay City Hall and destroyed the records of the courts.

After the records were reconstituted, the proceedings resumed and the
parties agreed that the money in dispute be invested in Treasury Bills to be
awarded in favor of the prevailing side. It was also agreed by the parties to
limit the issues at the trial to the following:chanrob1es virtual 1aw library

1. Who, between David and Yang, is legally entitled to the proceeds of

Equitable Banking Corporation (EBC) Cashier’s Check No. CCPS 14-009467
in the sum of P2,087,000.00 dated December 22, 1987, and Far East Bank
and Trust Company (FEBTC) Cashier’s Check No. 287078 in the sum of
P2,087,000.00 dated December 22, 1987, together with the earnings
derived therefrom pendente lite?

2. Are the defendants FEBTC and PCIB solidarily liable to Yang for having
allowed the encashment of FEBTC Dollar Draft No. 4771, in the sum of
US$200,000.00 plus interest thereon despite the stop payment order of Cely
Yang? 7

On July 4, 1995, the trial court handed down its decision in Civil Cases Nos.
5479 and 5492, to wit:chanrob1es virtual 1aw library

WHEREFORE, the Court renders judgment in favor of defendant Fernando

David against the plaintiff Cely Yang and declaring the former entitled to the
proceeds of the two (2) cashier’s checks, together with the earnings derived
therefrom pendente lite; ordering the plaintiff to pay the defendant Fernando
David moral damages in the amount of P100,000.00; attorney’s fees in the
amount of P100,000.00 and to pay the costs. The complaint against Far East
Bank and Trust Company (FEBTC), Philippine Commercial International Bank
(PCIB) and Equitable Banking Corporation (EBC) is dismissed. The decision is
without prejudice to whatever action plaintiff Cely Yang will file against
defendant Prem Chandiramani for reimbursement of the amounts received
by him from defendant Fernando David.

SO ORDERED. 8

In finding for David, the trial court ratiocinated:chanrob1es virtual 1aw

library

The evidence shows that defendant David was a holder in due course for the
reason that the cashier’s checks were complete on their face when they were
negotiated to him. They were not yet overdue when he became the holder
thereof and he had no notice that said checks were previously dishonored;
he took the cashier’s checks in good faith and for value. He parted some
$200,000.00 for the two (2) cashier’s checks which were given to defendant
Chandiramani; he had also no notice of any infirmity in the cashier’s checks
or defect in the title of the drawer. As a matter of fact, he asked the
manager of the China Banking Corporation to inquire as to the genuineness
of the cashier’s checks (tsn, February 5, 1988, p. 21, September 20, 1991,
pp. 13–14). Another proof that defendant David is a holder in due course is
the fact that the stop payment order on [the] FEBTC cashier’s check was
lifted upon his inquiry at the head office (tsn, September 20, 1991, pp. 24–
25). The apparent reason for lifting the stop payment order was because of
the fact that FEBTC realized that the checks were not actually lost but indeed
reached the payee defendant David. 9

Yang then moved for reconsideration of the RTC judgment, but the trial
court denied her motion in its Order of September 20, 1995.

In the belief that the trial court misunderstood the concept of a holder in due
course and misapprehended the factual milieu, Yang seasonably filed an
appeal with the Court of Appeals, docketed as CA-G.R. CV No. 52398.

On March 25, 1999, the appellate court decided CA-G.R. CV No. 52398 in
this wise:chanrob1es virtual 1aw library

WHEREFORE, this court AFFIRMS the judgment of the lower court with
modification and hereby orders the plaintiff-appellant to pay defendant-
appellant PCIB the amount of Twenty-Five Thousand Pesos (P25,000.00).

SO ORDERED. 10

In affirming the trial court’s judgment with respect to herein respondent

David, the appellate court found that:chanrob1es virtual 1aw library

In this case, defendant-appellee had taken the necessary precautions to

verify, through his bank, China Banking Corporation, the genuineness of
whether (sic) the cashier’s checks he received from Chandiramani. As no
stop payment order was made yet (at) the time of the inquiry, defendant-
appellee had no notice of what had transpired earlier between the plaintiff-
appellant and Chandiramani. All he knew was that the checks were issued to
Chandiramani with whom he was he had (sic) a transaction. Further on,
David received the checks in question in due course because Chandiramani,
who at the time the checks were delivered to David, was acting as Yang’s
agent.

David had no notice, real or constructive, cogent for him to make further
inquiry as to any infirmity in the instrument(s) and defect of title of the
holder. To mandate that each holder inquire about every aspect on how the
instrument came about will unduly impede commercial transactions,
Although negotiable instruments do not constitute legal tender, they often
take the place of money as a means of payment.

The mere fact that David and Chandiramani knew one another for a long
time is not sufficient to establish that they connived with each other to
defraud Yang. There was no concrete proof presented by Yang to support
her theory. 11

The appellate court awarded P25,000.00 in attorney’s fees to PCIB as it

found the action filed by Yang against said bank to be "clearly unfounded
and baseless." Since PCIB was compelled to litigate to protect itself, then it
was entitled under Article 2208 12 of the Civil Code to attorney’s fees and
litigation expenses.

Hence, the instant recourse wherein petitioner submits the following issues
for resolution:chanrob1es virtual 1aw library

a WHETHER THE CHECKS WERE ISSUED TO PREM CHANDIRAMANI BY

PETITIONER;

b WHETHER THE ALLEGED TRANSACTION BETWEEN PREM CHANDIRAMANI

AND FERNANDO DAVID IS LEGITIMATE OR A SCHEME BY BOTH PRIVATE
RESPONDENTS TO SWINDLE PETITIONER;

c WHETHER FERNANDO DAVID GAVE PREM CHANDIRAMANI US$360,000.00

OR JUST A FRACTION OF THE AMOUNT REPRESENTING HIS SHARE OF THE
LOOT;

d WHETHER PRIVATE RESPONDENTS FERNANDO DAVID AND PCIB ARE

ENTITLED TO DAMAGES AND ATTORNEY’S FEES. 13

At the outset, we must stress that this is a petition for review under Rule 45
of the 1997 Rules of Civil Procedure. It is basic that in petitions for review
under Rule 45, the jurisdiction of this Court is limited to reviewing questions
of law, questions of fact are not entertained absent a showing that the
factual findings complained of are totally devoid of support in the record or
are glaringly erroneous. 14 Given the facts in the instant case, despite
petitioner’s formulation, we find that the following are the pertinent issues to
be resolved:chanrob1es virtual 1aw library

a) Whether the Court of Appeals erred in holding herein respondent

Fernando David to be a holder in due course; and

b) Whether the appellate court committed a reversible error in awarding

damages and attorney’s fees to David and PCIB.

On the first issue, petitioner Yang contends that private respondent

Fernando David is not a holder in due course of the checks in question.
While it is true that he was named the payee thereof, David failed to inquire
from Chandiramani about how the latter acquired possession of said checks.
Given his failure to do so, it cannot be said that David was unaware of any
defect or infirmity in the title of Chandiramani to the checks at the time of
their negotiation. Moreover, inasmuch as the checks were crossed, then
David should have, pursuant to our ruling in Bataan Cigar & Cigarette
Factory, Inc. v. Court of Appeals, G.R. No. 93048, March 3, 1994, 230 SCRA
643, been put on guard that the checks were issued for a definite purpose
and accordingly, made inquiries to determine if he received the checks
pursuant to that purpose. His failure to do so negates the finding in the
proceedings below that he was a holder in due course.

Finally, the petitioner argues that there is no showing whatsoever that David
gave Chandiramani any consideration of value in exchange for the
aforementioned checks.

Private respondent Fernando David counters that the evidence on record

shows that when he received the checks, he verified their genuineness with
his bank, and only after said verification did he deposit them. David stresses
that he had no notice of previous dishonor or any infirmity that would have
aroused his suspicions, the instruments being complete and regular upon
their face. David stresses that the checks in question were cashier’s checks.
From the very nature of cashier’s checks, it is highly unlikely that he would
have suspected that something was amiss. David also stresses negotiable
instruments are presumed to have been issued for valuable consideration,
and he who alleges otherwise must controvert the presumption with
sufficient evidence. The petitioner failed to discharge this burden, according
to David. He points out that the checks were delivered to him as the payee,
and he took them as holder and payee thereof. Clearly, he concludes, he
should be deemed to be their holder in due course.

We shall now resolve the first issue.

Every holder of a negotiable instrument is deemed prima facie a holder in

due course. However, this presumption arises only in favor of a person who
is a holder as defined in Section 191 of the Negotiable Instruments Law, 15
meaning a "payee or indorsee of a bill or note, who is in possession of it, or
the bearer thereof."cralaw virtua1aw library

In the present case, it is not disputed that David was the payee of the
checks in question. The weight of authority sustains the view that a payee
may be a holder in due course. 16 Hence, the presumption that he is a
prima facie holder in due course applies in his favor. However, said
presumption may be rebutted. Hence, what is vital to the resolution of this
issue is whether David took possession of the checks under the conditions
provided for in Section 52 17 of the Negotiable Instruments Law. All the
requisites provided for in Section 52 must concur in David’s case, otherwise
he cannot be deemed a holder in due course.

We find that the petitioner’s challenge to David’s status as a holder in due

course hinges on two arguments: (1) the lack of proof to show that David
tendered any valuable consideration for the disputed checks; and (2) David’s
failure to inquire from Chandiramani as to how the latter acquired
possession of the checks, thus resulting in David’s intentional ignorance
tantamount to bad faith. In sum, petitioner posits that the last two requisites
of Section 52 are missing, thereby preventing David from being considered a
holder in due course. Unfortunately for the petitioner, her arguments on this
score are less than meritorious and far from persuasive.

First, with respect to consideration, Section 24 18 of the Negotiable

Instruments Law creates a presumption that every party to an instrument
acquired the same for a consideration 19 or for value. 20 Thus, the law itself
creates a presumption in David’s favor that he gave valuable consideration
for the checks in question. In alleging otherwise, the petitioner has the onus
to prove that David got hold of the checks absent said consideration. In
other words, the petitioner must present convincing evidence to overthrow
the presumption. Our scrutiny of the records, however, shows that the
petitioner failed to discharge her burden of proof. The petitioner’s averment
that David did not give valuable consideration when he took possession of
the checks is unsupported, devoid of any concrete proof to sustain it. Note
that both the trial court and the appellate court found that David did not
receive the checks gratis, but instead gave Chandiramani US$360,000.00 as
consideration for the said instruments. Factual findings of the Court of
Appeals are conclusive on the parties and not reviewable by this Court; they
carry great weight when the factual findings of the trial court are affirmed by
the appellate court. 21

Second, petitioner fails to point any circumstance which should have put
David on inquiry as to the why and wherefore of the possession of the
checks by Chandiramani. David was not privy to the transaction between
petitioner and Chandiramani. Instead, Chandiramani and David had a
separate dealing in which it was precisely Chandiramani’s duty to deliver the
checks to David as payee. The evidence shows that Chandiramani performed
said task to the letter. Petitioner admits that David took the step of asking
the manager of his bank to verify from FEBTC and Equitable as to the
genuineness of the checks and only accepted the same after being assured
that there was nothing wrong with said checks. At that time, David was not
aware of any "stop payment" order. Under these circumstances, David thus
had no obligation to ascertain from Chandiramani what the nature of the
latter’s title to the checks was, if any, or the nature of his possession. Thus,
we cannot hold him guilty of gross neglect amounting to legal absence of
good faith, absent any showing that there was something amiss about
Chandiramani’s acquisition or possession of the checks. David did not close
his eyes deliberately to the nature or the particulars of a fraud allegedly
committed by Chandiramani upon the petitioner, absent any knowledge on
his part that the action in taking the instruments amounted to bad faith. 22

Belatedly, and we say belatedly since petitioner did not raise this matter in
the proceedings below, petitioner now claims that David should have been
put on alert as the instruments in question were crossed checks. Pursuant to
Bataan Cigar & Cigarette Factory, Inc. v. Court of Appeals, David should at
least have inquired as to whether he was acquiring said checks for the
purpose for which they were issued, according to petitioner’s submission.

Petitioner’s reliance on the Bataan Cigar case, however, is misplaced. The

facts in the present case are not on all fours with Bataan Cigar. In the latter
case, the crossed checks were negotiated and sold at a discount by the
payee, while in the instant case, the payee did not negotiate further the
checks in question but promptly deposited them in his bank account.

The Negotiable Instruments Law is silent with respect to crossed checks,

although the Code of Commerce 23 makes reference to such instruments.
Nonetheless, this Court has taken judicial cognizance of the practice that a
check with two parallel lines in the upper left hand corner means that it
could only be deposited and not converted into cash. 24 The effects of
crossing a check, thus, relates to the mode of payment, meaning that the
drawer had intended the check for deposit only by the rightful person, i.e.,
the payee named therein. In Bataan Cigar, the rediscounting of the check by
the payee knowingly violated the avowed intention of crossing the check.
Thus, in accepting the cross checks and paying cash for them, despite the
warning of the crossing, the subsequent holder could not be considered in
good faith and thus, not a holder in due course. Our ruling in Bataan Cigar
reiterates that in De Ocampo & Co. v. Gatchalian.25cralaw:red

The factual circumstances in De Ocampo and in Bataan Cigar are not present
in this case. For here, there is no dispute that the crossed checks were
delivered and duly deposited by David, the payee named therein, in his bank
account. In other words, the purpose behind the crossing of the checks was
satisfied by the payee.

Proceeding to the issue of damages, petitioner merely argues that

respondents David and PCIB are not entitled to damages, attorney’s fees,
and costs of suit as both acted in bad faith towards her, as shown by her
version of the facts which gave rise to the instant case.

Respondent David counters that he was maliciously and unceremoniously

dragged into this suit for reasons which have nothing to do with him at all,
but which arose from petitioner’s failure to receive her share of the profit
promised her by Chandiramani. Moreover, in filing this suit which has lasted
for over a decade now, the petitioner deprived David of the rightful
enjoyment of the two checks, to which he is entitled, under the law,
compelled him to hire the services of counsel to vindicate his rights, and
subjected him to social humiliation and besmirched reputation, thus harming
his standing as a person of good repute in the business community of
Pampanga. David thus contends that it is but proper that moral damages,
attorney’s fees, and costs of suit be awarded him.

For its part, respondent PCIB stresses that it was established by both the
trial court and the appellate court that it was needlessly dragged into this
case. Hence, no error was committed by the appellate court in declaring
PCIB entitled to attorney’s fees as it was compelled to litigate to protect
itself.

We have thoroughly perused the records of this case and find no reason to
disagree with the finding of the trial court, as affirmed by the appellate
court, that:chanrob1es virtual 1aw library

[D]efendant David is entitled to [the] award of moral damages as he has

been needlessly and unceremoniously dragged into this case which should
have been brought only between the plaintiff and defendant Chandiramani.
26

A careful reading of the findings of facts made by both the trial court and
appellate court clearly shows that the petitioner, in including David as a
party in these proceedings, is barking up the wrong tree. It is apparent from
the factual findings that David had no dealings with the petitioner and was
not privy to the agreement of the latter with Chandiramani. Moreover, any
loss which the petitioner incurred was apparently due to the acts or
omissions of Chandiramani, and hence, her recourse should have been
against him and not against David. By needlessly dragging David into this
case all because he and Chandiramani knew each other, the petitioner not
only unduly delayed David from obtaining the value of the checks, but also
caused him anxiety and injured his business reputation while waiting for its
outcome. Recall that under Article 2217 27 of the Civil Code, moral damages
include mental anguish, serious anxiety, besmirched reputation, wounded
feelings, social humiliation, and similar injury. Hence, we find the award of
moral damages to be in order.

The appellate court likewise found that like David, PCIB was dragged into
this case on unfounded and baseless grounds. Both were thus compelled to
litigate to protect their interests, which makes an award of attorney’s fees
justified under Article 2208 (2) 28 of the Civil Code. Hence, we rule that the
award of attorney’s fees to David and PCIB was proper.

WHEREFORE, the instant petition is DENIED. The assailed decision of the

Court of Appeals, dated March 25, 1999, in CA-G.R. CV No. 52398 is
AFFIRMED. Costs against the petitioner.chanrob1es virtua1 1aw 1ibrary

SO ORDERED.