RAMON CHING AND POWING PROPERTIES, INC
JOSEPH CHENG, JAIME CHENG, MERCEDES IGNE
G.R. No. 175507,October 8, 2014
Joseph Cheng, Jaime Cheng, and Mercedes Igne (the Chengs) filed a complaint for declaration of nullity of titles against Ramon Ching before the Regional Trial Court of Manila.
The complaint was amended, with leave of court, to implead additional defendants, Po Wing Properties, of which Ramon Ching was a primary stockholder. The amended complaint was for "Annulment of Agreement, Waiver, Extra-Judicial Settlement of Estate and the Certificates of Title Issued by Virtue of Said Documents with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction.
After the responsive pleadings had been filed, Po Wing Properties filed a motion to dismiss on the ground of lack of jurisdiction of the subject matter. The Regional Trial Court of Manila, Branch 6, granted the motion to dismiss. Upon motion of the Chengs’ counsel, however, the Chengs and Lucina Santos were given fifteen (15) days to file the appropriate pleading. They did not do so.
The Chengs and Lucina Santos filed a complaint for "Annulment of Agreement, Waiver, Extra-Judicial Settlement of Estate and the Certificates of Title Issued by Virtue of Said Documents with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction" against Ramon Ching and Po Wing Properties (the second case) and raffled to Branch 20 of the Regional Trial Court of Manila. When Branch 20 was made aware of the first case, it issued an order transferring the case to Branch 6, considering that the case before it involved substantially the same parties and causes of action.
The Chengs and Lucina Santos filed a motion to dismiss their complaint in the second case, praying that it be dismissed without prejudice. RTC Branch 6 issued an order granting the motion to dismiss on the basis that the summons had not yet been served on Ramon Ching and Po Wing Properties, and they had not yet filed any responsive pleading. The dismissal of the second case was made without prejudice.
Ramon Ching and Po Wing Properties filed a motion for reconsideration of the order dated November 22, 2002. They argue that the dismissal should have been with prejudice under the "two dismissal rule" of Rule 17, Section 1 of the 1997 Rules of Civil Procedure, in view of the previous dismissal of the first case.
During the pendency of the motion for reconsideration, the Chengs and Lucina Santos filed a complaint for "Disinheritance and Declaration of Nullity of Agreement and Waiver, Affidavit of Extra judicial Agreement, Deed of Absolute Sale, and Transfer Certificates of Title with Prayer for TRO and Writ of Preliminary Injunction" against Ramon Ching and Po Wing Properties (the third case) and was eventually raffled to Branch 6.
Ramon Ching and Po Wing Properties filed their comment/opposition to the application for temporary restraining order in the third case. They also filed a motion to dismiss on the ground of res judicata, litis pendencia, forum-shopping, and failure of the complaint to state a cause of action.
RTC Branch 6 issued an omnibus order resolving both the motion for reconsideration in the second case and the motion to dismiss in the third case. The trial court denied the motion for reconsideration and the motion to dismiss, holding that the dismissal of the second case was without prejudice and, hence, would not bar the filing of the third case.
while their motion for reconsideration in the third case was pending, Ramon Ching and Po Wing Properties filed a petition for certiorari with the Court of Appeals, assailing the order which upheld the dismissal of the second case.
The trial court issued an order denying the motion for reconsideration in the third case. The denial prompted Ramon Ching and Po Wing Properties to file a petition for certiorari and prohibition with application for a writ of preliminary injunction or the issuance of a temporary restraining order with the Court of Appeals.
The Court of Appeals rendered the decision in the first certiorari case dismissing the petition. The appellate court ruled that Ramon Ching and Po Wing Properties’ reliance on the "two-dismissal rule" was misplaced since the rule involves two motions for dismissals filed by the plaintiff only. Upon the denial of their motion for reconsideration, Ramon Ching and Po Wing Properties filed this present petition for review under Rule 45 of the Rules of Civil Procedure.
Whether or not the trial court’s dismissal of the second case operated as a bar to the filing of a third case, as per the "two-dismissal rule".
No. Rule 17 of the Rules of Civil Procedure governs dismissals of actions at the instance of the plaintiff. Hence, the "two-dismissal rule" under Rule 17, Section 1 of the Rules of Civil Procedure will not apply if the prior dismissal was done at the instance of the defendant. Dismissals upon the instance of the defendant are generally governed by Rule 16, which covers motions to dismiss.
As a general rule, dismissals under Section 1 of Rule 17 are without prejudice except when it is the second time that the plaintiff caused its dismissal. Accordingly, for a dismissal to operate as an adjudication upon the merits, i.e, with prejudice to the re-filing of the same claim, the following requisites must be present:
(1) There was a previous case that was dismissed by a competent court;
(2) Both cases were based on or include the same claim;
(3) Both notices for dismissal were filed by the plaintiff; and
(4) When the motion to dismiss filed by the plaintiff was consented to by the defendant on the ground that the latter paid and satisfied all the claims of the former.
The purpose of the "two-dismissal rule" is "to avoid vexatious litigation." When a complaint is dismissed a second time, the plaintiff is now barred from seeking relief on the same claim.
The dismissal of the second case was without prejudice in view of the "two-dismissal rule"
Here, the first case was filed as an ordinary civil action. It was later amended to include not only new defendants but new causes of action that should have been adjudicated in a special proceeding. A motion to dismiss was inevitably filed by the defendants on the ground of lack of jurisdiction.
The dismissal of the first case was done at the instance of the defendant under Rule 16, Section 1(b) of the Rules of Civil Procedure, which states:
Section 1. Grounds.— Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds:
(b) That the court has no jurisdiction over the subject matter of the claim;
Under Section 5 of the same rule, a party may re-file the same action or claim subject to certain exceptions.
Thus, when respondents filed the second case, they were merely refiling the same claim that had been previously dismissed on the basis of lack of jurisdiction. When they moved to dismiss the second case, the motion to dismiss can be considered as the first dismissal at the plaintiff’s instance.
When respondents filed the third case on substantially the same claim, there was already one prior dismissal at the instance of the plaintiffs and one prior dismissal at the instance of the defendants.
While it is true that there were two previous dismissals on the same claim, it does not necessarily follow that the re-filing of the claim was barred by Rule 17, Section 1 of the Rules of Civil Procedure. The circumstances surrounding each dismissal must first be examined to determine before the rule may apply, as in this case. Thus, the trial court's dismissal of the second case is not a bar to the filing of the third case.
Chavez vs National Housing Authority
G.R No 164527
Petitioner Francisco Chavez in his capacity as taxpayer seeks to declare null and void the Joint Venture Agreement between the NHA and R-II Builder’s, Inc (RBI) for being unconstitutional and invalid, and to enjoin respondents — particularly respondent NHA – from implementing and/or enforcing the said project and other agreements related thereto. On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. 161 approving and directing the implementation of the Comprehensive and Integrated Metropolitan Manila Waste Management Plan. Specifically, respondent NHA was ordered to “conduct feasibility studies and develop low-cost housing projects at the dumpsite and absorb scavengers in NHA resettlement/low-cost housing projects.”
Pursuant to MO 161-A, NHA prepared the feasibility studies which resulted in the formulation of the Smokey Mountain Development Plan and Reclamation of the Area Across R-10 or the Smokey Mountain Development and Reclamation Project. SMDRP aimed to convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area across R-10, adjacent to the Smokey Mountain as the enabling component of the project. Once finalized, the plan was submitted to President Aquino for her approval. On January 17, 1992, President Aquino proclaimed MO 415, approving and directing the implementation of the SMDRP through a private sector joint venture. Said MO stipulated that the land area covered by the Smokey Mountain dumpsite is conveyed to the NHA as well as the area to be reclaimed across R-10. In the same MO 415, President Aquino created an Executive Committee to oversee the implementation of the plan and an inter-agency Technical Committee was created composed of the technical representatives of the EXECOM. Based on the evaluation of the pre-qualification documents, the EXECOM declared the New San Jose Builders, Inc. and RBI as top two contractors. Thereafter, TECHCOM submitted its recommendation to the EXECOM to approve the RBI proposal which garnered the highest score.
On October 7, 1992, President Ramos authorized NHA to enter into a JVA with RBI. Afterwards, President Ramos issued Proclamation No. 465 increasing the proposed area for reclamation across R-10 from 40 hectares to 79 hectares. On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent No. 3591 conveying in favor of NHA an area of 211,975 square meters covering the Smokey Mountain Dumpsite. The land reclamation was completed in August 1996. Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special Patent No. 3598 conveying in favor of NHA an additional 390,000 square meter area. After some time, the JVA was terminated. RBI demanded the payment of just compensation for all accomplishments and costs incurred in developing the SMDRP plus a reasonable rate of return. In a Memorandum of Agreement (MOA) executed by NHA and RBI, both parties agreed to terminate the JVA and other subsequent agreements, which stipulated, among others, that unpaid balance may be paid in cash, bonds or through the conveyance of properties or any combination thereof. On August 5, 2004, former Solicitor General Francisco I. Chavez filed this Petition for Prohibition and Mandamus seeking to declare null and void the Joint Venture Agreement and the Smokey Mountain Development and Reclamation Project, and all other agreements in relation thereto, for being Unconstitutional and Invalid. The petitioner challenges the authority of NHA to reclaim lands. He claims that the power to reclaim lands of public domain is vested exclusively with the Public Estates Authority. He also contends that NHA and RBI were not given the power and authority by DENR to reclaim foreshore and submerged lands, as required and that there was no proclamation officially classifying the reclaimed lands as alienable and disposable.
Whether or not the NHA has the authority to reclaim lands.
Yes. While the authority of NHA to reclaim lands is challenged by petitioner, we find that the NHA had more than enough authority to do so under existing laws. While PD 757, the charter of NHA, does not explicitly mention “reclamation” in any of the listed powers of the agency, we rule that the NHA has an implied power to reclaim land as this is vital or incidental to effectively, logically, and successfully implement an urban land reform and housing program enunciated in Sec. 9 of Article XIII of the 1987 Constitution. Basic in administrative law is the doctrine that a government agency or office has express and implied powers based on its charter and other pertinent statutes. Express powers are those powers granted, allocated, and delegated to a government agency or office by express provisions of law. On the other hand, implied powers are those that can be inferred or are implicit in the wordings of the law or conferred by necessary or fair implication in the enabling act. When a general grant of power is conferred or duty enjoined, every particular power necessary for the exercise of the one or the performance of the other is also conferred by necessary implication. when the statute does not specify the particular method to be followed or used by a government agency in the exercise of the power vested in it by law, said agency has the authority to adopt any reasonable method to carry out its functions. The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415, RA 6957, and PD 3- A. Land reclamation is an integral part of the development of resources for some of the housing requirements of the NHA. Private participation in housing projects may also take the form of land reclamation.
Globe Wireless vs. Public Service Commission
G.R No. L-27520
Globe Wireless, Ltd., a duly organized Philippines corporation engaged in international telecommunication business under a franchise granted by Public Acts Nos. 3495, 3692 and 4150 as amended by Republic Act No. 4630. A message addressed to Maria Diaz, Monte Esquina 30, Madrid, Spain, filed by private respondent Antonio B. Arnaiz with the telegraph office of the Bureau of Telecommunications in Dumaguete City was transmitted to the Bureau of Telecommunications in Manila. It was forwarded to petitioner Globe Wireless Ltd. for transmission to Madrid. Petitioner sent the message to the American Cable and Radio Corporation in New York, which, in turn, transmitted the same to the Empresa Nacional de Telecommunicaciones in Madrid. The latter, however, mislaid said message, resulting in its non-delivery to the addressee. After being informed of said fact, private respondent Arnaiz, sent to then Public Service Commissioner Enrique Medina an unverified letter-complaint relating the incident.
Hearing ensued, after which the PSC issued an order finding petitioner "responsible for the inadequate and unsatisfactory service complained of, in violation of the Public Service Act" and ordering it "to pay a fine of TWO HUNDRED [P200.00] PESOS under Sec. 21 of Com. Act 146, as amended." petitioner was likewise required to refund the sum of P19.14 to the remitter of the undelivered message.
Whether or not the PSC exceeded to their jurisdiction to the franchisee.
The basic in administrative law to need citation of jurisprudence is the rule that the jurisdiction and powers of administrative agencies, like respondent Commission, are limited to those expressly granted or necessarily implied from those granted in the legislation creating such body; and any order without or beyond such jurisdiction is void and ineffective. PRINCIPLES: Commonwealth Act No. 146 Sec. 5. The Public Service Commission is hereby given jurisdiction over the grantee only with respect to the rates which the grantee may charge the public subject to international commitments made or adhered to by the Republic of the Philippines. Section 21 of C.A. No. 146, as amended, the Commission was empowered to impose an administrative fine in cases of violation of or failure by a Public service to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission. Globe Wireless Ltd. operated under a legislative franchise, so there were no terms nor conditions of any certificate issued by the Commission to violate.
Padua v. Ranada
G.R. No. 141949
The Toll Regulatory Board (TRB) issued Resolution No. 2001-89 authorizing provisional toll rate adjustments on November 9, 2001, at the Metro Manila Skyway, effective January 1, 2002. For its implementation starting January 1, 2002 after its publication once a week for three (3) consecutive weeks in a newspaper of general circulation and that said Provisional Toll Rate Increase shall remain in effect until such time that the TRB Board has determined otherwise: On December 17, 24 and 31, 2001, the above Resolution approving provisional toll rate adjustments was published in the newspapers of general circulation. Tracing back the events that led to the issuance of the said Resolution, it appears that on February 27, 2001 the Citra Metro Manila Tollways Corporation (CITRA) filed with the TRB an application for an interim adjustment of the toll rates at the Metro Manila Skyway Project – Stage 1. CITRA moored its petition on the provisions of the (STOA)"Supplemental Toll Operation Agreement" , authorizing it, as the investor, to apply for and if warranted, to be granted an interim adjustment of toll rates in the event of a "significant currency devaluation." Claiming that the peso exchange rate to a U.S. dollar had devaluated from P26.1671 in 1995 to P48.00 in 2000, CITRA alleged that there was a compelling need for the increase of the toll rates to meet the loan obligations of the Project and the substantial increase in debt-service burden.
On October 30, 2001, CITRA moved to withdraw its "Urgent Motion for Provisional Approval" without prejudice to its right to seek or be granted provisional relief under the above-quoted provisions of the TRB Rules of Procedure, obviously, referring to the power of the Board to act on its own initiative. On November 9, 2001, TRB granted CITRA’s motion to withdraw the Urgent Motion for Provisional Approval and, at the same time, issued Resolution No. 2001-89, earlier quoted. Hence, petitioners Ceferino Padua and Eduardo Zialcita assail before this Court the validity and legality of TRB Resolution No. 2001-89.
Whether or not Resolution No. 2001-89 issued by the Toll Regulatory Board valid.
For one, it is not true that the provisional toll rate adjustments were not published prior to its implementation on January 1, 2002. Records show that they were published on December 17, 24 and 31, 2001 in three newspapers of general circulation, particularly the Philippine Star, Philippine Daily Inquirer and The Manila Bulletin. Surely, such publications sufficiently complied with Section 5 of P.D. No. 1112 which mandates that "no new rates shall be collected unless published in a newspaper of general publication at least once a week for three consecutive weeks." At any rate, it must be pointed out that under Letter of Instruction No. 1334-A, the TRB may grant and issue ex-parte to any petitioner, without need of notice, publication or hearing, provisional authority to collect, pending hearing and decision on the merits of the petition, the increase in rates prayed for or such lesser amount as the TRB may in its discretion provisionally grant. That LOI No. 1334-A has the force and effect of law finds support in a catena of cases decreeing that "all proclamations, orders, decrees, instructions, and acts promulgated, issued, or done by the former President (Ferdinand E. Marcos) are part of the law of the land, and shall remain valid, legal, binding, and effective, unless modified, revoked or superseded by subsequent proclamations, orders, decrees, instructions, or other acts of the President. It may be recalled that Former President Ferdinand E. Marcos promulgated P.D. No. 1112 creating the TRB on March 31, 1977. The end in view was to authorize the collection of toll fees for the use of certain public improvements in order to attract private sector investment in the government infrastructure projects. The TRB was tasked to supervise the collection of toll fees and the operation of toll facilities. One of its powers is to "issue, modify and promulgate from time to time the rates of toll that will be charged the direct users of toll facilities and upon notice and hearing, to approve or disapprove petitions for the increase thereof. To clarify the intent of P.D. No. 1112 as to the extent of the TRB’s power, Former President Marcos further issued LOI No. 1334-A expressly allowing the TRB to grant ex-parte provisional or temporary increase in toll rates
Dacudao vs. Gonzales
G.R No. 188056
Petitioners, residents of Bacaca Road, Davao City - were among the investors whom Celso G. Delos Angeles, Jr. and his associates in the Legacy Group of Companies (Legacy Group) allegedly defrauded through the Legacy Group's "buy back agreement" that earned them check payments that were dishonored. After their written demands for the return of their investments went unheeded, they initiated a number of charges for syndicated estafa against Delos Angeles, Jr., et al. in the Office of the City Prosecutor of Davao City on February 6, 2009. On March 18, 2009, the Secretary of Justice issued Department of Justice (DOJ) Order No. 182 (DO No. 182), directing all Regional State Prosecutors, Provincial Prosecutors, and City Prosecutors to forward all cases already filed against Delos Angeles, Jr., et al. to the Secretariat of the DOJ Special Panel in Manila for appropriate action. Pursuant to DO No. 182, the complaints of petitioners were forwarded by the Office of the City Prosecutor of Davao City to the Secretariat of the Special Panel of the DOJ. Aggrieved by such turn of events, petitioners have directly come to the Court via petition for certiorari, prohibition and mandamus, ascribing to respondent Secretary of Justice grave abuse of discretion in issuing DO No. 182.
They claim that DO No. 182 violated their right to due process, their right to the equal protection of the laws, and their right to the speedy disposition of cases. They insist that DO No. 182 was an obstruction of justice and a violation of the rule against enactment of laws with retroactive effect.
Whether or not respondent Secretary of Justice committed grave abuse of discretion in issuing DO No. 182.
No. For a special civil action for certiorari to prosper, the following requisites must concur, namely: (a) it must be directed against a tribunal, board or officer exercising judicial or quasi-judicial functions; (b) the tribunal, board, or officer must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (c) there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law. Yet, petitioners have not shown a compliance with the requisites. To start with, they merely alleged that the Secretary of Justice had acted without or in excess of his jurisdiction. Also, the petition did not show that the Secretary of Justice was an officer exercising judicial or quasi-judicial functions. Instead, the Secretary of Justice would appear to be not exercising any judicial or quasi-judicial functions because his questioned issuances were ostensibly intended to ensure his subordinates’ efficiency and economy in the conduct of the preliminary investigation of all the cases involving the Legacy Group.
The function involved was purely executive or administrative. The fact that the DOJ is the primary prosecution arm of the Government does not make it a quasi-judicial office or agency. Its preliminary investigation of cases is not a quasi-judicial proceeding. Nor does the DOJ exercise a quasi-judicial function when it reviews the findings of a public prosecutor on the finding of probable cause in any case. The prosecutor in a preliminary investigation does not determine the guilt or innocence of the accused. He does not exercise adjudication nor rule-making functions. Preliminary investigation is merely inquisitorial, and is often the only means of discovering the persons who may be reasonably charged with a crime and to enable the fiscal to prepare his complaint or information. It is not a trial of the case on the merits and has no purpose except that of determining whether a crime has been committed and whether there is probable cause to believe that the accused is guilty thereof. While the fiscal makes that determination, he cannot be said to be acting as a quasi-court, for it is the courts, ultimately, that pass judgment on the accused, not the fiscal.
Dario vs. Mison
G.R No. 81954
In 1986, Cory Aquino promulgated Proclamation No. 3, which is the mandate of the people to Completely reorganize the government. Two years later, President Aquino promulgated EO 127, which provides for the reorganization of the Ministry of Finance and along with it the reorganization of the Bureau of Customs and prescribes a new staffing pattern for the abovementioned office. Following the adoption of the new Constitution, On January 1988 the incumbent Commissioner of Customs Salvador Mison issued a memorandum “Guidelines on the Implementation of Reorganization Executive Orders which prescribes the procedure in personnel placement. Such memorandum provides that by February of 1988, all of the employees covered by EO 127 shall be informed of their re-appointment and also offered another position in the same department or agency and to be informed of their termination.
Mison addressed several notices to various Customs officials stating that they shall continue to perform their respective duties and responsibilities in a hold-over capacity, and that those incumbents whose positions are not carried in the new reorganization pattern, or who are not re-appointed, shall be deemed separated from the service.
A total of 394 officials and employees of the Bureau of Customs were given individual notices of separation. They filed appeals with the CSC. On June 1988, the CSC promulgated its ruling ordering the reinstatement of the 279 employees, the 279 private respondents in G.R. No. 85310. Commissioner Mison, represented by the Solicitor General, filed a motion for reconsideration, which was denied. Commissioner Mison instituted certiorari proceedings. On June 10, 1988, Republic Act No. 6656, was signed into law and according to the provisions of the aforementioned Act, the process in which terminated employees in violation of RA 6656 shall be reinstated or reappointed. On June 23, 1988, Benedicto Amasa and William Dionisio, customs examiners appointed by Commissioner Mison pursuant to the ostensible reorganization subject of this controversy, petitioned the Court to contest the validity of the statute.
On October 21, 1988, thirty-five more Customs officials whom the Civil Service Commission had ordered reinstated by its June 30, 1988 Resolution filed their own petition to compel the Commissioner of Customs to comply with the said Resolution. Cesar Dario was one of the Deputy Commissioners of the Bureau of Customs until his relief on orders of Commissioner Mison on January 26, 1988. In essence, he questions the legality of his dismissal, which he alleges was upon the authority of Section 59 of E.O. No. 127 He contends that neither the E.O. nor the staffing pattern proposed by the Secretary of Finance abolished the office of Deputy Commissioner of Customs, but, rather, increased it to three. Nor can it be said, so he further maintains, that he had not been "reappointed" because "reappointment therein presupposes that the position to which it refers is a new one in lieu of that which has been abolished or although an existing one, has absorbed that which has been abolished." Lastly, he claims, that under the Provisional Constitution, the power to dismiss public officials without cause ended on February 25, 1987, and that thereafter, public officials enjoyed security of tenure under the provisions of the 1987 Constitution.
Vicente Feria asserts his security of tenure and that he cannot be said to be covered by Section 59 of E.O. No. 127, having been appointed on April 22, 1986 - during the effectivity of the Provisional Constitution. He adds that under E.O. No. 39, the Commissioner of Customs has the power "to appoint all Bureau personnel, except those appointed by the President," and that his position, which is that of a Presidential appointee, is beyond the control of Commissioner Mison for purposes of reorganization. Provisions of Section 16, Article XVIII explicitly authorize the removal of career civil service employees "not for cause but as a result of the reorganization pursuant to Proclamation No. 3 dated March 25, 1986 and the reorganization following the ratification of this Constitution. For this reason, Mison posits, claims of violation of security of tenure are allegedly no defense. That contrary to the employees' argument, Section 59 of E.O.no. 127 is applicable, in the sense that retention in the Bureau, under the E.O., depends on either retention of the position in the new staffing pattern or reappointment of the incumbent, and since the dismissed employees had not been reappointed, they had been considered legally separated. Moreover, Mison proffers that under Section 59 incumbents are considered on holdover status, "which means that all those positions were considered vacant."
Whether or not Section 16 of Article XVIII of the 1987 Constitution is a grant of a license upon the Government to remove career public officials it could have validly done under an "automatic"- vacancy-authority and to remove them without rhyme or reason.
No. The Court held that the State can still carry out reorganizations provided that it is done in good faith. Removal of career officials without cause cannot be done after the passing of the 1987 Constitution. The above is a mere recognition of the right of the Government to reorganize its offices, bureaus, and instrumentalities. Under Section 4, Article XVI, of the 1935 Constitution. Transition periods are characterized by provisions for "automatic" vacancies. They are dictated by the need to hasten the passage from the old to the new Constitution free from the "fetters" of due process and security of tenure. Since 1935, transition periods have been characterized by provisions for "automatic" vacancies. We take the silence of the 1987 Constitution on this matter as a restraint upon the Government to dismiss public servants at a moment's notice. If the present Charter envisioned an "automatic" vacancy, it should have said so in clearer terms. Plainly the concern of Section 16 is to ensure compensation for "victims" of constitutional revamps - whether under the Freedom or existing Constitution - and only secondarily and impliedly, to allow reorganization. In order to be entitled to the benefits granted under Section 16 of Article XVIII of the Constitution of 1987, two requisites, one negative and the other positive, must concur, to wit: 1. The separation must not be for cause, and 2. The separation must be due to any of the three situations mentioned. By its terms, the authority to remove public officials under the Provisional Constitution ended on February 25, 1987, advanced by jurisprudence to February 2, 1987. It can only mean, then, that whatever reorganization is taking place is upon the authority of the present Charter, and necessarily, upon the mantle of its provisions and safeguards. Hence, it cannot be legitimately stated that we are merely continuing what the revolutionary Constitution of the Revolutionary Government had started. We are through with reorganization under the Freedom Constitution - the first stage. We are on the second stage - that inferred from the provisions of Section 16 of Article XVIII of the permanent basic document.
After February 2, 1987, incumbent officials and employees have acquired security of tenure. The present organic act requires that removals "not for cause" must be as a result of reorganization. As we observed, the Constitution does not provide for "automatic" vacancies. It must also pass the test of good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in case of a dismissal) or separation actually occurs because the position itself ceases to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the "abolition," which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in good faith, no valid "abolition" takes place and whatever "abolition" is done, is void ab initio. There is an invalid "abolition" as where there is merely change of nomenclature of positions, or where claims of economy are belied by the existence of ample funds. The Court finds that Commissioner Mison did not act in good faith since after February 2, 1987 no perceptible restructuring of the Customs hierarchy - except for the change of personnel - has occurred, which would have justified (all things being equal) the contested dismissals. There is also no showing that legitimate structural changes have been made - or a reorganization actually undertaken, for that matter - at the Bureau since Commissioner Mison assumed office, which would have validly prompted him to hire and fire employees. With respect to E.O. No. 127, Commissioner Mison submits that under Section 59 thereof, "Those incumbents whose positions are not included therein or who are not reappointed shall be deemed separated from the service." He submits that because the 394 removed personnel have not been "reappointed," they are considered terminated. To begin with, the Commissioner's appointing power is subject to the provisions of Executive Order No. 39. Under E.O. No. 39, the Commissioner of Customs may "appoint all Bureau personnels except those appointed by the President." Thus, with respect to Deputy Commissioners Cesar Dario and Vicente Feria, Jr., Commissioner Mison could not have validly terminated them, they being Presidential appointees. That Customs employees, under Section 59 of E.O. No. 127 had been on a mere holdover status cannot mean that the positions held by them had become vacant. The occupancy of a position in a holdover capacity was conceived to facilitate reorganization and would have lapsed on 25 February 1987 (under the Provisional Constitution), but advanced to February 2, 1987 when the 1987 Constitution became effective. After the said date the provisions of the latter on security of tenure govern. Hence the petition of the employees was granted while the petition of Mison was dismissed.
The court ordered the reinstatement of the Employees of the Bureau of Customs.
Crisostomo vs. CA G.R. No. 106296
Petitioner Isabelo Crisostomo was President of the Philippine College of Commerce (PCC),
having been appointed to that position by the President of the Philippines on July 17, 1974.
During his tenure as president of the PCC, two administrative cases were filed against petitioner
for illegal use of government vehicles, misappropriation of construction materials belonging to the
college, oppression and harassment, grave misconduct, nepotism and dishonesty. The
administrative cases, which were filed with the Office of the President, were subsequently referred
to the Office of the Solicitor General for investigation. Charges of violations of R.A. No. 3019and R.A. No. 992, and R.A. No. 733, were likewise filed against him with the Office of Tanodbayan.
On June 14, 1976, three (3) informations for violation of Sec. 3(e) of the Anti-Graft and Corrupt
Practices Act (R.A. No. 3019, as amended) were filed against him. The informations alleged that
he appropriated for himself a bahay kubo, which was intended for the College, and construction
materials worth P250,000.00, more or less. Petitioner was also accused of using a driver of the
College as his personal and family driver.
On October 22, 1976, petitioner was preventively suspended from office pursuant to R.A. No.
3019, §13, as amended. In his place Dr. Pablo T. Mateo, Jr. was designated as officer-in-charge
on November 10, 1976, and then as Acting President on May 13, 1977.
On April 1, 1978, P.D. No. 1341 was issued by then President Ferdinand E. Marcos,
CONVERTING THE PHILIPPINE COLLEGE OF COMMERCE INTO A POLYTECHNIC
UNIVERSITY, DEFINING ITS OBJECTIVES, ORGANIZATIONAL STRUCTURE AND
FUNCTIONS, AND EXPANDING ITS CURRICULAR OFFERINGS.
Mateo continued as the head of the new University. On April 3, 1979, he was appointed Acting
President and on March 28, 1980, as President for a term of six (6) years.
Whether or not the Philippine College of Commerce was abolished by the Polytechnic University
of the Philippines in virtue of P.D. No. 1341.
Presidential Decree No. 1341 did not abolish, but only changed, the former Philippine College of Commerce into what is now the Polytechnic University of the Philippines, in the same way that earlier in 1952,R.A. No. 778 had converted what was then the Philippine School of Commerce into the Philippine
College of Commerce. What took place was a change in academic status of the educational
institution, not in its corporate life. Hence the change in its name, the expansion of its curricular
offerings, and the changes in its structure and organization.
As petitioner correctly points out, when the purpose is to abolish a department or an office or an
organization and to replace it with another one, the lawmaking authority says so.
The law does not state that the lands, buildings and equipment owned by the PCC were being
"transferred" to the PUP but only that they "stand transferred" to it. "Stand transferred" simply
means, for example, that lands transferred to the PCC were to be understood as transferred to
the PUP as the new name of the institution.
In this case, Dr. Pablo T. Mateo Jr., who had been acting president of the university since April 3,
1979, was appointed president of PUP for a term of six (6) years on March 28, 1980, with the
result that petitioner's term was cut short. In accordance with §7 of the law, therefore, petitioner
became entitled only to retirement benefits or the payment of separation pay. Petitioner must
have recognized this fact, that is why in 1992 he asked then President Aquino to consider him for
appointment to the same position after it had become vacant in consequence of the retirement of
The decision of the Court of Appeals is MODIFIED by SETTING ASIDE the questioned orders of
the Regional Trial Court directing the reinstatement of the petitioner Isabelo T. Crisostomo to the
position of president of the Polytechnic University of the Philippines and the payment to him of
salaries and benefits which he failed to receive during his suspension in so far as such payment
would include salaries accruing after March 28, 1980 when petitioner Crisostomo's term was
terminated. Further proceedings in accordance with this decision may be taken by the trial court
to determine the amount due and payable to petitioner by the university up to March 28, 1980.
PNB vs CA (25 SCRA 693, 29 Oct 1968)
A GSIS check with petitioner PNB as the drawee bank was deposited by a payee in his current account with the private respondent PCIB. PNB paid PCIB the amount in the check without returning the same in the course of clearing. The check was later discovered to have forged signatures.
Whether or not PNB may recover from PCIB.
YES. By not returning the check to the PCIB, by thereby indicating that the PNB had found nothing wrong with the check and would honor the same, and by actually paying its amount to the PCIB, the PNB induced the latter, not only to believe that the check was genuine and good in every respect, but, also, to pay its amount to payee. In other words, the PNB was the primary or proximate cause of the loss, and, hence, may not recover from the PCIB.
Clark vs Sellner (GR No. 16477, 22 Nov 1921)
Defendant, was acquitted on the crime of malversation of public fund due to reasonable doubt. The judgement however still found the defendant civilly liable for the amount malversed. Defendant appealed the said judgement, contending that she was just a mere indorser of the said checks issued against the funds of the government. The CA certified the this said case to the sc as it was purely a question of law.
Whether the Petitioner is civilly liable for being a mere indorser on account of the dishonor of the checks indorsed by her.
Yes, the holder or last indorsee of a negotiable instrument has the right to “enforce payment of the instrument for the full amount thereof against all parties liable thereon.” Among the “parties liable thereon” is an indorser of the instrument i.e., “a person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor ** unless he clearly indicates by appropriate words his intention to be bound in some other capacity. “Such an indorser “who indorses without qualification,” inter alia “engages that on due presentment, ** (the instrument) shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.” Maniego may also be deemed an “accommodation party” in the light of the facts, i.e., a person “who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.”
Crisologo vs CA (177 SCRA 594, 15 Sept 1989)
Respondent was the vice-president of Mover Enterprises, Inc. in-charge of marketing and sales; and the president of the said corporation was Atty. Oscar Z. Benares. Atty. Benares, in accommodation of his clients, issued Check payable to petitioner. Since the check was under the account of Mover Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation. However, since at that time, the treasurer of Mover Enterprises was not available, Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check as an alternate signatory. When petitioner deposited this check it was dishonored for insufficiency of funds. Hence, petitioner filed a criminal complaint against Respondent. Respondent tendered cashier’s check to the petitioner who refused to receive the cashier’s check in payment of the dishonoured. Hence, plaintiff deposited said amount with the Clerk of Court. After trial, the court a quo, holding that it was “not persuaded to believe that consignation referred to in Article 1256 of the Civil Code is applicable to this case,” rendered judgment dismissing respondent complaint and petitioner’s counterclaim. CA reversed and set aside said judgment of dismissal and revived the complaint for consignation, directing the trial court to give due course thereto. Hence, the instant petition.
Whether the corporation is liable to the petitioner as an accommodation party when the corporate officer issued a corporation’s check in their personal capacity.
No, The provision of the Negotiable Instruments Law which holds an accommodation party liable on the instrument to a holder for value, although such holder at the time of taking the instrument knew him to be only an accommodation party, does not include nor apply to corporations which are accommodation parties. This is because the issue or indorsement of negotiable paper by a corporation without consideration and for the accommodation of another is ultra vires. Hence, one who has taken the instrument with knowledge of the accommodation nature thereof cannot recover against a corporation where it is only an accommodation party. If the form of the instrument, or the nature of the transaction, is such as to charge the indorsee with knowledge that the issue or indorsement of the instrument by the corporation is for the accommodation of another, he cannot recover against the corporation thereon.
People vs Maniego
Maniego was an indorser of several checks drawn by her sister, which were dishonored after they had been exchanged with cash belonging to the Government, then in the official custody of Lt. Ubay. She was also found by court as an "accommodation party"who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.
Later, Maniego, was acquitted on the crime of malversation of public fund due to reasonable doubt. The judgement however still found the Maniego civilly liable for the amount malversed. Maniego appealed the said judgement, contending that she was just a mere indorser of the said checks issued against the funds of the government. The CA certified the this said case to the SC as it was purely a question of law.
Whether the indorser who is merely an accommodation party is liable for the negotiable instrument.
Yes, the indorser who is merely an accommodation party is liable for the negotiable instrument.
Under the NIL, among the "parties liable thereon" is an indorser "who indorses without qualification," inter alia "engages that on due presentment, the instrument shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it." Here, Maniego is "liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew her to be only an accommodation party,". After paying the holder, Maniego has the right to obtain reimbursement from the party accommodated, "since the relation between them is in effect that of principal and surety, the accommodation party being the surety."
Atrium Management Corp. vs CA (GR No. 109491, 28 Feb 2001)
Hi-Cement Corporation through its corporate signatories, Lourdes M. de Leon, treasurer, and Antonio de las Alas, Chairman, issued checks in favor of E.T. Henry and Co. Inc., as payee. E.T. Henry and Co., Inc. endorsed the four checks to petitioner Atrium Management Corporation for valuable consideration. Upon presentment for payment, the drawee bank dishonored all four checks for the common reason "payment stopped". Atrium instituted this action after its demand for payment of the value of the checks was denied. The trial court rendered a decision ordering Lourdes M. de Leon, her husband Rafael de Leon, E.T. Henry and Co., Inc. and Hi-Cement Corporation to pay petitioner Atrium, jointly and severally, the amount of P2 million corresponding to the value of the four checks, plus interest and attorney's fees. The Court of Appeals modified the decision of the trial court, absolving Hi-Cement Corporation from liability and dismissing the complaint as against it on the grounds that: (1) Lourdes M. de Leon was not authorized to issue the subject checks in favor of E.T. Henry, Inc.; (2) The issuance of the subject checks by Lourdes M. de Leon and the late Antonio de las Alas constituted ultra vires acts.. Hence, this petition.
Whether or not the issuance of the questioned checks was an ultra vires act.
No. Lourdes M. de Leon is the treasurer of the corporation and is authorized to sign checks for the corporation. At the time of the issuance of the checks, there were sufficient funds in the bank to cover payment of the amount of P2 million pesos. The act of issuing the checks was well within the ambit of a valid corporate act, for it was for securing a loan to finance the activities of the corporation, hence, not an ultra vires act.
"An ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the power conferred upon it by law" The term "ultra vires" is "distinguished from an illegal act for the former is merely voidable which may be enforced by performance, ratification, or estoppel, while the latter is void and cannot be validated."
Salas vs CA (GR No. 76788, 22 January 1990)
Juanita Salas (Petitioner) bought a motor vehicle from the Violago Motor Sales Corporation (VMS) as evidenced by a promissory note. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation (private respondent) which financed the purchase. Petitioner defaulted in her installments allegedly due to a discrepancy in the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and deed of chattel mortgage, which fact she discovered when the vehicle figured in an accident. This failure to pay prompted private respondent to initiate an action for a sum of money against petitioner before the Regional Trial Court.
Whether or not private respondent is a holder in due course.
Yes. The Promissory Note was negotiated by indorsement in writing on the instrument itself payable to the Order of Filinvest Finance and Leasing Corporation and it is an indorsement of the entire instrument. Under the circumstances, there appears to be no question that Filinvest is a holder in due course, having taken the instrument under the following conditions: [a] it is complete and regular upon its face; [b] it became the holder thereof before it was overdue, and without notice that it had previously been dishonored; [c] it took the same in good faith and for value; and [d] when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation.
Accordingly, respondent corporation holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof. This being so, petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS.
MWSS vs. CA, (GR L62943, 14 July 1986)
PNB is the depository bank of MWSS. Among the several accounts of NWSA with PNB is NWSA Account No. 6. The authorized signature for said Account No. 6 were those of MWSS treasurer Jose Sanchez, its auditor Pedro Aguilar, and its acting General Manager Victor L. Recio. Their respective specimen signatures were submitted by the MWSS to and on file with the PNB. By special arrangement with the PNB, the MWSS used personalized checks in drawing from this account.
During the months of March, April and May 1969, two (2) sets of twenty-three (23) checks bearing same numbers as the other checks were paid and cleared by PNB and debited against NWSA Account No. 6.
The 1 set of these 23 checks were deposited by the payees Raul Dizon, Arturo Sison and Antonio Mendoza in their respective current accounts with the Philippine Commercial and Industrial Bank (PCIB) and Philippine Bank of Commerce (PBC) in the months of March, April and May 1969. Thru the Central Bank Clearing, these checks were presented for payment by PBC and PCIB to the defendant PNB, and paid, also in the months of March, April and May 1969. At the time of their presentation to PNB these checks bear the standard indorsement which reads 'all prior indorsement and/or lack of endorsement guaranteed.'
Subsequent investigation however, conducted by the NBI showed that Raul Dizon, Arturo Sison and Antonio Mendoza were all fictitious persons.
NWSA addressed a letter to PNB requesting the immediate restoration to its Account No. 6, of the total sum of P3,457,903.00 corresponding to the total amount of these twenty-three (23) checks and sets up the defense of forgery against PNB.
The CFI of Manila resolved the complaint in favor of the plaintiff MWSS. The CA reversed the decision of the CFI of Manila.
Whether or not petitioner is barred from setting up the defense of forgery on the ground of gross negligence
Forgery cannot be presumed. It must be established by clear, positive, and convincing evidence. This was not done in the present case.
Considering the absence of sufficient security in the printing of the checks coupled with the very close similarities between the genuine signatures and the alleged forgeries, the twenty-three (23) checks in question could have been presented to the petitioner's signatories without their knowing that they were bogus checks. Indeed, the cashier of the petitioner whose signatures were allegedly forged was unable to ten the difference between the allegedly forged signature and his own genuine signature. On the other hand, the MWSS officials admitted that these checks could easily be passed on as genuine.
Moreover, the petitioner is barred from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law which provides that:
SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto can be acquired through or under such signature unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
because it was guilty of negligence not only before the questioned checks were negotiated but even after the same had already been negotiated.. The records show that at the time the twenty-three (23) checks were prepared, negotiated, and encashed, the petitioner was using its own personalized checks, instead of the official PNB Commercial blank checks. In the exercise of this special privilege, however, the petitioner failed to provide the needed security measures. That there was gross negligence in the printing of its personalized checks. And failure of the petitioner to reconcile the bank statements with its own records.
Montinola vs PNB (88 Phil 178, 26 Feb 1951)
Laya, provincial treasurer of Misamis Oriental, issued a check to Ramos. Montinola in exchange of the check paid 45K Japanese notes, instead of 85K Japanese notes, to Ramos. On the back of the check, Ramos wrote:
“Pay to the order of Enrique P. Montinola P30,000 only. The balance to be deposited in the Philippine National Bank to the credit of M. V. Ramos.”
Montinola sought to have the check encashed but PNB dishonored the check. It appears that there was an insertion made. Under the signature of Laya, the words “Agent, Philippine National Bank” was inserted, thus making it appear that Laya disbursed the check as an agent of PNB and not as provincial treasurer of Misamis Oriental.
Whether the insertion of "Agent, Phil. National Bank" is a material alteration.
Yes, it is material alteration.
The insertion of the words "Agent, Phil. National Bank" which converts the bank from a mere drawee to a drawer and therefore changes its liability, constitutes a material alteration of the instrument without the consent of the parties liable thereon, and so discharges the instrument. (Section 124 of the Negotiable Instruments Law). The check was not legally negotiated within the meaning of the Negotiable Instruments Law. Section 32 of the NIL provides that "the indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable does not operate as a negotiation of the instrument." Montinola at most he may be regarded as a mere assignee of the P30,000 sold to him by Ramos, in which case, as such assignee, he is subject to all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos.
PCIB vs CA (350 SCRA 446)
This case is composed of three consolidated petitions involving several checks, payable to the Bureau of Internal Revenue, but was embezzled allegedly by an organized syndicate.
G.R. Nos. 121413 and 121479
Ford drew and issued its Citibank Check No. SN-04867 in the amount of P4,746,114.41 in favor of the Commissioner of Internal Revenue (BIR/CIR) for payment of manufacturer’s taxes. The Check was deposited to PCIB and was subsequently cleared at the Central Bank.
The check was presented to Citibank, the proceeds of the check was paid to PCIB as collecting or depository bank. However, the proceeds never reached BIR, so plaintiff was compelled to make a second payment. Ford demanded for reimbursement from PCIB
Defendant refused to reimburse plaintiff, and so the latter filed a complaint. An investigation of NBI revealed that the check was recalled by Godofredo Rivera, the general ledger accountant of Ford. He purportedly needed to hold back the check because there was an error in the computation of the tax due to the Bureau of Internal Revenue (BIR). PCIBank replaced the check with two of its own Managers check. Alleged members of a syndicate deposited the two manager’s checks with Pacific Banking Corporation (PBC).
Ford filed a third party complaint against Rivera and PBC. The case against PBC was dismissed. The case against Rivera was likewise dismissed because summons could not be served. The trial court held Citibank and PCIB jointly and severally liable to Ford.
The Court of Appeals modified the decision of RTC and only held PCIB liable.
G.R. No. 128604
On another case, Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting to P5,851,706.37 and P6,311,591.73. Both are crossed checks payable to payee’s account only. The checks never reached BIR, so plaintiff was compelled to make second payments. Plaintiff instituted an action for recovery against PCIB and Citibank. On investigation of NBI, the modus operandi of the syndicate was discovered.
Gorofredo Rivera made the checks but instead of delivering them to BIR, passed it to Remberto Castro, who was the manager of PCIB San Andres. Castro opened a checking account in the name of a fictitious person “Reynaldo Reyes”. Castro deposited a worthless Bank of America check with the same amount as that issued by Ford. While being routed to the Central Bank for clearing, the worthless check was replaced by the genuine one from Ford.
Whether or not petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue?
G.R. Nos. 121413 and 121479
Since the questioned crossed check was deposited with PCIBank, which claimed to be a depository/collecting bank of the BIR, it had the responsibility to make sure that the check in question is deposited in Payee’s account only.
Indeed, the crossing of the check with the phrase “Payee’s Account Only,” is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee’s account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement “all prior indorsements and/or lack of indorsement guaranteed.”
G.R. No. 128604
PCIB and Citibank are both negligent in the performance of their duties.
Citibank must likewise answer for the damages incurred by Ford on Citibank Checks Numbers SN-10597 and 16508, because of the contractual relationship existing between the two. Citibank, as the drawee bank breached its contractual obligation with Ford and such degree of culpability contributed to the damage caused to the latter. On this score, we agree with the respondent court’s ruling.
thus, invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN-10597 and 16508. Banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence.A bank’s liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment.
Ford is not completely blameless in its failure to detect the fraud. Failure on the part of the depositor to examine its passbook, statements of account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in the exercise of due care and diligence find therein, serves to mitigate the banks’ liability by reducing the award of interest from twelve percent (12%) to six percent (6%) per annum. As
In the case, there is a defect on the title of the person negotiating the instrument because it was obtained by fraud and unlawful means, and the proceeds of the checks were not remitted to the payee. The direct perpetrators of the offense, namely the embezzlers belonging to a syndicate, are now fugitives from justice.
On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances.
Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted instructions given by the payor or its agent.
It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an agreement to the contrary, that of principal and agent. A bank which receives such paper for collection is the agent of the payee or holder.
Papa vs AU Valencia (284 SCRA 643, 23 Jan 1998)
Myron C. Papa, acting as attorney-in-fact of Angela M. Butte, sold to Peñarroyo through Valencia, a parcel of land, which was mortgaged to the Associated Banking Corporation, together with several other parcels of land. The bank refused to release it unless and until all the mortgaged properties were also redeemed. Respondents discovered that petitioner had been collecting monthly rentals from the tenants of the property, knowing that said property had already been sold to Peñarroyo.On appeal, the petitioner argued that alleged sale of the subject property had not been consummated because he did not encash the check (in the amount of P40,000.00), which did not produce the effect of payment as in Art. 1249 of the Civil Code.
Whether the sale was not consummated due to alleged non encashment of check for over ten years.
No, Valencia and Peñarroyo had given petitioner Myron C. Papa the amounts of Five Thousand Pesos (P5,000.00) in cash on 24 May 1973, and Forty Thousand Pesos (P40,000.00) in check on 15 June 1973, in payment of the purchase price of the subject lot. Petitioner himself admits having received said amounts, and having issued receipts therefor. Petitioner's assertion that he never encashed the aforesaid check is not substantiated and is at odds with his statement in his answer that "he can no longer recall the transaction which is supposed to have happened 10 years ago." After more than ten (10) years from the payment in party by cash and in part by check, the presumption is that the check had been encashed. As already stated, he even waived the presentation of oral evidence. Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay.
While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor's unreasonable delay in presentment. Art. 1249 of the Civil Code provides, in part, that payment by checks shall produce the effect of payment only when they have been cashed or when through the fault of the creditor they have been impaired. In this case, the acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given. It has, likewise, been held that if no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused.
Great Eastern Insurance vs Hongkong Shanghai Bank Corp. (GR No 18657, 23 Aug 1922)
The plaintiff is an insurance corporation, which drew a check in favor of Melicor. This was stolen by Maasim, forged the signature of Melicor and deposited the check to his account in PNB. Thereafter, PNB endorsed the check to HSBC who later debited the account of plaintiff. Plaintiff believed all along that Melicor received the payment. Upon knowledge of the debit HSBC did on its account, it demanded that the same amount be credited.
May 3, 1920: Great Eastern Life Ins. Co. (Eastern) drew its check for P2,000 on the Hongkong and Shanghai Banking Corporation (HSBC) payable to the order of Lazaro Melicor.
E. M. Maasim fraudulently obtained possession of the check, forged Melicor's signature, as an endorser, and then personally endorsed and presented it to the Philippine National Bank (PNB) and it was placed to his credit.
Next day, PNB endorsed the check to the HSBC who paid it HSBC sent a bank statement to the Eastern showing the amount of the check was charged to its account, and no objection was made 4 months after the check was charged, it developed that Lazaro Melicor, to whom the check was made payable, had never received it, and that his signature, as an endorser, was forged by Maasim, Eastern promptly made a demand upon the HSBC to credit the amount of the forged check Eastern filed against HSBC and PNB
RTC: dismissed the case
Whether the delivery of a check produces the effect of payment only when it is cashed.
Yes, Lower court is reversed. Eastern against HSBC who can claim against PNB forgery was that of Melicor (payees and NOT the maker) Eastern received it banks statement, it had a right to assume that Melicor had personally endorsed the check, and that, otherwise, the bank would not have paid it Section 23 of Negotiable Instruments Law:
When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
The Philippine National Bank had no license or authority to pay the money to Maasim or anyone else upon a forge signature.
Its remedy is against Maasim to whom it paid the money.
Nyco Sales vs BA Finance (200 SCRA 637, 1991)
Nyco Sales Corporation (Nyco) whose president and general manager is Rufino Yao (Yao), is engaged in the business of selling construction materials. The Fernandez brothers, acting in behalf of Sanshell Corporation (Sanshell), approached Rufino Yao for credit accommodation.
Fernandez Brothers went to Yao for the purpose of discounting Sanshell's post-dated check payable to Nyco. Following the discounting process agreed upon, Nyco, thru Yao, endorsed the check in favor of BA Finance. Thereafter, BA Finance issued a check payable to Nyco which endorsed it in favor of Sanshell. Sanshell then made use of and/or negotiated the check. Accompanying the exchange of checks was a Deed of Assignment executed by Nyco in favor of BA Finance with the conformity of Sanshell with Sanshell Corporation as the debtor-obligor. The BPI check, however, was dishonored by the drawee bank upon presentment for payment. Nyco contended that they are not notified of the fact of dishonor.
Whether the assignor is liable to its assignee for its dishonored checks.
Yes, the assignor-vendor is liable for the invalidity of whatever he as signed to the assignee-vendee
An assignment of credit is the process of transferring the right of the assignor to the assignee, who would then be allowed to proceed against the debtor. It may be done either gratuitously or generously, in which case, the assignment has an effect similar to that of a sale.
According to Article 1628 of the Civil Code, the assignor-vendor warrants both the credit itself (its existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the case at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor should be held answerable therefor. The dishonor of an assigned check simply stresses its liability and the failure to give a notice of dishonor will not discharge it from such liability. This is because the cause of action stems from the breach of the warranties embodied in the Deed of Assignment, and not from the dishonoring of the check alone (See Art. 1628, Civil Code).
Here, it is beyond dispute that Nyco executed a deed of assignment in favor of BA Finance with Sanshell Corporation as the debtor-obligor. Nyco is liable to pay the amount represented in the said checks.
Great Asian Sales vs CA (GR No 105774, 25 April 2002)
March 17, 1981: Great Asian BOD approved a resolution authorizing its Treasurer and General Manager, Arsenio Lim Piat, Jr. (Arsenio) to secure a loan, not exceeding 1M, from Bancasia
February 10, 1982: Great Asian BOD approved a resolution authorizing Great Asian to secure a discounting line with Bancasia in an amount not exceeding P2M
also designated Arsenio as the authorized signatory to sign all instruments, documents and checks necessary to secure the discounting line
Tan Chong Lin signed 2 surety agreements in favor of Bancasia
Great Asian, through its Treasurer and General Manager Arsenio, signed 4 Deeds of Assignment of Receivables (Deeds of Assignment), assigning to Bancasia 15 postdated checks:
9 checks were payable to Great Asian
3 were payable to "New Asian Emp."
3 were payable to cash
various customers of Great Asian issued these postdated checks in payment for appliances and other merchandise.
Deed of Assignments of assignment:
January 12, 1982: 4 post-dated checks of P244,225.82 maturing March 17, 1982, 2 were dishonored
January 12, 1982: 4 post-dated checks of P312,819 maturing April 1, 1982, all 4 were dishonored
February 11, 1982: 8 postdated checks of P344,475 maturing April 30, 1982, all 8 checks were dishonored
March 5, 1982: 1 postdated checks of P200K maturing March 18, 1982 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 15 dishonored checks by signing his name at the back of the checks
8 dishonored checks bore the endorsement of Arsenio below the stamped name of "Great Asian Sales Center"
7 dishonored checks just bore the signature of Arsenio
The drawee banks dishonored the 15 checks on maturity when deposited for collection by Bancasia, with any of the following as reason for the dishonor:
"account under garnishment"
"insufficiency of funds
March 18, 1982: Bancasia's lawyer,Atty. Eladia Reyes, sent by registered mail to Tan Chong Lin a letter notifying him of the dishonor and demanding payment from him
June 16, 1982: Bancasia sent by personal delivery a letter to Tan Chong Lin
May 21, 1982: Great Asian filed a case before the CFI for insolvency listing Bancasia as one of the creditors of Great Asian in the amount of P1,243,632.00
June 23, 1982: Bancasia filed a complaint for collection of a sum of money against Great Asian and Tan Chong Lin
CFI: favored Bancasia ordering Great Asian and Tan Chong Lin to pay jointly and severally
CA: deleted atty. fees
Whether or not Bancasia and Tang Chon Lin should be held liable under the Civil Code because it was a separate and distinct deed of assignment
Yes. Affirmed with Modification. 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 negotiated, a negotiable instrument may be assigned.
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. (only security)
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. 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. 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 timely notice of dishonor, still there would be no prejudice whatever to Great Asian.
Luis Wong vs CA (GR No. 117857, 2 Feb 2001)
Luis Wong was an agent of Limtong Press. Inc. (LPI), a manufacturer of calendars. After printing the calendars, LPI would ship the calendars directly to the customers. Thereafter, the agents would come around to collect the payments. Wong, however, had a history of unremitted collections. Hence, petitioner’s customers were required to issue post-dated checks before LPI would accept their purchase orders.In early December 1985, Wong issued six (6) postdated checks totaling P18,025.00, intended to guarantee the calendar orders of customers who failed to issue post-dated checks. However, following company policy, LPI refused to accept the checks as guarantees. Instead, the parties agreed to apply the checks to the payment of Wong’s unremitted collections. Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the checks and promised to replace them within 30 days. However, Wong reneged on his promise. Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks were returned for the reason "account closed." Wong failed to make arrangements for payment within five (5) bankingdays. Wong was charged with three (3) counts of violation of B.P. Blg. 22 and was found guilty by the trial court, to which the CA affirmed. Wong contends that checks were issued as guarantee and the obligations they were supposed to guarantee were already paid and not as payment for unremitted collection
Whether Wong is guilty for the violation of BP 22.
Yes. Wong’s argument is flawed and has no factual basis, the RTC and CA having both ruled that the checks were in payment for unremitted collections, and not as guarantee. Likewise, the argument has no legal basis, for what B.P. Blg. 22 punishes the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating to its issuance.There are two (2) ways of violating B.P. Blg. 22: (1) by making or drawing and issuing a check to apply on account or for value knowing at the time of issue that the check is not sufficiently funded; and (2) by having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep sufficient funds therein or credit with said bank to cover the full amount of the check when presented to the drawee bank within a period of ninety (90) days.
As to the second element, B.P. Blg. 22 creates a presumption juris tantum that the second element prima facie exists when the first and third elements of the offense are present.20 Thus, the maker’s knowledge is presumed from the dishonor of the check for insufficiency of funds.21
Petitioner avers that since the complainant deposited the checks on June 5, 1986, or 157 days after the December 30, 1985 maturity date, the presumption of knowledge of lack of funds under Section 2 of B.P. Blg. 22 should not apply to him. He further claims that he should not be expected to keep his bank account active and funded beyond the ninety-day period.
Associated Bank vs CA (208 SCRA 468, 1992)
Reyes was engaged in the RTW business and held transactions with different department stores. She was about to collect payments from the department stores when she was informed that the payments had already been made, through crossed checks issued in her business’ name and the same were deposited with the bank. The bank consequently allowed its transfer to Sayson who later encashed the checks. This prompted Reyes to sue the bank and its manager for the return of the money. The trial and appellate court ruled in her favor.
Whether or not crossed checks can be encashed.
There is no doubt that the checks were crossed checks and for payee’s account only. Reyes was able to show that she has never authorized Sayson to deposit the checks nor to encash the same; that the bank had allowed all checks to be deposited, cleared and paid to one Sayson in
violation of the instructions in the said crossed checks that the same were for payee’s account only; and that Reyes maintained a savings account with the bank which never cleared the said checks.
Under accepted banking practice, crossing a check is done by writing two parallel lines diagonally on the top left portion of the checks. The crossing is special where the name of a bank or a business institution is written between the two parallel lines, which means that the drawee should pay
only with the intervention of the company. The crossing is general where the words written in between are “And Co.” and “for payee’s account only”, as in the case at bar. This means that the drawee bank should not encash the check but merely accept it for deposit.
The effects of crossing a check are as follows:
1. That the check may not be encashed but only deposited in the bank
2. That the check may be negotiated only once—to one who has an account with a bank
3. That the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to the
The subject checks were accepted for deposit by the bank for the account of Sayson although they were crossed checks and the payee wasn't Sayson but Reyes. The bank stamped thereon its guarantee that all prior endorsements and/or lack of endorsements guaranteed. By such deliberate and positive act, the bank had for all legal intents and purposes treated the said checks as negotiable instruments and accordingly assumed the warranty of the endorser.
When the bank paid the checks so indorsed notwithstanding that title has not passed to the endorser, it did so at its peril and became liable to the payee for the value of the checks.
Casabuena vs. CA (286 SCRA 594)
Ciriaco Urdaneta (Ciriaco) was indebted to Benin, to secure which debt the spouses Urdaneta ceded their rights over the land through a deed of assignment. A deed of sale with mortgage was executed, with Urdaneta undertaking to pay the City. After having incurred additional, Ciriaco executed another deed of assignment involving the whole lot, with assignee Benin agreeing to shoulder all obligations including the payment of amortization to the City. The parties verbally agreed that Urdaneta could redeem the property upon payment of the loan; failure to pay would transfer physical possession of the lot to Benin, without actual transfer of title and ownership thereto. A Transfer Certificate of Title was issued in the name of Spouses Urdaneta or Ciriaco, married to Ofelia Ipil. Benin had transferred her right, title and interest of the land for a consideration to Casabuena, Benin's rental collector and lessee on the duplex erected on the land. However, their relationship soured, compelling the Benin to filed a complaint for ejectment against Casabuena, alleging that the Casabuena stopped paying rentals.
Can a deed of assignment transfer ownership of the property to the assignee.
No, a deed of assignment does not transfer ownership of the property to the assignee. An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, transfers his credit and its accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. The assignment involves no transfer of ownership but merely effects the transfer rights which the assignor has at the time, to the assignee. The act of assignment could not have operated to efface liens or restrictions burdening the right assigned, because an assignee cannot acquire a greater right than that pertaining to the assignor. At most, an assignee can only acquire rights duplicating those which his assignor is entitled by law to exercise.
Here, Benin having been deemed subrogated to the rights and obligations of the spouses Urdaneta, she was bound by exactly the same conditions to which the spouses were bound. Not having acquired any right over the land in question, it follows that Benin conveyed nothing to Casabuena with respect to the property. Hence, notwithstanding the encumbrance of the Bulacan lot through a deed of assignment in favor of Benin, the spouses Urdaneta remain its owners, to the exclusion of Casabuena.
Caltex (Philippines) vs. CA (212 SCRA 448, 10 August 1992)
Security bank issued Certificates of Time Deposit to Angel Dela Cruz which she later used to purchase fuel products from Caltex. However, later after the said transaction, Angel Dela Cruz went to the issuing bank and claimed that the CTDs were lost.
Upon compliance with some formal requirements, Angel was issued replacements. Thereafter, he secured a loan from the bank where he assigned the certificates as security. Here comes the petitioner, averred that the certificates were not actually lost but were given as security for payment for fuel purchases.
The bank demanded some proof of the agreement but the petitioner failed to comply. The loan matured and the time deposits were terminated and then applied to the payment of the loan.
Calex demands the payment of the certificates but to no avail.
Whether or not a certificate of time deposit is a negotiable instrument.
Yes. The Court ruled that the certificates of time deposit are negotiable instruments as they meet the requirements provided for by law.
For an an instrument to be negotiable, it must conform to the requirements, as follows:
Section 1 of the Negotiable Instruments Law.
It must be in writing and signed by the maker or drawer;
Must contain an unconditional promise or order to pay a sum certain in money;
Must be payable on demand, or at a fixed or determinable future time;
Must be payable to order or to bearer; and
Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.