Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
AUGUSTUS GONZALES andSPOUSES
NESTOR VICTOR andMA. LOURDES
RODRIGUEZ,
Petitioners,

G.R. No. 167398

Present:
CARPIO,* J.,
VELASCO, JR., J., Chairperson,
BRION,**
PERALTA, and
SERENO,*** JJ.

-versus-

Promulgated:
QUIRICO PE,
Respondent.

August 9, 2011

x-----------------------------------------------------------------------------------------x
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to set aside the
Decision[1] dated June 23, 2004 and Resolution [2] dated February 23, 2005 of the Court
of Appeals (CA), Twentieth Division, in CA-G.R. SP No. 73171, entitledQuirico Pe v.
Honorable

Judge

Rene

Hortillo,

in

his

capacity

as

Presiding

Judge of the Regional Trial Court of Iloilo City, Branch 31, Augustus Gonzales and
Spouses Engr. Nestor Victor and Dr. Ma. Lourdes Rodriguez, which granted the petition
of respondent Quirico Pe. The CA Decision reversed and set aside the Order [3] dated
September 23, 2002 of the Regional Trial Court (RTC) of Iloilo City, Branch 31, which
dismissed respondent's appeal for non-payment of docket and other lawful fees, and
directing the issuance of the writ of execution for the implementation of its
Decision[4] dated June

28,

2002 in

favor

of

the

petitioners

and

against

the

respondent. The CA Decision also directed the RTC to assess the appellate docket

fees to be paid by the respondent, if it has not done so, and allow him to pay such fees
and give due course to his appeal.
The antecedents are as follows:
Respondent Quirico Pe was engaged in the business of construction materials,
and had been transacting business with petitioner Spouses Nestor Victor Rodriguez and
Ma. Lourdes Rodriguez. The Department of Public Works and Highways (DPWH)
awarded two contracts in favor of petitioner Nestor Rodriguez for the following projects,
namely, construction of Lanot-Banga Road (Kalibo Highway) km. 39 + 200 to km. 40 +
275 Section IV (Aklan side) and concreting of Laua-an Pandan Road (Tibial-Culasi
Section), Province of Antique. In 1998, respondent agreed to supply cement for the
construction projects of petitioner Spouses Rodriguez. Petitioner Nestor Rodriguez
availed of the DPWHs pre-payment program for cement requirement regarding the
Lanot-Banga Road, Kalibo Highway project (Kalibo project), wherein the DPWH would
give an advance payment even before project completion upon his presentment, among
others, of an official receipt for the amount advanced. Petitioner Nestor Rodriguez gave
Land Bank of the Philippines (LBP) Check No. 6563066 to respondent, which was
signed by co-petitioners (his wife Ma. Lourdes Rodriguez and his business partner
Augustus Gonzales), but leaving the amount and date in blank. The blank LBP check
was delivered to respondent to guarantee the payment of 15,698 bags of Portland
cement valued at P1,507,008.00, covered by Official Receipt No. 1175, [5] issued by
respondent (as owner of Antique Commercial), in favor of petitioner Nestor Rodriguez
(as owner of Greenland Builders). However, a year later, respondent filled up blank
LBP Check No. 6563066, by placing P2,062,000.00 and June 30, 1999, corresponding
to the amount and date.

On December 9, 1999, petitioners filed an Amended Complaint [6] for Declaration

of Payment, Cancellation of Documents and Damages against respondent with the
RTC, Branch 31, Iloilo City, docketed as Civil Case No. 25945. The amended complaint
alleged that they entrusted blank LBP Check No. 6563066 to respondent so as to
facilitate the approval of the pre-payment application of petitioner Nestor Rodriguez with
the DPWH. They stated that the blank LBP check would serve as collateral to
guarantee the payment for 15,698 bags to be used for the Kalibo project, amounting
to P1,507,008.00, and that after payment of the said amount, respondent would return
the LBP check. According to them, after having paid respondent the amount
of P2,306,500.00, which is P139,160.00 more than the amount of P2,167,340.00
(representing the value for 23,360 bags of cement taken for the Kalibo project), they
were cleared of any liability.
On January 6, 2000, respondent filed an Answer to Amended Complaint,
[7]

averring that he had so far delivered 40,360 bags of cement to petitioners who

remitted P2,306,500.00, thereby leaving an outstanding amount of P2,062,000.00. He

countered that when petitioners stopped the bank-to-bank online payments to him, he
filled up the amount of P2,062,000.00 and made the LBP check payable on June 30,
1999. The LBP check was dishonored for being drawn against insufficient funds
(DAIF). By way of compulsory counterclaim, he sought recovery of the balance
of P2,062,000.00, with interest at 24% from January 29, 1999 until fully paid as actual
damages.
In the Pre-trial Order[8] dated January 28, 2000, the trial court determined the
following to be the delimited issues, to wit:
(1) whether plaintiffs [herein petitioners] liability to defendant
[herein respondent] for 15,698 bags priced at P1,507,008.00 subject of the
earlier-mentioned pre-payment program and covered by the blank LBP
Check No. 6563066 has already been paid, hence, plaintiffs are no longer
liable to the defendant for this amount;
(2) whether this LBP Check No. 6563066 should not be returned
by defendant to plaintiffs, or failing in which, should now be declared as
cancelled, null and void;

(3) whether plaintiffs have completely paid to the defendant the

price of the cement used for the Kalibo project which specifically is the
amount of 23,360 bags of cement valued in the total amount
of P2,167,340.00;
(4) whether plaintiffs are entitled to damages and attorneys fees;
and
(5) whether this case be dismissed and with the dismissal of the
complaint to proceed with the counterclaim.[9]
In a Decision dated June 28, 2002, the trial court, applying Section 14 [10] of the
Negotiable Instruments Law, found that respondents subsequent filling up of LBP
Check No. 6563066 in the amount of P2,062,000.00 was not made strictly in
accordance with the authority given to him by petitioner Nestor Rodriguez, and that
since one year had already lapsed, the same was not done within a reasonable time. As
to the 23,360 bags of cement for the Kalibo project, valued at P2,167,340.00 which was
subject of previous transactions, the trial court ruled that the same had been fully paid
and considered a settled issue. Consequently, the RTC rendered judgment in favor of
the petitioners and against the respondent, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendant, as follows:
1. Declaring plaintiffs' obligation to the defendant for the
cement supplied for the Kalibo (Lanot-Banga) Road Construction Project
in the amount of P2,167,340.00 as already and fully paid, hence, plaintiffs
are no longer liable to the defendant;
2. Declaring Land Bank Check No. 6563066 dated June
30, 1999 for P2,062,000.00 as null and void and without any legal effect;
3. Ordering defendant to pay each plaintiff the sums
of P100,000.00
as
actual
damages; P500,000.00
as
moral
damages;P200,000.00 as attorney's fees and P2,000.00 per hearing as
appearance fee; P50,000.00 as miscellaneous actual and necessary
litigation expenses; and
4. To pay the costs.
Defendant's counterclaim is hereby DISMISSED.

SO ORDERED.[11]

After receipt of a copy of the said RTC Decision on July 26, 2002, respondent filed
a Notice of Appeal on July 30, 2002.
In an Order[12] dated August 5, 2002, the trial court gave due course to
respondent's appeal, and directed the Branch Clerk of Court to transmit the entire
records of the case to the CA.

On August 26, 2002, petitioners filed a Motion for Reconsideration, to Dismiss

Appeal, and for Issuance of Writ of Execution,[13] stating that respondents appeal should
be dismissed as the same was not perfected due to non-payment of docket and other
lawful fees as required under Section 4, Rule 41 of the Rules of Court. Claiming that
since the respondents appeal was not perfected and, as a consequence, the RTC
Decision dated June 28, 2002 became final and executory, petitioners sought the
issuance of a writ of execution for the implementation of the said RTC Decision. To
buttress their motion, petitioners also appended a Certification [14] dated August 19, 2002,
issued by the Clerk of Court of the Office of the Clerk of Court (OCC) of the RTC, Iloilo
City, certifying that no appeal fees in the case had been paid and received by the OCC.
In the Order dated September 23, 2002, the trial court dismissed respondent's
appeal and directed the issuance of a writ of execution to implement the RTC Decision
dated June 28, 2002.
On October 2, 2002, the Clerk of Court and Ex-officio Provincial Sheriff of Iloilo
issued the Writ of Execution[15]directing the execution of the RTC Decision dated June
28, 2002.

On October 7, 2002, respondent filed a Petition for Certiorari and Prohibition with
Application for Writ of Preliminary Injunction and Prayer for Temporary Restraining
Order,[16] seeking to set aside the RTC Order dated September 23, 2002 (which
dismissed his appeal and directed the issuance of a writ of execution to implement the
RTC Decision dated June 28, 2002), and to enjoin the implementation of the Writ of
Execution dated October 2, 2002.
In a Resolution[17] dated October 9, 2002, the CA granted the respondents prayer
for Temporary Restraining Order and, in the Resolution [18] dated August 20, 2003,
approved the respondents injunction bond and directed the Division Clerk of Court to
issue the writ of preliminary injunction.
On August 20, 2003, the Division Clerk of Court issued the Writ of Preliminary
Injunction,[19] thereby enjoining the implementation of the Writ of Execution dated
October 2, 2002.
On June 23, 2004, the CA rendered a Decision in favor of the respondent, the
dispositive portion of which reads:
WHEREFORE, the petition is granted. The assailed order and writ
of execution of the Regional Trial Court must be, as it is hereby, SET
ASIDE. The trial court is hereby ordered to assess the appellate docket
fees, if it has not done so, and allow the petitioner to pay such fees and
give due course to the petitioner's appeal. No costs.
SO ORDERED.[20]
Aggrieved, petitioners filed a Motion for Reconsideration [21] on August 24, 2004,
which, however, was denied by the CA in a Resolution [22] dated February 23, 2005.
Hence, petitioner filed this present petition raising the sole issue that:
THE

THE COURT OF APPEALS PATENTLY ERRED IN REVERSING

DECISION OF THE LOWER COURT AND ALLOWING

RESPONDENT TO BELATEDLY PAY THE REQUIRED APPELLATE

DOCKET AND OTHER LEGAL FEES.
Petitioners allege that since respondent failed to pay the docket and other legal
fees at the time he filed the Notice of Appeal, his appeal was deemed not perfected in
contemplation of the law. Thus, petitioners pray that the CA decision be set aside and a
new one be rendered dismissing the respondents appeal and ordering the execution of
the RTC Decision dated June 28, 2002.
On the other hand, respondent, citing Section 9, Rule 41 of the Rules of Court,
maintains that his appeal has been perfected by the mere filing of the notice of
appeal. Respondent theorizes that with the perfection of his appeal, the trial court is
now divested of jurisdiction to dismiss his appeal and, therefore, only the CA has
jurisdiction to determine and rule on the propriety of his appeal. He raises the defense
that his failure to pay the required docket and other legal fees was because the RTC
Branch Clerk of Court did not make an assessment of the appeal fees to be paid when
he filed the notice of appeal.
The petition is meritorious.
In cases of ordinary appeal, Section 2, Rule 41 of the Rules of Court provides that
the appeal to the CA in cases decided by the RTC in the exercise of its original
jurisdiction shall be taken by filing a notice of appeal with the RTC (the court which
rendered the judgment or final order appealed from) and serving a copy thereof upon
the adverse party. Section 3 thereof states that the appeal shall be taken within fifteen
(15) days from notice of the judgment or final order appealed from. Concomitant with
the filing of a notice of appeal is the payment of the required appeal fees within the 15day reglementary period set forth in Section 4 of the said Rule. Thus,
SEC. 4. Appellate court docket and other lawful fees. Within the
period for taking an appeal, the appellant shall pay to the clerk of the court
which rendered the judgment or final order appealed from, the full amount
of the appellate court docket and other lawful fees. Proof of payment of

said fees shall be transmitted to the appellate court together with the
original record or the record on appeal.

In reversing the ruling of the trial court, the CA cited Yambao v. Court of
Appeals[23] as justification for giving due course to respondents petition and ordering the
belated payment of docket and other legal fees. In Yambao, the CA dismissed therein
petitioners appeal from the RTC decision for failure to pay the full amount of the
required docket fee. Upon elevation of the case, the Court, however, ordered the CA to
give due course to their appeal, and ruled that their subsequent payment of the P20.00
deficiency, even before the CA had passed upon their motion for reconsideration, was
indicative of their good faith and willingness to comply with the Rules.
The ruling in Yambao is not applicable to the present case as herein respondent
never made any payment of the docket and other lawful fees, not even an attempt to do
so, simultaneous with his filing of the Notice of Appeal. Although respondent was able
to file a timely Notice of Appeal, however, he failed to pay the docket and other legal
fees, claiming that the Branch Clerk of Court did not issue any assessment. This
procedural lapse on the part of the respondent rendered his appeal with the CA to be
dismissible and, therefore, the RTC Decision, dated June 28, 2002, to be final and
executory.
In Far Corporation v. Magdaluyo,[24] as with other subsequent cases[25] of the same
ruling, the Court explained that the procedural requirement under Section 4 of Rule 41
is not merely directory, as the payment of the docket and other legal fees within the
prescribed period is both mandatory and jurisdictional. It bears stressing that an appeal
is not a right, but a mere statutory privilege. An ordinary appeal from a decision or final
order of the RTC to the CA must be made within 15 days from notice. And within this
period, the full amount of the appellate court docket and other lawful fees must be paid
to the clerk of the court which rendered the judgment or final order appealed from. The
requirement of paying the full amount of the appellate docket fees within the prescribed

period is not a mere technicality of law or procedure. The payment of docket fees
within the prescribed period is mandatory for the perfection of an appeal. Without such
payment, the appeal is not perfected. The appellate court does not acquire jurisdiction
over the subject matter of the action and the Decision sought to be appealed from
becomes final and executory. Further, under Section 1 (c), Rule 50, an appeal may be
dismissed by the CA, on its own motion or on that of the appellee, on the ground of the
non-payment of the docket and other lawful fees within the reglementary period as
provided under Section 4 of Rule 41. The payment of the full amount of the docket fee
is an indispensable step for the perfection of an appeal. In both original and appellate
cases, the court acquires jurisdiction over the case only upon the payment of the
prescribed docket fees.
Respondents claim that his non-payment of docket and other lawful fees should
be treated as mistake and excusable negligence, attributable to the RTC Branch Clerk
of Court, is too superficial to warrant consideration. This is clearly negligence of
respondent's counsel, which is not excusable. Negligence to be excusable must be
one which ordinary diligence and prudence could not have guarded against.
[26]

Respondent's counsel filed a notice of appeal within the reglementary period for

filing the same without, however, paying the appellate docket fees. He simply ignored
the basic procedure of taking an appeal by filing a notice of appeal, coupled with the
payment of the full amount of docket and other lawful fees. Respondents counsel
should keep abreast of procedural laws and his ignorance of the procedural
requirements shall bind the respondent. In National Power Corporation v. Laohoo,
[27]

we ruled that therein counsels failure to file the appeal in due time does not amount

to excusable negligence. The non-perfection of the appeal on time is not a mere

technicality. Besides, to grant therein petitioners plea for the relaxation of the rules on
technicality would disturb a well-entrenched ruling that could make uncertain when a
judgment attains finality, leaving the same to depend upon the resourcefulness of a
party in concocting implausible excuses to justify an unwarranted departure from the

time-honored policy of the law that the period for the perfection of an appeal is
mandatory and jurisdictional.

The CA took cognizance over the case, based on the wrong premise that when
the RTC issued the Order dated August 5, 2002 giving due course to respondents
Notice of Appeal and directing the Branch Clerk of Court to transmit the entire records
of the case to the CA, it ipso facto lost jurisdiction over the case. Section 9,[28] Rule 41
of the Rules explains that the court of origin loses jurisdiction over the case only upon
the perfection of the appeal filed in due time by the appellant and the expiration of the
time to appeal of the other parties. Withal, prior to the transmittal of the original records
of the case to the CA, the RTC may issue orders for the protection and preservation of
the rights of the prevailing party, as in this case, the issuance of the writ of execution
because the respondents appeal was not perfected.
Moreover, Section 13, Rule 41 of the Rules states that the CA may dismiss an
appeal taken from the RTC on the ground of non-payment of the docket and other
lawful fees within the 15-day reglementary period:
SEC 13. Dismissal of appeal. Prior to the transmittal of the
original record or the record on appeal to the appellate court, the trial court
may motu proprio or on motion dismiss the appeal for having been taken
out of time, or for non-payment of the docket and other lawful fees within
the reglementary period. (As amended by A.M. No. 00-2-10-SC, May 1,
2000.)
Since respondents appeal was not perfected within the 15-day reglementary
period, it was as if no appeal was actually taken. Therefore, the RTC retains jurisdiction
to rule on pending incidents lodged before it, such as the petitioners Motion for
Reconsideration, to Dismiss Appeal, and for Issuance of Writ of Execution, filed on
August 26, 2002, which sought to set aside its Order dated August 5, 2002 that gave
due course to respondents Notice of Appeal, and directed the issuance of a writ of
execution. Having no jurisdiction over the case, the prudent thing that the CA should
have done was to dismiss the respondents appeal for failure to pay the appeal fees,

and declare that the RTC Decision dated June 28, 2002 has now become final and
executory.

As an incidental matter on the propriety of petitioners petition for review

on certiorari under Rule 45 of the Rules, respondent raises the argument that since the
subject of the present petition is the writ of preliminary injunction granted by the CA (in
favor of the respondent enjoining the execution of the RTC Decision dated June 28,
2002), in CA-G.R. SP No. 73171, which is interlocutory in nature, petitioners petition
should be denied for being the wrong remedy. In other words, respondent advances
the theory that since the assailed CA Decision dated June 23, 2004 partakes of an
interlocutory order, i.e., enjoining the finality of the RTC Decision dated June 28, 2002,
petitioners should have availed of the remedy of a petition for certiorariunder Rule 65,
not a petition for review on certiorari under Rule 45.
Respondents argument is unfounded. The proper remedy of a party aggrieved
by a decision of the CA is a petition for review on certiorari under Rule 45, which is not
identical to a petition for certiorari under Rule 65. Rule 45 provides that decisions, final
orders or resolutions of the CA in any case, i.e., regardless of the nature of the action or
proceedings involved, may be appealed to Us by filing a petition for review on certiorari,
which would be but a continuation of the appellate process over the original case.
[29]

Therefore, petitioners filing of the present petition for review on certiorari under Rule

45 is the proper and adequate remedy to challenge the Decision dated June 24, 2004
and Resolution dated February 23, 2005 of the CA.
To recapitulate, one who seeks to avail of the right to appeal must strictly comply
with the requirements of the rules, and failure to do so leads to the loss of the right to
appeal.[30] The rules require that from the date of receipt of the assailed RTC order
denying ones motion for reconsideration, an appellant may take an appeal to the CA by
filing a notice of appeal with the RTC and paying the required docket and other lawful
fees with the RTC Branch Clerk of Court, within the 15-day reglementary period for the

perfection of an appeal. Otherwise, the appellant's appeal is not perfected, and the CA
may dismiss the appeal on the ground of non-payment of docket and other lawful
fees. As a consequence, the assailed RTC decision shall become final and executory
and, therefore, the prevailing parties can move for the issuance of a writ of execution.
Since the CA erroneously took cognizance over the case, its Decision dated
June 23, 2004 and Resolution dated February 23, 2005 should be overturned, and the
Writ of Preliminary Injunction issued on August 20, 2003 should likewise be
lifted. Thus, the RTC Decision dated June 28, 2002 is reinstated and, as the said
decision having become final and executory, the case is remanded for its prompt
execution.
While every litigant must be given the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities, the failure to
perfect an appeal within the reglementary period is not a mere technicality. It raises
jurisdictional problem, as it deprives the appellate court of its jurisdiction over the
appeal. After a decision is declared final and executory, vested rights are acquired by
the winning party. Just as a losing party has the right to appeal within the prescribed
period, the winning party has the correlative right to enjoy the finality of the decision on
the case.[31]
WHEREFORE, the petition is GRANTED. The Decision dated June 23, 2004
and Resolution dated February 23, 2005 of the Court of Appeals, in CA-G.R. SP No.
73171, are REVERSED and SET ASIDE. The Writ of Preliminary Injunction, issued by
the Court of Appeals on August 20, 2003, is LIFTED.
The Decision dated June 28, 2002 of the Regional Trial Court, Branch 31, Iloilo
City is REINSTATED and, in view of its finality, the case is REMANDED for its prompt
execution.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION

G.R. No. 93048 March 3, 1994

BATAAN
CIGAR
AND
CIGARETTE
FACTORY,
INC., petitioner,
vs.
THE COURT OF APPEALS and STATE INVESTMENT HOUSE, INC., respondents.
Teresita Gandiongco Oledan for petitioner.
Acaban & Sabado for private respondent.

NOCON, J.:
For our review is the decision of the Court of Appeals in the case entitled "State
Investment House, Inc. v. Bataan Cigar & Cigarette Factory Inc.," 1affirming the decision
of the Regional Trial Court 2 in a complaint filed by the State Investment House, Inc.
(hereinafter referred to as SIHI) for collection on three unpaid checks issued by Bataan
Cigar & Cigarette Factory, Inc. (hereinafter referred to as BCCFI). The foregoing
decisions unanimously ruled in favor of SIHI, the private respondent in this case.

Emanating from the records are the following facts. Petitioner, Bataan Cigar & Cigarette
Factory, Inc. (BCCFI), a corporation involved in the manufacturing of cigarettes,
engaged one of its suppliers, King Tim Pua George (herein after referred to as George
King), to deliver 2,000 bales of tobacco leaf starting October 1978. In consideration
thereof, BCCFI, on July 13, 1978 issued crossed checks post dated sometime in March
1979 in the total amount of P820,000.00. 3
Relying on the supplier's representation that he would complete delivery within three
months from December 5, 1978, petitioner agreed to purchase additional 2,500 bales of
tobacco leaves, despite the supplier's failure to deliver in accordance with their earlier
agreement. Again petitioner issued post dated crossed checks in the total amount of
P1,100,000.00, payable sometime in September 1979. 4
During these times, George King was simultaneously dealing with private respondent
SIHI. On July 19, 1978, he sold at a discount check TCBT 551826 5 bearing an amount
of P164,000.00, post dated March 31, 1979, drawn by petitioner, naming George King
as payee to SIHI. On December 19 and 26, 1978, he again sold to respondent checks
TCBT Nos. 608967 & 608968, 6 both in the amount of P100,000.00, post dated
September 15 & 30, 1979 respectively, drawn by petitioner in favor of George King.
In as much as George King failed to deliver the bales of tobacco leaf as agreed despite
petitioner's demand, BCCFI issued on March 30, 1979, a stop payment order on all
checks payable to George King, including check TCBT 551826. Subsequently, stop
payment was also ordered on checks TCBT Nos. 608967 & 608968 on September 14 &
28, 1979, respectively, due to George King's failure to deliver the tobacco leaves.
Efforts of SIHI to collect from BCCFI having failed, it instituted the present case, naming
only BCCFI as party defendant. The trial court pronounced SIHI as having a valid claim
being a holder in due course. It further said that the non-inclusion of King Tim Pua
George as party defendant is immaterial in this case, since he, as payee, is not an
indispensable party.
The main issue then is whether SIHI, a second indorser, a holder of crossed checks, is
a holder in due course, to be able to collect from the drawer, BCCFI.
The Negotiable Instruments Law states what constitutes a holder in due course, thus:
Sec. 52 A holder in due course is a holder who has taken the
instrument under the following conditions:
(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without
notice that it had been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any
infirmity in the instrument or defect in the title of the person negotiating it.
Section 59 of the NIL further states that every holder is deemed prima facie a holder in
due course. However, when it is shown that the title of any person who has negotiated
the instrument was defective, the burden is on the holder to prove that he or some
person under whom he claims, acquired the title as holder in due course.
The facts in this present case are on all fours to the case of State Investment House,
Inc. (the very respondent in this case)v. Intermediate Appellate Court 7 wherein we
made a discourse on the effects of crossing of checks.
As preliminary, a check is defined by law as a bill of exchange drawn on a bank payable
on demand. 8 There are a variety of checks, the more popular of which are the
memorandum check, cashier's check, traveler's check and crossed check. Crossed
check is one where two parallel lines are drawn across its face or across a corner
thereof. It may be crossed generally or specially.
A check is crossed specially when the name of a particular banker or a company is
written between the parallel lines drawn. It is crossed generally when only the words
"and company" are written or nothing is written at all between the parallel lines. It may
be issued so that the presentment can be made only by a bank. Veritably the Negotiable
Instruments Law (NIL) does not mention "crossed checks," although Article 541 9 of the
Code of Commerce refers to such instruments.
According to commentators, the negotiability of a check is not affected by its being
crossed, whether specially or generally. It may legally be negotiated from one person to
another as long as the one who encashes the check with the drawee bank is another
bank, or if it is specially crossed, by the bank mentioned between the parallel
lines. 10 This is specially true in England where the Negotiable Instrument Law
originated.
In the Philippine business setting, however, we used to be beset with bouncing checks,
forging of checks, and so forth that banks have become quite guarded in encashing
checks, particularly those which name a specific payee. Unless one is a valued client, a
bank will not even accept second indorsements on checks.

In order to preserve the credit worthiness of checks, jurisprudence has pronounced that
crossing of a check should have the following effects: (a) the check may not be
encashed but only deposited in the bank; (b) the check may be negotiated only once
to one who has an account with a bank; (c) and the act of crossing the check serves
as warning to the holder that the check has been issued for a definite purpose so that
he must inquire if he has received the check pursuant to that purpose, otherwise, he
is not a holder in due course. 11
The foregoing was adopted in the case of SIHI v. IAC, supra. In that case, New
Sikatuna Wood Industries, Inc. also sold at a discount to SIHI three post dated crossed
checks, issued by Anita Pea Chua naming as payee New Sikatuna Wood Industries,
Inc. Ruling that SIHI was not a holder in due course, we then said:
The three checks in the case at bar had been crossed generally and
issued payable to New Sikatuna Wood Industries, Inc. which could only
mean that the drawer had intended the same for deposit only by the
rightful person, i.e. the payee named therein. Apparently, it was not the
payee who presented the same for payment and therefore, there was no
proper presentment, and the liability did not attach to the drawer. Thus, in
the absence of due presentment, the drawer did not become liable.
Consequently, no right of recourse is available to petitioner (SIHI) against
the drawer of the subject checks, private respondent wife (Anita),
considering that petitioner is not the proper party authorized to make
presentment of the checks in question.
xxx xxx xxx
That the subject checks had been issued subject to the condition that
private respondents (Anita and her husband) on due date would make the
back up deposit for said checks but which condition apparently was not
made, thus resulting in the non-consummation of the loan intended to be
granted by private respondents to New Sikatuna Wood Industries, Inc.,
constitutes a good defense against petitioner who is not a holder in due
course. 12
It is then settled that crossing of checks should put the holder on inquiry and upon him
devolves the duty to ascertain the indorser's title to the check or the nature of his
possession. Failing in this respect, the holder is declared guilty of gross negligence
amounting to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable
Instruments Law, 13 and as such the consensus of authority is to the effect that the
holder of the check is not a holder in due course.

In the present case, BCCFI's defense in stopping payment is as good to SIHI as it is to

George King. Because, really, the checks were issued with the intention that George
King would supply BCCFI with the bales of tobacco leaf. There being failure of
consideration, SIHI is not a holder in due course. Consequently, BCCFI cannot be
obliged to pay the checks.
The foregoing does not mean, however, that respondent could not recover from the
checks. The only disadvantage of a holder who is not a holder in due course is that the
instrument
is
subject
to
defenses
as
if
it
were
14
non-negotiable. Hence, respondent can collect from the immediate indorser, in this
case, George King.
WHEREFORE, finding that the court a quo erred in the application of law, the instant
petition is hereby GRANTED. The decision of the Regional Trial Court as affirmed by
the Court of Appeals is hereby REVERSED. Cost against private respondent.
SO ORDERED.
Narvasa, C.J., Regalado and Puno, JJ., concur.

SECOND DIVISION
ROBERT DINO,
Petitioner,

G.R. No. 170912

Present:

- versus -

CARPIO, J., Chairperson,

BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

MARIA LUISA JUDAL-LOOT,

joined by her husband
VICENTE LOOT,
Promulgated:
Respondents.
April 19, 2010
x-----------------------------------------------------------------------------------------x
DECISION
CARPIO, J.:

The Case

This is a petition for review[1] of the 16 August 2005 Decision[2] and 30 November
2005 Resolution[3] of the Court of Appeals in CA-G.R. CV No. 57994. The Court of
Appeals affirmed the decision of the Regional Trial Court, 7th Judicial Region, Branch
56, Mandaue City (trial court), with the deletion of the award of interest, moral damages,
attorneys fees and litigation expenses. The trial court ruled that respondents Maria
Luisa Judal-Loot and Vicente Loot are holders in due course of Metrobank Check No.
C-MA 142119406 CA and ordered petitioner Robert Dino as drawer, together with codefendant Fe Lobitana as indorser, to solidarily pay respondents the face value of the
check, among others.
The Facts

Sometime in December 1992, a syndicate, one of whose members posed as an

owner of several parcels of land situated in Canjulao, Lapu-lapu City, approached
petitioner and induced him to lend the group P3,000,000.00 to be secured by a real
estate mortgage on the properties. A member of the group, particularly a woman
pretending to be a certain Vivencia Ompok Consing, even offered to execute a Deed of
Absolute Sale covering the properties, instead of the usual mortgage contract. [4]Enticed
and convinced by the syndicates offer, petitioner issued three Metrobank checks
totaling P3,000,000.00, one of which is Check No. C-MA-142119406-CA postdated 13
February 1993 in the amount of P1,000,000.00 payable to Vivencia Ompok Consing
and/or Fe Lobitana.[5]
Upon scrutinizing the documents involving the properties, petitioner discovered
that the documents covered rights over government properties. Realizing he had been
deceived, petitioner advised Metrobank to stop payment of his checks. However, only

the payment of Check No. C-MA- 142119406-CA was ordered stopped. The other two
checks were already encashed by the payees.
Meanwhile, Lobitana negotiated and indorsed Check No. C-MA- 142119406-CA to
respondents in exchange for cash in the sum of P948,000.00, which respondents
borrowed from Metrobank and charged against their credit line. Before respondents
accepted the check, they first inquired from the drawee bank, Metrobank, Cebu-Mabolo
Branch which is also their depositary bank, if the subject check was sufficiently funded,
to which Metrobank answered in the positive. However, when respondents deposited
the check with Metrobank, Cebu-Mabolo Branch, the same was dishonored by the
drawee bank for reason PAYMENT STOPPED.
Respondents filed a collection suit [6] against petitioner and Lobitana before the trial
court. In their Complaint, respondents alleged, among other things, that they are holders
in due course and for value of Metrobank Check No. C-MA-142119406-CA and that they
had no prior information concerning the transaction between defendants.
In his Answer, petitioner denied respondents allegations that on the face of the
subject check, no condition or limitation was imposed and that respondents are holders
in due course and for value of the check. For her part, Lobitana denied the allegations
in the complaint and basically claimed that the transaction leading to the issuance of the
subject check is a sale of a parcel of land by Vivencia Ompok Consing to petitioner and
that she was made a payee of the check only to facilitate its discounting.
The trial court ruled in favor of respondents and declared them due course holders
of the subject check, since there was no privity between respondents and
defendants. The dispositive portion of the 14 March 1996 Decision of the trial court
reads:
In summation, this Court rules for the Plaintiff and against the
Defendants and hereby orders:

1.)
2.)
3.)
4.)
5.)

defendants to pay to Plaintiff, and severally, the amount

of P1,000,000.00 representing the face value of subject
Metrobank check;
to pay to Plaintiff herein, jointly and severally, the sum
of P101,748.00 for accrued and paid interest;
to pay to Plaintiff, jointly and severally, moral damages in
the amount of P100,000.00;
to pay to Plaintiff, jointly and severally, the sum
of P200,000.00 for attorneys fees; and
to pay to Plaintiff, jointly and severally, litigation
expenses in the sum of P10,000.00 and costs of the suit.

SO ORDERED.[7]

Only petitioner filed an appeal. Lobitana did not appeal the trial courts judgment.
The Ruling of the Court of Appeals

The Court of Appeals affirmed the trial courts finding that respondents are holders
in due course of Metrobank Check No. C-MA- 142119406-CA. The Court of Appeals
pointed out that petitioners own admission that respondents were never parties to the
transaction among petitioner, Lobitana, Concordio Toring, Cecilia Villacarlos, and
Consing, proved respondents lack of knowledge of any infirmity in the instrument or
defect in the title of the person negotiating it. Moreover, respondents verified from
Metrobank whether the check was sufficiently funded before they accepted it. Therefore,
respondents must be excluded from the ambit of petitioners stop payment order.
The Court of Appeals modified the trial courts decision by deleting the award of
interest, moral damages, attorneys fees and litigation expenses. The Court of Appeals
opined that petitioner was only exercising (although incorrectly), what he perceived to
be his right to stop the payment of the check which he rediscounted. The Court of
Appeals ruled that petitioner acted in good faith in ordering the stoppage of payment of
the subject check and thus, he must not be made liable for those amounts.

In its 16 August 2005 Decision, the Court of Appeals affirmed the trial courts
decision with modifications, thus:
WHEREFORE, premises considered, finding no reversible error in
the decision of the lower court, WE hereby DISMISS the appeal and
AFFIRM the decision of the court a quo with modifications that the award
of interest, moral damages, attorneys fees and litigation expenses be
deleted.
No pronouncement as to costs.
SO ORDERED.[8]
In its 30 November 2005 Resolution, the Court of Appeals denied petitioners
motion for reconsideration.
In denying the petitioners motion for reconsideration, the Court of Appeals noted
that petitioner raised the defense that the check is a crossed check for the first time on
appeal (particularly in the motion for reconsideration). The Court of Appeals rejected
such defense considering that to entertain the same would be offensive to the basic
rules of fair play, justice, and due process.
Hence, this petition.
The Issues
Petitioner raises the following issues:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT
THE RESPONDENTS WERE HOLDERS IN DUE COURSE. THE FACT
THAT METROBANK CHECK NO. 142119406 IS A CROSSED CHECK
CONSTITUTES SUFFICIENT WARNING TO THE RESPONDENTS TO
EXERCISE EXTRAORDINARY DILIGENCE TO DETERMINE THE TITLE
OF THE INDORSER.

II.
THE COURT OF APPEALS ERRED IN DENYING
PETITIONERS MOTION FOR RECONSIDERATION UPON THE
GROUND THAT THE ARGUMENTS RELIED UPON HAVE ONLY BEEN
RAISED FOR THE FIRST TIME. EQUITY DEMANDS THAT THE COURT
OF APPEALS SHOULD HAVE MADE AN EXCEPTION TO PREVENT
THE COMMISSION OF MANIFEST WRONG AND INJUSTICE UPON
THE PETITIONER.[9]

The Ruling of this Court

The petition is meritorious.

Respondents point out that petitioner raised the defense that Metrobank Check
No. C-MA-142119406-CA is a crossed check for the first time in his motion for
reconsideration before the Court of Appeals. Respondents insist that issues not raised
during the trial cannot be raised for the first time on appeal as it would be offensive to
the elementary rules of fair play, justice and due process. Respondents further assert
that a change of theory on appeal is improper.
In his Answer, petitioner specifically denied, among others,

(1) Paragraph

4 of the Complaint, concerning the allegation that on the face of the subject check, no
condition or limitation was imposed, and

(2) Paragraph 8 of the Complaint,

regarding the allegation that respondents were holders in due course and for value of
the subject check. In his Special Affirmative Defenses, petitioner claimed that for
want or lack of the prestation, he could validly stop the payment of his check, and that
by rediscounting petitioners check, respondents took the risk of what might happen on
the check. Essentially, petitioner maintained that respondents are not holders in due

course of the subject check, and as such, respondents could not recover any liability on
the check from petitioner.
Indeed, petitioner did not expressly state in his Answer or raise during the trial that
Metrobank Check No. C-MA-142119406-CA is a crossed check. It must be stressed,
however, that petitioner consistently argues that respondents are not holders in due
course of the subject check, which is one of the possible effects of crossing a
check. The act of crossing a check serves as a warning to the holder that the check
has been issued for a definite purpose so that the holder thereof must inquire if he has
received the check pursuant to that purpose; otherwise, he is not a holder in due
course.[10] Contrary to respondents view, petitioner never changed his theory, that
respondents are not holders in due course of the subject check, as would violate
fundamental rules of justice, fair play, and due process. Besides, the subject check
was presented and admitted as evidence during the trial and respondents did not and in
fact cannot deny that it is a crossed check.
In any event, the Court is clothed with ample authority to entertain issues or
matters not raised in the lower courts in the interest of substantial justice. [11] In Casa
Filipina Realty v. Office of the President,[12] the Court held:
[T]he trend in modern-day procedure is to accord the courts broad
discretionary power such that the appellate court may consider matters
bearing on the issues submitted for resolution which the parties failed to
raise or which the lower court ignored. Since rules of procedure are mere
tools designed to facilitate the attainment of justice, their strict and rigid
application which would result in technicalities that tend to frustrate rather
than promote substantial justice, must always be avoided. Technicality
should not be allowed to stand in the way of equitably and completely
resolving the rights and obligations of the parties. [13]

Having disposed of the procedural issue, the Court shall now proceed to the
merits of the case. The main issue is whether respondents are holders in due course of
Metrobank Check No. C-MA 142119406 CA as to entitle them to collect the face value
of the check from its drawer or petitioner herein.

Section 52 of the Negotiable Instruments Law defines a holder in due course,

thus:
A holder in due course is a holder who has taken the instrument
under the following conditions:
(a)
(b)

That it is complete and regular upon its face;

That he became the holder of it before it was overdue,
and without notice that it has been previously dishonored, if
such was the fact;

(c)
(d)

That he took it in good faith and for value;

That at the time it was negotiated to him, he had no
notice of any infirmity in the instrument or defect in the title of
the person negotiating it.

In the case of a crossed check, as in this case, the following principles must
additionally be considered: A crossed check (a) may not be encashed but only
deposited in the bank; (b) may be negotiated only once to one who has an account
with a bank; and (c) warns the holder that it has been issued for a definite purpose so
that the holder thereof must inquire if he has received the check pursuant to that
purpose; otherwise, he is not a holder in due course. [14]
Based on the foregoing, respondents had the duty to ascertain the indorsers, in
this case Lobitanas, title to the check or the nature of her possession. This respondents
failed to do. Respondents verification from Metrobank on the funding of the check does
not amount to determination of Lobitanas title to the check. Failing in this respect,
respondents are guilty of gross negligence amounting to legal absence of good faith,
[15]

contrary to Section 52(c) of the Negotiable Instruments Law. Hence, respondents

are not deemed holders in due course of the subject check. [16]
State Investment House v. Intermediate Appellate Court [17] squarely applies to this
case. There, New Sikatuna Wood Industries, Inc. sold at a discount to State

Investment House three post-dated crossed checks, issued by Anita Pea Chua naming
as payee New Sikatuna Wood Industries, Inc. The Court found State Investment House
not a holder in due course of the checks. The Court also expounded on the effect of
crossing a check, thus:
Under usual practice, crossing a check is done by placing two
parallel lines diagonally on the left top portion of the check. The crossing
may be special wherein between the two parallel lines is written the name
of a bank or a business institution, in which case the drawee should pay
only with the intervention of that bank or company, or crossing may be
general wherein between two parallel diagonal lines are written the words
and Co. or none at all as in the case at bar, in which case the drawee
should not encash the same but merely accept the same for deposit.
The effect therefore of crossing a check relates to the mode of its
presentment for payment. Under Section 72 of the Negotiable Instruments
Law, presentment for payment to be sufficient must be made (a) by the
holder, or by some person authorized to receive payment on his
behalf
x x x As to who the holder or authorized person will be depends
on the instructions stated on the face of the check.
The three subject checks in the case at bar had been crossed
generally and issued payable to New Sikatuna Wood Industries, Inc.
which could only mean that the drawer had intended the same for deposit
only by the rightful person, i.e., the payee named therein. Apparently, it
was not the payee who presented the same for payment and therefore,
there was no proper presentment, and the liability did not attach to the
drawer.
Thus, in the absence of due presentment, the drawer did not
become liable. Consequently, no right of recourse is available to petitioner
against the drawer of the subject checks, private respondent wife,
considering that petitioner is not the proper party authorized to make
presentment of the checks in question.

In this case, there is no question that the payees of the check, Lobitana or
Consing, were not the ones who presented the check for payment. Lobitana negotiated
and indorsed the check to respondents in exchange for P948,000.00. It was
respondents who presented the subject check for payment; however, the check was
dishonored for reason PAYMENT STOPPED. In other words, it was not the payee who

presented the check for payment; and thus, there was no proper presentment. As a
result, liability did not attach to the drawer. Accordingly, no right of recourse is available
to respondents against the drawer of the check, petitioner herein, since respondents are
not the proper party authorized to make presentment of the subject check.
However, the fact that respondents are not holders in due course does not
automatically mean that they cannot recover on the check. [18] The Negotiable
Instruments Law does not provide that a holder who is not a holder in due course may
not in any case recover on the instrument. The only disadvantage of a holder who is not
in due course is that the negotiable instrument is subject to defenses as if it were nonnegotiable.[19] Among such defenses is the absence or failure of consideration, [20]which
petitioner sufficiently established in this case. Petitioner issued the subject check
supposedly for a loan in favor of Consings group, who turned out to be a syndicate
defrauding gullible individuals. Since there is in fact no valid loan to speak of, there is
no consideration for the issuance of the check. Consequently, petitioner cannot be
obliged to pay the face value of the check.
Respondents

can

collect

from

the

immediate

indorser,[21] in

this

case

Lobitana. Significantly, Lobitana did not appeal the trial courts decision, finding her
solidarily liable to pay, among others, the face value of the subject check. Therefore,
the trial courts judgment has long become final and executory as to Lobitana.
WHEREFORE, we GRANT the petition. We SET ASIDE the 16 August 2005
Decision and 30 November 2005 Resolution of the Court of Appeals in CA-G.R. CV No.
57994.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

PEOPLE
OF
PHILIPPINES,

THE

G.R. No. 184053

Present:

Plaintiff-Appellee,

CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
- versus -

DEL CASTILLO, and

VILLARAMA, JR., JJ.

Promulgated:

VIRGINIA
MONTANER,

BABY

P.
August 31, 2011

AccusedAppellant.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

LEONARDO-DE CASTRO, J.:

This is an appeal of the Decision [1] dated February 12,

2008 of the Court of Appeals in CA-G.R. CR.-H.C. No. 01162,
entitled People of the Philippines v. Virginia Baby P.
Montaner, which affirmed the Decision[2] dated April 8, 2003 of the
Regional Trial Court (RTC) of San Pedro, Laguna, Branch 93, in
Criminal Case No. 0748-SPL. The RTC found appellant Virginia
Baby P. Montaner guilty beyond reasonable doubt of the crime of
estafa as defined and penalized under paragraph 2(d), Article 315
of the Revised Penal Code.

In an Information[3] dated April 21, 1998, appellant was

charged as follows:

That on or about May 17, 1996 in the Municipality of San Pedro,

Province of Laguna and within the jurisdiction of this Honorable Court
accused Virginia (Baby) P. Montaner did then and there willfully,
unlawfully and feloniously defraud one Reynaldo Solis in the following
manner: said accused by means of false pretenses and fraudulent acts
that her checks are fully funded draw, make and issue in favor of one
Reynaldo Solis the following Prudential Bank Checks Nos.:

1.

0002284

P5,000.00

2.

0002285

P5,000.00

3.

0002286

P5,000.00

4.

0002287

P5,000.00

5.

0002288

P5,000.00

6.

0002289

P5,000.00

7.

0002290

P5,000.00

8.

0002291

P5,000.00

9.

0002292

P5,000.00

10.

0002293

P5,000.00

all having a total value of FIFTY THOUSAND PESOS (P50,000.00) and all
aforesaid checks are postdated June 17, 1996 in exchange for cash
knowing fully well that she has no funds in the drawee bank and when
the said checks were presented for payment the same were
dishonored by the drawee bank on reason of ACCOUNT CLOSED and
despite demand accused failed and refused to pay the value thereof to
the damage and prejudice of Reynaldo Solis in the aforementioned
total amount of P50,000.00.

Appellant pleaded not guilty to the charge leveled against

her during her arraignment on June 10, 1998. [4] Thereafter, trial
ensued.

The parties evidence was summarized by the trial court, as

follows:

The evidence for the prosecution disclose that on May 17,

1996, accused Virginia Baby P. Montaner, in exchange for cash, issued
to private complainant Reynaldo Solis in his house at Caliraya Street,
Holiday Homes, San Pedro, Laguna, ten (10) Prudential Bank checks,
specifically, check nos. 0002284, 0002285, 0002286, 0002287,
0002288, 0002289, 0002290, 0002291, 0002292, and 0002293 all
postdated June 17, 1996, each in the amount of P5,000.00 all in the
total amount of P50,000.00. Accused represented to complainant Solis
that the checks were fully funded. When private complainant deposited
the checks for encashment however, they were dishonored for the
reason account closed. Private complainant verbally and thereafter,

thru demand letter (Exhibit A) formally demanded that accused settle

her accounts. Despite receipt of the demand letter, accused Montaner
failed to pay the value of the ten (10) checks, thus private complainant
Reynaldo Solis filed the instant complaint for estafa. In connection with
this complaint, private complainant Solis executed a sworn statement
(Exhibit D).

Ruel Allan Pajarito, Branch Cashier O-I-C of Prudential Bank

testified that they placed the mark account closed on the ten (10)
checks issued in the account of accused Montaner considering that at
the time the same were presented to them, the account of accused
Montaner was already closed. Witness Pajarito further testified that as
per their records, the account of accused Montaner, account no.
00099-000050-4 was closed on July 11, 1996. The checks were
returned on October 4, 1996 for the reason account closed.

Accused, thru counsel initially manifested that she is intending

to file a demurrer to evidence. However, her right to file the same was
considered waived in view of her failure to file the demurrer despite
due notice.

To exculpate herself from criminal liability, accused Virginia Baby

P. Montaner denied the allegations that she issued ten (10) checks in
private complainants favor claiming that the ten (10) checks were
borrowed from her by one Marlyn Galope because the latter needed
money. She gave the ten checks to Galope, signed the same albeit the
space for the date, amount and payee were left blank so that the
checks cannot be used for any negotiation. She further told Galope
that the checks were not funded. When she learned that a case was
filed against her for estafa, she confronted Marlyn Galope and the
latter told her that money will not be given to her if she will not issue
the said checks. She has no knowledge of the notice of dishonor sent
to her by private complainant and claimed that her husband, who
supposedly received the notice of dishonor left for abroad in July 1996
and returned only after a year, that is, in 1997. [5]

In a Decision dated April 8, 2003, the trial court convicted

appellant for the crime of estafa as defined and penalized under

paragraph 2(d), Article 315 of the Revised Penal Code. The

dispositive portion of said Decision reads:

WHEREFORE, this Court hereby sentences accused Virginia Baby

P. Montaner to suffer an indeterminate penalty of imprisonment from
twelve (12) years of prision mayor as minimum to twenty-two (22)
years of reclusion perpetua as maximum and to indemnify complainant
Reynaldo Solis in the amount of P50,000.00.[6]

Appellant elevated the case to the Court of Appeals but the

adverse ruling was merely affirmed by the appellate court in its
Decision dated February 12, 2008, the dispositive portion of which
states:

WHEREFORE, premises considered, the instant petition is

DENIED. Accordingly, the challenged Decision is hereby AFFIRMED
intoto.[7]

Hence, appellant interposed this appeal before this Court

and adopted her Appellants Brief with the Court of Appeals,
wherein she put forth a single assignment of error:

THE TRIAL COURT GRAVELY ERRED IN FINDING THE ACCUSED

APPELLANT GUILTY BEYOND REASONABLE DOUBT OF THE CRIME OF
ESTAFA UNDER ARTICLE 315, PAR. 2 (D) OF THE REVISED PENAL CODE.
[8]

Appellant maintains that she entrusted the subject checks,

purportedly signed in blank, to Marilyn Galope (Galope) out of pity
in order for the latter to secure a loan. Thus, there is purportedly
no certainty beyond reasonable doubt that she issued the checks
purposely to defraud Reynaldo Solis (Solis) into lending her
money. She further claims that no transaction had ever
transpired between her and Solis. Admitting that she may have
been imprudent, she nonetheless insists that her simple
imprudence does not translate to criminal liability.

We are not persuaded.

Paragraph 2(d), Article 315 of the Revised Penal Code

provides:

ART. 315. Swindling (estafa). Any person who shall defraud

another by any of the means mentioned hereinbelow x x x:

xxxx

2. By means of any of the following false pretenses or fraudulent

acts executed prior to or simultaneously with the commission of the
fraud:

xxxx

(d) By postdating a check, or issuing a check in payment of an

obligation when the offender had no funds in the bank, or his funds
deposited therein were not sufficient to cover the amount of the check.
The failure of the drawer of the check to deposit the amount necessary
to cover his check within three (3) days from receipt of notice from the

bank and/or the payee or holder that said check has been dishonored
for lack or insufficiency of funds shall be prima facie evidence of deceit
constituting false pretense or fraudulent act.

The elements of estafa under paragraph 2(d), Article 315 of

the Revised Penal Code are: (1) the postdating or issuance of a
check in payment of an obligation contracted at the time the
check was issued; (2) lack of sufficiency of funds to cover the
check; and (3) damage to the payee.[9]

In the case at bar, the prosecution sufficiently established

appellants guilt beyond reasonable doubt for estafa under
paragraph 2(d), Article 315 of the Revised Penal Code. According
to Soliss clear and categorical testimony, appellant issued to him
the 10 postdated Prudential Bank checks, each in the amount
of P5,000.00 or a total of P50,000.00, in his house in exchange for
their cash equivalent. We quote the pertinent portions of the
transcript:

[On Direct Examination]

Q:
Mr. Witness, why did you file this complaint against the
accused?
A:

She issued me checks in exchange for cash, ten postdated

checks, maam.

Q:

When did Mrs. Montaner issue to you these checks?

A:

In May 1996, maam.

Q:

What was the purpose of issuing to you these checks?

A:

Because she needed cash, maam.

Q:

And how many checks did she issue to you?

A:

Ten checks, maam.

Q:

And what is the date of the checks that were issued to you?

A:

June 17, 1996, maam.

Q:

What is the total value of these ten checks?

A:

Fifty Thousand Pesos.

Q:

At the time these checks were issued to you, what if any, was her
representation about them?

A:

To deposit those checks on their due date, maam.

Q:

And aside from telling you to deposit those checks on their due date,
what else did she represent to you regarding these checks?

A:

None, maam.

Q:

Did you deposit these checks?

A:

Yes, maam.

Q:

Where?

A:

At the Premier Bank, San Pedro, Laguna.

Q:

What happened to these checks after depositing the same?

A:

The checks bounced, maam.

Q:

All these checks?

A:

Yes, maam, all checks bounced for reason account closed.

Q:

After these checks were dishonored what did you do?

A:

I informed her about that.

Q:

Thru what, verbal or written?

A:
maam.

Initially it was verbal, then I informed her thru a demand letter,

xxxx

Fiscal (continuing):

Q:

A.

You said that the accused issued to you ten checks in exchange
for cash, where are those checks?

The original checks are with me here, maam.

Q.

Handed to this representation are checks, Prudential Bank checks Nos.

002284, 002285, 002286, 002287, 002288, 002289, 002290, 002291,
002292, 002293 all dated June 17, 1996 and all in the amount
of P50,000 [should be P5,000.00] each. Mr. Witness, there appears
from these checks a signature at the bottom portion whose signature is
this?

A.

The signature of Mrs. Montaner, maam.

Q.

Why do you say it is her signature?

A.

She signed those in my presence, maam.

Q.

I am showing these checks to the opposing counsel for comparison

Atty. Peala

The checks are admitted, your Honor.

xxxx

[On Cross-Examination]

Atty. Peala (continuing):

Q:

When Mrs. Montaner issued those checks, ten checks were they
issued in your house or in her house?

A:

In my house, sir.

Q:

Mrs. Montaner brought the checks in your house?

A:

Yes, sir.

Q:

Can you tell us the time of the day when she brought the
checks to you?

A:

May 17, 1996 at 1:00 oclock in the afternoon, sir.

Q:

Was she alone or including her husband?

A:

She was alone, sir.[10]

From the circumstances narrated above, it was evident that

Solis would not have given P50,000.00 cash to appellant had it
not been for her issuance of the 10 Prudential Bank
checks. These postdated checks were undoubtedly issued by
appellant to induce Solis to part with his cash. However, when
Solis attempted to encash them, they were all dishonored by the
bank because the account was already closed.

Solis wrote appellant a demand letter dated October 13,

1996
which was received by appellants husband to inform
appellant that her postdated checks had bounced and that she
must settle her obligation or else face legal action from
Solis. Appellant did not comply with the demand nor did she
deposit the amount necessary to cover the checks within three
days from receipt of notice. This gave rise to a prima
facie evidence of deceit, which is an element of the crime of
estafa, constituting false pretense or fraudulent act as stated in
the second sentence of paragraph 2(d), Article 315 of the Revised
Penal Code.
[11]

As for appellants claims that she merely entrusted to

Galope the blank but signed checks imprudently, without knowing
that Galope would give them as a guarantee for a loan, the Court
views such statements with the same incredulity as the lower
courts.

Evidence, to be believed, must not only proceed from the

mouth of a credible witness, but it must be credible in itself such
as the common experience and observation of mankind can
approve as probable under the circumstances. The Court has no
test of the truth of human testimony, except its conformity to our

knowledge, observation and experience. Whatever is repugnant

to these belongs to the miraculous and is outside judicial
cognizance.[12]

Appellant wishes to impress upon the Court that she

voluntarily parted with her blank but signed checks not knowing
or even having any hint of suspicion that the same may be used
to defraud anyone who may rely on them. Verily, appellants
assertion defies ordinary common sense and human experience.

Moreover, it is elementary that denial, if unsubstantiated by

clear and convincing evidence, is negative and self-serving
evidence which has far less evidentiary value than the testimony
of credible witnesses who testify on affirmative matters. [13] We
agree with the lower courts that appellants bare denial cannot be
accorded credence for lack of evidentiary support. As aptly noted
by the trial court, appellants failure to produce Galope as a
witness to corroborate her story is fatal to her cause. [14] In all, the
Court of Appeals committed no error in upholding the conviction
of appellant for estafa.

WHEREFORE, premises considered, the Decision dated

February 12, 2008 of the Court of Appeals in CA-G.R. CR.-H.C. No.
01162 is hereby AFFIRMED.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

EUMELIA R. MITRA,
Petitioner,

G.R. NO. 191404

Present:
CARPIO, J., Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

- versus -

PEOPLE OF
THE PHILIPPINESand
FELICISIMO S. TARCELO,
Respondents.

Promulgated:
July 5, 2010

X --------------------------------------------------------------------------------------X

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of

Court assailing the July 31, 2009 Decision [1] and the February 11, 2010 Resolution
of the Court of Appeals (CA) in CA-G.R. CR No. 31740. The subject decision and
resolution affirmed the August 22, 2007 Decision of the Regional Trial Court,
Branch 2, Batangas City (RTC) which, in turn, affirmed the May 21, 2007
Decision of the Municipal Trial Court in Cities, Branch 2, Batangas City (MTCC).
THE FACTS:
Petitioner Eumelia R. Mitra (Mitra) was the Treasurer, and Florencio L.
Cabrera, Jr. (now deceased) was the President, of Lucky Nine Credit
Corporation (LNCC), a corporation engaged in money lending activities.
Between 1996 and 1999, private respondent Felicisimo S.
Tarcelo (Tarcelo) invested money in LNCC. As the usual practice in money
placement transactions, Tarcelo was issued checks equivalent to the amounts he
invested plus the interest on his investments. The following checks, signed by
Mitra and Cabrera, were issued by LNCC to Tarcelo.[2]

Bank

Date Issued

Security Bank September 15, 1998

Date of Check

January 15, 1999

Amount

Check No.

P 3,125.00

0000045804

-do-

September 15, 1998

January 15, 1999

125,000.00 0000045805

-do-

September 20, 1998

January 20, 1999

2,500.00 0000045809

-do-

September 20, 1998

January 20, 1999

100,000.00 0000045810

-do-

September 30, 1998

January 30, 1999

5,000.00 0000045814

-do-

September 30, 1998

January 30, 1999

200,000.00 0000045815

-do-

October 3, 1998

February 3, 1999

2,500.00 0000045875

-do-

October 3, 1998

February 3, 1999

100,000.00 0000045876

-do-

November 17, 1998

February17, 1999

5,000.00 0000046061

-do-

November 17, 1998

March 17, 1999

5,000.00 0000046062

-do-

November 17, 1998

March 17, 1999

200,000.00 0000046063

-do-

November 19, 1998

January 19, 1999

2,500.00 0000046065

-do-

November 19, 1998

February19, 1999

2,500.00 0000046066

-do-

November 19, 1998

March 19, 1999

2,500.00 0000046067

-do-

November 19, 1998

March 19, 1999

100,000.00 0000046068

-do-

November 20, 1998

January 20, 1999

10,000.00 0000046070

-do-

November 20, 1998

February 20, 1999

10,000.00 0000046071

-do-

November 20, 1998

March 20, 1999

10,000.00 0000046072

-do-

November 20, 1998

March 20, 1999

10,000.00 0000046073

-do-

November 30, 1998

January 30, 1999

2,500.00 0000046075

-do-

November 30, 1998

February 28, 1999

2,500.00 0000046076

-do-

November 30, 1998

March 30, 1999

2,500.00 0000046077

-do-

November 30, 1998

March 30, 1999

100,000.00 0000046078

When Tarcelo presented these checks for payment, they were dishonored for
the reason account closed. Tarcelo made several oral demands on LNCC for the
payment of these checks but he was frustrated. Constrained, in 2002, he caused the

filing of seven informations for violation of Batas Pambansa Blg. 22 (BP 22) in the
total amount of P925,000.00 with the MTCC in Batangas City.[3]
After trial on the merits, the MTCC found Mitra and Cabrera guilty of the
charges. The fallo of the May 21, 2007 MTCC Decision[4] reads:
WHEREFORE, foregoing
premises
considered,
the
accused FLORENCIO I. CABRERA, JR., and EUMELIA R.
MITRA are hereby found guilty of the offense of violation of Batas
Pambansa Bilang 22 and are hereby ORDERED to respectively
pay the following fines for each violation and with subsidiary
imprisonment in all cases, in case of insolvency:
1.
2.
3.
4.
5.
6.
7.

Criminal Case No. 43637

Criminal Case No. 43640
Criminal Case No. 43648
Criminal Case No. 43700
Criminal Case No. 43702
Criminal Case No. 43704
Criminal Case No. 43706

- P200,000.00
- P100,000.00
- P100,000.00
- P125,000.00
- P200,000.00
- P100,000.00
- P100,000.00

Said accused, nevertheless, are adjudged civilly liable and

are ordered to pay, in solidum, private complainant Felicisimo S.
Tarcelo the amount of NINE HUNDRED TWENTY FIVE
THOUSAND PESOS (P925,000.000).
SO ORDERED.

Mitra and Cabrera appealed to the Batangas RTC contending that: they
signed the seven checks in blank with no name of the payee, no amount stated and
no date of maturity; they did not know when and to whom those checks would be
issued; the seven checks were only among those in one or two booklets of checks
they were made to sign at that time; and that they signed the checks so as not to
delay the transactions of LNCC because they did not regularly hold office there.[5]

The RTC affirmed the MTCC decision and later denied their motion for
reconsideration. Meanwhile, Cabrera died. Mitra alone filed this petition for
review[6] claiming, among others, that there was no proper service of the notice of
dishonor on her. The Court of Appeals dismissed her petition for lack of merit.
Mitra is now before this Court on a petition for review and submits these
issues:
1.
WHETHER OR NOT THE ELEMENTS OF
VIOLATION OF BATAS PAMBANSA BILANG 22 MUST BE
PROVED BEYOND REASONABLE DOUBT AS AGAINST THE
CORPORATION WHO OWNS THE CURRENT ACCOUNT
WHERE THE SUBJECT CHECKS WERE DRAWN BEFORE
LIABILITY ATTACHES TO THE SIGNATORIES.
2.
WHETHER OR NOT THERE IS PROPER SERVICE
OF NOTICE OF DISHONOR AND DEMAND TO PAY TO THE
PETITIONER AND THE LATE FLORENCIO CABRERA, JR.

The Court denies the petition.

A check is a negotiable instrument that serves as a substitute for money and
as a convenient form of payment in financial transactions and obligations. The use
of checks as payment allows commercial and banking transactions to proceed
without the actual handling of money, thus, doing away with the need to physically
count bills and coins whenever payment is made. It permits commercial and
banking transactions to be carried out quickly and efficiently. But the convenience
afforded by checks is damaged by unfunded checks that adversely affect
confidence in our commercial and banking activities, and ultimately injure public
interest.

BP 22 or the Bouncing Checks Law was enacted for the specific purpose of
addressing the problem of the continued issuance and circulation of unfunded
checks by irresponsible persons. To stem the harm caused by these bouncing
checks to the community, BP 22 considers the mere act of issuing an unfunded
check as an offense not only against property but also against public order.[7] The
purpose of BP 22 in declaring the mere issuance of a bouncing check as malum
prohibitum is to punish the offender in order to deter him and others from
committing the offense, to isolate him from society, to reform and rehabilitate him,
and to maintain social order.[8] The penalty is stiff. BP 22 imposes the penalty of
imprisonment for at least 30 days or a fine of up to double the amount of the check
or both imprisonment and fine.
Specifically, BP 22 provides:
SECTION 1. Checks Without Sufficient Funds. Any
person who makes or draws and issues any check to apply on
account or for value, knowing at the time of issue that he does not
have sufficient funds in or credit with the drawee bank for the
payment of such check in full upon its presentment, which check
is subsequently dishonored by the drawee bank for insufficiency of
funds or credit or would have been dishonored for the same
reason had not the drawer, without any valid reason, ordered the
bank to stop payment, shall be punished by imprisonment of not
less than thirty days but not more than one (1) year or by a fine of
not less than but not more than double the amount of the check
which fine shall in no case exceed Two Hundred Thousand Pesos,
or both such fine and imprisonment at the discretion of the court.
The same penalty shall be imposed upon any person who,
having sufficient funds in or credit with the drawee bank when he
makes or draws and issues a check, shall fail to keep sufficient
funds or to maintain a credit to cover the full amount of the check
if presented within a period of ninety (90) days from the date
appearing thereon, for which reason it is dishonored by the
drawee bank.

Where the check is drawn by a corporation, company or

entity, the person or persons who actually signed the check in
behalf of such drawer shall be liable under this Act.

SECTION 2. Evidence of Knowledge of Insufficient Funds.

The making, drawing and issuance of a check payment of which
is refused by the drawee because of insufficient funds in or credit
with such bank, when presented within ninety (90) days from the
date of the check, shall be prima facie evidence of knowledge of
such insufficiency of funds or credit unless such maker or drawer
pays the holder thereof the amount due thereon, or makes
arrangements for payment in full by the drawee of such check
within five (5) banking days after receiving notice that such check
has not been paid by the drawee.

Mitra posits in this petition that before the signatory to a bouncing corporate
check can be held liable, all the elements of the crime of violation of BP 22 must
first be proven against the corporation. The corporation must first be declared to
have committed the violation before the liability attaches to the signatories of the
checks.[9]
The Court finds Itself unable to agree with Mitras posture. The third
paragraph of Section 1 of BP 22 reads: "Where the check is drawn by a
corporation, company or entity, the person or persons who actually signed the
check in behalf of such drawer shall be liable under this Act." This provision
recognizes the reality that a corporation can only act through its officers. Hence, its
wording is unequivocal and mandatory that the person who actually
signed the corporate check shall be held liable for a violation of BP 22. This
provision does not contain any condition, qualification or limitation.
In the case of Llamado v. Court of Appeals, [10] the Court ruled that the
accused was liable on the unfunded corporate check which he signed as treasurer

of the corporation. He could not invoke his lack of involvement in the negotiation
for the transaction as a defense because BP 22 punishes the mere issuance of a
bouncing check, not the purpose for which the check was issued or in
consideration of the terms and conditions relating to its issuance. In this case, Mitra
signed the LNCC checks as treasurer. Following Llamado, she must then be held
liable for violating BP 22.
Another essential element of a violation of BP 22 is the drawers knowledge
that he has insufficient funds or credit with the drawee bank to cover his check.
Because this involves a state of mind that is difficult to establish, BP 22 creates
the prima facie presumption that once the check is dishonored, the drawer of the
check gains knowledge of the insufficiency, unless within five banking days from
receipt of the notice of dishonor, the drawer pays the holder of the check or makes
arrangements with the drawee bank for the payment of the check. The service of
the notice of dishonor gives the drawer the opportunity to make good the check
within those five days to avert his prosecution for violating BP 22.
Mitra alleges that there was no proper service on her of the notice of
dishonor and, so, an essential element of the offense is missing. This contention
raises a factual issue that is not proper for review. It is not the function of the Court
to re-examine the finding of facts of the Court of Appeals. Our review is limited to
errors of law and cannot touch errors of facts unless the petitioner shows that the
trial court overlooked facts or circumstances that warrant a different disposition of
the case[11] or that the findings of fact have no basis on record. Hence, with respect
to the issue of the propriety of service on Mitra of the notice of dishonor, the Court
gives full faith and credit to the consistent findings of the MTCC, the RTC and the
CA.
The defense postulated that there was no demand served
upon the accused, said denial deserves scant consideration.
Positive allegation of the prosecution that a demand letter was
served upon the accused prevails over the denial made by the

accused. Though, having denied that there was no demand letter

served on April 10, 2000, however,the prosecution positively alleged
and proved that the questioned demand letter was served upon the
accused on April 10, 2000, that was at the time they were attending
Court hearing before Branch I of this Court. In fact, the prosecution
had submitted a Certification issued by the other Branch of this
Court certifying the fact that the accused were present during
the April 10, 2010 hearing. With such straightforward and
categorical testimony of the witness, the Court believes that the
prosecution has achieved what was dismally lacking in the three
(3) cases of Betty King, Victor Ting and Caras evidence of the
receipt by the accused of the demand letter sent to her. The Court
accepts the prosecutions narrative that the accused refused to
sign the same to evidence their receipt thereof. To require the
prosecution to produce the signature of the accused on said
demand letter would be imposing an undue hardship on it. As
well, actual receipt acknowledgment is not and has never been
required of the prosecution either by law or jurisprudence.
[12]
[emphasis supplied]

With the notice of dishonor duly served and disregarded, there arose the
presumption that Mitra and Cabrera knew that there were insufficient funds to
cover the checks upon their presentment for payment. In fact, the account was
already closed.
To reiterate the elements of a violation of BP 22 as contained in the abovequoted provision, a violation exists where:
1. a person makes or draws and issues a check to apply on account or
for value;
2. the person who makes or draws and issues the check knows at the
time of issue that he does not have sufficient funds in or credit
with the drawee bank for the full payment of the check upon its
presentment; and

3. the check is subsequently dishonored by the drawee bank for

insufficiency of funds or credit, or would have been dishonored
for the same reason had not the drawer, without any valid reason,
ordered the bank to stop payment. [13]

There is no dispute that Mitra signed the checks and that the bank
dishonored the checks because the account had been closed. Notice of dishonor
was properly given, but Mitra failed to pay the checks or make arrangements for
their payment within five days from notice. With all the above elements duly
proven, Mitra cannot escape the civil and criminal liabilities that BP 22 imposes
for its breach.[14]
WHEREFORE, the July 31, 2009 Decision and the February 11, 2010
Resolution of the Court of Appeals in CA-G.R. CR No. 31740 are
hereby AFFIRMED.
SO ORDERED.