G.R. No.

97753 August 10, 1992

CALTEX
(PHILIPPINES),
vs.
COURT
OF
APPEALS
and
SECURITY
COMPANY, respondents.

INC., petitioner,
BANK

AND

TRUST

Total
===== ========

280

P1,120,000

2. Angel dela Cruz delivered the said certificates of time (CTDs) to

herein plaintiff in connection with his purchased of fuel products
from the latter (Original Record, p. 208).

Bito, Lozada, Ortega & Castillo for petitioners.

3. Sometime in March 1982, Angel dela Cruz informed Mr.
Timoteo Tiangco, the Sucat Branch Manger, that he lost all the
certificates of time deposit in dispute. Mr. Tiangco advised said
depositor to execute and submit a notarized Affidavit of Loss, as
required by defendant bank's procedure, if he desired
replacement of said lost CTDs (TSN, February 9, 1987, pp. 4850).

Nepomuceno, Hofilea & Guingona for private.

REGALADO, J.:
This petition for review on certiorari impugns and seeks the reversal of the decision
promulgated by respondent court on March 8, 1991 in CA-G.R. CV No.
23615 1 affirming with modifications, the earlier decision of the Regional Trial Court of
Manila, Branch XLII, 2 which dismissed the complaint filed therein by herein petitioner
against respondent bank.
The undisputed background of this case, as found by the court a quo and adopted by
respondent court, appears of record:
1. On various dates, defendant, a commercial banking institution,
through its Sucat Branch issued 280 certificates of time deposit
(CTDs) in favor of one Angel dela Cruz who deposited with herein
defendant the aggregate amount of P1,120,000.00, as follows:
(Joint Partial Stipulation of Facts and Statement of Issues,
Original Records, p. 207; Defendant's Exhibits 1 to 280);
CTD
Dates Serial Nos. Quantity Amount
22
26
2
4
5
5
5
8
9
9
9

Feb.
Feb.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.

82
82
82
82
82
82
82
82
82
82
82

90101
74602
74701
90127
74797
89965
70147
90001
90023
89991
90251

to
to
to
to
to
to
to
to
to
to
to

CTD

90120
74691
74740
90146
94800
89986
90150
90020
90050
90000
90272

20
90
40
20
4
22
4
20
28
10
22

P80,000
360,000
160,000
80,000
16,000
88,000
16,000
80,000
112,000
40,000
88,000

4. On March 18, 1982, Angel dela Cruz executed and delivered to

defendant bank the required Affidavit of Loss (Defendant's Exhibit
281). On the basis of said affidavit of loss, 280 replacement CTDs
were issued in favor of said depositor (Defendant's Exhibits 282561).
5. On March 25, 1982, Angel dela Cruz negotiated and obtained a
loan from defendant bank in the amount of Eight Hundred
Seventy Five Thousand Pesos (P875,000.00). On the same date,
said depositor executed a notarized Deed of Assignment of Time
Deposit (Exhibit 562) which stated, among others, that he (de la
Cruz) surrenders to defendant bank "full control of the indicated
time deposits from and after date" of the assignment and further
authorizes said bank to pre-terminate, set-off and "apply the said
time deposits to the payment of whatever amount or amounts
may be due" on the loan upon its maturity (TSN, February 9,
1987, pp. 60-62).
6. Sometime in November, 1982, Mr. Aranas, Credit Manager of
plaintiff Caltex (Phils.) Inc., went to the defendant bank's Sucat
branch and presented for verification the CTDs declared lost by
Angel dela Cruz alleging that the same were delivered to herein
plaintiff "as security for purchases made with Caltex Philippines,
Inc." by said depositor (TSN, February 9, 1987, pp. 54-68).
7. On November 26, 1982, defendant received a letter
(Defendant's Exhibit 563) from herein plaintiff formally informing it
of its possession of the CTDs in question and of its decision to
pre-terminate the same.

8. On December 8, 1982, plaintiff was requested by herein

defendant to furnish the former "a copy of the document
evidencing the guarantee agreement with Mr. Angel dela Cruz" as
well as "the details of Mr. Angel dela Cruz" obligation against
which plaintiff proposed to apply the time deposits (Defendant's
Exhibit 564).
9. No copy of the requested documents was furnished herein
defendant.
10. Accordingly, defendant bank rejected the plaintiff's demand
and claim for payment of the value of the CTDs in a letter dated
February 7, 1983 (Defendant's Exhibit 566).
11. In April 1983, the loan of Angel dela Cruz with the defendant
bank matured and fell due and on August 5, 1983, the latter setoff and applied the time deposits in question to the payment of the
matured loan (TSN, February 9, 1987, pp. 130-131).
12. In view of the foregoing, plaintiff filed the instant complaint,
praying that defendant bank be ordered to pay it the aggregate
value of the certificates of time deposit of P1,120,000.00 plus
accrued interest and compounded interest therein at 16% per
annum, moral and exemplary damages as well as attorney's fees.
After trial, the court a quo rendered its decision dismissing the
instant complaint. 3
On appeal, as earlier stated, respondent court affirmed the lower court's dismissal of
the complaint, hence this petition wherein petitioner faults respondent court in ruling
(1) that the subject certificates of deposit are non-negotiable despite being clearly
negotiable instruments; (2) that petitioner did not become a holder in due course of
the said certificates of deposit; and (3) in disregarding the pertinent provisions of the
Code of Commerce relating to lost instruments payable to bearer. 4
The instant petition is bereft of merit.
A sample text of the certificates of time deposit is reproduced below to provide a better
understanding of the issues involved in this recourse.
SECURITY
AND
6778
Ayala
Metro
SUCAT

TRUST
Ave.,
Makati
Manila,
OFFICEP

BANK
COMPANY
No.
90101
Philippines
4,000.00

CERTIFICATE
Rate 16%

OF

DEPOSIT

Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____

This is to Certify that B E A R E R has
deposited in this Bank the sum of PESOS:
FOUR THOUSAND ONLY, SECURITY BANK
SUCAT OFFICE P4,000 & 00 CTS Pesos,
Philippine Currency, repayable to said
depositor 731
days. after
date,
upon
presentation and surrender of this certificate,
with interest at the rate of 16% per cent per
annum.
(Sgd. Illegible) (Sgd. Illegible)

AUTHORIZED SIGNATURES 5
Respondent court ruled that the CTDs in question are non-negotiable instruments,
nationalizing as follows:
. . . While it may be true that the word "bearer" appears rather
boldly in the CTDs issued, it is important to note that after the
word "BEARER" stamped on the space provided supposedly for
the name of the depositor, the words "has deposited" a certain
amount follows. The document further provides that the amount
deposited shall be "repayable to said depositor" on the period
indicated. Therefore, the text of the instrument(s) themselves
manifest with clarity that they are payable, not to whoever
purports to be the "bearer" but only to the specified person
indicated therein, the depositor. In effect, the appellee bank
acknowledges its depositor Angel dela Cruz as the person who
made the deposit and further engages itself to pay said depositor
the amount indicated thereon at the stipulated date. 6
We disagree with these findings and conclusions, and hereby hold that the CTDs in
question are negotiable instruments. Section 1 Act No. 2031, otherwise known as the
Negotiable Instruments Law, enumerates the requisites for an instrument to become
negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum

certain in money;

Atty. Calida:
q Mr. Witness, who is the depositor identified
in all of these certificates of time deposit
insofar as the bank is concerned?

(c) Must be payable on demand, or at a fixed or determinable

future time;
(d) Must be payable to order or to bearer; and

witness:

(e) Where the instrument is addressed to a drawee, he must be

named or otherwise indicated therein with reasonable certainty.

a Angel dela Cruz is the depositor. 8

xxx xxx xxx

The CTDs in question undoubtedly meet the requirements of the law for negotiability.
The parties' bone of contention is with regard to requisite (d) set forth above. It is
noted that Mr. Timoteo P. Tiangco, Security Bank's Branch Manager way back in 1982,
testified in open court that the depositor reffered to in the CTDs is no other than Mr.
Angel de la Cruz.
xxx xxx xxx
Atty. Calida:
q In other words Mr. Witness, you are saying
that per books of the bank, the depositor
referred (sic) in these certificates states that it
was Angel dela Cruz?
witness:
a Yes, your Honor, and we have the record to
show that Angel dela Cruz was the one who
cause (sic) the amount.
Atty. Calida:
q And no other person or entity or company,
Mr. Witness?
witness:
a None, your Honor. 7
xxx xxx xxx

On this score, the accepted rule is that the negotiability or non-negotiability of an

instrument is determined from the writing, that is, from the face of the instrument
itself. 9 In the construction of a bill or note, the intention of the parties is to control, if it
can be legally ascertained. 10 While the writing may be read in the light of surrounding
circumstances in order to more perfectly understand the intent and meaning of the
parties, yet as they have constituted the writing to be the only outward and visible
expression of their meaning, no other words are to be added to it or substituted in its
stead. The duty of the court in such case is to ascertain, not what the parties may
have secretly intended as contradistinguished from what their words express, but what
is the meaning of the words they have used. What the parties meant must be
determined by what they said. 11
Contrary to what respondent court held, the CTDs are negotiable instruments. The
documents provide that the amounts deposited shall be repayable to the depositor.
And who, according to the document, is the depositor? It is the "bearer." The
documents do not say that the depositor is Angel de la Cruz and that the amounts
deposited are repayable specifically to him. Rather, the amounts are to be repayable
to the bearer of the documents or, for that matter, whosoever may be the bearer at the
time of presentment.
If it was really the intention of respondent bank to pay the amount to Angel de la Cruz
only, it could have with facility so expressed that fact in clear and categorical terms in
the documents, instead of having the word "BEARER" stamped on the space provided
for the name of the depositor in each CTD. On the wordings of the documents,
therefore, the amounts deposited are repayable to whoever may be the bearer
thereof. Thus, petitioner's aforesaid witness merely declared that Angel de la Cruz is
the depositor "insofar as the bank is concerned," but obviously other parties not privy
to the transaction between them would not be in a position to know that the depositor
is not the bearer stated in the CTDs. Hence, the situation would require any party
dealing with the CTDs to go behind the plain import of what is written thereon to
unravel the agreement of the parties thereto through facts aliunde. This need for
resort to extrinsic evidence is what is sought to be avoided by the Negotiable
Instruments Law and calls for the application of the elementary rule that the
interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity. 12

The next query is whether petitioner can rightfully recover on the CTDs. This time, the
answer is in the negative. The records reveal that Angel de la Cruz, whom petitioner
chose not to implead in this suit for reasons of its own, delivered the CTDs amounting
to P1,120,000.00 to petitioner without informing respondent bank thereof at any time.
Unfortunately for petitioner, although the CTDs are bearer instruments, a valid
negotiation thereof for the true purpose and agreement between it and De la Cruz, as
ultimately ascertained, requires both delivery and indorsement. For, although
petitioner seeks to deflect this fact, the CTDs were in reality delivered to it as a
security for De la Cruz' purchases of its fuel products. Any doubt as to whether the
CTDs were delivered as payment for the fuel products or as a security has been
dissipated and resolved in favor of the latter by petitioner's own authorized and
responsible representative himself.
In a letter dated November 26, 1982 addressed to respondent Security Bank, J.Q.
Aranas, Jr., Caltex Credit Manager, wrote: ". . . These certificates of deposit were
negotiated to us by Mr. Angel dela Cruz to guarantee his purchases of fuel products"
(Emphasis ours.) 13 This admission is conclusive upon petitioner, its protestations
notwithstanding. Under the doctrine of estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon. 14 A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon them. 15 In the law
of evidence, whenever a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act
upon such belief, he cannot, in any litigation arising out of such declaration, act, or
omission, be permitted to falsify it. 16
If it were true that the CTDs were delivered as payment and not as security,
petitioner's credit manager could have easily said so, instead of using the words "to
guarantee" in the letter aforequoted. Besides, when respondent bank, as defendant in
the court below, moved for a bill of particularity therein 17 praying, among others, that
petitioner, as plaintiff, be required to aver with sufficient definiteness or particularity (a)
the due date or dates of payment of the alleged indebtedness of Angel de la Cruz to
plaintiff and (b) whether or not it issued a receipt showing that the CTDs were
delivered to it by De la Cruz as payment of the latter's alleged indebtedness to it,
plaintiff corporation opposed the motion. 18 Had it produced the receipt prayed for, it
could have proved, if such truly was the fact, that the CTDs were delivered as
payment and not as security. Having opposed the motion, petitioner now labors under
the presumption that evidence willfully suppressed would be adverse if produced. 19
Under the foregoing circumstances, this disquisition in Intergrated Realty Corporation,
et al. vs. Philippine National Bank, et al. 20 is apropos:
. . . Adverting again to the Court's pronouncements in Lopez,
supra, we quote therefrom:
The character of the transaction between the
parties is to be determined by their intention,
regardless of what language was used or

what the form of the transfer was. If it was

intended to secure the payment of money, it
must be construed as a pledge; but if there
was some other intention, it is not a pledge.
However, even though a transfer, if regarded
by itself, appears to have been absolute, its
object and character might still be qualified
and explained by contemporaneous writing
declaring it to have been a deposit of the
property as collateral security. It has been
said that a transfer of property by the debtor
to a creditor, even if sufficient on its face to
make an absolute conveyance, should be
treated as a pledge if the debt continues in
inexistence and is not discharged by the
transfer, and that accordingly the use of the
terms ordinarily importing conveyance of
absolute ownership will not be given that
effect in such a transaction if they are also
commonly used in pledges and mortgages
and therefore do not unqualifiedly indicate a
transfer of absolute ownership, in the
absence of clear and unambiguous language
or other circumstances excluding an intent to
pledge.
Petitioner's insistence that the CTDs were negotiated to it begs the question. Under
the Negotiable Instruments Law, an instrument is negotiated when it is transferred
from one person to another in such a manner as to constitute the transferee the holder
thereof, 21 and a holder may be the payee or indorsee of a bill or note, who is in
possession of it, or the bearer thereof. 22 In the present case, however, there was no
negotiation in the sense of a transfer of the legal title to the CTDs in favor of petitioner
in which situation, for obvious reasons, mere delivery of the bearer CTDs would have
sufficed. Here, the delivery thereof only as security for the purchases of Angel de la
Cruz (and we even disregard the fact that the amount involved was not disclosed)
could at the most constitute petitioner only as a holder for value by reason of his lien.
Accordingly, a negotiation for such purpose cannot be effected by mere delivery of the
instrument since, necessarily, the terms thereof and the subsequent disposition of
such security, in the event of non-payment of the principal obligation, must be
contractually provided for.
The pertinent law on this point is that where the holder has a lien on the instrument
arising from contract, he is deemed a holder for value to the extent of his lien. 23 As
such holder of collateral security, he would be a pledgee but the requirements therefor
and the effects thereof, not being provided for by the Negotiable Instruments Law,
shall be governed by the Civil Code provisions on pledge of incorporeal
rights, 24 which inceptively provide:

Art. 2095. Incorporeal rights, evidenced by negotiable

instruments, . . . may also be pledged. The instrument proving the
right pledged shall be delivered to the creditor, and if negotiable,
must be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a
description of the thing pledged and the date of the pledge do not
appear in a public instrument.
Aside from the fact that the CTDs were only delivered but not indorsed, the factual
findings of respondent court quoted at the start of this opinion show that petitioner
failed to produce any document evidencing any contract of pledge or guarantee
agreement between it and Angel de la Cruz. 25 Consequently, the mere delivery of the
CTDs did not legally vest in petitioner any right effective against and binding upon
respondent bank. The requirement under Article 2096 aforementioned is not a mere
rule of adjective law prescribing the mode whereby proof may be made of the date of
a pledge contract, but a rule of substantive law prescribing a condition without which
the execution of a pledge contract cannot affect third persons adversely. 26
On the other hand, the assignment of the CTDs made by Angel de la Cruz in favor of
respondent bank was embodied in a public instrument. 27 With regard to this other
mode of transfer, the Civil Code specifically declares:
Art. 1625. An assignment of credit, right or action shall produce no
effect as against third persons, unless it appears in a public
instrument, or the instrument is recorded in the Registry of
Property in case the assignment involves real property.
Respondent bank duly complied with this statutory requirement. Contrarily, petitioner,
whether as purchaser, assignee or lien holder of the CTDs, neither proved the amount
of its credit or the extent of its lien nor the execution of any public instrument which
could affect or bind private respondent. Necessarily, therefore, as between petitioner
and respondent bank, the latter has definitely the better right over the CTDs in
question.
Finally, petitioner faults respondent court for refusing to delve into the question of
whether or not private respondent observed the requirements of the law in the case of
lost negotiable instruments and the issuance of replacement certificates therefor, on
the ground that petitioner failed to raised that issue in the lower court. 28
On this matter, we uphold respondent court's finding that the aspect of alleged
negligence of private respondent was not included in the stipulation of the parties and
in the statement of issues submitted by them to the trial court. 29The issues agreed
upon by them for resolution in this case are:

1. Whether or not the CTDs as worded are negotiable

instruments.
2. Whether or not defendant could legally apply the amount
covered by the CTDs against the depositor's loan by virtue of the
assignment (Annex "C").
3. Whether or not there was legal compensation or set off
involving the amount covered by the CTDs and the depositor's
outstanding account with defendant, if any.
4. Whether or not plaintiff could compel defendant to preterminate
the CTDs before the maturity date provided therein.
5. Whether or not plaintiff is entitled to the proceeds of the CTDs.
6. Whether or not the parties can recover damages, attorney's
fees and litigation expenses from each other.
As respondent court correctly observed, with appropriate citation of some doctrinal
authorities, the foregoing enumeration does not include the issue of negligence on the
part of respondent bank. An issue raised for the first time on appeal and not raised
timely in the proceedings in the lower court is barred by estoppel. 30 Questions raised
on appeal must be within the issues framed by the parties and, consequently, issues
not raised in the trial court cannot be raised for the first time on appeal. 31
Pre-trial is primarily intended to make certain that all issues necessary to the
disposition of a case are properly raised. Thus, to obviate the element of surprise,
parties are expected to disclose at a pre-trial conference all issues of law and fact
which they intend to raise at the trial, except such as may involve privileged or
impeaching matters. The determination of issues at a pre-trial conference bars the
consideration of other questions on appeal. 32
To accept petitioner's suggestion that respondent bank's supposed negligence may be
considered encompassed by the issues on its right to preterminate and receive the
proceeds of the CTDs would be tantamount to saying that petitioner could raise on
appeal any issue. We agree with private respondent that the broad ultimate issue of
petitioner's entitlement to the proceeds of the questioned certificates can be premised
on a multitude of other legal reasons and causes of action, of which respondent
bank's supposed negligence is only one. Hence, petitioner's submission, if accepted,
would render a pre-trial delimitation of issues a useless exercise. 33
Still, even assuming arguendo that said issue of negligence was raised in the court
below, petitioner still cannot have the odds in its favor. A close scrutiny of the
provisions of the Code of Commerce laying down the rules to be followed in case of
lost instruments payable to bearer, which it invokes, will reveal that said provisions,

even assuming their applicability to the CTDs in the case at bar, are merely permissive
and not mandatory. The very first article cited by petitioner speaks for itself.
Art 548. The dispossessed owner, no matter for what cause it
may be, may apply to the judge or court of competent jurisdiction,
asking that the principal, interest or dividends due or about to
become due, be not paid a third person, as well as in order to
prevent the ownership of the instrument that a duplicate be issued
him. (Emphasis ours.)
xxx xxx xxx
The use of the word "may" in said provision shows that it is not mandatory but
discretionary on the part of the "dispossessed owner" to apply to the judge or court of
competent jurisdiction for the issuance of a duplicate of the lost instrument. Where the
provision reads "may," this word shows that it is not mandatory but discretional. 34 The
word "may" is usually permissive, not mandatory. 35 It is an auxiliary verb indicating
liberty, opportunity, permission and possibility. 36
Moreover, as correctly analyzed by private respondent, 37 Articles 548 to 558 of the
Code of Commerce, on which petitioner seeks to anchor respondent bank's supposed
negligence, merely established, on the one hand, a right of recourse in favor of a
dispossessed owner or holder of a bearer instrument so that he may obtain a
duplicate of the same, and, on the other, an option in favor of the party liable thereon
who, for some valid ground, may elect to refuse to issue a replacement of the
instrument. Significantly, none of the provisions cited by petitioner categorically
restricts
or
prohibits
the
issuance
a
duplicate
or
replacement
instrument sans compliance with the procedure outlined therein, and none establishes
a mandatory precedent requirement therefor.
WHEREFORE, on the modified premises above set forth, the petition is DENIED and
the appealed decision is hereby AFFIRMED.
SO ORDERED.

Philguarantee filed against Astro and Roxas a complaint for sum of money with the
RTC of Makati.
In his Answer, Roxas disclaims any liability on the instruments, alleging, inter
alia, that he merely signed the same in blank and the phrases in his personal capacity
and in his official capacity were fraudulently inserted without his knowledge.[6]
After trial, the RTC rendered its decision in favor of Philguarantee with the
following dispositive portion:

ASTRO ELECTRONICS CORP. and PETER ROXAS, petitioner, vs. PHILIPPINE

EXPORT
AND
FOREIGN
LOAN
GUARANTEE
CORPORATION, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Assailed in this petition for review on certiorari under Rule 45 of the Rules of
Court is the decision of the Court of Appeals in CA-G.R. CV No. 41274, [1] affirming the
decision of the Regional Trial Court (Branch 147) of Makati, then Metro Manila,
whereby petitioners Peter Roxas and Astro Electronics Corp. (Astro for brevity) were
ordered to pay respondent Philippine Export and Foreign Loan Guarantee Corporation
(Philguarantee), jointly and severally, the amount of P3,621,187.52 with interests and
costs.
The antecedent facts are undisputed.
Astro was granted several loans by the Philippine Trust Company (Philtrust)
amounting to P3,000,000.00 with interest and secured by three promissory notes: PN
NO. PFX-254 dated December 14, 1981 for P600,000.00, PN No. PFX-258 also dated
December 14, 1981 for P400,000.00 and PN No. 15477 dated August 27, 1981 for
P2,000,000.00. In each of these promissory notes, it appears that petitioner Roxas
signed twice, as President of Astro and in his personal capacity.[2] Roxas also signed a
Continuing Surety ship Agreement in favor of Philtrust Bank, as President of Astro and
as surety.[3]
Thereafter, Philguarantee, with the consent of Astro, guaranteed in favor of
Philtrust the payment of 70% of Astros loan,[4] subject to the condition that upon
payment by Philguanrantee of said amount, it shall be proportionally subrogated to the
rights of Philtrust against Astro.[5]
As a result of Astros failure to pay its loan obligations, despite demands,
Philguarantee paid 70% of the guaranteed loan to Philtrust. Subsequently,

WHEREFORE,inviewofalltheforegoing,theCourtherebyrendersjudgmentinfavoror
(sic)theplaintiffandagainstthedefendantsAstroElectronicsCorporationandPeterT.Roxas,
orderingthethen(sic)topay,jointlyandseverally,theplaintiffthesumofP3,621.187.52
representing the total obligation of defendants in favor of plaintiff Philguarantee as of
December31,1984withinterestatthestipulatedrateof16%perannumandstipulatedpenalty
chargesof16%perannumcomputedfromJanuary1,1985untiltheamountisfullypaid.With
costs.
SOORDERED.[7]
The trial court observed that if Roxas really intended to sign the instruments
merely in his capacity as President of Astro, then he should have signed only once in
the promissory note.[8]
On appeal, the Court of Appeals affirmed the RTC decision agreeing with the
trial court that Roxas failed to explain satisfactorily why he had to sign twice in the
contract and therefore the presumption that private transactions have been fair and
regular must be sustained.[9]
In the present petition, the principal issue to be resolved is whether or not Roxas
should be jointly and severally liable (solidary) with Astro for the sum awarded by the
RTC.
The answer is in the affirmative.
Astros loan with Philtrust Bank is secured by three promissory notes. These
promissory notes are valid and binding against Astro and Roxas. As it appears on the
notes, Roxas signed twice: first, as president of Astro and second, in his personal
capacity. In signing his name aside from being the President of Asro, Roxas became a
co-maker of the promissory notes and cannot escape any liability arising from
it. Under the Negotiable Instruments Law, persons who write their names on the face
of promissory notes are makers,[10] promising that they will pay to the order of the
payee or any holder according to its tenor.[11] Thus, even without the phrase personal
capacity, Roxas will still be primarily liable as a joint and several debtor under the
notes considering that his intention to be liable as such is manifested by the fact that

he affixed his signature on each of the promissory notes twice which necessarily
would imply that he is undertaking the obligation in two different capacities, official and
personal.
Unnoticed by both the trial court and the Court of Appeals, a closer examination
of the signatures affixed by Roxas on the promissory notes, Exhibits A-4 and 3-A and
B-4 and 4-A readily reveals that portions of his signatures covered portions of the
typewritten words personal capacity indicating with certainty that the typewritten words
were already existing at the time Roxas affixed his signatures thus demolishing his
claim that the typewritten words were just inserted after he signed the promissory
notes. If what he claims is true, then portions of the typewritten words would have
covered portions of his signatures, and not vice versa.
As to the third promissory note, Exhibit C-4 and 5-A, the copy submitted is not
clear so that this Court could not discern the same observations on the notes, Exhibits
A-4 and 3-A and B-4 and 4-A.
Nevertheless, the following discussions equally apply to all three promissory
notes.
The three promissory notes uniformly provide: FOR VALUE RECEIVED, I/We
jointly, severally and solidarily, promise to pay to PHILTRUST BANK or order... [12] An
instrument which begins with I, We, or Either of us promise to pay, when signed by
two or more persons, makes them solidarily liable. [13] Also, the phrase joint and several
binds the makers jointly and individually to the payee so that all may be sued together
for its enforcement, or the creditor may select one or more as the object of the suit.
[14]
Having signed under such terms, Roxas assumed the solidary liability of a debtor
and Philtrust Bank may choose to enforce the notes against him alone or jointly with
Astro.
Roxas claim that the phrases in his personal capacity and in his official capacity
were inserted on the notes without his knowledge was correctly disregarded by the
RTC and the Court of Appeals. It is not disputed that Roxas does not deny that he
signed the notes twice. As aptly found by both the trial and appellate court, Roxas did
not offer any explanation why he did so. It devolves upon him to overcome the
presumptions that private transactions are presumed to be fair and regular [15] and that
a person takes ordinary care of his concerns. [16]Aside from his self-serving allegations,
Roxas failed to prove the truth of such allegations. Thus, said presumptions prevail
over his claims. Bare allegations, when unsubstantiated by evidence, documentary or
otherwise, are not equivalent to proof under our Rules of Court.[17]
Roxas is the President of Astro and reasonably, a businessman who is
presumed to take ordinary care of his concerns. Absent any countervailing evidence, it
cannot be gainsaid that he will not sign document without first informing himself of its
contents and consequences. Clearly, he knew the nature of the transactions and
documents involved as he not only executed these notes on two different dates but he
also executed, and again, signed twice, a continuing Surety ship Agreement notarized

on July 31, 1981, wherein he guaranteed, jointly and severally with Astro the
repayment of P3,000,000.00 due to Philtrust. Such continuing suretyship agreement
even re-enforced his solidary liability Philtrust because as a surety, he bound himself
jointly and severally with Astros obligation. [18] Roxas cannot now avoid liability by
hiding under the convenient excuse that he merely signed the notes in blank and the
phrases in personal capacity and in his official capacity were fraudulently inserted
without his knowledge.
Lastly, Philguarantee has all the right to proceed against petitioner, it is
subrogated to the rights of Philtrust to demand for and collect payment from both
Roxas and Astro since it already paid the value of 70% of roxas and Astro Electronics
Corp.s loan obligation. In compliance with its contract of Guarantee in favor of
Philtrust.
Subrogation is the transfer of all the rights of the creditor to a third person, who
substitutes him in all his rights. [19] It may either be legal or conventional. Legal
subrogation is that which takes place without agreement but by operation of law
because of certain acts.[20] Instances of legal subrogation are those provided in Article
1302 of the Civil Code. Conventional subrogation, on the other hand, is that which
takes place by agreement of the parties.[21]
Roxas acquiescence is not necessary for subrogation to take place because the
instant case is one of the legal subrogation that occurs by operation of law, and
without need of the debtors knowledge.[22] Further, Philguarantee, as guarantor,
became the transferee of all the rights of Philtrust as against Roxas and Astro
because the guarantor who pays is subrogated by virtue thereof to all the rights which
the creditor had against the debtor.[23]
WHEREFORE, finding no error with the decision of the Court of Appeals dated
December 10, 1998, the same is hereby AFFIRMED in toto.
SO ORDERED.

G.R. No. 93073 December 21, 1992

REPUBLIC
PLANTERS
vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.

BANK, petitioner,

CAMPOS, JR., J.:

This is an appeal by way of a Petition for Review on Certiorari from the decision * of
the Court of Appeals in CA G.R. CV No. 07302, entitled "Republic Planters
Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al., Defendants, and
Fermin Canlas, Defendant-Appellant", which affirmed the decision ** in Civil Case No.
82-5448 except that it completely absolved Fermin Canlas from liability under the
promissory notes and reduced the award for damages and attorney's fees. The RTC
decision, rendered on June 20, 1985, is quoted hereunder:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiff Republic Planters Bank, ordering
defendant Pinch Manufacturing Corporation (formerly Worldwide
Garment Manufacturing, Inc.) and defendants Shozo Yamaguchi
and Fermin Canlas to pay, jointly and severally, the plaintiff bank
the following sums with interest thereon at 16% per annum from
the dates indicated, to wit:
Under the promissory note (Exhibit "A"), the sum of P300,000.00
with interest from January 29, 1981 until fully paid; under
promissory note (Exhibit "B"), the sum of P40,000.00 with interest
from November 27, 1980; under the promissory note (Exhibit "C"),
the sum of P166,466.00 which interest from January 29, 1981;
under the promissory note (Exhibit "E"), the sum of P86,130.31
with interest from January 29, 1981; under the promissory note
(Exhibit "G"), the sum of P12,703.70 with interest from November
27, 1980; under the promissory note (Exhibit "H"), the sum of
P281,875.91 with interest from January 29, 1981; and under the
promissory note (Exhibit "I"), the sum of P200,000.00 with interest
from January 29, 1981.

Under the promissory note (Exhibit "D") defendants Pinch

Manufacturing Corporation (formerly named Worldwide Garment
Manufacturing, Inc.), and Shozo Yamaguchi are ordered to pay
jointly and severally, the plaintiff bank the sum of P367,000.00
with interest of 16% per annum from January 29, 1980 until fully
paid
Under the promissory note (Exhibit "F") defendant corporation
Pinch (formerly Worldwide) is ordered to pay the plaintiff bank the
sum of P140,000.00 with interest at 16% per annum from
November 27, 1980 until fully paid.
Defendant Pinch (formely Worldwide) is hereby ordered to pay
the plaintiff the sum of P231,120.81 with interest at 12% per
annum from July 1, 1981, until fully paid and the sum of
P331,870.97 with interest from March 28, 1981, until fully paid.

marked as Exhibits A to I inclusive, each of which were uniformly worded in the

following manner:
___________, after date, for value received, I/we, jointly and
severaIly promise to pay to the ORDER of the REPUBLIC
PLANTERS BANK, at its office in Manila, Philippines, the sum of
___________ PESOS(....) Philippine Currency...
On the right bottom margin of the promissory notes appeared the signatures of Shozo
Yamaguchi and Fermin Canlas above their printed names with the phrase "and (in) his
personal capacity" typewritten below. At the bottom of the promissory notes appeared:
"Please credit proceeds of this note to:
________ Savings Account ______XX Current Account
No. 1372-00257-6

All the defendants are also ordered to pay, jointly and severally,
the plaintiff the sum of P100,000.00 as and for reasonable
attorney's fee and the further sum equivalent to 3% per annum of
the respective principal sums from the dates above stated as
penalty charge until fully paid, plus one percent (1%) of the
principal sums as service charge.
With costs against the defendants.
SO ORDERED. 1
From the above decision only defendant Fermin Canlas appealed to the then
Intermediate Court (now the Court Appeals). His contention was that inasmuch as he
signed the promissory notes in his capacity as officer of the defunct Worldwide
Garment Manufacturing, Inc, he should not be held personally liable for such
authorized corporate acts that he performed. It is now the contention of the petitioner
Republic Planters Bank that having unconditionally signed the nine (9) promissory
notes with Shozo Yamaguchi, jointly and severally, defendant Fermin Canlas is
solidarity liable with Shozo Yamaguchi on each of the nine notes.
We find merit in this appeal.
From the records, these facts are established: Defendant Shozo Yamaguchi and
private respondent Fermin Canlas were President/Chief Operating Officer and
Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of Board
Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private
respondent Fermin Canlas were authorized to apply for credit facilities with the
petitioner Republic Planters Bank in the forms of export advances and letters of
credit/trust receipts accommodations. Petitioner bank issued nine promissory notes,

of WORLDWIDE GARMENT MFG. CORP.

These entries were separated from the text of the notes with a bold line which ran
horizontally across the pages.
In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment
Manufacturing, Inc. was apparently rubber stamped above the signatures of defendant
and private respondent.
On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its
corporate name to Pinch Manufacturing Corporation.
On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of
money covered among others, by the nine promissory notes with interest thereon,
plus attorney's fees and penalty charges. The complainant was originally brought
against Worldwide Garment Manufacturing, Inc. inter alia, but it was later amended to
drop Worldwide Manufacturing, Inc. as defendant and substitute Pinch Manufacturing
Corporation it its place. Defendants Pinch Manufacturing Corporation and Shozo
Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pretrial conference despite due notice. Only private respondent Fermin Canlas filed an
Amended Answer wherein he, denied having issued the promissory notes in question
since according to him, he was not an officer of Pinch Manufacturing Corporation, but
instead of Worldwide Garment Manufacturing, Inc., and that when he issued said
promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the same were
in blank, the typewritten entries not appearing therein prior to the time he affixed his
signature.

In the mind of this Court, the only issue material to the resolution of this appeal is
whether private respondent Fermin Canlas is solidarily liable with the other
defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on the
nine promissory notes.

Finally, the respondent Court made a grave error in holding that an amendment in a
corporation's Articles of Incorporation effecting a change of corporate name, in this
case from Worldwide Garment manufacturing Inc to Pinch Manufacturing Corporation
extinguished the personality of the original corporation.

We hold that private respondent Fermin Canlas is solidarily liable on each of the
promissory notes bearing his signature for the following reasons:

The corporation, upon such change in its name, is in no sense a new corporation, nor
the successor of the original corporation. It is the same corporation with a different
name, and its character is in no respect changed. 10

The promissory motes are negotiable instruments and must be governed by the
Negotiable Instruments Law. 2
Under the Negotiable lnstruments Law, persons who write their names on the face of
promissory notes are makers and are liable as such. 3 By signing the notes, the maker
promises to pay to the order of the payee or any holder 4according to the tenor
thereof. 5 Based on the above provisions of law, there is no denying that private
respondent Fermin Canlas is one of the co-makers of the promissory notes. As such,
he cannot escape liability arising therefrom.
Where an instrument containing the words "I promise to pay" is signed by two or more
persons, they are deemed to be jointly and severally liable thereon. 6 An instrument
which begins" with "I" ,We" , or "Either of us" promise to, pay, when signed by two or
more persons, makes them solidarily liable. 7 The fact that the singular pronoun is
used indicates that the promise is individual as to each other; meaning that each of
the co-signers is deemed to have made an independent singular promise to pay the
notes in full.
In the case at bar, the solidary liability of private respondent Fermin Canlas is made
clearer and certain, without reason for ambiguity, by the presence of the phrase "joint
and several" as describing the unconditional promise to pay to the order of Republic
Planters Bank. A joint and several note is one in which the makers bind themselves
both jointly and individually to the payee so that all may be sued together for its
enforcement, or the creditor may select one or more as the object of the suit. 8 A joint
and several obligation in common law corresponds to a civil law solidary obligation;
that is, one of several debtors bound in such wise that each is liable for the entire
amount, and not merely for his proportionate share. 9 By making a joint and several
promise to pay to the order of Republic Planters Bank, private respondent Fermin
Canlas assumed the solidary liability of a debtor and the payee may choose to enforce
the notes against him alone or jointly with Yamaguchi and Pinch Manufacturing
Corporation as solidary debtors.
As to whether the interpolation of the phrase "and (in) his personal capacity" below the
signatures of the makers in the notes will affect the liability of the makers, We do not
find it necessary to resolve and decide, because it is immaterial and will not affect to
the liability of private respondent Fermin Canlas as a joint and several debtor of the
notes. With or without the presence of said phrase, private respondent Fermin Canlas
is primarily liable as a co-maker of each of the notes and his liability is that of a
solidary debtor.

A change in the corporate name does not make a new corporation, and whether
effected by special act or under a general law, has no affect on the identity of the
corporation, or on its property, rights, or liabilities. 11
The corporation continues, as before, responsible in its new name for all debts or
other liabilities which it had previously contracted or incurred. 12
As a general rule, officers or directors under the old corporate name bear no personal
liability for acts done or contracts entered into by officers of the corporation, if duly
authorized. Inasmuch as such officers acted in their capacity as agent of the old
corporation and the change of name meant only the continuation of the old juridical
entity, the corporation bearing the same name is still bound by the acts of its agents if
authorized by the Board. Under the Negotiable Instruments Law, the liability of a
person signing as an agent is specifically provided for as follows:
Sec. 20. Liability of a person signing as agent and so forth. Where
the instrument contains or a person adds to his signature words
indicating that he signs for or on behalf of a principal , or in a
representative capacity, he is not liable on the instrument if he
was duly authorized; but the mere addition of words describing
him as an agent, or as filling a representative character, without
disclosing his principal, does not exempt him from personal
liability.
Where the agent signs his name but nowhere in the instrument has he disclosed the
fact that he is acting in a representative capacity or the name of the third party for
whom he might have acted as agent, the agent is personally liable to take holder of
the instrument and cannot be permitted to prove that he was merely acting as agent of
another and parol or extrinsic evidence is not admissible to avoid the agent's personal
liability. 13
On the private respondent's contention that the promissory notes were delivered to
him in blank for his signature, we rule otherwise. A careful examination of the notes in
question shows that they are the stereotype printed form of promissory notes
generally used by commercial banking institutions to be signed by their clients in
obtaining loans. Such printed notes are incomplete because there are blank spaces to
be filled up on material particulars such as payee's name, amount of the loan, rate of
interest, date of issue and the maturity date. The terms and conditions of the loan are

printed on the note for the borrower-debtor 's perusal. An incomplete instrument which
has been delivered to the borrower for his signature is governed by Section 14 of the
Negotiable Instruments Law which provides, in so far as relevant to this case, thus:
Sec. 14. Blanks: when may be filled. Where the instrument is
wanting in any material particular, the person in possesion thereof
has a prima facie authority to complete it by filling up the blanks
therein. ... In order, however, that any such instrument when
completed may be enforced against any person who became a
party thereto prior to its completion, it must be filled up strictly in
accordance with the authority given and within a reasonable
time...
Proof that the notes were signed in blank was only the self-serving testimony of
private respondent Fermin Canlas, as determined by the trial court, so that the trial
court ''doubts the defendant (Canlas) signed in blank the promissory notes". We chose
to believe the bank's testimony that the notes were filled up before they were given to
private respondent Fermin Canlas and defendant Shozo Yamaguchi for their
signatures as joint and several promissors. For signing the notes above their
typewritten names, they bound themselves as unconditional makers. We take judicial
notice of the customary procedure of commercial banks of requiring their clientele to
sign promissory notes prepared by the banks in printed form with blank spaces
already filled up as per agreed terms of the loan, leaving the borrowers-debtors to do
nothing but read the terms and conditions therein printed and to sign as makers or comakers. When the notes were given to private respondent Fermin Canlas for his
signature, the notes were complete in the sense that the spaces for the material
particular had been filled up by the bank as per agreement. The notes were not
incomplete instruments; neither were they given to private respondent Fermin Canlas
in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not
applicable.
The ruling in case of Reformina vs. Tomol relied upon by the appellate court in
reducing the interest rate on the promissory notes from 16% to 12% per annum does
not squarely apply to the instant petition. In the abovecited case, the rate of 12% was
applied to forebearances of money, goods or credit and court judgemets thereon, only
in the absence of any stipulation between the parties.

Inasmuch as this Court had declared that increases in interest rates are not subject to
any ceiling prescribed by the Usury Law, the appellate court erred in limiting the
interest rates at 12% per annum. Central Bank Circular No. 905, Series of 1982
removed the Usury Law ceiling on interest rates. 16
In the 1ight of the foregoing analysis and under the plain language of the statute and
jurisprudence on the matter, the decision of the respondent: Court of Appeals
absolving private respondent Fermin Canlas is REVERSED and SET ASIDE.
Judgement is hereby rendered declaring private respondent Fermin Canlas jointly and
severally liable on all the nine promissory notes with the following sums and at 16%
interest per annum from the dates indicated, to wit:
Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest
from January 29, 1981 until fully paid; under promissory note marked as Exhibit B, the
sum of P40,000.00 with interest from November 27, 1980: under the promissory note
denominated as Exhibit C, the amount of P166,466.00 with interest from January 29,
1981; under the promissory note denominated as Exhibit D, the amount of
P367,000.00 with interest from January 29, 1981 until fully paid; under the promissory
note marked as Exhibit E, the amount of P86,130.31 with interest from January 29,
1981; under the promissory note marked as Exhibit F, the sum of P140,000.00 with
interest from November 27, 1980 until fully paid; under the promissory note marked as
Exhibit G, the amount of P12,703.70 with interest from November 27, 1980; the
promissory note marked as Exhibit H, the sum of P281,875.91 with interest from
January 29, 1981; and the promissory note marked as Exhibit I, the sum of
P200,000.00 with interest on January 29, 1981.
The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide
Garment Manufacturing, Inc.) and Shozo Yamaguchi, for not having appealed from the
decision of the trial court, shall be adjudged in accordance with the judgment rendered
by the Court a quo.
With respect to attorney's fees, and penalty and service charges, the private
respondent Fermin Canlas is hereby held jointly and solidarity liable with defendants
for the amounts found, by the Court a quo. With costs against private respondent.
SO ORDERED.

In the case at bar however , it was found by the trial court that the rate of interest is
9% per annum, which interest rate the plaintiff may at any time without notice, raise
within the limits allowed law. And so, as of February 16, 1984 , the plaintiff had fixed
the interest at 16% per annum.
This Court has held that the rates under the Usury Law, as amended by Presidential
Decree No. 116, are applicable only to interests by way of compensation for the use or
forebearance of money. Article 2209 of the Civil Code, on the other hand, governs
interests by way of damages. 15 This fine distinction was not taken into consideration
by the appellate court, which instead made a general statement that the interest rate
be at 12% per annum.

G.R. No. 167567

September 22, 2010

SAN
MIGUEL
vs.
BARTOLOME PUZON, JR., Respondent.

CORPORATION, Petitioner,

DECISION
DEL CASTILLO, J.:
This petition for review assails the December 21, 2004 Decision 1 and March 28, 2005
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 83905, which dismissed
the petition before it and denied reconsideration, respectively.
Factual Antecedents
Respondent Bartolome V. Puzon, Jr., (Puzon) owner of Bartenmyk Enterprises, was a
dealer of beer products of petitioner San Miguel Corporation (SMC) for Paraaque
City. Puzon purchased SMC products on credit. To ensure payment and as a business
practice, SMC required him to issue postdated checks equivalent to the value of the
products purchased on credit before the same were released to him. Said checks
were returned to Puzon when the transactions covered by these checks were paid or
settled in full.
On December 31, 2000, Puzon purchased products on credit amounting
to P11,820,327 for which he issued, and gave to SMC, Bank of the Philippine Islands
(BPI) Check Nos. 27904 (for P309,500.00) and 27903 (forP11,510,827.00) to cover
the said transaction.
On January 23, 2001, Puzon, together with his accountant, visited the SMC Sales
Office in Paraaque City to reconcile his account with SMC. During that visit Puzon
allegedly requested to see BPI Check No. 17657. However, when he got hold of BPI
Check No. 27903 which was attached to a bond paper together with BPI Check No.
17657 he allegedly immediately left the office with his accountant, bringing the checks
with them.

SMC sent a letter to Puzon on March 6, 2001 demanding the return of the said
checks. Puzon ignored the demand hence SMC filed a complaint against him for theft
with the City Prosecutors Office of Paraaque City.

WHETHER X X X PUZON HAD STOLEN FROM SMC ON JANUARY 23, 2001,

AMONG OTHERS BPI CHECK NO. 27903 DATED MARCH 30, 2001 IN THE
AMOUNT OF PESOS: ELEVEN MILLION FIVE HUNDRED TEN THOUSAND EIGHT
HUNDRED TWENTY SEVEN (Php11,510,827.00)

Rulings of the Prosecutor and the Secretary of Department of Justice (DOJ)

II
The investigating prosecutor, Elizabeth Yu Guray found that the "relationship between
[SMC] and [Puzon] appears to be one of credit or creditor-debtor relationship. The
problem lies in the reconciliation of accounts and the non-payment of beer empties
which cannot give rise to a criminal prosecution for theft."3 Thus, in her July 31, 2001
Resolution,4 she recommended the dismissal of
the case for lack of evidence. SMC appealed.
On June 4, 2003, the DOJ issued its resolution 5 affirming the prosecutors Resolution
dismissing the case. Its motion for reconsideration having been denied in the April 23,
2004 DOJ Resolution,6 SMC filed a petition for certiorari with the CA.
Ruling of the Court of Appeals
The CA found that the postdated checks were issued by Puzon merely as a security
for the payment of his purchases and that these were not intended to be encashed. It
thus concluded that SMC did not acquire ownership of the checks as it was duty
bound to return the same checks to Puzon after the transactions covering them were
settled. The CA agreed with the prosecutor that there was no theft, considering that a
person cannot be charged with theft for taking personal property that belongs to
himself. It disposed of the appeal as follows:
WHEREFORE, finding no grave abuse of discretion committed by public respondent,
the instant petition is herebyDISMISSED. The assailed Resolutions of public
respondent, dated 04 June 2003 and 23 April 2004, areAFFIRMED. No costs at this
instance.
SO ORDERED.7

WHETHER X X X THE POSTDATED CHECKS ISSUED BY PUZON, PARTICULARLY

BPI CHECK NO. 27903 DATED MARCH 30, 2001 IN THE AMOUNT OF PESOS:
ELEVEN MILLION FIVE HUNDRED TEN THOUSAND EIGHT HUNDRED TWENTY
SEVEN (Php11,510,827.00), WERE ISSUED IN PAYMENT OF HIS BEER
PURCHASES OR WERE USED MERELY AS SECURITY TO ENSURE PAYMENT OF
PUZONS OBLIGATION.
III
WHETHER X X X THE PRACTICE OF SMC IN RETURNING THE POSTDATED
CHECKS ISSUED IN PAYMENT OF BEER PRODUCTS PURCHASED ON CREDIT
SHOULD THE TRANSACTIONS COVERED BY THESE CHECKS [BE] SETTLED ON
[THE] MATURITY DATES THEREOF COULD BE LIKENED TO A CONTRACT OF
PLEDGE.
IV
WHETHER X X X SMC HAD ESTABLISHED PROBABLE CAUSE TO JUSTIFY THE
INDICTMENT OF PUZON FOR THE CRIME OF THEFT PURSUANT TO ART. 308 OF
THE REVISED PENAL CODE.8
Petitioner's Arguments
SMC contends that Puzon was positively identified by its employees to have taken the
subject postdated checks. It also contends that ownership of the checks was
transferred to it because these were issued, not merely as security but were, in
payment of Puzons purchases. SMC points out that it has established more than
sufficient probable cause to justify the indictment of Puzon for the crime of Theft.

The motion for reconsideration of SMC was denied. Hence, the present petition.
Respondents Arguments
Issues
Petitioner now raises the following issues:

On the other hand, Puzon contends that SMC raises questions of fact that are beyond
the province of an appeal on certiorari. He also insists that there is no probable cause
to charge him with theft because the subject checks were issued only as security and
he therefore retained ownership of the same.

I
Our Ruling

The petition has no merit.

Preliminary Matters
At the outset we find that as pointed out by Puzon, SMC raises questions of fact. The
resolution of the first issue raised by SMC of whether respondent stole the subject
check, which calls for the Court to determine whether respondent is guilty of a felony,
first requires that the facts be duly established in the proper forum and in accord with
the proper procedure. This issue cannot be resolved based on mere allegations of
facts and affidavits. The same is true with the second issue raised by petitioner, to wit:
whether the checks issued by Puzon were payments for his purchases or were
intended merely as security to ensure payment. These issues cannot be properly
resolved in the present petition for review on certiorari which is rooted merely on the
resolution of the prosecutor finding no probable cause for the filing of an information
for theft.
The third issue raised by petitioner, on the other hand, would entail venturing into
constitutional matters for a complete resolution. This route is unnecessary in the
present case considering that the main matter for resolution here only concerns grave
abuse of discretion and the existence of probable cause for theft, which at this point is
more properly resolved through another more clear cut route.
Probable Cause for Theft
"Probable cause is defined as such facts and circumstances that will engender a wellfounded belief that a crime has been committed and that the respondent is probably
guilty thereof and should be held for trial." 9 On the fine points of the determination of
probable cause, Reyes v. Pearlbank Securities, Inc.10 comprehensively elaborated
that:
The determination of [the existence or absence of probable cause] lies within the
discretion of the prosecuting officers after conducting a preliminary investigation upon
complaint of an offended party. Thus, the decision whether to dismiss a complaint or
not is dependent upon the sound discretion of the prosecuting fiscal. He may dismiss
the complaint forthwith, if he finds the charge insufficient in form or substance or
without any ground. Or he may proceed with the investigation if the complaint in his
view is sufficient and in proper form. To emphasize, the determination of probable
cause for the filing of information in court is an executive function, one that properly
pertains at the first instance to the public prosecutor and, ultimately, to the Secretary
of Justice, who may direct the filing of the corresponding information or move for the
dismissal of the case. Ultimately, whether or not a complaint will be dismissed is
dependent on the sound discretion of the Secretary of Justice. And unless made with
grave abuse of discretion, findings of the Secretary of Justice are not subject to
review.
For this reason, the Court considers it sound judicial policy to refrain from interfering in
the conduct of preliminary investigations and to leave the Department of Justice ample

latitude of discretion in the determination of what constitutes sufficient evidence to

establish probable cause for the prosecution of supposed offenders. Consistent with
this policy, courts do not reverse the Secretary of Justice's findings and conclusions
on the matter of probable cause except in clear cases of grave abuse of discretion.
In the present case, we are also not sufficiently convinced to deviate from the general
rule of non-interference. Indeed the CA did not err in dismissing the petition for
certiorari before it, absent grave abuse of discretion on the part of the DOJ Secretary
in not finding probable cause against Puzon for theft.
The Revised Penal Code provides:
Art. 308. Who are liable for theft. - Theft is committed by any person who, with intent
to gain but without violence against, or intimidation of persons nor force upon things,
shall take personal property of another without the latters consent.
xxxx
"[T]he essential elements of the crime of theft are the following: (1) that there be a
taking of personal property; (2) that said property belongs to another; (3) that the
taking be done with intent to gain; (4) that the taking be done without the consent of
the owner; and (5) that the taking be accomplished without the use of violence or
intimidation against persons or force upon things."11
Considering that the second element is that the thing taken belongs to another, it is
relevant to determine whether ownership of the subject check was transferred to
petitioner. On this point the Negotiable Instruments Law provides:
Sec. 12. Antedated and postdated The instrument is not invalid for the reason only
that it is antedated or postdated, provided this is not done for an illegal or fraudulent
purpose. The person to whom an instrument so dated is delivered acquires the title
thereto as of the date of delivery. (Underscoring supplied.)
Note however that delivery as the term is used in the aforementioned provision means
that the party delivering did so for the purpose of giving effect thereto. 12 Otherwise, it
cannot be said that there has been delivery of the negotiable instrument. Once there
is delivery, the person to whom the instrument is delivered gets the title to the
instrument completely and irrevocably.
If the subject check was given by Puzon to SMC in payment of the obligation, the
purpose of giving effect to the instrument is evident thus title to or ownership of the
check was transferred upon delivery. However, if the check was not given as payment,
there being no intent to give effect to the instrument, then ownership of the check was
not transferred to SMC.

The evidence of SMC failed to establish that the check was given in payment of the
obligation of Puzon. There was no provisional receipt or official receipt issued for the
amount
of
the
check.
What
was
issued
was
a
receipt
for
thedocument, a "POSTDATED CHECK SLIP."13
Furthermore, the petitioner's demand letter sent to respondent states "As per
company policies on receivables, all issuances are to be covered by post-dated
checks. However, you have deviated from this policy by forcibly taking away the check
you have issued to us to cover the December issuance." 14 Notably, the term "payment"
was not used instead the terms "covered" and "cover" were used.
Although the petitioner's witness, Gregorio L. Joven III, states in paragraph 6 of his
affidavit that the check was given in payment of the obligation of Puzon, the same is
contradicted by his statements in paragraph 4, where he states that "As a standard
company operating procedure, all beer purchases by dealers on credit shall
be coveredby postdated checks equivalent to the value of the beer products
purchased"; in paragraph 9 where he states that "the transaction covered by the said
check had not yet been paid for," and in paragraph 8 which clearly shows that partial
payment is expected to be made by the return of beer empties, and not by the deposit
or encashment of the check.1avvphi1 Clearly the term "cover" was not meant to be
used interchangeably with "payment."
When taken in conjunction with the counter-affidavit of Puzon where he states that
"As the [liquid beer] contents are paid for, SMC return[s] to me the corresponding
PDCs or request[s] me to replace them with whatever was the unpaid balance." 15 it

becomes clear that both parties did not intend for the check to pay for the beer
products. The evidence proves that the check was accepted, not as payment, but in
accordance with the long-standing policy of SMC to require its dealers to issue
postdated checks to cover its receivables. The check was only meant to coverthe
transaction and in the meantime Puzon was to pay for the transaction by some other
means other than the check. This being so, title to the check did not transfer to SMC; it
remained with Puzon. The second element of the felony of theft was therefore not
established. Petitioner was not able to show that Puzon took a check that belonged to
another. Hence, the prosecutor and the DOJ were correct in finding no probable
cause for theft.
Consequently, the CA did not err in finding no grave abuse of discretion committed by
the DOJ in sustaining the dismissal of the case for theft for lack of probable cause.
WHEREFORE, the petition is DENIED. The December 21, 2004 Decision and March
28, 2005 Resolution of the Court of Appeals in CA-G.R. SP. No. 83905
are AFFIRMED.
SO ORDERED.