[ G.R. No.

 L-15380, September 30, 1960 ]

CHAN WAN, PLAINTIFF AND APPELLANT, VS. TAN KIM AND CHEN SO, DEFENDANTS AND APPELLEES.

DECISION

BENGZON, J.:

This suit to collect eleven checks totalling P4,290.00 is here for decision because it involves no issue of
fact.

Such checks payable to "cash or bearer", and drawn.. by defendant Tan Kim (the other defendant is her
husband) upon the Equitable Banking Corporation, were all presented for payment by Chan Wan to the
drawee bank, but they "were all dishonored and returned to him unpaid due to insufficient funds and/or
causes attributable to the drawer."

At the hearing of the case, in the Manila court of first instance, the plaintiff did not take the witness
stand. His attorney, however, testified only to identify the checks—which are Exhibits A to K—plus the
letters of demand upon defendants.

On the other hand, Tan Kim declared without contradiction that the checks had been issued to two
persons named Pinong and Muy for some shoes the former had promised to make and "were intended
as mere receipts".

In view of such circumstances, the court declined to order payment for two principal reasons: (a)
plaintiff failed to prove he was a holder in due course, and (b) the checks being crossed checks
shoud not have been presented to the drawee for "payment," but should have been deposited instead
with the bank mentioned in the crossing.

It may be stated in this connection, that defendants asserted a counterclaim, the court dismissed it for
failure of proof, and from such dismissal they did not appeal. The only issue is, therefore, the plaintiff's
right to collect on the eleven commercial documents.

The Negotiable Instruments Law regulating the issuance of negotiable checks, the rights and the
liabilities arising therefrom, does not mention "crossed checks". Art. 541 of the Code of Commerce
refers to such instruments.[1] The bills of Exchange Act of England of 1882, contains several provisions
about them, some of which are quoted in the margin. [2] In Philippine National Bank vs. Zulueta, 101 Phil.,
1071; 55 Off. Gaz., 222, we applied some provisions "of said Bills of Exchange Act because the
Negotiable Instruments Law, originating from England and codified in the United States, permits resort
thereto in matters not covered by it and local legislation. [3]

Eight of the checks here in question bear across their face two parallel transverse lines between which
these words are written: non-negotiable—China Banking Corporation. These checks have, therefore,

1
been crossed specially to the China Banking Corporation, and should have been presented for payment
4by China Banking, and not by Chan Wan. [4] Inasmuch as Chan Wan did present them for payment
himself—the Manila court said—there was no proper presentment, and the liability did not attach to the
drawer.

We agree to the legal premises and conclusion. It must be remembered, at this point, that the drawer in
drawing the check engaged that "on due presentment, the check would be paid, and that if it be
dishonored * * * he will pay the amount thereof to the holder". [5] Wherefore, in the absence of due
presentment, the drawer did not become liable.

Nevertheless we find, on the backs of the cheeks, endorsements which apparently show they had been
deposited with the China" Banking Corporation and were, by the latter, presented .to the drawee bank
for collection. For instance, on the back of the check Exhibit A (same as in Exh. B), this endorsement
appears:

"For deposit to the account of White House Shoe Supply with tiie China Banking Corporation."

and then this:

"Cleared through the clearing office Central Bank of the Philippines. All prior endorsements and/or lack
of endorsements guaranteed. China Banking Corporation."

And on the back of Exh. G:

"For deposit to the credit of our account. Viuda e Hijos de Chua Chiang Pio People's Shoe Company",

followed by the endorsement of China Banking Corporation as in Exhibits A and B. All the crossed checks
have the "clearance" endorsement of China Banking Corporation.

These circumstances would seem to show deposit of the checks with China Banking Corporation and
subsequent presentation by the latter through the clearing office; but as drawee had no funds, they
were unpaid and returned, some of them stamped "account' closed". How they reached his hands,
plaintiff did not indicate. Most probably, as the trial court surmised,—this is not a finding of fact—he got
them after they had been thus returned, because he presented them in court with such "account closed"
stamps, without bothering to explain. Naturally and rightly, the lower court held him not to be a holder
in due course under the circumstances, since he knew, upon taking them up, that the checks had
already been dishonored.[6]

Yet it does not follow as a legal proposition, that simply because he was not a holder in due course,
Chan Wan could not recover on the checks. The Negotiable Instruments Law does not provide that a
holder[7] who is not a holder in due course, may not in any case, recover on the instrument. If B
purchases an overdue negotiable promissory note signed by A, he is not a holder in due course; but he
may recover from A,[8] if the latter has no valid excuse for refusing payment. The only disadvan- tage of a
holder who is not a holder in due course is that the negotiable instrument is subject to'defenses1 as if it
were non-negotiable.[9]

2
Now what defenses did the defendant Tan Kim prove? The lower court's decision does not mention any;
evidently His Honor had in mind the defense pleaded in defendant's ¦ answer, but thought it
unnecessary to specify, because the "crossing" and presentation incidents sufficed to bar recovery, in his
opinion.

Tan Kim admitted on cross-examination either that the checks had been issued as evidence of debts to
Pinong and Muy, and/or that they had been issued in payment of shoes which Pinong had promised to
make for her.

Seeming to imply that Pinong had failed to make the shoes, she asserted Pinong had "promised to pay
the checks for me". Yet she did not complete the idea, perhaps because she was. just answering cross-
questions, her main testimony having referred merely to their counter-claim.

Needless to say, if it were true that the checks had been issued in payment for shoes that were never
made and delivered, Tan Kim would have a good defense as against a holder who is not a holder in due
course.[10]

Considering the deficiency of important details on which a fair adjudication of the parties' rights
depends, we think the record should be and is hereby returned, in the interest of justice, to the court
below for additional evidence, and such further proceedings as are not inconsistent with this opinion.
With the understanding that, as defendants did not appeal, their counterclaim must be and is hereby
definitely dismissed. So ordered.

Paras, C. J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J. B.L., Barrera, Gutierrez David,
Paredes, and Dizon, JJ., concur.

[1]
 SEC. 641.—The maker or any legal holder of a check shall be entitled to indicate therein that it be paid to a certain banker or institution,
which he shall do by writing across the face the name of said banker or institution, or only the words "and company."

The payment made to a person other than the banker or institution shall not exempt the person on whom it is .drawn, if the payment was not
correctly made.

[2]
 76. [General and Special Crossings Defined.]—(1) Where a check bears across its face an addition of—

(a) The words "and company" or any abbreviation thereof between two parallel transverse lines, either with or without the words "not
negotiable;" or

(b) Two parallel transverse lines simply, either with or without the words "not negotiable;" that addition constitutes a crossing, and the cheque
is crossed generally.

(2) Where a cheque bears across its face an addition of the name of a banker, either with or without the words "not negotiable," that addition
constitutes a crossing, and the cheque is crossed specially and to that banker.

79. * * * (2) Where the banker on whom a cheque is drawn which is so crossed nevertheless pays the same, or pays a cheque crossed generally
otherwise than to a banker, or if crossed specially otherwise than to the banker to whom it is crossed, or bis agent for collection being a banker,
he is liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid. (Taken from Rrannan's
Negotiable Instruments Law, 6th Ed. 1250-1251.)

3
[3]
 Sec, 196, Negotiable Instruments Law.

[4]
 If it is not presented) by said Bank for payment, the drawee runs the risk, in case of payment to persons not entitled thereto. So the practice
is for the drawee to refuse when presented by individuals. The check is generally deposited with Hie bank mentiond in the crossing, so that the
latter may take charge of the collection.

[5]
 Sec. 61. Negotiable Instruments Law.

[6]
 Sec. 52 (b), Negotiable, Instruments Law.

[7]
 He waa a holder all right, because he had possession of the checks that were payable to bearer.

[8]
 Sec. 51. Negotiable Instruments Law.

[9]
 Sec. 58. Negotiable Instruments Law.

[10]
 Lack of consideration is a defense. (Sec. 28, Negotiable Instruments Law.)

FIRST DIVISION

[ G.R. No. 88866, February 18, 1991 ]

METROPOLITAN BANK & TRUST COMPANY, PETITIONER, VS. COURT OF APPEALS, GOLDEN SAVINGS &
LOAN ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO AND GLORIA CASTILLO, RESPONDENTS.

DECISION

CRUZ, J.:

This case, for all its seeming complexity, turns on a simple question of negligence.  The facts, pruned of
all non-essentials, are easily told.

The Metropolitan Bank and Trust Co. is a commercial bank with branches throughout the Philippines
and even abroad.  Golden Savings and Loan Association was, at the time these events happened,
operating, in Calapan, Mindoro, with the other private respondents as its principal officers.

In January 1979, a certain Eduardo Gomez opened an account with Golden Savings and deposited over a
period of two months 38 treasury warrants with a total value of P1,755,228.37.  They were all drawn by
the Philippine Fish Marketing Authority and purportedly signed by its General Manager and
countersigned by its Auditor.  Six of these were directly payable to Gomez while the others appeared to
have been indorsed by their respective payees, followed by Gomez as second indorser. [1]

On various dates between June 25 and July 16, 1979, all these warrants were subsequently indorsed by
Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account No. 2498 in the
Metrobank branch in Calapan, Mindoro.  They were then sent for clearing by the branch office to the
principal office of Metrobank, which forwarded them to the Bureau of Treasury for special clearing. [2]

4
More than two weeks after the deposits, Gloria Castillo went to the Calapan branch several times to ask
whether the warrants had been cleared.  She was told to wait.  Accordingly, Gomez was meanwhile not
allowed to withdraw from his account.  Later, however, "exasperated" over Gloria's repeated inquiries
and also as an accommodation for a "valued client," the petitioner says it finally decided to allow Golden
Savings to withdraw from the proceeds of the warrants. [3] The first withdrawal was made on July 9,
1979, in the amount of P508,000.00, the second on July 13, 1979, in the amount of P310,000.00, and the
third on  July 16, 1979, in the amount of P150,000.00.  The total withdrawal was P968,000.00. [4]

In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own account,
eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared
warrants.  The last withdrawal was made on July 16, 1979.

On July 21, 1979, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by
the Bureau of Treasury on July 19, 1979, and demanded the refund by Golden Savings of the amount it
had previously withdrawn, to make up the deficit in its account.

The demand was rejected.  Metrobank then sued Golden Savings in the Regional Trial Court of Mindoro.
[5]
 After trial, judgment was rendered in favor of Golden Savings, which, however, filed a motion for
reconsideration even as Metrobank filed its notice of appeal.  On November 4, 1986, the lower court
modified its decision thus:

ACCORDINGLY, judgment is hereby rendered:

1.  Dismissing the complaint with costs against the plaintiff;

2.  Dissolving and lifting the writ of attachment of the properties of defendant Golden Savings and Loan
Association, Inc. and defendant Spouses Magno Castillo and Lucia Castillo;

3.  Directing the plaintiff to reverse its action of debiting Savings Account No. 2498 of the sum of
P1,754,089.00 and to reinstate and credit to such account such amount existing before the debit was
made including the amount of P812,033.37 in favor of defendant Golden Savings and Loan Association,
Inc. and thereafter, to allow defendant Golden Savings and Loan Association, Inc. to withdraw the
amount outstanding thereon before the debit;

4.  Ordering the plaintiff to pay the defendant Golden Savings and Loan Association, Inc. attorney's fees
and expenses of litigation in the amount of P200,000.00

5.  Ordering the plaintiff to pay the defendant Spouses Magno Castillo and Lucia Castillo attorney's fees
and expenses of litigation in the amount of P100,000.00.

SO ORDERED.

5
On appeal to the respondent court,[6] the decision was affirmed, prompting Metrobank to file this
petition for review on the following grounds:

1.    Respondent Court of Appeals erred in disregarding and failing to apply the clear contractual terms
and conditions on the deposit slips allowing Metrobank to charge back any amount erroneously
credited.

(a) Metrobank's right to charge back is not limited to instances where the checks or treasury warrants
are forged or unauthorized.

(b) Until such time as Metrobank is actually paid, its obligation is that of a mere collecting agent which
cannot be held liable for its failure to collect on the warrants.

2. Under the lower court's decision, affirmed by respondent Court of Appeals, Metrobank is made to pay
for warrants already dishonored, thereby perpetuating the fraud committed by Eduardo Gomez.

3. Respondent Court of Appeals erred in not finding that as between Metrobank and Golden Savings, the
latter should bear the loss.

4. Respondent Court of Appeals erred in holding that the treasury warrants involved in this case are not
negotiable instruments.

The petition has no merit.

From the above undisputed facts, it would appear to the Court that Metrobank was indeed negligent in
giving Golden Savings the impression that the treasury warrants had been cleared and that,
consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his account with it. 
Without such assurance, Golden Savings would not have allowed the withdrawals; with such assurance,
there was no reason not to allow the withdrawal.  Indeed, Golden Savings might even have incurred
liability for its refusal to return the money that to all appearances belonged to the depositor, who could
therefore withdraw it any time and for any reason he saw fit.

It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to
its account with Metrobank.  Golden Savings had no clearing facilities of its own.  It relied on Metrobank
to determine the validity of the warrants through its own services.  The proceeds of the warrants were
withheld from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own
deposit.[7] It was only when Metrobank gave the go-signal that Gomez was finally allowed by Golden
Savings to withdraw them from his own account.

The argument of Metrobank that Golden Savings should have exercised more care in checking the
personal circumstances of Gomez before accepting his deposit does not hold water.  It was Gomez who
was entrusting the warrants, not Golden Savings that was extending him a loan; and moreover, the

6
treasury warrants were subject to clearing, pending which the depositor could not withdraw its
proceeds.  There was no question of Gomez's identity or of the genuineness of his signature as checked
by Golden Savings.  In fact, the treasury warrants were dishonored allegedly because of the forgery of
the signatures of the drawers, not of Gomez as payee or indorser.  Under the circumstances, it is clear
that Golden Savings acted with due care and diligence and cannot be faulted for the withdrawals it
allowed Gomez to make.

By contrast, Metrobank exhibited extraordinary carelessness.  The amount involved was not trifling -
more than one and a half million pesos (and this was 1979).  There was no reason why it should not
have waited until the treasury warrants had been cleared; it would not have lost a single centavo by
waiting.  Yet, despite the lack of such clearance - and notwithstanding that it had not received a single
centavo from the proceeds of the treasury warrants, as it now repeatedly stresses - it allowed Golden
Savings to withdraw - not once, not twice, but thrice - from the uncleared treasury warrants in the total
amount of P968,000.00.

Its reason?  It was "exasperated" over the persistent inquiries of Gloria Castillo about the clearance and
it also wanted to "accommodate" a valued client.  It "presumed" that the warrants had been cleared
simply because of "the lapse of one week." [8] For a bank with its long experience, this explanation is
unbelievably naive.

And now, to gloss over its carelessness, Metrobank would invoke the conditions printed on the dorsal
side of the deposit slips through which the treasury warrants were deposited by Golden Savings with its
Calapan branch.  The conditions read as follows:

Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's collecting
agent, assuming no responsibility beyond care in selecting correspondents, and until such time as actual
payment shall have come into possession of this bank, the right is reserved to charge back to the
depositor's account any amount previously credited, whether or not such item is returned.   This also
applies to checks drawn on local banks and bankers and their branches as well as on this bank, which are
unpaid due to insufficiency of funds, forgery, unauthorized overdraft or any other reason. 
(Underscoring supplied.)

According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent for
Golden Savings and give it the right to "charge back to the depositor's account any amount previously
credited, whether or not such item is returned.  This also applies to checks “… which are unpaid due to
insufficiency of funds, forgery, unauthorized overdraft or any other reason." It is claimed that the said
conditions are in the nature of contractual stipulations and became binding on Golden Savings when
Gloria Castillo, as its Cashier, signed the deposit slips.

Doubt may be expressed about the binding force of the conditions, considering that they have
apparently been imposed by the bank unilaterally, without the consent of the depositor.  Indeed, it
could be argued that the depositor, in signing the deposit slip, does so only to identify himself and not to

7
agree to the conditions set forth in the given permit at the back of the deposit slip.  We do not have to
rule on this matter at this time.  At any rate, the Court feels that even if the deposit slip were considered
a contract, the petitioner could still not validly disclaim responsibility thereunder in the light of the
circumstances of this case.

In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank seems to be
suggesting that as a mere agent it cannot be liable to the principal.  This is not exactly true.  On the
contrary, Article 1909 of the Civil Code clearly provides that -

Art. 1909. --The agent is responsible not only for fraud, but also for negligence, which shall be judged
with more or less rigor by the courts, according to whether the agency was or was not for a
compensation.

The negligence of Metrobank has been sufficiently established.  To repeat for emphasis, it was the
clearance given by it that assured Golden Savings it was already safe to allow Gomez to withdraw the
proceeds of the treasury warrants he had deposited.  Metrobank misled Golden Savings.  There may
have been no express clearance, as Metrobank insists (although this is refuted by Golden Savings) but in
any case that clearance could be implied from its allowing Golden Savings to withdraw from its account
not only once or even twice but three times.  The total withdrawal was in excess of its original balance
before the treasury warrants were deposited, which only added to its belief that the treasury warrants
had indeed been cleared.

Metrobank's argument  that it may recover the disputed amount if the warrants are not paid for any
reason is not acceptable.  Any reason does not mean no reason at all.  Otherwise, there would have
been no need at all for Golden Savings to deposit the treasury warrants with it for clearance.  There
would have been no need for it to wait until the warrants had been cleared before paying the proceeds
thereof to Gomez.  Such a condition, if interpreted in the way the petitioner suggests, is not binding for
being arbitrary and unconscionable.  And it, becomes more so in the case at bar when it is considered
that the supposed dishonor of the warrants was not communicated to Golden Savings before it made its
own payment to Gomez.

The belated notification aggravated the petitioner's earlier negligence in giving express or at least
implied clearance to the treasury warrants and allowing payments therefrom to Golden Savings.  But
that is not all.  On top of this, the supposed reason for the dishonor, to wit, the forgery of the signatures
of the general manager and the auditor of the drawer corporation, has not been established. [9] This was
the finding of the lower courts which we see no reason to disturb.  And as we said in MWSS v. Court of
Appeals:[10]

Forgery cannot be presumed (Siasat, et. al. v. IAC, et al., 139 SCRA 238).  It must be established by clear,
positive and convincing evidence.  This was not done in the present case.

8
A  no less important consideration is the circumstance that the treasury warrants in question are not
negotiable instruments.  Clearly stamped on their face is the word "non-negotiable." Moreover, and this
is of equal significance, it is indicated that they are payable from a particular fund, to wit, Fund 501.

The following sections of the Negotiable Instruments Law, especially the underscored parts, are
pertinent:

SECTION 1.  - Form of negotiable instruments.  - An instrument to be negotiable must conform to the
following requirements:

(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;

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

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

(e)     Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein
with reasonable certainty.

x        x          x

SEC. 3.  When promise is unconditional.  - An unqualified order or promise to pay is unconditional within
the meaning of this Act though coupled with -

(a)     An indication of a particular fund out of which reimbursement is to be made or a particular

(b)     A statement of the transaction which, gives rise to the instrument.

But an order or promise to pay out of a particular fund is not unconditional.

The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the
order or promise to pay "not unconditional" and the warrants themselves non-negotiable.  There should
be no question that the exception on Section 3 of the Negotiable Instruments Law is applicable in the
case at bar.  This conclusion conforms to Abubakar vs. Auditor General [11] where the Court held:

The petitioner argues that he is a holder in good faith and for value of a negotiable instrument and is
entitled to the rights and privileges of a holder in due course, free from defenses.  But this treasury
warrant is not within the scope of the negotiable instrument law.  For one thing, the document bearing
on its face the words "payable from the appropriation for food administration, is actually an Order for
payment out of “a particular fund," and is not unconditional and does not fulfill one of the essential

9
requirements of a negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable
Instruments Law).

Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they
were "genuine and in all respects what they purport to be," in accordance with Section 66 of the
Negotiable Instruments Law.  The simple reason is that this law is not applicable to the non-negotiable
treasury warrants.  The indorsement was made by Gloria Castillo not for the purpose of guaranteeing
the genuineness of the warrants but merely to deposit them with Metrobank for clearing.  It was in fact
Metrobank that made the guarantee when it stamped on the back of the warrants: "All prior
indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch."

The petitioner lays heavy stress on Jai Alai Corporation v. Bank of the Philippine Islands, [12] but we feel
this case is inapplicable to the present controversy.  That case involved checks whereas this case
involves treasury warrants.  Golden Savings never represented that the warrants were negotiable but
signed them only for the purpose of depositing them for clearance.  Also, the fact of forgery was proved
in that case but not in the case before us.  Finally, the Court found the Jai Alai Corporation negligent in
accepting the checks without question from one Antonio Ramirez notwithstanding that the payee was
the Inter-Island Gas Services, Inc. and it did not appear that he was authorized to indorse it.  No similar
negligence can be imputed to Golden Savings.

We find the challenged decision to be basically correct.  However, we will have to amend it insofar as it
directs the petitioner to credit Golden Savings with the full amount of the treasury checks deposited to
its account.

The total value of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez was
allowed to withdraw P1,167,500.00 before Golden Savings was notified of the dishonor.  The amount he
has withdrawn must be charged not to Golden Savings but to Metrobank, which must bear the
consequences of its own negligence.  But the balance of P586,589.00 should be debited to Golden
Savings, as obviously Gomez can no longer be permitted to withdraw this amount from his deposit
because of the dishonor of the warrants.  Gomez has in fact disappeared.  To also credit the balance to
Golden Savings would unduly enrich it at the expense of Metrobank, let alone the fact that it has already
been informed of the dishonor of the treasury warrants.

WHEREFORE, the challenged decision is AFFIRMED, with the modification that Paragraph 3 of the
dispositive portion of the judgment of the lower court shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of P586,589.00 only and thereafter allowing defendant
Golden Savings & Loan Association, Inc. to withdraw the amount outstanding thereon, if any, after the
debit.

10
SECOND DIVISION

[ G.R. No. L-40824, February 23, 1989 ]

GOVERNMENT SERVICE INSURANCE SYSTEM, PETITIONER, VS. COURT OF APPEALS AND MR. & MRS
ISABELO R. RACHO, RESPONDENTS.

DECISION

REGALADO, J.:

Private respondents, Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and Mrs. Flaviano
Lagasca, executed a deed of mortgage, dated November 13, 1957, in favor of petitioner Government
Service Insurance System (hereinafter referred to as GSIS) and, subsequently, another deed of
mortgage, dated April 14, 1958, in connection with two loans granted by the latter in the sums of
P11,500.00 and P3,00.00, respectively.[1] A parcel of land covered by Transfer Certificate of Title No.
38989 of the Register of Deeds of Quezon City, co-owned by said mortgagor spouses, was given as
security under the aforesaid two deeds. [2] They also executed a “promissory note” which states in part:

“x x x for value received, we the undersigned . . . JOINTLY, SEVERALLY and SOLIDARILY, promise to pay
the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P11,500.00) Philippine Currency, with
interest at the rate of six (6%) per centum compounded monthly, payable in . . . (120) equal monthly
installments of . . . (P127.65) each.”[3]

On July 11, 1961, the Lagasca spouses executed an instrument denominated “Assumption of Mortgage”
under which they obligated themselves to assume the aforesaid obligation to the GSIS and to secure the
release of the mortgage covering that portion of the land belonging to herein private respondents and
which was mortgage to the GSIS.[4] This undertaking was not fulfilled.[5]

Upon failure of the mortgagors to comply with the conditions of the mortgage, particularly the payment
of the amortizations due, GSIS extrajudicially foreclosed the mortgage and caused the mortgaged
property to be sold at public auction on December 3, 1962. [6]

More than two years thereafter, or on August 23, 1965, herein private respondents filed a complaint
against the petitioner and the Lagasca spouses in the former Court of First Instance of Quezon City,
[7]
 praying that the extra judicial foreclosure “made on their property and all other documents executed
in relation thereto in favor of the Government Service Insurance System” be declared null and void. It
was further prayed that they be allowed to recover said property, and/or the GSIS be ordered to pay
them the value thereof, and/or they be allowed to repurchase the land. Additionally, they asked for
actual and moral damages and attorney’s fees.

In their aforesaid complaint, private respondents alleged that they signed the mortgage contracts not as

11
sureties or guarantors for the Lagasca spouses but they merely gave their common property to the said
co-owners who were solely benefited by the loans from the GSIS.

The trial court rendered judgment on February 25, 1968 dismissing the complaint for failure to establish
a cause of action.[8]

Said decision was reversed by the respondent Court of Appeals [9] which held that:

“x x x although formally they are co-mortgagors, they are so only for accommodation (sic) in that the
GSIS required their consent to the mortgage of the entire parcel of land which was covered with only
one certificate of title, with full knowledge that the loans secured thereby were solely for the benefit of
the appellant (sic) spouses who alone applied for the loan.”

x        x         x

“It is, therefore, clear that as against the GSIS, appellants have a valid cause for having foreclosed the
mortgage without having given sufficient notice to them as required either as to their delinquency in the
payment of amortization or as to the subsequent foreclosure of the mortgage by reason of any default
in such payment. The notice published in the newspaper, ‘Daily Record’ (Exh. 12) and posted pursuant to
Sec. 3 of Act 3135 is not the motion to which the mortgagor is entitled upon the application being made
for an extrajudicial foreclosure. x x x” [10]

On the foregoing findings, the respondent court consequently decreed that-

“In view of all the foregoing, the judgment appealed from is hereby reversed, and another one entered
(1) declaring the foreclosure of the mortgage void insofar as it affects the share of the appellants; (2)
directing the GSIS to reconvey to appellants their share of the mortgaged property, or the value thereof
if already sold to third party, in the sum of P35,000.00, and (3) ordering the appellees Flaviano Lagasca
and Esther Lagasca to pay the appellants the sum of P10,000.00 as moral damages, P5,000.00 as
attorney’s fees, and costs.”[11]

The case is now before Us in this petition for review.

In submitting their case to this Court, both parties relied on the provisions of section 29 of Act No. 2031,
otherwise known as the Negotiable Instruments Law, which provide that an accommodation party is one
who has signed an instrument as maker, drawer, acceptor or indorser without receiving value therefore,
but is held liable on the instrument to a holder for value although the latter knew him to be only an
accommodation party.

This approach of both parties appears to be misdirected and their reliance misplaced. The promissory
note hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable
instruments. These documents do not comply with fourth requisite to be considered as such under
Section 1 of Act No. 2031 because they are neither payable to order nor to bearer. The note is payable

12
to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031 would not
apply; governance shall be afforded, instead, by the provisions of the Civil Code and special Laws on
mortgages.

As earlier indicated, the factual findings of respondent court are that private respondents signed the
documents “only to give their consent to the mortgage as required by GSIS”, with the latter having full
knowledge that the loans secured thereby were solely for the benefit of the Lagasca spouses. [12] This
appears to be duly supported by sufficient evidence of record. Indeed, it would be unusual for the GSIS
to arrange for and deduct the monthly amortizations on the loans from the salary as an army officer of
Flaviano Lagasca without likewise affecting deductions from the salary of Isabelo Racho who was also an
army sergeant. Then there is also the undisputed fact, as already stated, that the Lagasca spouses
executed a so-called “Assumption of Mortgage” promising to exclude private respondents and their
share of the mortgage property from liability to the mortgagee. There is no intimation that the former
executed such instrument for a consideration, thus confirming that they did so pursuant to their original
agreement.

The parol evidence rule[13] cannot be used by petitioner as a shield in this case for it is clear that there
was no objection in the court below regarding the admissibility of the testimony and documents that
were presented to prove that the private respondents signed the mortgage papers just to accommodate
their co-owners, the Lagasca spouses. Besides, the introduction of such evidence falls under the
exception to said rule, there being allegations in the complaint of private respondents in the court below
regarding the failure of the mortgage contracts to express the true agreement of the parties. [14]

However, contrary to the holding of the respondent court, it cannot be said that private respondents are
without liability under the aforesaid mortgage contracts. The factual context of this case is precisely
what is contemplated in the last paragraph of Article 2085 of the Civil Code to the effect that third
persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging
their own property.

So long as valid consent was given, the fact that the loans were solely for the benefit of the Lagasca
spouses would not invalidate the mortgage with respect to private respondents’ share in the property.
In consenting thereto, even assuming that private respondents may not be assuming personal liability
for the debt, their share in the property shall nevertheless secure and respond for the performance of
the principal obligation. The parties to the mortgage could have intended that the same would apply
only to the aliquot portion of the Lagasca spouses in the property, otherwise the consent of the private
respondents would not have been required.

The supposed requirement of prior demand on the private respondents would not be in point here since
the mortgage contracts created obligations with specific terms for the compliance thereof. The facts
further shows that the private respondents expressly bound themselves as solidary debtors in
promissory note hereinbefore quoted.

13
Coming now to the extrajudicial foreclosure effected by GSIS, We cannot agree with the ruling of
respondent court that lack of notice to the private respondents of the extrajudicial foreclosure sale
impairs the validity thereof. In Bonnevie, et al. vs. Court Appeals, et al.,[15] the Court ruled that Act No.
3135, as amended, does not require personal notice on the mortgagor, quoting the requirement on
notice in such cases as follows:

“Section 3. Notice shall be given by posting notices of sale for not less than twenty days in at least three
public places of the municipality where the property is situated, and if such property is worth more than
four hundred pesos, such notice shall also be published once a week for at least three consecutive
weeks in a newspaper of general circulation in the municipality of city.”

There is no showing that the foregoing requirement on notice was not complied with in the foreclosure
sale complained of.

The respondent court, therefore, erred in annulling the mortgage insofar as it affected the share of
private respondents or in directing reconveyance of their property or the payment of the value thereof.
Indubitably, wether or not private respondents herein benefited from the loan, the mortgage and the
extrajudicial foreclosure proceedings were valid.

WHEREFORE, judgment is hereby rendered REVERSING the decision of the respondent Court of Appeals

SO ORDERED.

14
[ G. R. No. 16454, September 29, 1921 ]

GEORGE A. KAUFFMAN, PLAINTIFF AND APPELLEE, VS. THE PHILIPPINE NATIONAL BANK, DEFENDANT
AND APPELLANT.

DECISION

STREET, J.:

At the time of the transaction which gave rise to this litigation the plaintiff, George A. Kauffman, was the
president of a domestic corporation engaged chiefly in the exportation of hemp from the Philippine
Islands and known as the Philippine Fiber and Produce Company, of which company the plaintiff
apparently held in his own right nearly the entire issue of capital stock. On February 5, 1918, the board
of directors of said company, declared a dividend of P100,000 from its surplus earnings for the year
1917, of which the plaintiff was entitled to the sum of P98,000. This amount was accordingly placed to
his credit on the books of the company, and so remained until in October of the same year when an
unsuccessful effort was made to transmit the whole, or a greater part thereof, to the plaintiff in New
York City.

In this connection it appears that on October 9, 1918, George B. Wicks, treasurer of the Philippine Fiber
and Produce Company, presented himself in the exchange department of the Philippine National Bank in
Manila and requested that a telegraphic transfer of $45,000 should be made to the plaintiff in New York
City, upon account of the Philippine Fiber and Produce Company. He was informed that the total cost of
said transfer, including exchange and cost of message, would be P90,355.50. Accordingly, Wicks, as
treasurer of the Philippine Fiber and Produce Company, thereupon drew and delivered a check for that
amount on the Philippine National Bank; and the same was accepted by the officer selling the exchange
in payment of the transfer in question. As evidence of this transaction a document was made out and
delivered to Wicks, which is referred to by the bank's assistant cashier as its official receipt. This
memorandum receipt is in the following language:

"October
9th,1918.

"CABLE TRANSFER BOUGHT

"PHILIPPINE NATIONAL
BANK,

"Manila, P. I. StampP18.

15
 "ForeignAmoun
Rate
t

$45,000. 3/8% P90,337.50

"Payable through Philippine National Bank, New York. To G. A. Kauffman, New York. Total P90,355.50,
Account of Philippine Fiber and Produce Company. Sold to Messrs. Philippine Fiber and Produce
Company, Manila.

(Sgd.) "Y. LERMA,

"Manager,' Foreign
Department."

On the same day the Philippine National Bank dispatched to its New York agency a cablegram to the
following effect:

"Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000. (Sgd.) PHILIPPINE
NATIONAL BANK, Manila"

Upon receiving this telegraphic message, the bank's representative in New York sent a cable message in
reply suggesting the advisability of withholding this money from Kauffman, in view of his reluctance to
accept certain bills of the Philippine Fiber and Produce Company. The Philippine National Bank
acquiesced in this and on October 11 dispatched to its New York agency another message to withhold
the Kauffman payment as suggested.

Meanwhile Wicks, the treasurer of the Philippine Fiber and Produce Company, cabled to Kauffman in
New York, advising him that $45,000 had been placed to his credit in the New York agency of the
Philippine National Bank; and in response to this advice Kauffman presented himself at the office of the
Philippine National Bank in New York City on October 15, 1918, and demanded the money. By this time,
however, the message from .the Philippine National Bank of October 11, directing the withholding of
payment had been received in New York, and payment was therefore refused.

In view of these facts, the plaintiff Kauffman instituted the present action in the Court of First Instance
of the city of Manila to recover said sum, with interest and costs; and judgment having been there
entered favorably to the plaintiff, the defendant appealed.

Among additional facts pertinent to the case we note the circumstance that at the time of the
transaction abovementioned, the Philippine Fiber and Produce Company did not have on deposit in the
Philippine National Bank money adequate to pay the check for P90,355.50, which was delivered in
payment of the telegraphic order; but the company did have credit to that extent, or more, for overdraft
in current account, and the check in question was charged as an overdraft against the Philippine Fiber
and Produce Company and has remained on the books of the bank as an interest-bearing item in the
account of said company.

16
It is furthermore noteworthy that no evidence has been introduced tending to show failure of
consideration with respect to the amount paid for said telegraphic order. It is true that in the
defendant's answer it is suggested that the failure of the bank to pay over the amount of this remittance
to the plaintiff in New York City, pursuant to its agreement, was due to a desire to protect the bank in its
relations with the Philippine Fiber and Produce Company, whose credit was secured at the bank by
warehouse receipts on Philippine products; and it is alleged that after the exchange in question was sold
the bank found that it did not have sufficient security to warrant payment of the remittance. In view,
however, of the failure of the bank to substantiate these allegations, or to offer any other proof showing
failure of consideration, it must be assumed that the obligation of the bank was supported by adequate
consideration.

In this court the defense is mainly, if not exclusively, based upon the proposition that, inasmuch as the
plaintiff Kauffman was not a party to the contract with the bank for the transmission of this credit, no
right of action can be vested in him for the breach thereof. "In this situation,"—we here quote the
words of the appellant's brief,— "if there exists a cause of action against the defendant, it would not be
in favor of the plaintiff who had taken no part at all in the transaction nor had entered into any contract
with the plaintiff, but in favor of the Philippine Fiber and Produce Company, the party which contracted
in its own name with the defendant."

The question thus placed before us is one purely of law; and at the very threshold of the discussion it
can be stated that the provisions of the Negotiable Instruments Law (Act No. 2031) are not relevant to
the case. The reason for this is that before the Negotiable Instruments Law can come into operation
there must be a document in existence of the character described in section 1 of that Law; and no rights
properly speaking arise in respect to said instrument until it is delivered. In the case before us there was
an order, it is true, transmitted by the defendant bank to its New York branch, for the payment of a
specified sum of money to George A. Kauffman. But this order was not made payable "to order" or "to
bearer," as required in subsection (d) of that Act; and inasmuch as it never left the possession of the
bank, or its representative in New York City, there was no delivery in the sense intended in section 16 of
the same Law. In this connection it is unnecessary to point out that the official receipt delivered by the
bank to the purchaser of the telegraphic order, and already set out above, cannot itself be viewed in the
light of a negotiable instrument, although it affords complete proof of the obligation actually assumed
by the bank.

Stated in bare simplicity the admitted facts show that the defendant bank for a valuable consideration
paid by the Philippine Fiber and Produce Company agreed on October 9, 1918, to cause a sum of money
to be paid to the plaintiff in New York City; and the question is whether the plaintiff can maintain an
action against the bank for the nonperformance of said undertaking. In other words, is the lack of privity
with the contract on the part of the plaintiff fatal to the maintenance of an action by him?

The only express provision of law that has been cited as bearing directly on this question is the second
paragraph of article 1257 of the Civil Code; and unless the present action can be maintained under that
provision, the plaintiff admittedly has no case. This provision states an exception to the more general
rule expressed in the first paragraph of the same article to the effect that contracts are productive of

17
effects only between the parties who execute them; and in harmony with this general rule are
numerous decisions of this court (Wolfson vs. Estate of Martinez, 20 Phil., 340; Ibanez de
Aldecoa vs. Hongkong and Shanghai Banking Corporation, 22 Phil., 572, 584; Manila Railroad
Co. vs. Compania Trasatlantica, and Atlantic, Gulf & Pacific Co., 38 Phil., 875, 894.)

The paragraph introducing the exception which we are now to consider is in these words:

"Should the contract contain any stipulation in favor of a third person, he may demand its fulfillment,
provided he has given notice of his acceptance to the person bound before the stipulation has been
revoked." (Art. 1257, par. 2, Civ. Code.)

In the case of Uy Tarn and Uy Yet vs. Leonard (30 Phil., 471), is found an elaborate dissertation upon the
history and interpretation of the paragraph above quoted and so complete is the discussion contained in
that opinion that it would be idle for us here to go over the same matter. Suffice it to say that Justice
Trent, speaking for the court in that case, sums up its conclusions upon the conditions governing the
right of the person for whose benefit a contract is made to maintain an action for the breach thereof in
the following words:

"So, we believe the fairest test, in this jurisdiction at least, whereby to determine whether the interest
of a third person in a contract is a stipulation pour autrui, or merely an incidental interest, is to rely upon
the intention of the parties as disclosed by their contract.

"If a third person claims an enforcible interest in the contract, that question must be settled by
determining whether the contracting parties desired to tender him such an interest. Did they
deliberately insert terms in their agreement with the avowed purpose of conferring a favor upon such
third person? In resolving this question, of course, the ordinary rules of construction and interpretation
of writings must be observed." (Uy Tarn and Uy Yet vs. Leonard, supra,)

Further on in the same opinion he adds: "In applying this test to a stipulation pour autrui, it matters not
whether the stipulation is in the nature of a gift or whether there is an obligation owing from the
promisee to the third person. That no such obligation exists may in some degree assist in determining
whether the parties intended to benefit a third person, whether they stipulated for him." (Uy Tarn and
Uy Yet vs. Leonard, supra.)

In the light of the conclusions thus stated, the right of the plaintiff to maintain the present action is clear
enough; for it is undeniable that the bank's promise to cause a definite sum of money to be paid to the
plaintiff in New York City is a stipulation in his favor within the meaning of the paragraph above quoted;
and the circumstances under which that promise was given disclose an evident intention on the part of
the contracting parties that the plaintiff should have that money upon demand in New York City. The
recognition of this unqualified right in the plaintiff to receive the money implies in our opinion the right
in him to maintain an action to recover it; and indeed if the provision in question were not applicable to
the facts now before us, it would be difficult to conceive of a case arising under it.

18
It will be noted that under the paragraph cited a third person seeking to enforce compliance with a
stipulation in his favor must signify his acceptance before it has been revoked. In this case the plaintiff
clearly signified his acceptance to the bank by demanding payment; and although the Philippine
National Bank had already directed its New York agency to withhold payment when this demand was
made, the rights of the plaintiff cannot be considered to have been prejudiced by that fact. The word
"revoked," as there used, must be understood to imply revocation by the mutual consent of the
contracting parties, or at least by direction of the party purchasing the exchange.

In the course of the argument attention was directed to the case of Legniti vs. Mechanics, etc. Bank (130
N. E. Rep., 597), decided by the Court of Appeals of the State of New York on March 1, 1921, wherein it
is held that, by selling a cable transfer of funds on a foreign country in ordinary course, a bank incurs a
simple contractual obligation, and cannot be considered as holding the money which was paid for the
transfer in the character of a specific trust. Thus, it was said, "Cable transfers, therefore, mean a method
of transmitting money by cable wherein the seller engages that he has the balance at .the point on
which the payment is ordered and that on receipt of the cable directing the transfer his correspondent
at such point will make payment to the beneficiary described in the cable. All these transactions are
matters of purchase and sale create no trust relationship."

As we view it there is nothing in the decision referred to decisive of the question now before us, which is
merely that of the right of the beneficiary to maintain an action against the bank selling the transfer.

Upon the considerations already stated, we are of the opinion that the right of action exists, and the
judgment must be affirmed. It is so ordered, with costs against the appellant. Interest will be computed
as prescribed in section 510 of the Code of Civil Procedure.

Johnson, Aravllo, Avancena, and Villamor, JJ., concur.

19
THIRD DIVISION

[ G.R. No. 75908, October 22, 1999 ]

FEDERICO O. BORROMEO, LOURDES O. BORROMEO AND FEDERICO O. BORROMEO, INC, PETITIONERS

DECISION

PURISIMA, J.:

At bar is a Petition for review on Certiorari under Rule 45 of the Revised Rules of Court seeking to set
aside the Resolution of the then Intermediate Appellate Court [1] , dated March 13, 1986, in AC-G.R. CV
NO. 67988, which reversed its earlier Decision dated February 12, 1985, setting aside the Decision of the
former Court of the First Instance of Rizal, Branch X, in Civil Case No. 19466.

The antecedent facts are as follows:

Private respondent Amancio Sun brought before the then Court of the First Instance of Rizal, Branch X,
an action against Lourdes O. Borromeo (in her capacity as corporate secretary), Federico O. Borromeo
and Federico O. Borromeo (F.O.B.), Inc., to compel the transfer to his name in the books of F.O.B., Inc.,
23,223 shares of stock registered in the name of Federico O. Borromeo, as evidenced by a Deed of
Assignment dated January 16, 1974.

Private respondent averred [2] that all the shares of stock of F.O.B. Inc. registered in the name of Federico
O. Borromeo belong to him, as the said shares were placed in the name of Federico O. Borromeo ‘only
to give the latter personality and importance in the business world.’ [3] According to the private
respondent, on January 16, 1974 Federico O. Borromeo executed in his favor a Deed of Assignment with
respect to the said 23,223 shares of stock.

On the other hand, petitioner Federico O. Borromeo disclaimed any participation in the execution of the
Deed of Assignment, theorizing that his supposed signature thereon was forged.

After trial, the lower court of origin came out with a decision declaring the questioned signature on
subject Deed of Assignment, dated January 16, 1974, as the genuine signature of Federico O. Borromeo;
ratiocinating thus:

‘After considering the testimonies of the two expert witnesses for the parties and after a careful and
judicious study and analysis of the questioned signature as compared to the standard signatures, the
Court is not in a position to declare that the questioned signature in Exh. A is a forgery. On the other
hand, the Court is of the opinion that the questioned signature is the real signature of Federico O.

20
Borromeo between the years 1954 to 1957 but definitely is not his signature in 1974 for by then he has
changed his signature. Consequently, to the mind of the Court Exhibit A was signed by defendant
Federico O. Borromeo between the years 1954 to 1957 although the words in the blank were filled at a
much later date.’[4]

On appeal by petitioners, the Court of Appeals adjudged as forgery the controverted signature of
Federico O. Borromeo; disposing as follows:

‘WHEREFORE, the judgment of the Court a quo as to the second cause of action dated March 12, 1980 is
hereby reversed and set aside and a new judgment is hereby rendered:

1. Ordering the dismissal of the complaint as to defendant-appellants;

2. Ordering plaintiff-appellee on appellants’ counterclaim to pay the latter:

a) P 20,000.00 as moral damages;

b) P 10,000.00 as exemplary damages;

c) P 10,000.00 as attorney’s fees.

3. Ordering plaintiff-appellee to pay the costs.’[5]

On March 29, 1985, Amancio Sun interposed a motion for reconsideration of the said decision,
contending that Segundo Tabayoyong, petitioners’ expert witness, is not a credible witness as found and
concluded in the following disposition by this Court in Cesar vs. Sandigan Bayan [6] :

“The testimony of Mr. Segundo Tabayoyong on March 5, 1980, part of which is cited on pages 19-23 of
the petition, shows admissions which are summarized by the petitioner as follows:

‘He never finished any degree in Criminology. Neither did he obtain any degree in physics or chemistry.
He was a mere trainee in the NBI laboratory. He said he had gone abroad only once-to Argentina which,
according to him ‘is the only one country in the world that gives this degree (?) … ‘People go there
where they obtain this sort of degree (?) where they are authorized to practice (sic) examination of
questioned documents.’

‘His civil service eligibility was second grade (general clerical). His present position had to be ‘re-
classified’ ‘confidential’ in order to qualify him to it. He never passed any Board Examination.

‘He has never authored any book on the subject on which he claimed to be an ‘expert.’ Well, he did
‘write’ a so-called pamphlet pretentiously called ‘Fundamentals of Questioned Documents Examination
and Forgery Detection.’ In that pamphlet, he mentioned some references’ – (some) are Americans and
one I think is a British, sir, like in the case of Dr. Wilson Harrison, a British’ (he repeated with emphasis).
Many of the ‘theories’ contained in his pamphlet were lifted body and soul from those references, one
of them being Albert Osborn. His pamphlet has neither quotations nor footnotes, although he was too
aware of the crime committed by many an author called ‘plagiarism.’ But that did not deter him, nor

21
bother him in the least. ‘He has never been a member of any professional organization of experts in his
supposed field of expertise, because he said there is none locally. Neither is he on an international
level.’[7]

Acting on the aforesaid motion for reconsideration, the Court of Appeals reconsidered its decision of
February 12, 1985 aforementioned. Thereafter, the parties agreed to have subject Deed of Assignment
examined by the Philippine Constabulary (PC) Crime Laboratory, which submitted a Report on January 9,
1986, the pertinent portion of which, stated:

‘1. Comparative examination and analysis of the questioned and the standard signature reveal
significant similarities in the freedom of movement, good quality of lines, skills and individual
handwriting characteristics.

2. By process of interpolation the questioned signature fits in and can be bracketed in time with the
standard signatures written in the years between 1956 to 1959. Microscopic examination of the ink used
in the questioned signature and the standard signature in document dated 30 July 1959 marked Exh. ‘E’
indicate gallotanic ink.’

xxx

‘1. The questioned signature FEDERICO O. BORROMEO marked ‘Q’ appearing in the original Deed of
Assignment dated 16 January 1974 and the submitted standard signatures of Federico O. Borromeo
marked ‘S-1’ to ‘S-49’ inclusive were written BY ONE AND THE SAME PERSON.

2. The questioned signature FEDERICO O. BORROMEO marked ‘Q’ COULD HAVE BEEN SIGNED IN THE
YEARS BETWEEN 1950-1957.’[8]

After hearing the arguments the lawyers of record advanced on the said “Report” of the PC Crime
Laboratory, the Court of Appeals resolved:

"xxx

1) to ADMIT the Report dated Jan. 9, 1986 of the PC Crime Laboratory on the Deed of Assignment in
evidence, without prejudice to the parties’ assailing the credibility of said Report;

2) to GIVE both parties a non-extendible period of FIVE (5) DAYS from February 27, 1986, within which to
file simultaneous memoranda.’[9]

On March 13, 1986, the Court of Appeals reversed its decision of February 12, 1985, which affirmed in
toto the decision of the trial court of origin; resolving thus:

“WHEREFORE, finding the Motion for Reconsideration meritorious, We hereby set aside our Decision,
dated February 12, 1985 and in its stead a new judgment is hereby rendered affirming in toto the
decision of the trial Court, dated March 12, 1980, without pronouncement as to costs.

SO ORDERED.”[10]

22
Therefrom, petitioners found their way to this court via the present Petition; theorizing that:

I.

THE RESPONDENT COURT ERRED IN HOLDING THAT WHEN PETITIONER AGREED TO THE SUGGESTION
OF RESPONDENT COURT TO HAVE THE QUESTIONED DOCUMENT EXAMINED BY THE PC CRIME
LABORATORY THEY COULD NO LONGER QUESTION THE COMPETENCY OF THE DOCUMENT.

II

THE COURT OF APPEALS ERRED IN HOLDING THAT THE QUESTIONED DOCUMENT WAS SIGNED IN 1954
BUT WAS DATED IN 1974.

III

THE COURT OF APPEALS ERRED IN HOLDING THAT THE SIGNATURE OF FEDERICO O. BORROMEO IN THE
DEED OF ASSIGNMENT (EXHIBIT “A” ) IS A GENUINE SIGNATURE CIRCA 1954-1957.

The Petition is barren of merit.

Well-settled is the rule that “factual finding of the Court of Appeals are conclusive on the parties and not
reviewable by the Supreme Court – and they carry even more weight when the Court of Appeals affirms
the factual findings of the trial court.” [11]

In the present case, the trial court found that the signature in question is the genuine signature of
Federico O. Borromeo between the years 1954 to 1957 although the words in the blank space of the
document in question were written on a much later date. The same conclusion was arrived at by the
Court of Appeals on the basis of the Report of the PC crime Laboratory corroborating the findings of Col.
Jose Fernandez that the signature under controversy is genuine.

It is significant to note that Mr. Tabayoyong, petitioners’ expert witness, limited his comparison of the
questioned signature with the 1974 standard signature of Federico O. Borromeo. No comparison of the
subject signature with the 1950 - 1957 standard signature was ever made by Mr. Tabayoyong despite his
awareness that the expert witness of private respondent, Col. Jose Fernandez, made a comparison of
said signatures and notwithstanding his (Tabayoyong’s) access to such signatures as they were all
submitted to the lower Court. As correctly ratiocinated [12] by the Court of origin, the only conceivable
reason why Mr. Tabayoyong avoided making such a comparison must have been, that even to the naked
eye, the questioned signature affixed to the Deed of Assignment, dated January 16, 1974, is strikingly
similar to the 1950 to 1954 standard signature of Federico O. Borromeo, such that if a comparison
thereof was made by Mr. Tabayoyong, he would have found the questioned signature genuine.

That the Deed of Assignment is dated January 16, 1974 while the questioned signature was found to be
circa 1954-1957, and not that of 1974, is of no moment. It does not necessarily mean, that the deed is a
forgery. Pertinent records reveal that the subject Deed of Assignment is embodied in a blank form for
the assignment of shares with authority to transfer such shares in the books of the corporation. It was

23
clearly intended to be signed in blank to facilitate the assignment of shares from one person to another
at any future time. This is similar to Section 14 of the Negotiable Instruments Law where the blanks may
be filled up by the holder, the signing in blank being with the assumed authority to do so. Indeed, as the
shares were registered in the name of Federico O. Borromeo just to give him personality and standing in
the business community, private respondent had to have a counter evidence of ownership of the shares
involve. Thus the execution of the deed of assignment in blank, to be filled up whenever needed. The
same explains the discrepancy between the date of the deed of assignment and the date when the
signature was affixed thereto.

While it is true that the 1974 standard signature of Federico O. Borromeo is to the naked eye dissimilar
to his questioned signature circa 1954-1957, which could have been caused by sheer lapse of time, Col.
Jose Fernandez, respondent’s expert witness, found the said signatures similar to each other after
subjecting the same to stereomicroscopic examination and analysis because the intrinsic and natural
characteristic of Federico O. Borromeo’s handwriting were present in all the exemplar signatures used
by both Segundo Tabayoyong and Col. Jose Fernandez.

It is therefore beyond cavil that the findings of the Court of origin affirmed by the Court of Appeals on
the basis of the corroborative findings of the Philippine Constabulary Crime Laboratory confirmed the
genuineness of the signature of Federico O. Borromeo in the Deed of Assignment dated January 16,
1974.

Petitioners, however, question the “Report” of the document examiner on the ground that they were
not given an opportunity to cross-examine the Philippine Constabulary document examiner; arguing
that they never waived their right to question the competency of the examiner concerned. While the
Court finds merit in the contention of petitioners, that they did not actually waived their right to cross-
examine on any aspect of subject Report of the Philippine Constabulary Crime Laboratory, the Court
discerns no proper basis for deviating from the findings of the Court of Appeals on the matter. It is
worthy to stress that courts may place whatever weight due on the testimony of an expert witness.
[13]
 Conformably, in giving credence and probative value to the said “Report” of the Philippine
Constabulary Crime Laboratory, corroborating the findings of the trial Court, the Court of Appeals
merely exercised its discretion. There being no grave abuse in the exercise of such judicial discretion, the
findings by the Court of Appeals should not be disturbed on appeal.

Premises studiedly considered, the Court is of the irresistible conclusion, and so holds, that the
respondent court erred not in affirming the decision of the Regional Trial Court a quo in Civil Case No.
19466.

WHEREFORE, the Petition is DISMISSED for lack of merit and the assailed Resolution, dated March 13,
1986, AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

24
25