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Republic of the Philippines SUPREMECOURT Manila

EN BANC

G.R. No. L-22405 June 30, 1971

PHILIPPINE EDUCATION CO., INC., plaintiff-appellant, vs. MAURICIO A. SORIANO, ET AL.,defendant-appellees.

Marcial Esposo for plaintiff-appellant.

Office of the Solicitor General Arturo A. Alafriz,Assistant Solicitor General Antonio G. Ibarra andAttorney Concepcion Torrijos-Agapinan fordefendants-appellees.

DIZON, J .:

An appeal from a decision of the Court of FirstInstance of Manila dismissing the complaint filed by

the Philippine Education Co., Inc. against Mauricio A.Soriano, Enrico Palomar and Rafael Contreras.

On April 18, 1958 Enrique Montinola sought topurchase from the Manila Post Office ten (10) moneyorders of P200.00 each payable to E.P. Montinolawithaddress at Lucena, Quezon. After the postalteller had made out money ordersnumbered 124685,124687-124695, Montinola offered to pay for themwith a private checks were not generally accepted inpayment of money orders, the teller advised him tosee the Chief of the Money Order Division, but

instead of doing so, Montinola managed to leavebuilding with his own check and the ten(10) moneyorders without the knowledge of the teller.

On the same date, April 18, 1958, upon discovery ofthe disappearance of the unpaid money orders, anurgent message was sent to all postmasters, and thefollowing day notice was likewise served upon allbanks, instructing them not to pay anyone of themoney orders aforesaid if presented for payment.

The Bank of America received a copy of said noticethree days later.

On April 23, 1958 one of the above-mentioned


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(b) To pay to the plaintiff out of their own personalfunds, jointly and severally, actual and moraldamages in the amount of P1,000.00 or in such

amount as will be proved and/or determined by thisHonorable Court: exemplary damages in the amountof P1,000.00, attorney's fees of P1,000.00, and thecosts of action.

Plaintiff also prays for such other and further relief asmay be deemed just and equitable.

On November 17, 1962, after the parties hadsubmitted the stipulation of facts reproduced atpages 12 to 15 of the Record on Appeal, the above-named court rendered judgment as follows:

WHEREFORE, judgment is hereby rendered,ordering the defendants to countermand the noticegiven to the Bank of America on September 27,1961, deducting from said Bank's clearing accountthe sum of P200.00 representing the amount ofpostal money order No. 124688, or in the alternative,

to indemnify the plaintiff in the said sum of P200.00with interest thereon at the rate of 8-% per annumfrom September 27, 1961 until fully paid; without anypronouncement as to cost and attorney's fees.

The case was appealed to the Court of First Instanceof Manila where, after the parties had resubmittedthe same stipulation of facts, the appealed decision

dismissing the complaint, with costs, was rendered.

The first, second and fifth assignments of errordiscussed in appellant's brief are related to the otherand will therefore be discussed jointly. They raise thismain issue: that the postal money order in question isa negotiable instrument; that its nature as such is notin anyway affected by the letter dated October 26,1948 signed by the Director of Posts and addressed

to all banks with a clearing account with the PostOffice, and that money orders, once issued, create acontractual relationship of debtor and creditor,respectively, between the government, on the onehand, and the remitters payees or endorses, on theother.

It is not disputed that our postal statutes werepatterned after statutes in force in the United States.For this reason, ours are generally construed in

accordance with the construction given in the UnitedStates to their own postal statutes, in the absence ofany special reason justifying a departure from thispolicy or practice. The weight of authority in the


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United States is that postal money orders are notnegotiable instruments (Bolognesi vs. U.S. 189 Fed.395; U.S. vs. Stock Drawers National Bank, 30 Fed.

912), the reason behind this rule being that, inestablishing and operating a postal money ordersystem, the government is not engaging incommercial transactions but merely exercises agovernmental power for the public benefit.

It is to be noted in this connection that some of therestrictions imposed upon money orders by postallaws and regulations are inconsistent with the

character of negotiable instruments. For instance,such laws and regulations usually provide for notmore than one endorsement; payment of moneyorders may be withheld under a variety ofcircumstances (49 C.J. 1153).

Of particular application to the postal money order inquestion are the conditions laid down in the letter ofthe Director of Posts of October 26, 1948 (Exhibit 3)to the Bank of America for the redemption of postal

money orders received by it from its depositors.Among others, the condition is imposed that "incases of adverse claim, the money order or moneyorders involved will be returned to you (the bank) and

the, corresponding amount will have to be refundedto the Postmaster, Manila, who reserves the right todeduct the value thereof from any amount due you if

such step is deemed necessary." The conditions thusimposed in order to enable the bank to continueenjoying the facilities theretofore enjoyed by itsdepositors, were accepted by the Bank of America.The latter is therefore bound by them. That it is so isclearly referred from the fact that, upon receivingadvice that the amount represented by the moneyorder in question had been deducted from its clearingaccount with the Manila Post Office, it did not file any

protest against such action.

Moreover, not being a party to the understandingexisting between the postal officers, on the one hand,and the Bank of America, on the other, appellant hasno right to assail the terms and conditions thereof onthe ground that the letter setting forth the terms andconditions aforesaid is void because it was notissued by a Department Head in accordance withSec. 79 (B) of the Revised Administrative Code. Inreality, however, said legal provision does not applyto the letter in question because it does not providefor a department regulation but merely sets down


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certain conditions upon the privilege granted to theBank of Amrica to accept and pay postal moneyorders presented for payment at the Manila Post

Office. Such being the case, it is clear that theDirector of Posts had ample authority to issue itpursuant to Sec. 1190 of the Revised AdministrativeCode.

In view of the foregoing, We do not find it necessaryto resolve the issues raised in the third and fourthassignments of error.

WHEREFORE, the appealed decision being inaccordance with law, the same is hereby affirmedwith costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar,Fernando, Teehankee, Barredo and Villamor, JJ.,concur.

Castro and Makasiar, JJ., took no part.


SECOND DIVISION

G.R. No. 97753 August 10, 1992

CALTEX (PHILIPPINES), INC., petitioner, vs. COURT OF APPEALS and SECURITY BANKAND TRUST COMPANY, respondents.

Bito, Lozada, Ortega & Castillo for petitioners.

Nepomuceno, Hofilea & Guingona for private.

REGALADO, J .:

This petition for review on certiorari impugns andseeks the reversal of the decision promulgated by

respondent court on March 8, 1991 in CA-G.R. CVNo. 23615 1 affirming with modifications, the earlierdecision of the Regional Trial Court of Manila,


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Branch XLII, 2 which dismissed the complaint filedtherein by herein petitioner against respondent bank.

The undisputed background of this case, as found bythe court a quo and adopted by respondent court,appears of record:

1. On various dates, defendant, a commercialbanking institution, through its Sucat Branch issued280 certificates of time deposit (CTDs) in favor of one

Angel dela Cruz who deposited with hereindefendant the aggregate amount of P1,120,000.00,as follows: (Joint Partial Stipulation of Facts andStatement of Issues, Original Records, p. 207;Defendant's Exhibits 1 to 280);

CTDCTD DatesSerial Nos.QuantityAmount22 Feb. 82 90101 to 90120 20 P80,000 26 Feb. 8274602 to 74691 90 360,000 2 Mar. 82 74701 to74740 40 160,000 4 Mar. 82 90127 to 90146 2080,000 5 Mar. 82 74797 to 94800 4 16,000 5 Mar.82 89965 to 89986 22 88,000 5 Mar. 82 70147 to90150 4 16,000 8 Mar. 82 90001 to 90020 2080,000 9 Mar. 82 90023 to 90050 28 112,000 9Mar. 82 89991 to 90000 10 40,000 9 Mar. 82 90251

to 90272 22 88,000 Total 280P1,120,000 ===== ========2. Angel dela Cruz delivered the said certificates oftime (CTDs) to herein plaintiff in connection with hispurchased of fuel products from the latter (OriginalRecord, p. 208).

3. Sometime in March 1982, Angel dela Cruzinformed Mr. Timoteo Tiangco, the Sucat BranchManger, that he lost all the certificates of time depositin dispute. Mr. Tiangco advised said depositor toexecute and submit a notarized Affidavit of Loss, asrequired by defendant bank's procedure, if he desiredreplacement of said lost CTDs (TSN, February 9,1987, pp. 48-50).

4. On March 18, 1982, Angel dela Cruz executed anddelivered to defendant bank the required Affidavit ofLoss (Defendant's Exhibit 281). On the basis of saidaffidavit of loss, 280 replacement CTDs were issuedin favor of said depositor (Defendant's Exhibits 282-

561).

5. On March 25, 1982, Angel dela Cruz negotiatedand obtained a loan from defendant bank in the


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amount of Eight Hundred Seventy Five ThousandPesos (P875,000.00). On the same date, saiddepositor executed a notarized Deed of Assignment

of Time Deposit (Exhibit 562) which stated, amongothers, that he (de la Cruz) surrenders to defendantbank "full control of the indicated time deposits fromand after date" of the assignment and furtherauthorizes said bank to pre-terminate, set-off and"apply the said time deposits to the payment ofwhatever amount or amounts may be due" on theloan upon its maturity (TSN, February 9, 1987, pp.60-62).

6. Sometime in November, 1982, Mr. Aranas, CreditManager of plaintiff Caltex (Phils.) Inc., went to thedefendant bank's Sucat branch and presented forverification the CTDs declared lost by Angel delaCruz alleging that the same were delivered to hereinplaintiff "as security for purchases made with CaltexPhilippines, Inc." by said depositor (TSN, February 9,1987, pp. 54-68).

7. On November 26, 1982, defendant received aletter (Defendant's Exhibit 563) from herein plaintiffformally informing it of its possession of the CTDs inquestion 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 thedocument evidencing the guarantee agreement withMr. Angel dela Cruz" as well as "the details of Mr.

Angel dela Cruz" obligation against which plaintiffproposed to apply the time deposits (Defendant'sExhibit 564).

9. No copy of the requested documents wasfurnished herein defendant.

10. Accordingly, defendant bank rejected theplaintiff's demand and claim for payment of the valueof the CTDs in a letter dated February 7, 1983(Defendant's Exhibit 566).

11. In April 1983, the loan of Angel dela Cruz with thedefendant bank matured and fell due and on August5, 1983, the latter set-off and applied the timedeposits 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 instantcomplaint, praying that defendant bank be ordered to


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pay it the aggregate value of the certificates of timedeposit of P1,120,000.00 plus accrued interest andcompounded interest therein at 16% per annum,

moral and exemplary damages as well as attorney'sfees.

After trial, the court a quo rendered its decisiondismissing the instant complaint. 3

On appeal, as earlier stated, respondent courtaffirmed the lower court's dismissal of the complaint,hence this petition wherein petitioner faultsrespondent court in ruling (1) that the subject

certificates of deposit are non-negotiable despitebeing clearly negotiable instruments; (2) thatpetitioner did not become a holder in due course ofthe said certificates of deposit; and (3) indisregarding the pertinent provisions of the Code ofCommerce relating to lost instruments payable tobearer. 4

The instant petition is bereft of merit.

A sample text of the certificates of time deposit isreproduced below to provide a better understandingof the issues involved in this recourse.

SECURITY BANKAND TRUST COMPANY 6778Ayala Ave., Makati No. 90101 Metro Manila,Philippines SUCAT OFFICEP4,000.00 CERTIFICATE OF DEPOSIT Rate 16%

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

This is to Certify that B E A R E R has deposited inthis Bank the sum of PESOS: FOUR THOUSANDONLY, SECURITY BANK SUCAT OFFICE P4,000 &00 CTS Pesos, Philippine Currency, repayable tosaid depositor 731 days. after date, uponpresentation and surrender of this certificate, withinterest at the rate of 16% per cent per annum.

(Sgd. Illegible) (Sgd. Illegible)

AUTHORIZED SIGNATURES5

Respondent court ruled that the CTDs in questionare non-negotiable instruments, nationalizing asfollows:


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. . . While it may be true that the word "bearer" appearsrather boldly in the CTDs issued, it is important to notethat after the word "BEARER" stamped on the spaceprovided supposedly for the name of the depositor, thewords "has deposited" a certain amount follows. Thedocument further provides that the amount depositedshall be "repayable to said depositor" on the periodindicated. 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 thespecified person indicated therein, the depositor. Ineffect, the appellee bank acknowledges its depositorAngel dela Cruz as the person who made the deposit and

further engages itself to pay said depositor the amountindicated thereon at the stipulated date. 6

We disagree with these findings and conclusions,and hereby hold that the CTDs in question arenegotiable instruments. Section 1 Act No. 2031,otherwise known as the Negotiable Instruments Law,enumerates the requisites for an instrument tobecome negotiable, viz:

(a) It must be in writing and signed by the maker ordrawer;

(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 thereinwith reasonable certainty.

The CTDs in question undoubtedly meet therequirements of the law for negotiability. The parties'

bone of contention is with regard to requisite (d) setforth 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 inthe 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 perbooks of the bank, the depositor referred (sic) inthese certificates states that it was Angel dela Cruz?


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witness:

a Yes, your Honor, and we have the record to show

that Angel dela Cruz was the one who cause (sic) theamount.

Atty. Calida:

q And no other person or entity or company, Mr.Witness?

witness:

a None, your Honor.7

xxx xxx xxx

Atty. Calida:

q Mr. Witness, who is the depositor identified in all ofthese certificates of time deposit insofar as the bankis concerned?

witness:

a Angel dela Cruz is the depositor. 8

xxx xxx xxx

On this score, the accepted rule is that the

negotiability or non-negotiability of an instrument isdetermined from the writing, that is, from the face ofthe instrument itself. 9 In the construction of a bill ornote, the intention of the parties is to control, if it canbe legally ascertained. 10 While the writing may beread in the light of surrounding circumstances inorder to more perfectly understand the intent andmeaning of the parties, yet as they have constitutedthe writing to be the only outward and visibleexpression of their meaning, no other words are tobe added to it or substituted in its stead. The duty ofthe court in such case is to ascertain, not what theparties may have secretly intended ascontradistinguished from what their words express,but what is the meaning of the words they have used.What the parties meant must be determined by whatthey said. 11

Contrary to what respondent court held, the CTDs

are negotiable instruments. The documents providethat the amounts deposited shall be repayable to thedepositor. And who, according to the document, isthe depositor? It is the "bearer." The documents do


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not say that the depositor is Angel de la Cruz andthat the amounts deposited are repayable specificallyto 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 ofpresentment.

If it was really the intention of respondent bank to paythe amount to Angel de la Cruz only, it could havewith facility so expressed that fact in clear andcategorical terms in the documents, instead of havingthe word "BEARER" stamped on the space providedfor the name of the depositor in each CTD. On thewordings of the documents, therefore, the amountsdeposited are repayable to whoever may be thebearer thereof. Thus, petitioner's aforesaid witnessmerely declared that Angel de la Cruz is thedepositor "insofar as the bank is concerned," butobviously other parties not privy to the transactionbetween them would not be in a position to know thatthe 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 whatis written thereon to unravel the agreement of theparties thereto through facts aliunde. This need for

resort to extrinsic evidence is what is sought to beavoided by the Negotiable Instruments Law and callsfor the application of the elementary rule that the

interpretation of obscure words or stipulations in acontract shall not favor the party who caused theobscurity. 12

The next query is whether petitioner can rightfullyrecover on the CTDs. This time, the answer is in thenegative. The records reveal that Angel de la Cruz,whom petitioner chose not to implead in this suit forreasons of its own, delivered the CTDs amounting toP1,120,000.00 to petitioner without informingrespondent bank thereof at any time. Unfortunatelyfor petitioner, although the CTDs are bearerinstruments, a valid negotiation thereof for the truepurpose and agreement between it and De la Cruz,as ultimately ascertained, requires both delivery andindorsement. For, although petitioner seeks to deflectthis fact, the CTDs were in reality delivered to it as asecurity 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 hasbeen dissipated and resolved in favor of the latter bypetitioner's own authorized and responsible


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representative himself.

In a letter dated November 26, 1982 addressed to

respondent Security Bank, J.Q. Aranas, Jr., CaltexCredit Manager, wrote: ". . . These certificates ofdeposit were negotiated to us by Mr. Angel dela Cruzto guarantee his purchases of fuel products"(Emphasis ours.) 13 This admission is conclusiveupon petitioner, its protestations notwithstanding.Under the doctrine of estoppel, an admission orrepresentation is rendered conclusive upon theperson making it, and cannot be denied or disprovedas against the person relying thereon. 14 A party maynot go back on his own acts and representations tothe prejudice of the other party who relied uponthem. 15 In the law of evidence, whenever a partyhas, by his own declaration, act, or omission,intentionally and deliberately led another to believe aparticular thing true, and to act upon such belief, hecannot, in any litigation arising out of suchdeclaration, act, or omission, be permitted to falsify it.16

If it were true that the CTDs were delivered aspayment and not as security, petitioner's creditmanager could have easily said so, instead of using

the words "to guarantee" in the letter aforequoted.Besides, when respondent bank, as defendant in thecourt below, moved for a bill of particularity therein 17

praying, among others, that petitioner, as plaintiff, berequired to aver with sufficient definiteness orparticularity (a) the due date or dates of paymentofthe alleged indebtedness of Angel de la Cruz toplaintiff and (b) whether or not it issued a receiptshowing that the CTDs were delivered to it by De laCruz aspaymentof the latter's alleged indebtednessto it, plaintiff corporation opposed the motion. 18Hadit produced the receipt prayed for, it could haveproved, if such truly was the fact, that the CTDs weredelivered as payment and not as security. Havingopposed the motion, petitioner now labors under thepresumption that evidence willfully suppressed wouldbe adverse if produced. 19

Under the foregoing circumstances, this disquisitionin Intergrated Realty Corporation, et al. vs. PhilippineNational Bank, et al.20is apropos:

. . . Adverting again to the Court's pronouncements inLopez, supra, we quote therefrom:

The character of the transaction between the parties


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is to be determined by their intention, regardless ofwhat language was used or what the form of thetransfer 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 apledge. However, even though a transfer, if regardedby itself, appears to have been absolute, its objectand character might still be qualified and explainedby contemporaneous writing declaring it to havebeen a deposit of the property as collateral security.It has been said that a transfer of property by thedebtor to a creditor, even if sufficient on its face tomake an absolute conveyance, should be treated asa pledge if the debt continues in inexistence and isnot discharged by the transfer, and that accordinglythe use of the terms ordinarily importing conveyanceof absolute ownership will not be given that effect insuch a transaction if they are also commonly used inpledges and mortgages and therefore do notunqualifiedly indicate a transfer of absoluteownership, in the absence of clear and unambiguouslanguage or other circumstances excluding an intent

to pledge.

Petitioner's insistence that the CTDs were negotiated

to it begs the question. Under the NegotiableInstruments Law, an instrument is negotiated when itis transferred from one person to another in such a

manner as to constitute the transferee the holderthereof, 21 and a holder may be the payee or indorseeof a bill or note, who is in possession of it, or thebearer thereof. 22In the present case, however, therewas no negotiation in the sense of a transfer of thelegal title to the CTDs in favor of petitioner in whichsituation, for obvious reasons, mere delivery of thebearer CTDs would have sufficed. Here, the deliverythereof only as security for the purchases of Angel dela Cruz (and we even disregard the fact that theamount involved was not disclosed) could at themost constitute petitioner only as a holder for valueby reason of his lien. Accordingly, a negotiation forsuch purpose cannot be effected by mere delivery ofthe instrument since, necessarily, the terms thereofand the subsequent disposition of such security, inthe event of non-payment of the principal obligation,must be contractually provided for.

The pertinent law on this point is that where theholder has a lien on the instrument arising fromcontract, he is deemed a holder for value to the


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extent of his lien. 23As such holder of collateralsecurity, he would be a pledgee but the requirementstherefor and the effects thereof, not being provided

for by the Negotiable Instruments Law, shall begoverned by the Civil Code provisions on pledge ofincorporeal rights, 24which inceptively provide:

Art. 2095. Incorporeal rights, evidenced bynegotiable instruments, . . . may also be pledged.The instrument proving the right pledged shall bedelivered to the creditor, and if negotiable, must beindorsed.

Art. 2096. A pledge shall not take effect against thirdpersons if a description of the thing pledged and thedate of the pledge do not appear in a publicinstrument.

Aside from the fact that the CTDs were onlydelivered but not indorsed, the factual findings ofrespondent court quoted at the start of this opinionshow that petitioner failed to produce any document

evidencing any contract of pledge or guaranteeagreement between it and Angel de la Cruz. 25Consequently, the mere delivery of the CTDs did notlegally vest in petitioner any right effective against

and binding upon respondent bank. The requirementunder Article 2096 aforementioned is not a mere ruleof adjective law prescribing the mode whereby proof

may be made of the date of a pledge contract, but arule of substantive law prescribing a condition withoutwhich the execution of a pledge contract cannotaffect third persons adversely. 26

On the other hand, the assignment of the CTDsmade by Angel de la Cruz in favor of respondentbank was embodied in a public instrument. 27 Withregard to this other mode of transfer, the Civil Codespecifically declares:

Art. 1625. An assignment of credit, right or actionshall produce no effect as against third persons,unless it appears in a public instrument, or theinstrument is recorded in the Registry of Property incase the assignment involves real property.

Respondent bank duly complied with this statutoryrequirement. Contrarily, petitioner, whether as

purchaser, assignee or lien holder of the CTDs,neither proved the amount of its credit or the extentof its lien nor the execution of any public instrumentwhich could affect or bind private respondent.


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Necessarily, therefore, as between petitioner andrespondent bank, the latter has definitely the betterright over the CTDs in question.

Finally, petitioner faults respondent court for refusingto delve into the question of whether or not privaterespondent observed the requirements of the law inthe case of lost negotiable instruments and theissuance of replacement certificates therefor, on theground that petitioner failed to raised that issue in thelower court. 28

On this matter, we uphold respondent court's finding

that the aspect of alleged negligence of privaterespondent was not included in the stipulation of theparties and in the statement of issues submitted bythem to the trial court. 29The issues agreed upon bythem for resolution in this case are:

1. Whether or not the CTDs as worded arenegotiable instruments.

2. Whether or not defendant could legally apply theamount covered by the CTDs against the depositor'sloan by virtue of the assignment (Annex "C").

3. Whether or not there was legal compensation orset off involving the amount covered by the CTDsand the depositor's outstanding account with

defendant, if any.

4. Whether or not plaintiff could compel defendant topreterminate the CTDs before the maturity dateprovided therein.

5. Whether or not plaintiff is entitled to the proceedsof the CTDs.

6. Whether or not the parties can recover damages,

attorney's fees and litigation expenses from eachother.

As respondent court correctly observed, withappropriate citation of some doctrinal authorities, theforegoing enumeration does not include the issue ofnegligence on the part of respondent bank. An issueraised for the first time on appeal and not raisedtimely in the proceedings in the lower court is barred

by estoppel.30

Questions raised on appeal must bewithin the issues framed by the parties and,consequently, issues not raised in the trial courtcannot be raised for the first time on appeal. 31


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Pre-trial is primarily intended to make certain that allissues necessary to the disposition of a case areproperly 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 theyintend to raise at the trial, except such as mayinvolve privileged or impeaching matters. Thedetermination of issues at a pre-trial conference barsthe consideration of other questions on appeal. 32

To accept petitioner's suggestion that respondentbank's supposed negligence may be consideredencompassed by the issues on its right to

preterminate and receive the proceeds of the CTDswould be tantamount to saying that petitioner couldraise on appeal any issue. We agree with privaterespondent that the broad ultimate issue ofpetitioner's entitlement to the proceeds of thequestioned certificates can be premised on amultitude of other legal reasons and causes ofaction, of which respondent bank's supposednegligence is only one. Hence, petitioner's

submission, if accepted, would render a pre-trialdelimitation of issues a useless exercise. 33

Still, even assuming arguendo that said issue of

negligence was raised in the court below, petitionerstill cannot have the odds in its favor. A closescrutiny of the provisions of the Code of Commerce

laying down the rules to be followed in case of lostinstruments payable to bearer, which it invokes, willreveal that said provisions, even assuming theirapplicability to the CTDs in the case at bar, aremerely permissive and not mandatory. The very firstarticle cited by petitioner speaks for itself.

Art 548. The dispossessed owner, no matter for whatcause it may be, mayapply to the judge or court ofcompetent jurisdiction, asking that the principal,

interest or dividends due or about to become due, benot paid a third person, as well as in order to preventthe ownership of the instrument that a duplicate beissued him. (Emphasis ours.)

xxx xxx xxx

The use of the word "may" in said provision showsthat it is not mandatory but discretionary on the part

of the "dispossessed owner" to apply to the judge orcourt of competent jurisdiction for the issuance of aduplicate of the lost instrument. Where the provisionreads "may," this word shows that it is not mandatory


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but discretional. 34 The word "may" is usuallypermissive, not mandatory. 35 It is an auxiliary verbindicating liberty, opportunity, permission and

possibility.

36

Moreover, as correctly analyzed by privaterespondent, 37Articles 548 to 558 of the Code ofCommerce, on which petitioner seeks to anchorrespondent bank's supposed negligence, merelyestablished, on the one hand, a right of recourse infavor of a dispossessed owner or holder of a bearerinstrument so that he may obtain a duplicate of thesame, and, on the other, an option in favor of the

party liable thereon who, for some valid ground, mayelect to refuse to issue a replacement of theinstrument. Significantly, none of the provisions citedby petitioner categorically restricts or prohibits theissuance a duplicate or replacement instrument sanscompliance with the procedure outlined therein, andnone establishes a mandatory precedentrequirement therefor.

WHEREFORE, on the modified premises above setforth, the petition is DENIED and the appealeddecision is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Padilla and Nocon, JJ., concur.


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Republic of the Philippines SUPREMECOURT ManilaFIRST DIVISION

G.R. No. 88866 February 18, 1991

METROPOLITAN BANK & TRUST COMPANY,petitioner, vs. COURT OF APPEALS, GOLDENSAVINGS & LOAN ASSOCIATION, INC., LUCIACASTILLO, MAGNO CASTILLO and GLORIA

CASTILLO, respondents.

Angara, Abello, Concepcion, Regala & Cruz forpetitioner.

Bengzon, Zarraga, Narciso, Cudala, Pecson &Bengson for Magno and Lucia Castillo.

Agapito S. Fajardo and Jaime M. Cabiles forrespondent Golden Savings & Loan Association, Inc.

CRUZ, J .:p

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

The Metropolitan Bank and Trust Co. is a commercialbank with branches throughout the Philippines andeven abroad. Golden Savings and Loan Associationwas, at the time these events happened, operating inCalapan, Mindoro, with the other private respondentsas its principal officers.

In January 1979, a certain Eduardo Gomez openedan account with Golden Savings and deposited overa period of two months 38 treasury warrants with atotal value of P1,755,228.37. They were all drawn bythe Philippine Fish Marketing Authority andpurportedly signed by its General Manager andcountersigned by its Auditor. Six of these weredirectly payable to Gomez while the others appearedto 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


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by Gloria Castillo as Cashier of Golden Savings anddeposited to its Savings Account No. 2498 in theMetrobank branch in Calapan, Mindoro. They werethen sent for clearing by the branch office to theprincipal office of Metrobank, which forwarded themto the Bureau of Treasury for special clearing. 2

More than two weeks after the deposits, GloriaCastillo went to the Calapan branch several times toask whether the warrants had been cleared. She wastold to wait. Accordingly, Gomez was meanwhile notallowed 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 toallow Golden Savings to withdraw from the proceedsof the warrants. 3 The first withdrawal was made onJuly 9, 1979, in the amount of P508,000.00, thesecond on July 13, 1979, in the amount ofP310,000.00, and the third on July 16, 1979, in theamount of P150,000.00. The total withdrawal wasP968.000.00. 4

In turn, Golden Savings subsequently allowedGomez to make withdrawals from his own account,eventually collecting the total amount of

P1,167,500.00 from the proceeds of the apparentlycleared warrants. The last withdrawal was made onJuly 16, 1979.

On July 21, 1979, Metrobank informed GoldenSavings that 32 of the warrants had been dishonoredby the Bureau of Treasury on July 19, 1979, anddemanded the refund by Golden Savings of theamount it had previously withdrawn, to make up thedeficit in its account.

The demand was rejected. Metrobank then suedGolden Savings in the Regional Trial Court of

Mindoro. 5 After trial, judgment was rendered in favorof Golden Savings, which, however, filed a motion forreconsideration even as Metrobank filed its notice ofappeal. On November 4, 1986, the lower courtmodified 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 theproperties of defendant Golden Savings and Loan


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Association, Inc. and defendant Spouses MagnoCastillo and Lucia Castillo;

3. Directing the plaintiff to reverse its action ofdebiting Savings Account No. 2498 of the sum ofP1,754,089.00 and to reinstate and credit to suchaccount such amount existing before the debit wasmade including the amount of P812,033.37 in favorof defendant Golden Savings and Loan Association,Inc. and thereafter, to allow defendant GoldenSavings and Loan Association, Inc. to withdraw theamount outstanding thereon before the debit;

4. Ordering the plaintiff to pay the defendant GoldenSavings and Loan Association, Inc. attorney's feesand expenses of litigation in the amount ofP200,000.00.

5. Ordering the plaintiff to pay the defendantSpouses Magno Castillo and Lucia Castillo attorney'sfees and expenses of litigation in the amount ofP100,000.00.

SO ORDERED.

On appeal to the respondent court, 6 the decision

was affirmed, prompting Metrobank to file thispetition for review on the following grounds:

1. Respondent Court of Appeals erred indisregarding and failing to apply the clear contractualterms and conditions on the deposit slips allowingMetrobank to charge back any amount erroneouslycredited.

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

(b) Until such time as Metrobank is actually paid, itsobligation is that of a mere collecting agent whichcannot be held liable for its failure to collect on thewarrants.

2. Under the lower court's decision, affirmed byrespondent Court of Appeals, Metrobank is made topay for warrants already dishonored, therebyperpetuating the fraud committed by Eduardo

Gomez.

3. Respondent Court of Appeals erred in not findingthat as between Metrobank and Golden Savings, the


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latter should bear the loss.

4. Respondent Court of Appeals erred in holding thatthe treasury warrants involved in this case are notnegotiable instruments.

The petition has no merit.

From the above undisputed facts, it would appear tothe Court that Metrobank was indeed negligent ingiving Golden Savings the impression that thetreasury warrants had been cleared and that,consequently, it was safe to allow Gomez to

withdraw the proceeds thereof from his account withit. Without such assurance, Golden Savings wouldnot have allowed the withdrawals; with suchassurance, there was no reason not to allow thewithdrawal. Indeed, Golden Savings might even haveincurred liability for its refusal to return the moneythat to all appearances belonged to the depositor,who could therefore withdraw it any time and for anyreason he saw fit.

It was, in fact, to secure the clearance of the treasurywarrants that Golden Savings deposited them to itsaccount with Metrobank. Golden Savings had no

clearing facilities of its own. It relied on Metrobank todetermine the validity of the warrants through its ownservices. The proceeds of the warrants were withheldfrom Gomez until Metrobank allowed Golden Savingsitself to withdraw them from its own deposit. 7 It wasonly when Metrobank gave the go-signal that Gomezwas finally allowed by Golden Savings to withdrawthem from his own account.

The argument of Metrobank that Golden Savingsshould have exercised more care in checking thepersonal circumstances of Gomez before acceptinghis deposit does not hold water. It was Gomez who

was entrusting the warrants, not Golden Savings thatwas extending him a loan; and moreover, thetreasury warrants were subject to clearing, pendingwhich the depositor could not withdraw its proceeds.There was no question of Gomez's identity or of thegenuineness of his signature as checked by GoldenSavings. In fact, the treasury warrants weredishonored allegedly because of the forgery of thesignatures of the drawers, not of Gomez as payee or

indorser. Under the circumstances, it is clear thatGolden Savings acted with due care and diligenceand cannot be faulted for the withdrawals it allowed


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Gomez to make.

By contrast, Metrobank exhibited extraordinarycarelessness. The amount involved was not trifling more than one and a half million pesos (and this was1979). There was no reason why it should not havewaited until the treasury warrants had been cleared;it would not have lost a single centavo by waiting.Yet, despite the lack of such clearance andnotwithstanding that it had not received a singlecentavo from the proceeds of the treasury warrants,as it now repeatedly stresses it allowed GoldenSavings 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 persistentinquiries of Gloria Castillo about the clearance and italso wanted to "accommodate" a valued client. It"presumed" that the warrants had been clearedsimply because of "the lapse of one week." 8 For abank with its long experience, this explanation is

unbelievably naive.

And now, to gloss over its carelessness, Metrobankwould invoke the conditions printed on the dorsal

side of the deposit slips through which the treasurywarrants were deposited by Golden Savings with itsCalapan branch. The conditions read as follows:

Kindly note that in receiving items on deposit, thebank obligates itself only as the depositor's collectingagent, assuming no responsibility beyond care inselecting correspondents, and until such time asactual payment shall have come into possession ofthis bank, the right is reserved to charge back to thedepositor's account any amount previously credited,whether or not such item is returned. This alsoapplies to checks drawn on local banks and bankers

and their branches as well as on this bank, which areunpaid due to insufficiency of funds, forgery,unauthorized overdraft or any other reason.(Emphasis supplied.)

According to Metrobank, the said conditions clearlyshow that it was acting only as a collecting agent forGolden Savings and give it the right to "charge backto the depositor's account any amount previously

credited, whether or not such item is returned. Thisalso applies to checks ". . . which are unpaid due toinsufficiency of funds, forgery, unauthorized overdraftof any other reason." It is claimed that the said


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conditions are in the nature of contractual stipulationsand became binding on Golden Savings when GloriaCastillo, as its Cashier, signed the deposit slips.

Doubt may be expressed about the binding force ofthe conditions, considering that they have apparentlybeen imposed by the bank unilaterally, without theconsent of the depositor. Indeed, it could be arguedthat the depositor, in signing the deposit slip, does soonly to identify himself and not to agree to theconditions set forth in the given permit at the back ofthe deposit slip. We do not have to rule on this matterat this time. At any rate, the Court feels that even if

the deposit slip were considered a contract, thepetitioner could still not validly disclaim responsibilitythereunder in the light of the circumstances of thiscase.

In stressing that it was acting only as a collectingagent for Golden Savings, Metrobank seems to besuggesting that as a mere agent it cannot be liable tothe 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 forfraud, but also for negligence, which shall be judged

'with more or less rigor by the courts, according towhether the agency was or was not for acompensation.

The negligence of Metrobank has been sufficientlyestablished. To repeat for emphasis, it was theclearance given by it that assured Golden Savings itwas already safe to allow Gomez to withdraw theproceeds of the treasury warrants he had depositedMetrobank misledGolden Savings. There may havebeen no express clearance, as Metrobank insists(although this is refuted by Golden Savings) but inany case that clearance could be implied from its

allowing Golden Savings to withdraw from its accountnot only once or even twice but three times. The totalwithdrawal was in excess of its original balancebefore the treasury warrants were deposited, whichonly added to its belief that the treasury warrants hadindeed been cleared.

Metrobank's argument that it may recover thedisputed amount if the warrants are not paid for any

reason is not acceptable. Any reason does not meanno reason at all. Otherwise, there would have beenno need at all for Golden Savings to deposit thetreasury warrants with it for clearance. There would


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he must be named or otherwise indicated thereinwith reasonable certainty.

xxx xxx xxx

Sec. 3. When promise is unconditional. Anunqualified order or promise to pay is unconditionalwithin the meaning of this Act though coupled with

(a) An indication of a particular fund out of whichreimbursement is to be made or a particular accountto be debited with the amount; or

(b) A statement of the transaction which gives rise tothe instrument judgment.

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

The indication of Fund 501 as the source of thepayment to be made on the treasury warrants makesthe order or promise to pay "not unconditional" andthe warrants themselves non-negotiable. There

should be no question that the exception on Section3 of the Negotiable Instruments Law is applicable inthe case at bar. This conclusion conforms to

Abubakar vs. Auditor General 11 where the Courtheld:

The petitioner argues that he is a holder in good faith

and for value of a negotiable instrument and isentitled to the rights and privileges of a holder in duecourse, free from defenses. But this treasury warrantis not within the scope of the negotiable instrumentlaw. For one thing, the document bearing on its facethe words "payable from the appropriation for foodadministration, is actually an Order for payment outof "a particular fund," and is not unconditional anddoes not fulfill one of the essential requirements of a

negotiable instrument (Sec. 3 last sentence andsection [1(b)] of the Negotiable Instruments Law).

Metrobank cannot contend that by indorsing thewarrants in general, Golden Savings assumed thatthey were "genuine and in all respects what theypurport to be," in accordance with Section 66 of theNegotiable Instruments Law. The simple reason isthat this law is not applicable to the non-negotiable

treasury warrants. The indorsement was made byGloria Castillo not for the purpose of guaranteeingthe genuineness of the warrants but merely todeposit them with Metrobank for clearing. It was in


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fact Metrobank that made the guarantee when itstamped on the back of the warrants: "All priorindorsement and/or lack of endorsementsguaranteed, Metropolitan Bank & Trust Co., CalapanBranch."

The petitioner lays heavy stress on Jai AlaiCorporation v. Bank of the Philippine Islands, 12 butwe feel this case is inapplicable to the presentcontroversy. That case involved checks whereas thiscase involves treasury warrants. Golden Savingsnever represented that the warrants were negotiablebut signed them only for the purpose of depositing

them for clearance. Also, the fact of forgery wasproved in that case but not in the case before us.Finally, the Court found the Jai Alai Corporationnegligent in accepting the checks without questionfrom one Antonio Ramirez notwithstanding that thepayee was the Inter-Island Gas Services, Inc. and itdid not appear that he was authorized to indorse it.No similar negligence can be imputed to GoldenSavings.

We find the challenged decision to be basicallycorrect. However, we will have to amend it insofar asit directs the petitioner to credit Golden Savings with

the full amount of the treasury checks deposited to itsaccount.

The total value of the 32 treasury warrants

dishonored was P1,754,089.00, from which Gomezwas allowed to withdraw P1,167,500.00 beforeGolden Savings was notified of the dishonor. Theamount he has withdrawn must be charged not toGolden Savings but to Metrobank, which must bearthe consequences of its own negligence. But thebalance of P586,589.00 should be debited to GoldenSavings, as obviously Gomez can no longer bepermitted to withdraw this amount from his deposit

because of the dishonor of the warrants. Gomez hasin fact disappeared. To also credit the balance toGolden Savings would unduly enrich it at theexpense of Metrobank, let alone the fact that it hasalready been informed of the dishonor of the treasurywarrants.

WHEREFORE, the challenged decision isAFFIRMED, with the modification that Paragraph 3 of

the dispositive portion of the judgment of the lowercourt shall be reworded as follows:

3. Debiting Savings Account No. 2498 in the sum of


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P586,589.00 only and thereafter allowing defendantGolden Savings & Loan Association, Inc. to withdrawthe amount outstanding thereon, if any, after thedebit.

SO ORDERED.

Narvasa, Gancayco, Grio-Aquino and Medialdea,JJ., concur.

Republic of the Philippines SUPREMECOURT ManilaTHIRD DIVISION

G.R. No. 89252 May 24, 1993

RAUL SESBREO, petitioner, vs. HON. COURTOF APPEALS, DELTA MOTORS CORPORATIONAND PILIPINAS BANK, respondents.

Salva, Villanueva & Associates for Delta MotorsCorporation.

Reyes, Salazar & Associates for Pilipinas Bank.

FELICIANO, J .:

On 9 February 1981, petitioner Raul Sesbreo made

a money market placement in the amount ofP300,000.00 with the Philippine UnderwritersFinance Corporation ("Philfinance"), Cebu Branch;


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the placement, with a term of thirty-two (32) days,would mature on 13 March 1981, Philfinance, also on9 February 1981, issued the following documents topetitioner:

(a) the Certificate of Confirmation of Sale, "withoutrecourse," No. 20496 of one (1) Delta MotorsCorporation Promissory Note ("DMC PN") No. 2731for a term of 32 days at 17.0% per annum;

(b) the Certificate of securities Delivery Receipt No.16587 indicating the sale of DMC PN No. 2731 topetitioner, with the notation that the said security was

in custodianship of Pilipinas Bank, as perDenominated Custodian Receipt ("DCR") No. 10805dated 9 February 1981; and

(c) post-dated checks payable on 13 March 1981(i.e., the maturity date of petitioner's investment), withpetitioner as payee, Philfinance as drawer, andInsular Bank of Asia and America as drawee, in thetotal amount of P304,533.33.

On 13 March 1981, petitioner sought to encash thepostdated checks issued by Philfinance. However,the checks were dishonored for having been drawn

against insufficient funds.

On 26 March 1981, Philfinance delivered to petitionerthe DCR No. 10805 issued by private respondent

Pilipinas Bank ("Pilipinas"). It reads as follows:

PILIPINAS BANK Makati Stock ExchangeBldg.,Ayala Avenue, Makati, Metro Manila

February 9, 1981 VALUE DATETO Raul Sesbreo

April 6, 1981 MATURITY DATENO. 10805

DENOMINATED CUSTODIAN RECEIPT

This confirms that as a duly Custodian Bank, andupon instruction of PHILIPPINE UNDERWRITESFINANCE CORPORATION, we have in our custodythe following securities to you [sic] the extent herein

indicated.

SERIAL MAT. FACE ISSUED REGISTERED


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AMOUNT NUMBER DATE VALUE BY HOLDERPAYEE

2731 4-6-81 2,300,833.34 DMC PHIL.

307,933.33 UNDERWRITERS FINANCE CORP.We further certify that these securities may beinspected by you or your duly authorizedrepresentative at any time during regular bankinghours.

Upon your written instructions we shall undertakephysical delivery of the above securities fully

assigned to you should this DenominatedCustodianship Receipt remain outstanding in yourfavor thirty (30) days after its maturity.

PILIPINAS BANK (By Elizabeth De Villa IllegibleSignature)

1

On 2 April 1981, petitioner approached Ms. Elizabeth

de Villa of private respondent Pilipinas, MakatiBranch, and handed her a demand letter informingthe bank that his placement with Philfinance in the

amount reflected in the DCR No. 10805 hadremained unpaid and outstanding, and that he ineffect was asking for the physical delivery of theunderlying promissory note. Petitioner then examined

the original of the DMC PN No. 2731 and found: thatthe security had been issued on 10 April 1980; that itwould mature on 6 April 1981; that it had a face valueof P2,300,833.33, with the Philfinance as "payee"and private respondent Delta Motors Corporation("Delta") as "maker;" and that on face of thepromissory note was stamped "NON NEGOTIABLE."Pilipinas did not deliver the Note, nor any certificateof participation in respect thereof, to petitioner.

Petitioner later made similar demand letters, dated 3July 1981 and 3 August 1981, 2 again asking privaterespondent Pilipinas for physical delivery of theoriginal of DMC PN No. 2731. Pilipinas allegedlyreferred all of petitioner's demand letters toPhilfinance for written instructions, as has beensupposedly agreed upon in "Securities Custodianship

Agreement" between Pilipinas and Philfinance.

Philfinance did not provide the appropriateinstructions; Pilipinas never released DMC PN No.2731, nor any other instrument in respect thereof, to


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petitioner.

Petitioner also made a written demand on 14 July1981 3 upon private respondent Delta for the partial

satisfaction of DMC PN No. 2731, explaining thatPhilfinance, as payee thereof, had assigned to himsaid Note to the extent of P307,933.33. Delta,however, denied any liability to petitioner on thepromissory note, and explained in turn that it hadpreviously agreed with Philfinance to offset its DMCPN No. 2731 (along with DMC PN No. 2730) againstPhilfinance PN No. 143-A issued in favor of Delta.

In the meantime, Philfinance, on 18 June 1981, wasplaced under the joint management of the Securitiesand exchange commission ("SEC") and the CentralBank. Pilipinas delivered to the SEC DMC PN No.2731, which to date apparently remains in thecustody of the SEC. 4

As petitioner had failed to collect his investment andinterest thereon, he filed on 28 September 1982 anaction for damages with the Regional Trial Court("RTC") of Cebu City, Branch 21, against privaterespondents Delta and Pilipinas. 5 The trial court, in adecision dated 5 August 1987, dismissed the

complaint and counterclaims for lack of merit and forlack of cause of action, with costs against petitioner.

Petitioner appealed to respondent Court of Appeals

in C.A.-G.R. CV No. 15195. In a Decision dated 21March 1989, the Court of Appeals denied the appealand held: 6

Be that as it may, from the evidence on record, ifthere is anyone that appears liable for the travails ofplaintiff-appellant, it is Philfinance. As correctlyobserved by the trial court:

This act of Philfinance in accepting the investment ofplaintiff and charging it against DMC PN No. 2731when its entire face value was already obligated orearmarked for set-off or compensation is difficult tocomprehend and may have been motivated with badfaith. Philfinance, therefore, is solely and legallyobligated to return the investment of plaintiff, togetherwith its earnings, and to answer all the damagesplaintiff has suffered incident thereto. Unfortunatelyfor plaintiff, Philfinance was not impleaded as one ofthe defendants in this case at bar; hence, this Courtis without jurisdiction to pronounce judgementagainst it. (p. 11, Decision)


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WHEREFORE, finding no reversible error in thedecision appealed from, the same is hereby affirmedin toto. Cost against plaintiff-appellant.

Petitioner moved for reconsideration of the aboveDecision, without success.

Hence, this Petition for Review on Certiorari.

After consideration of the allegations contained andissues raised in the pleadings, the Court resolved togive due course to the petition and required theparties to file their respective memoranda. 7

Petitioner reiterates the assignment of errors hedirected at the trial court decision, and contends thatrespondent court of Appeals gravely erred: (i) inconcluding that he cannot recover from privaterespondent Delta his assigned portion of DMC PNNo. 2731; (ii) in failing to hold private respondentPilipinas solidarily liable on the DMC PN No. 2731 inview of the provisions stipulated in DCR No. 10805issued in favor r of petitioner, and (iii) in refusing topierce the veil of corporate entity betweenPhilfinance, and private respondents Delta andPilipinas, considering that the three (3) entities

belong to the "Silverio Group of Companies" underthe leadership of Mr. Ricardo Silverio, Sr. 8

There are at least two (2) sets of relationships which

we need to address: firstly, the relationship ofpetitionervis-a-vis Delta; secondly, the relationship ofpetitioner in respect of Pilipinas. Actually, of course,there is a third relationship that is of criticalimportance: the relationship of petitioner andPhilfinance. However, since Philfinance has not beenimpleaded in this case, neither the trial court nor theCourt of Appeals acquired jurisdiction over theperson of Philfinance. It is, consequently, not

necessary for present purposes to deal with this thirdrelationship, except to the extent it necessarilyimpinges upon or intersects the first and secondrelationships.

I.

We consider first the relationship between petitionerand Delta.

The Court of appeals in effect held that petitioneracquired no rights vis-a-vis Delta in respect of theDelta promissory note (DMC PN No. 2731) which


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Philfinance sold "without recourse" to petitioner, tothe extent of P304,533.33. The Court of Appeals saidon this point:

Nor could plaintiff-appellant have acquired any right overDMC PN No. 2731 as the same is "non-negotiable" asstamped on its face (Exhibit "6"), negotiation beingdefined as the transfer of an instrument from one personto another so as to constitute the transferee the holder ofthe instrument (Sec. 30, Negotiable Instruments Law). Aperson not a holder cannot sue on the instrument in hisown name and cannot demand or receive payment(Section 51, id.) 9

Petitioner admits that DMC PN No. 2731 was non-negotiable but contends that the Note had beenvalidly transferred, in part to him by assignment andthat as a result of such transfer, Delta as debtor-maker of the Note, was obligated to pay petitionerthe portion of that Note assigned to him by the payeePhilfinance.

Delta, however, disputes petitioner's contention and

argues:

(1) that DMC PN No. 2731 was not intended to benegotiated or otherwise transferred by Philfinance as

manifested by the word "non-negotiable" stamp acrossthe face of the Note 10 and because maker Delta andpayee Philfinance intended that this Note would be offsetagainst the outstanding obligation of Philfinance

represented by Philfinance PN No. 143-A issued to Deltaas payee;

(2) that the assignment of DMC PN No. 2731 byPhilfinance was without Delta's consent, if notagainst its instructions; and

(3) assuming (arguendo only) that the partial assignmentin favor of petitioner was valid, petitioner took the Notesubject to the defenses available to Delta, in particular,

the offsetting of DMC PN No. 2731 against PhilfinancePN No. 143-A. 11

We consider Delta's arguments seriatim.

Firstly, it is important to bear in mind that thenegotiation of a negotiable instrument must bedistinguished from the assignmentor transfer of aninstrument whether that be negotiable or non-

negotiable. Only an instrument qualifying as anegotiable instrument under the relevant statute maybe negotiatedeither by indorsement thereof coupledwith delivery, or by delivery alone where the


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negotiable instrument is in bearer form. A negotiableinstrument may, however, instead of beingnegotiated, also be assigned or transferred. Thelegal consequences of negotiation as distinguished

from assignment of a negotiable instrument are, ofcourse, different. A non-negotiable instrument may,obviously, not be negotiated; but it may be assignedor transferred, absent an express prohibition againstassignment or transfer written in the face of theinstrument:

The words "not negotiable,"stamped on the face of thebill of lading, did not destroy its assignability, but the sole

effect was to exempt the bill from the statutory provisionsrelative thereto, and a bill, though not negotiable, may betransferred by assignment; the assignee taking subject tothe equities between the original parties. 12 (Emphasisadded)

DMC PN No. 2731, while marked "non-negotiable,"was notat the same time stamped "non-transferable"or "non-assignable." It contained no stipulation whichprohibited Philfinance from assigning or transferring,

in whole or in part, that Note.

Delta adduced the "Letter of Agreement" which it had

entered into with Philfinance and which should bequoted in full:

April 10, 1980

Philippine Underwriters Finance Corp. BenavidezSt., Makati, Metro Manila.

Attention: Mr. Alfredo O. Banaria SVP-TreasurerGENTLEMEN:

This refers to our outstanding placement of

P4,601,666.67 as evidenced by your PromissoryNote No. 143-A, dated April 10, 1980, to mature on

April 6, 1981.

As agreed upon, we enclose our non-negotiablePromissory Note No. 2730 and 2731 forP2,000,000.00 each, dated April 10, 1980, to beoffsetted [sic] against your PN No. 143-A upon co-terminal maturity.

Please deliver the proceeds of our PNs to ourrepresentative, Mr. Eric Castillo.


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Very Truly Yours,

(Sgd.) Florencio B. Biagan Senior Vice President13

We find nothing in his "Letter of Agreement" whichcan be reasonably construed as a prohibition uponPhilfinance assigning or transferring all or part ofDMC PN No. 2731, before the maturity thereof. It isscarcely necessary to add that, even had this "Letterof Agreement" set forth an explicit prohibition oftransfer upon Philfinance, such a prohibition cannot

be invoked against an assignee or transferee of theNote who parted with valuable consideration in goodfaith and without notice of such prohibition. It is notdisputed that petitioner was such an assignee ortransferee. Our conclusion on this point is reinforcedby the fact that what Philfinance and Delta weredoing by their exchange of their promissory noteswas this: Delta invested, by making a money marketplacement with Philfinance, approximatelyP4,600,000.00 on 10 April 1980; but promptly, on thesame day, borrowed back the bulk of that placement,i.e., P4,000,000.00, by issuing its two (2) promissorynotes: DMC PN No. 2730 and DMC PN No. 2731,

both also dated 10 April 1980. Thus, Philfinance wasleft with not P4,600,000.00 but only P600,000.00 incash and the two (2) Delta promissory notes.

Apropos Delta's complaint that the partial assignmentby Philfinance of DMC PN No. 2731 had beeneffected without the consent of Delta, we note thatsuch consent was not necessary for the validity andenforceability of the assignment in favor of petitioner. 14 Delta's argument that Philfinance's sale orassignment of part of its rights to DMC PN No. 2731constituted conventional subrogation, which requiredits (Delta's) consent, is quite mistaken. Conventional

subrogation, which in the first place is never lightlyinferred, 15 must be clearly established by theunequivocal terms of the substituting obligation or bythe evident incompatibility of the new and oldobligations on every point. 16 Nothing of the sort ispresent in the instant case.

It is in fact difficult to be impressed with Delta'scomplaint, since it released its DMC PN No. 2731 to

Philfinance, an entity engaged in the business ofbuying and selling debt instruments and othersecurities, and more generally, in money markettransactions. In Perez v. Court of Appeals, 17 the


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Court, speaking through Mme. Justice Herrera, madethe following important statement:

There is another aspect to this case. What is

involved here is a money market transaction. Asdefined by Lawrence Smith "the money market is amarket dealing in standardized short-term creditinstruments (involving large amounts) where lendersand borrowers do not deal directly with each otherbut through a middle manor a dealer in the openmarket." It involves "commercial papers" which areinstruments "evidencing indebtness of any person orentity. . ., which are issued, endorsed, sold or

transferred or in any manner conveyed to anotherperson or entity, with or without recourse". Thefundamental function of the money market device inits operation is to match and bring together in a mostimpersonal manner both the "fund users" and the"fund suppliers." The money market is an"impersonal market", free from personalconsiderations. "The market mechanism is intendedto provide quick mobility of money and securities."

The impersonal character of the money marketdevice overlooks the individuals or entitiesconcerned. The issuer of a commercial paper in the

money market necessarily knows in advance that itwould be expenditiously transacted and transferredto any investor/lender without need of notice to saidissuer. In practice, no notification is given to the

borrower or issuer of commercial paper of the sale ortransfer to the investor.

xxx xxx xxx

There is need to individuate a money market transaction,a relatively novel institution in the Philippine commercialscene. It has been intended to facilitate the flow andacquisition of capital on an impersonal basis. And asspecifically required by Presidential Decree No. 678, theinvesting public must be given adequate and effective

protection in availing of the credit of a borrower in thecommercial paper market. 18 (Citations omitted; emphasissupplied)

We turn to Delta's arguments concerning allegedcompensation or offsetting between DMC PN No.2731 and Philfinance PN No. 143-A. It is important tonote that at the time Philfinance sold part of its rights

under DMC PN No. 2731 to petitioner on 9 February1981, no compensation had as yet taken place andindeed none could have taken place. The essential


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requirements of compensation are listed in the CivilCode as follows:

Art. 1279. In order that compensation may be proper,

it is necessary:

(1) That each one of the obligors be boundprincipally, and that he be at the same time aprincipal creditor of the other;

(2) That both debts consists in a sum of money, or ifthe things due are consumable, they be of the samekind, and also of the same quality if the latter has

been stated;

(3) That the two debts are due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retentionor controversy, commenced by third persons andcommunicated in due time to the debtor. (Emphasissupplied)

On 9 February 1981, neither DMC PN No. 2731 norPhilfinance PN No. 143-A was due. This was

explicitly recognized by Delta in its 10 April 1980"Letter of Agreement" with Philfinance, where Deltaacknowledged that the relevant promissory noteswere "to be offsetted (sic) against [Philfinance] PN

No. 143-A upon co-terminal maturity."

As noted, the assignment to petitioner was made on9 February 1981 or from forty-nine (49) days beforethe "co-terminal maturity" date, that is to say, beforeany compensation had taken place. Further, theassignment to petitioner would have preventedcompensation had taken place between Philfinanceand Delta, to the extent of P304,533.33, because

upon execution of the assignment in favor ofpetitioner, Philfinance and Delta would have ceasedto be creditors and debtors of each other in their ownright to the extent of the amount assigned byPhilfinance to petitioner. Thus, we conclude that theassignment effected by Philfinance in favor ofpetitioner was a valid one and that petitioneraccordingly became owner of DMC PN No. 2731 tothe extent of the portion thereof assigned to him.

The record shows, however, that petitioner notifiedDelta of the fact of the assignment to him only on 14July 1981, 19 that is, after the maturity not only of the


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money market placement made by petitioner but alsoof both DMC PN No. 2731 and Philfinance PN No.143-A. In other words, petitioner notified Delta of hisrights as assignee after compensation had taken

place by operation of law because the offsettinginstruments had both reached maturity. It is a firmlysettled doctrine that the rights of an assignee are notany greater that the rights of the assignor, since theassignee is merely substituted in the place of theassignor20 and that the assignee acquires his rightssubject to the equities i.e., the defenses whichthe debtor could have set up against the originalassignor before notice of the assignment was given

to the debtor. Article 1285 of the Civil Code providesthat:

Art. 1285. The debtor who has consented to theassignment of rights made by a creditor in favor of athird person, cannot set up against the assignee thecompensation which would pertain to him against theassignor, unless the assignor was notified by thedebtor at the time he gave his consent, that he

reserved his right to the compensation.

If the creditor communicated the cession to him butthe debtor did not consentthereto, the lattermay set

up the compensation of debts previous to thecession, but not of subsequent ones.

If the assignment is made without the knowledge of

the debtor, he may set up the compensation of allcredits prior to the same and also later ones until hehad knowledge of the assignment. (Emphasissupplied)

Article 1626 of the same code states that: "the debtorwho, before having knowledge of the assignment,pays his creditor shall be released from theobligation." In Sison v. Yap-Tico, 21 the Court

explained that:

[n]o man is bound to remain a debtor; he may pay to himwith whom he contacted to pay; and if he pay beforenotice that his debt has been assigned, the law holds himexonerated, for the reason that it is the duty of the personwho has acquired a title by transfer to demand paymentof the debt, to give his debt or notice. 22

At the time that Delta was first put to notice of the

assignment in petitioner's favor on 14 July 1981,DMC PN No. 2731 had already been discharged bycompensation. Since the assignor Philfinance could


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not have then compelled payment anew by Delta ofDMC PN No. 2731, petitioner, as assignee ofPhilfinance, is similarly disabled from collecting fromDelta the portion of the Note assigned to him.

It bears some emphasis that petitioner could havenotified Delta of the assignment or sale was effectedon 9 February 1981. He could have notified Delta assoon as his money market placement matured on 13March 1981 without payment thereof being made byPhilfinance; at that time, compensation had yet to setin and discharge DMC PN No. 2731. Again petitionercould have notified Delta on 26 March 1981 when

petitioner received from Philfinance the DenominatedCustodianship Receipt ("DCR") No. 10805 issued byprivate respondent Pilipinas in favor of petitioner.Petitioner could, in fine, have notified Delta at anytime before the maturity date of DMC PN No. 2731.Because petitioner failed to do so, and because therecord is bare of any indication that Philfinance haditself notified Delta of the assignment to petitioner,the Court is compelled to uphold the defense of

compensation raised by private respondent Delta. Ofcourse, Philfinance remains liable to petitioner underthe terms of the assignment made by Philfinance to

petitioner.

II.

We turn now to the relationship between petitionerand private respondent Pilipinas. Petitioner contendsthat Pilipinas became solidarily liable with Philfinanceand Delta when Pilipinas issued DCR No. 10805 withthe following words:

Upon your written instruction, we [Pilipinas] shallundertake physical delivery of the above securities fullyassigned to you. 23

The Court is not persuaded. We find nothing in theDCR that establishes an obligation on the part ofPilipinas to pay petitioner the amount of P307,933.33nor any assumption of liability in solidum withPhilfinance and Delta under DMC PN No. 2731. Weread the DCR as a confirmation on the part ofPilipinas that:

(1) it has in its custody, as duly constituted custodian

bank, DMC PN No. 2731 of a certain face value, tomature on 6 April 1981 and payable to the order ofPhilfinance;


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(2) Pilipinas was, from and after said date of theassignment by Philfinance to petitioner (9 February1981), holding that Note on behalf and for the benefit of

petitioner, at least to the extent it had been assigned to

petitioner by payee Philfinance;24

(3) petitioner may inspect the Note either "personallyor by authorized representative", at any time duringregular bank hours; and

(4) upon written instructions of petitioner, Pilipinaswould physically deliver the DMC PN No. 2731 (or aparticipation therein to the extent of P307,933.33)"should this Denominated Custodianship receipt

remain outstanding in [petitioner's] favor thirty (30)days after its maturity."

Thus, we find nothing written in printers ink on theDCR which could reasonably be read as convertingPilipinas into an obligor under the terms of DMC PNNo. 2731 assigned to petitioner, either upon maturitythereof or any other time. We note that both in hiscomplaint and in his testimony before the trial court,

petitioner referred merely to the obligation of privaterespondent Pilipinas to effect the physical delivery tohim of DMC PN No. 2731. 25 Accordingly, petitioner's

theory that Pilipinas had assumed a solidaryobligation to pay the amount represented by aportion of the Note assigned to him by Philfinance,appears to be a new theory constructed only after the

trial court had ruled against him. The solidary liabilitythat petitioner seeks to impute Pilipinas cannot,however, be lightly inferred. Under article 1207 of theCivil Code, "there is a solidary liability only when thelaw or the nature of the obligation requires solidarity,"The record here exhibits no express assumption ofsolidary liability vis-a-vis petitioner, on the part ofPilipinas. Petitioner has not pointed to us to any lawwhich imposed such liability upon Pilipinas nor has

petitioner argued that the very nature of thecustodianship assumed by private respondentPilipinas necessarily implies solidary liability underthe securities, custody of which was taken byPilipinas. Accordingly, we are unable to hold Pilipinassolidarily liable with Philfinance and privaterespondent Delta under DMC PN No. 2731.

We do not, however, mean to suggest that Pilipinas

has no responsibility and liability in respect ofpetitioner under the terms of the DCR. To thecontrary, we find, after prolonged analysis and


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deliberation, that private respondent Pilipinas hadbreached its undertaking under the DCR to petitionerSesbreo.

We believe and so hold that a contract of depositwas constituted by the act of Philfinance indesignating Pilipinas as custodian or depositarybank. The depositor was initially Philfinance; theobligation of the depository was owed, however, topetitioner Sesbreo as beneficiary of thecustodianship or depository agreement. We do notconsider that this is a simple case of a stipulation pour autri. The custodianship or depositary

agreement was established as an integral part of themoney market transaction entered into by petitionerwith Philfinance. Petitioner bought a portion of DMCPN No. 2731; Philfinance as assignor-vendordeposited that Note with Pilipinas in order that thething sold would be placed outside the control of thevendor. Indeed, the constituting of the depositary orcustodianship agreement was equivalent toconstructive delivery of the Note (to the extent it had

been sold or assigned to petitioner) to petitioner. Itwill be seen that custodianship agreements aredesigned to facilitate transactions in the money

market by providing a basis for confidence on thepart of the investors or placers that the instrumentsbought by them are effectively taken out of thepocket, as it were, of the vendors and placed safely

beyond their reach, that those instruments will bethere available to the placers of funds should theyhave need of them. The depositary in a contract ofdeposit is obliged to return the security or the thingdeposited upon demand of the depositor (or, in thepresented case, of the beneficiary) of the contract,even though a term for such return may have beenestablished in the said contract. 26 Accordingly, anystipulation in the contract of deposit or custodianship

that runs counter to the fundamental purpose of thatagreement or which was not brought to the notice ofand accepted by the placer-beneficiary, cannot beenforced as against such beneficiary-placer.

We believe that the position taken above issupported by considerations of public policy. If thereis any party that needs the equalizing protection ofthe law in money market transactions, it is the

members of the general public whom place theirsavings in such market for the purpose of generatinginterest revenues. 27 The custodian bank, if it is not


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related either in terms of equity ownership ormanagement control to the borrower of the funds, orthe commercial paper dealer, is normally a preferredor traditional banker of such borrower or dealer

(here, Philfinance). The custodian bank would haveevery incentive to protect the interest of its client theborrower or dealer as against the placer of funds.The providers of such funds must be safeguardedfrom the impact of stipulations privately madebetween the borrowers or dealers and the custodianbanks, and disclosed to fund-providers only aftertrouble has erupted.

In the case at bar, the custodian-depositary bankPilipinas refused to deliver the security depositedwith it when petitioner first demanded physicaldelivery thereof on 2 April 1981. We must again note,in this connection, that on 2 April 1981, DMC PN No.2731 had not yet matured and therefore,compensation or offsetting against Philfinance PNNo. 143-A had not yet taken place. Instead ofcomplying with the demand of the petitioner, Pilipinaspurported to require and await the instructions ofPhilfinance, in obvious contravention of itsundertaking under the DCR to effect physical delivery

of the Note upon receipt of "written instructions" frompetitioner Sesbreo. The ostensible term written intothe DCR (i.e., "should this [DCR] remain outstandingin your favor thirty [30] days after its maturity") was

not a defense against petitioner's demand forphysical surrender of the Note on at least threegrounds: firstly, such term was never brought to theattention of petitioner Sesbreo at the time themoney market placement with Philfinance was made;secondly, such term runs counter to the very purposeof the custodianship or depositary agreement as anintegral part of a money market transaction; andthirdly, it is inconsistent with the provisions of Article

1988 of the Civil Code noted above. Indeed, inprinciple, petitioner became entitled to demandphysical delivery of the Note held by Pilipinas assoon as petitioner's money market placementmatured on 13 March 1981 without payment fromPhilfinance.

We conclude, therefore, that private respondentPilipinas must respond to petitioner for damagessustained by arising out of its breach of duty. Byfailing to deliver the Note to the petitioner asdepositor-beneficiary of the thing deposited, Pilipinas


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effectively and unlawfully deprived petitioner of theNote deposited with it. Whether or not Pilipinas itselfbenefitted from such conversion or unlawfuldeprivation inflicted upon petitioner, is of no moment

for present purposes. Prima facie, the damagessuffered by petitioner consisted of P304,533.33, theportion of the DMC PN No. 2731 assigned topetitioner but lost by him by reason of discharge ofthe Note by compensation, plus legal interest of sixpercent (6%) per annum containing from 14 March1981.

The conclusion we have reached is, of course,

without prejudice to such right of reimbursement asPilipinas may have vis-a-vis Philfinance.

III.

The third principal contention of petitioner thatPhilfinance and private respondents Delta andPilipinas should be treated as one corporate entity need not detain us for long.

In the first place, as already noted, jurisdiction overthe person of Philfinance was never acquired eitherby the trial court nor by the respondent Court of

Appeals. Petitioner similarly did not seek to impleadPhilfinance in the Petition before us.

Secondly, it is not disputed that Philfinance and

private respondents Delta and Pilipinas have beenorganized as separate corporate entities. Petitionerasks us to pierce their separate corporate entities,but has been able only to cite the presence of acommon Director Mr. Ricardo Silverio, Sr., sittingon the Board of Directors of all three (3) companies.Petitioner has neither alleged nor proved that one oranother of the three (3) concededly relatedcompanies used the other two (2) as mere alter egos

or that the corporate affairs of the other two (2) wereadministered and managed for the benefit of one.There is simply not enough evidence of record to

justify disregarding the separate corporatepersonalities of delta and Pilipinas and to hold themliable for any assumed or undetermined liability ofPhilfinance to petitioner. 28

WHEREFORE, for all the foregoing, the Decision andResolution of the Court of Appeals in C.A.-G.R. CVNo. 15195 dated 21 march 1989 and 17 July 1989,respectively, are hereby MODIFIED and SET ASIDE,to the extent that such Decision and Resolution had


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dismissed petitioner's complaint against PilipinasBank. Private respondent Pilipinas bank is herebyORDERED to indemnify petitioner for damages in theamount of P304,533.33, plus legal interest thereon at

the rate of six percent (6%) per annum counted from2 April 1981. As so modified, the Decision andResolution of the Court of Appeals are hereby

AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Bidin, Davide, Jr., Romero and Melo, JJ., concur.


SECOND DIVISION

G.R. No. 113236 March 5, 2001

FIRESTONE TIRE & RUBBER COMPANY OF THEPHILIPPINES, petitioner, vs. COURT OFAPPEALS and LUZON DEVELOPMENT BANK,respondents.

QUISUMBING, J.:

This petition assails the decision 1 dated December29, 1993 of the Court of Appeals in CA-G.R. CV No.29546, which affirmed the judgment 2 of theRegional Trial Court of Pasay City, Branch 113 inCivil Case No. PQ-7854-P, dismissing Firestone'scomplaint for damages.

The facts of this case, adopted by the CA and basedon findings by the trial court, are as follows:

. . . [D]efendant is a banking corporation. It operatesunder a certificate of authority issued by the Central


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Bank of the Philippines, and among its activities,accepts savings and time deposits. Said defendanthad as one of its client-depositors the Fojas-ArcaEnterprises Company ("Fojas-Arca" for brevity).

Fojas-Arca maintaining a special savings accountwith the defendant, the latter authorized and allowedwithdrawals of funds therefrom through the mediumof special withdrawal slips. These are supplied by thedefendant to Fojas-Arca.

In January 1978, plaintiff and Fojas-Arca entered intoa "Franchised Dealership Agreement" (Exh. B)whereby Fojas-Arca has the privilege to purchase on

credit and sell plaintiff's products.

On January 14, 1978 up to May 15, 1978. Pursuantto the aforesaid Agreement, Fojas-Arca purchasedon credit Firestone products from plaintiff with a totalamount of P4,896,000.00. In payment of thesepurchases, Fojas-Arca delivered to plaintiff six (6)special withdrawal slips drawn upon the defendant.In turn, these were deposited by the plaintiff with itscurrent account with the Citibank. All of them were

honored and paid by the defendant. This singularcircumstance made plaintiff believe [sic] and relied[sic] on the fact that the succeeding special

withdrawal slips drawn upon the defendant would beequally sufficiently funded. Relying on suchconfidence and belief and as a direct consequencethereof, plaintiff extended to Fojas-Arca other

purchases on credit of its products.

On the following dates Fojas-Arca purchasedFirestone products on credit (Exh. M, I, J, K) anddelivered to plaintiff the corresponding specialwithdrawal slips in payment thereof drawn upon thedefendant, to wit:

DATEWITHDRAWAL

SLIP NO.AMOUNT

June 15, 1978 42127 P1,198,092.80

July 15, 1978 42128 940,190.00

Aug. 15, 1978 42129 880,000.00

Sep. 15, 1978 42130 981,500.00

These were likewise deposited by plaintiff in itscurrent account with Citibank and in turn the Citibankforwarded it [sic] to the defendant for payment and


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collection, as it had done in respect of the previousspecial withdrawal slips. Out of these four (4)withdrawal slips only withdrawal slip No. 42130 in theamount of P981,500.00 was honored and paid by the

defendant in October 1978. Because of the absencefor a long period coupled with the fact that defendanthonored and paid withdrawal slips No. 42128 datedJuly 15, 1978, in the amount of P981,500.00plaintiff's belief was all the more strengthened thatthe other withdrawal slips were likewise sufficientlyfunded, and that it had received full value andpayment of Fojas-Arca's credit purchased thenoutstanding at the time. On this basis, plaintiff was

induced to continue extending to Fojas-Arca furtherpurchase on credit of its products as per agreement(Exh. "B").

However, on December 14, 1978, plaintiff wasinformed by Citibank that special withdrawal slips No.42127 dated June 15, 1978 for P1,198,092.80 andNo. 42129 dated August 15, 1978 for P880,000.00were dishonored and not paid for the reason 'NO

ARRANGEMENT.' As a consequence, the Citibankdebited plaintiff's account for the total sum ofP2,078,092.80 representing the aggregate amount of

the above-two special withdrawal slips. Under suchsituation, plaintiff averred that the pecuniary losses itsuffered is caused by and directly attributable todefendant's gross negligence.

On September 25, 1979, counsel of plaintiff served awritten demand upon the defendant for thesatisfaction of the damages suffered by it. And due todefendant's refusal to pay plaintiff's claim, plaintiffhas been constrained to file this complaint, therebycompelling plaintiff to incur litigation expenses andattorney's fees which amount are recoverable fromthe defendant.

Controverting the foregoing asseverations of plaintiff,defendant asserted, inter alia that the transactionsmentioned by plaintiff are that of plaintiff and Fojas-

Arca only, [in] which defendant is not involved;Vehemently, it was denied by defendant that thespecial withdrawal slips were honored and treated asif it were checks, the truth being that when thespecial withdrawal slips were received by d

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