GSIS vs CA

Government Service Insurance System v. Court of Appeals

170 SCRA 533, 
February 23, 1989

Facts:

Private respondents, Mr. and Mrs. Isabelo R. Racho, together with spouses Mr. and Mrs
Flaviano Lagasca, executed a deed of mortgage, dated November 13, 1957, in favor of
petitioner GSIS and subsequently, another deed of mortgage, dated April 14, 1958, in
connection with two loans granted by the latter in the sums of P 11,500.00 and P
3,000.00, respectively. A parcel of land covered by Transfer Certificate of Title No.
38989 of the Register of Deed of Quezon City, co-owned by said mortgagor spouses,
was given as security under the two deeds. They also executed a 'promissory note".

On July 11, 1961, the Lagasca spouses executed an instrument denominated

"Assumption of Mortgage," obligating themselves to assume the said obligation to the
GSIS and to secure the release of the mortgage covering that portion of the land
belonging to spouses Racho and which was mortgaged to the GSIS. This undertaking
was not fulfilled. 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.

For more than two years, the spouses Racho filed a complaint against the spouses
Lagasca praying that the extrajudicial 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.

The trial court rendered judgment on February 25, 1968 dismissing the complaint for
failure to establish a cause of action. However, said decision was reversed by the
respondent Court of Appeals, stating that, although formally they are co-mortgagors, 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 were
solely for the benefit of the appellant Lagasca spouses who alone applied for the loan.

Issues:

Whether the respondent court erred in annulling the mortgage as it affected the share of
private respondents in the reconveyance of their property?

Whether private respondents benefited from the loan, the mortgage and the extrajudicial
foreclosure proceedings are valid? 

Held:
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 of indorser without receiving value
therefor, but is held liable on the instrument to a holder for value although the latter
knew him to be only an accommodation party. 

The promissory note, as well as the mortgage deeds subject of this case, are clearly not
negotiable instruments. These documents do not comply with the 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 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.

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. 

The respondent court, 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.

Federal Express Corp. v. Antonino

FACTS:
Eliza was the owner of Unit 22-A in Allegro Condominium, located at New York, United
States. In November 2003, monthly common charges on the Unit became due for the
period of July 2003 to November 2003, and were for a total amount of US$9,742.81. On
December 15, 2003, while Luwalhati and Eliza were in the Philippines they decided to
send several Citibank checks, amounting to US$17,726.18 for the payment of monthly
charges and US$11,619.35 for the payment of real estate taxes to Veronica Z. Sison,
who was based in New York and such were sent by Luwalhati through FedEx. The
package was addressed to Sison who was tasked to deliver the checks payable to
Maxwell- Kates, Inc. and to the New York County Department of Finance. Sison
allegedly did not receive the package, resulting in the non-payment of Luwalhati and
Eliza’s obligations and the foreclosure of the Unit. Upon learning that the checks were
sent on December 15, 2003, Sison contacted FedEx to inquire about the non-delivery.
She was informed that the package was delivered to her neighbor but there was no
signed receipt. On March 14, 2004, Luwalhati and Eliza sent a demand letter to FedEx
for payment of damages due to the non-delivery of the package, but FedEx refused to
heed their demand. Hence, on April 5, 2004, they filed their Complaint for damages. As
for FedEx defenses, it claimed that Luwalhati and Eliza “had no cause of action against
it because they failed to comply with a condition precedent, that of filing a written notice
of claim within the 45 calendar days from the acceptance of the shipment.” It added that
it was absolved of liability as Luwalhati and Eliza shipped prohibited items and
misdeclared these items as “documents.” It pointed to conditions under its Air Waybill
prohibiting the “transportation of money”. The Regional Trial Court ruled for Luwalhati
and Eliza. The Court of Appeals affirmed the ruling of the RTC.
ISSUE:
Whether or not petitioner Federal Express Corporation may be held liable for damages
on account of its failure to deliver the checks shipped by respondents Luwalhati R.
Antonino and Eliza Bettina Ricasa Antonino to the consignee Veronica Sison. 
RULING:
Yes.
VIOLATION OF THE TERMS OF THE AIRWAY BILL
Petitioner’s International Air Waybill states: Items Not Acceptable for Transportation. We
do not accept transportation of money (including but not limited to coins or negotiable
instruments equivalent to cash such as endorsed stocks and bonds). We exclude all
liability for shipments of such items accepted by mistake. xxx The prohibition has a
singular object: money. The additional phrase, enclosed as it is in parentheses, is not
the object of the prohibition, but merely a postscript to the word “money.” Moreover, its
introductory words “including but not limited to” signify that the items that follow are
illustrative examples; they are not qualifiers that are integral to or inseverable from
“money.” Money is “what is generally acceptable in exchange for goods.” Laws usually
define what can be considered as a generally acceptable medium of exchange. The
New Central Bank Act, defines legal tender as; “All notes and coins issued by the
Bangko Sentral shall be fully guaranteed by the Government of the Republic of the
Philippines and shall be legal tender in the Philippines for all debts, both public and
private. It is settled in jurisprudence that checks, being only negotiable instruments, are
only substitutes for money and are not legal tender; more so when the check has a
named payee and is not payable to bearer. The Air Waybill’s prohibition mentions
“negotiable instruments” only in the course of making an example. Thus, they are not
prohibited items themselves. Moreover, the illustrative example does not even pertain to
negotiable instruments per se but to “negotiable instruments equivalent to cash.” The
checks involved here are payable to specific payees, Maxwell-Kates, Inc. and the New
York County Department of Finance. Thus, they are order instruments. They are not
payable to their bearer, i.e., bearer instruments. Under the Negotiable Instruments Law,
aside from following the requisites as stated in Section 1, an order instrument requires
an indorsement from the payee or holder before it may be validly negotiated. A bearer
instrument, on the other hand, does not require an indorsement to be validly negotiated.
An order instrument, which has to be endorsed by the payee before it may be
negotiated, cannot be a negotiable instrument equivalent to cash. It is worth
emphasizing that the instruments given as further examples under the Air Waybill must
be endorsed to be considered equivalent to cash What this Court’s protracted
discussion reveals is that petitioner’s Air Waybill lends itself to a great deal of confusion.
The clarity of its terms leaves much to be desired. This lack of clarity can only militate
against petitioner’s cause. The contract between petitioner and respondents is a
contract of adhesion; it was prepared solely by petitioner for respondents to conform to.
Although not automatically void, any ambiguity in a contract of adhesion is construed
strictly against the party that prepared it. Accordingly, the prohibition against
transporting money must be restrictively construed against petitioner and liberally for
respondents. Viewed through this lens, with greater reason should respondents be
exculpated from liability for shipping documents or instruments, which are reasonably
understood as not being money, and for being unable to declare them as such.

Ubas, Sr. v. Chan

Facts: Petitioner alleged that respondent, “doing business under the name and style of
UNIMASTER,” was indebted to him in the amount of ₱1,500,000.00, representing the
price of boulders, sand, gravel, and other construction materials allegedly purchased by
respondent from him for the construction of the Macagtas Dam in Macagtas, Catarman,
Northern Samar. Further, he averred that respondent had issued three (3) bank checks,
payable to “CASH” in the amount of ₱500,000.00 but when petitioner presented the
subject checks for encashment, the same were dishonored due to a stop payment
order.
Respondent filed an Answer with Motion to Dismiss, seeking the dismissal of the case
on the following ground, among others: the complaint states no cause of action,
considering that the checks do not belong to him but to Unimasters Conglomeration,
Inc. (Unimasters).
The Regional Trial Court (RTC) ruled that petitioner had a cause of action against
respondent. At the outset, it observed that petitioner’s demand letter – which clearly
stated the serial numbers of the checks, including the dates and amounts thereof – was
not disputed by respondent.
The CA reversed and set aside the RTC’s ruling, dismissing petitioner’s complaint on
the ground of lack of cause of action. It held that respondent was not the proper party
defendant in the case, considering that the drawer of the subject checks was
Unimasters, which, as a corporate entity, has a separate and distinct personality from
respondent.
Issue: Whether or not the CA erred in dismissing petitioner’s complaint for lack of cause
of action.
 Rulings:
Yes, the CA erred in dismissing petitioner’s complaint for lack of cause of action.
Although the checks were under the account name of Unimasters, it should be
emphasized that the manner or mode of payment does not alter the nature of the
obligation. The source of obligation, as claimed by petitioner in this case, stems from his
contract with respondent. When they agreed upon the purchase of the construction
materials on credit for the amount of ₱1,500,000,00, the contract between them was
perfected. Therefore, even if corporate checks were issued for the payment of the
obligation, the fact remains that the juridical tie between the two (2) parties was already
established during the contract’s perfection stage and, thus, does not preclude the
creditor from proceeding against the debtor during the contract’s consummation stage.
That a privity of contract exists between petitioner and respondent is a conclusion amply
supported by the averments and evidence on record in this case. First, the Court
observes that petitioner was consistent in his account that he directly dealt with
respondent in his personal and not merely his representative capacity. Moreover, the
demand letter, which was admitted by respondent, was personally addressed to
respondent and not to Unimasters as represented by the latter. Also, petitioner
explained that he delivered the construction materials to respondent absent any written
agreement due to his trust on the latter.

Metropolitan Bank and Trust Company vs. Wilfred N. Chiok

(G.R. No. 172652; November 26, 2014)

Doctrine: While manager’s and cashier’s checks are still subject to clearing, they cannot
be countermanded for being drawn against a closed account, for being drawn against
insufficient funds, or for similar reasons such as a condition not appearing on the face of
the check.

Facts: On July 5, 1995, respondent Wilfred N. Chiok (Chiok) bought US$1,022,288.50

dollars from Gonzalo B. Nuguid (Nuguid) where Chiok deposited the three manager’s
checks (Asian Bank MC Nos. 025935 and 025939, and Metrobank CC No. 003380),
with an aggregate value of ₱26,068,350.00 in Nuguid’s account with petitioner Bank of
the Philippine Islands (BPI). Nuguid, however, failed to deliver the dollar equivalent of
the three checks as agreed upon, prompting Chiok to request that payment on the three
checks be stopped. On the following day, July 6, 1995, Chiok filed a Complaint for
damages with application for ex parte restraining order and/or preliminary injunction with
the Regional Trial Court (RTC) of Quezon City against the spouses Gonzalo and
Marinella Nuguid, and the depositary banks, Asian Bank and Metrobank. On July 25,
1995, the RTC issued an Order directing the issuance of a writ of preliminary prohibitory
injunction. When checks were presented for payment, Asian Bank refused to honor MC
Nos. 025935 and 025939 in deference to the TRO.

Issue: Whether or not payment of manager’s and cashier’s checks are subject to the
condition that the payee thereof should comply with his obligations to the purchaser of
the checks.

Held: No. A manager’s check, like a cashier’s check, is an order of the bank to pay,
drawn upon itself, committing in effect its total resources, integrity, and honor behind its
issuance. By its peculiar character and general use in commerce, a manager’s check or
a cashier’s check is regarded substantially to be as good as the money it represents.
While manager’s and cashier’s checks are still subject to clearing, they cannot be
countermanded for being drawn against a closed account, for being drawn against
insufficient funds, or for similar reasons such as a condition not appearing on the face of
the check. Long standing and accepted banking practices do not countenance the
countermanding of manager’s and cashier’s checks on the basis of a mere allegation of
failure of the payee to comply with its obligations towards the purchaser. Therefore,
when Nuguid failed to deliver the agreed amount to Chiok, the latter had a cause of
action against Nuguid to ask for the rescission of their contract; but, Chiok did not have
a cause of action against Metrobank and Global Bank that would allow him to rescind
the contracts of sale of the manager’s or cashier’s checks, which would have resulted in
the crediting of the amounts thereof back to his accounts.

National Marketing Corporation v. Federation of United NAMARCO

FACTS:
On November 16, 1959, the NAMARCO and the
FEDERATION entered into a Contract of Sale stipulating
among others that Two Hundred Thousand Pesos
(P200,000.00) be paid as part payment, and
FEDERATION deposits with the NAMARCO upon signing
of the items and/or merchandise a cash basis payment
upon delivery of the duly indorsed negotiable shipping
document covering the same. To insure payment of the
goods by the FEDERATION, the NAMARCO accepted
three domestic letters of credit which is an accepted draft
and duly executed trust receipt approved by the Philippine
National Bank.

Upon arrival of the goods in Manila in January,

1960, the NAMARCO billed FEDERATION Statement of
Account for P277,357.91, covering shipment of the 2,000 
cartons of PK Chewing Gums, 1,000 cartons of Juicy Fruit
Chewing Gums, and 500 cartons of Adams Chicklets;
Statement of Account of P135,891.32, covering shipment of
the 168 cartons of Blue Denims; and Statement of Account
of P197,824.12, covering shipment of the 183 bales of
Khaki Twill, or a total of P611,053.35. Subsequently, it was
received by FEDERATION on January 29, 1960. However,
on March 2, 1960 FEDERATION filed a complaint against
Namarco for undelivery of some items contained in the
contract of sale. FEDERATION refuses to pay
acknowledge the domestic letters of credit until full
delivery is done by NAMARCO.

ISSUE:
Should FEDERATION be obliged to pay the
amount of the merchandise even if there was still
incomplete delivery of items by NAMARCO?

RULING:
Yes. The right of the NAMARCO to the cost of the
goods existed upon delivery of the said goods to the
FEDERATION which, under the Contract of Sale, had to
pay for them. Therefore, the claim of the NAMARCO for
the cost of the goods delivered arose out of the failure of
the FEDERATION to pay for the said goods, and not out of
the refusal of the NAMARCO to deliver the other goods to
the FEDERATION. Furthermore, FEDERATION’s nonpayment
would result to it being unjustly enriched.
However, the lower court erred in imposing interest at the
legal rate on the amount due, "from date of delivery of the
merchandise", and not from extra-judicial demand. In the
absence of any stipulations on the matter, the rule is that
the obligor is considered in default only from the time the
obligee judicially or extra-judicially demands fulfillment of
the obligation and interest is recoverable only from the
time such demand is made. There being no stipulation as
to when the aforesaid payments were to be made, the
FEDERATION is therefore liable to pay interest at the legal
rate only from June 7, 1960, the date when NAMARCO
made the extra-judicial demand upon said party.

Fortunado vs ca

Fortunado v CA
G.R. No. 78556. April 25, 1991
Art. 1249 – Payment of debts in money shall be made in currency.
Facts:
·          RTC Quezon City awarded the petitioner Fortunado damages in Civil Case
against Angel Bautista.
·          Pursuant to the said judgment, Bautista levied upon two parcels of land
registered in her name.
·          But the second lot had already been purchased by National Steel Corporation
although not yet registered in its name.
·          After due notice, these lots were sold at public auction to the petitioners, and
registered in his name.
·          NSC filed with the trial court an urgent motion to redeem both lots, which was
opposed by the petitioner.
·          As the motion remained unresolved and the period of redemption would expire,
NSC issued to the sheriff PNB Check as the redemption price for the lot.
·          The sheriff acknowledged receipt of the check as redemption money for the two
parcels of land and issued a certificate of redemption in favor of NSC and Bautista.
·          The petitioner rejected the redemption by check because it was not legal tender
and was not intended for payment but merely for deposit.

Issue:
WoN Article 1249 of the New Civil Code does not apply to the payment of the
redemption price of property sold at public auction.

Held:
            Yes, the Court holds that Art. 1249 is inapplicable as it "deals with a mode of
extinction of debts" while the "right to redeem is not an obligation, nor is it intended to
discharge a pre-existing debt."
            In Javellana v. Mirasol, the Court declares that "a redemption of property sold
under execution is not rendered invalid by reason of the fact that the payment to the
sheriff for the purpose of redemption is effected by means of a check for the amount
due."
            Such ruling is applicable to the present controversy, stressing the liberality of the
courts in redemption cases. When a right of redemption is exercised, it is the policy of
the law to aid rather than to defeat the right of redemption. Hence, a payment by check
which is not legal tender is effective when the officer accepted such payment.
            Thus, the petition is denied.