CELY YANG, petitioner, vs. HON.

COURT OF APPEALS, PHILIPPINE COMMERCIAL INTERNATIONAL BANK, FAR EAST BANK & TRUST CO., EQUITABLE BANKING CORPORATION, PREM CHANDIRAMANI and FERNANDO DAVID, respondents. DECISION
QUISUMBING, J.:

For review on certiorari is the decision1[1] of the Court of Appeals, dated March 25, 1999, in CA-G.R. CV No. 52398, which affirmed with modification the joint decision of the Regional Trial Court (RTC) of Pasay City, Branch 117, dated July 4, 1995, in Civil Cases Nos. 54792[2] and 5492.3[3] The trial court dismissed the complaint against herein respondents Far East Bank & Trust Company (FEBTC), Equitable Banking Corporation (Equitable), and Philippine Commercial International Bank (PCIB) and ruled in favor of respondent Fernando David as to the proceeds of the two cashiers checks, including the earnings thereof pendente lite. Petitioner Cely Yang was ordered to pay David moral damages of P100,000.00 and attorneys fees also in the amount of P100,000.00. The facts of this case are not disputed, to wit: On or before December 22, 1987, petitioner Cely Yang and private respondent Prem Chandiramani entered into an agreement whereby the latter was to give Yang a PCIB managers check in the amount of P4.2 million in exchange for two (2) of Yangs managers checks, each in the amount of P2.087 million, both payable to the order of private respondent Fernando David. Yang and Chandiramani agreed that the difference of P26,000.00 in the exchange would be their profit to be divided equally between them. Yang and Chandiramani also further agreed that the former would secure from FEBTC a dollar draft in the amount of US$200,000.00, payable to PCIB FCDU Account No. 4195-01165-2, which Chandiramani would exchange for another dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of Hong Kong. Accordingly, on December 22, 1987, Yang procured the following:
a) Equitable Cashiers Check No. CCPS 14-009467 in the sum of P2,087,000.00, dated December 22, 1987, payable to the order of Fernando David; FEBTC Cashiers Check No. 287078, in the amount of P2,087,000.00, dated December 22, 1987, likewise payable to the order of Fernando David; and FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New York, in the

b) c)

amount of US$200,000.00, dated December 22, 1987, payable to PCIB FCDU Account No. 4195-01165-2.

At about one oclock in the afternoon of the same day, Yang gave the aforementioned cashiers checks and dollar drafts to her business associate, Albert Liong, to be delivered to Chandiramani by Liongs messenger, Danilo Ranigo. Ranigo was to meet Chandiramani at Philippine Trust Bank, Ayala Avenue, Makati City, Metro Manila where he would turn over Yangs cashiers checks and dollar draft to Chandiramani who, in turn, would deliver to Ranigo a PCIB managers check in the sum of P4.2 million and a Hang Seng Bank dollar draft for US$200,000.00 in exchange. Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the two cashiers checks and the dollar draft bought by petitioner. Ranigo reported the alleged loss of the checks and the dollar draft to Liong at half past four in the afternoon of December 22, 1987. Liong, in turn, informed Yang, and the loss was then reported to the police. It transpired, however, that the checks and the dollar draft were not lost, for Chandiramani was able to get hold of said instruments, without delivering the exchange consideration consisting of the PCIB managers check and the Hang Seng Bank dollar draft. At three oclock in the afternoon or some two (2) hours after Chandiramani and Ranigo were to meet in Makati City, Chandiramani delivered to respondent Fernando David at China Banking Corporation branch in San Fernando City, Pampanga, the following: (a) FEBTC Cashiers Check No. 287078, dated December 22, 1987, in the sum of P2.087 million; and (b) Equitable Cashiers Check No. CCPS 14-009467, dated December 22, 1987, also in the amount of P2.087 million. In exchange, Chandiramani got US$360,000.00 from David, which Chandiramani deposited in the savings account of his wife, Pushpa Chandiramani; and his mother, Rani Reynandas, who held FCDU Account No. 124 with the United Coconut Planters Bank branch in Greenhills, San Juan, Metro Manila. Chandiramani also deposited FEBTC Dollar Draft No. 4771, dated December 22, 1987, drawn upon the Chemical Bank, New York for US$200,000.00 in PCIB FCDU Account No. 4195-01165-2 on the same date. Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost. Both banks complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft No. 4771, thus enabling the holder of PCIB FCDU Account No. 419501165-2 to receive the amount of US$200,000.00. On December 28, 1987, herein petitioner Yang lodged a Complaint4[4] for injunction and damages against Equitable, Chandiramani, and David, with prayer for a temporary restraining order, with the Regional Trial Court of Pasay City. The Complaint was docketed as Civil Case No. 5479. The Complaint was subsequently amended to include a prayer for Equitable to return to Yang the amount of P2.087 million, with interest

thereon until fully paid.5[5] On January 12, 1988, Yang filed a separate case for injunction and damages, with prayer for a writ of preliminary injunction against FEBTC, PCIB, Chandiramani and David, with the RTC of Pasay City, docketed as Civil Case No. 5492. This complaint was later amended to include a prayer that defendants therein return to Yang the amount of P2.087 million, the value of FEBTC Dollar Draft No. 4771, with interest at 18% annually until fully paid.6[6] On February 9, 1988, upon the filing of a bond by Yang, the trial court issued a writ of preliminary injunction in Civil Case No. 5479. A writ of preliminary injunction was subsequently issued in Civil Case No. 5492 also. Meanwhile, herein respondent David moved for dismissal of the cases against him and for reconsideration of the Orders granting the writ of preliminary injunction, but these motions were denied. David then elevated the matter to the Court of Appeals in a special civil action for certiorari docketed as CA-G.R. SP No. 14843, which was dismissed by the appellate court. As Civil Cases Nos. 5479 and 5492 arose from the same set of facts, the two cases were consolidated. The trial court then conducted pre-trial and trial of the two cases, but the proceedings had to be suspended after a fire gutted the Pasay City Hall and destroyed the records of the courts. After the records were reconstituted, the proceedings resumed and the parties agreed that the money in dispute be invested in Treasury Bills to be awarded in favor of the prevailing side. It was also agreed by the parties to limit the issues at the trial to the following:
1. Who, between David and Yang, is legally entitled to the proceeds of Equitable Banking Corporation (EBC) Cashiers Check No. CCPS 14-009467 in the sum of P2,087,000.00 dated December 22, 1987, and Far East Bank and Trust Company (FEBTC) Cashiers Check No. 287078 in the sum of P2,087,000.00 dated December 22, 1987, together with the earnings derived therefrom pendente lite? 2. Are the defendants FEBTC and PCIB solidarily liable to Yang for having allowed the encashment of FEBTC Dollar Draft No. 4771, in the sum of US$200,000.00 plus interest thereon despite the stop payment order of Cely Yang?7[7]

On July 4, 1995, the trial court handed down its decision in Civil Cases Nos. 5479 and 5492, to wit:
WHEREFORE, the Court renders judgment in favor of defendant Fernando David against the plaintiff Cely Yang and declaring the former entitled to the proceeds of the two (2) cashiers checks, together with the earnings derived therefrom pendente lite;

ordering the plaintiff to pay the defendant Fernando David moral damages in the amount of P100,000.00; attorneys fees in the amount of P100,000.00 and to pay the costs. The complaint against Far East Bank and Trust Company (FEBTC), Philippine Commercial International Bank (PCIB) and Equitable Banking Corporation (EBC) is dismissed. The decision is without prejudice to whatever action plaintiff Cely Yang will file against defendant Prem Chandiramani for reimbursement of the amounts received by him from defendant Fernando David. SO ORDERED.8[8]

In finding for David, the trial court ratiocinated:

The evidence shows that defendant David was a holder in due course for the reason that the cashiers checks were complete on their face when they were negotiated to him. They were not yet overdue when he became the holder thereof and he had no notice that said checks were previously dishonored; he took the cashiers checks in good faith and for value. He parted some $200,000.00 for the two (2) cashiers checks which were given to defendant Chandiramani; he had also no notice of any infirmity in the cashiers checks or defect in the title of the drawer. As a matter of fact, he asked the manager of the China Banking Corporation to inquire as to the genuineness of the cashiers checks (tsn, February 5, 1988, p. 21, September 20, 1991, pp. 13-14). Another proof that defendant David is a holder in due course is the fact that the stop payment order on [the] FEBTC cashiers check was lifted upon his inquiry at the head office (tsn, September 20, 1991, pp. 24-25). The apparent reason for lifting the stop payment order was because of the fact that FEBTC realized that the checks were not actually lost but indeed reached the payee defendant David.9[9]

Yang then moved for reconsideration of the RTC judgment, but the trial court denied her motion in its Order of September 20, 1995. In the belief that the trial court misunderstood the concept of a holder in due course and misapprehended the factual milieu, Yang seasonably filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 52398. On March 25, 1999, the appellate court decided CA-G.R. CV No. 52398 in this wise:
WHEREFORE, this court AFFIRMS the judgment of the lower court with modification and hereby orders the plaintiff-appellant to pay defendant-appellant PCIB the amount of Twenty-Five Thousand Pesos (P25,000.00). SO ORDERED.10[10]

In affirming the trial courts judgment with respect to herein respondent David, the appellate court found that:
In this case, defendant-appellee had taken the necessary precautions to verify, through his bank, China Banking Corporation, the genuineness of whether (sic) the

cashiers checks he received from Chandiramani. As no stop payment order was made yet (at) the time of the inquiry, defendant-appellee had no notice of what had transpired earlier between the plaintiff-appellant and Chandiramani. All he knew was that the checks were issued to Chandiramani with whom he was he had (sic) a transaction. Further on, David received the checks in question in due course because Chandiramani, who at the time the checks were delivered to David, was acting as Yangs agent. David had no notice, real or constructive, cogent for him to make further inquiry as to any infirmity in the instrument(s) and defect of title of the holder. To mandate that each holder inquire about every aspect on how the instrument came about will unduly impede commercial transactions, Although negotiable instruments do not constitute legal tender, they often take the place of money as a means of payment. The mere fact that David and Chandiramani knew one another for a long time is not sufficient to establish that they connived with each other to defraud Yang. There was no concrete proof presented by Yang to support her theory.11[11]

The appellate court awarded P25,000.00 in attorneys fees to PCIB as it found the action filed by Yang against said bank to be clearly unfounded and baseless. Since PCIB was compelled to litigate to protect itself, then it was entitled under Article 220812[12] of the Civil Code to attorneys fees and litigation expenses. Hence, the instant recourse wherein petitioner submits the following issues for resolution:
abWHETHER THE CHECKS WERE ISSUED TO PREM CHANDIRAMANI BY PETITIONER; WHETHER THE ALLEGED TRANSACTION BETWEEN PREM CHANDIRAMANI AND FERNANDO DAVID IS LEGITIMATE OR A SCHEME BY BOTH PRIVATE RESPONDENTS TO SWINDLE PETITIONER; WHETHER FERNANDO DAVID GAVE PREM US$360,000.00 OR JUST A FRACTION OF REPRESENTING HIS SHARE OF THE LOOT; CHANDIRAMANI THE AMOUNT

c-

d-

WHETHER PRIVATE RESPONDENTS FERNANDO DAVID AND PCIB ARE ENTITLED TO DAMAGES AND ATTORNEYS FEES.13[13]

At the outset, we must stress that this is a petition for review under Rule 45 of the 1997 Rules of Civil Procedure. It is basic that in petitions for review under Rule 45, the jurisdiction of this Court is limited to reviewing questions of law, questions of fact are not entertained absent a showing that the factual findings complained of are totally devoid

of support in the record or are glaringly erroneous.14[14] Given the facts in the instant case, despite petitioners formulation, we find that the following are the pertinent issues to be resolved:
a) b) Whether the Court of Appeals erred in holding herein respondent Fernando David to be a holder in due course; and Whether the appellate court committed a reversible error in awarding damages and attorneys fees to David and PCIB.

On the first issue, petitioner Yang contends that private respondent Fernando David is not a holder in due course of the checks in question. While it is true that he was named the payee thereof, David failed to inquire from Chandiramani about how the latter acquired possession of said checks. Given his failure to do so, it cannot be said that David was unaware of any defect or infirmity in the title of Chandiramani to the checks at the time of their negotiation. Moreover, inasmuch as the checks were crossed, then David should have, pursuant to our ruling in Bataan Cigar & Cigarette Factory, Inc. v. Court of Appeals, G.R. No. 93048, March 3, 1994, 230 SCRA 643, been put on guard that the checks were issued for a definite purpose and accordingly, made inquiries to determine if he received the checks pursuant to that purpose. His failure to do so negates the finding in the proceedings below that he was a holder in due course. Finally, the petitioner argues that there is no showing whatsoever that David gave Chandiramani any consideration of value in exchange for the aforementioned checks. Private respondent Fernando David counters that the evidence on record shows that when he received the checks, he verified their genuineness with his bank, and only after said verification did he deposit them. David stresses that he had no notice of previous dishonor or any infirmity that would have aroused his suspicions, the instruments being complete and regular upon their face. David stresses that the checks in question were cashiers checks. From the very nature of cashiers checks, it is highly unlikely that he would have suspected that something was amiss. David also stresses negotiable instruments are presumed to have been issued for valuable consideration, and he who alleges otherwise must controvert the presumption with sufficient evidence. The petitioner failed to discharge this burden, according to David. He points out that the checks were delivered to him as the payee, and he took them as holder and payee thereof. Clearly, he concludes, he should be deemed to be their holder in due course. We shall now resolve the first issue. Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law,15[15] meaning a payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. In the present case, it is not disputed that David was the payee of the checks in

question. The weight of authority sustains the view that a payee may be a holder in due course.16[16] Hence, the presumption that he is a prima facie holder in due course applies in his favor. However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions provided for in Section 5217[17] of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in Davids case, otherwise he cannot be deemed a holder in due course. We find that the petitioners challenge to Davids status as a holder in due course hinges on two arguments: (1) the lack of proof to show that David tendered any valuable consideration for the disputed checks; and (2) Davids failure to inquire from Chandiramani as to how the latter acquired possession of the checks, thus resulting in Davids intentional ignorance tantamount to bad faith. In sum, petitioner posits that the last two requisites of Section 52 are missing, thereby preventing David from being considered a holder in due course. Unfortunately for the petitioner, her arguments on this score are less than meritorious and far from persuasive. First, with respect to consideration, Section 2418[18] of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration19[19] or for value.20[20] Thus, the law itself creates a presumption in Davids favor that he gave valuable consideration for the checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of the checks absent said consideration. In other words, the petitioner must present convincing evidence to overthrow the presumption. Our scrutiny of the records, however, shows that the petitioner failed to discharge her burden of proof. The petitioners averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the checks gratis, but instead gave Chandiramani US$360,000.00 as consideration for the said instruments. Factual findings of the Court of Appeals are conclusive on the parties and not reviewable by this Court; they carry great weight when the factual findings of the trial court are affirmed by the appellate court.21[21] Second, petitioner fails to point any circumstance which should have put David on inquiry as to the why and wherefore of the possession of the checks by Chandiramani. David was not privy to the transaction between petitioner and Chandiramani. Instead,

Chandiramani and David had a separate dealing in which it was precisely Chandiramanis duty to deliver the checks to David as payee. The evidence shows that Chandiramani performed said task to the letter. Petitioner admits that David took the step of asking the manager of his bank to verify from FEBTC and Equitable as to the genuineness of the checks and only accepted the same after being assured that there was nothing wrong with said checks. At that time, David was not aware of any stop payment order. Under these circumstances, David thus had no obligation to ascertain from Chandiramani what the nature of the latters title to the checks was, if any, or the nature of his possession. Thus, we cannot hold him guilty of gross neglect amounting to legal absence of good faith, absent any showing that there was something amiss about Chandiramanis acquisition or possession of the checks. David did not close his eyes deliberately to the nature or the particulars of a fraud allegedly committed by Chandiramani upon the petitioner, absent any knowledge on his part that the action in taking the instruments amounted to bad faith.22[22] Belatedly, and we say belatedly since petitioner did not raise this matter in the proceedings below, petitioner now claims that David should have been put on alert as the instruments in question were crossed checks. Pursuant to Bataan Cigar & Cigarette Factory, Inc. v. Court of Appeals, David should at least have inquired as to whether he was acquiring said checks for the purpose for which they were issued, according to petitioners submission. Petitioners reliance on the Bataan Cigar case, however, is misplaced. The facts in the present case are not on all fours with Bataan Cigar. In the latter case, the crossed checks were negotiated and sold at a discount by the payee, while in the instant case, the payee did not negotiate further the checks in question but promptly deposited them in his bank account. The Negotiable Instruments Law is silent with respect to crossed checks, although the Code of Commerce23[23] makes reference to such instruments. Nonetheless, this Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and not converted into cash.24[24] The effects of crossing a check, thus, relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein. In Bataan Cigar, the rediscounting of the check by the payee knowingly violated the avowed intention of crossing the check. Thus, in accepting the cross checks and paying cash for them, despite the warning of the crossing, the subsequent holder could not be considered in good faith and thus, not a holder in due course. Our ruling in Bataan Cigar reiterates that in De Ocampo & Co. v. Gatchalian.25[25]

The factual circumstances in De Ocampo and in Bataan Cigar are not present in this case. For here, there is no dispute that the crossed checks were delivered and duly deposited by David, the payee named therein, in his bank account. In other words, the purpose behind the crossing of the checks was satisfied by the payee. Proceeding to the issue of damages, petitioner merely argues that respondents David and PCIB are not entitled to damages, attorneys fees, and costs of suit as both acted in bad faith towards her, as shown by her version of the facts which gave rise to the instant case. Respondent David counters that he was maliciously and unceremoniously dragged into this suit for reasons which have nothing to do with him at all, but which arose from petitioners failure to receive her share of the profit promised her by Chandiramani. Moreover, in filing this suit which has lasted for over a decade now, the petitioner deprived David of the rightful enjoyment of the two checks, to which he is entitled, under the law, compelled him to hire the services of counsel to vindicate his rights, and subjected him to social humiliation and besmirched reputation, thus harming his standing as a person of good repute in the business community of Pampanga. David thus contends that it is but proper that moral damages, attorneys fees, and costs of suit be awarded him. For its part, respondent PCIB stresses that it was established by both the trial court and the appellate court that it was needlessly dragged into this case. Hence, no error was committed by the appellate court in declaring PCIB entitled to attorneys fees as it was compelled to litigate to protect itself. We have thoroughly perused the records of this case and find no reason to disagree with the finding of the trial court, as affirmed by the appellate court, that:
[D]efendant David is entitled to [the] award of moral damages as he has been needlessly and unceremoniously dragged into this case which should have been brought only between the plaintiff and defendant Chandiramani.26[26]

A careful reading of the findings of facts made by both the trial court and appellate court clearly shows that the petitioner, in including David as a party in these proceedings, is barking up the wrong tree. It is apparent from the factual findings that David had no dealings with the petitioner and was not privy to the agreement of the latter with Chandiramani. Moreover, any loss which the petitioner incurred was apparently due to the acts or omissions of Chandiramani, and hence, her recourse should have been against him and not against David. By needlessly dragging David into this case all because he and Chandiramani knew each other, the petitioner not only unduly delayed David from obtaining the value of the checks, but also caused him anxiety and injured his business reputation while waiting for its outcome. Recall that under Article 221727[27] of the Civil Code, moral damages include mental anguish, serious anxiety, besmirched reputation, wounded feelings, social humiliation, and similar injury.

Hence, we find the award of moral damages to be in order. The appellate court likewise found that like David, PCIB was dragged into this case on unfounded and baseless grounds. Both were thus compelled to litigate to protect their interests, which makes an award of attorneys fees justified under Article 2208 (2)28[28] of the Civil Code. Hence, we rule that the award of attorneys fees to David and PCIB was proper. WHEREFORE, the instant petition is DENIED. The assailed decision of the Court of Appeals, dated March 25, 1999, in CA-G.R. CV No. 52398 is AFFIRMED. Costs against the petitioner. SO ORDERED.

15 Gempesaw vs. Court of Appeals [GR 92244. 9 February 1993] Second Division, Campos Jr. (J): 4 concur see case entry 32 Facts: Natividad O. Gempesaw owns and operates four grocery stores located at Rizal Avenue Extension and at Second Avenue, both in Caloocan City. Among these groceries are D.G. Shopper's Mart and D.G. Whole Sale Mart. Gempesaw maintains a checking account numbered 13-00038-1 with the Caloocan City Branch of PBCom. To facilitate payment of debts to her suppliers, Gempesaw draws checks against her checking account with PBCom as drawee. Her customary practice of issuing checks in payment of her suppliers was as follows: The checks were prepared and filled up as to all material particulars by her trusted bookkeeper, Alicia Galang, an employee for more than 8 years. After the bookkeeper prepared the checks, the completed checks were submitted to Gempesaw for her signature, together with the corresponding invoice receipts which indicate the correct obligations due and payable to her suppliers. Gempesaw signed each and every check without bothering to verify the accuracy of the checks against the corresponding invoices because she reposed full and implicit trust and confidence on her bookkeeper. The issuance and delivery of the checks to the payees named therein were left to the bookkeeper. Gempesaw admitted that she did not make any verification as to whether the checks were actually delivered to their respective payees. Although PBCom notified her of all checks presented to and paid by the bank, Gempesaw did not verify the correctness of the returned checks,

much less check if the payees actually received the checks in payment for the supplies she received. In the course of her business operations covering a period of 2 years, Gempesaw issued, following her usual practice, a total of 82 checks in favor of several suppliers. These checks were all presented by the indorsees as holders thereof to, and honored by PBCom. PBCom correspondingly debited the amounts thereof against Gempesaw's checking account numbered 30-00038-1. Most of the checks were for amounts in excess of her actual obligations to the various payees as shown in their corresponding invoices. Practically, all the checks
Commercial Law Negotiable Instruments Law, 2006 ( 17 ) Narratives (Berne Guerrero)

issued and honored by PBCom were crossed checks. Aside from the daily notice given to Gempesaw by PBCom, the latter also furnished her with a monthly statement of her bank transactions, attaching thereto all the cancelled checks she had issued and which were debited against her current account. It was only after the lapse of more than 2 years that Gempesaw found out about the fraudulent manipulations of her bookkeeper. All the 82 checks with forged signatures of the payees were brought to Ernest L. Boon, Chief Accountant of PBCom at the Buendia branch, who, without authority therefor, accepted them all for deposit at the Buendia branch to the credit and/or in the accounts of Alfredo Y. Romero and Benito Lam. Ernest L. Boon was a very close friend of Alfredo Y. Romero. 63 out of the 82 checks were deposited in Savings Account 00844-5 of Alfredo Y. Romero at PBCom's Buendia branch, and 4 checks in his Savings Account 32-81-9 at its Ongpin branch. The rest of the checks were deposited in Account 0443-4, under the name of Benito Lam at the Elcano branch of the respondent drawee Bank. About 30 of the payees whose names were specifically written on the checks did not receive nor even see the subject checks and that the indorsements appearing at the back of the checks were not theirs. The team of auditors from the main office of PBCom which conducted periodical inspection of the branches' operations failed to discover, check or stop the unauthorized acts of Ernest L. Boon. All the deposit slips of the 82 checks in question were initialed and/or approved for deposit by Ernest L. Boon, contrary to the rules of PBCom, where only a Branch Manager, and no other official of PBCom, may accept a second indorsement on a check for deposit. The Branch Managers of the Ongpin and Elcano branches accepted the deposits made in the Buendia branch and credited the accounts of Alfredo Y. Romero

and Benito Lam in their respective branches. On 7 November 1984, Gempesaw made a written demand on PBCom to credit her account with the money value of the 82 checks totalling P1,208,606.89 for having been wrongfully charged against her account. PBCom refused to grant Gempesaw's demand. On 23 January 1985, Gempesaw filed a Complaint against the Philippine Bank of Communications (PBCom) for recovery of the money value of 82 checks charged against Gempesaw's account with PBCom on the ground that the payees' indorsements were forgeries. The Regional Trial Court, Branch CXXVIII of Caloocan City, which tried the case, rendered a decision on 17 November 1987 dismissing the complaint as well as PBCom's counterclaim. On appeal, the Court of Appeals in a decision rendered on 22 February 1990, affirmed the decision of the RTC on two grounds, namely (1) that Gempesaw's gross negligence in issuing the checks was the proximate cause of the loss and (2) assuming that the bank was also negligent, the loss must nevertheless be borne by the party whose negligence was the proximate cause of the loss. On 5 March 1990, Gempesaw filed the petition for review under Rule 45 of the Rules of Court. Issue [1]: Whether the drawers account may be charged for checks where the indorsements were forged. Held [1]: As a matter of practical significance, problems arising from forged indorsements of checks may generally be broken into two types of cases: (1) where forgery was accomplished by a person not associated with the drawer for example a mail robbery; and (2) where the indorsement was forged by an agent of the drawer. This difference in situations would determine the effect of the drawer's negligence with respect to forged indorsements. While there is no duty resting on the depositor to look for forged indorsements on his cancelled checks in contrast to a duty imposed upon him to look for forgeries of his own name, a depositor is under a duty to set up an accounting system and a business procedure as are reasonably calculated to prevent or render difficult the forgery of indorsements, particularly by the depositor's own employees. And if the drawer (depositor) learns that a check drawn by him has been paid under a forged indorsement, the drawer is under duty promptly to report such fact to the drawee bank. For his negligence or failure either to discover or to report promptly the fact of such forgery to the drawee, the drawer loses his right against the drawee who has debited his account under the forged indorsement. As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot charge the drawer's account for the amount of said check. An

exception to this rule is where the drawer is guilty of such negligence which causes the bank to honor such a check or checks. If a check is stolen from the payee, it is quite obvious that the drawer cannot possibly discover the forged indorsement by mere examination of his cancelled check. This accounts for the rule that although a depositor owes a duty to his drawee bank to examine his cancelled checks for forgery of his own signature, he has no similar duty as to forged indorsements. A different situation arises where the indorsement
Commercial Law Negotiable Instruments Law, 2006 ( 18 ) Narratives (Berne Guerrero)

was forged by an employee or agent of the drawer, or done with the active participation of the latter. Most of the cases involving forgery by an agent or employee deal with the payee's indorsement. The drawer and the payee oftentimes have business relations of long standing. The continued occurrence of business transactions of the same nature provides the opportunity for the agent/employee to commit the fraud after having developed familiarity with the signatures of the parties. However, sooner or later, some leak will show on the drawer's books. It will then be just a question of time until the fraud is discovered. This is specially true when the agent perpetrates a series of forgeries as herein. The negligence of a depositor which will prevent recovery of an unauthorized payment is based on failure of the depositor to act as a prudent businessman would under the circumstances. Herein, Gempesaw relied implicitly upon the honesty and loyalty of her bookkeeper, and did not even verify the accuracy of the amounts of the checks she signed against the invoices attached thereto. Although she regularly received her bank statements, she apparently did not carefully examine the same nor the check stubs and the returned checks, and did not compare them with the sales invoices. Otherwise, she could have easily discovered the discrepancies between the checks and the documents serving as bases for the checks. With such discovery, the subsequent forgeries would not have been accomplished. It was not until 2 years after the bookkeeper commenced her fraudulent scheme that Gempesaw discovered that 82 checks were wrongfully charged to her account, at which time she notified PBCom. Gempesaw's failure to make such adequate inquiry constituted negligence which resulted in the bank's honoring of the subsequent checks with forged indorsements. Gempesaw's negligence was the proximate cause of her loss. And since it was her negligence which caused PBCom to honor the forged checks or prevented it from recovering the amount it

had already paid on the checks, Gempesaw cannot now complain should the bank refuse to recredit her account with the amount of such checks. Under Section 23 of the NIL, she is now precluded from using the forgery to prevent the bank's debiting of her account. Issue [2]: Whether banking rules prohibiting the drawee bank from having checks with more than one indorsement invalidate the negotiation or transfer of the said check. Held [2]: The banking rule banning acceptance of checks for deposit or cash payment with more than one indorsement unless cleared by some bank officials does not invalidate the instrument; neither does it invalidate the negotiation or transfer of the said check. In effect, this rule destroys the negotiability of bills/checks by limiting their negotiation by indorsement of only the payee. Under the Negotiable Instruments Law, the only kind of indorsement which stops the further negotiation of an instrument is a restrictive indorsement which prohibits the further negotiation thereof. In this kind of restrictive indorsement, the prohibition to transfer or negotiate must be written in express words at the back of the instrument, so that any subsequent party may be forewarned that it ceases to be negotiable. However, the restrictive indorsee acquires the right to receive payment and bring any action thereon as any indorser, but he can no longer transfer his rights as such indorsee where the form of the indorsement does not authorize him to do so. Although the holder of a check cannot compel a drawee bank to honor it because there is no privity between them, as far as the drawer-depositor is concerned, such bank may not legally refuse to honor a negotiable bill of exchange or a check drawn against it with more than one indorsement if there is nothing irregular with the bill or check and the drawer has sufficient funds. The drawee cannot be compelled to accept or pay the check by the drawer or any holder because as a drawee, he incurs no liability on the check unless he accepts it. But the drawee will make itself liable to a suit for damages at the instance of the drawer for wrongful dishonor of the bill or check.

20 Yang vs. Court of Appeals [GR 138074, 15 August 2003] Second Division, Quisumbing (J): 3 concur, 1 on leave Facts: On or before 22 December 1987, Cely Yang and Prem Chandiramani entered into an agreement whereby the latter was to give Yang a Philippine Commercial International Bank (PCIB) manager's check in the amount of P4.2 million in exchange for 2 of Yang's manager's checks, each in the amount of P2.087

million, both payable to the order of Fernando David. Yang and Chandiramani agreed that the difference of P26,000.00 in the exchange would be their profit to be divided equally between them. Yang and Chandiramani also further agreed that the former would secure from Far East Bank & Trust Company (FEBTC) a dollar draft in the amount of US$200,000.00, payable to PCIB FCDU Account 419501165-2, which Chandiramani would exchange for another dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of Hong Kong. Accordingly, on December 22, 1987, Yang procured (a) Equitable Banking Corporation [ECB] Cashier's Check CCPS 14-009467 in the sum of P2,087,000.00, dated 22 December 1987, payable to the order of Fernando David; (b) FEBTC Cashier's Check 287078, in the amount of P2,087,000.00, dated 22 December 1987, likewise payable to the order of Fernando David; and (c) FEBTC Dollar Draft 4771, drawn on Chemical Bank, New York, in the amount of US$200,000.00, dated 22 December 1987,
Commercial Law Negotiable Instruments Law, 2006 ( 25 ) Narratives (Berne Guerrero)

payable to PCIB FCDU Account 4195-01165-2. At about 1:00 p.m. of the same day, Yang gave the aforementioned cashier's checks and dollar drafts to her business associate, Albert Liong, to be delivered to Chandiramani by Liong's messenger, Danilo Ranigo. Ranigo was to meet Chandiramani at Philippine Trust Bank, Ayala Avenue, Makati City, Metro Manila where he would turn over Yang's cashier's checks and dollar draft to Chandiramani who, in turn, would deliver to Ranigo a PCIB manager's check in the sum of P4.2 million and a Hang Seng Bank dollar draft for US$200,000.00 in exchange. Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the two cashier's checks and the dollar draft bought by Yang. Ranigo reported the alleged loss of the checks and the dollar draft to Liong at 4:30 p.m. of 22 December 1987. Liong, in turn, informed Yang, and the loss was then reported to the police. It transpired, however, that the checks and the dollar draft were not lost, for Chandiramani was able to get hold of said instruments, without delivering the exchange consideration consisting of the PCIB manager's check and the Hang Seng Bank dollar draft. At 3:00 p.m. or some 2 hours after Chandiramani and Ranigo were to meet in Makati City, Chandiramani delivered to David at China Banking Corporation branch in San Fernando City, Pampanga, the (a) FEBTC Cashier's Check 287078, and the (b) Equitable Cashier's Check CCPS 14-009467. In exchange,

Chandiramani got US$360,000.00 from David, which Chandiramani deposited in the savings account of his wife, Pushpa Chandiramani; and his mother, Rani Reynandas, who held FCDU Account 124 with the United Coconut Planters Bank (UCPB) branch in Greenhills, San Juan, Metro Manila. Chandiramani also deposited FEBTC Dollar Draft 4771, in PCIB FCDU Account 4195-01165-2 on the same date. Meanwhile, Yang requested FEBTC and ECB to stop payment on the instruments she believed to be lost. Both banks complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft 4771, thus enabling the holder of PCIB FCDU Account 4195-01165-2 to receive the amount of US$200,000.00. On 28 December 1987, Yang lodged a Complaint for injunction and damages against ECB, Chandiramani, and David, with prayer for a temporary restraining order, with the Regional Trial Court of Pasay City (Civil Case 5479). The Complaint was subsequently amended to include a prayer for Equitable to return to Yang the amount of P2.087 million, with interest thereon until fully paid. On 12 January 1988, Yang filed a separate case for injunction and damages, with prayer for a writ of preliminary injunction against FEBTC, PCIB, Chandiramani and David, with the RTC of Pasay City, docketed as Civil Case No. 5492. This complaint was later amended to include a prayer that FEBTC et al return to Yang the amount of P2.087 million, the value of FEBTC Dollar Draft 4771, with interest at 18% annually until fully paid. On 9 February 1988, upon the filing of a bond by Yang, the trial court issued a writ of preliminary injunction in Civil Case No. 5479. A writ of preliminary injunction was subsequently issued in Civil Case 5492 also. Meanwhile, David moved for dismissal of the cases against him and for reconsideration of the Orders granting the writ of preliminary injunction, but these motions were denied. David then elevated the matter to the Court of Appeals in a special civil action for certiorari (CA-GR SP 14843), which was dismissed by the appellate court. As Civil Cases 5479 and 5492 arose from the same set of facts, the two cases were consolidated. The trial court then conducted pre-trial and trial of the two cases, but the proceedings had to be suspended after a fire gutted the Pasay City Hall and destroyed the records of the courts. After the records were reconstituted, the proceedings resumed and the parties agreed that the money in dispute be invested in Treasury Bills to be awarded in favor of the prevailing side, and limiting the issues in the case. On 4 July 1995, the trial court handed down its

decision in Civil Cases 5479 and 5492, in favor of David declaring him entitled to the proceeds of the 2 cashier's checks, together with the earnings derived therefrom pendente lite; ordering Yang to pay David moral damages in the amount of P100,000.00; attorney's fees in the amount of P100,000.00 and to pay the costs. The trial court dismissed the complaint against FEBTC, PCIB and EBC; without prejudice to whatever action Yang will file against Chandiramani for reimbursement of the amounts received by him from David. Yang then moved for reconsideration of the RTC judgment, but the trial court denied her motion in its Order of 20 September 1995. Yang seasonably filed an appeal with the Court of Appeals (CA-GR CV 52398). On 25 March 1999, the appellate court affirmed the decision of the trial court with modification and ordered Yang to pay PCIB the amount of P25,000.00, as attorney's fees. Yang filed the petition for review on certiorari.
Commercial Law Negotiable Instruments Law, 2006 ( 26 )

Issue: Whether David was a holder in due course.

Narratives (Berne Guerrero)

Held: Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a "payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof." Herein, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course applies in his favor. However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in David's case, otherwise he cannot be deemed a holder in due course. Yang's challenge to David's status as a holder in due course hinges on two arguments: (1) the lack of proof to show that David tendered any valuable consideration for the disputed checks; and (2) David's failure to inquire from Chandiramani as to how the latter acquired possession of the checks, thus resulting in David's intentional ignorance tantamount to bad faith. In sum, Yang posits that the last two requisites of Section 52 are missing, thereby preventing David from being considered a holder in due course. Unfortunately for Yang, her arguments on this score are less than meritorious and far from persuasive.

Issue [a]: Whether there is lack of proof to show that David tendered any valuable consideration for the disputed checks. Held [a]: With respect to consideration, Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value. Thus, the law itself creates a presumption in David's favor that he gave valuable consideration for the checks in question. In alleging otherwise, Yang has the onus to prove that David got hold of the checks absent said consideration. In other words, Yang must present convincing evidence to overthrow the presumption. The records, however, shows that Yang failed to discharge her burden of proof. Yang's averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the checks gratis, but instead gave Chandiramani US$360,000.00 as consideration for the said instruments. Factual findings of the Court of Appeals are conclusive on the parties and not reviewable by the Supreme Court; they carry great weight when the factual findings of the trial court are affirmed by the appellate court. Issue [b]: Whether David's failure to inquire from Chandiramani as to how the latter acquired possession of the checks, resulted in David's intentional ignorance tantamount to bad fait Held [b]: Yang fails to point any circumstance which should have put David on inquiry as to the why and wherefore of the possession of the checks by Chandiramani. David was not privy to the transaction between Yang and Chandiramani. Instead, Chandiramani and David had a separate dealing in which it was precisely Chandiramani's duty to deliver the checks to David as payee. The evidence shows that Chandiramani performed said task to the letter. Yang admits that David took the step of asking the manager of his bank to verify from FEBTC and Equitable as to the genuineness of the checks and only accepted the same after being assured that there was nothing wrong with said checks. At that time, David was not aware of any "stop payment" order. Under these circumstances, David thus had no obligation to ascertain from Chandiramani what the nature of the latter's title to the checks was, if any, or the nature of his possession. Thus, he cannot be held guilty of gross neglect amounting to legal absence of good faith, absent any showing that there was something amiss about Chandiramani's acquisition or possession of the checks. David did not close his eyes deliberately to the nature or the particulars of a fraud allegedly committed by Chandiramani upon Yang,

absent any knowledge on his part that the action in taking the instruments amounted to bad faith. Issue [c]: Whether David should at least have inquired as to whether he was acquiring said checks for the
Commercial Law Negotiable Instruments Law, 2006 ( 27 ) Narratives (Berne Guerrero)

purpose for which they were issued, pursuant to Bataan Cigar & Cigarette Factory, Inc. v. Court of Appeals. Held [c]: Yang's reliance on the Bataan Cigar case, however, is misplaced. The facts in the case are not on all fours with Bataan Cigar. In the latter case, the crossed checks were negotiated and sold at a discount by the payee, while herein, the payee did not negotiate further the checks in question but promptly deposited them in his bank account. The Negotiable Instruments Law is silent with respect to crossed checks, although the Code of Commerce makes reference to such instruments. Nonetheless, the Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and not converted into cash. The effects of crossing a check, thus, relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein. In Bataan Cigar, the rediscounting of the check by the payee knowingly violated the avowed intention of crossing the check. Thus, in accepting the cross checks and paying cash for them, despite the warning of the crossing, the subsequent holder could not be considered in good faith and thus, not a holder in due course. The ruling in Bataan Cigar reiterates that in De Ocampo & Co. v. Gatchalian. The factual circumstances in De Ocampo and in Bataan Cigar are not present herein. For here, there is no dispute that the crossed checks were delivered and duly deposited by David, the payee named therein, in his bank account. In other words, the purpose behind the crossing of the checks was satisfied by the payee.

LIM VS SABAN

of the Court of Appeals, Seventh Division, in CA-G.R. V No. 60392.[2] The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu City (the lot), entered into an Agreement and Authority to Negotiate and Sell (Agency Agreement) with respondent

Florencio Saban (Saban) on February 8, 1994. Under the Agency Agreement, Ybaez authorized Saban to look for a buyer of the lot for Two Hundred Thousand Pesos (P200,000.00) and to mark up the selling price to include the amounts needed for payment of taxes, transfer of title and other expenses incident to the sale, as well as Sabans commission for the sale.[3] Through Sabans efforts, Ybaez and his wife were able to sell the lot to the petitioner Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim) on March 10, 1994. The price of the lot as indicated in the Deed of Absolute Sale is Two Hundred Thousand Pesos (P200,000.00).[4] It appears, however, that the vendees agreed to purchase the lot at the price of Six Hundred Thousand Pesos (P600,000.00), inclusive of taxes and other incidental expenses of the sale. After the sale, Lim remitted to Saban the amounts of One Hundred Thirteen Thousand Two Hundred Fifty Seven Pesos (P113,257.00) for payment of taxes due on the transaction as well as Fifty Thousand Pesos (P50,000.00) as brokers commission.[5] Lim also issued in the name of Saban four postdated checks in the aggregate amount of Two Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos (P236,743.00). These checks were Bank of the Philippine Islands (BPI) Check No. 1112645 dated June 12, 1994 for P25,000.00; BPI Check No. 1112647 dated June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26, 1994 for P25,000.00; and Equitable PCI Bank Check No. 021491B dated June 20, 1994 for P168,000.00.

Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the letter Ybaez asked Lim to cancel all the checks issued by her in Sabans favor and to extend another partial payment for the lot in his (Ybaezs) favor.[6] After the four checks in his favor were dishonored upon

presentment, Saban filed a Complaint for collection of sum of money and damages against Ybaez and Lim with the Regional Trial Court (RTC) of Cebu City on August 3, 1994.[7] The case was assigned to Branch 20 of the RTC. In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase the lot for P600,000.00, i.e., with a mark-up of Four Hundred Thousand Pesos (P400,000.00) from the price set by Ybaez. Of the total purchase price of P600,000.00, P200,000.00 went to Ybaez, P50,000.00 allegedly went to Lims agent, and P113,257.00 was given to Saban to cover taxes and other expenses incidental to the sale. Lim also issued four (4) postdated checks[8] in favor of Saban for the remaining P236,743.00.[9] Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any commission for the sale since he concealed the actual selling price of the lot from Ybaez and because he was not a licensed real estate broker. Ybaez was able to convince Lim to cancel all four checks. Saban further averred that Ybaez and Lim connived to deprive him of his sales commission by withholding payment of the first three checks. He also claimed that Lim failed to make good the fourth

check which was dishonored because the account against which it was drawn was closed. In his Answer, Ybaez claimed that Saban was not entitled to any commission because he concealed the actual selling price from him and because he was not a licensed real estate broker. Lim, for her part, argued that she was not privy to the agreement between Ybaez and Saban, and that she issued stop payment orders for the three checks because Ybaez requested her to pay the purchase price directly to him, instead of coursing it through Saban. She also alleged that she agreed with Ybaez that the purchase price of the lot was only P200,000.00. Ybaez died during the pendency of the case before the RTC. Upon motion of his counsel, the trial court dismissed the case only against him without any objection from the other parties.[10] On May 14, 1997, the RTC rendered its Decision[11] dismissing Sabans complaint, declaring the four (4) checks issued by Lim as stale and non-negotiable, and absolving Lim from any liability towards Saban. Saban appealed the trial courts Decision to the Court of Appeals. On October 27, 2003, the appellate court promulgated its Decision[12] reversing the trial courts ruling. It held that Saban was entitled to his commission amounting to P236,743.00.[13] The Court of Appeals ruled that Ybaezs revocation of his contract of agency with Saban was invalid because the agency was coupled with an interest and Ybaez effected the revocation in bad faith in

order to deprive Saban of his commission and to keep the profits for himself.[14] The appellate court found that Ybaez and Lim connived to deprive Saban of his commission. It declared that Lim is liable to pay Saban the amount of the purchase price of the lot corresponding to his commission because she issued the four checks knowing that the total amount thereof corresponded to Sabans commission for the sale, as the agent of Ybaez. The appellate court further ruled that, in issuing the checks in payment of Sabans commission, Lim acted as an accommodation party. She signed the checks as drawer, without receiving value therefor, for the purpose of lending her name to a third person. As such, she is liable to pay Saban as the holder for value of the checks.[15] Lim filed a Motion for Reconsideration of the appellate courts Decision, but her Motion was denied by the Court of Appeals in a Resolution dated May 6, 2004.[16] Not satisfied with the decision of the Court of Appeals, Lim filed the present petition. Lim argues that the appellate court ignored the fact that after paying her agent and remitting to Saban the amounts due for taxes and transfer of title, she paid the balance of the purchase price directly to Ybaez.[17] She further contends that she is not liable for Ybaezs debt to Saban under the Agency Agreement as she is not privy thereto, and that Saban has no one but himself to blame for consenting to the

dismissal of the case against Ybaez and not moving for his substitution by his heirs.[18] Lim also assails the findings of the appellate court that she issued the checks as an accommodation party for Ybaez and that she connived with the latter to deprive Saban of his commission.[19] Lim prays that should she be found liable to pay Saban the amount of his commission, she should only be held liable to the extent of one-third (1/3) of the amount, since she had two covendees (the Spouses Lim) who should share such liability.[20] In his Comment, Saban maintains that Lim agreed to purchase the lot for P600,000.00, which consisted of the P200,000.00 which would be paid to Ybaez, the P50,000.00 due to her broker, the P113,257.00 earmarked for taxes and other expenses incidental to the sale and Sabans commission as broker for Ybaez. According to Saban, Lim assumed the obligation to pay him his commission. He insists that Lim and Ybaez connived to unjustly deprive him of his commission from the negotiation of the sale.[21] The issues for the Courts resolution are whether Saban is entitled to receive his commission from the sale; and, assuming that Saban is entitled thereto, whether it is Lim who is liable to pay Saban his sales commission. The Court gives due course to the petition, but agrees with the result reached by the Court of Appeals. The Court affirms the appellate courts finding that the agency was not revoked since Ybaez requested that Lim make stop payment orders for the checks payable to Saban only after the

consummation of the sale on March 10, 1994. At that time, Saban had already performed his obligation as Ybaezs agent when, through his (Sabans) efforts, Ybaez executed the Deed of Absolute Sale of the lot with Lim and the Spouses Lim. To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a breach of his contract of agency with Ybaez which expressly states that Saban would be entitled to any excess in the purchase price after deducting the P200,000.00 due to Ybaez and the transfer taxes and other incidental expenses of the sale.[22] In Macondray & Co. v. Sellner,[23] the Court recognized the right of a broker to his commission for finding a suitable buyer for the sellers property even though the seller himself consummated the sale with the buyer.[24] The Court held that it would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the brokers efforts. In Infante v. Cunanan, et al.,[25] the Court upheld the right of the brokers to their commissions although the seller revoked their authority to act in his behalf after they had found a buyer for his properties and negotiated the sale directly with the buyer whom he met through the brokers efforts. The Court ruled that the sellers withdrawal in bad faith of the brokers authority cannot unjustly deprive the brokers of their commissions as the sellers duly constituted agents.

The pronouncements of the Court in the aforecited cases are applicable to the present case, especially considering that Saban had completely performed his obligations under his contract of agency with Ybaez by finding a suitable buyer to preparing the Deed of Absolute Sale between Ybaez and Lim and her co-vendees. Moreover, the contract of agency very clearly states that Saban is entitled to the excess of the mark-up of the price of the lot after deducting Ybaezs share of P200,000.00 and the taxes and other incidental expenses of the sale. However, the Court does not agree with the appellate courts pronouncement that Sabans agency was one coupled with an interest. Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. Stated differently, an agency is deemed as one coupled with an interest where it is established for the mutual benefit of the principal and of the agent, or for the interest of the principal and of third persons, and it cannot be revoked by the principal so long as the interest of the agent or of a third person subsists. In an agency coupled with an interest, the agents interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation. When an agents interest is confined to earning his agreed compensation, the agency is not one coupled with an interest, since an agents interest in

obtaining his compensation as such agent is an ordinary incident of the agency relationship.[26] Sabans entitlement to his commission having been settled, the Court must now determine whether Lim is the proper party against whom Saban should address his claim. Sabans right to receive compensation for negotiating as broker for Ybaez arises from the Agency Agreement between them. Lim is not a party to the contract. However, the record reveals that she had knowledge of the fact that Ybaez set the price of the lot at P200,000.00 and that the P600,000.00the price agreed upon by her and Sabanwas more than the amount set by Ybaez because it included the amount for payment of taxes and for Sabans commission as broker for Ybaez. According to the trial court, Lim made the following payments for the lot: P113,257.00 for taxes, P50,000.00 for her broker, and P400.000.00 directly to Ybaez, or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty Seven Pesos (P563,257.00).[27] Lim, on the other hand, claims that on March 10, 1994, the date of execution of the Deed of Absolute Sale, she paid directly to Ybaez the amount of One Hundred Thousand Pesos (P100,000.00) only, and gave to Saban P113,257.00 for payment of taxes and P50,000.00 as his commission,[28] and One Hundred Thirty Thousand Pesos (P130,000.00) on June 28, 1994,[29] or a total of Three Hundred Ninety Three Thousand Two Hundred Fifty Seven Pesos (P393,257.00). Ybaez, for his part, acknowledged that Lim and her co-vendees paid him P400,000.00 which he said was the

full amount for the sale of the lot.[30] It thus appears that he received P100,000.00 on March 10, 1994, acknowledged receipt (through Saban) of the P113,257.00 earmarked for taxes and P50,000.00 for commission, and received the balance of

P130,000.00 on June 28, 1994. Thus, a total of P230,000.00 went directly to Ybaez. Apparently, although the amount actually paid by Lim was P393,257.00, Ybaez rounded off the amount to P400,000.00 and waived the difference. Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies her claim that she and her co-vendees did not agree to purchase the lot at P600,000.00. If she did not agree thereto, there would be no reason for her to issue those checks which is the balance of P600,000.00 less the amounts of P200,000.00 (due to Ybaez), P50,000.00 (commission), and the P113,257.00 (taxes). The only logical conclusion is that Lim changed her mind about agreeing to purchase the lot at

P600,000.00 after talking to Ybaez and ultimately realizing that Sabans commission is even more than what Ybaez received as his share of the purchase price as vendor. Obviously, this change of mind resulted to the prejudice of Saban whose efforts led to the completion of the sale between the latter, and Lim and her covendees. This the Court cannot countenance. The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for the facts therein are similar to the circumstances of the present case. In that case, Consejo Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two lots and the house

built thereon for Thirty Thousand Pesos (P30,000.00) . She promised to pay them five percent (5%) of the purchase price plus whatever overprice they may obtain for the property. Cunanan and Mijares offered the properties to Pio Noche who in turn expressed willingness to purchase the properties. Cunanan and Mijares thereafter introduced Noche to Infante. However, the latter told Cunanan and Mijares that she was no longer interested in selling the property and asked them to sign a document stating that their written authority to act as her agents for the sale of the properties was already cancelled. Subsequently, Infante sold the properties directly to Noche for Thirty One Thousand Pesos (P31,000.00). The Court upheld the right of Cunanan and Mijares to their

commission, explaining that

[Infante] had changed her mind even if respondent had found a buyer who was willing to close the deal, is a matter that would not give rise to a legal consequence if [Cunanan and Mijares] agreed to call off the transaction in deference to the request of [Infante]. But the situation varies if one of the parties takes advantage of the benevolence of the other and acts in a manner that would promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot be sanctioned without according the party prejudiced the reward which is due him. This is the situation in which [Cunanan and Mijares] were placed by [Infante]. [Infante] took advantage of the services rendered by [Cunanan and Mijares], but believing that she could evade payment of their commission, she made use of a ruse by inducing them to sign the deed of cancellation.This act of subversion cannot be sanctioned and cannot serve as basis for [Infante] to escape payment of the commission agreed upon.[31]

The appellate court therefore had sufficient basis for concluding that Ybaez and Lim connived to deprive Saban of his commission by dealing with each other directly and reducing the purchase price of the lot and leaving nothing to compensate Saban for his efforts.

Considering the circumstances surrounding the case, and the undisputed fact that Lim had not yet paid the balance of P200,000.00 of the purchase price of P600,000.00, it is just and proper for her to pay Saban the balance of P200,000.00. Furthermore, since Ybaez received a total of P230,000.00 from Lim, or an excess of P30,000.00 from his asking price of P200,000.00, Saban may claim such excess from Ybaezs estate, if that remedy is still available,[32] in view of the trial courts dismissal of Sabans complaint as against Ybaez, with Sabans express consent, due to the latters demise on November 11, 1994.[33] The appellate court however erred in ruling that Lim is liable on the checks because she issued them as an accommodation party. Section 29 of the Negotiable Instruments Law defines an

accommodation party as a person who has signed the negotiable instrument as maker, drawer, acceptor or indorser, without receiving value therefor, for the purpose of lending his name to some other person. The accommodation party is liable on the instrument to a holder for value even though the holder at the time of taking the instrument knew him or her to be merely an accommodation party. The accommodation party may of course seek reimbursement from the party accommodated.[34] As gleaned from the text of Section 29 of the Negotiable Instruments Law, the accommodation party is one who meets all these three requisites, viz: (1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the signature; and (3) he signed for the purpose of lending his name to

some other person. In the case at bar, while Lim signed as drawer of the checks she did not satisfy the two other remaining requisites. The absence of the second requisite becomes pellucid when it is noted at the outset that Lim issued the checks in question on account of her transaction, along with the other purchasers, with Ybaez which was a sale and, therefore, a reciprocal contract. Specifically, she drew the checks in payment of the balance of the purchase price of the lot subject of the transaction. And she had to pay the agreed purchase price in consideration for the sale of the lot to her and her co-vendees. In other words, the amounts covered by the checks form part of the cause or consideration from Ybaezs end, as vendor, while the lot represented the cause or consideration on the side of Lim, as vendee.[35] Ergo, Lim received value for her signature on the checks. Neither is there any indication that Lim issued the checks for the purpose of enabling Ybaez, or any other person for that matter, to obtain credit or to raise money, thereby totally debunking the presence of the third requisite of an accommodation party. WHEREFORE, in view of the foregoing, the petition is DISMISSED.