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September 26, 2016

Nordic Asia vs. CA

By With No comments:
  • This case involves two cases.
  • The first case was an extrajudicial foreclosure of property instituted by Nordic Asia against Sextant Maritime for the latter’s failure in paying a loan.
  • The second case was a collection case filed by Nam Ung Maritime and 27 crew members against Sextant Maritime for recovery of unpaid wages, overtime pay and other benefits. The crew members here were able to cause the attachment of the vessel.
  • Upon learning of the collection case, Nordic Asia thereafter filed a motion for leave to intervene in the said case. 
  • It alleged that they hold a mortgage over the vessel and that their intervention is only for the purpose of opposing the crew members' unfounded and grossly exaggerated claim. 
  • RTC granted the said motion. (NOTE: the attachment of the vessel was discharged after Nordic put up a counterbound)
  • The lower court ruled Nordic Asia has no right to intervene because its complaint-in-intervention failed to state a cause of action and that the requisites for intervention are not present.

Issue: WON the complaint-in-intervention filed by Nordic Asia was proper. NO


The Supreme Court ruled in the negative. It enumerated the two requirements for intervention; namely:
[a] legal interest in the matter in litigation; and 
[b]consideration must be given as to whether the adjudication of the rights of the original parties may be delayed or prejudiced, or whether the intervenor's rights may be protected in a separate proceeding or not.

In this case, Nordic Asia failed to meet the requirements.

As to the first requirement, the SC said that: Legal interest, which entitles a person to intervene, must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by direct legal operation and effect of the judgment.

Nordic Asia, being co-creditors, are not the parties liable for the claims of Nam Ung and the crew members. Also, their remedies as unpaid mortgagees remain preserved as the collection case will not preclude the foreclosure of the vessel. Therefore, the collection case has no “direct” effect on the petitioners.

As to the second requisite, Nordic Asis’a rights were already protected through the extrajudicial foreclosure proceeding while on the other hand, the rights of Nam Ung and crew members have been unduly delayed or prejudiced. It was noted by the SC that the decision of the RTC in favor of Nam Ung and crew members never attained finality even if the actual judgment obligors (Sextant) neverf filed an appeal. Clearly, the only parties prolonging the collection case are the intervenors or Nordic Asia.

Re: intervention pro interesse suo *citing Int’l. Banking Corp vs. Corrales case (a lien or statutory right of preference clothed the intervenor with an interest in the subject-matter in litigation) and Joaquin Herrera (intervention pro interesse suo is a mode of intervention wherein a stranger desires to intervene for the purpose of asserting a property right which is the subject matter of litigation without becoming a formal plaintiff or defendant)

As to the argument of Nordic Asia that its intervention was in the nature of an intervention pro interesse suo, the SC said that:
In the International Banking Corp. case, intervention was allowed because the intervenor had a superior right of preference over the subject property and he had sought to enforce his own claims against the defendant and to foreclose on the said subject property. 
o Nordic prayed in this casethat they be allowed to intervene, on the basis of their secondary right as unpaid mortgagees, merely to oppose the claims of respondents and not for the purpose of enforcing their own claims.
In the Joaquin case, the plaintiff sought to compel the local officials of Caloocan to issue a cockpit license to him. A third party intervened to oppose the plaintiff's application and to assert his own right by asking that the cockpit license be issued to him instead. 
o In this case, Nordic wanted only to oppose the claims of respondents without asserting their unpaid mortgage.

o Legal interest, which entitles a person to intervene, must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by direct legal operation and effect of the judgment.
o Mortgagee – Nordic Asia
o Mortagagor – Sextant Maritime

  • G.R. No. 111159             
  • July 13, 2004
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Q & A: Certification Election

By With No comments:
The BUREAU OF LABOR RELATIONS covers the important aspects of labor relations. This department sets the environment for a healthy relationship by making both the employer and the employee aware of their rights and obligations. The BLR fosters an environment where employers and employees can reach a compromise regarding their issues and contribute in policy-making.

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September 25, 2016

Quileste vs. People

By With No comments:
  • Virgilio Quileste is a public officer found liable by the RTC for malversation.
  • He appealed with the CA.
  • The CA dismissed outright the appeal because Quileste. (Reason: Failure to furnish the Office of the Solicitor General a copy of his Motion for Extension to File Appellant’s Brief and his Appellant’s Brief in violation of Rule 124, Section 3.)
  • He moved to reconsider the said CA resolution.
  • The motion was denied by the CA on the finding that despite allegation that a copy of the motion was served upon the OSG via a registered mail, the registry receipt was not attached to the motion in violation of Sections 5 and 13 of Rule 13.
  • Furthermore, the affidavit of service attached to the motion to rectify the defect in appellant’s brief showed that it was filed via a registry mail and the registry receipt was not attached to the said affidavit. 
  • There was no explanation why the registered mail was resorted to in the service of appellant’s brief upon the OSG in violation of Section 11 and 13 of Rule 13.

Issue: WON the act of the CA in dismissing the appeal is proper based on mere technicality despite showing of substantial compliance with the requirements. 


The Court did not really discuss whether or not there was a violation of Section 11 of Rule 13 of the Rules.

It only ruled that Quileste should have appealed the RTC Decision of conviction to the Sandiganbayan within 15 days from the promulgation of the judgment or from the notice of the final order appealed from.

By lodging his appeal with the CA, which in turn erred in taking cognizance of the same, although it dismissed the appeal on technical grounds, the period within which to appeal with the proper court, the Sandiganbayan, lapsed.

Thus, Quileste lost his right to appeal. 

The RTC decision became final and executory upon the expiration of the period to appeal.


Rule 124, Section 3: When brief for the appellant to be filed – Within 30 days from receipt by the appellant or his counsel of the notice from the clerk of court of the Court of Appeals that the evidence, oral and documentary, is already attached to the record, the appellant shall file seven copies of his brief with the clerk of court which shall be accompanied by proof of service of two copies thereof upon the appellee.

Thus, Quileste lost his right to appeal.  Consequently, he cannot come before this Court to question the dismissal of his appeal, the RTC Decision having become final and executory upon the expiration of the period to appeal.

Rule 13 Section 11. Priorities in modes of service and filing. — Whenever practicable, the service and filing of pleadings and other papers shall be done personally. Except with respect to papers emanating from the court, a resort to other modes must be accompanied by a written explanation why the service or filing was not done personally. A violation of this Rule may be cause to consider the paper as not filed. (n)

  • G.R. No. 180334
  • February 18, 2009
  • VIRGILIO V. QUILESTE, Petitioner, - versus - PEOPLE OF THE PHILIPPINES, Respondent.
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September 23, 2016

Spouses Paragas vs. Heirs of Balacano

By With No comments:
  • Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of Lot 1175-E and Lot 1175-F of the Subd. Plan Psd-38042 [located at Baluarte, Santiago City, Isabela].
  • Gregorio and Lorenza had three children, namely: Domingo, Catalino and Alfredo, all surnamed Balacano. 
  • Lorenza died on December 11, 1991. Gregorio, on the other hand, died on July 28, 1996. Petitioners were the grandchildren of Gregorio. 
  • Prior to his death, Gregorio was admitted at the Veterans General Hospital in Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until July 19, 1996. He was transferred in the afternoon of July 19, 1996 to the Veterans Memorial Hospital in Quezon City where he was confined until his death. 
  • Respondents essentially alleged – in asking for the nullification of the deed of sale – that: (1) their grandfather Gregorio could not have appeared before the notary public on July 22, 1996 at Santiago City because he was then confined at the Veterans Memorial Hospital in Quezon City; (2) at the time of the alleged execution of the deed of sale, Gregorio was seriously ill, in fact dying at that time, which vitiated his consent to the disposal of the property; and (3) Catalino (uncle) manipulated the execution of the deed and prevailed upon the dying Gregorio to sign his name on a paper the contents of which he never understood because of his serious condition. 
  • Alternatively, they alleged that assuming Gregorio was of sound and disposing mind, he could only transfer a half portion of Lots 1175-E and 1175-F as the other half belongs to their grandmother Lorenza who predeceased Gregorio – they claimed that Lots 1175-E and 1175-F form part of the conjugal partnership properties of Gregorio and Lorenza. 
  • Finally, they alleged that the sale to the Spouses Paragas covers only a 5-hectare portion of Lots 1175-E and 1175-F leaving a portion of 6,416 square meters that Catalino is threatening to dispose. They asked for the nullification of the deed of sale executed by Gregorio and the partition of Lots 1175-E and 1175-F. 
  • The defendants-appellees denied the material allegations of the complaint. Additionally, they claimed that: (1) the deed of sale was actually executed by Gregorio on July 19 (or 18), 1996 and not July 22, 1996; (2) the Notary Public personally went to the Hospital in Bayombong, Nueva Vizcaya on July 18, 1996 to notarize the deed of sale already subject of a previously concluded covenant between Gregorio and the Spouses Paragas; (3) at the time Gregorio signed the deed, he was strong and of sound and disposing mind; (4) Lots 1175-E and 1175-F were Gregorio’s separate capital and the inscription of Lorenza’s name in the titles was just a description of Gregorio’s marital status; (5) the entire area of Lots 1175-E and 1175-F were sold to the Spouses Paragas. 

Issues:Whether or not Gregorio has executed a perfected Deed of Sale. NO

Ruling: Gregorio’s consent was absent in the execution of the Deed of Sale. 

It is not disputed that when Gregorio signed the deed of sale, Gregorio was seriously ill, as he in fact died a week after the deed’s signing. Gregorio died of complications caused by cirrhosis of the liver. Gregorio’s death was neither sudden nor immediate; he fought at least a month-long battle against the disease until he succumbed to death on July 22, 1996. Given that Gregorio purportedly executed a deed during the last stages of his battle against his disease, we seriously doubt whether Gregorio could have read, or fully understood, the contents of the documents he signed or of the consequences of his act. We note in this regard that Gregorio was brought to the Veteran’s Hospital at Quezon City because his condition had worsened on or about the time the deed was allegedly signed. This transfer and fact of death not long after speak volumes about Gregorio’s condition at that time. We likewise see no conclusive evidence that the contents of the deed were sufficiently explained to Gregorio before he affixed his signature. 

Article 24 of the Civil Code tells us that in all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. 

In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in the hospital. Gregorio was an octogenarian at the time of the alleged execution of the contract and suffering from liver cirrhosis at that – circumstances which raise grave doubts on his physical and mental capacity to freely consent to the contract.

  • G.R. No. 168220
  • August 31, 2005
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Associated vs. CA

By With No comments:
  • The Province of Tarlac maintains a current account with the Philippine National Bank (PNB) Tarlac Branch where the provincial funds are deposited.
  • Checks issued by the Province are signed by the Provincial Treasurer and countersigned by the Provincial Auditor or the Secretary of the Sangguniang Bayan.
  • A portion of the funds of the province is allocated to the Concepcion Emergency Hospital. The allotment checks for said government hospital are drawn to the order of "Concepcion Emergency Hospital, Concepcion, Tarlac" or "The Chief, Concepcion Emergency Hospital, Concepcion, Tarlac." 
  • The checks are released by the Office of the Provincial Treasurer and received for the hospital by its administrative officer and cashier.
  • It was then discovered that the hospital did not receive several allotment checks drawn by the Province.
  • The Provincial Treasurer requested the manager of the PNB to return all of its cleared checks which were issued from 1977 to 1980 in order to verify the regularity of their encashment. 
  • After the checks were examined, the Provincial Treasurer learned that 30 checks amounting to P203,300.00 were encashed by one Fausto Pangilinan, with the Associated Bank acting as collecting bank.
  • It turned out that Fausto Pangilinan, who was the administrative officer and cashier of Concepcion hospital until his retirement, collected the questioned checks from the office of the Provincial Treasurer. He claimed to be assisting or helping the hospital follow up the release of the checks and had official receipts.
  • Pangilinan sought to encash the first check with Associated Bank. However, the manager of Associated Bank refused and suggested that Pangilinan deposit the check in his personal savings account with the same bank. Pangilinan was able to withdraw the money when the check was cleared and paid by the drawee bank, PNB.
  • After forging the signature of Dr. Adena Canlas who was chief of the payee hospital, Pangilinan followed the same procedure for the other checks.
  • All the checks bore the stamp of Associated Bank which reads "All prior endorsements guaranteed ASSOCIATED BANK."
  • Jesus David, the manager of Associated Bank testified that Pangilinan made it appear that the checks were paid to him for certain projects with the hospital. He did not find as irregular the fact that the checks were not payable to Pangilinan but to the Concepcion Emergency Hospital. While he admitted that his wife and Pangilinan's wife are first cousins, the manager denied having given Pangilinan preferential treatment on this account.
  • The Provincial Treasurer wrote the manager of the PNB seeking the restoration of the various amounts debited from the current account of the Province.
  • In turn, the PNB manager demanded reimbursement from the Associated Bank on May 15, 1981. 
  • As both banks resisted payment, the Province of Tarlac brought suit against PNB which, in turn, impleaded Associated Bank as third-party defendant. The latter then filed a fourth-party complaint against Adena Canlas and Fausto Pangilinan.
  • RTC ordered: PNB to pay the Province of Tarlac P203,000 with interest, ordered Associated Bank to reimburse PNB for P203,000, Canlas and Pangilinan were not held liable.
  • CA affirmed in toto RTC’s ruling.
  • Arguments of the parties:
    • PNB: Province of Tarlac was negligent since it delivered and released the checks to Pangilinan who was already retired from the hospital and that the CA should have directed Associated Bank to pay the liability to the Province of Tarlac to avoid circuity.
    • Associated Bank: PNB as drawee bank is estopped from asserting the defense of guarantee of prior indorsements against Associated Bank (collecting bank). 
    • Associated Bank claims that PNB was at fault and should solely bear the loss because it cleared and paid the forged checks.xxx

Issue: Where thirty checks bearing forged endorsements are paid, who bears the loss, the drawer, the drawee bank or the collecting bank?

Held: Shared liability (50%-50%) [depending on the contributory negligence of the party]

Discussion re: Section 23 of the NIL on forged signature
The case at bench concerns checks payable to the order of Concepcion Emergency Hospital or its Chief. They were properly issued and bear the genuine signatures of the drawer, the Province of Tarlac. The infirmity in the questioned checks lies in the payee's (Concepcion Emergency Hospital) indorsements which are forgeries. At the time of their indorsement, the checks were order instruments. Checks having forged indorsements should be differentiated from forged checks or checks bearing the forged signature of the drawer.

Where the instrument is payable to order at the time of the forgery, such as the checks in this case, the signature of its rightful holder (here, the payee hospital) is essential to transfer title to the same instrument. When the holder's indorsement is forged, all parties prior to the forgery may raise the real defense of forgery against all parties subsequent thereto.

An indorser of an order instrument warrants "that the instrument is genuine and in all respects what it purports to be; that he has a good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his indorsement valid and subsisting." He cannot interpose the defense that signatures prior to him are forged.

The drawee bank has the liability to pay the check to the order of the payee; the risk of loss falls on the drawee bank
The bank on which a check is drawn, known as the drawee bank, is under strict liability to pay the check to the order of the payee. The drawer's instructions are reflected on the face and by the terms of the check. Payment under a forged indorsement is not to the drawer's order. 

When the drawee bank pays a person other than the payee, it does not comply with the terms of the check and violates its duty to charge its customer's (the drawer) account only for properly payable items. Since the drawee bank did not pay a holder or other person entitled to receive payment, it has no right to reimbursement from the drawer. The general rule then is that the drawee bank may not debit the drawer's account and is not entitled to indemnification from the drawer. The risk of loss must perforce fall on the drawee bank.

Associated Bank will necessarily be liable to PNB for the checks bearing forged indorsements
In cases involving a forged check, where the drawer's signature is forged, the drawer can recover from the drawee bank. No drawee bank has a right to pay a forged check. If it does, it shall have to recredit the amount of the check to the account of the drawer. The liability chain ends with the drawee bank whose responsibility it is to know the drawer's signature since the latter is its customer.

In this case, the checks were indorsed by the collecting bank (Associated Bank) to the drawee bank (PNB). The former will necessarily be liable to the latter for the checks bearing forged indorsements. If the forgery is that of the payee's or holder's indorsement, the collecting bank is held liable, without prejudice to the latter proceeding against the forger.Since a forged indorsement is inoperative, the collecting bank had no right to be paid by the drawee bank. The former must necessarily return the money paid by the latter because it was paid wrongfully.

Discussion on Section 66 of the NIL and liability of the collecting bank or last indorser
More importantly, by reason of the statutory warranty of a general indorser in section 66 of the Negotiable Instruments Law, a collecting bank which indorses a check bearing a forged indorsement and presents it to the drawee bank guarantees all prior indorsements, including the forged indorsement. It warrants that the instrument is genuine, and that it is valid and subsisting at the time of his indorsement. Because the indorsement is a forgery, the collecting bank commits a breach of this warranty and will be accountable to the drawee bank. This liability scheme operates without regard to fault on the part of the collecting/presenting bank. Even if the latter bank was not negligent, it would still be liable to the drawee bank because of its indorsement.

The Court has consistently ruled that "the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements."

The drawee bank is not similarly situated as the collecting bank 
The drawee makes no warranty as to the genuineness. of any indorsement. The drawee bank's duty is but to verify the genuineness of the drawer's signature and not of the indorsement because the drawer is its client.

Moreover, the collecting bank is made liable because it is privy to the depositor who negotiated the check. The bank knows him, his address and history because he is a client. It has taken a risk on his deposit. The bank is also in a better position to detect forgery, fraud or irregularity in the indorsement.

The province of Tarlac was equally negligent and should therefore share the burden of loss from the checks bearing the forged instruments
The Province of Tarlac permitted Fausto Pangilinan to collect the checks when the latter, having already retired from government service, was no longer connected with the hospital. With the exception of the first check (dated January 17, 1978), all the checks were issued and released after Pangilinan's retirement on February 28, 1978. After nearly three years, the Treasurer's office was still releasing the checks to the retired cashier. In addition, some of the aid allotment checks were released to Pangilinan and the others to Elizabeth Juco, the new cashier. The fact that there were now two persons collecting the checks for the hospital is an unmistakable sign of an irregularity which should have alerted employees in the Treasurer's office of the fraud being committed. There is also evidence indicating that the provincial employees were aware of Pangilinan's retirement and consequent dissociation from the hospital.

The failure of the Province of Tarlac to exercise due care contributed to a significant degree to the loss tantamount to negligence. Hence, the Province of Tarlac should be liable for part of the total amount paid on the questioned checks.

PNB is liable for its failure to pay only according to the terms of the check
The drawee bank PNB also breached its duty to pay only according to the terms of the check. Hence, it cannot escape liability and should also bear part of the loss.

PNB can recover from the Associated Bank
The situation in the case at bench is analogous to the case of Associated Bank vs. CA, for it was not the payee who deposited the checks with the collecting bank. Here, the checks were all payable to Concepcion Emergency Hospital but it was Fausto Pangilinan who deposited the checks in his personal savings account.

Although Associated Bank claims that the guarantee stamped on the checks (All prior and/or lack of endorsements guaranteed) is merely a requirement forced upon it by clearing house rules, it cannot but remain liable. The stamp guaranteeing prior indorsements is not an empty rubric which a bank must fulfill for the sake of convenience. 

A bank is not required to accept all the checks negotiated to it
It is within the bank's discretion to receive a check for no banking institution would consciously or deliberately accept a check bearing a forged indorsement. When a check is deposited with the collecting bank, it takes a risk on its depositor. It is only logical that this bank be held accountable for checks deposited by its customers.A delay in informing the collecting bank (Associated Bank) of the forgery, which deprives it of the opportunity to go after the forger, signifies negligence on the part of the drawee bank (PNB) and will preclude it from claiming reimbursement.

Even if the rule mandates that the checks be returned within 24 hours, PNB did not commit negligent delay
The rule mandates that the checks be returned within twenty-four hours after discovery of the forgery but in no event beyond the period fixed by law for filing a legal action. The rationale of the rule is to give the collecting bank (which indorsed the check) adequate opportunity to proceed against the forger. If prompt notice is not given, the collecting bank maybe prejudiced and lose the opportunity to go after its depositor.

PNB gave prompt notice to Associated Bank and the latter bank was not prejudiced in going after Fausto Pangilinan. After the Province of Tarlac informed PNB of the forgeries, PNB necessarily had to inspect the checks and conduct its own investigation. Thereafter, it requested the Provincial Treasurer's office on March 31, 1981 to return the checks for verification. The Province of Tarlac returned the checks only on April 22, 1981. Two days later, Associated Bank received the checks from PNB.

PNB is not estopped from recovering even if it paid and cleared the checks
Even if PNB cleared and paid the checks, it can still recover from Associated Bank. This is true even if the payee's Chief Officer who was supposed to have indorsed the checks is also a customer of the drawee bank. 

PNB's duty was to verify the genuineness of the drawer's signature and not the genuineness of payee's indorsement. Associated Bank, as the collecting bank, is the entity with the duty to verify the genuineness of the payee's indorsement.

Ruling of the court:
The Court finds as reasonable, the proportionate sharing of fifty percent - fifty percent (50%-50%). Due to the negligence of the Province of Tarlac in releasing the checks to an unauthorized person (Fausto Pangilinan), in allowing the retired hospital cashier to receive the checks for the payee hospital for a period close to three years and in not properly ascertaining why the retired hospital cashier was collecting checks for the payee hospital in addition to the hospital's real cashier, respondent Province contributed to the loss amounting to P203,300.00 and shall be liable to the PNB for fifty (50%) percent thereof. In effect, the Province of Tarlac can only recover fifty percent (50%) of P203,300.00 from PNB.

The collecting bank, Associated Bank, shall be liable to PNB for fifty (50%) percent of P203,300.00. It is liable on its warranties as indorser of the checks which were deposited by Fausto Pangilinan, having guaranteed the genuineness of all prior indorsements, including that of the chief of the payee hospital, Dr. Adena Canlas. Associated Bank was also remiss in its duty to ascertain the genuineness of the payee's indorsement.

  • G.R. No. 107382/G.R. No. 107612            
  •  January 31, 1996
  • x x x x x x x x x x x x x x x x x x x x x
  • G.R. No. 107612             
  • January 31, 1996
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