G.R. No. 228958 - People vs. Baer

Case Summary (G.R. No. 228958)

Petitioner’s Claim and Relief Sought

Petitioner filed a Complaint for Sum of Money with Application for Writ of Attachment alleging respondent was indebted in the total amount of P1,500,000.00 as the price of construction materials supplied for the Macagtas Dam project. Petitioner alleged that respondent issued three bank checks payable to “CASH” (P500,000.00 each) dated January 31, 1998, March 13, 1998, and April 3, 1998, which were presented for encashment on June 29, 1998 and dishonored due to a stop payment order. Petitioner claimed respondent unjustly refused to pay and committed fraud and sought recovery of the indebtedness.

Respondent’s Defense

Respondent denied personal liability and asserted three principal defenses: (a) the checks belonged to Unimasters Conglomeration, Inc., a separate juridical entity; (b) there was no contract between petitioner and respondent personally; and (c) if any cause of action existed, it should have been asserted against Unimasters, not against respondent. Respondent acknowledged signing the checks but maintained they were issued to Engr. Merelos as replenishment of the project revolving fund and that Engr. Merelos had lost the checks; Unimasters thereafter allegedly issued a stop payment order.

Evidence Adduced at Trial

Petitioner testified to an oral agreement with respondent for the supply of aggregates and produced the three dishonored checks, a demand letter specifying check serial numbers and details, and offered testimony from Jose Chie Ubas and bank witness Francisco Barrelo corroborating deliveries and the dishonor. Respondent presented testimony from Unimasters’ comptroller Murillo denying that petitioner was a supplier, asserting the checks were corporate, were intended for replenishment of the revolving fund, and that Murillo issued a stop payment order after the checks were reported lost. Respondent admitted he signed the checks but claimed they were not issued to petitioner.

RTC Ruling

The RTC found petitioner had a cause of action against respondent. The court relied on the demand letter (which detailed check serial numbers, dates and amounts) and the dishonored checks in petitioner’s possession, and applied the disputable presumption under Section 24 of the Negotiable Instruments Law (NIL) that every negotiable instrument is prima facie issued for valuable consideration and that signatories became parties thereto for value. The RTC concluded respondent failed to rebut this presumption, ordered respondent to pay P1,500,000.00 plus legal interest from June 1998 until fully paid, and awarded litigation expenses, attorney’s fees and costs.

Court of Appeals’ Ruling

The CA reversed and dismissed the complaint for lack of cause of action, holding respondent was not the proper defendant because the checks were drawn in the name of Unimasters and thus suggested Unimasters, not respondent individually, was the obligor. The CA treated the corporate identity as dispositive, finding the checks could only support a claim against Unimasters. The CA also noted the absence of delivery receipts or similar proof of materials delivered and declined to apply piercing the corporate veil because the argument was raised on appeal and records lacked facts supporting that doctrine. The CA therefore found Unimasters an indispensable party and deemed the case improperly brought against respondent.

Issue Before the Supreme Court

Whether the Court of Appeals erred in dismissing petitioner’s complaint for lack of cause of action by concluding respondent was not the proper party and that the corporate drawee precluded a cause of action against respondent personally.

Applicable Law and Constitutional Basis

Because the decision under review was rendered in 2017, the Court applied the 1987 Philippine Constitution. Controlling substantive and procedural rules included the Negotiable Instruments Law (notably Sections 16 and 24), Civil Code principles on obligations and contracts, and established standards of appellate review on findings of fact and prima facie presumptions.

Legal Standard on Cause of Action and Presumptions

The Supreme Court reiterated that cause of action is determined from the allegations of the complaint and that in suits for recovery of sums of money the plaintiff bears the burden of proof. However, where the plaintiff produces an instrument evidencing indebtedness, Section 24 of the NIL gives rise to a disputable presumption that the instrument was issued for valuable consideration and that signatories are parties thereto for value. This presumption dispenses with the need for further documentary proof unless rebutted by the defendant.

Analysis of Evidence and Admissions

The Court emphasized respondent’s admission that he signed the checks and that petitioner possessed the dishonored instruments. The demand letter specifying serial numbers and check particulars was admitted by respondent. The Court accepted the RTC’s factual findings that it was unlikely petitioner, if in wrongful possession, would have sent such a detailed demand letter, and noted the absence of any action by respondent or Unimasters to recover a substantial sum allegedly lost or stolen. Given respondent’s admissions and the documentary proof in petitioner’s hands, the Court found the presumption under Section 24 stood unrebutted and that the RTC’s credibility findings merited deference under the standard that appellate courts do not reweigh evidence or reassess witness demeanor absent compelling reason.

On Corporate Checks, Privity and Personal Liability

The Supreme Court held that the corporate character of the checks (i.e., checks drawn on Unimasters’ account) did not necessarily negate petitioner’s cause of action against respondent pers

Case Syllabus (G.R. No. 228958)

Procedural History

Petition for review on certiorari assails the Court of Appeals (CA) Decision dated October 28, 2014 in CA-G.R. CV No. 04024 dismissing petitioner Manuel C. Ubas, Sr.’s complaint for lack of cause of action.
Original action was a Complaint for Sum of Money with Application for Writ of Attachment filed December 14, 2001 before the Regional Trial Court (RTC) of Catarman, Northern Samar, Branch 19, docketed as Civil Case No. C-1071.
RTC rendered a Decision dated January 30, 2008 finding petitioner had a cause of action and ordering respondent to pay P1,500,000.00 plus interest, litigation expenses, attorney’s fees, and costs; respondent’s motion for reconsideration was denied (Resolution dated August 19, 2008; motion for reconsideration dated February 26, 2008).
Respondent filed notice of appeal dated September 19, 2008 to the CA.
CA Decision dated October 28, 2014 reversed the RTC and dismissed the complaint for lack of cause of action; petitioner then filed the present petition to the Supreme Court.
Decision of the Supreme Court (Perlas-Bernabe, J.) dated February 6, 2017 grants the petition, sets aside the CA Decision, and reinstates the RTC Decision dated January 30, 2008.

Parties and Caption

Petitioner: Manuel C. Ubas, Sr.
Respondent: Wilson Chan (doing business under the name and style of UNIMASTER / Unimasters Conglomeration, Inc. referenced in pleadings and testimony).
Case citation: G.R. No. 215910; reported at 805 Phil. 264; Decision authored by Justice Perlas-Bernabe.

Facts — Transaction and Allegations

Petitioner alleged respondent, “doing business under the name and style of UNIMASTER,” was indebted to him in the amount of P1,500,000.00 for price of boulders, sand, gravel, and other construction materials allegedly purchased for the Macagtas Dam project in Barangay Macagtas, Catarman, Northern Samar.
Alleged obligation became due and demandable and respondent unjustly refused to pay despite repeated demands; last demand was by Demand Letter received December 5, 2001 per Registry Return Receipt.
Petitioner alleged respondent issued three (3) bank checks, payable to “CASH,” of P500,000.00 each dated January 31, 1998, March 13, 1998, and April 3, 1998 (the “subject checks”).
Petitioner presented that the subject checks were presented for encashment on June 29, 1998 and were dishonored due to a stop payment order.
Petitioner alleged respondent was guilty of fraud in incurring the obligation because of the dishonored checks.

Pleadings and Defenses

Respondent filed an Answer with Motion to Dismiss (dated May 10, 2002) arguing:
- The complaint states no cause of action because the checks belong to Unimasters Conglomeration, Inc. (Unimasters), not to him personally.
- There was no contract that ever existed between him and petitioner.
- If petitioner had any right of action, the complaint should have been filed against Unimasters, a separately juridical corporate entity, not against him personally.
Respondent admitted signing the subject checks but asserted they were issued not to petitioner but to Engr. Ereberto Merelos (project engineer) as replenishment of the project’s revolving fund; Engr. Merelos allegedly lost the checks sometime in January 1998.
Unimasters’ comptroller, Belma Murillo, testified respondent, as President of Unimasters, instructed issuance of a Stop Payment Order on April 10, 1998.

Evidence Presented at Trial

For petitioner:
- Petitioner’s testimony that on January 1, 1998 he entered into a verbal agreement with respondent to supply materials for the Macagtas Dam project.
- The three subject checks given to petitioner, delivered to his office by respondent’s worker on different occasions, and later deposited by petitioner on June 29, 1998.
- Demand letter detailing serial numbers, dates and amounts of checks.
- Testimony of Jose Chie Ubas, operations manager of Ubas Construction, Inc., who accompanied deliveries of aggregates in 1998 to the project and testified respondent issued checks for their payment.
- Testimony of Francisco Barrelo, former Far East Bank employee, that the checks were dishonored upon presentment due to a stop payment order.
For respondent / Unimasters:
- Testimony of Belma Murillo (Unimasters’ comptroller) that Unimasters was contracted by the Department of Public Works and Highways for the Macagtas Dam project; Engr. Merelos supervised work, deliveries, payments, negotiated supply and revolving fund; subject checks issued for replenishment of revolving fund and lost by Engr. Merelos; respondent instructed stop payment order upon being informed.
- Murillo denied any delivery receipts or proof of delivery from petitioner being processed by Unimasters.
- Respondent admitted signing the checks and testified they were issued to Engr. Merelos / for Unimasters’ revolving fund; respondent also described their usual procedure of not entering written contracts for supplies and asserted petitioner was not among their suppliers because petitioner never submitted bills attaching purchase orders and delivery receipts as other suppliers did.

Trial Court (RTC) Findings and Ruling (Decision dated January 30, 2008)

RTC ruled petitioner had a cause of action against respondent:
- RTC took note that petitioner’s demand letter, which specified serial numbers, dates and amounts of checks, was undisputed by respondent.
- RTC found respondent’s claim that the checks were lost and only came into petitioner’s possession not credible, observing petitioner would have incriminated himself had he stolen the checks by admitting particulars in the demand letter; respondent did not file a theft case related to the lost checks.
- RTC found respondent failed to overcome the disputable presumption under Section 24 of Act No. 2031 (Negotiable Instruments Law) that every party to an instrument acquired it for a valuable consideration.
RTC ordered respondent to pay petitioner P1,500,000.00 representing the principal obligation plus legal interests from June 1998 until fully paid, P40,000 as litigation expenses, P50,000 as attorney’s fees, and costs o