Patrimonio v. Gutierrez
REITERATIONFacts
The Antecedents: Petitioner Alvin Patrimonio and respondent Napoleon Gutierrez entered into a business venture, Slam Dunk Corporation. Patrimonio pre-signed several blank checks for business expenses and entrusted them to Gutierrez with the instruction not to fill them out without prior notification and approval. In February 1994, Gutierrez, without Patrimonio's knowledge or consent, borrowed ₱200,000.00 from respondent Octavio Marasigan, claiming it was for the construction of Patrimonio's house. Gutierrez gave Marasigan one of the pre-signed blank checks, which was filled out with "Cash," "Two Hundred Thousand Pesos Only," and the amount of "₱200,000.00," dated May 23, 1994. The check was dishonored for "ACCOUNT CLOSED" as Patrimonio's account had been closed since May 28, 1993. Marasigan sought recovery from Gutierrez and later sent demand letters to Patrimonio, which were unheeded. Marasigan filed a criminal case for violation of B.P. 22 against Patrimonio. Procedural History: On September 10, 1997, Patrimonio filed a complaint for declaration of nullity of loan and recovery of damages against Gutierrez and Marasigan. Gutierrez was declared in default. The Regional Trial Court (RTC) dismissed Patrimonio's complaint and ordered him to pay Marasigan ₱200,000.00, with the right to claim reimbursement from Gutierrez. The Court of Appeals (CA) affirmed the RTC's decision, although it found Marasigan not to be a holder in due course, it still held Patrimonio liable for the loan amount. The Petition: Patrimonio filed a petition for review on certiorari, arguing that he never authorized the loan or the check's negotiation, that a special power of attorney is required for borrowing money, that the loan was between Gutierrez and Marasigan, that the check was not filled out strictly according to his authority, and that Marasigan was not a holder in due course.
Issue(s)
Whether the contract of loan in the amount of ₱200,000.00 granted by respondent Marasigan to petitioner, through respondent Gutierrez, may be nullified for being void, and whether there is basis to hold the petitioner liable for the payment of the ₱200,000.00 loan. Whether respondent Gutierrez has completely filled out the subject check strictly under the authority given by the petitioner. Whether Marasigan is a holder in due course.
Ruling
The Supreme Court granted the petition for review on certiorari, annulling and setting aside the decision of the Court of Appeals. The Court ruled that the contract of loan was void for lack of consent from the petitioner, as Gutierrez had no special power of attorney to borrow money on Patrimonio's behalf. Consequently, Patrimonio was not bound by the loan agreement. Furthermore, the Court held that Marasigan was not a holder in due course, and since the check was not filled up strictly in accordance with the authority given by Patrimonio, Marasigan could not enforce payment against Patrimonio.
Ratio Decidendi
On the first and second issues (Nullity of Loan and Petitioner's Liability): The Court held that the contract of loan entered into by Gutierrez in behalf of Patrimonio is null and void for being void. Article 1878, paragraph 7 of the Civil Code explicitly requires a special power of attorney for an agent to loan or borrow money in behalf of the principal. The records did not show that Patrimonio executed any such special power of attorney in favor of Gutierrez, nor did Patrimonio authorize Gutierrez verbally or in writing to borrow money on his behalf. The Court reiterated that while agency may be oral, the authority to borrow money must be duly established by competent and convincing evidence other than self-serving assertions. The entrustment of pre-signed blank checks to Gutierrez did not constitute sufficient authority to borrow money or grant consent to the loan agreement. Therefore, the essential element of consent was absent, and Patrimonio was not bound by the loan agreement. On the third issue (Completion of Check Strictly Under Authority): The Court found that Gutierrez exceeded the authority given to fill up and use the check. Patrimonio's instruction was clear: the checks were for business expenses of Slam Dunk Corporation, and Gutierrez could only use them upon Patrimonio's prior approval. Gutierrez's use of the check to pay a personal loan, purportedly for the construction of Patrimonio's house, was a clear violation of these instructions. While Section 14 of the Negotiable Instruments Law (NIL) grants a prima facie authority to complete a blank instrument, this authority does not extend to its use once completed, and it is subject to contrary proof. Since Gutierrez did not secure prior approval and used the check for a purpose outside the scope of his authority, it could not be concluded that the check was completed strictly in accordance with the authority given. On the fourth issue (Marasigan as Holder in Due Course): The Court ruled that Marasigan was not a holder in due course. Section 52 of the NIL defines a holder in due course as one who takes the instrument complete and regular on its face, before it is overdue and without notice of dishonor, in good faith and for value, and without notice of any infirmity or defect in title. The testimony of Ambet Nabus revealed that Marasigan knew that the underlying obligation was not for Patrimonio, and that Gutierrez had borrowed the money. This knowledge, coupled with Marasigan's inaction and failure to verify with Patrimonio, constituted bad faith. Therefore, the presumption that a possessor of an instrument is a holder in due course was inapplicable. As Marasigan was not a holder in due course, the check was subject to personal defenses, including the fact that it was not filled up strictly in accordance with the authority given.
Main Doctrine
A pre-signed blank check, when completed and negotiated to a holder who is not in due course, is subject to personal defenses, such as the fact that the blanks were not filled up strictly in accordance with the authority given by the maker. Furthermore, a contract of loan entered into by an agent without a special power of attorney, express or implied, is void and does not bind the principal.