Naguiat v. CA

Facts:

Queao applied with Naguiat for a loan in the amount of P200,000.00, which Naguiat granted. On 11 August 1980, Naguiat indorsed to Queao Associated Bank Check No. 090990 dated 11 August 1980 for the amount of P95,000.00, which was earlier issued to Naguiat by the Corporate Resources Financing Corporation. She also issued her own Filmanbank Check No. 065314, to the order of Queao, also dated 11 August 1980 and for the amount of P95,000.00. The proceeds of these checks were to constitute the loan granted by Naguiat to Queao.

To secure the loan, Queao executed a Deed of Real Estate Mortgage dated 11 August 1980 in favor of Naguiat, and surrendered to the latter the owners duplicates of the titles covering the mortgaged properties. On the same day, the mortgage deed was notarized, and Queao issued to Naguiat a promissory note for the amount of P200,000.00, with interest at 12% per annum, payable on 11 September 1980. Queao also issued a Security Bank and Trust Company check, postdated 11 September 1980, for the amount of P200,000.00 and payable to the order of Naguiat.

Upon presentment on its maturity date, the Security Bank check was dishonored for insufficiency of funds. On the following day, 12 September 1980, Queao requested Security Bank to stop payment of her postdated check, but the bank rejected the request pursuant to its policy not to honor such requests if the check is drawn against insufficient funds.

On 16 October 1980, Queao received a letter from Naguiats lawyer, demanding settlement of the loan. Shortly thereafter, Queao and Ruebenfeldt met with Naguiat. At the meeting, Queao told Naguiat that she did not receive the proceeds of the loan, adding that the checks were retained by Ruebenfeldt, who purportedly was Naguiats agent.

Naguiat applied for the extrajudicial foreclosure of the mortgage with the Sheriff of Rizal Province, who then scheduled the foreclosure sale on 14 August 1981.Three days before the scheduled sale, Queao filed the case before the Pasay City RTC, seeking the annulment of the mortgage deed. The trial court eventually stopped the auction sale.

On 8 March 1991, the RTC rendered judgment, declaring the Deed of Real Estate Mortgage null and void, and ordering Naguiat to return to Queao the owners duplicates of her titles to the mortgaged lots. Naguiat appealed the decision before the Court of Appeals, making no less than eleven assignments of error. CA promulgated the decision now assailed before us that affirmed in toto the RTC decision.

Issues:

I. Whether or not Queao had actually received the loan proceeds which were supposed to be covered by the two checks Naguiat had issued or indorsed

II. Whether or not there is the admissibility of various representations and pronouncements of Ruebenfeldt, invoking the rule on the non-binding effect of the admissions of third persons.

Held:

The Court held that the presumption of truthfulness engendered by notarized documents is rebuttable, yielding as it does to clear and convincing evidence to the contrary, as in this case.

On the other hand, absolutely no evidence was submitted by Naguiat that the checks she issued or endorsed were actually encashed or deposited. The mere issuance of the checks did not result in the perfection of the contract of loan. For the Civil Code provides that the delivery of bills of exchange and mercantile documents such as checks shall produce the effect of payment only when they have been cashed. It is only after the checks have produced the effect of payment that the contract of loan may be deemed perfected. Art. 1934 of the Civil Code provides:

An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract.

A loan contract is a real contract, not consensual, and, as such, is perfected only upon the delivery of the object of the contract. The objects of the contract are the loan proceeds which Queao would enjoy only upon the encashment of the checks signed or indorsed by Naguiat. If indeed the checks were encashed or deposited, Naguiat would have certainly presented the corresponding documentary evidence, such as the returned checks and the pertinent bank records. Since Naguiat presented no such proof, it follows that the checks were not encashed or credited to Queaos account.

On the second issue, CA rejected the argument, holding that since Ruebenfeldt was an authorized representative or agent of Naguiat the situation falls under a recognized exception to the rule.

The existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample evidence. Naguiat instructed Ruebenfeldt to withhold from Queao the checks she issued or indorsed to Queao, pending delivery by the latter of additional collateral. Ruebenfeldt served as agent of Naguiat on the loan application of Queaos friend, Marilou Farralese, and it was in connection with that transaction that Queao came to know Naguiat. It was also Ruebenfeldt who accompanied Queao in her meeting with Naguiat and on that occasion, on her own and without Queao asking for it, Reubenfeldt actually drew a check for the sum of P220,000.00 payable to Naguiat, to cover for Queaos alleged liability to Naguiat under the loan agreement.

The Court of Appeals recognized the existence of an agency by estoppel citing Article 1873 of the Civil Code. Apparently, it considered that at the very least, as a consequence of the interaction between Naguiat and Ruebenfeldt, Queao got the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to correct Queaos impression. In that situation, the rule is clear. One who clothes another with apparent authority as his agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith, and in the honest belief that he is what he appears to be. CA is correct in invoking the said rule on agency by estoppel.

More fundamentally, whatever was the true relationship between Naguiat and Ruebenfeldt is irrelevant in the face of the fact that the checks issued or indorsed to Queao were never encashed or deposited to her account of Naguiat.