*Maria Tuazon, Alejandro P. Tuazon, Melecio P. Tuazon, Spouses Anastacio and Mary T. Buenaventura vs. Heirs of Bartolome Ramos*
**Facts:**
On different dates between May 2, 1988, and June 5, 1988, Spouses Leonilo and Maria Tuazon purchased a total of 8,326 cavans of rice from Bartolome Ramos. Out of these, they paid for 4,437 cavans but failed to settle the remaining 3,889 cavans, valued at PHP 1,211,919. To cover this debt, they issued checks drawn from Traders Royal Bank. However, when presented, the checks were dishonored due to insufficient funds. Despite repeated demands, the Tuazons did not pay.
Anticipating legal action, the Tuazons executed simulated sales of their properties to their sons, Alejandro and Melecio Tuazon, and to Spouses Anastacio and Mary Buenaventura. These transactions, dated prior to the suit, transferred ownership of several properties, leaving the Tuazons asset-free and unable to pay creditors.
In their defense, the Tuazons denied purchasing rice from Bartolome Ramos, claiming Maria Tuazon acted as an agent for Magdalena Ramos, and that one Evangeline Santos was the actual buyer who issued the checks.
Procedurally, the heirs of Bartolome Ramos, as respondents, filed civil and criminal cases against the Tuazons, which were later consolidated. The criminal cases resulted in acquittals, and the focus shifted to the civil liability. The Tuazons’ claim for the necessity of impleading Evangeline Santos was rejected by both the Regional Trial Court and the Court of Appeals.
**Issues:**
1. Whether the petitioners were agents of the respondents.
2. Whether Evangeline Santos was an indispensable party.
**Court’s Decision:**
The Supreme Court affirmed the lower court’s decision:
1. **Agency:**
– The Court upheld that factual findings of the RTC and CA are binding unless there is a grave abuse of discretion, which was not proved.
– There was no evidence establishing that an agency relationship existed between the Tuazons and Bartolome Ramos. The Tuazons claimed to be agents but failed to present credible evidence, such as a formal agreement or the consent of Bartolome Ramos.
– The Tuazons themselves filed a separate lawsuit against Santos for the checks, contradicting their claim of being mere agents.
2. **Indispensable Party:**
– The Court ruled that Evangeline Santos was not an indispensable party. The primary obligation was on the Tuazons for the unpaid rice, not on the issuer of the checks.
– According to the Negotiable Instruments Law, as endorser Maria Tuazon warranted payment and became primarily liable once the checks bounced.
– There was no contractual nexus between the respondents and Santos, thus a final determination of the case could proceed without her.
**Doctrine:**
– The case establishes that an indorser of a check becomes liable once the instrument is dishonored, reaffirming principles under the Negotiable Instruments Law.
– Party asserting agency bears the burden of proof to show the existence, nature, and extent of that agency.
– Indispensable parties are defined as those whose interests are so bound to the case that no final decision can be made without affecting them.
**Class Notes:**
– **Agency:** Requires mutual consent, an object representing a third person, actual intent to appoint and accept the appointment, and the agent must act within the scope of the authority given.
– **Important Provision:** Article 1868, Civil Code – The basis of an agency is representation.
– **Indorsement of Checks:**
– **Provision:** Section 31 and 63, Negotiable Instruments Law – Indorsement means becoming liable upon dishonor of the check. Requires indorsement to be on the instrument itself or attached.
– **Provision:** Section 66 – Defines secondary liability becoming effective and identical to the primary obligor once the check is dishonored.
**Historical Background:**
This case occurred in the late 1980s to early 2000s, a period highlighting the use of negotiable instruments (checks) in commerce and the legal ramifications of their misuse. It reflects ongoing judicial efforts to uphold financial obligations and deter fraudulent conveyance of assets to avoid debt repayment.
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