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RCBCvsCA:133107:March25,1999:J.Kapunan:FirstDivision

SYLLABI/SYNOPSIS

FIRSTDIVISION

[G.R.No.133107.March25,1999]

RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. COURT OF


APPEALSandFELIPELUSTRE,respondents.
DECISION
KAPUNAN,J.:

Asimpletelephonecallandanounceofgoodfaithonthepartofpetitionercouldhavepreventedthe
presentcontroversy.
OnMarch10,1993,privaterespondentAtty.FelipeLustrepurchasedaToyotaCorollafromToyota
Shaw,Inc.forwhichhemadeadownpaymentofP164,620.00,thebalanceofthepurchasepricetobe
paidin24equalmonthlyinstallments.Privaterespondentthusissued24postdatedchecksfortheamount
ofP14,976.00each.ThefirstwasdatedApril10,1991subsequentchecksweredatedevery10thdayof
eachsucceedingmonth.
To secure the balance, private respondent executed a promissory note[1] and a contract of chattel
mortgage[2]overthevehicleinfavorofToyotaShaw,Inc.Thecontractofchattelmortgage,inparagraph
11thereof,providedforanaccelerationclausestatingthatshouldthemortgagordefaultinthepayment
of any installment, the whole amount remaining unpaid shall become due. In addition, the mortgagor
shallbeliablefor25%oftheprincipaldueasliquidateddamages.
OnMarch14,1991,ToyotaShaw,Inc.assignedallitsrightsandinterestsinthechattelmortgageto
petitionerRizalCommercialBankingCorporation(RCBC).
All the checks dated April 10, 1991 to January 10, 1993 were thereafter encashed and debited by
RCBCfromprivaterespondent'saccount,exceptforRCBCCheckNo.279805representingthepayment
for August 10, 1991, which was unsigned. Previously, the amount represented by RCBC Check No.
279805 was debited from private respondent's account but was later recalled and recredited to him.
Becauseoftherecall,thelasttwochecks,datedFebruary10,1993andMarch10,1993,werenolonger
presentedforpayment.Thiswaspurportedlyinconformitywithpetitionerbank'sprocedurethatoncea
client'saccountwasforwardedtoitsaccountrepresentative,allremainingchecksoutstandingasofthe
datetheaccountwasforwardedwerenolongerpresentedforpayment.
On the theory that respondent defaulted in his payments, the check representing the payment for
August10,1991beingunsigned,petitioner,inaletterdatedJanuary21,1993,demandedfromprivate
respondent the payment of the balance of the debt, including liquidated damages. The latter refused,
prompting petitioner to file an action for replevin and damages before the Pasay City Regional Trial
Court(RTC).Privaterespondent,inhisAnswer,interposedacounterclaimfordamages.
Aftertrial,theRTC[3]renderedadecisiondisposingofthecaseasfollows:
WHEREFORE,inviewoftheforegoing,judgmentisherebyrenderedasfollows:
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I.Thecomplaint,forlackofcauseofaction,isherebyDISMISSEDandplaintiffRCBCishereby
ordered,
A.ToacceptthepaymentequivalenttothethreechecksamountingtoatotalofP44,938.00,without
interest
B. To release/cancel the mortgage on the car xxx upon payment of the amount of P44,938.00
withoutinterest.
C.Topaythecostofsuit

II.OnTheCounterclaim
A.PlaintiffRCBCtopayAtty.LustretheamountofP200,000.00asmoraldamages.
B.RCBCtopayP100,000.00asexemplarydamages.
C.RCBCtopayAtty.ObispoP50,000.00asAttorney'sfees.Atty.Lustreisnotentitledtoanyfee
forlawyeringforhimself.

AllawardsfordamagesaresubjecttopaymentoffeestobeassessedbytheClerkofCourt,RTC,
PasayCity.
SOORDERED.
Onappealbypetitioner,theCourtofAppealsaffirmedthedecisionoftheRTC,thus:
Wexxxconcurwiththetrialcourt'srulingthattheChattelMortgagecontractbeingacontractof
adhesionthatis,onewhereinaparty,usuallyacorporation,preparesthestipulationsthecontract,while
theotherpartymerelyaffixeshissignatureorhis"adhesion"theretoxxxistobestrictlyconstrued
againstappellantbankwhichpreparedtheformContractxxx.Hencexxxparagraph11oftheChattel
Mortgagecontract[containingtheaccelerationclause]shouldbeconstruedtocoveronlydeliberateand
advertentfailureonthepartofthemortgagortopayanamortizationasitbecamedueinlinewiththe
consistentholdingoftheSupremeCourtconstruingobscuritiesandambiguitiesintherestrictivesense
againstthedrafterthereofxxxinthelightof
Article1377oftheCivilCode.
Inthecaseatbench,plaintiffappellant'simputationofdefaulttodefendantappelleerestedsolelyonthe
factthatthe5thcheckissuedbyappelleexxxwasrecalledforlackofsignature.However,thecheckwas
recalledonlyaftertheamountcoveredtherebyhadbeendeductedfromdefendantappellee'saccount,as
shownbythetestimonyofplaintiff'sownwitnessFranciscoBulataowhowasinchargeofthe
preparationofthelistandtrialbalancesofbankcustomersxxx.The"default"wasthereforenotacaseof
failuretopay,thecheckbeingsufficientlyfunded,andwhichamountwasinfactalreadydebitted[sic]
fromappellee'saccountbytheappellantbankwhichsubsequentlyrecreditedtheamounttodefendant
appellee'saccountforlackofsignature.AlltheseactionsRCBCdidonitsownwithoutnotifying
defendantuntilsixteen(16)monthslaterwhenitwroteitsdemandletterdatedJanuary21,1993.
Clearly,appellantbankwasremissintheperformanceofitsfunctionsforitcouldhaveeasilycalledthe
defendant'sattentiontothelackofsignatureonthecheckandsentthecheckto,orsummoned,thelatter
toaffixhissignature.Itisalsotobenotedthatthedemandlettercontainsnoexplanationastohow
defendantappelleeincurredarrearagesintheamountofP66,255.70,whichiswhydefendantappellee
madeaprotestnotationthereon.
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Notably,alltheotherchecksissuedbytheappelleedatedsubsequenttoAugust10,1991anddated
earlierthanthedemandletter,weredulyencashed.Thisfactshouldhavealreadypromptedtheappellant
banktoreviewitsactionrelativetotheunsignedcheck.xxx[4]
We take exception to the application by both the trial and appellate courts of Article 1377 of the
CivilCode,whichstates:
Theinterpretationofobscurewordsorstipulationsinacontractshallnotfavorthepartywhocausedthe
obscurity.
Itbearsstressingthatacontractofadhesionisjustasbindingasordinarycontracts.[5]Itistruethat
we have, on occasion, struck down such contracts as void when the weaker party is imposed upon in
dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on equal footing.[6] Nevertheless, contracts of
adhesionarenotinvalidperse[7]theyarenotentirelyprohibited.[8]Theonewhoadherestothecontract
isinrealityfreetorejectitentirelyifheadheres,hegiveshisconsent.[9]
Whileambiguitiesinacontractofadhesionaretobeconstruedagainstthepartythatpreparedthe
same,[10]thisruleappliesonlyifthestipulationsinsuchcontractareobscureorambiguous.Iftheterms
thereofareclearandleavenodoubtupontheintentionofthecontractingparties,theliteralmeaningof
itsstipulationsshallcontrol.[11]Inthelattercase,therewouldbenoneedforconstruction.[12]
Here, the terms of paragraph 11 of the Chattel Mortgage Contract[13] are clear. Said paragraph
states:
11.IncasetheMORTGAGORfailstopayanyoftheinstallments,ortopaytheinterestthatmaybedue
asprovidedinthesaidpromissorynote,thewholeamountremainingunpaidthereinshallimmediately
becomedueandpayableandthemortgageontheproperty(ies)hereinabovedescribedmaybe
foreclosedbytheMORTGAGEE,ortheMORTGAGEEmaytakeanyotherlegalactiontoenforce
collectionoftheobligationherebysecured,andineithercasetheMORTGAGORfurtheragreestopay
theMORTGAGEEanadditionalsumof25%oftheprincipaldueandunpaid,asliquidateddamages,
whichsaidsumshallbecomepartthereof.TheMORTGAGORherebywaivesreimbursementofthe
amountheretoforepaidbyhim/ittotheMORTGAGEE.
Theabovetermsleavenoroomforconstruction.Allthatisrequiredistheapplicationthereof.
Petitioner claims that private respondent's check representing the fifth installment was "not
encashed,[14]suchthattheinstallmentforAugust1991wasnotpaid.Byvirtueofparagraph11above,
petitioner submits that it "was justified in treating the entire balance of the obligation as due and
demandable."[15]Despitedemandbypetitioner,however,privaterespondentrefusedtopaythebalance
ofthedebt.Petitioner,insum,imputesdelayonthepartofprivaterespondent.
Wedonotsubscribetopetitioner'stheory.
Article1170oftheCivilCodestatesthatthosewhointheperformanceoftheirobligationsareguilty
ofdelayareliablefordamages.Thedelayintheperformanceoftheobligation,however,mustbeeither
maliciousornegligent.[16]Thus,assumingthatprivaterespondentwasguiltyofdelayinthepaymentof
the value of the unsigned check, private respondent cannot be held liable for damages. There is no
imputation,muchlessevidence,thatprivaterespondentactedwithmaliceornegligenceinfailingtosign
the check. Indeed, we agree with the Court of Appeals' finding that such omission was mere
"inadvertence" on the part of private respondent. Toyota salesperson Jorge Geronimo testified that he
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even verified whether private respondent had signed all the checks and in fact returned three or four
unsignedcheckstohimforsigning:
Atty.Obispo:
Afterthesereceiptswereissued,whatelsedidyoudoaboutthetransaction?
A:DuringourtransactionwithAtty.Lustre,Ifoundoutwhenheissuedtomethe24checks,Ifoundout3to4
checksareunsignedandIaskedhimtosignthesechecks.
Atty.Obispo:
Whatdidyoudo?
A: I asked him to sign the checks. After signing the checks, I reviewed again all the documents, after I
reviewedallthedocumentsandfoundoutthatallarecompletedandthedownpaymentswascompleted,
wereleasedtohimthecar.[17]

Evenwhenthechecks,weredeliveredtopetitioner,itdidnotobjecttotheunsignedcheck.Inviewofthe
lack of malice or negligence on the part of private respondent, petitioner's blind and mechanical
invocationofparagraph11ofthecontractofchattelmortgagewasunwarranted.
Petitioners conduct, in the light of the circumstances of this case, can only be described as
mercenary. Petitioner had already debited the value of the unsigned check from private respondent's
accountonlytorecredititmuchlatertohim.Thereafter,petitionerencashedcheckssubsequentlydated,
then abruptly refused to encash the last two. More than a year after the date of the unsigned check,
petitioner,claimingdelayandinvokingparagraph11,demandedfromprivaterespondentpaymentofthe
valueofsaidcheckand.thatofthelasttwochecks,includingliquidateddamages.Aspointedoutbythe
trialcourt,thiswholecontroversycouldhavebeenavoidedifonlypetitionerbotheredtocallupprivate
respondent and ask him to sign the check. Good faith not only in compliance with its contractual
obligations,[18]butalsoinobservanceofthestandardinhumanrelations,foreveryperson"toactwith
justice,giveeveryonehisdue,andobservehonestyandgoodfaith."[19]behoovedthebanktodoso.
Failingthus,petitionerisliablefordamagescausedtoprivaterespondent.[20]Theseincludemoral
damages for the mental anguish, serious anxiety, besmirched reputation, wounded feelings and social
humiliationsufferedbythelatter.[21]Thetrialcourtfoundthatprivaterespondentwas
[a]clientwhohassharedtransactionsforovertwentyyearswithabankxxx.Theshabbytreatmentgiven
thedefendantisunpardonablesincehewasputtoshameandembarrassmentafterthecasewasfiledin
Court.Heisalawyerinhisownright,marriedtoanothermemberofthebar.Hesiredchildrenwhoare
allprofessionalsintheirchosenfield.Heisknowntothecommunityofgolferswithwhomhegravitates.
Surely,thefilingofthecasemadedefendantfeelsobadandbothered.
To deter others from emulating petitioners callous example, we affirm the award of exemplary
damages.[22]Asexemplarydamagesarewarranted,soareattorney'sfees.[23]
We,however,findexcessivetheamountofdamagesawardedbythetrialcourtinfavorofprivate
respondentwithrespecttohiscounterclaimsand,accordingly,reducethesameasfollows:
(a)MoraldamagesfromP200,000.00toP100,000.00,
(b)(b)ExemplarydamagesfromP100,000.00toP75,000.00,
(c)(c)Attorney'sfeesfromP50,000,00toP30,000.00.
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WHEREFORE,subjecttothesemodifications,thedecisionoftheCourtofAppealsisAFFIRMED.
SOORDERED.
Davide,Jr.,C.J.,(Chairman),Melo,andPardo,JJ.,concur.
[1]ExhibitA.
[2]ExhibitB.
[3]Branch108,presidedbyJudgePriscillaMijares.
[4]Rollo,pp.68.
[5]Articles1305,1308,CivilCode.Serravs.CourtofAppeals,229SCRA60(1994).
[6]Phil.CommercialInternationalBankvs.CourtBankvs.CourtofAppeals,255SCRA299(1996).
[7] Philippine Airlines, Inc. vs. Court of Appeals, 255 SCRA 48 (1996) Telengtan Brothers & Sons, Inc. vs. Court of
Appeals,236SCRA617(1994).
[8]TelengtanBrothers&Sons,Inc.vs.CourtofAppeals,supra,PhilippineAmericanGeneralInsuranceCo.,Inc.vs.Sweet
Lines, Inc., 212 SCRA 194 (1992) Pan American Airways vs. Rapadas, 209 SCRA 67 (1992) Saludo, Jr. vs. Court of
Appeals,207SCRA498(1992).
[9]Serravs.CourtofAppeals,supraPhilippineAmericanGeneralInsuranceCo.,Inc.vs.SweetLines,Inc.,supraSaludo,
Jr.vs.CourtofAppeals,supra.
[10]Angelesvs.Calasanz,135SCRA323(1985).
[11]Article 1370, Civil Code. Salvatierra vs. Court of Appeals, 261 SCRA 45 (1996) Abella vs. Court of Appeals 257
SCRA482(1996)Syquiavs.CourtofAppeals,217SCRA624(1993)LufthansaGermanAirlinesvs.CourtofAppeals,
208SCRA708(1992)Papavs.Alonzo,198SCRA564(1991).
[12]Leverizavs.IntermediateAppellateCourt,157SCRA283(1988).
[13]ExhibitB.
[14]Rollo,p.12.
[15]Id.,at13.
[16]IVTolentino,CommentariesandJurisprudenceontheCivilCodeofthePhilippines,1991ed.,p.113.
[17]TSN,March10,1994,pp.1516.
[18]Article1159,CivilCode.
[19]Article19,CivilCode.
[20]Article19,inrelationtoArticle21,id.
[21]Article2217,id.
[22]Article2229,id.
[23]Article2208(1),id
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