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BPI Card Corp. v. CA: Effect of Post-dating a check, it does not automatically extinguish the
obligation upon issuance, it is from the time it is encashed that the obligation is extinguished

FACTS: The records of this case show that plaintiff, who is a lawyer by profession was a
complimentary member of BECC from February 1988 to February 1989 and was issued Credit Card
No. 100-012-5534

Their contractual relations went on smoothly until his statement of account for October, 1989
amounting to P8,987.84 was not paid in due time. The plaintiff admitted having inadvertently failed
to pay his account for the said month because he was in Quezon province attending to some
professional and personal commitments. He was informed by his secretary that defendant was
demanding immediate payment of his outstanding account, was requiring him to issue a check
for P15,000.00 which would include his future bills, and was threatening to suspend his credit card.

Plaintiff issued Far East Bank and Trust Co. Check No. 494675 in the amount of P15,000.00,
postdated December 15, 1989 which was received on November 23, 1989 by Tess Lorenzo, an
employee of the defendant (Exhs. J and J-1), who in turn gave the said check to Jeng Angeles, a co-
employee who handles the account of the plaintiff. The check remained in the custody of Jeng
Angeles. Mr. Roberto Maniquiz, head of the collection department of defendant was formally
informed of the postdated check about a week later.

On November 28, 1989, defendant served plaintiff a letter by ordinary mail informing him of the
temporary suspension of the privileges of his credit card and the inclusion of his account number in
their Caution List. He was also told to refrain from further use of his credit card to avoid any
inconvenience/embarrassment and that unless he settles his outstanding account with the
defendant within 5 days from receipt of the letter, his membership will be permanently cancelled
(Exh. 3). There is no showing that the plaintiff received this letter before December 8, 1989.

Confident that he had settled his account with the issuance of the postdated check, plaintiff invited
some guests on December 8, 1989 and entertained them at Caf Adriatico. When he presented his
credit card to Caf Adriatico for the bill amounting to P735.32, said card was dishonored. One of his
guests, Mary Ellen Ringler, paid the bill

In a letter addressed to the BPI dated December 12, 1989, plaintiff requested that he be sent the
exact billing due him as of December 15, 1989, to withhold the deposit of his postdated check and
that said check be returned to him because he had already instructed his bank to stop the payment
thereof as the defendant violated their agreement that the plaintiff issue the check to the defendant
to cover his account amounting to only P8,987.84 on the condition that the defendant will not
suspend the effectivity of the card

Plaintiff sent BPI another letter dated March 12, 1990 reminding the latter that he had long
rescinded and cancelled whatever arrangement he entered into with defendant and requesting for
his correct billing, less the improper charges and penalties, and for an explanation within five (5)
days from receipt thereof why his card was dishonored on December 8, 1989 despite assurance to
the contrary by defendant's personnel-in-charge, otherwise the necessary court action shall be filed
to hold defendant responsible for the humiliation and embarrassment suffered by him

The defendant served its final demand to the plaintiff dated March 21, 1990 requiring him to pay in
full his overdue account, including stipulated fees and charges, within 5 days from receipt thereof
or face court action also to replace the postdated check with cash within the same period or face
criminal suit for violation of the Bouncing Check Law (Exh. G/Exh. 13). The plaintiff, in a reply letter
dated April 5, 1990 (Exh. H), demanded defendant's compliance with his request in his first letter
dated March 12, 1990 within three (3) days from receipt, otherwise the plaintiff will file a case
against them

Plaintiff filed a case for damages against BPI, after trial, the trial court ruled, finding BPI abused its
right in contravention of Article 19 of the Civil Code.

CA affirmed the decision of RTC: However, while it is true that, as indicated in the terms and
conditions of the application for BPI credit card, upon failure of the cardholder to pay his
outstanding obligation for more than thirty (30) days, the defendant can automatically suspend or
cancel the credit card, that reserved right should not have been abused, as it was in fact abused, in
plaintiff's case. What is more peculiar here is that there have been admitted communications
between plaintiff and defendant prior to the suspension or cancellation of plaintiff's credit card and
his inclusion in the caution list. However, nowhere in any of these communications was there ever a
hint given to plaintiff that his card had already been suspended or cancelled. In fact, the Court
observed that while defendant was trying its best to persuade plaintiff to update its account and
pay its obligation, it had already taken steps to suspend/cancel plaintiff's card and include him in
the caution list. While the Court admires defendant's diplomacy in dealing with its clients, it cannot
help but frown upon the backhanded way defendant dealt with plaintiff's case.

ISSUE: Whether BPI abused its right to suspend the credit card of herein private respondent
which result into incurring damages

RULING: NO, BPI did not abused its right

Under the terms and conditions of the credit card, signed by the private respondent, any card with
outstanding balances after thirty (30) days from original billing/statement shall automatically be
suspended thus; Any CARD with outstanding balances unpaid after thirty (30) days from original
billing/statement date shall automatically be suspended, and those with accounts unpaid after sixty
(60) days from said original billing/statement date shall automatically be cancelled, without
prejudice to BECC's right to suspend or cancel any CARD any time and for whatever reason.

We agree with the findings of the respondent court, that there was an arrangement between the
parties, wherein the petitioner required the private respondent to issue a check worth P15,000 as
payment for the latter's billings. However, we find that the private respondent was not able to
comply with his obligation.

As agreed upon by the parties, on the following day, private respondent did issue a check
for P15,000. However, the check was postdated 15 December 1989. Settled is the doctrine that a
check is only a substitute for money and not money, the delivery of such an instrument does not, by
itself operate as payment.[9] This is especially true in the case of a postdated check.

Thus, the issuance by the private respondent of the postdated check was not effective payment. It
did not comply with his obligation under the arrangement with Miss Lorenzo. Petitioner
corporation was therefore justified in suspending his credit card.

We do not dispute the findings of the lower court that private respondent suffered damages as a
result of the cancellation of his credit card. However, there is a material distinction between
damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or harm
which results from the injury; and damages are the recompense or compensation awarded for the
damage suffered. Thus, there can be damage without injury in those instances in which the loss or
harm was not the result of a violation of a legal duty. In such cases, the consequences must be borne
by the injured person alone, the law affords no remedy for damages resulting from an act which
does not amount to a legal injury or wrong. These situations are often called damnum absque

In other words, in order that a plaintiff may maintain an action for the injuries of which he
complains, he must establish that such injuries resulted from a breach of duty which the defendant
owed to the plaintiff - a concurrence of injury to the plaintiff and legal responsibility by the person
causing it. The underlying basis for the award of tort damages is the premise that an individual was
injured in contemplation of law. Thus, there must first be a breach of some duty and the imposition
of liability for that breach before damages may be awarded;[13] and the breach of such duty should
be the proximate cause of the injury.

We therefore disagree with the ruling of the respondent court that the dishonor of the credit card of
the private respondent by Caf Adriatico is attributable to petitioner for its willful or gross neglect to
inform the private respondent of the suspension of his credit card, the unfortunate consequence of
which brought social humiliation and embarrassment to the private respondent.[14]

It was petitioner's failure to settle his obligation which caused the suspension of his credit card and
subsequent dishonor at Caf Adriatico. He can not now pass the blame to the petitioner for not
notifying him of the suspension of his card. As quoted earlier, the application contained the
stipulation that the petitioner could automatically suspend a card whose billing has not been paid
for more than thirty days.Nowhere is it stated in the terms and conditions of the application that
there is a need of notice before suspension may be effected as private respondent claims.

Associated Bank v. CA: Encashing a check to a person not authorized therein, the bank bears the

FACTS: The private respondent is engaged in the business of ready-to-wear garments under the
firm name "Melissa's RTW."

These companies issued in payment of their respective accounts crossed checks payable to
Melissa's RTW
When she went to these companies to collect on what she thought were still unpaid accounts, she
was informed of the issuance of the above-listed crossed checks. Further inquiry revealed that the
said checks had been deposited with the Associated Bank (hereinafter, "the Bank") and
subsequently paid by it to one Rafael Sayson, one of its "trusted depositors," in the words of its
branch manager and co-petitioner, Conrado Cruz, Sayson had not been authorized by the private
respondent to deposit and encash the said checks.

The private respondent sued the petitioners in the Regional Trial Court of Quezon City for recovery
of the total value of the checks plus damages. After trial, judgment was rendered requiring them to
pay the private respondent the total value of the subject checks, affirmed by CA.

ISSUE: Whether Associated bank is liable

RULING: YES, it is liable

Under accepted banking practice, crossing a check is done by writing two parallel lines diagonally
on the left top portion of the checks. The crossing is special where the name of a bank or a business
institution is written between the two parallel lines, which means that the drawee should pay only
with the intervention of that company. 3 The crossing is general where the words written between
the two parallel lines are "and Co." or "for payee's account only," as in the case at bar. This means
that the drawee bank should not encash the check but merely accept it for deposit. 4

In State Investment House vs. IAC, 5 this Court declared that "the effects of crossing a check are: (1)
that the check may not be encashed but only deposited in the bank; (2) that the check may be
negotiated only once –– to one who has an account with a bank; and (3) that the act of crossing the
check serves as a warning to the holder that the check has been issued for a definite purpose so that
he must inquire if he has received the check pursuant to that purpose."

The effects therefore of crossing a check relate to the mode of its presentment for payment. Under
Sec. 72 of the Negotiable Instruments Law, presentment for payment, to be sufficient, must be made
by the holder or by some person authorized to receive payment on his behalf. Who the holder or
authorized person is depends on the instruction stated on the face of the check.

The six checks in the case at bar had been crossed and issued "for payee's account only." This could
only signify that the drawers had intended the same for deposit only by the person indicated, to wit,
Melissa's RTW.

The subject checks were accepted for deposit by the Bank for the account of Rafael Sayson although
they were crossed checks and the payee was not Sayson but Melissa's RTW. The Bank stamped
thereon its guarantee that "all prior endorsements and/or lack of endorsements (were)
guaranteed." By such deliberate and positive act, the Bank had for all legal intents and purposes
treated the said checks as negotiable instruments and, accordingly, assumed the warranty of the

The weight of authority is to the effect that "the possession of check on a forged or unauthorized
indorsement is wrongful, and when the money is collected on the check, the bank can be held 'for
moneys had and received." 6 The proceeds are held for the rightful owner of the payment and may
be recovered by him. The position of the bank taking the check on the forged or unauthorized
indorsement is the same as if it had taken the check and collected without indorsement at all. The
act of the bank amounts to conversion of the check.

It is not disputed that the proceeds of the subject checks belonged to the private respondent. As she
had not at any time authorized Rafael Sayson to endorse or encash them, there was conversion of
the funds by the Bank.

When the Bank paid the checks so endorsed notwithstanding that title had not passed to the
endorser, it did so at its peril and became liable to the payee for the value of the checks. This
liability attached whether or not the Bank was aware of the unauthorized endorsement.

As the Court stressed in Banco de Oro Savings and Mortgage Bank vs. Equitable Banking Corp., 9 "the
law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it, for the
purpose of determining their genuineness and regularity. The collecting bank, being primarily
engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it
to a high standard of conduct."

The petitioners insist that the private respondent has no cause of action against them because they
have no privity of contract with her. They also argue that it was Eddie Reyes, the private
respondent's own husband, who endorsed the checks.

Assuming that Eddie Reyes did endorse the crossed checks, we hold that the Bank would still be
liable to the private respondent because he was not authorized to make the endorsements. And
even if the endorsements were forged, as alleged, the Bank would still be liable to the private
respondent for not verifying the endorser's authority. There is no substantial difference between an
actual forging of a name to a check as an endorsement by a person not authorized to make the
signature and the affixing of a name to a check as an endorsement by a person not authorized to
endorse it. 10

The Bank does not deny collecting the money on the endorsement. It was its responsibility to
inquire as to the authority of Rafael Sayson to deposit crossed checks payable to Melissa's RTW
upon a prior endorsement by Eddie Reyes. The failure of the Bank to make this inquiry was a
breach of duty that made it liable to the private respondent for the amount of the checks.

State Investment House vs. IAC: Presentment for payment of a crossed check must be the person
designated by the drawer, i.e. the payee named therein

FACTS: It appears that shortly before September 5, 1980, New Sikatuna Wood Industries, Inc.
requested for a loan from private respondent Harris Chua. The latter agreed to grant the same
subject to the condition that the former should wait until December 1980 when he would have the
money. In view of this agreement, private respondent-wife, Anita Pena Chua issued three (3)
crossed checks payable to New Sikatuna Wood Industries
Subsequently, New Sikatuna Wood Industries, Inc. entered into an agreement with herein
petitioner State Investment House, Inc. whereby for and in consideration of the sum of
Pl,047,402.91 under a deed of sale, the former assigned and discounted with petitioner eleven (11)
postdated checks including the aforementioned three (3) postdated checks issued by herein private
respondent-wife Anita Peña Chua to New Sikatuna Wood Industries, Inc.

When the three checks issued by private respondent Anita Pena Chua were allegedly deposited by
petitioner, these checks were dishonored by reason of "insufficient funds", "stop payment" and
"account closed", respectively. Petitioner claims that despite demands on private respondent Anita
Peña to make good said checks, the latter failed to pay the same necessitating the former to file an
action for collection against the latter and her husband Harris Chua before the Regional Trial Court
of Manila

On April 30, 1984, the lower court 1 rendered judgment against herein private respondents
spouses. On appeal filed by private respondents in AC-G.R. CV No. 04523, the Intermediate
Appellate Court 3 (now Court of Appeals) reversed the lower court's judgment in the now assailed

ISSUE: Whether SIH is a holder in due course

RULING: NO, it cannot be considered as a holder in due course

Admittedly, the Negotiable Instruments Law regulating the issuance of negotiable checks as well as
the lights and liabilities arising therefrom, does not mention "crossed checks". But this Court has
taken cognizance of the practice that a check with two parallel lines in the upper left hand corner
means that it could only be deposited and may not be converted into cash. Consequently, such
circumstance should put the payee on inquiry and upon him devolves the duty to ascertain the
holder's title to the check or the nature of his possession. Failing in this respect, the payee is
declared guilty of gross negligence amounting to legal absence of good faith and as such the
consensus of authority is to the effect that the holder of the check is not a holder in good faith.

Relying on the ruling in Ocampo v. Gatchalian (supra), the Intermediate Appellate Court (now Court
of Appeals), correctly elucidated that the effects of crossing a check are: the check may not be
encashed but only deposited in the bank; the check may be negotiated only once to one who has an
account with a bank; and the act of crossing the check serves as a warning to the holder that the
check has been issued for a definite purpose so that he must inquire if he has received the check
pursuant to that purpose, otherwise he is not a holder in due course

The pertinent ruling of the CA is enlightening: It results therefore that when appellee rediscounted
the check knowing that it was a crossed check he was knowingly violating the avowed intention of
crossing the check. Furthermore, his failure to inquire from the holder, party defendant New
Sikatuna Wood Industries, Inc., the purpose for which the three checks were cross despite the
warning of the crossing, prevents him from being considered in good faith and thus he is not a
holder in due course. Being not a holder in due course, plaintiff is subject to personal defenses, such
as lack of consideration between appellants and New Sikatuna Wood Industries.
Under Section 72 of the Negotiable Instruments Law, presentment for payment to be sufficient
must be made (a) by the holder, or by some person authorized to receive payment on his behalf ...
As to who the holder or authorized person will be depends on the instructions stated on the face of
the check.

The three subject checks in the case at bar had been crossed generally and issued payable to New
Sikatuna Wood Industries, Inc. which could only mean that the drawer had intended the same for
deposit only by the rightful person, i.e., the payee named therein. Apparently, it was not the payee
who presented the same for payment and therefore, there was no proper presentment, and the
liability did not attach to the drawer.

Thus, in the absence of due presentment, the drawer did not become liable. 7 Consequently, no right
of recourse is available to petitioner against the drawer of the subject checks, private respondent
wife, considering that petitioner is not the proper party authorized to make presentment of the
checks in question.

Yet it does not follow as a legal proposition that simply because petitioner was not a holder in due
course as found by the appellate court for having taken the instruments in question with notice that
the same is for deposit only to the account of payee named in the subject checks, petitioner could
not recover on the checks. The Negotiable Instruments Law does not provide that a holder who is
not a holder in due course may not in any case recover on the instrument for in the case at bar,
petitioner may recover from the New Sikatuna Wood Industries, Inc. if the latter has no valid excuse
for refusing payment. The only disadvantage of a holder who is not in due course is that the
negotiable instrument is subject to defenses as if it were non-negotiable.

People vs. Nitafan: Memorandum check is included in B.P. 22

FACTS: The facts are simple. Private respondent K.T. Lim was charged before respondent court
with violation of B.P. 22 in an Information alleging : That on . . . January 10, 1985, in the City of
Manila . . . the said accused did then and there wilfully, unlawfully and feloniously make or draw
and issue to Fatima Cortez Sasaki . . . Philippine Trust Company Check No. 117383 dated February
9, 1985 . . . in the amount of P143,000.00, . . . well knowing that at the time of issue he . . . did not
have sufficient funds in or credit with the drawee bank . . . which check . . . was subsequently
dishonored by the drawee bank for insufficiency of funds, and despite receipt of notice of such
dishonor, said accused failed to pay said Fatima Cortez Sasaki the amount of said check or to make
arrangement for full payment of the same within five (5) banking days after receiving said notice.

On 18 July 1986, private respondent moved to quash the Information of the ground that the facts
charged did not constitute a felony as B.P. 22 was unconstitutional and that the check he issued was
a memorandum check which was in the nature of a promissory note, perforce, civil in nature. On 1
September 1986, respondent judge, ruling that B.P. 22 on which the Information was based was
unconstitutional, issued the questioned Order quashing the Information. Hence, this petition for
review on certiorari filed by the Solicitor General in behalf of the government

Since the constitutionality of the "Bouncing Check Law" has already been sustained by this Court
in Lozano v.Martinez 3 and the seven (7) other cases decided jointly with it, 4 the remaining issue, as
aptly stated by private respondent in his Memorandum, is whether a memorandum check issued
postdated in partial payment of a pre-existing obligation is within the coverage of B.P. 22.

ISSUE: Whether the memorandum check issued is not covered under B.P 22 hence non

RULING: NO, such type of check is included under B.P. 22

A memorandum check is in the form of an ordinary check, with the word "memorandum", "memo"
or "mem" written across its face, signifying that the maker or drawer engages to pay the bona
fide holder absolutely, without any condition concerning its presentment. 6 Such a check is an
evidence of debt against the drawer, and although may not be intended to be presented, 7 has the
same effect as an ordinary check

From the above definition, it is clear that a memorandum check, which is in the form of an ordinary
check, is still drawn on a bank and should therefore be distinguished from a promissory note, which
is but a mere promise to pay. If private respondent seeks to equate memorandum check with
promissory note, as he does to skirt the provisions of B.P. 22, he could very well have issued a
promissory note, and this would be have exempted him form the coverage of the law. In the
business community a promissory note, certainly, has less impact and persuadability than a check.

Verily, a memorandum check comes within the meaning of Sec. 185 of the Negotiable Instruments
Law which defines a check as "a bill of exchange drawn on a bank payable on demand." A check is
also defined as " [a] written order or request to a bank or persons carrying on the business of
banking, by a party having money in their hands, desiring them to pay, on presentment, to a person
therein named or bearer, or to such person or order, a named sum of money. Another definition of
check is that is "[a] draft drawn upon a bank and payable on demand, signed by the maker or
drawer, containing an unconditional promise to pay a sum certain in money to the order of the

A memorandum check, upon presentment, is generally accepted by the bank. Hence it does not
matter whether the check issued is in the nature of a memorandum as evidence of indebtedness or
whether it was issued is partial fulfillment of a pre-existing obligation, for what the law punishes is
the issuance itself of a bouncing check 15 and not the purpose for which it was issuance

To require that the agreement surrounding the issuance of check be first looked into and thereafter
exempt such issuance from the punitive provision of B.P. 22 on the basis of such agreement or
understanding would frustrate the very purpose for which the law was enacted — to stem the
proliferation of unfunded checks.

Tan vs. CA: Reliance of the client to the EEs of the bank with regards to banking procedures

FACTS: Petitioner Ramon Tan, a trader-businessman and community leader in Puerto Princesa, had
maintained since 1976 Current Account No. 109058068 with RCBC (Private respondent).

On March 11, 1988, to avoid carrying cash while enroute to Manila, he secured a Cashier's Check
No. L 406000126 from the Philippine Commercial Industrial Bank (PCIB), Puerto Princesa branch,
in the amount of Thirty Thousand (P30,000.00) Pesos, payable to his order. He deposited the check
in his account with RCBC Binondo on March 15

On the same day, RCBC erroneously sent the same cashier's check for clearing to the Central Bank
which was returned for having been "missent" or "misrouted."1 The next day, March 16, RCBC
debited the amount covered by the same cashier's check from the account of the petitioner.
Respondent bank at this time had not informed the petitioner of its action which the latter claims
he learned of only 42 days after, specifically on March 16, when he received the bank's debit memo.

Relying on the common knowledge that a cashier's check was as good as cash, that the usual
banking practice that local checks are cleared within three (3) working days and regional checks
within seven (7) working days, and the fact that the cashier's check was accepted, petitioner issued
two (2) personal checks both dated March 18. However, the checks were returned due to
insufficiency of funds

Petitioner, alleging to have suffered humiliation and loss of face in the business sector due to the
bounced checks, filed a complaint against RCBC for damages in the Regional Trial Court of Palawan
and Puerto Princesa with the following arguments;

First, that it was RCBC's responsibility to call his attention there and then that he had erroneously
filled the wrong deposit slip at the time he deposited the cashier's check with the respondent
bank's teller and it was negligence on RCBC's part not to have done so;6

Second, that RCBC had been remiss in the performance of its obligation to the petitioner when it
"missent" the cashier's check to the Central Bank knowing, as it should, that the source of the check,
PCIB, Puerto Princesa Branch, is not included in the areas required to be cleared by the Central
Bank, a fact known to the banking world and surely to the respondent bank;7

Third, that RCBC upon knowing of its error in "missending" the cashier's check to the Central Bank
did not attempt to rectify its "misclearing" error by clearing it seasonably with PCIB, Puerto
Princesa, thru its own RCBC Puerto Princesa Branch with whom it had direct radio contact

In its defense, RCBC disowning any negligence, put the blame for the "misrouting" on the petitioner
for using the wrong check deposit slip. It insisted that the misuse of a local check deposit slip,
instead of a regional check deposit slip, triggered the "misrouting" by RCBC of the cashier's check to
the Central Bank and it was petitioner's negligent "misuse" of a local deposit slip which was the
proximate cause of the "misrouting," thus he should bear the consequence

Finally, respondent claimed that serious attempts were made to contact petitioner through the
telephone numbers in the signature specimen card of petitioner but to no avail. 17 The Assistant
Branch Accountant of RCBC Binondo Branch testified that the first telephone number in the card
had been deleted from the phone company's list and that when RCBC tried to contact petitioner's
daughter Evelyn Tan-Banzon thru a certain telephone number and when they asked for Evelyn Tan,
they were told there was no such person.
RTC rendered a decision against RCBC but reversed by CA on the ground that: What appeared to
have caused the unfortunate incident was that the plaintiff filled up the wrong deposit slip which
led to the sending of the check to the Central Bank when the clearing should have been made

ISSUE: Whether RCBC should be held liable for the damages sustained by petitioner

RULING: YES, RCBC should be liable

Citing the jurisprudence laid down in City trust Corp vs. IAC: the depositor, instead of stating her
correct account number 29000823 inaccurately wrote 2900823. Because of this error, six
postdated checks amounting to P20,209.00 she issued were dishonored for insufficiency of funds.
The Regional Trial Court dismissed the complaint for lack of merit. The Court of Appeals, however,
found the appeal meritorious and ordered the bank to pay nominal damages of P2,000.00,
temperate and moderate damages of P5,000.00 and attorney's fees of P4,000.00. Upon review, this
Court quoted with favor to the depositor that this, indeed, could have been avoided at the first
instance had the teller of defendant bank performed her duties efficiently and well. For then she
could have readily detected that the account number in the name of Emma E. Herrero was
erroneous and would be rejected by the computer. That is, or should be, part of the training and
standard operating procedure of the bank's employees. On the other hand, the depositors are not
concerned with banking procedure. That is the responsibility of the bank and its employees.
Depositors are only concerned with the facility of depositing their money, earning interest thereon,
if any, and withdrawing therefrom, particularly businessmen, like plaintiff, who are supposed to be
always on-the-go. Plaintiff's account is a current account which should immediately be posted. After
all, it does not earn interest. At least, the forbearance should be commensurated with prompt,
efficient and satisfactory service.

Bank clients are supposed to rely on the services extended by the bank, including the assurance
that their deposits will be duly credited them as soon as they are made. For, any delay in crediting
their account can be embarrassing to them as in the case of plaintiff.

The point is that as a business affected with public interest and because of the nature of its
functions, the bank is under obligation to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship.

In the light of the above-cited case, the respondent bank cannot exculpate itself from liability by
claiming that its depositor "impliedly instructed" the bank to clear his check with the Central Bank
by filling a local check deposit slip. Such posture is disingenuous, to say the least. First, why would
RCBC follow a patently erroneous act born of ignorance or inattention or both. Second, bank
transactions pass through a succession of bank personnel whose duty is to check and countercheck
transactions for possible errors. In the instant case, the teller should not have accepted the local
deposit slip with the cashier's check that on its face was clearly a regional check without calling the
depositor's attention to the mistake at the very moment this was presented to her. Neither should
everyone else down the line who processed the same check for clearing have allowed the check to
be sent to Central Bank. Depositors do not pretend to be past master of banking technicalities,
much more of clearing procedures. As soon as their deposits are accepted by the bank teller, they
wholly repose trust in the bank personnel's mastery of banking, their and the bank's sworn
profession of diligence and meticulousness in giving irreproachable service.

So it is in the instance case, where the conclusion is inevitable that respondent RCBC had been
remiss in the performance of its duty and obligation to its client, as well as to itself. We draw
attention to the fact that the two dishonored checks issued by petitioner, Check No. 040719 and
No. 040718 were presented for payment 24 more than 45 days from the day the cashier's check was
deposited. This gave RCBC more than ample time to have cleared the cashier's check had it
corrected its "missending" the same upon return from Central Bank using the correct slip this time
so it can be cleared properly. Instead, RCBC promptly debited the amount of P30,000.00 against
petitioner's account and left it at that.

Now, what was presented for deposit in the instant cases was not just an ordinary check but a
cashier's check payable to the account of the depositor himself. A cashier's check is a primary
obligation of the issuing bank and accepted in advance by its mere issuance. 27 By its very nature, a
cashier's check is the bank's order to pay drawn upon itself, committing in effect its total resources,
integrity and honor behind the check. A cashier's check by its peculiar character and general use in
the commercial world is regarded substantially to be as good as the money which it represents.28 In
this case, therefore, PCIB by issuing the check created an unconditional credit in favor of any
collecting bank.

All these considered, petitioner's reliance on the layman's perception that a cashier's check is as
good as cash is not entirely misplaced, as it is rooted in practice, tradition, and principle. We see no
reason thus why this so-called discretion was not exercised in favor of petitioner, specially since
PCIB and RCBC are members of the same clearing house group relying on each other's solvency.
RCBC could surely rely on the solvency of PCIB when the latter issued its cashier's check.

Teddy Pabugais vs. Dave Sahijwani: Consignation of a check is valid to extinguish obligation
provided that the creditor has refused to accept payment not because of the form of payment

FACTS: Pursuant to an "Agreement And Undertaking"4 dated December 3, 1993, petitioner Teddy
G. Pabugais, in consideration of the amount of Fifteen Million Four Hundred Eighty Seven Thousand
Five Hundred Pesos (P15,487,500.00), agreed to sell to respondent Dave P. Sahijwani a lot
containing 1,239 square meters located at Jacaranda Street, North Forbes Park, Makati, Metro
Manila. Respondent paid petitioner the amount of P600,000.00 as option/reservation fee and the
balance of P14,887,500.00 to be paid within 60 days from the execution of the contract,
simultaneous with delivery of the owner’s duplicate Transfer Certificate of Title in respondent’s
name the Deed of Absolute Sale; the Certificate of Non-Tax Delinquency on real estate taxes and
Clearance on Payment of Association Dues.

The parties further agreed that failure on the part of respondent to pay the balance of the purchase
price entitles petitioner to forfeit the P600,000.00 option/reservation fee; while non-delivery by
the latter of the necessary documents obliges him to return to respondent the said
option/reservation fee with interest at 18% per annum

Petitioner failed to deliver the required documents. In compliance with their agreement, he
returned to respondent the latter’s P600,000.00 option/reservation fee by way of Far East Bank &
Trust Company Check No. 25AO54252P, which was, however, dishonored.

What transpired thereafter is disputed by both parties. Petitioner claimed that he twice tendered to
respondent, through his counsel, the amount of P672,900.00 (representing the P600,000.00
option/reservation fee plus 18% interest per annum computed from December 3, 1993 to August 3,
1994) in the form of Far East Bank & Trust Company Manager’s Check No. 088498, dated August 3,
1994, but said counsel refused to accept the same. His first attempt to tender payment was
allegedly made on August 3, 1994 through his messenger; while the second one was on August 8,
1994,7 when he sent via DHL Worldwide Services, the manager’s check attached to a letter dated
August 5, 1994.8 On August 11, 1994, petitioner wrote a letter to respondent saying that he is
consigning the amount tendered with the Regional Trial Court of Makati City.9 On August 15, 1994,
petitioner filed a complaint for consignation

Respondent’s counsel, on the other hand, admitted that his office received petitioner’s letter dated
August 5, 1994, but claimed that no check was appended thereto.11 He averred that there was no
valid tender of payment because no check was tendered and the computation of the amount to be
tendered was insufficient,12 because petitioner verbally promised to pay 3% monthly interest and
25% attorney’s fees as penalty for default, in addition to the interest of 18% per annum on the
P600,000.00 option/reservation fee.

On November 29, 1996, the trial court rendered a decision declaring the consignation invalid for
failure to prove that petitioner tendered payment to respondent and that the latter refused to
receive the same. It further held that even assuming that respondent refused the tender, the same is
justified because the manager’s check allegedly offered by petitioner was not legal tender, hence,
there was no valid tender of payment. Affirmed by CA

On a motion for reconsideration, the Court of Appeals declared the consignation as valid in an
Amended Decision dated January 16, 2003. It held that the validity of the consignation had the
effect of extinguishing petitioner’s obligation to return the option/reservation fee to respondent.
Hence, petitioner can no longer withdraw the same.

ISSUE: Whether the consignation was valid even if what was deposited is a manager’s check

RULING: YES, the consignation was valid

Consignation is the act of depositing the thing due with the court or judicial authorities whenever
the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of
payment.22 In order that consignation may be effective, the debtor must show that: (1) there was a
debt due; (2) the consignation of the obligation had been made because the creditor to whom
tender of payment was made refused to accept it, or because he was absent or incapacitated, or
because several persons claimed to be entitled to receive the amount due or because the title to the
obligation has been lost; (3) previous notice of the consignation had been given to the person
interested in the performance of the obligation; (4) the amount due was placed at the disposal of
the court; and (5) after the consignation had been made the person interested was notified thereof.
Failure in any of these requirements is enough ground to render a consignation ineffective.

As testified by the counsel for respondent, the reasons why his client did not accept petitioner’s
tender of payment were – (1) the check mentioned in the August 5, 1994 letter of petitioner
manifesting that he is settling the obligation was not attached to the said letter; and (2) the amount
tendered was insufficient to cover the obligation. It is obvious that the reason for respondent’s non-
acceptance of the tender of payment was the alleged insufficiency thereof – and not because the
said check was not tendered to respondent, or because it was in the form of manager’s check. While
it is true that in general, a manager’s check is not legal tender, the creditor has the option of
refusing or accepting it.24 Payment in check by the debtor may be acceptable as valid, if no prompt
objection to said payment is made.25 Consequently, petitioner’s tender of payment in the form of
manager’s check is valid.

As regards petitioner’s right to withdraw the amount consigned, reliance on Article 1260 of the
Civil Code is misplaced. The said Article provides –

Art. 1260. Once the consignation has been duly made, the debtor may ask the judge to order the
cancellation of the obligation.

Before the creditor has accepted the consignation, or before a judicial confirmation that the
consignation has been properly made, the debtor may withdraw the thing or the sum deposited,
allowing the obligation to remain in force.

The amount consigned with the trial court can no longer be withdrawn by petitioner because
respondent’s prayer in his answer that the amount consigned be awarded to him is equivalent to an
acceptance of the consignation, which has the effect of extinguishing petitioner’s obligation.