Stella C.

Policarpio

G.R. No. 118492 August 15, 2001

GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners,vs.

THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST
COMPANY, respondents.

DE LEON, JR., J.:

FACTS: In view of the 20th Asian Racing Conference in Sydney, Australia, the Philippine
Racing Club, Inc. (PRCI) petitioner Gregorio H. Reyes (vice-president for finance, racing
manager, treasurer, and director of PRCI) sent Godofredo Reyes, the club's chief cashier, to
the respondent bank (FAR EAST BANK AND TRUST COMPANY) to apply for a foreign
exchange demand draft in Australian dollars.
Godofredo Reyes was attended to by Mr. Yasis (respondent bank’s assistant cashier), who at
first denied the application for the reason that respondent bank did not have an Australian
dollar account in any bank in Sydney. Godofredo asked if there could be a way for Far Eastern
Bank to accommodate their need to remit Australian dollars to Sydney.
Yasis informed Godofredo of a way of effecting the requested remittance to Sydney – that the
respondent bank would draw a demand draft against Westpac Bank in Sydney, Australia
(Westpac-Sydney) and have the latter reimburse itself from the U.S. dollar account of the
respondent in Westpac Bank in New York, U.S.A. (Westpac-New York). PRCI and the
petitioner Gregorio H. Reyes, acting through Godofredo, agreed to this arrangement.
However, upon due presentment of the foreign exchange demand draft, the same was
dishonored. Meanwhile, Wespac-New York sent a cable to respondent bank informing the
latter that its dollar account in the sum of AU$ 1,610.00 was debited. In response to PRCI’s
complaint about the dishonor of the said foreign exchange demand draft, respondent bank
informed Westpac-Sydney of the issuance of the said demand draft, drawn against the
Wespac-Sydney and informing the latter to be reimbursed from the respondent bank’s dollar
account in Westpac-New York. The respondent bank on the same day likewise informed
Wespac-New York requesting the latter to honor the reimbursement claim of Wespac-Sydney.
Upon its second presentment for payment, the demand draft was again dishonored by
Westpac-Sydney for the same reason. Gregorio Reyes and Consuelo Puyat-Reyes arrived in
Sydney on a separate date and both were humiliated and embarrassed in the presence of
international audience after being denied registration of the conference secretariat since the
foreign exchange draft was dishonored.
ISSUE: Whether or not respondent bank is liable for damages due to the dishonor of the
foreign exchange demand drafts.
RULING: NO. The evidence showed that the respondent bank exercised that degree of
diligence expected of an ordinary prudent person under the circumstances. The respondent
bank even advised Westpac-New York to honor the reimbursement claim of Westpac-Sydney
and to debit the dollar account of respondent bank with the former. The degree of diligence
required of banks, is more than that of a good father of a family where the fiduciary nature of
their relationship with their depositors is concerned. HOWEVER, the said ruling applies only to
cases where banks act under their fiduciary capacity, that is, as depositary of the deposits of
their depositors.
Considering the foregoing, the respondent bank was not required to exert more than the
diligence of a good father of a family in regard to the sale and issuance of the subject foreign
exchange demand draft since the transaction does not involve the handling of petitioners'
deposit. Instead, the relationship involved was that of a buyer and seller, that is, between the
respondent bank as the seller of the subject foreign exchange demand draft, and PRCI as the
buyer of the same.
Stella C. Policarpio

G.R. No. 128703 October 18, 2000

TEODORO BAÑAS,*C. G. DIZON CONSTRUCTION, INC., and CENEN DIZON, petitioners,

vs.
ASIA PACIFIC FINANCE CORPORATION, substituted by INTERNATIONAL CORPORATE
BANK now known as UNION BANK OF THE PHILIPPINES, respondent.

FACTS: Teodoro Bañas executed a Promissory Note in favor of C. G. Dizon Construction

whereby he promised to pay to the order of C. G. Dizon Construction the sum of ₱390,000.00 in
installments of "₱32,500.00 every 25th day of the month starting from September 25, 1980 up
to August 25, 1981."

Later, C. G. Dizon Construction endorsed with recourse the Promissory Note to ASIA PACIFIC,
and to secure payment thereof, C. G. Dizon Construction, executed a Deed of Chattel
Mortgage covering three (3) heavy equipment units of Caterpillar Bulldozer Crawler Tractors in
favor of ASIA PACIFIC.

In compliance with the provisions of the Promissory Note, C. G. Dizon Construction made the
following installment payments to ASIA PACIFIC, however, C. G. Dizon Construction defaulted
in the payment of the remaining installments, prompting ASIA PACIFIC to send a Statement of
Account to Cenen Dizon for the unpaid balance of ₱267,737.50. As the demand was unheeded,
ASIA PACIFIC sued Teodoro Bañas, C. G. Dizon Construction and Cenen Dizon.

While defendants (herein petitioners) admitted the genuineness and due execution of
the Promissory Note, the Deed of Chattel Mortgage and the Continuing Undertaking, they
nevertheless maintained that these documents were never intended by the parties to be legal,
valid and binding but a mere subterfuge to conceal the loan of ₱390,000.00 with usurious
interests.

Defendants claimed that since ASIA PACIFIC could not directly engage in banking business, it
proposed to them a scheme wherein plaintiff ASIA PACIFIC could extend a loan to them without
violating banking laws.

On 21 April 1981 the trial court issued a writ of replevin against defendant C. G. Dizon
Construction for the surrender of the bulldozer crawler tractors subject of the Deed of Chattel
Mortgage. Of the three (3) bulldozer crawler tractors, only two (2) were actually turned over by
defendants - D8-14A and D8-2U - which units were subsequently foreclosed by ASIA PACIFIC
to satisfy the obligation. D8-14A was sold for ₱120,000.00 and D8-2U for ₱60,000.00 both to
ASIA PACIFIC as the highest bidder.

During the pendency of the case, defendant Teodoro Bañas passed away, and on motion of the
remaining defendants, the trial court dismissed the case against him. On the other hand, ASIA
PACIFIC was substituted as party plaintiff by International Corporate Bank (now Union Bank of
the Philippines) after the disputed Promissory Note was assigned and/or transferred by ASIA
PACIFIC to International Corporate Bank.

Regional Trial Court ruled in favor of ASIA PACIFIC holding the defendants jointly and severally
liable for the unpaid balance of the obligation under the Promissory Note.

On appeal, the CA affirmed in toto the decision of the trial court.

ISSUE: Whether the disputed transaction between petitioners and ASIA PACIFIC violated
banking laws, hence, null and void; and

RULING: NO. The petitioner’s insistence that ASIA PACIFIC was organized as an investment
house not engage in the lending of funds obtained from the public through receipt of deposits
making the disputed Promissory Note, Deed of Chattel Mortgage and Continuing Undertaking
not valid and binding on the parties is without merit.
Stella C. Policarpio

An investment company refers to any issuer which is or holds itself out as being engaged or
proposes to engage primarily in the business of investing, reinvesting or trading in securities.
Clearly, the transaction between petitioners and respondent was not a loan but purchase
of receivables at a discount, which an investment company, like ASIA PACIFIC, is authorized to Commented [ROKA1]: well within the purview of
perform and does not constitute a violation of the General Banking Act. "investing, reinvesting or trading in securities"

Moreover, what is prohibited by law is for investment companies to lend funds obtained from the
public through receipts of deposit, which is a function of banking institutions. But here, the funds
supposedly "lent" to petitioners have not been shown to have been obtained from the public by
way of deposits, hence, the inapplicability of banking laws.

As for the petitioners' submission that the true intention of the parties was to enter into a contract
of loan, the Supreme Court find the terms and conditions of the instrument clear, free from any
ambiguity, and expressive of the real intent and agreement of the parties. Likewise, the Deed of
Chattel Mortgage and Continuing Undertaking were duly acknowledged before a notary public Commented [ROKA2]: Notarial documents are
and, as such, have in their favor the presumption of regularity. Interestingly, petitioners' evidence of the facts in clear and unequivocal manner
therein expressed.
assertions were based mainly on the self-serving testimony of Cenen Dizon, and not on any
other independent evidence. Commented [ROKA3]: To contradict them there must
be clear, convincing and more than merely
preponderant evidence. However, the records do not
show the petitioners' claim that the Deed of Chattel
Mortgage and Continuing Undertaking were never
intended by the parties to be legal, valid and binding.

Commented [ROKA4]: Oral evidence certainly cannot

prevail over the written agreements of the parties. The
courts need only rely on the faces of the written
contracts to determine their true intention on the
principle that when the parties have reduced their
agreements in writing, it is presumed that they have
made the writings the only repositories and memorials
of their true agreement.
Stella C. Policarpio

[G.R. No. 165339 : August 23, 2010]

EQUITABLE PCI BANK, PETITIONER, VS. ARCELITO B. TAN, RESPONDENT.

FACTS: On May 13, 1992, respondent (Tan) issued PCIB Check No. 275100 postdated May
30, 1992 in the amount of P34,588.72 in favor of Sulpicio Lines, Inc. As of May 14, 1992,
respondent's balance with petitioner was P35,147.59. On May 14, 1992, Sulpicio Lines, Inc.
deposited the aforesaid check to its account with Solid Bank, Carbon Branch, Cebu City. After
clearing, the amount of the check was immediately debited by petitioner from
respondent's account thereby leaving him with a balance of only P558.87.

Meanwhile, respondent also issued three checks from May 9 to May 16, 1992, specifically:
• PCIB Check No. 275080 dated May 9, 1992, payable to Agusan del Sur Electric
Cooperative Inc. (ASELCO) for the amount of P6,427.68;
• PCIB Check No. 275097 dated May 10, 1992 payable to Agusan del Norte Electric
Cooperative Inc., (ANECO) for the amount of P6,472.01;
• PCIB Check No. 314104 dated May 16, 1992 payable in cash for the amount of
P10,000.00.
When presented for payment, they were dishonored for being drawn against insufficient funds.

Respondent claimed that Check No. 275100 was a postdated check in payment of Bills of
Lading Nos. 15, 16 and 17, and that his account with petitioner would have had sufficient funds
to cover payment of the three other checks were it not for the negligence of petitioner in
immediately debiting from his account Check No. 275100, in the amount of P34,588.72, even
as the said check was postdated to May 30, 1992.

In its defense, petitioner denied that the questioned check was postdated May 30, 1992 and
claimed that it was a current check dated May 3, 1992.

RTC ruled in favor of petitioner and dismissed the complaint. On appeal, RTC decision
was reversed and petitioner was directed to pay respondent the sum of P1,864,500.00 as
actual damages, P50,000.00 by way of moral damages, P50,000.00 as exemplary damages
and attorney's fees in the amount of P30,000.00.

Petitioner filed a motion for reconsideration, which the CA denied, hence the petition.

ISSUE: WON CA erred in reversing the decision of the CA

RULING: NO. A reading of Check No. 275100[14] would readily show that it was dated May 30,
1992.

We agree with appellant that appellee Bank apparently erred in misappreciating the date of
Check No. 275100. Undoubtedly, had not appellee bank prematurely debited the amount of
the check from appellant's account before its due date, the two other checks (Exhs. LLLL and
GGGG) successively dated May 9, 1992 and May 16, 1992 which were paid by appellant to
ASELCO and ANECO, respectively, would not have been dishonored.

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2
of R.A. 8791. The diligence required of banks, therefore, is more than that of a good father of a
family. In every case, the depositor expects the bank to treat his account with the utmost
fidelity. The bank must record every single transaction accurately, down to the last centavo,
and as promptly as possible. 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. From the
foregoing, it is clear that petitioner bank did not exercise the degree of diligence that it ought to
have exercised in dealing with its client.

The decision of the CA was affirmed with modification as to the damages.