International Corporate Bank vs. Gueco
International Corporate Bank vs. Gueco
International Corporate Bank vs. Gueco
GUECO breach of contract, moral damages may only be awarded when the breach was
516 SUPREME COURT REPORTS ANNOTATED attended by fraud or bad faith. The law presumes good faith.
International Corporate Bank vs. Gueco Banks and Banking; Checks; Negotiable Instruments; Words and Phrases; A
G.R. No. 141968. February 12, 2001.* stale check is one which has not been presented for payment within a reasonable
THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE time after its issue.—A stale check is one which has not been presented for payment
PHILIPPINES), petitioner, vs. SPS. FRANCIS S. GUECO and MA. LUZ E. within a reasonable time after its issue. It is valueless and, therefore, should not
GUECO, respondents. be paid. Under the negotiable instruments law, an instrument not payable on
Appeals; Evidence; It is well settled that the findings of fact of the lower demand must be presented for payment on the day it falls due. When the
court, especially when affirmed by the Court of Appeals, are binding upon the instrument is payable on demand, presentment must be made within a reasonable
Supreme Court.—As to the first issue, we find for the respondents. The issue as to time after its
what constitutes the terms of the oral compromise or any subsequent novation is a 518
question of fact that was resolved by the Regional Trial Court and the Court of 518 SUPREME COURT REPORTS ANNOTATED
Appeals in favor of respondents. It is well settled that the findings of fact of the International Corporate Bank vs. Gueco
lower court, especially when affirmed by the Court of Appeals, are binding upon issue. In the case of a bill of exchange, presentment is sufficient if made
this Court. While there within a reasonable time after the last negotiation thereof.
Same; Same; Same; A check must be presented for payment within a
_______________ reasonable time after its issue, and in determining what is a “reasonable time,”
* FIRST DIVISION. regard is to be had to the nature of the instrument, the usage of trade or business
517 with respect to such instruments, and the facts of the particular case.—A check must
VOL. 351, FEBRUARY 12, 2001 517 be presented for payment within a reasonable time after its issue, and in
International Corporate Bank vs. Gueco determining what is a “reasonable time,” regard is to be had to the nature of the
are exceptions to this rule, the present case does not fall under any one of instrument, the usage of trade or business with respect to such instruments, and
them, the petitioner’s claim to the contrary, notwithstanding. the facts of the particular case. The test is whether the payee employed such
Obligations and Contracts; Fraud; Words and Phrases; Fraud is the diligence as a prudent man exercises in his own affairs. This is because the nature
deliberate intention to cause damage or prejudice, the voluntary execution of a and theory behind the use of a check points to its immediate use and payability. In
wrongful act, or a willful omission, knowing and intending the effects which a case, a check payable on demand which was long overdue by about two and a half
naturally and necessarily arise from such act or omission; The fraud referred to in (2-1/2) years was considered a stale check. Failure of a payee to encash a check for
Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal more than ten (10) years undoubtedly resulted in the check becoming stale. Thus,
fulfillment of an obligation.—Fraud has been defined as the deliberate intention to even a delay of one (1) week or two (2) days, under the specific circumstances of the
cause damage or prejudice. It is the voluntary execution of a wrongful act, or a cited cases constituted unreasonable time as a matter of law.
willful omission, knowing and intending the effects which naturally and necessarily Same; Same; Same; Words and Phrases; A manager’s check is one drawn by
arise from such act or omission; the fraud referred to in Article 1170 of the Civil the bank’s manager upon the bank itself, and it is similar to a cashier’s check both
Code is the deliberate and intentional evasion of the normal fulfillment of as to effect and use. A cashier’s check is a check of the bank’s cashier on his own or
obligation. We fail to see how the act of the petitioner bank in requiring the another check—it is a bill of exchange drawn by the cashier of a bank upon the bank
respondent to sign the joint motion to dismiss could constitute as fraud. True, itself, and accepted in advance by the act of its issuance.—In the case at bar,
petitioner may have been remiss in informing Dr. Gueco that the signing of a joint however, the check involved is not an ordinary bill of exchange but a manager’s
motion to dismiss is a standard operating procedure of petitioner bank. However, check. A manager’s check is one drawn by the bank’s manager upon the bank itself.
this cannot in anyway have prejudiced Dr. Gueco. The motion to dismiss was in It is similar to a cashier’s check both as to effect and use. A cashier’s check is a
fact also for the benefit of Dr. Gueco, as the case filed by petitioner against it before check of the bank’s cashier on his own or another check. In effect, it is a bill of
the lower court would be dismissed with prejudice. The whole point of the parties exchange drawn by the cashier of a bank upon the bank itself, and accepted in
entering into the compromise agreement was in order that Dr. Gueco would pay his advance by the act of its issuance. It is really the bank’s own check and may be
outstanding account and in return petitioner would return the car and drop the treated as a promissory note with the bank as a maker. The check becomes the
case for money and replevin before the Metropolitan Trial Court. The joint motion primary obligation of the bank which issues it and constitutes its written promise
to dismiss was but a natural consequence of the compromise agreement and simply to pay upon demand. The mere issuance of it is considered an acceptance thereof.
stated that Dr. Gueco had fully settled his obligation, hence, the dismissal of the If treated as promissory note, the drawer would be the maker and in which case
case. Petitioner’s act of requiring Dr. Gueco to sign the joint motion to dismiss the holder need not prove presentment for payment or present the bill to the drawee
cannot be said to be a deliberate attempt on the part of petitioner to renege on the for acceptance.
compromise agreement of the parties. It should, likewise, be noted that in cases of
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Same; Same; Same; Even assuming that presentment is needed, failure to Rivera. The negotiations resulted in the further reduction of the outstanding loan
present a manager’s check for payment within a reasonable time will result to the to P150,000.00.
discharge of the drawer only to the extent of the loss caused by On August 29, 1995, Dr. Gueco delivered a manager’s check in the amount of
519 P150.000.00 but the car was not released because of his refusal to sign the Joint
VOL. 351, FEBRUARY 12, 2001 519 Motion to Dismiss. It is the contention of the Gueco spouses and their counsel that
International Corporate Bank vs. Gueco Dr. Gueco need not sign the motion for joint dismissal considering that they had
the delay.—Even assuming that presentment is needed, failure to present for not yet filed their Answer. Petitioner, however, insisted that the joint motion to
payment within a reasonable time will result to the discharge of the drawer only to dismiss is standard operating procedure in their bank to effect a compromise and
the extent of the loss caused by the delay. Failure to present on time, thus, does not to preclude future filing of claims, counterclaims or suits for damages.
totally wipe out all liability. In fact, the legal situation amounts to an After several demand letters and meetings with bank representatives, the
acknowledgment of liability in the sum stated in the check. In this case, the Gueco respondents Gueco spouses initiated a civil action for damages before the
spouses have not alleged, much less shown that they or the bank which issued the Metropolitan Trial Court of Quezon City, Branch 33. The Metropolitan Trial Court
manager’s check has suffered damage or loss caused by the delay or non- dismissed the complaint for lack of merit.3
presentment. Definitely, the original obligation to pay certainly has not been On appeal to the Regional Trial Court, Branch 227 of Quezon City, the decision
erased. of the Metropolitan Trial Court was reversed. In its decision, the RTC held that
there was a meeting of the minds between the parties as to the reduction of the
PETITION for review on certiorari of a decision of the Court of Appeals. amount of indebtedness and the release of the car but said agreement did not
The facts are stated in the opinion of the Court. include the signing of the joint motion to dismiss as a condition sine qua non for
Tomas R. Leonidas for petitioners. the effectivity of the compromise. The court further ordered the bank:
Estrella, Estrella, Estrella & Associates for private respondents.
1. 1.to return immediately the subject car to the appellants in good working
KAPUNAN, J.: condition; Appellee may deposit the Manager’s check—the proceeds of
The respondents Gueco Spouses obtained a loan from petitioner International which have long been under the control of the issuing bank in favor of
Corporate Bank (now Union Bank of the Philippines) to purchase a car—a Nissan the appellee since its issuance, whereas the funds have long been
Sentra 1600 4DR, 1989 Model. In consideration thereof, the Spouses executed
promissory notes which were payable in monthly installments and chattel ________________
mortgage over the car to serve as security for the notes. 3 Rollo, p. 30
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO 7 Amigo, et al. v. Teves, 96 Phil. 252 (1954).
AGREEMENT WITH RESPECT TO THE EXECUTION OF THE JOINT MOTION 8 Ramos v. Pepsi Cola, 195 SCRA 289 (1967).
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that the joint motion should have been shown to Dr. Gueco in the August 28,1995 standard operating procedure of petitioner bank. However, this cannot in anyway
meeting. Why Dr. Gueco was not given a copy of the joint motion that day of August have prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of
28, 1995, for his family or legal counsel to see to be brought signed, together with Dr. Gueco, as the case filed by petitioner against it before the lower court would be
the P150,000.00 in manager’s check form to be submitted on the following day on dismissed with prejudice. The whole point of the parties entering into the
August 29, 1995? (sic) [I]s a question whereby the answer up to now eludes this compromise agreement was in order that Dr. Gueco would pay his outstanding
Court’s comprehension. The appellees would like this Court to believe that Dr. account and in return petitioner would return the car and drop the case for money
Gueco was informed by Mr. Rivera of the bank requirement of signing the joint and replevin before the Metropolitan Trial Court. The joint motion to dismiss was
motion on August 28, 1995 but he did not bother to show a copy thereof to his family but a natural consequence of the compromise agreement and simply stated that Dr.
or legal counsel that day August 28, 1995. This part of the theory of appellee is too Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioner’s
complicated for any simple oral agreement. The idea of a Joint Motion to Dismiss act of requiring Dr. Gueco to sign the joint motion to dismiss cannot be said to be a
being signed as a condition to the pushing through a deal surfaced only on August deliberate attempt on the part of petitioner to renege on the compromise agreement
29, 1995. of the parties. It should, likewise, be noted that in cases of breach of contract, moral
This Court is not convinced by the appellees’ posturing. Such claim rests on too damages may only be awarded when the breach was attended by fraud or bad
slender a frame, being inconsistent with human experience. Considering the effect faith.12 The law presumes good faith. Dr. Gueco failed to present an iota of evidence
of the signing of the Joint Motion to Dismiss on the appellants’ substantive right, to overcome this presumption. In fact, the act of petitioner bank in lowering the
it is more in accord with human experience to expect Dr. Gueco, upon being shown debt of Dr. Gueco from P184,000.00 to P150,000.00 is indicative of its good faith
the Joint Motion to Dismiss, to refuse to pay the Manager’s Check and for the bank and sincere desire to settle the case. If respondent did suffer any damage, as a
to refuse to accept the manager’s check. The only logical explanation for this result of
inaction is that Dr. Gueco was not shown the Joint Motion to Dismiss in the
meeting of August 28, 1995, bolstering his claim that its signing was never put into ________________
consideration in reaching a compromise.’ x x x.9 10 Id., at 34.
We see no reason to reverse. 11 Legaspi Oil Co., Inc. vs. CA, 224 SCRA 213, 216 (1993).
Anent the issue of award of damages, we find the claim of petitioner 12 Article 2220 of the NEW CIVIL CODE.
meritorious. In finding the petitioner liable for damages, both the Regional Trial 526
Court and the Court of Appeals ruled that there was fraud on the part of the 526 SUPREME COURT REPORTS ANNOTATED
petitioner. The CA thus declared: International Corporate Bank vs. Gueco
The lower court’s finding of fraud which became the basis of the award of the withholding of his car by petitioner, he has only himself to blame. Necessarily,
damages was likewise sufficiently proven. Fraud under Article 1170 of the Civil the claim for exemplary damages must fail. In no way, may the conduct of petitioner
Code of the Philippines, as amended is the ‘deliberate and intentional evasion of be characterized as “wanton, fraudulent, reckless, oppressive or malevolent.” 13
the normal fulfillment of obligation.’ When petitioner refused to release the car We, likewise, find for the petitioner with respect to the third assigned error. In
despite respondents tender of payment in the form of a manager’s check, the former the meeting of August 29, 1995, respondent Dr. Gueco delivered a manager’s check
intentionally evaded its representing the reduced amount of P150,000.00. Said check was given to Mr.
Rivera, a representative of respondent bank. However, since Dr. Gueco refused to
________________ sign the joint motion to dismiss, he was made to execute a statement to the effect
9 Rollo, pp. 31-33.
that he was withholding the payment of the check.14 Subsequently, in a letter
525 addressed to Ms. Desi Tomas, vice president of the bank, dated September 4, 1995,
VOL. 351, FEBRUARY 12, 2001 525 Dr. Gueco instructed the bank to disregard the “hold order” letter and demanded
International Corporate Bank vs. Gueco the immediate release of his car,15 to which the former replied that the condition of
obligation and thereby became liable for moral and exemplary damages, as well as signing the joint motion to dismiss must be satisfied and that they had kept the
attorney’s fees.10 check which could be claimed by Dr. Gueco anytime.16 While there is controversy
We disagree. as to whether the document evidencing the order to hold payment of the check was
Fraud has been defined as the deliberate intention to cause damage or formally offered as evidence by petitioners,17 it appears from the pleadings that
prejudice. It is the voluntary execution of a wrongful act, or a willful omission, said check has not been encashed.
knowing and intending the effects which naturally and necessarily arise from such The decision of the Regional Trial Court, which was affirmed in toto by the
act or omission; the fraud referred to in Article 1170 of the Civil Code is the Court of Appeals, orders the petitioner:
deliberate and intentional evasion of the normal fulfillment of obligation.11 We fail
to see how the act of the petitioner bank in requiring the respondent to sign the 1. 1.to return immediately the subject car to the appellants in good working
joint motion to dismiss could constitute as fraud. True, petitioner may have been condition. Appellee may deposit the Manager’s Check—the proceeds of
remiss in informing Dr. Gueco that the signing of a joint motion to dismiss is a which have long been under the control of the issuing bank in favor of
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the appellee since its issuance, whereas the funds have long been paid by International Corporate Bank vs. Gueco
appellants to secure said Manager’s Check over which appellants have half (2-1/2) years was considered a stale check.25 Failure of a payee to encash a
no control.18 check for more than ten (10) years undoubtedly resulted in the check becoming
stale.26 Thus, even a delay of one (1) week27 or two (2) days,28 under the specific
________________ circumstances of the cited cases constituted unreasonable time as a matter of law.
13 Articles 2229 and 2232 of the NEW CIVIL CODE. In the case at bar, however, the check involved is not an ordinary bill of
14 Rollo, p. 28. exchange but a manager’s check. A manager’s check is one drawn by the bank’s
15 Ibid. manager upon the bank itself. It is similar to a cashier’s check both as to effect and
16 Id., at 28, 30. use. A cashier’s check is a check of the bank’s cashier on his own or another check.
17 Id., at 112. In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself,
18 Id., at 29. and accepted in advance by the act of its issuance.29 It is really the bank’s own
527 check and may be treated as a promissory note with the bank as a maker. 30 The
VOL. 351, FEBRUARY 12, 2001 527 check becomes the primary obligation of the bank which issues it and constitutes
International Corporate Bank vs. Gueco its written promise to pay upon demand. The mere issuance of it is considered an
Respondents would make us hold that petitioner should return the car or its value acceptance thereof. If treated as promissory note, the drawer would be the maker
and that the latter, because of its own negligence, should suffer the loss occasioned and in which case the holder need not prove presentment for payment or present
by the fact that the check had become stale.19 It is their position that delivery of the bill to the drawee for acceptance.31
the manager’s check produced the effect of payment20 and, thus, petitioner was Even assuming that presentment is needed, failure to present for payment
negligent in opting not to deposit or use said check. Rudimentary sense of justice within a reasonable time will result to the discharge of the drawer only to the extent
and fair play would not countenance respondents’ position. of the loss caused by the delay.32 Failure to present on time, thus, does not totally
A stale check is one which has not been presented for payment within a wipe out all liability. In fact, the legal situation amounts to an acknowledgment of
reasonable time after its issue. It is valueless and, therefore, should not be paid. liability in the sum stated in the check. In this case, the Gueco spouses have not
Under the negotiable instruments law, an instrument not payable on demand must alleged, much less shown that they or the bank which issued the manager’s check
be presented for payment on the day it falls due. When the instrument is payable has suffered damage or loss
on demand, presentment must be made within a reasonable time after its issue. In
the case of a bill of exchange, presentment is sufficient if made within a reasonable _______________
25 Montinola v. Philippine National Bank, 88 Phil. 178 (1951).
time after the last negotiation thereof.21
A check must be presented for payment within a reasonable time after its 26 Papa v. A.U. Valencia and Co., Inc., 289 SCRA 643 (1998).
issue,22 and in determining what is a “reasonable time,” regard is to be had to the 27 Parker v. Grav., 188 Ark., 68 S.W. (2) 1023.
nature of the instrument, the usage of trade or business with respect to such 28 National Plumbing Supple Co. v. Stevenson, 213 111. App. 49.
instruments, and the facts of the particular case.23 The test is whether the payee 29 Anderson v. Bank of Tupelo, 135 Miss. 351, 100 So. 179; Republic of the
employed such diligence as a prudent man exercises in his own affairs. 24 This is Philippines v. PNB, 3 SCRA 851, 856 (1961).
because the nature and theory behind the use of a check points to its immediate 30 Section 130, NIL.
use and payability. In a case, a check payable on demand which was long overdue 31 1st National Bank v. Comm. Ins. Co., 113 Pac. 815.
529
________________ VOL. 351, FEBRUARY 12, 2001 529
19 The check was issued sometime in August 1995. By current banking practice, International Corporate Bank vs. Gueco
a check becomes stale after more than six (6) months. (Pacheco v. Court of Appeals, caused by the delay or non-presentment. Definitely, the original obligation to pay
et al., G.R. No. 126670, December 2, 1999, 319 SCRA 595). certainly has not been erased.
20 Citing New Pacific Timber and Supply Co., Inc. v. Sevens, 101 SCRA It has been held that, if the check had become stale, it becomes imperative that
686 (1980); see also Tan v. Court of Appeals, 239 SCRA 310 (1994); Tibajia, Jr. v. the circumstances that caused its non-presentment be determined.33 In the case at
Court of Appeals, 223 SCRA 163 (1993). bar, there is no doubt that the petitioner bank held on the check and refused to
21 Section 71, Act No. 231, Negotiable Instruments Law (NIL). encash the same because of the controversy surrounding the signing of the joint
22 Section 186, NIL. motion to dismiss. We see no bad faith or negligence in this position taken by the
23 Section 193, NIL. Bank.
24 Jell Bros. Stones v. McCullough (1934) 188 Ark 1108, 69 S.W. (2d) 863. WHEREFORE, premises considered, the petition for review is given due course.
528 The decision of the Court of Appeals affirming the decision of the Regional Trial
528 SUPREME COURT REPORTS ANNOTATED Court is SET ASIDE. Respondents are further ordered to pay the original
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obligation amounting to P150,000.00 to the petitioner upon surrender or
cancellation of the manager’s check in the latter’s possession, afterwhich, petitioner
is to return the subject motor vehicle in good working condition.
SO ORDERED.
Davide, Jr. (C.J., Chairman), Puno, Pardo and Ynares-Santiago,
JJ., concur.
Petition granted, judgment set aside.
Notes.—There is an element of certainty or assurance in an ordinary check
that it will be paid upon presentation that is why it is perceived as a convenient
substitute for currency in commercial and financial transactions. (Tan vs. Court of
Appeals, 239 SCRA 310 [1994])
A manager’s check is like a cashier’s check which, in the commercial world, is
regarded substantially to be as good as the money it represents. (Bank of the
Philippine Islands vs. Court of Appeals, 326 SCRA 641 [2000])
——o0o——
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