Professional Documents
Culture Documents
No.
88013.
March
19,
1990.]
FACTS:
The petitioner is a private corporation engaged in the exportation of food
products. It buys these products from various local suppliers and then sells
them abroad, particularly in the United States, Canada and the Middle
East. Most of its exports are purchased by the petitioner on credit.
The petitioner was a depositor of the respondent bank and maintained a
checking account in its branch at Romulo Avenue, Cubao, Quezon City.
May 25, 1981 - Petitioner deposited to its account in the said bank the
amount of P100,000.00, thus increasing its balance as of that date to
P190,380.74.
Subsequently, the petitioner issued several checks against its deposit but
was suprised to learn later that they had been dishonored for insufficient
funds.
The dishonored checks are the following:
1.
2.
3.
4.
5.
6.
7.
8.
In the case at bar, the petitioner is seeking such damages for the prejudice
sustained by it as a result of the private respondents fault. The
respondent court said that the claimed losses are purely speculative and
are not supported by substantial evidence, but if failed to consider that the
amount of such losses need not be established with exactitude, precisely
because of their nature. Moral damages are not susceptible of pecuniary
estimation. Article 2216 of the Civil Code specifically provides that "no
proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be adjudicated." That is
why the determination of the amount to be awarded (except liquidated
damages) is left to the sound discretion of the court, according to "the
circumstances of each case.
From every viewpoint except that of the petitioners, its claim of moral
damages in the amount of P1,000,000.00 is nothing short of preposterous.
Its business certainly is not that big, or its name that prestigious, to
sustain such an extravagant pretense. Moreover, a corporation is not as a
rule entitled to moral damages because, not being a natural person, it
cannot experience physical suffering or such sentiments as wounded
feelings, serious anxiety, mental anguish and moral shock. The only
exception to this rule is where the corporation has a good reputation that
is debased, resulting in its social humiliation.
Petitioner did suffer injury because of the private respondents negligence
caused by the dishonoring of the checks issued by it. The immediate
consequence was that its prestige was impaired because of the bouncing
checks and confidence in it as a reliable debtor was diminished.
Petitioner did suffer injury because of the private respondents negligence
caused by the dishonoring of the checks issued by it. The immediate
consequence was that its prestige was impaired because of the bouncing
checks and confidence in it as a reliable debtor was diminished.
Considering all this, we feel that the award of nominal damages in the
sum of P20,000.00 was not the proper relief to which the petitioner was
entitled. Under Article 2221 of the Civil Code, "nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for
the purpose of indemnifying the plaintiff for any loss suffered by him." As
we have found that the petitioner has indeed incurred loss through the
fault of the private respondent, the proper remedy is the award to it of
moral damages, which we impose, in our discretion, in the same amount
of P20,000.00.
Art. 2229. Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to the moral,
temperate,
liquidated
or
compensatory
damages.
Art. 2232. In contracts and quasi-contracts, the court may award
exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.
The banking system is an indispensable institution in the modern world
and plays a vital role in the economic life of every civilized nation. Whether
as mere passive entities for the safekeeping and saving of money or as
active instruments of business and commerce, banks have become an
ubiquitous presence among the people, who have come to regard them
with respect and even gratitude and, most of all, confidence. Thus, even
the humble wage-earner has not hesitated to entrust his lifes savings to
the bank of his choice, knowing that they will be safe in its custody and
will even earn some interest for him. The ordinary person, with equal faith,
usually maintains a modest checking account for security and convenience
in the settling of his monthly bills and the payment of ordinary expenses.
As for business entities like the petitioner, the bank is a trusted and active
associate that can help in the running of their affairs, not only in the form
of loans when needed but more often in the conduct of their day-to-day
transactions like the issuance or encashment of checks.
In every case, the depositor expects the bank to treat his account with the
utmost fidelity, whether such account consists only of a few hundred pesos
or of millions. The bank must record every single transaction accurately,
down to the last centavo, and as promptly as possible. This has to be done
if the account is to reflect at any given time the amount of money the
depositor can dispose of as he sees fit, confident that the bank will deliver
it as and to whomever he directs. A blunder on the part of the bank, such
as the dishonor of a check without good reason, can cause the depositor
not a little embarrassment if not also financial loss and perhaps even civil
and criminal litigation.
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 case at bar, it is obvious that
the respondent bank was remiss in that duty and violated that
relationship. What is especially deplorable is that, having been informed of
its error in not crediting the deposit in question to the petitioner, the
respondent bank did not immediately correct it but did so only one week
later or twenty-three days after the deposit was made. It bears repeating
that the record does not contain any satisfactory explanation of why the
error was made in the first place and why it was not corrected immediately
after its discovery. Such ineptness comes under the concept of the wanton
manner contemplated in the Civil Code that calls for the imposition of
exemplary
damages.
After deliberating on this particular matter, the Court, in the exercise of its
discretion, hereby imposes upon the respondent bank exemplary damages
in the amount of P50,000.00, "by way of example or correction for the
public good," in the words of the law. It is expected that this ruling will
serve as a warning and deterrent against the repetition of the ineptness
and indifference that has been displayed here, lest the confidence of the
public in the banking system be further impaired.
Appealed judgment is hereby MODIFIED and the private respondent is
ordered to pay the petitioner, in lieu of nominal damages, moral damages
in the amount of P20,000.00, and exemplary damages in the amount of
P50,000.00 plus the original award of attorneys fees in the amount of
P5,000.00,
and
costs.
SO ORDERED.
(3) Trust Receipt No. CD 83.10 dated 15 March 1983 for P251,250.
G.R. No. 127469
Marcos deposited the required 30% marginal deposit for the trust receipt
agreements. Marcos claimed that his obligation to the BANK was therefore
only P595,875 representing 70% of the letters of credit.
Marcos believed that he and the BANK became creditors and debtors of
each other. Marcos expected the BANK to offset automatically a portion of
his time deposits and the accumulated interest with the amount covered
by the three trust receipts totalling P851,250 less the 30% marginal
deposit that he had paid. Marcos argued that if only the BANK applied his
time deposits and the accumulated interest to his remaining obligation,
which is 70% of the total amount of the letters of credit, he would have
paid completely his debt. Marcos further pointed out that since he did not
apply for a renewal of the trust receipt agreements, the BANK had no right
to renew the same.
Marcos accused the BANK of unjustly demanding payment for the total
amount of the trust receipt agreements without deducting the 30%
marginal deposit that he had already made. He decried the BANKs
unlawful charging of accumulated interest because he claimed there was
no agreement as to the payment of interest. The interest arose from
numerous alleged extensions and penalties. Marcos reiterated that there
was no agreement to this effect because his time deposits served as the
collateral for his remaining obligation.
Marcos also denied that he obtained another loan from the BANK for
P500,000 with interest at 25% per annum supposedly covered by
Promissory Note No. 20-979-83 dated October 24, 1983. Marcos bewailed
the BANKs belated claim that his time deposits were applied to this void
promissory note on March 12, 1985.
September 18, 1989, summons and a copy of the complaint were served
on the BANK.
October 9, 1989, BANK filed its Answer with Counterclaim. The BANK
denied the allegations in the complaint. The BANK believed that the suit
was Marcos desperate attempt to avoid liability under several trust receipt
agreements that were the subject of a criminal complaint.
The BANK alleged that as of 12 March 1982, the total amount of the
various time deposits of Marcos has only P764,897.67 and not
P1,428,795.357 as alleged in the complaint. The P764,897.67 included the
P664,897.67 that Marcos deposited on 11 March 1982.
The BANK pointed out that Marcos delivered to the BANK the time deposit
certificates by virtue of the Deed of Assignment dated 2 June 1989.
Marcos executed the Deed of Assignment to secure his various loan
obligations. The BANK claimed that these loans are covered by Promissory
Note No. 20-756-82 dated 2 June 1982 for P420,000 and Promissory Note
No. 20-979-83 dated 24 October 1983 for P500,000. The BANK stressed
that these obligations are separate and distinct from the trust receipt
agreements.
When Marcos defaulted in the payment of Promissory Note No. 20-979-83,
the BANK debited his time deposits and applied the same to the obligation
that is now considered fully paid.8 The BANK insisted that the Deed of
Assignment authorized it to apply the time deposits in payment of
Promissory Note No. 20-979-83.
the trial court on motion of Marcos counsel issued an order declaring the
BANK in default for filing its answer five days after the 15-day period to
file the answer had lapsed.9 The trial court also held that the answer is a
mere scrap of paper because a copy was not furnished to Marcos. In the
same order, the trial court allowed Marcos to present his evidence ex parte
on 18 December 1989. On that date, Marcos testified and presented
documentary evidence. The case was then submitted for decision.
On 19 December 1989, Marcos received a copy of the BANKs Answer with
Compulsory Counterclaim.
On 29 December 1989, the BANK filed an opposition to Marcos motion to
declare the BANK in default. On 9 January 1990, the BANK filed a motion
to lift the order of default claiming that it had only then learned of the
order of default. The BANK explained that its delayed filing of the Answer
with Counterclaim and failure to serve a copy of the answer on Marcos was
due to excusable negligence. The BANK asked the trial court to set aside
the order of default because it had a valid and meritorious defense.
Trial Court issued an order setting aside the default order and admitting
the BANKs Answer with Compulsory Counterclaim. The trial court ordered
the BANK to present its evidence
BANK filed a motion praying to cross-examine Marcos who had testified
during the ex-parte hearing
Trial court denied the BANKs motion and directed the BANK to present
its evidence. Trial then ensued.
The BANK presented two witnesses, Rodolfo Sales, the Branch Manager of
the BANKs Cubao Branch since 1987, and Pagsaligan, the Branch Manager
of the same branch from 1982 to 1986.
On 24 April 1990, the counsel of Marcos cross-examined Pagsaligan. Due
to lack of material time, the trial court reset the continuation of the crossexamination and presentation of other evidence. The succeeding hearings
were postponed, specifically on 24, 27 and 28 of August 1990, because of
the BANKs failure to produce its witness, Pagsaligan. The BANK on these
scheduled hearings also failed to present other evidence.
CA:
Modified the decision of the trial court by reducing the amount of actual
damages and deleting the attorneys fees awarded to Marcos.
Hence the current petition
ISSUE:
1) WHETHER OR NOT THE PETITIONER [sic] ABLE TO PROVE THE PRIVATE
RESPONDENTS OUTSTANDING OBLIGATIONS SECURED BY THE
ASSIGNMENT OF TIME DEPOSITS?
1.1) COROLLARILY, WHETHER OR NOT THE PROVISIONS OF SECTION 8
RULE 10 OF [sic] THEN REVISED RULES OF COURT BE APPLIED [sic] SO
AS TO CREATE A JUDICIAL ADMISSION ON THE GENUINENESS AND DUE
EXECUTION OF THE ACTIONABLE DOCUMENTS APPENDED TO THE
PETITIONERS ANSWER?
2) WHETHER OR NOT PETITIONER [sic] DEPRIVED OF DUE PROCESS
WHEN THE LOWER COURT HAS [sic] DECLARED PETITIONER TO HAVE
WAIVED PRESENTATION OF FURTHER EVIDENCE AND CONSIDERED THE
CASE SUBMITTED FOR RESOLUTION?19
HELD:
Negative
The BANKs Fiduciary Duty to its Depositor
The BANK is liable to Marcos for offsetting his time deposits with a
fictitious promissory note. The existence of Promissory Note No. 20-97983 could have been easily proven had the BANK presented the original
copies of the promissory note and its supporting evidence. In lieu of the
original copies, the BANK presented the "machine copies of the duplicate"
of the documents. These substitute documents have no evidentiary value.
The BANKs failure to explain the absence of the original documents and to
maintain a record of the offsetting of this loan with the time deposits bring
to fore the BANKs dismal failure to fulfill its fiduciary duty to Marcos.
copies of these documents. Clearly, the BANK failed to treat the account of
Marcos with meticulous care.
The BANK claims that it is a reputable banking institution and that it has
no reason to forge Promissory Note No. 20-979-83. The trial court and
appellate court did not rule that it was the bank that forged the promissory
note. It was Pagsaligan, the BANKs branch manager and a close friend of
Marcos, whom the trial court categorically blamed for the fictitious loan
agreements. The trial court held that Pagsaligan made up the loan
agreement to cover up his inability to account for the time deposits of
Marcos.
Although RA No. 8791 took effect only in the year 2000,34 at the time that
the BANK transacted with Marcos, jurisprudence had already imposed on
banks the same high standard of diligence required under RA No. 8791.35
This fiduciary relationship means that the banks obligation to observe
"high standards of integrity and performance" is deemed written into every
deposit agreement between a bank and its depositor.
The fiduciary nature of banking requires banks to assume a degree of
diligence higher than that of a good father of a family. Thus, the BANKs
fiduciary duty imposes upon it a higher level of accountability than that
expected of Marcos, a businessman, who negligently signed blank forms
and entrusted his certificates of time deposits to Pagsaligan without
retaining copies of the certificates.
The business of banking is imbued with public interest. The stability of
banks largely depends on the confidence of the people in the honesty and
efficiency of banks.
In every case, the depositor expects the bank to treat his account with the
utmost fidelity, whether such account consists only of a few hundred pesos
or of millions. The bank must record every single transaction accurately,
down to the last centavo, and as promptly as possible. This has to be done
if the account is to reflect at any given time the amount of money the
depositor can dispose of as he sees fit, confident that the bank will deliver
it as and to whomever he directs.
As the BANKs depositor, Marcos had the right to expect that the BANK was
accurately recording his transactions with it. Upon the maturity of his time
deposits, Marcos also had the right to withdraw the amount due him after
the BANK had correctly debited his outstanding obligations from his time
deposits.
By the very nature of its business, the BANK should have had in its
possession the original copies of the disputed promissory note and the
records and ledgers evidencing the offsetting of the loan with the time
deposits of Marcos. The BANK inexplicably failed to produce the original
What the BANK presented were merely the "machine copies of the
duplicate" of the loan application and promissory note. No explanation was
ever offered by the BANK for its inability to produce the original copies of
the documentary evidence. The BANK also did not comply with the orders
of the trial court to submit the originals.
The purpose of the rule requiring the production of the best evidence is the
prevention of fraud.41 If a party is in possession of evidence and withholds
it, and seeks to substitute inferior evidence in its place, the presumption
naturally arises that the better evidence is withheld for fraudulent
purposes, which its production would expose and defeat.42
The absence of the original of the documentary evidence casts suspicion
on the existence of Promissory Note No. 20-979-83 considering the BANKs
fiduciary duty to keep efficiently a record of its transactions with its
depositors. Moreover, the circumstances enumerated by the trial court
bolster the conclusion that Promissory Note No. 20-979-83 is bogus. The
BANK has only itself to blame for the dearth of competent proof to
establish the existence of Promissory Note No. 20-979-83.
Total Amount Due to Marcos
The BANK and Marcos do not now dispute the ruling of the Court of
Appeals that the total amount of time deposits that Marcos placed with the
BANK is only P764,897.67 and not P1,429,795.34 as found by the trial
court. The BANK has always argued that Marcos time deposits only
totalled P764,897.67.43 What the BANK insists on in this petition is the
trial courts violation of its right to procedural due process and the absence
of any obligation to pay or return anything to Marcos. Marcos, on the other
hand, merely prays for the affirmation of either the trial court or appellate
court decision.44 We uphold the finding of the Court of Appeals as to the
amount of the time deposits as such finding is in accord with the evidence
on record.
Thank you.
Sgd. FLORENCIO B. PAGSALIGAN
Branch Manager45
The foregoing certification is clear. The total amount of time deposits of
Marcos as of 12 March 1982 is P764,897.67, inclusive of the sum of
P664,987.67 that Marcos placed on time deposit on 11 March 1982. This is
plainly seen from the use of the word "aggregate."
We are not swayed by Marcos testimony that the certification is actually
for the first time deposit that he placed on 11 March 1982. The lettercertification speaks of "various Time Deposits Certificates with an
aggregate value of P764,897.67." If the amount stated in the lettercertification is for a single time deposit only, and did not include the 11
March 1982 time deposit, then Marcos should have demanded a new letter
of certification from Pagsaligan. Marcos is a businessman. While he already
made an error in judgment in entrusting to Pagsaligan the certificates of
time deposits, Marcos should have known the importance of making the
letter-certification reflect the true nature of the transaction. Marcos is
bound by the letter-certification since he was the one who prodded
Pagsaligan to issue it.
We modify the amount that the Court of Appeals ordered the BANK to
return to Marcos. The appellate court did not offset Marcos outstanding
debt with the BANK covered by the three trust receipt agreements even
though Marcos admits his obligation under the three trust receipt
agreements. The total amount of the trust receipts is P851,250 less the
30% marginal deposit of P255,375 that Marcos had already paid the
BANK. This reduced Marcos total debt with the BANK to P595,875 under
the trust receipts.
The trial and appellate courts found that the parties did not agree on the
imposition of interest on the loan covered by the trust receipts and thus no
interest is due on this loan. However, the records show that the three trust
receipt agreements contained stipulations for the payment of interest but
the parties failed to fill up the blank spaces on the rate of interest. Put
differently, the BANK and Marcos expressly agreed in writing on the
payment of interest46 without, however, specifying the rate of interest.
We, therefore, impose the legal interest of 12% per annum, the legal
interest for the forbearance of money,47 on each of the three trust
receipts.
This is to certify that we are taking care in your behalf various Time
Deposit Certificates with an aggregate value of PESOS: SEVEN HUNDRED
SIXTY FOUR THOUSAND EIGHT HUNDRED NINETY SEVEN AND 67/100
(P764,897.67) ONLY, issued today for 90 days at 17% p.a. with the
interest payable at maturity on June 10, 1982.
Marcos claimed that the certificates of time deposit were with Pagsaligan
for safekeeping. Marcos was only able to present the receipt dated 11
March 1982 and the letter-certification dated 12 March 1982 to prove the
total amount of his time deposits with the BANK. The letter-certification
issued by Pagsaligan reads:
March 12, 1982
demand is dated 6 March 1989. We hold that the trust receipts became
due on 6 March 1987.
Marcos payment of the marginal deposit of P255,375 for the trust receipts
resulted in the proportionate reduction of the three trust receipts. The
reduced value of the trust receipts and their respective interest as of 6
March 1987 are as follows:
signing as witness. The deed was notarized by Notary Public Manolo Cruz.7
On 4 April 1963, the Kasulatan was registered with the Register of Deeds
of Bulacan.8
18 March 1981, another Deed of Sale9 conveying another portion of the
subject lot consisting of 50 square meters as right of way was executed by
Eduardo in favor of Ricardo in order to reach the portion covered by the
first sale executed in 1954 and to have access to his fishpond from the
provincial road.10 The deed was signed by Eduardo himself and his wife
Engracia Aniceto, together with Eduardo Manlapat, Jr. and Patricio
Manlapat. The same was also duly notarized on 18 July 1981 by Notary
Public Arsenio Guevarra.11
June 8, 2005
duplicate certificate outside the bank premises when the latter showed the
Kasulatan.15 The Cruzes returned the owners duplicate certificate on the
same day after having copied the same. They then brought the copy of the
OCT to Register of Deeds Jose Flores (Flores) of Meycauayan and showed
the same to him to secure his legal opinion as to how the Cruzes could
legally protect their interest in the property and register the same.16
Flores suggested the preparation of a subdivision plan to be able to
segregate the area purchased by Ricardo from Eduardo and have the same
covered by a separate title.17
Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla (Arandilla),
Land Registration Officer, Director III, Legal Affairs Department, Land
Registration Authority at Quezon City, who agreed with the advice given by
Flores.18 Relying on the suggestions of Flores and Arandilla, the Cruzes
hired two geodetic engineers to prepare the corresponding subdivision
plan. The subdivision plan was presented to the Land Management Bureau,
Region III, and there it was approved by a certain Mr. Pambid of said office
on 21 July 1989.
After securing the approval of the subdivision plan, the Cruzes went back
to RBSP and again asked for the owners duplicate certificate from Salazar.
The Cruzes informed him that the presentation of the owners duplicate
certificate was necessary, per advise of the Register of Deeds, for the
cancellation of the OCT and the issuance in lieu thereof of two separate
titles in the names of Ricardo and Eduardo in accordance with the
approved subdivision plan.19 Before giving the owners duplicate
certificate, Salazar required the Cruzes to see Atty. Renato Santiago (Atty.
Santiago), legal counsel of RBSP, to secure from the latter a clearance to
borrow the title. Atty. Santiago would give the clearance on the condition
that only Cruzes put up a substitute collateral, which they did.20 As a
result, the Cruzes got hold again of the owners duplicate certificate.
After the Cruzes presented the owners duplicate certificate, along with the
deeds of sale and the subdivision plan, the Register of Deeds cancelled the
OCT and issued in lieu thereof TCT No. T-9326-P(M) covering 603 square
meters of Lot No. 2204 in the name of Ricardo and TCT No. T-9327-P(M)
covering the remaining 455 square meters in the name of Eduardo.21
On 9 August 1989, the Cruzes went back to the bank and surrendered to
Salazar TCT No. 9327-P(M) in the name of Eduardo and retrieved the title
they had earlier given as substitute collateral. After securing the new
separate titles, the Cruzes furnished petitioners with a copy of TCT No.
9327-P(M) through the barangay captain and paid the real property tax for
1989.22
The Cruzes also sent a formal letter to Guillermo Reyes, Jr., Director,
Supervision Sector, Department III of the Central Bank of the Philippines,
inquiring whether they committed any violation of existing bank laws
under the circumstances. A certain Zosimo Topacio, Jr. of the Supervision
Sector sent a reply letter advising the Cruzes, since the matter is between
them and the bank, to get in touch with the bank for the final settlement
of the case.23
In October of 1989, Banaag went to RBSP, intending to tender full
payment of the mortgage obligation. It was only then that he learned of
the dealings of the Cruzes with the bank which eventually led to the
subdivision of the subject lot and the issuance of two separate titles
thereon. In exchange for the full payment of the loan, RBSP tried to
persuade petitioners to accept TCT No. T-9327-P(M) in the name of
Eduardo.24
As a result, three (3) cases were lodged, later consolidated, with the trial
court, all involving the issuance of the TCTs
As a result, three (3) cases were lodged, later consolidated, with the trial
court, all involving the issuance of the TCTs, to wit:
(1) Civil Case No. 650-M-89, for reconveyance with damages filed by the
heirs of Eduardo Manlapat against Consuelo Cruz, Rosalina Cruz-Bautista,
Rural Bank of San Pascual, Jose Salazar and Jose Flores, in his capacity as
Deputy Registrar, Meycauayan Branch of the Registry of Deeds of Bulacan;
(2) Civil Case No. 141-M-90 for damages filed by Jose Salazar against
Consuelo Cruz, et. [sic] al.; and
(3) Civil Case No. 644-M-89, for declaration of nullity of title with damages
filed by Rural Bank of San Pascual, Inc. against the spouses Ricardo Cruz
and Consuelo Cruz, et al.25
RTC of Malolos:
Rendered a decision in favor of the heirs of Eduardo
CA:
Reversed the decision of the RTC.
Hence the current petition
ISSUE:
WON the action of the bank lending the OCT to the Cruzs is valid
HELD:
Negative
character is a patent failure to foresee the risk created by the act in view
of the provisions of Section 53 of P.D. No. 1529. This act runs afoul of
every banks mandate to observe the highest degree of diligence in dealing
with its clients. Moreover, a mortgagor has also the right to be afforded
due process before deprivation or diminution of his property is effected as
the OCT was still in the name of Eduardo. Notice and hearing are
indispensable elements of this right which the bank miserably ignored.
sign for and in my behalf any act of strict dominion or ownership any sale,
disposition, mortgage, lease or any other transactions including quitclaims, waiver and relinquishment of rights in and over the parcels of land
situated in General Trias, Cavite, covered by Transfer Certificates of Title
Nos. T-112254 and T-112255 of the Registry of Deeds of Cavite, in
conjunction with his co-owner and in the person ATTY. AUGUSTO F. DEL
ROSARIO;
3. To exercise any or all acts of strict dominion or ownership over the
above-mentioned properties, rights and interest therein. (Emphasis
supplied.)
On the strength of the aforesaid SPA, Julian, on 12 December 1996,
obtained a loan from the respondent in the amount of P3,000,000.00,
secured by real estate mortgage constituted on TCT No. RT-18206
(106338) which covers a parcel of land with an area of 805 square meters,
registered with the Registry of Deeds of Quezon City.
FACTS:
Petitioners are heirs of Perla N. Mercado (Perla). Perla, during her lifetime,
owned several pieces of real property situated in different provinces of the
Philippines.
Respondent, on the other hand, is a banking institution duly authorized as
such under the Philippine laws.
On 28 May 1992, Perla executed a Special Power of Attorney (SPA) in
favor of her husband, Julian D. Mercado (Julian) over several pieces of real
property registered under her name, authorizing the latter to perform the
following acts:
1. To act in my behalf, to sell, alienate, mortgage, lease and deal
otherwise over the different parcels of land described hereinafter, 2. To
The court a quo likewise ordered that the foreclosure proceedings and the
auction sale conducted pursuant to the void REM, be nullified.
CA:
Reversed the RTC Decision and upheld the validity of the REM constituted
over the subject property on the strength of the SPA. The appellate court
declared that Perla intended the subject property to be included in the SPA
she executed in favor of Julian, and that her subsequent revocation of the
said SPA, not being contained in a public instrument, cannot bind third
persons.
MR:
Denied
HELD:
Negative
The subject property was not among those enumerated therein. There is
no obvious reference to the subject property covered by TCT No. RT-18206
(106338) registered with the Registry of Deeds of Quezon City.
There was also nothing in the language of the SPA from which we could
deduce the intention of Perla to include the subject property therein. We
cannot attribute such alleged intention to Perla who executed the SPA
when the language of the instrument is bare of any indication suggestive
of such intention. Contrariwise, to adopt the intent theory advanced by the
respondent, in the absence of clear and convincing evidence to that effect,
would run afoul of the express tenor of the SPA and thus defeat Perlas
true intention.
In cases where the terms of the contract are clear as to leave no room for
interpretation, resort to circumstantial evidence to ascertain the true intent
of the parties, is not countenanced.
[T]he law is that if the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its
stipulation shall control. When the language of the contract is explicit,
leaving no doubt as to the intention of the drafters, the courts may not
read into it [in] any other intention that would contradict its main import.
The clear terms of the contract should never be the subject matter of
interpretation. Neither abstract justice nor the rule on liberal interpretation
justifies the creation of a contract for the parties which they did not make
themselves or the imposition upon one party to a contract or obligation not
assumed simply or merely to avoid seeming hardships. The true meaning
must be enforced, as it is to be presumed that the contracting parties
know their scope and effects.14
Equally relevant is the rule that a power of attorney must be strictly
construed and pursued. The instrument will be held to grant only those
powers which are specified therein, and the agent may neither go beyond
nor deviate from the power of attorney.15 Where powers and duties are
specified and defined in an instrument, all such powers and duties are
limited and are confined to those which are specified and defined, and all
other powers and duties are excluded.16 This is but in accord with the
disinclination of courts to enlarge the authority granted beyond the powers
expressly given and those which incidentally flow or derive therefrom as
being usual and reasonably necessary and proper for the performance of
such express powers.17
Even the commentaries of renowned Civilist Manresa18 supports a strict
and limited construction of the terms of a power of attorney:
The law, which must look after the interests of all, cannot permit a man to
express himself in a vague and general way with reference to the right he
confers upon another for the purpose of alienation or hypothecation,
whereby he might be despoiled of all he possessed and be brought to ruin,
such excessive authority must be set down in the most formal and explicit
terms, and when this is not done, the law reasonably presumes that the
principal did not mean to confer it.
In this case, we are not convinced that the property covered by TCT No.
106338 registered with the Registry of Deeds of Pasig (now Makati) is the
same as the subject property covered by TCT No. RT-18206 (106338)
registered with the Registry of Deeds of Quezon City. The records of the
case are stripped of supporting proofs to verify the respondents claim that
the two titles cover the same property. It failed to present any certification
from the Registries of Deeds concerned to support its assertion. Neither
did respondent take the effort of submitting and making part of the
records of this case copies of TCTs No. RT-106338 of the Registry of Deeds
of Pasig (now Makati) and RT-18206 (106338) of the Registry of Deeds of
Quezon City, and closely comparing the technical descriptions of the
properties covered by the said TCTs. The bare and sweeping statement of
respondent that the properties covered by the two certificates of title are
one and the same contains nothing but empty imputation of a fact that
could hardly be given any evidentiary weight by this Court.
Having arrived at the conclusion that Julian was not conferred by Perla
with the authority to mortgage the subject property under the terms of the
SPA, the real estate mortgages Julian executed over the said property are
therefore unenforceable.
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 respondent bank to accommodate PRCI's urgent need to remit
Australian dollars to Sydney. Yasis of respondent bank then informed
Godofredo of a roundabout way of effecting the requested remittance to
Sydney thus: the respondent bank would draw a demand draft against
Westpac Bank in Sydney, Australia (Westpac-Sydney for brevity) 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 for brevity). This
arrangement has been customarily resorted to since the 1960's and the
procedure has proven to be problem-free. PRCI and the petitioner Gregorio
H. Reyes, acting through Godofredo, agreed to this arrangement or
approach in order to effect the urgent transfer of Australian dollars payable
to the Secretariat of the 20th Asian Racing Conference.
July 28, 1988, the respondent bank approved the said application of PRCI
and issued Foreign Exchange Demand Draft (FXDD) No. 209968 in the
sum applied for, that is, One Thousand Six Hundred Ten Australian Dollars
(AU$ 1,610.00), payable to the order of the 20th Asian Racing Conference
Secretariat of Sydney, Australia, and addressed to Westpac-Sydney as the
drawee bank.
August 10, 1988, upon due presentment of the foreign exchange demand
draft, denominated as FXDD No. 209968, the same was dishonored, with
the notice of dishonor stating the following: "xxx No account held with
Westpac." Meanwhile, on August 16, 1988, Wespac-New York sent a cable
to respondent bank informing the latter that its dollar account in the sum
of One Thousand Six Hundred Ten Australian Dollars (AU$ 1,610.00) was
debited. On August 19, 1988, 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 FXDD
No. 209968, 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 WespacNew York requesting the latter to honor the reimbursement claim of
Wespac-Sydney. On September 14, 1988, upon its second presentment for
payment, FXDD No. 209968 was again dishonored by Westpac-Sydney for
the same reason, that is, that the respondent bank has no deposit dollar
account with the drawee Wespac-Sydney.
September 17, 1988 and September 18, 1988, respectively, petitioners
spouses Gregorio H. Reyes and Consuelo Puyat-Reyes left for Australia to
attend the said racing conference. When petitioner Gregorio H. Reyes
arrived in Sydney in the morning of September 18, 1988, he went directly
to the lobby of Hotel Regent Sydney to register as a conference delegate.
At the registration desk, in the presence of other delegates from various
member of the conference secretariat that he could not register because
the foreign exchange demand draft for his registration fee had been
dishonored for the second time. A discussion ensued in the presence and
within the hearing of many delegates who were also registering. Feeling
terribly embarrassed and humiliated, petitioner Gregorio H. Reyes asked
the lady member of the conference secretariat that he be shown the
subject foreign exchange demand draft that had been dishonored as well
as the covering letter after which he promised that he would pay the
registration fees in cash. In the meantime he demanded that he be given
his name plate and conference kit. The lady member of the conference
secretariat relented and gave him his name plate and conference kit. It
was only two (2) days later, or on September 20, 1988, that he was given
the dishonored demand draft and a covering letter. It was then that he
actually paid in cash the registration fees as he had earlier promised.
September 19, 1988, petitioner Consuelo Puyat-Reyes arrived in Sydney.
She too was embarassed and humiliated at the registration desk of the
conference secretariat when she was told in the presence and within the
hearing of other delegates that she could not be registered due to the
dishonor of the subject foreign exchange demand draft. She felt herself
trembling and unable to look at the people around her. Fortunately, she
saw her husband, coming toward her. He saved the situation for her by
telling the secretariat member that he had already arranged for the
payment of the registration fee in cash once he was shown the dishonored
demand draft. Only then was petitioner Puyat-Reyes given her name plate
and conference kit.
At the time the incident took place, petitioner Consuelo Puyat-Reyes was a
member of the House of Representatives representing the lone
Congressional District of Makati, Metro Manila. She has been an officer of
the Manila Banking Corporation and was cited by Archbishop Jaime
Cardinal Sin as the top lady banker of the year in connection with her
conferment of the Pro-Ecclesia et Pontifice Award. She has also been
awarded a plaque of appreciation from the Philippine Tuberculosis Society
for her extraordinary service as the Society's campaign chairman for the
ninth (9th) consecutive year.
On November 23, 1988, the petitioners filed in the Regional Trial Court of
Makati, Metro Manila, a complaint for damages, docketed as Civil Case No.
88-2468, against the respondent bank due to the dishonor of the said
foreign exchange demand draft issued by the respondent bank. The
petitioners claim that as a result of the dishonor of the said demand draft,
they were exposed to unnecessary shock, social humiliation, and deep
mental anguish in a foreign country, and in the presence of an
international audience.
RTC of Makati:
In favor of the defendant (respondent bank) and against the plaintiffs
(herein petitioners)
CA:
Affirmed the decision of the trial court but in effect deleted the award of
attorney's fees to the defendant (herein respondent bank) and the
pronouncement as to the costs.
Hence the current petition:
ISSUE:
Whether or not respondent bank is liable for damages due to the dishonor
of the foreign exchange demand drafts.
HELD:
Negative
The courts a quo found that respondent bank did not misrepresent that it
was maintaining a deposit account with Westpac-Sydney. Respondent
bank's assistant cashier explained to Godofredo Reyes, representing PRCI
and petitioner Gregorio H. Reyes, how the transfer of Australian dollars
would be effected through Westpac-New York where the respondent bank
has a dollar account to Westpac-Sydney where the subject foreign
exchange demand draft (FXDD No. 209968) could be encashed by the
payee, the 20th Asian Racing Conference Secretariat. PRCI and its VicePresident for finance, petitioner Gregorio H. Reyes, through their said
representative, agreed to that arrangement or procedure. In other words,
the petitioners are estopped from denying the said arrangement or
procedure. Similar arrangements have been a long standing practice in
banking to facilitate international commercial transactions. In fact, the
SWIFT cable message sent by respondent bank to the drawee bank,
Westpac-Sydney, stated that it may claim reimbursement from its New
York branch, Westpac-New York, where respondent bank has a deposit
dollar account. The facts as found by the courts a quo show that
respondent bank did not cause an erroneous transmittal of its SWIFT cable
message to Westpac-Sydney. It was the erroneous decoding of the cable
message on the part of Westpac-Sydney that caused the dishonor of the
subject foreign exchange demand draft. An employee of Westpac-Sydney
in Sydney, Australia mistakenly read the printed figures in the SWIFT cable
message of respondent bank as "MT799" instead of as "MT199". As a
result, Westpac-Sydney construed the said cable message as a format for
a letter of credit, and not for a demand draft. The appellate court correct
found that "the figure before '99' can still be distinctly seen as a number
'1' and not number '7'." Indeed, the line of a "7" is in a slanting position
while the line of a "1" is in a horizontal position. Thus, the number "1" in
"MT199" cannot be construed as "7".11
The evidence also shows that the respondent bank exercised that degree
of diligence expected of an ordinary prudent person under the
circumstances obtaining. Prior to the first dishonor of the subject foreign
exchange demand draft, the respondent bank advised Westpac-New York
fees of the petitioners as delegates of the PRCI to the 20th Asian Racing
Conference in Sydney.
The evidence shows that the respondent bank did everything within its
power to prevent the dishonor of the subject foreign exchange demand
draft. The erroneous reading of its cable message to Westpac-Sydney by
an employee of the latter could not have been foreseen by the respondent
bank. Being unaware that its employee erroneously read the said cable
message, Westpac-Sydney merely stated that the respondent bank has no
deposit account with it to cover for the amount of One Thousand Six
Hundred Ten Australian Dollar (AU $1610.00) indicated in the foreign
exchange demand draft. Thus, the respondent bank had the impression
that Westpac-New York had not yet made available the amount for
reimbursement to Westpac-Sydney despite the fact that respondent bank
has a sufficient deposit dollar account with Westpac-New York. That was
the reason why the respondent bank had to re-confirm and repeatedly
notify Westpac-New York to debit its (respondent bank's) deposit dollar
account with it and to transfer or credit the corresponding amount to
Westpac-Sydney to cover the amount of the said demand draft.
In view of all the foregoing, and considering that the dishonor of the
subject foreign exchange demand draft is not attributable to any fault of
the respondent bank, whereas the petitioners appeared to be under
estoppel as earlier mentioned, it is no longer necessary to discuss the
alleged application of Section 61 of the Negotiable Instruments Law to the
case at bar. In any event, it was established that the respondent bank
acted in good faith and that it did not cause the embarrassment of the
petitioners in Sydney, Australia. Hence, the Court of Appeals did not
commit any reversable error in its challenged decision.
WHEREFORE, the petition is hereby DENIED, and the assailed decision of
the Court of Appeals is AFFIRMED. Costs against the petitioners.