BP 22

1. JAIME DICO v. CA AND PEOPLE (elements of bp22 and importance of notice)

FACTS: Accused Jaime Dico, now petitioner, was charged on 28 March 1994 with three (3) counts
of violation of Batas Pambansa Bilang 22 (B.P. Blg. 22)
That on or about the 12th day of May, 1993 and for sometime subsequent thereto, in the City of
Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, knowing
at the time of issue of the check she/he does not have sufficient funds in or credit with the drawee
bank for the payment of such check in full upon its presentment, with deliberate intent, with intent
of gain and of causing damage, did then and there issue, make or draw Far East Bank and Trust
Co. Check No. 364903 dated May 12, 1993 in the amount of P100,000.00 payable to Equitable
Banking Corp. which check was issued in payment of an obligation of said accused, but when said check
was presented with said bank, the same was dishonored for reason Account Closed and despite notice
and demands made to redeem or make good said check, said accused failed and refused, and up to
the present time still fails and refuses to do so, to the damage and prejudice of said Equitable Card
Network Inc. in the amount of P100,000.00 Philippine Currency.
The two other Informations are similarly worded except for the number, date, and amount of the checks.

Case No. Check No. Date Amount

38255-R 369404 June 12, 1993 P200,000.00
38256-R 369380 Jan. 15, 1993 P296,736.27

The evidence of the prosecution adduced thru the testimony of Lily Canlas, collection manager of
the complainant Equitable Card Network, Inc. show that the accused is a credit card holder of the
said network; that the complainant filed these cases because the three (3) checks which the accused
issued in its favor, and in payment of his obligation to the complainant card network all bounced,
for reason "Account Closed"
Ms. Canlas testified that in 1993, the credit line of the accused with the complainant Equitable
Card Network was P499,000.00; that the accused had a good record with the complainant until he
issued the bouncing checks above-mentioned; that the outstanding obligation of the accused to the
complainant Equitable Card Network including interests and charges thereon is P1,035,590.28 and
that the obligation of the accused to the complainant rose to a million because the accused abused
his credit card; that in January, 1993, the accused applied with the complainant for an increase of
his credit line to P699,000.00 but this was rejected by the complainant
The accused Jaime Dico testifying on direct examination admits having issued in favor of the complainant
Equitable Card Network. That due to the conflicts and inconsistencies in the billings made upon him by
the complainant with regard(s) to amounts reflected in his accounts, he advised the Branch Manager then,
Bernard Chua not to present to the bank the checks that he has issued until all the said conflicts and
inconsistencies in his accounts shall have been reconciled.
That he does not understand why his total obligation to the complainant has already reached
P1,035,589.28 when his credit line is only P499,000.00; hence, he approached the complainant’s manager
to reconcile his accounts and find out where the complainant was mistaken; that even if his accounts were
reconciled, he cannot admit that his obligation to the complainant has already reached millions; and that
the problem with the complainant is that it did not return to him the checks which he sent to the
complainant together with his proposal to reconcile his accounts
The accused further testified on cross-examination that although he could not agree on his outstanding
obligation to the complainant, he nevertheless placed his total liability to the complainant in his Petition,
because he was made to understand in the insolvency proceedings that he has to list down the checks that
he has issued but were never returned to him; and since the complainant did not return to him the checks
subject of these cases, he has to include said checks in his assets and liabilities in his petition for
insolvency
TC – guilty si Dico, MR – denied ; RTC – affirmed in toto ; CA – affirmed with modification
ISSUE: Was the prosecution able to prove all the elements of B.P. Blg. 22
HELD:
The essential elements of the offense penalized under Section 1, B.P. Blg. 22 are as follows: (1) the
making, drawing and issuance of any check to apply to account or for value; (2) the knowledge of
the maker, drawer or issuer that at the time of issue he does not have sufficient funds or credit with
the drawee bank for the payment of such check in full upon its presentment; and (3) subsequent
dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the
same reason had not the drawer, without any valid cause, ordered the bank to stop payment.
The prosecution has the burden to prove all the elements of the crime beyond reasonable doubt. Failure to
do so will necessarily result in exoneration.

SEC. 2. Evidence of knowledge of insufficient funds. – The making, drawing and issuance of a check
payment of which is refused by the drawee because of insufficient funds in or credit with such bank,
when presented within ninety (90) days from the date of the check, shall be prima facie evidence of
knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder
thereof the amount due thereon, or makes arrangements for payment in full by the drawee of such
check within five (5) banking days after receiving notice that such check has not been paid by the
drawee.

For this presumption to arise, the prosecution must prove the following: (a) the check is presented
within ninety (90) days from the date of the check; (b) the drawer or maker of the check receives
notice that such check has not been paid by the drawee; and (c) the drawer or maker of the check
fails to pay the holder of the check the amount due thereon, or make arrangements for payment in
full within five (5) banking days after receiving notice that such check has not been paid by the
drawee. In other words, the presumption is brought into existence only after it is proved that the issuer
had received a notice of dishonor and that within five days from receipt thereof, he failed to pay the
amount of the check or to make arrangements for its payment. The presumption or prima facie evidence
as provided in this section cannot arise, if such notice of nonpayment by the drawee bank is not sent to the
maker or drawer, or if there is no proof as to when such notice was received by the drawer, since there
would simply be no way of reckoning the crucial 5-day period.

A notice of dishonor received by the maker or drawer of the check is thus indispensable before a
conviction can ensue. The notice of dishonor may be sent by the offended party or the drawee bank.
The notice must be in writing. A mere oral notice to pay a dishonored check will not suffice. The
lack of a written notice is fatal for the prosecution.
The requirement of notice, its sending to, and its actual receipt by, the drawer or maker of the check gives
the latter the option to prevent criminal prosecution if he pays the holder of the check the amount due
thereon, or makes arrangements for payment in full by the drawee of such check within five (5) banking
days after receiving notice that the check has not been paid.

As already stated above, the only notice received by petitioner for the three checks involved in these
cases was that dated 08 June 1993. There is no dispute that there was indeed a demand letter from
the counsel of Equitable Card Network, Inc., but the same was received by petitioner before the
check’s maturity or due date on 12 June 1993. As testified to by prosecution witness Lily Canlas,
the demand letter was sent to petitioner on 08 June 199339 and the check was deposited on 14 June
1993.40 The demand letter was sent four days before the date of the check and six days before said check
was deposited.

This Court rules that as regards FEBTC Check No. 369404,41 petitioner did not receive the notice of
dishonor contemplated by the law. There was no valid notice of dishonor to speak of. The term "notice
of dishonor" denotes that a check has been presented for payment and was subsequently dishonored by
the drawee bank. This means that the check must necessarily be due and demandable because only a
check that has become due can be presented for payment and subsequently be dishonored. A postdated
check cannot be dishonored if presented for payment before its due date.

The failure of Equitable Card Network, Inc., to send another letter demanding that FEBTC Check
No. 369404 be paid within five days after it has been dishonored prevents the disputable
presumption - that petitioner had knowledge of the insufficiency of his funds at the time he issued
the check - from arising. Absent such presumption, the burden of evidence shifts to the prosecution
to prove such knowledge.

Not all elements of BP22 were proven against him.

Petitioner is ordered to pay Equitable Card Network, Inc., the amount of P200,000.00, representing the
face value of FEBTC Check No. 369404, with 12% legal interest per annum, from the filing of the
information until the finality of this decision, the sum of which, inclusive of interest shall be subject
thereafter to 12% per annum interest until the amount is fully paid.

2. BPI Card Corp v. CA (napahiya si atty)

FACTS: The case arose from the dishonor of the credit card of the plaintiff Atty. Ricardo J.
Marasigan by Café Adriatico, a business establishment accredited with the defendant-appellate BPI
Express Card Corporation (BECC for brevity), on December 8, 1989 when the plaintiff entertained
some guests thereat.

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, 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, 2989, 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. Confidential 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 Café Adriatico. When he
presented his credit card to Café Adriatico for the bill amounting to P735.32, said card was dishonored.
One of his guests, Mary Ellen Ringler, paid the bill by using her own credit card a Unibankard.

Thus, on May 7, 1990 private respondent filed a complaint for damages against petitioner.

TC – in favor of the plaintiff

There is no question that plaintiff had been in default in the payment of his billings for more than two
months, prompting defendant to call him and reminded him of his obligation. Unable to personally talk
with him, this Court is convinced that somehow one or another employee of defendant called him up
more that once.

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 that 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.

RTC – affirmed with modifications

ISSUE:

1. whether petitioner had the right to suspend the credit card of the private respondent.

2. whether prior to the suspension of private respondent's credit card on 28 November 1989 the parties
entered into an agreement whereby the card could still be used and would be duly honored by duly
accredited establishments.

HELD:

1. YES, 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

The aforequoted provision of the card cannot be any clearer. By his own admission private
respondent no payment within thirty days for his billing/statement dated 27 September 1989.
Neither did he make payment for his original billing/statement dated 27 October 1989.
Consequently as early as 28 October 1989 thirty days from the non-payment of his billing dated 27
September 1989, petitioner corporation could automatically suspend his credit card.
2. here was an arrangement between the parties, wherein the petitioner required the private
respondent to issue a check worth P15,000.00 as payment for the latter's billings. However we find
that the private respondent was not able to comply with this obligation. here was an arrangement
between the parties, wherein the petitioner required the private respondent to issue a check worth
P15,000.00 as payment for the latter's billings. However we find that the private respondent was not able
to comply with this obligation.

As early as 28 October 1989, petitioner could have suspended private respondent's card outright. Instead,
petitioner allowed private respondent to use his card for several weeks. Petitioner had even notified
private respondent of the impending suspension of his credit card and made special accommodations for
him for setting his outstanding account. As such, petitioner cannot be said to have capriciously and
arbitrarily canceled the private respondent's credit card.

We therefore disagree with the ruling of the respondent court that the dishonor of the credit card of the
private respondent by Café 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.

3. ASSOCIATED BANK and CONRADO CRUZ v. CA and MELRE V. REYES (biglang na

deposit check niya kala niya di pa siya bayad.)

FACTS: The private respondent is engaged in the business of ready-to-wear garments under the
firm name "Melissa's RTW." She deals with, among other customers, Robinson's Department Store,
Payless Department Store, Rempson Department Store, and the Corona Bazaar.

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.

RTC – in favor of Melissa RTW

ISSUE: whether or not the private respondent has a cause of action against the petitioners for their
encashment and payment to another person of certain crossed checks issued in her favor

HELD: YES, 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 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 endorser.

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.

4. STATE INVESTMENT HOUSE v. IAC, ANITA PEÑA CHUA and HARRIS CHUA (endorsed
check)

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, Inc. all postdated December 22, 1980

The total value of the three (3) postdated checks amounted to P 299,450.00.

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

TC – against respondents ; CA – reversed

ISSUE - whether or not petitioner is a holder in due course as to entitle it to proceed against private
respondents for the amount stated in the dishonored checks
HELD: Section 52(c) of the Negotiable Instruments Law defines a holder in due course as one who takes
the instrument "in good faith and for value". On the other hand, Section 52(d) provides that in order that
one may be a holder in due course, it is necessary that "at the time the instrument was negotiated to him
he had no notice of any x x x defect in the title of the person negotiating it." However, under Section 59
every holder is deemed prima facie to be 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.

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.

Under usual practice, crossing a check is done by placing two parallel lines diagonally on the left top
portion of the check. The crossing may be special wherein between the two parallel lines is written the
name of a bank or a business institution, in which case the drawee should pay only with the intervention
of that bank or company, or crossing may be general wherein between two parallel diagonal lines are
written the words "and Co." or none at all as in the case at bar, in which case the drawee should not
encash the same but merely accept the same for deposit.

5. PEOPLE v. NITAFAN and K.T. LIM (memorandum check = ordinary check)

FACTS: 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.
ISSUE: Whether or not a memorandum check is in nature of a promissory note

HELD: NO, 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, 8 and if passed to the third
person, will be valid in his hands like any other 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,"

But even if We retrace the enactment of the "Bouncing Check Law" to determine the parameters of
the concept of "check", We can easily glean that the members of the then Batasang Pambansa
intended it to be comprehensive as to include all checks drawn against banks.

6. TAN v. CA AND RCBC (failure of the teller to exercise due diligence in making sure that the
proper deposit slip is given to them)

FACTS: Petitioner Ramon Tan, a trader-businessman and community leader in Puerto Princesa,
had maintained since 1976 Current Account No. 109058068 with respondent bank's Binondo
branch. 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. Check No. 040719 in the name of Go Lac for Five Thousand Five Hundred
(P5,5000.00) Pesos was presented on April 25,3more than 30 days from petitioner's deposit date of the
cashier's check. Check No. 040718 in the name of MS Development Trading Corporation for Six
Thousand Fifty-Three Pesos and Seventy Centavos (P6,053.70) was returned twice on March 24, nine (9)
days from his deposit date and again on April 26, twenty-two days after the day the cashier's check was
deposited for 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, Branch 47, docketed as Civil Case No. 2101.

TC – In favor of the petitioner ; CA – reversed

ISSUE: Whether or not the bank is free from liability
HELD: 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.

We do not subscribe to RCBC's assertion that petitioner's use of the wrong deposit slip was the proximate
cause of the clearing fiasco and so, petitioner must bear the consequence. In Pilipinas Bank, v. CA, 23 this
Court said:

The bank is not expected to be infallible but, as correctly observed by respondent

Appellate Court, in this instance, it must bear the blame for not discovering the
mistake of its teller despite the established procedure requiring the papers and bank
books to pass through a battery of bank personnel whose duty it is to check and
countercheck them for possible errors. Apparently, the officials and employees
tasked to do that did not perform their duties with due care, . .

We draw attention to the fact that the two dishonored checks issued by petitioner, Check No. 040719 and
Check 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.
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.

On the third and fourth issue, RCBC contends that moral damages cannot be recovered in an action for
breach of contract since under Article 2219 of the New Civil Code, the instant case is not among those
enumerated. For an award of moral damages in a breach of contract, it is imperative that the party acted in
bad faith or fraudulently as provided for in Art. 2220 of the Civil Code, to wit:

Art. 2220. Willful injury to property may be a legal ground for awarding moral damages
if the court should find that, under the circumstances, such damages are justly due. The
same rule applies to breaches of contract where the defendant acted fraudulently or in bad
faith.

In the absence of moral damages, RCBC argues, exemplary damages cannot be awarded under Art. 2225
of the same Code which states:

Exemplary damages 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.

We hold that petitioner has the right to recover moral damages even if the bank's negligence may
not have been attended with malice and bad faith. In American Express International, Inc. v. IAC

7. TEDDY PABUGAIS v DAVE SAHIJIWANI (consignation, manager’s check)

FACTS: Pursuant to an Agreement and Undertaking, petitioner Teddy G. Pabugais agreed to sell to
respondent Dave P. Sahijwani a lot. Respondent paid petitioner an option/reservation fee and the
balance to be paid within 60 days from the execution of the contract. The parties further agreed that
failure on the part of respondent to pay the balance of the purchase price entitles petitioner to forfeit
the 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 option/reservation fee by way of manager’s check which was, however, dishonored.

Petitioner claimed that he twice tendered to respondent, through his counsel, in the form of Far East Bank
& Trust Company Managers Check but said counsel refused to accept the same. He wrote a letter to
respondent saying that he is consigning the amount tendered, thus petitioner filed a complaint for
consignation.

ISSUE:

1. WHETHER OR NOT there was a valid consignation.

2. WHETHER OR NOT petitioner can withdraw the amount consigned as a matter of right.

HELD:

1. Yes. As testified by the counsel for respondent, the reasons why his client did not accept petitioners
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 respondents 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 managers 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. Payment in check by the debtor may be acceptable as valid, if no
prompt objection to said payment is made.

2. No. 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.
Petitioner failed to manifest his intention to comply with the Agreement and Undertaking by
delivering the necessary documents and the lot subject of the sale to respondent in exchange for the
amount deposited. Withdrawal of the money consigned would enrich petitioner and unjustly
prejudice respondent.

8. PNB v. Sps. CHEA CHEE CHONG

Law favoreth diligence, and therefore, hateth folly and negligence.—Wingate’s Maxim.

FACTS: On November 4, 1992, Ofelia Cheah (Ofelia) and her friend Adelina Guarin (Adelina)
were having a conversation in the latter’s office when Adelina’s friend, Filipina Tuazon (Filipina),
approached her to ask if she could have Filipina’s check cleared and encashed for a service fee of
2.5%. The check is Bank of America Check No. 1906 under the account of Alejandria Pineda and
Eduardo Rosales and drawn by Atty. Eduardo Rosales against Bank of America Alhambra Branch
in California, USA, with a face amount of $300,000.00, payable to cash. Because Adelina does not
have a dollar account in which to deposit the check, she asked Ofelia if she could accommodate
Filipina’s request since she has a joint dollar savings account with her Malaysian husband Cheah
Chee Chong (Chee Chong) under Account No. 265-705612-2 with PNB Buendia Branch.

Ofelia agreed.

That same day, Ofelia and Adelina went to PNB Buendia Branch. They met with Perfecto Mendiola of
the Loans Department who referred them to PNB Division Chief Alberto Garin (Garin). Garin discussed
with them the process of clearing the subject check and they were told that it normally takes 15
days. Assured that the deposit and subsequent clearance of the check is a normal transaction, Ofelia
deposited Filipina’s check. PNB then sent it for clearing through its correspondent bank, Philadelphia
National Bank. Five days later, PNB received a credit advice from Philadelphia National Bank that
the proceeds of the subject check had been temporarily credited to PNB’s account as of November
6, 1992. On November 16, 1992, Garin called up Ofelia to inform her that the check had already
been cleared. The following day, PNB Buendia Branch, after deducting the bank charges, credited
$299,248.37 to the account of the spouses Cheah. Acting on Adelina’s instruction to withdraw the
credited amount, Ofelia that day personally withdrew $180,000.00. Adelina was able to withdraw the
remaining amount the next day after having been authorized by Ofelia. Filipina received all the proceeds.

In the meantime, the Cable Division of PNB Head Office in Escolta, Manila received on November 16,
1992 a SWIFT message from Philadelphia National Bank dated November 13, 1992 with
Transaction Reference Number (TRN) 46506218, informing PNB of the return of the subject check
for insufficient funds. However, the PNB Head Office could not ascertain to which branch/office it
should forward the same for proper action. Eventually, PNB Head Office sent Philadelphia National Bank
a SWIFT message informing the latter that SWIFT message with TRN 46506218 has been relayed to
PNB’s various divisions/departments but was returned to PNB Head Office as it seemed misrouted. PNB
Head Office thus requested for Philadelphia National Bank’s advice on said SWIFT message’s proper
disposition. After a few days, PNB Head Office ascertained that the SWIFT message was intended
for PNB Buendia Branch.
Ofelia immediately contacted Filipina to get the money back. But the latter told her that all the
money had already been given to several people who asked for the check’s encashment. In their
effort to recover the money, spouses Cheah then sought the help of the National Bureau of
Investigation. Said agency’s Anti-Fraud and Action Division was later able to apprehend some of
the beneficiaries of the proceeds of the check and recover from them $20,000.00. Criminal charges
were then filed against these suspect beneficiaries

Chee Chong in the end signed a PNB drafted19 letter20 which states that the spouses Cheah are offering
their condominium units as collaterals for the amount withdrawn. Under this setup, the amount
withdrawn would be treated as a loan account with deferred interest while the spouses try to recover the
money from those who defrauded them. Apparently, Chee Chong signed the letter after the Vice President
and Manager of PNB Buendia Branch, Erwin Asperilla (Asperilla), asked the spouses Cheah to help him
and the other bank officers as they were in danger of losing their jobs because of the incident. Asperilla
likewise assured the spouses Cheah that the letter was a mere formality and that the mortgage will be
disregarded once PNB receives its claim for indemnity from Philadelphia National Bank.

As their main defense, the spouses Cheah claimed that the proximate cause of PNB’s injury was its
own negligence of paying a US dollar denominated check without waiting for the 15-day clearing
period, in violation of its bank practice as mandated by its own bank circular, i.e., PNB General Circular
No. 52-101/88.

RTC – in favor of PNB, Cheah guilty of contributory negligence

Because Ofelia trusted a friend’s friend whom she did not know and considering the amount of the
check made payable to cash, the RTC opined that Ofelia showed lack of vigilance in her dealings.
She should have exercised due care by investigating the negotiability of the check and the identity
of the drawer. While the court found that the proximate cause of the wrongful payment of the check was
PNB’s negligence in not observing the 15-day guarantee period rule, it ruled that spouses Cheah still
cannot escape liability to reimburse PNB the value of the check as an accommodation party
pursuant to Section 29 of the Negotiable Instruments Law.29 It likewise applied the principle of solutio
indebiti under the Civil Code. With regard to the award of other forms of damages, the RTC held that
each party must suffer the consequences of their own acts and thus left both parties as they are.

CA – both party negligent (cheah and PNB)

ISSUE: whether or not Cheah should also suffer

HELD: YES, The petitions for review lack merit. Hence, we affirm the ruling of the CA.

PNB’s act of releasing the proceeds of the check prior to the lapse of the 15-day clearing period was
the proximate cause of the loss.1âwphi1

"Proximate cause is ‘that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury and without which the result would not have
occurred.’ x x x To determine the proximate cause of a controversy, the question that needs to be asked
is: If the event did not happen, would the injury have resulted? If the answer is no, then the event is the
proximate cause."

This Court already held that the payment of the amounts of checks without previously clearing them with
the drawee bank especially so where the drawee bank is a foreign bank and the amounts involved were
large is contrary to normal or ordinary banking practice.37 Also, in Associated Bank v. Tan,38 wherein the
bank allowed the withdrawal of the value of a check prior to its clearing, we said that "[b]efore the check
shall have been cleared for deposit, the collecting bank can only ‘assume’ at its own risk x x x that the
check would be cleared and paid out." The delay in the receipt by PNB Buendia Branch of the
November 13, 1992 SWIFT message notifying it of the dishonor of the subject check is of no
moment, because had PNB Buendia Branch waited for the expiration of the clearing period and
had never released during that time the proceeds of the check, it would have already been duly
notified of its dishonor. Clearly, PNB’s disregard of its preventive and protective measure against the
possibility of being victimized by bad checks had brought upon itself the injury of losing a significant
amount of money.

PNB miserably failed to do its duty of exercising extraordinary diligence and reasonable business
prudence. The disregard of its own banking policy amounts to gross negligence, which the law
defines as "negligence characterized by the want of even slight care, acting or omitting to act in a
situation where there is duty to act, not inadvertently but wilfully and intentionally with a conscious
indifference to consequences in so far as other persons may be affected."40 With regard to collection
or encashment of checks, suffice it to say that the law imposes on the collecting bank the duty to
scrutinize diligently the 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."41 A bank is expected to be
an expert in banking procedures and it has the necessary means to ascertain whether a check, local
or foreign, is sufficiently funded.

Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under the principle of solutio
indebiti, which is laid down in Article 2154 of the Civil Code:42

Art. 2154. If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises.

"[T]he indispensable requisites of the juridical relation known as solutio indebiti, are, (a) that he who paid
was not under obligation to do so; and (b) that the payment was made by reason of an essential mistake of
fact

The spouses Cheah are guilty of contributory negligence and are bound to share the loss with the
bank

The CA found Ofelia’s credulousness blameworthy. We agree. Indeed, Ofelia failed to observe caution
in giving her full trust in accommodating a complete stranger and this led her and her husband to
be swindled. Considering that Filipina was not personally known to her and the amount of the foreign
check to be encashed was $300,000.00, a higher degree of care is expected of Ofelia which she,
however, failed to exercise under the circumstances. Another circumstance which should have
goaded Ofelia to be more circumspect in her dealings was when a bank officer called her up to
inform that the Bank of America check has already been cleared way earlier than the 15-day
clearing period. The fact that the check was cleared after only eight banking days from the time it was
deposited or contrary to what Garin told her that clearing takes 15 days should have already put Ofelia on
guard. She should have first verified the regularity of such hasty clearance considering that if something
goes wrong with the transaction, it is she and her husband who would be put at risk and not the
accommodated party. However, Ofelia chose to ignore the same and instead actively participated in
immediately withdrawing the proceeds of the check.Thus, we are one with the CA in ruling that
Ofelia’s prior consultation with PNB officers is not enough to totally absolve her of any liability. In
the first place, she should have shunned any participation in that palpably shady transaction.