Equitable Philippine Commercial International Bank v. Ong
REITERATIONFacts
The Antecedents: Warliza Sarande deposited a P225,000.00 check into her account at PCI Bank. Upon inquiry, PCI Bank erroneously assured her the check had cleared. Relying on this, Sarande issued a P132,000.00 check to Rowena Ong. Ong, in turn, had this check converted into a PCI Bank Manager's Check. The next day, Ong deposited the manager's check into her account. PCI Bank later stopped payment on the manager's check, citing irregular issuance and that the original deposited check was returned due to a closed account, thus alleging failure of consideration. Procedural History: Ong filed a complaint for sum of money and damages. Ong filed a motion for summary judgment, which PCI Bank failed to oppose despite notice. The trial court granted the motion for summary judgment, ordering PCI Bank to pay Ong P132,000.00, and set the reception of evidence for damages. After trial on damages, the RTC rendered a decision ordering PCI Bank to pay Ong P50,000.00 for moral damages, P20,000.00 for exemplary damages, P3,500.00 for actual expenses, P20,000.00 for attorney's fees, and costs. The Court of Appeals affirmed the RTC decision. The Petition: PCI Bank filed a petition for review before the Supreme Court, raising issues regarding the propriety of the summary judgment, unjust enrichment, Ong's status as a holder in due course, the award of damages, and the denial of its counterclaim.
Issue(s)
Whether the Court of Appeals erred in sustaining the lower court's order granting summary judgment despite the existence of genuine issues of fact. Whether the Court of Appeals erred in sustaining the lower court's decision granting reliefs despite the alleged unjust enrichment of the respondent and the fact that the check was unfunded; and whether the Court of Appeals erred in affirming the lower court's factual finding that the respondent was a holder in due course. Whether the Court of Appeals erred in affirming the lower court's decision awarding damages to the respondent. Whether the Court of Appeals erred in affirming the lower court's decision denying the petitioner's counterclaim.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, upholding the trial court's judgment ordering Equitable PCI Bank to pay Rowena Ong the principal amount, moral damages, exemplary damages, actual expenses, and attorney's fees.
Ratio Decidendi
On the propriety of summary judgment: The Court held that summary judgment was proper because PCI Bank's admission of error in clearing the original check and issuing the manager's check fixed its liability. The Court reiterated that summary judgment is appropriate when there is no genuine issue as to any material fact, except for the amount of damages, and the moving party is entitled to judgment as a matter of law. PCI Bank's failure to file an opposition to the motion for summary judgment further supported its propriety. The Court found that the trial court correctly determined that the bank's liability was established based on the certification of the check, which is equivalent to acceptance under the Negotiable Instruments Law (NIL). On unjust enrichment, holder in due course status: The Court ruled that PCI Bank could not claim unjust enrichment or lack of consideration. By clearing Sarande's check and issuing a manager's check, PCI Bank became liable. The Court emphasized that a manager's check is substantially as good as money and is equivalent to a certified check, which implies sufficient funds and an agreement to apply them to the check's satisfaction. The Court stated that PCI Bank's liability is fixed under Section 62 of the NIL, as an acceptor. Therefore, Ong, as a holder in due course, could not be prejudiced by any defense of want or failure of consideration between the bank and the drawer. On the award of damages: The Court affirmed the awards for moral and exemplary damages. For moral damages, the Court found that Ong suffered embarrassment and humiliation due to the dishonor of the manager's check, which was a proximate result of PCI Bank's culpable act of clearing the initial check erroneously and then failing to honor its manager's check. For exemplary damages, the Court cited the fiduciary nature of banking and the high degree of diligence required of banks, noting that PCI Bank's failure to exercise this diligence warranted the award to serve as an example for the public good. On the denial of the counterclaim: Given that the main complaint was found to be meritorious and the bank's liability was established, the Court found no basis to grant PCI Bank's counterclaim, which was predicated on the supposed lack of merit of Ong's complaint.
Main Doctrine
A bank that certifies a check and issues a manager's check in exchange thereof is bound by its acceptance, and cannot interpose the defense of want or failure of consideration against a holder in due course, especially when the bank's own error in clearing the original check led to the situation. Banks are held to the highest degree of diligence, and failure to exercise such diligence in handling financial transactions warrants awards for moral and exemplary damages.