Negotiable Case

8/10/2019 Negotiable Case

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SECOND DIVISION

[G.R. No. 141278. March 23, 2004]

MICHAEL A. OSMEA, pet i t ioner, vs.CITIBANK, N.A., ASSOCIATEDBANK and FRANK TAN, respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of

Court, as amended, of the Decision[1]

of the Court of Appeals in CA-G.R. CVNo. 49529 which affirmed in totothe Decision[2]of the Regional Trial Court ofMakati City, Branch 38, in Civil Case No. 91-538.

As culled from the records, the appeal at bench stemmed from thefollowing factual backdrop:

On February 22, 1991, the petitioner filed with the Regional Trial Court ofMakati an action for damages against the respondents Citibank, N.A. and

Associated Bank.[3]The case was docketed as Civil Case No. 91-538. Thecomplaint materially alleged that, on or about August 25, 1989, the petitioner

purchased from the Citibank Managers Check No. 20-015301 (the check forbrevity) in the amount of P1,545,000 payable to respondent Frank Tan; thepetitioner later received information that the aforesaid managers check wasdeposited with the respondent Associated Bank, Rosario Branch, to theaccount of a certain Julius Dizon under Savings Account No. 19877; theclearing and/or payment by the respondents of the check to an improper partyand the absence of any indorsement by the payee thereof, respondent FrankTan, is a clear violation of the respondents obligations under the NegotiableInstruments Law and standard banking practice; considering that thepetitioners intended payee for the check, the respondent Frank Tan, did not

receive the value thereof, the petitioner demanded from the respondentsCitibank and the Associated Bank the payment or reimbursement of the valueof the check; the respondents, however, obstinately refused to heed hisrepeated demands for payment and/or reimbursement of the amount of thecheck; hence, the petitioner was compelled to file this complaint praying forthe restitution of the amount of the check, and for moral damages andattorneys fees.
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On June 17, 1991, the petitioner, with leave of court, filed an AmendedComplaint[4]impleading Frank Tan as an additional defendant. The petitioneraverred therein that the check was purchased by him as a demand loan torespondent Frank Tan. Since apparently respondent Frank Tan did notreceive the proceeds of the check, the petitioner might have no right to collect

from respondent Frank Tan and is consequently left with no recourse but toseek payment or reimbursement from either or both respondents Citibankand/or Associated Bank.

In its answer to the amended complaint,[5]the respondent Associated Bankalleged that the petitioner was not the real party-in-interest but respondentFrank Tan who was the payee of the check. The respondent also maintainedthat the check was deposited to the account of respondent Frank Tan, a.k.a.Julius Dizon, through its Ayala Head Office and was credited to the savingsaccount of Julius Dizon; the Ayala office confirmed with the Rosario Branch

that the account of Julius Dizon is also in reality that of respondent Frank Tan;it never committed any violation of its duties and responsibilities as theproceeds of the check went and was credited to respondent Frank Tan, a.k.a.Julius Dizon; the petitioners affirmative allegation of non-payment to thepayee is self-serving; as such, the petitioners claim for damages is baseless,unfounded and without legal basis.

On the other hand, the respondent Citibank, in answer to the amendedcomplaint,[6]alleged that the payment of the check was made by it in duecourse and in the exercise of its regular banking function. Since a managers

check is normally purchased in favor of a third party, the identity of whom inmost cases is unknown to the issuing bank, its only responsibility when payingthe check was to examine the genuineness of the check. It had no way ofascertaining the genuineness of the signature of the payee respondent FrankTan who was a total stranger to it. If at all, the petitioner had a cause of actiononly against the respondent Associated Bank which, as depository orcollecting bank, was obliged to make sure that the check in question wasproperly endorsed by the payee. It is not expected of the respondent Citibankto ascertain the genuineness of the indorsement of the payee or even the lackof indorsement by him, most especially when the check was presented for

payment with the respondent Associated Banks guaranteeing all priorindorsements or lack thereof.

On March 16, 1992, the trial court declared Frank Tan in default for failureto file his answer.[7]On June 10, 1992, the pre-trial conference was concludedwithout the parties reaching an amicable settlement.[8]Hence, trial on themerits ensued.
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After evaluating the evidence adduced by the parties, the trial courtresolved that the preponderance of evidence supports the claim of thepetitioner as against respondent Frank Tan only but not against respondentsBanks. Hence, on February 21, 1995, the trial court rendered judgment infavor of the petitioner and against respondent Frank Tan. The complaints

against the respondents Banks were dismissed. The dispositive portion of thedecision reads:

WHEREFORE, judgment is hereby rendered as follows :

1. Ordering defendant Frank Tan to pay plaintiff Michael Osmea the amount of One

Million Five Hundred Forty-Five Thousand (P1,545,000.00) Pesos, Philippine

Currency, with interest thereon at 12% per annum from January 1990, date of extra-

judicial demand until the full amount is paid;

2. Dismissing the complaint against defendants Citibank and Associated Bank;

3. Dismissing the counter-claims and the cross-claim of Citibank against Associated

Bank for lack of merit.

With costs against defendant Frank Tan.[9]

The petitioner appealed the decision,[10]while respondent Frank Tan didnot. On November 26, 1999, the appellate court rendered judgmentaffirming in totothe decision of the trial court. Aggrieved, the petitioner

assailed the decision in his petition at bar.

The petitioner contends that:

I. RESPONDENT COURT ERRED IN NOT HOLDING CITIBANK AND ASSOCIATEDBANK LIABLE TO PETITIONER FOR THE ENCASHMENT OF CITIBANKMANAGERS CHECK NO. 20015301 BY JULIUS DIZON.

II. RESPONDENT COURT ERRED IN HOLDING THAT FRANK TAN AND JULIUSDIZON ARE ONE AND THE SAME PERSON.

III. THE IDENTITY OF FRANK TAN AS JULIUS DIZON WAS KNOWN ONLY TOASSOCIATED BANK AND WAS NOT BINDING ON PETITIONER.[11]

The petition is denied.

The petitioner asserts that the check was payable to the order ofrespondent Tan. However, the respondent Associated Bank ordered thecheck to be deposited to the account of one Julius Dizon, although the checkwas not endorsed by respondent Tan. As Julius Dizon was not a holder of thecheck in due course, he could not validly negotiate the check. The latter was
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not even a transferee in due course because respondent Tan, the payee, didnot endorse the said check. The position of the respondent Bank is akin tothat of a bank accepting a check for deposit wherein the signature of thepayee or endorsee has been forged.

The contention of the petitioner does not hold water.The fact of the matter is that the check was endorsed by Julius Dizon

and was deposited and credited to Savings Account No. 19877 with therespondent Associated Bank. But the evidence on record shows that the saidaccount was in the name of Frank Tan Guan Leng, which is the Chinesename of the respondent Frank Tan, who also uses the alias Julius Dizon. Ascorrectly ruled by the Court of Appeals:

On the other hand, Associated satisfactorily proved that Tan is using and is also

known by his alias of Julius Dizon. He signed theAgreement On Bills

Purchased(Exh. 1) andContinuing Suretyship Agreement(Exh. 2) bothacknowledged on January 16, 1989, where his full name is stated to be FRANK Tan

Guan Leng (aka JULIUS DIZON). Exh. 1 also refers to his Account No.

SA#19877, the very same account to which theP1,545,000.00 from the managers

check was deposited. Osmea countered that such use of an alias is illegal. That is but

an irrelevant casuistry that does not detract from the fact that the payee Tan as Julius

Dizon has encashed and deposited the P1,545,000.00.[12]

The respondent Associated Bank presented preponderant evidence tosupport its assertion that respondent Tan, the payee of the check, did receivethe proceeds of the check. It adduced evidence that Julius Dizon and FrankTan are one and the same person. Respondent Tan was a regular andtrusted client or depositor of the respondent Associated Bank in its branch atRosario, Binondo, Manila. As such, respondent Tan was allowed to maintaintwo (2) savings accounts therein.[13]The first is Savings Account No. 20161-3under his name Frank Tan.[14]The other is Savings Account No. 19877 underhis assumed Filipino name Julius Dizon,[15]to which account the check wasdeposited in the instant case. Both witnesses for the respondent AssociatedBank, Oscar Luna (signature verifier) and Luz Lagrimas (new accounts clerk),testified that respondent Tan was using the alias Julius Dizon, and that both names referred to one and the same person, as Frank Tan himself regularlytransacted business at the bank under both names.[16]This is also evidencedby the Agreement on Bills Purchased[17]and the Continuing Suretyship

Agreement[18]executed between Frank Tan and the respondent AssociatedBank on January 16, 1989. Frank Tans name appears in said document asFRANK TAN GUAN LENG (a.k.a. JULIUS DIZON).[19]The same documentaryevidence also made reference to Savings Account No. 19877,[20]the very same
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account to which the check was deposited and the entire P1,545,000 wascredited. Additionally, Citibank Check No. 075713[21]which was presented bythe petitioner to prove one of the loans previously extended to respondent Tanshowed that the endorsement of respondent Tan at the dorsal side thereof[22]isstrikingly similar to the signatures of Frank Tan appearing in said

agreements.

By seeking to recover the loan from respondent Tan, the petitioneradmitted that respondent Tan received the amount of the check. Thisapprehension was not without any basis at all, for after the petitionerattempted to communicate with respondent Tan on January or February 1990,demanding payment for the loan, respondent Tan became elusive of thepetitioner.[23]As a matter of fact, respondent Tan did not file his answer to theamended complaint and was never seen or heard of by thepetitioner.[24] Besides, if it were really a fact that respondent Tan did not

receive the proceeds of the check, he could himself have initiated the instantcomplaint against respondents Banks, or in the remotest possibility, joined thepetitioner in pursuing the instant claim.

The petitioner initially sought to recover from the respondents Banks theamount of P1,545,000 corresponding to the loan obtained by respondent Tanfrom him, obviously because respondent Tan had no intent to pay theamount. The petitioner alleges that the respondents Banks were negligent inpaying the amount to a certain Julius Dizon, in relation to the pertinentprovisions of the Negotiable Instruments Law, without the proper indorsement

of the payee, Frank Tan. The petitioner cites the ruling of the CourtinAssociated Bank v. Court of Appeals,[25]in which we outlined the respectiveresponsibilities and liabilities of a drawee bank, such as the respondentCitibank, and a collecting bank, such as the defendant Associated Bank, inthe event that payment of a check to a person not designated as the payee, orwho is not a holder in due course, had been made. However, the ruling of theCourt therein does not apply to the present case for, as has been amplydemonstrated, the petitioner failed to establish that the proceeds of the checkwas indeed wrongfully paid by the respondents Banks to a person other thanthe intended payee. In addition, the Negotiable Instruments Law was enacted

for the purpose of facilitating, not hindering or hampering transactions incommercial paper. Thus, the said statute should not be tampered withhaphazardly or lightly. Nor should it be brushed aside in order to meet thenecessities in a single case.[26]

Moreover, the chain of events following the purported delivery of the checkto respondent Tan renders even more dubious the petitioners claim thatrespondent Tan had not received the proceeds of the check. Thus, the
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petitioner never bothered to find out from the said respondent whether thelatter received the check from his messenger. And if it were to be supposedthat respondent Tan did not receive the check, given that his need for themoney was urgent, it strains credulity that respondent Tan never even madean effort to get in touch with the petitioner to inform the latter that he did not

receive the check as agreed upon, and to inquire why the check had not beendelivered to him. The petitioner and respondent Tan saw each other duringsocial gatherings but they never took the chance to discuss details on the loanor the check.[27]Their actuations are not those to be usually expected of friendsof 15 years who, as the petitioner would want to impress upon this Court,were transacting business on the basis of confidence.[28]In fact, the first timethat the petitioner attempted to communicate with respondent Tan was onJanuary or February 1990, almost five or six months after the expecteddelivery of the check, for the purpose of demanding payment for theloan. And it was only on that occasion that respondent Tan, as the petitionerinsinuates, informed him that he (Frank Tan) had not received the proceeds ofthe check and refused to pay his loan.[29]All told, the petitioners allegation thatrespondent Tan did not receive the proceeds of the check [30]is belied by theevidence on record and attendant circumstances.

Conversely, the records would disclose that even the petitioner himselfhad misgivings about the truthfulness of his allegation that respondent Tan didnot receive the amount of the check. This is made implicit by respondentTans being made a party-defendant to the case when the petitioner filed hisamended complaint. In his memorandum in the case below, the petitioner

averred inter aliathat:

The amount of P1,545,000.00 is sought to be recovered from:

1. Frank Tan for his failure to pay the loan extended by plaintiff; and

2. Associated Bank and Citibank for having accepted for deposit and/or paid the

Citibank managers check despite the absence of any signature/endorsement by the

named payee, Frank Tan.

The claim of the petitioner that respondent Tans use of an alias is illegaldoes not detract a whit from the fact that respondent Tan had been creditedby the respondent Associated Bank for the amount of the check. RespondentTan did not appeal the decision of the RTC.

IN LIGHT OF ALL THE FOREGOING,the petition is DENIED. TheDecision dated November 26, 1999 of the Court of Appeals in CA-G.R. CVNo. 49529 is hereby AFFIRMED. Costs against the petitioner.
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SO ORDERED.

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 122796 December 10, 2001

PETROPHIL CORPORATION,petitioner,vs.COURT OF APPEALS, DR. AMANDA TERNIDA-CRUZ, JESSIE

DE VERA, MARCIAL MULIG, ANTONIO CUENCA, and RUFINOCUENCA,respondents.

QUISUMBING, J.:

This petition seeks to annul and set aside the decision1datedSeptember 26, 1995, of the Court of Appeals, affirming withmodification the decision of the Regional Trial Court of Manila,Branch 52, in Civil Case No. 87-40930 for specific performance with

preliminary injunction and Civil Case No. 88-43946 for damages. Itlikewise seeks to annul the resolution2dated November 16, 1995denying petitioner's motion for reconsideration.

On December 27, 1970, petitioner Petrophil Corporation (Petrophil)entered into contract with private respondent Dr. Amanda Ternida-Cruz, allowing the latter to haul and transport any and all packagesand/or bulk products of Petrophil. The contract provided amongothers, that Petrophil could terminate the contract for breach,

negligence, discourtesy, improper and/or inadequate performanceor abandonment. Dr. Cruz was also required to reserve the use of atleast two (2) units of tank trucks solely for the hauling requirementsof Petrophil. Paragraph 11 of the contract also stipulated that thecontact shall be for an indefinite period, provided that Petrophil mayterminate said contract at any time with 30 days prior written notice.3


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Annexed to the contract was the Penalty Clause which containedcalibrated penal sanctions for infractions that may be committed byDr. Cruz and/or her employees.4Petrophil also required theformation of a Hearing Committee that will hear the offenses

committed by hauling contractors or their employees, to give anerring party opportunity to be heard prior to the imposition of anypenalty.5

In a letter dated May 21, 1987, Petrophil, through its OperationsManager, advised Dr. Cruz that it was terminating her haulingcontract in accordance with paragraph 11 thereof.6Dr. Cruzappealed to Petrophil for reconsideration but said appeal wasdenied on June 5, 1987.

On June 23, 1987, Dr. Cruz filed with the Regional Trial Court ofManila, a complaint docketed as Civil Case No. 87-40930, againstPetrophil seeking the nullity of the termination of the contract anddeclaring its suspension as unjustified and contrary to its terms andconditions.7

On March 11, 1988, the other private respondents herein, Jessie deVera, Marcial Mulig, Antonio and Rufino Cuenca, all tank truck

drivers of Dr. Cruz, also filed a complaint docketed as Civil CaseNo. 88-43946 for damages against Petrophil Operations Manager

Antonio Santos, Pandacan Terminal Manager Crispino A. deCastro, and Pandacan Terminal Superintendent Jaime Tamayo.8

The two cases were consolidated and jointly tried.

During the hearing, Dr. Cruz testified that she had been in thegasoline business as dealer, operator and hauling contractor for the

last 26 years. She claimed that the termination of her haulingcontract was a retaliation against her for allegedly sympathizing withthe then striking Petrophil employees and for informing the PNOCpresident of anomalies perpetrated by some of its officers andemployees.


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Driver Jessie de Vera corroborated these allegations and said thatthe termination of Dr. Cruz's contract was intended to silence her.Further, he testified that before the termination of the contract,Petrophil officials reduced their hauling trips to make life harder for

them so that they would resign from Dr: Cruz's employ, which inturn would result in the closure of her business.

Petitioner denied that Petrophil officials were out to starve Dr.Cruz's drivers for their support of her. They professed that thehauling trips were reduced not because Dr. Cruz was beingpunished, but because the company was assigning hauling trips onthe basis of compartmentation and not on a first-come first-serve.

Additionally, witnesses for Petrophil testified that on April 25, 1987,

there was a strike at the Pandacan terminal and Dr. Cruz and herhusband were at the picket line. They refused to load petroleumproducts, resulting in the disruption of delivery to service stations inMetro Manila and in the provinces, which in turn resulted in loss ofsales and revenues. Because of Dr. Cruz's refusal to load, themanagement terminated the hauling contract.

The trial court on May 29, 1991 rendered a decision that reads:

WHEREFORE, judgments are rendered as follows:

1. In Civil Case No. 87-40830 (sic), the defendant PetrophilCorporation is ordered to pay plaintiff Dra. Amanda Ternida-Cruz the sum of P309,723.65 as unearned hauling chargesand P20,000.00 as attorney's fees and expenses of suit,without prejudice to indemnification from its officials andemployees responsible for the damage, and making thepreliminary injunction permanent.

2. In Civil Case NO. 88-43949 (sic), ordering the defendantstherein, jointly and severally, to pay each of plaintiffs Jessie deVera and Rufino Cuencathe sums of P64,390.00 andP5,000.00 as unearned income and attorney's fees,respectively.


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Costs in each case against the respective defendants.

SO ORDERED.9

In Civil Cases Nos. 87-40930 and 88-43946, Dr. Cruz alleged thatthe trial court erred in not awarding actual damages from loss ofincome during the illegal and arbitrary suspension of the haulingcontract. She asked that Petrophil be ordered to pay her the sum ofP309,723.65, representing the unearned hauling charges thatended in 1990 and until said amount is paid and settled; and toaward compensatory, exemplary, and moral damages.10

On September 26, 1995, the Court of Appeals affirmed with

modification the decision of the trial court. It held:

WHEREFORE, the appealed decision is hereby AFFIRMED,with the modification that the amount of P309,723.65, awardedas unearned hauling charges should earn legal interest fromMay 29, 1991 until fully paid.

SO ORDERED.11

The Court of Appeals sustained the trial court declaring that thetermination of the contract was "for cause", and that the proceduresset forth in petitioner's policy guidelines should be followed.

In this petition for review, Petrophil alleges that the Court of Appealserred in rendering a decision that:

I

. . . UNLAWFULLY SET ASIDE A VALID AND EXISTINGCONTRACTUAL STIPULATION BETWEEN THE PARTIES.

II


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. . . IMPOSED TORTIOUS LIABILITY WHERE THEREQUISITES PRESCRIBED BY LAW FOR SUCH LIABILITYWERE NOT ESTABLISHED AT ALL BY THE EVIDENCE.12

On the first assigned error, petitioner contends that the courts' aquofinding that the contract was terminated "for cause" was asuperfluity because petitioner was after all not contractually boundto use the mode, "for cause" under par. 7, nor prohibited from usingthe other mode, "without cause", under par. 1 l. It could use either.Petitioner avers these two modes were not mutually exclusive. Thehauling contract did not state that the existence of conditions for theexercise of one, precluded the exercise of the other. Petitioner saysit chose to terminate the contract under paragraph 11, whose

language was very clear and required no interpretation. Petitionerinsists that Article 1377 of the Civil Code,13applicable to contracts ofadhesion, does not apply in this case.

Private respondents, on the other hand, claim that the contract didnot envision a situation where the contract can be rescinded orterminated after the occurrence of ambivalent acts which mayqualify as cause for termination. The contract's vagueness,according to private respondents, needed an interpretation. Further,they contend that even granting arguendothat petitioner had all theright to terminate the contract even "without cause", petitioner wouldstill be liable to answer for damages under Article 19 of the CivilCode14on abuse of right for terminating the contract without reasonbut out of sheer whim and caprice.

Two questions must initially be resolved: (1) whether or not thehauling contract needed interpretation, and (2) whether petitioner

was guilty of arbitrary termination of the contract, which wouldentitle Dr. Cruz to damages.

On the first issue, we agree with petitioner that the contract clearlyprovided for two ways of terminating the contract, and, one modedoes not exclude the other. Although the contract provided forcauses for termination, it also stated in paragraph 11 that the


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contract was for an indefinite term subject to the right of Petrophil toterminate it any time after a written notice of 30 days. When thelanguage of a contract is clear, it requires no interpretation.15Thus,the finding that the termination of the contract was "for cause", is

immaterial. When petitioner terminated the contract "without cause",it was required only to give Dr. Cruz a 30-day prior written notice,which it did in this case.

However, we differ with petitioner on the second issue. Recall thatbefore Petrophil terminated the contract on May 25, 1987, there wasa strike of its employees at the Pandacan terminal. Dr. Cruz and herhusband were seen at the picket line and were reported to haveinstructed their truck drivers not to load petroleum products. At the

resumption of the operation in Pandacan terminal, Dr. Cruz'scontract was suspended for one week and eventually terminated.Based on these circumstances, the Court of Appeals like the trialcourt concluded that Petrophil terminated the contract because ofDr. Cruz's refusal to load petroleum products during the strike. Inrespondent court's view, the termination appeared as a retaliation orpunishment for her sympathizing with the striking employees.Nowhere in the record do we find that petitioner asked her to

explain her actions. Petrophil simply terminated her contract. Thesefactual findings are binding and conclusive on us, especially in theabsence of any allegation that said findings are unsupported by theevidence, or that the appellate and trial courts misapprehendedthese facts.16In terminating the hauling contract of Dr. Cruz withouthearing her side on the factual context above described, a petitioneropened itself to a charge of bad faith. While Petrophil had the rightto terminate the contract, petitioner could not act purposely to injureprivate respondents. In BPI Express Card Corporation vs. CA, 296

SCRA 260, 272 (1998), we held that there is abuse of a right underArticle 19 if the following elements are present: 1) there is a legalright or duty; 2) which is exercised in bad faith; 3) for the solepurpose of prejudicing or injuring another. We find all these threeelements present in the instant case. Hence, we are convinced that


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the termination by petitioner of the contract with Dr. Cruz calls forappropriate sanctions by way of damages.

Petitioner likewise contends that the lower court erred when they

applied the procedures set forth in the Policy Statement andGuidelines17and penalty clause.18Petitioner argues that theoffenses in the penalty clause refer to product theft or pilferage orgross violation of company policies on credit, security and the like,as required in tank truck deliveries. Dr. Cruz claims, in turn, thatthere was no showing that her alleged act was covered by the saidoffenses, hence petitioner erred when it imposed the procedure inher case. However, this is the first time that petitioner raises thisissue. Well-established is the rule that matters not brought out in the

proceedings below but raised for the first time on appeal willordinarily not be considered by a reviewing court.19Given nocompelling reason, we shall not now deviate from this familiar rule.

On the second assigned error, petitioner contends that the Court ofAppeals erred when it imposed a tortious liability where therequisites therefor were not established by the evidence. Accordingto petitioner, aside from the hearsay and inadmissible testimony ofJessie de Vera, there is no other evidence that the termination ofthe contract was done with deliberate intent to harm or for the solepurpose of prejudicing the respondent-drivers. Petitioner adds thatthe termination was an exercise of a right and directed primarily atDr. Cruz.

Article 20 of the Civil Code provides that every person who, contraryto law, willfully or negligently causes damage to another, shallindemnify the latter for the damage done. Petitioner might not have

deliberately intended to injure the respondent-drivers. But as aconsequence of its willful act directed against Dr. Cruz, respondent-drivers lost their jobs and ,consequently suffered loss of income.Note that under Article 20, there is no requirement that the act mustbe directed at a specific person, but it suffices that a person suffersdamage as a consequence of a wrongful act of another in order thatindemnity could be demanded from the wrongdoer.20The appellate


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court did not err, given the circumstances of this case, in awardingdamages to respondent-drivers.

WHEREFORE, the petition is DENIED. The decision and resolution

of the Court of Appeals dated September 26, 1995 and November16, 1995, respectively, are hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

Negotiable Case

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