G.R. No. 141968 - International Corporate Bank vs. Spouses Gueco

The spouses Francis S. Gueco and Ma. Luz E. Gueco obtained from International Corporate Bank (now Union Bank of the Philippines) a loan to purchase a 1989 Nissan Sentra 1600 4DR, secured by promissory notes payable in monthly installments and a chattel mortgage over the vehicle.
They defaulted on their payments, prompting the Bank on August 7, 1995 to file Civil Case No. 658-95 before the Metropolitan Trial Court (MTC) of Pasay City, Branch 45, for “Sum of Money with Prayer for a Writ of Replevin.”

On August 25, 1995, Dr. Francis Gueco was served summons, fetched by a sheriff, and escorted to Bank premises where Bank AVP Desi Tomas demanded ₱184,000. After negotiations, the balance was reduced to ₱154,000; non-payment led to detention of the car in the Bank’s compound.
On August 28, 1995, further negotiations with Jefferson Rivera (Head, Auto Loans/Credit Card Collection) reduced the outstanding balance to ₱150,000. On August 29, 1995, Dr. Gueco delivered a manager’s check for ₱150,000 but refused to sign a “Joint Motion to Dismiss”; the Bank declined to release the car.

Multiple demand letters and meetings ensued; the Guecos then filed a separate civil action for damages before MTC Quezon City, Branch 33, which dismissed their complaint for lack of merit.
On appeal, the Regional Trial Court (RTC) Quezon City, Branch 227 (Civil Case No. Q-97-31176) reversed: it found an oral compromise (reduction to ₱150,000 and release of car) without the joint motion condition, ordered immediate return of the vehicle in good working condition, and awarded ₱50,000 moral damages, ₱25,000 exemplary damages, ₱25,000 attorney’s fees, and costs.
The Court of Appeals, on February 17, 2000, denied the Bank’s petition for certiorari and affirmed the RTC decision in toto, relying on the RTC’s factual findings including that fraud attended the Bank’s refusal to release the car.

The petitioner Bank elevated the case to the Supreme Court under Rule 45, assigning errors: (a) the requirement of signing the Joint Motion to Dismiss was a condition of compromise; (b) the awards of moral/exemplary damages and attorney’s fees were improper; and (c) the Bank should recover its car without requiring a new manager’s check despite the original check becoming stale.
The Supreme Court resolved these issues, set aside the Court of Appeals decision, and rendered its final judgment.

Whether the oral compromise agreement of August 28, 1995 included the signing of a Joint Motion to Dismiss as a condition sine qua non for the release of the car.
Whether the Bank’s refusal to release the car upon receipt of the ₱150,000 manager’s check constituted fraud or bad faith warranting moral and exemplary damages and attorney’s fees.
Whether the Bank must return the car without requiring the issuance or deposit of a fresh manager’s/cashier’s check in lieu of the original check that became stale.