Case Summary (G.R. No. 175350)
Applicable Law
– 1987 Philippine Constitution (decision date: 2012)
– Negotiable Instruments Law (restrictive crossing doctrine)
– Civil Code provisions on quasi-delict (Arts. 2199–2217), actual damages (Art. 2200), moral damages (Art. 2217) and binding effect of contracts (Art. 1311)
– Legal interest rate for damages: 6% per annum
Facts of the Case
- SSPI sold electrodes to Interco; total invoice amount P985,234.98.
- Interco issued three checks payable to SSPI on July 10, July 16, and July 29, 1991, each crossed “account payee only.”
- Uy, lacking endorsement or authorization, presented the checks to Equitable, which accepted them for deposit in Uy’s personal accounts and guaranteed prior endorsements.
- Uy promptly withdrew the proceeds. SSPI did not receive payment until June 30, 1993, when Interco settled the principal plus partial interest, leaving SSPI unrecovered interest income of P437,040.35 at 36% per annum.
Procedural History
– SSPI and Pardo sued Equitable and Uy for quasi-delict damages: lost interest income, moral and exemplary damages, attorney’s fees; sought preliminary attachment.
– RTC granted attachment (later discharged against Equitable), found Equitable grossly negligent and Uy a convertor, and awarded P437,040.35 actual damages, P3,000,000 moral damages to Pardo, P500,000 exemplary damages, P200,000 attorney’s fees.
– CA affirmed. Equitable filed petition for review on certiorari before the Supreme Court.
Supreme Court’s Analysis on Cause of Action
– SSPI’s claim arises from quasi-delict, not contract.
– Crossed checks marked “account payee only” impose a duty on the bank to ensure deposit into the named payee’s account.
– Equitable’s reliance on Uy’s oral representation and his relationship to the drawer, without verification, constituted gross negligence.
Supreme Court’s Analysis on Actual Damages
– Actual damages include lost profits; contractual interest at 36% per annum is not recoverable from Equitable because SSPI did not lose entitlement to that rate once the checks were issued.
– SSPI, not being a party or assignee to the Interco contract, cannot enforce its stipulation against Equitable.
– SSPI is entitled to legal interest of 6% per annum for the deprivation period (July 1991 to June 1993, 23 months).
Supreme Court’s Analysis on Moral Damages
– Pardo’s anxiety and fear of prosecution were proximately caused by defendants’ wrongful acts.
– Moral damages need not await realization of feared events.
– The P3,000,000 award was excessive; P50,000 is reasonable to assuage his moral sufferings.
Supreme Court’s Analysis on Unjust Enrichment
– Equitable did not profit from Uy’s scheme but was made a vehicle of his fraud.
– Uy was unjustly enriched at Equitable’s expense; Equitable may recover from Uy the amounts it pays SSPI.
Supreme Court’s Analysis on Wrongful Preliminary Attachment
– SSPI’s affidavit alleged fraud against Equitable without clear, concrete factual support.
– Prelimi
Case Syllabus (G.R. No. 175350)
Facts of the Case
- Special Steel Products, Inc. (SSPI) is a domestic corporation selling steel products; its president and majority stockholder is Augusto L. Pardo.
- International Copra Export Corporation (Interco) is a regular customer of SSPI; Jose Isidoro Uy (alias Jolly Uy), Interco’s purchasing officer and son-in-law of its majority stockholder, handled purchases.
- Equitable Banking Corporation (Equitable) is the depository bank of both Interco and Uy.
- In early 1991, SSPI issued three sales invoices to Interco totaling ₱985,234.98, with a 36% per annum interest clause for delayed payment.
- Interco issued three crossed checks (“account payee only”) drawn on Equitable on July 10, 16, and 29, 1991, payable to SSPI, in amounts of ₱422,788.98; ₱313,845.84; and ₱441,505.30 respectively.
- Uy presented and deposited each check, stamped “ALL PRIOR ENDORSEMENT AND/OR LACK OF ENDORSEMENT GUARANTEED,” into his personal Equitable accounts (Nos. 18841-2 and 03474-0), and immediately withdrew the proceeds.
- SSPI did not receive the checks and repeatedly demanded payment from Interco throughout late 1991 and January 1992; Equitable refused to disclose information, citing depositor confidentiality.
- Interco ultimately paid SSPI the principal amounts on June 30, 1993, plus partial interest, leaving SSPI unable to collect ₱437,040.35 in contracted interest at 36% per annum.
Trial Court Proceedings
- SSPI and Pardo sued Uy and Equitable for damages under quasi-delict, alleging fraudulent diversion of funds by Uy and gross negligence or connivance by Equitable.
- Plaintiffs sought actual damages (lost interest income), moral damages (₱3,000,000 in favor of Pardo), exemplary damages (₱500,000), attorney’s fees (₱200,000), costs, and preliminary attachment of defendants’ properties.
- The Regional Trial Court granted a writ of preliminary attachment upon plaintiffs’ bond of ₱500,000, later discharging attachment against Equitable on counter-bond.
- Equitable moved to dismiss for lack of cause of action, contending no contractual liability and good-faith acceptance of checks; counterclaimed for malicious attachment against SSPI.
- Uy asserted holder-in-due-course status but failed to show how he obtained the checks or the value given.
- RTC Decision (May 4, 1998):
- Held SSPI’s cause of action is quasi-delict for wrongful non-delivery and neglect.
- Found Equitable grossly negligent for accepting crossed ch