G.R. No. 247589 - Plan, Jr. y Beloncio vs. People

Case Summary (G.R. No. 247589)

Procedural History

The bank filed a civil action for sum of money with prayer for replevin in the MTC of Pasay City after the Gueco spouses defaulted. Following negotiation attempts and the detention of the car on bank premises, respondents tendered a manager’s check for P150,000 but refused to sign a proposed joint motion to dismiss, which the bank required as part of its standard procedure. Respondents then filed an independent civil action for damages in the MTC Quezon City (Branch 33), which was dismissed. On appeal the RTC (Branch 227) reversed, finding an enforceable oral compromise reducing the indebtedness to P150,000, ordering return of the car, and awarding moral and exemplary damages, attorney’s fees, and costs. The Court of Appeals affirmed the RTC. The bank filed a Rule 45 petition to the Supreme Court.

Facts Material to the Dispute

The Guecos executed promissory notes and a chattel mortgage to secure the loan for the car and defaulted. The bank initially demanded P184,000 as unpaid balance; negotiations resulted in reductions to P154,000 and then P150,000. On August 29, 1995, Dr. Gueco delivered a manager’s check for P150,000 but refused to sign the bank’s draft joint motion to dismiss; the bank retained the car and treated the check as being on hold. The respondents asserted that no condition to sign a joint motion had been agreed upon; the bank maintained that execution of the joint motion was a condition of the compromise. The manager’s check remained in the bank’s possession and was apparently never encashed. Respondents later sought damages for the withholding of the car.

Issues Presented to the Supreme Court

The bank raised three principal assignments of error: (1) the Court of Appeals erred in holding that the execution of the joint motion to dismiss was not a condition of the parties’ oral compromise; (2) the Court of Appeals erred in awarding moral and exemplary damages and attorney’s fees to respondents; and (3) the Court of Appeals erred in ordering return of the car without requiring respondents to issue a new manager’s/cashier’s check in lieu of the original, which the bank contended had become stale.

Standard of Review on Factual Findings

The Supreme Court emphasized the well-settled doctrine that findings of fact by the trial court, especially those affirmed by the Court of Appeals, are binding on the Supreme Court unless one of the recognized exceptions applies. Because petitioner bore the affirmative burden of proving that the oral compromise included a condition requiring execution of a joint motion to dismiss, and because the lower courts resolved the factual dispute in favor of respondents after observing witness demeanor and considering contemporaneous circumstances, the Supreme Court found no basis to overturn the factual determinations that the joint-motion requirement was not an agreed condition of the August 28, 1995 compromise.

Analysis of Fraud, Moral and Exemplary Damages, and Attorney’s Fees

The Court analyzed the lower courts’ characterization of the bank’s conduct as fraudulent under Article 1170 of the Civil Code (fraud being the deliberate and intentional evasion of the normal fulfillment of an obligation). The Supreme Court rejected the finding that the bank’s insistence on signing the joint motion to dismiss constituted fraud or bad faith. The Court explained that requiring a joint motion to dismiss was a standard procedure beneficial to the respondent as it would effect dismissal of the pending action, and the bank’s reduction of the indebtedness from approximately P184,985.09 to P150,000 was indicative of good faith efforts to compromise. The Court reiterated the legal principle that moral and exemplary damages in breach-of-contract cases are proper only when the breach is attended by fraud, bad faith, or conduct characterized as wanton, oppressive, or malevolent; absent an adequate showing overcoming the presumption of good faith, such damages and attorney’s fees are not warranted. The Supreme Court thus concluded that the lower courts erred in awarding moral and exemplary damages and attorney’s fees based on a finding of fraud.

Legal Characterization and Treatment of the Manager’s Check

The Court addressed the legal nature of the instrument tendered by respondents. It explained that a manager’s check (analogous to a cashier’s check) is the bank’s own obligation and is treated like a promissory obligation of the issuing bank; its issuance constitutes an acceptance by the bank. Nonetheless, negotiable instruments law principles regarding presentment and “reasonable time” for payment apply: a check payable on demand must be presented within a reasonable time after issuance, and failure to present within a reasonable time may render a check stale, with attendant consequences. The Court noted that the manager’s check in this case was issued in August 1995 and that by contemporary banking practice a check becomes stale after

Case Syllabus (G.R. No. 247589)

Procedural History

Case originated from a civil action filed by petitioner on August 7, 1995, docketed as 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."
The MTC action was eventually dismissed for failure or lack of interest to prosecute (Annex 16).
Respondents later filed a civil action for damages before the Metropolitan Trial Court of Quezon City, Branch 33; the MTC dismissed that complaint for lack of merit.
On appeal, the Regional Trial Court (RTC), Branch 227 of Quezon City, reversed the MTC decision, finding an oral compromise and awarding return of the car and damages (moral, exemplary, attorney's fees) and costs.
The Court of Appeals (CA) affirmed the RTC decision in toto on February 17, 2000, denying petition for review on certiorari (decretal portion quoted in full in the source).
Petitioner brought a petition for review on certiorari to the Supreme Court under Rule 45, assigning three errors.
The Supreme Court granted due course to the petition, set aside the Court of Appeals decision, and rendered final relief ordering respondents to pay P150,000.00 upon surrender or cancellation of the manager's check, after which petitioner was to return the motor vehicle in good working condition.

Parties and Representation

Petitioner: The International Corporate Bank (now Union Bank of the Philippines).
Respondents: Spouses Francis S. Gueco and Ma. Luz E. Gueco.
Supreme Court decision authored by Justice Kapunan; concurrence by Chief Justice Davide, Jr. (Chairman), and Justices Puno, Pardo, and Ynares-Santiago.

Factual Background and Chronology

Respondents obtained a loan from petitioner to purchase a Nissan Sentra 1600 4DR, 1989 Model; promissory notes payable in monthly installments and a chattel mortgage on the car were executed as security.
Respondents defaulted on payments, prompting the bank’s civil action for sum and replevin.
August 25, 1995: Dr. Francis Gueco was served summons and was fetched by the sheriff and bank representative to a meeting at the bank. Assistant Vice President Desi Tomas demanded payment of P184,000.00 representing the unpaid balance; after negotiation amount lowered to P154,000.00; failure to pay resulted in detention of the car inside the bank compound.
August 28, 1995: Dr. Gueco met Jefferson Rivera (Administrative Support, Auto Loans/Credit Card Collection Head) and agreed to further reduction to P150,000.00.
August 29, 1995: Dr. Gueco delivered a manager's check for P150,000.00 but refused to sign a Joint Motion to Dismiss; bank did not release the car and recorded that Dr. Gueco was withholding payment of the check.
September 4, 1995: Dr. Gueco wrote to Ms. Desi Tomas instructing the bank to disregard the hold order and demanded release of the car; bank replied that signing the Joint Motion to Dismiss remained a condition and that the check was kept and could be claimed by Dr. Gueco.
There was controversy whether the document evidencing the hold order on the check was formally offered into evidence; pleadings indicate the check had not been encashed.

Claims, Counterclaims and Reliefs Sought Below

Petitioner sought recovery of unpaid loan balance and the car through replevin action.
Respondents, after bank’s detention of the car and alleged wrongful withholding despite delivery of manager’s check, filed an action for damages.
RTC awarded to respondents: immediate return of the car in good working condition; deposit of the manager's check; P50,000.00 moral damages; P25,000.00 exemplary damages; P25,000.00 attorney's fees; costs of suit.
CA affirmed the RTC decision in toto before Supreme Court review.

Issues Assigned to the Supreme Court

I. Whether the Court of Appeals erred in holding that execution of a Joint Motion to Dismiss was not part of the oral compromise as a condition for the compromise agreement.
II. Whether the Court of Appeals erred in granting moral and exemplary damages and attorney’s fees to respondents.
III. Whether the Court of Appeals erred in ordering return of the subject car to respondents without requiring issuance of a new manager’s/cashier’s check by respondents, in lieu of the original manager’s check that had become stale.

Standard of Review and Findings of Fact

The Supreme Court reiterated the settled rule that findings of fact of the lower courts, especially when affirmed by the Court of Appeals, are binding upon the Supreme Court.
Petitioner bore the burden to prove that the oral compromise included a stipulation that the parties would jointly file a motion to dismiss; petitioner failed to meet that burden.
The MTC’s factual findings (including that agreement on August 28, 1995 was for lowering the debt to P150,000.00 with release of the car upon payment) and the RTC’s factual conclusions were respected by RTC and CA.
The CA analyzed testimonial evidence: bank witness Jefferson Rivera testified that Dr. Gueco was aware signing the Joint Motion to Dismiss was a condition; respondents denied any such discussion. The trial court was credited for its opportunity to observe witness demeanor, and the trial court did not make a categorical finding that the signing was part of the agreement.

Supreme Court Ruling on Issue I (Joint Motion to Dismiss as Condition)

The Supreme Court found for respondents on the first issue.
It held petitioner failed to prove that signing the Joint Motion to Dismiss was a condition sine qua non of the compromise agreement.
The MTC expressly noted the agreement on August 28 was merely to reduce the amount to P150,000.00 and that the car would be released