Case Summary (G.R. No. 90314)
Petitioner and Respondent
• Petitioners: Metrobank, BPI, Global Business Bank, Inc.
• Respondent: Wilfred N. Chiok
Key Dates
• July 5–6, 1995: Purchase, negotiation, deposit of three checks totaling ₱26,068,350.00 and failure of Nuguid to deliver agreed dollar equivalent
• July 6, 1995: TRO issued by RTC Quezon City enjoining payment of the checks
• July 25, 1995: RTC grants preliminary prohibitory injunction upon bond posting
• August 29, 2002: RTC final decision orders Metrobank and Global Bank to refund Chiok with interest and attorney’s fees; dismisses BPI intervention
• May 5, 2006 & November 6, 2006: Court of Appeals affirms with modifications
• November 26, 2014: Supreme Court decision
Applicable Law
• 1987 Philippine Constitution (post-1990 decision)
• Negotiable Instruments Law (Articles 60, 1249, 1191, 1385; Section 49 on transfers without indorsement)
• New Central Bank Act (R.A. No. 7653), Section 60 on legal character of checks
• PCHC Rule Book on clearing and return procedures
• Rules of Court, Rule 57 on garnishment; Rule 129 on judicial admissions
Background of Transactions
Chiok engaged Nuguid in dollar trades for years, funding purchases with manager’s checks (MC) and cashier’s checks (CC) drawn on his deposit accounts with Asian Bank and Metrobank. On July 5, 1995, under a Bills Purchase Line Agreement, Asian Bank purchased an SBTC MC for ₱25.5 M, credited Chiok’s account, then issued MCs totaling ₱18,455,350.00 to Nuguid per Chiok’s instruction. Metrobank issued a CC of ₱7,613,000.00 to Nuguid. Chiok deposited these three checks (aggregate ₱26,068,350.00) into Nuguid’s FEBTC account but Nuguid failed to deliver US$1,022,288.50 as agreed.
Procedural History
Upon Nuguid’s default, Chiok obtained a TRO (July 6, 1995) and preliminary prohibitory injunction (July 25, 1995) from the RTC enjoining Metrobank and Asian/Global Bank from honoring the subject checks, conditioned on bond posting. Asian Bank complied immediately; Metrobank initially disputed but eventually halted payment. FEBTC (now BPI) filed intervention claiming it had already paid Nuguid upon deposit through the clearinghouse. RTC allowed the intervention but later dismissed it.
Issues Before the Supreme Court
- Whether purchaser of manager’s/cashier’s checks may stop payment by court order for payee’s alleged breach of contract.
- Whether rescission under Article 1191 can justify cancellation of such checks.
- Liability of Metrobank and Global Bank for amounts of checks and BPI’s claim as collecting bank.
Ruling on Manager’s and Cashier’s Checks
The Court held that manager’s and cashier’s checks are primary, unconditional obligations of the issuing banks, accepted in advance by issuance and “as good as cash.” They remain subject to clearing for material alteration or forgery only; they cannot be countermanded for alleged breach of contract between purchaser and payee. The general banking principle precludes stopping payment on such checks on grounds of personal contractual defaults.
Rescission and Injunctive Relief
Article 1191’s rescission remedy applies only to parties to a reciprocal contract. Metrobank and Global Bank, not being parties to Chiok–Nuguid currency contract, cannot be subjected to rescission relief. Injunctive relief against them was inappropriate where adequate remedy exists in an action for damages and garnishment against Nuguid. Chiok’s action against the banks to enjoin payment and claim refunds lacked merit.
Liability of Drawee Banks
Because the injunction is lifted and rescission inapplicable, Chiok’s claims to recover check proceeds from Metrobank and Global Bank are denied. Any set-off or recourse Global Bank claimed against Chiok likewise is moot and was not pleaded as a counterclaim.
BPI’s Intervention and Right to Proceeds
Nuguid admitted in pleadings he w
Case Syllabus (G.R. No. 90314)
Facts of the Dollar Trading Arrangement
- Wilfred N. Chiok engaged in dollar trading with Gonzalo B. Nuguid for six to eight years, with transactions in the millions of pesos.
- Chiok bought U.S. dollars at prevailing rates and paid Nuguid in cash or by manager’s/cashier’s checks.
- Delivery of dollars by Nuguid occurred the same day or within a week, as agreed.
Bills Purchase Line Agreement and Check Issuances
- Under a Bills Purchase Line Agreement (BPLA) with Asian Banking Corporation (now Global Business Bank), Chiok’s third-party checks could be purchased at a discount.
- On July 5, 1995, Asian Bank “bought” SBTC Manager’s Check No. 037364 for ₱25,500,000 and credited Chiok’s account.
- The same day, Chiok instructed Asian Bank to issue Manager’s Checks No. 025935 (₱7,550,000) and No. 025939 (₱10,905,350) to Nuguid, debited from his account.
- Metrobank issued Cashier’s Check No. 003380 (₱7,613,000) in Nuguid’s favor, debited from Chiok’s Metrobank account.
- Total face value of the three checks: ₱26,068,350.
Deposit of Checks and Failure to Deliver Dollars
- Chiok deposited the three checks into Nuguid’s account at Far East Bank & Trust Company (predecessor of BPI) on July 5, 1995.
- Nuguid was to deliver US$1,022,288.50 that afternoon but failed to do so.
- Chiok sought a stop-payment and was told to secure a court order within the 24-hour clearing period.
RTC Temporary Restraining Order and Injunction
- On July 6, 1995, the Quezon City RTC issued a TRO enjoining Nuguid, Asian Bank, and Metrobank from presenting or honoring the three checks.
- Asian Bank and Metrobank refused payment in deference to the TRO, though Metrobank later honored its own check after concluding nothing further could be done.
- After the bond was posted, on July 26, 1995, the RTC issued a writ of preliminary prohibitory injunction freezing payment on the checks during litigation.
PCHC Arbitration Attempt
- Far East Bank & Trust Company initiated arbitration with the Philippine Clearing House Corporation (PCHC) over Asian Bank’s honor of MC Nos. 025935 and 025939.
- The PCHC Arbitration Committee declined jurisdiction to avoid conflict with the pending TRO.
RTC Decision on Merits (August 29, 2002)
- The RTC:
• Declared the preliminary injunction permanent.
• Ordered Global Business Bank, Inc. (formerly Asian Bank) to pay Chiok ₱34,691,876.71 (less ₱255,000 in attorney’s fees) plus 12% interest from September 30, 1999.
• Ordered Metrobank to pay C