Case Summary (G.R. No. 212362)
Factual Background
In 1989 Ma. Lourdes Ong purchased three silver custodian certificates from the Far East Bank & Trust Company in the spouses’ names: CC No. 131157 (dated June 9, 1989) for P100,000; CC No. 131200 (dated July 25, 1989) for P500,000; and CC No. 224826 (dated November 8, 1989) for P150,000. The certificates recited that the Trust Investments Group of FEBTC had in its custody, for and on behalf of the named holders, corresponding Silver Certificates of Deposit; that the instruments were transferable only in the books of the custodian upon surrender together with a deed of assignment; that the holder could withdraw the Silver Certificate of Deposit at any time during office hours; that the instrument would cease to have force upon payment; and that the instrument was not valid unless duly signed by authorized bank signatories. The FEBTC later merged with BPI. After Ma. Lourdes Ong’s death in December 2002, petitioner discovered the three custodian certificates in her safety vault and wrote to BPI on August 12, 2003 to ascertain the procedure for claim. BPI replied that upon merger there were no outstanding Silver Certificates of Deposit and that the certificates had been paid on maturity by 1991.
Trial Court Proceedings
Petitioner filed a complaint for collection of sum of money and damages on March 7, 2006 seeking P750,000 for the three custodian certificates, legal interest, P75,000 for attorney’s fees, P100,000 for moral damages, an unspecified sum for exemplary damages, and costs. After trial the Regional Trial Court rendered judgment in favor of petitioner on June 5, 2008, ordering respondent to pay the principal amounts of P100,000, P500,000, and P150,000 with accrued interests and legal interest from maturity to payment; awarding P100,000 moral damages, P100,000 exemplary damages, P75,000 attorney’s fees, and costs.
Court of Appeals Decision
The Court of Appeals granted respondent’s appeal, reversed and set aside the RTC judgment, and dismissed the complaint. The CA held that the custodian certificates, standing alone, did not prove an outstanding deposit but merely certified that FEBTC had in its custody the corresponding Silver Certificates of Deposit; that surrender of the custodian certificates was not required for withdrawal or payment of the underlying certificates; and that possession of the custodian certificates did not ipso facto establish that the holder was an unpaid depositor of the bank.
Issues Presented on Review
The petition under Rule 45, Rules of Court raised primarily the legal question whether petitioner’s possession of the custodian certificates established an outstanding obligation of respondent and whether respondent met the burden to prove payment and extinguishment of the obligation. Petitioner contended that the wording of the custodian certificates admitted the existence and custody of the underlying Silver Certificates of Deposit and that respondent failed to produce any evidence of payment. Respondent had urged prescription under Article 1144, Civil Code and other defenses in its Answer and Comment.
Standard of Review and Exceptions to Factual Findings
The Court reiterated that petitions under Rule 45, Rules of Court present questions of law and that this Court normally does not reweigh factual findings of the appellate courts where supported by substantial evidence. The Court cited Chessman v. Intermediate Appellate Court and identified the expanded exceptions listed in Medina v. Mayor Assistor, Jr. to permit review where appellate findings are grounded on speculation, manifestly mistaken inferences, grave abuse of discretion, misapprehension of facts, conflict between trial and appellate findings, findings without citation of evidence, and related situations. Because the RTC and the CA reached contrary factual conclusions on the existence and payment of the deposits, the Court found review proper under those exceptions.
Supreme Court Ruling
The Supreme Court granted the petition, reversed and set aside the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 02715, and affirmed and reinstated the Decision of the Regional Trial Court, Branch 33, Iloilo City dated June 5, 2008, with modification that the awards of moral damages, exemplary damages, and attorney’s fees be omitted.
Legal Reasoning on Custodian Certificates and Burden of Proof
The Court held that the custodian certificates were undisputed evidence that FEBTC had the underlying Silver Certificates of Deposit in its custody for and on behalf of the named holders, and that the CA erred in treating the custodian certificates as proving nothing more than custody. The Court reiterated the rule that when the existence of a debt is established by the record, the burden to prove extinguishment by payment rests on the debtor. The respondent offered no acknowledgement or proof of full payment but only assertions that no outstanding certificates remained on the bank’s books at merger. The Court applied the requisites for extinguishment by payment — identity of the prestation and its integrity — and found respondent failed to meet that burden.
Assessment of the Court of Appeals’ Conclusions
The Court found the CA’s pronouncement that surrender of the custodian certificates was not required and that possession did not indicate nonpayment to be inconsistent with the plain wording of the custodian certificates, which contemplated surrender upon transfer and stated the instrument would cease upon payment. The Court observed that the bank’s business is impressed with public interest and that banks are expected to exercise greater care and prudence; it would be inconceivable that the bank would have made payment without requiring surrender of the custodian instruments o
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Case Syllabus (G.R. No. 212362)
Parties and Procedural Posture
- Jose T. Ong Bun filed a Petition for Review on Certiorari under Rule 45, Rules of Court seeking reversal of the Court of Appeals' decision dismissing his complaint for collection of sum of money and damages.
- Bank of the Philippine Islands was respondent in the action arising from claimed unpaid Silver Certificates of Deposit placed in custody by Far East Bank & Trust Company.
- The action originated as Civil Case No. 06-28822 before the Regional Trial Court, Branch 33, Iloilo City, which rendered a June 5, 2008 decision in favor of the plaintiff.
- The Court of Appeals reversed and dismissed the RTC decision, and the petitioner appealed to the Supreme Court by a petition filed on May 22, 2014.
- The Supreme Court granted the petition, reversed the Court of Appeals, and reinstated the RTC decision with specified modifications.
Key Facts
- In 1989 Ma. Lourdes Ong purchased three Silver Custodian Certificates (CC) in the Spouses' names from Far East Bank & Trust Company in the amounts of PHP 100,000, PHP 500,000, and PHP 150,000.
- The CCs contained express language certifying that the Trust Investments Group of FEBTC "has in its custody for and in behalf of" the named holders the corresponding Silver Certificates of Deposit and stated that the instrument "shall cease to have force and effect upon payment under the terms hereof."
- FEBTC merged with BPI circa 2000, and Ma. Lourdes Ong died in December 2002.
- Petitioner discovered the three CCs in his late wife's safety vault and sent a written inquiry to BPI on August 12, 2003, and later made a final demand for payment after BPI denied any outstanding Silver Certificates of Deposit.
- Petitioner filed the complaint on March 7, 2006 seeking payment of PHP 750,000 for principal, interest, attorney's fees, moral and exemplary damages, and costs.
Claims and Defenses
- Petitioner contended that the CCs were incontrovertible evidence that FEBTC retained the underlying Silver Certificates of Deposit in custody and that the obligations remained unpaid and thus binding on BPI after the merger.
- BPI asserted that the Silver Certificates had a term of twenty-five months and matured in 1991, that all such certificates were paid at maturity, that presentation or surrender of the CCs was not a condition precedent to payment, and that petitioner’s claim prescribed under Article 1144 of the Civil Code.
- BPI counterclaimed for attorney's fees, appearance fees, litigation expenses, exemplary damages, and costs.
Issues Presented
- Whether the possession of the three custodian certificates alone established that the underlying Silver Certificates of Deposit remained outstanding and unpaid.
- Whether BPI discharged its burden to prove that the alleged debt was extinguished by payment.
- Whether prescrip