G.R. No. 138074 - Yang vs. Court of Appeals

Case Summary (G.R. No. 138074)

Facts of the Case

Petitioner Cely Yang and Prem Chandiramani entered into an agreement involving the exchange of manager’s checks and dollar drafts totaling millions of pesos and U.S. dollars. Yang issued two cashier’s checks (Equitable and FEBTC) each worth P2,087,000.00 payable to Fernando David, and a FEBTC dollar draft for US$200,000.00. Chandiramani was to deliver a PCIB manager’s check worth P4.2 million and a Hang Seng Bank dollar draft for the same amount to Yang in exchange.

On December 22, 1987, Chandiramani failed to meet Ranigo (Yang’s messenger) as agreed and allegedly “lost” the checks and draft. However, Chandiramani delivered the cashier’s checks to Fernando David, who gave Chandiramani US$360,000.00 in exchange and deposited the dollar draft into a PCIB foreign currency account. Yang then requested a stop payment order from FEBTC and Equitable for the instruments, which FEBTC later lifted on the dollar draft after representation from PCIB. Yang filed two civil cases seeking to recover the amount of the checks and dollar draft with damages against the banks and individuals involved.

Trial Court Proceedings and Decision

The Regional Trial Court (RTC) of Pasay City dismissed the complaints against the banks (FEBTC, Equitable, PCIB) and ruled in favor of Fernando David as the lawful holder of the proceeds of the two cashier’s checks, as well as the earnings therefrom pendente lite. Yang was ordered to pay David moral damages of P100,000.00 and attorney’s fees of the same amount. The court held that David was a holder in due course of the checks, having taken them in good faith, for value, without notice of any defects or dishonor. The court allowed dismissal of claims against the banks but reserved Yang’s remedy against Chandiramani for reimbursement.

Court of Appeals Ruling

The Court of Appeals (CA) affirmed the RTC decision with modification. It agreed that Fernando David was a holder in due course, emphasizing that he had taken reasonable measures by verifying the genuineness of the checks through his bank before acceptance, had no notice or knowledge of any infirmity, and acted in good faith. The CA also ruled that David’s acquaintanceship with Chandiramani was insufficient evidence of conspiracy to defraud Yang. PCIB was awarded attorney’s fees of P25,000.00 as the claim against it was baseless. The appeal by Yang was denied.

Issues Presented Before the Supreme Court

Whether the checks were issued to Prem Chandiramani by petitioner Cely Yang;
Whether the transaction between Chandiramani and Fernando David was legitimate or a scheme to defraud petitioner;
Whether David gave Chandiramani US$360,000.00 or only a fraction thereof;
Whether David and PCIB were entitled to damages and attorney’s fees.

Supreme Court's Analysis on Holder in Due Course Status

The Court emphasized that a payee such as David is prima facie presumed a holder in due course if he meets the requisites under Section 52 of the Negotiable Instruments Law: the instrument must be complete and regular on its face; acquired before it was overdue and without notice of past dishonor; taken in good faith and for value; and with no notice of any defect in title or instrument.

The Court rejected petitioner’s argument that David failed to inquire into Chandiramani’s title to the checks and that the crossed nature of the checks mandated such inquiry. The Court noted that David, as payee, deposited the checks promptly into his bank account, satisfying the purpose of the crossing. The Court distinguished this case from Bataan Cigar Cigarette Factory, Inc. v. Court of Appeals, where the payee discounted the crossed check in bad faith.

Regarding consideration, the Court relied on the presumption under Section 24 of the Negotiable Instruments Law that all negotiable instruments are issued for value, and noted that petitioner failed to present credible evidence to rebut this presumption. The factual findings of the trial and appellate court that David paid Chandiramani US$360,000.00 for the checks were binding. Additionally, David performed due diligence by verifying the genuineness of the checks through his bank prior to acceptance and had no notice of the stop payment. Thus, he took the ch

Case Syllabus (G.R. No. 138074)

Background and Procedural History

This case concerns a petition for review on certiorari filed before the Supreme Court to challenge the decision of the Court of Appeals dated March 25, 1999, in CA-G.R. CV No. 52398.
The appellate court affirmed with modification a joint decision of the Regional Trial Court (RTC) of Pasay City, Branch 117 dated July 4, 1995, in Civil Cases Nos. 5479 and 5492.
The RTC dismissed the complaint against Far East Bank Trust Company (FEBTC), Equitable Banking Corporation (Equitable), and Philippine Commercial International Bank (PCIB). It ruled in favor of respondent Fernando David regarding the proceeds of two cashier’s checks and their earnings pendente lite.
The RTC ordered petitioner Cely Yang to pay respondent Fernando David moral damages amounting to P100,000.00 and attorney’s fees of P100,000.00.
Petitioner’s complaint initially sought injunction and damages against the banks, Chandiramani, and David for the alleged wrongful encashment and loss of cashier’s checks and a dollar draft.

Factual Background

Petitioner Cely Yang and respondent Prem Chandiramani entered into a financial arrangement on or before December 22, 1987, involving the exchange of manager’s checks and drafts totaling multi-million pesos and US dollars, whereby Chandiramani was to give Yang a PCIB manager’s check worth P4.2 million in exchange for two of Yang’s cashier’s checks, both payable to Fernando David.
The transaction contemplated a difference of P26,000.00 shared as profit between Yang and Chandiramani.
Yang also agreed to secure a US$200,000.00 dollar draft from FEBTC, which Chandiramani was to exchange with another dollar draft from Hang Seng Bank Ltd. of Hong Kong.
On December 22, 1987, Yang procured the cashier’s checks and dollar draft totaling PHP and USD amounts payable to Fernando David and PCIB FCDU account.
Yang entrusted her business associate Albert Liong to have his messenger, Danilo Ranigo, deliver the instruments to Chandiramani at a designated meeting place for exchange.
Chandiramani did not appear at the meeting; Ranigo allegedly lost the checks and draft but later it was revealed Chandiramani actually acquired these instruments without delivering the agreed value instruments.
Subsequently, Chandiramani delivered the two cashier’s checks to respondent Fernando David and received US$360,000.00 from David, which was deposited in FCDU accounts of Chandiramani’s wife and mother.
The FEBTC dollar draft was also deposited in the PCIB FCDU account.
Yang requested stop payments on the instruments with FEBTC and Equitable, both banks complied, but FEBTC later lifted the stop order on the dollar draft following PCIB’s representation.

Legal Claims and Trial Proceedings

Yang filed two lawsuits before the RTC (Civil Cases Nos. 5479 and 5492) for injunction and damages against the banks, Chandiramani, and David seeking recovery of the funds representing the cashier’s checks and dollar draft.
Preliminary injunctions were issued in both cases following the posting of bonds.
Respondent David filed motions to dismiss and for reconsideration of the injunction which were denied; he elevated the matter to the Court of Appeals but the special civil action for certiorari was dismissed.
The two cases were consolidated due to common facts; parties agreed to invest the disputed money in Treasury Bills pending resolution.
The issues were limited to:
1. Who is legally entitled to the proceeds of the two cashier’s checks and interest?
2. Whether FEBTC and PCIB are solidarily liable for permitting encashment of FEBTC dollar draft despite stop payment orders.

Trial Court Findings and Ruling

The RTC held that Fernando David was a holder in due course of the two cashier’s checks and therefore entitled