Eastern Shipping Lines, Inc. v. CA and The First Nationwide Assurance Corp.

FACTS: 13 coils of uncoated 7-wire stress relieved wire strand for prestressed concrete wereshipped on board a vessel owned and operated by Eastern Shipping Lines at Kobe, Japan,for delivery to Stresstek Post-Tensioning Phils., Inc. in Manilawhile en route from Kobe to Manila, the carrying vessel encountered very rough seas and stormy weather; the coils wrapped in burlap cloth and cardboard paper were stored in thelower hold of the hatch of the vessel which was flooded with water; the water entered thehatch when the vessel encountered heavy weather en route to Manila; upon request, asurvey of bad order cargo was conducted at the pier in the presence of the representativesof the consignee and E. Razon, Inc. and it was found that 7 coils were rusty on one sideeach; upon survey conducted at the consignees warehouse it was found that the wettingof the cargo was caused by fresh water that entered the hat ch when the vesselencountered heavy weather; all 13 coils were extremely rusty and totally unsuitable forthe intended purpose The First Nationwide Assurance Corp. indemnified the consignee in the amount of P171,923.00 for damage and loss to the insured cargo

the extraordinary diligence required by Article 1733 of the Civil Code inorder to escape liability for damage or destruction to the goods that it had admittedlycarried in this case. But no evidence was presented; hence, the carrier cannot escapeliability PNB v ca FACTS GR L-26001, 29 October 1968

One Augusto Lim deposited in his current account with PCI Bank (Padre Faura Branch) a GSIS check drawn against PNB. The signatures of the General Manager and Auditor of GSIS were forged. PCIBank stamped at the back of the check All prior indorsements or lack of indorsements guaranteed, PCI Bank. PCIBank sent the check to PNB through the Central Bank. PNB did not return the check to PCIBank; and thus PCIBank credited Lims account. As GSIS has informed PNB that the check was lost two months before said transaction, its account was recredited by PNB upon its demand (due to the forged check). PNB requested for refund with PCI Bank. The latter refused.

ISSUE Who shall bear the loss resulting from the forged check. HELD The collecting bank is not liable as the forgery existing are those of the drawers and not of the indorsers. The indorsement of the intermediate bank does not guarantee the signature of the drawer. PNBs failure to return the check to the collecting bank implied that the check was good. In fact, PNB even honored the check even if GSIS has reported two months earlier that the check was stolen and the bank thus should stop payment. PNBs negligence was the main and proximate cause for the corresponding loss. PNB thus should bear such loss. Upon payment by PNB, as drawee, the check ceased to be a negotiable instrument, and became a mere voucher or proof of payment.

ISSUE:WON Eastern Shipping Lines is liable HELD:Yes. under Art. 1733, common carriers are bound to observe extraordinary vigilance over goods according to all circumstances of each case Art. 1735: In all cases other than those mentioned in Art. 1734, if the goods are lost,destroyed or deteriorated, common carriers are presumed to have been at fault or to haveacted negligently, unless they prove that they observed extraordinary diligence Since the carrier has failed to establish any caso fortuito, the presumption by law of faultor negligence on the part of the carrier applies; and the carrier must present evidence thatit has observed

Sebastian Siga-an, petitioner, vs. Alicia Villanueva, respondent. Facts: Respondent filed a complaint for sum of money against petitioner. Respondent claimed that petitioner approached her inside the PNO and offered to loan her the amount of P540,000.00 of which the loan agreement was not reduced in writing and there was no stipulation as to the payment of interest for the loan. Respondent issued a check worth P500,000.00 to petitioner as partial payment of the loan. She then issued another check in the amount of P200,000.00 to petitioner as payment of the remaining balance of the loan of which the excess amount of P160,000.00 would be applied as interest for the loan. Not satisfied with the amount applied as interest, petitioner pestered her to pay additional interest and threatened to block or disapprove her transactions with the PNO if she would not comply with his demand. Thus, she paid additional amounts in cash and checks as interests for the loan. She asked petitioner for receipt for the payments but was told that it was not necessary as there was mutual trust and confidence between them. According to her computation, the total amount she paid to petitioner for the loan and interest accumulated to P1,200,000.00. The RTC rendered a Decision holding that respondent made an overpayment of her loan obligation to petitioner and that the latter should refund the excess amount to the former. It ratiocinated that respondents obligation was only to pay the loaned amount of P540,000.00, and that the alleged interests due should not be included in the computation of respondents total monetary debt because there was no agreement between them regarding payment of interest. It concluded that since respondent made an excess payment to petitioner in the amount of P660,000.00 through mistake, petitioner should return the said amount to respondent pursuant to the principle of solutio indebiti.

Also, petitioner should pay moral damages for the sleepless nights and wounded feelings experienced by respondent. Further, petitioner should pay exemplary damages by way of example or correction for the public good, plus attorneys fees and costs of suit. Whether or not interest was due to petitioner; and whether the principle of solutio indebiti applies to the case at bar.

Issue: Ruling:

(1)No. Compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan and no interest was due on the loan because there was no written agreement as regards payment of interest. Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. As can be gleaned from the foregoing provision, payment of monetary interest is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of monetary interest. Thus, we have held that collection of interest without any stipulation therefor in writing is prohibited by law. (2) Petitioner cannot be compelled to return the alleged excess amount paid by respondent as interest. Under Article 1960 of the Civil Code, if the borrower of loan pays interest when there has been no stipulation therefor, the provisions of the Civil Code concerning solutio indebiti shall be applied. Article 2154 of the Civil Code explains the principle of solutio indebiti. Said provision provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. In such a case, a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake,

and the person who has no right to receive such payment becomes obligated to return the same. The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. The principle of solutio indebiti applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made through mistake, and not through liberality or some other cause. We have held that the principle of solutio indebiti applies in case of erroneous payment of undue interest. Article 2232 of the Civil Code states that in a quasi-contract, such as solutio indebiti, exemplary damages may be imposed if the defendant acted in an oppressive manner. Petitioner acted oppressively when he pestered respondent to pay interest and threatened to block her transactions with the PNO if she would not pay interest. This forced respondent to pay interest despite lack of agreement thereto. Thus, the award of exemplary damages is appropriate so as to deter petitioner and other lenders from committing similar and other serious wrongdoings.

does not accrue until the notice is given (Gullas v. PNB, G.R. No. L43191, Nov. 13, 1935) Paulino Gullas v. PNB, 1935 Facts: United States Veterans Bureau issued a warrant payable to the order of Francisco Sabectoria Bacos. Paulino Gullas and Pedro Lopez signed as indorsers of this check. Thereupon it was cashed by the Philippine National Bank. Subsequently the treasury warrant was dishonored. The bank sent notices by mail to Mr. Gullas which could not be delivered to him at that time because he was in Manila. The bank then proceeded to apply the outstanding balances of Mr. Gullas current accounts with it to the part payment of the subject check.

Issue: Whether PNB properly set off the account of Gullas with the payment of the indorsed check. Ruling: No. Although PNB had with respect to the deposit of Gullas a right of set off, its remedy was not enforced properly. Notice of dishonor is necessary in order to charge an indorser and that the right of action against him does not accrue until the notice is given. Prior to the mailing of notice of dishonor, and without waiting for any action by Gullas, the bank made use of the money standing in his account to make good for the treasury warrant. The action of the bank was prejudicial to Gullas. As such Gullas

Gullas v pnb Treasury warrants were indorsed by A and B. These were presented for encashment by PNB. Subsequently, these were dishonored by the Insular Treasurer. Because of the dishonor, PNB applied As deposit in the PNB for payment of the warrant. Is the application of the deposit of A properly enforced? No. The general indorser of a negotiable instrument engages that if it be dishonored and the necessary proceedings of dishonor be duly taken, he will pay the amount thereof to the holder. In this connection, it has been held that notice of dishonor is necessary in order to charge an indorser and that the right of action against him

Teofisto Guingona, Jr., Antonio Martin, and Teresita Santos vs. The City Fiscal of Manila, Hon. Jose Flaminiano, Asst. City Fiscal Felizardo Lota and Facts: From March 1979 to March 1981, Clement David made several investments with the National Savings and Loan Association. On March 21, 1981, the bank was placed under receivership by the Bangko Sentral. Upon Davids request, petitioners Guingona and

Martin issued a joint promissory note, absorbing the obligations of the bank. On July 17, 1981, they divided the indebtedness. David filed a complaint for estafa and violation of Central Bank Circular No. 364 and related regulations regarding foreign exchange transactions before the Office of the City Fiscal of Manila. Petitioners filed the herein petition for prohibition and injunction with a prayer for immediate issuance of restraining order and/or writ of preliminary injunction to enjoin the public respondents to proceed with the preliminary investigation on the ground that the petitioners obligation is civil in nature.

Issue:(1) Whether the contract between NSLA and David is a contract of depositor a contract of loan, which answer determines whether the City Fiscal has the jurisdiction to file a case for estafa (2) Whether there was a violation of Central Bank Circular No. 364 Held: When private respondent David invested his money on nine. and savings deposits with the aforesaid bank, the contract that was perfected was a contract of simple loan or mutuum and not a contract of deposit. Hence, the relationship between the private respondent and the Nation Savings and Loan Association is that of creditor and debtor; consequently, the ownership of the amount deposited was transmitted to the Bank upon the perfection of the contract and it can make use of the amount deposited for its banking operations, such as to pay interests on deposits and to pay withdrawals. While the Bank has the obligation to return the amount deposited, it has, however, no obligation to return or deliver the same money that was deposited. And, the failure of the Bank to return the amount deposited will not constitute estafa through misappropriation punishable under Article 315, par. l(b) of the Revised Penal Code, but it will only give rise to civil liability over which the public respondents have no jurisdiction. But even granting that the failure of the bank to pay the time and savings deposits of private respondent David would constitute a violation of paragraph 1(b) of Article 315 of the Revised Penal Code, nevertheless any incipient criminal liability was deemed avoided, because when the aforesaid bank was placed under

receivership by the Central Bank, petitioners Guingona and Martin assumed the obligation of the bank to private respondent David, thereby resulting in the novation of the original contractual obligation arising from deposit into a contract of loan and converting the original trust relation between the bank and private respondent David into an ordinary debtor-creditor relation between the petitioners and private respondent. Consequently, the failure of the bank or petitioners Guingona and Martin to pay the deposits of private respondent would not constitute a breach of trust but would merely be a failure to pay the obligation as a debtor. Moreover, while it is true that novation does not extinguish criminal liability, it may however, prevent the rise of criminal liability as long as it occurs prior to the filing of the criminal information in court. In the case at bar, there is no dispute that petitioners Guingona and Martin executed a promissory note on June 17, 1981 assuming the obligation of the bank to private respondent David; while the criminal complaint for estafa was filed on December 23, 1981 with the Office of the City Fiscal. Hence, it is clear that novation occurred long before the filing of the criminal complaint with the Office of the City Fiscal. Consequently, as aforestated, any incipient criminal liability would be avoided but there will still be a civil liability on the part of petitioners Guingona and Martin to pay the assumed obligation. (2) Petitioner Guingona merely accommodated the request of the Nation Savings and loan Association in order to clear the bank draft through his dollar account because the bank did not have a dollar account. Immediately after the bank draft was cleared, petitioner Guingona authorized Nation Savings and Loan Association to withdraw the same in order to be utilized by the bank for its operations. It is safe to assume that the U.S. dollars were converted first into Philippine pesos before they were accepted and deposited in Nation Savings and Loan Association, because the bank is presumed to have followed the ordinary course of the business which is to accept deposits in Philippine currency only, and that the transaction

was regular and fair, in the absence of a clear and convincing evidence to the contrary. In conclusion, considering that the liability of the petitioners is purely civil in nature and that there is no clear showing that they engaged in foreign exchange transactions, We hold that the public respondents acted without jurisdiction when they investigated the charges against the petitioners. Consequently, public respondents should be restrained from further proceeding with the criminal case for to allow the case to continue, even if the petitioners could have appealed to the Ministry of Justice, would work great injustice to petitioners and would render meaningless the proper administration of justice.

Case Digest in Evidence (Remedial Law): BPI vs. Reyes BANK OF THE PHILIPPINE ISLANDS vs. JESUSA P. REYES and CONRADO B. REYES FACTS: On December 7, 1990, respondent Jesusa Reyes together with her daughter, went to BPI Zapote Branch to open an ATM account. Respondent informed one of petitioners employees, Mr. Capati, that they wanted to open an ATM account for the amount of P200,000.00, P100,000.00 of which shall be withdrawn from her exiting savings account with BPI bank which is account no. 02332433-88 and the other P100,000.00 will be given by her in cash. Capati allegedly made a mistake and prepared a withdrawal slip for P200,00.00 to be withdrawn from her existing savings account with said bank and the respondent believing in good faith that Capati prepared the papers with the correct amount signed the same unaware of the mistakes in figures. Minutes later after the slips were presented to the teller, Capati returned to where the respondent was seating and informed the latter that the withdrawable balance could not accommodate P200,000.00. Respondent explained that she is withdrawing the amount of P100,000.00 only and then changed and correct the figure two (2) into one (1) with her signature super-imposed thereto signifying

the change, afterwhich the amount of P100,000.00 in cash in two bundles containing 100 pieces of P500.00 peso bill were given to Capati with her daughter Joan witnessing the same. Thereafter Capati prepared a deposit slip for P200,000.00 in the name of resondent Jesusa Reyes with the new account no. 0235-0767-48 and brought the same to the teller's booth. After a while, he returned and handed to the respondent her duplicate copy of her deposit to account no. 0235-0767-48 reflecting the amount of P200,000.00 with receipt stamp showing December 7, as the date. Later on, respondent would become aware that her ATM account only contained the amount of P100,000.00 with interest. Hence, she filed an action before the RTC. Petitioner claimed that there was actually no cash involved with the transactions which happened on December 7, 1990 as contained in the banks teller tape. On August 12, 1994, the RTC issued a Decision upholding the versions of respondents. Aggrieved, petitioner appealed to the CA which affirmed the RTC decision with modification

ISSUE:Whether the CA erred in sustaining the RTC's finding that respondent Jesusa made an initial deposit of P200,000.00 in her newly opened Express Teller account on December 7, 1990. HELD: It is a basic rule in evidence that each party to a case must prove his own affirmative allegations by the degree of evidence required by law. In civil cases, the party having the burden of proof must establish his case by preponderance of evidence, or that evidence which is of greater weight or is more convincing than that which is in opposition to it. It does not mean absolute truth; rather, it means that the testimony of one side is more believable than that of the other side, and that the probability of truth is on one side than on the other. For a better perspective on the calibration of the evidence on hand, it must first be stressed that the judge who had heard and seen the witnesses testify was not the same judge who penned the decision.

Thus, not having heard the testimonies himself, the trial judge or the appellate court would not be in a better position than this Court to assess the credibility of witnesses on the basis of their demeanor. Hence, to arrive at the truth, we thoroughly reviewed the transcripts of the witnesses' testimonies and examined the pieces of evidence on record. After a careful and close examination of the records and evidence presented by the parties, we find that respondents failed to successfully prove by preponderance of evidence that respondent Jesusa made an initial deposit of P200,000.00 in her Express Teller account. CENTRAL BANK OF THE PHILIPPINES v. CITYTRUST BANKING CORPORATION 578 SCRA 27 (2009) If the plaintiffs negligence was only contributory, the immediate and proximate cause of the injury being the defendants lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. The Citytrust Banking Corporation (Citytrust) gave Central Bank of the Philippines a list of signatures of five of its officers authorized to sign checks and serve as drawers and indorsers for its account, and also the list of the roving tellers authorized to perform other transactions on its behalf, one of whom was Rounceval Flores (Flores). Flores presented two checks to the Central Banks Senior Teller Iluminada dela Cruz (Dela Cruz) and was subsequently approved. Dela Cruz prepared the cash transfer slip where Flores should sign but instead he sign as one Rosauro C. Cayabyab. This fact was missed by Dela Cruz. It was given to Cash Department and the signatures were examined and later on paid Flores for the checks. After one year and nine months, the Citytrust demanded that the checks be cancelled and the funds taken out be returned because the check was stolen before.

Central Bank did not heed such call. Citytrust filed a complaint to collect the sum of money with damages against Central Bank to the Regional Trial Court (RTC). RTC found both parties negligent and held them equally liable for the loss. Court of Appeals affirmed the decision.

ISSUE: Whether or not Citytrust can collect sum of money as damages from the CentralBank. HELD: The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No. 8791 (R.A. 8791), which took effect on 13 June 2000, declares that the State recognizes the fiduciary nature of banking that requires high standards of integrity and performance. This fiduciary relationship means that the banks obligation to observe high standards of integrity and performance is deemed written into every depositagreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good fatherof a family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligence of a good father of a family. Section 2 of R.A. 8791 prescribes the statutory diligence required from banks that banks must observe high standards of integrity and performance in servicing their depositors. Citytrusts failure to timely examine its account, cancel the checks and notify petitioner of their alleged loss/theft should mitigate petitioners liability, in accordance with Article 2179 of the Civil Code which provides that if the plaintiffs negligence was only contributory, the immediate and proximate cause of the injury being the defendants lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.