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[G.R. No. 141278. March 23, 2004]


BANK and FRANK TAN, respondents.

This is a petition for review on certiorari under Rule 45 of the Rules of

Court, as amended, of the Decision of the Court of Appeals in CA-G.R. CV
No. 49529 which affirmed in toto the Decision of the Regional Trial Court of
Makati City, Branch 38, in Civil Case No. 91-538.


As culled from the records, the appeal at bench stemmed from the
following factual backdrop:
On February 22, 1991, the petitioner filed with the Regional Trial Court of
Makati an action for damages against the respondents Citibank, N.A. and
Associated Bank. The case was docketed as Civil Case No. 91-538. The
complaint materially alleged that, on or about August 25, 1989, the petitioner
purchased from the Citibank Managers Check No. 20-015301 (the check for
brevity) in the amount of P1,545,000 payable to respondent Frank Tan; the
petitioner later received information that the aforesaid managers check was
deposited with the respondent Associated Bank, Rosario Branch, to the
account of a certain Julius Dizon under Savings Account No. 19877; the
clearing and/or payment by the respondents of the check to an improper party
and the absence of any indorsement by the payee thereof, respondent Frank
Tan, is a clear violation of the respondents obligations under the Negotiable
Instruments Law and standard banking practice; considering that the
petitioners intended payee for the check, the respondent Frank Tan, did not
receive the value thereof, the petitioner demanded from the respondents
Citibank and the Associated Bank the payment or reimbursement of the value
of the check; the respondents, however, obstinately refused to heed his
repeated demands for payment and/or reimbursement of the amount of the
check; hence, the petitioner was compelled to file this complaint praying for
the restitution of the amount of the check, and for moral damages and
attorneys fees.

On June 17, 1991, the petitioner, with leave of court, filed an Amended
Complaint impleading Frank Tan as an additional defendant. The petitioner
averred therein that the check was purchased by him as a demand loan to
respondent Frank Tan. Since apparently respondent Frank Tan did not
receive the proceeds of the check, the petitioner might have no right to collect
from respondent Frank Tan and is consequently left with no recourse but to
seek payment or reimbursement from either or both respondents Citibank
and/or Associated Bank.

In its answer to the amended complaint, the respondent Associated Bank

alleged that the petitioner was not the real party-in-interest but respondent
Frank Tan who was the payee of the check. The respondent also maintained
that the check was deposited to the account of respondent Frank Tan, a.k.a.
Julius Dizon, through its Ayala Head Office and was credited to the savings
account of Julius Dizon; the Ayala office confirmed with the Rosario Branch
that the account of Julius Dizon is also in reality that of respondent Frank Tan;
it never committed any violation of its duties and responsibilities as the
proceeds of the check went and was credited to respondent Frank Tan, a.k.a.
Julius Dizon; the petitioners affirmative allegation of non-payment to the
payee is self-serving; as such, the petitioners claim for damages is baseless,
unfounded and without legal basis.

On the other hand, the respondent Citibank, in answer to the amended

complaint, alleged that the payment of the check was made by it in due
course and in the exercise of its regular banking function. Since a managers
check is normally purchased in favor of a third party, the identity of whom in
most cases is unknown to the issuing bank, its only responsibility when paying
the check was to examine the genuineness of the check. It had no way of
ascertaining the genuineness of the signature of the payee respondent Frank
Tan who was a total stranger to it. If at all, the petitioner had a cause of action
only against the respondent Associated Bank which, as depository or
collecting bank, was obliged to make sure that the check in question was
properly endorsed by the payee. It is not expected of the respondent Citibank
to ascertain the genuineness of the indorsement of the payee or even the lack
of indorsement by him, most especially when the check was presented for
payment with the respondent Associated Banks guaranteeing all prior
indorsements or lack thereof.

On March 16, 1992, the trial court declared Frank Tan in default for failure
to file his answer. On June 10, 1992, the pre-trial conference was concluded
without the parties reaching an amicable settlement. Hence, trial on the
merits ensued.


After evaluating the evidence adduced by the parties, the trial court
resolved that the preponderance of evidence supports the claim of the
petitioner as against respondent Frank Tan only but not against respondents
Banks. Hence, on February 21, 1995, the trial court rendered judgment in
favor of the petitioner and against respondent Frank Tan. The complaints
against the respondents Banks were dismissed. The dispositive portion of the
decision reads:
WHEREFORE, judgment is hereby rendered as follows :
1. Ordering defendant Frank Tan to pay plaintiff Michael Osmea the amount of One
Million Five Hundred Forty-Five Thousand (P1,545,000.00) Pesos, Philippine
Currency, with interest thereon at 12% per annum from January 1990, date of extrajudicial demand until the full amount is paid;
2. Dismissing the complaint against defendants Citibank and Associated Bank;
3. Dismissing the counter-claims and the cross-claim of Citibank against Associated
Bank for lack of merit.
With costs against defendant Frank Tan.


The petitioner appealed the decision, while respondent Frank Tan did
not. On November 26, 1999, the appellate court rendered judgment
affirming in toto the decision of the trial court. Aggrieved, the petitioner
assailed the decision in his petition at bar.

The petitioner contends that:


The petition is denied.

The petitioner asserts that the check was payable to the order of
respondent Tan. However, the respondent Associated Bank ordered the
check to be deposited to the account of one Julius Dizon, although the check
was not endorsed by respondent Tan. As Julius Dizon was not a holder of the
check in due course, he could not validly negotiate the check. The latter was

not even a transferee in due course because respondent Tan, the payee, did
not endorse the said check. The position of the respondent Bank is akin to
that of a bank accepting a check for deposit wherein the signature of the
payee or endorsee has been forged.
The contention of the petitioner does not hold water.
The fact of the matter is that the check was endorsed by Julius Dizon
and was deposited and credited to Savings Account No. 19877 with the
respondent Associated Bank. But the evidence on record shows that the said
account was in the name of Frank Tan Guan Leng, which is the Chinese
name of the respondent Frank Tan, who also uses the alias Julius Dizon. As
correctly ruled by the Court of Appeals:
On the other hand, Associated satisfactorily proved that Tan is using and is also
known by his alias of Julius Dizon. He signed the Agreement On Bills
Purchased (Exh. 1) and Continuing Suretyship Agreement (Exh. 2) both
acknowledged on January 16, 1989, where his full name is stated to be FRANK Tan
Guan Leng (aka JULIUS DIZON). Exh. 1 also refers to his Account No.
SA#19877, the very same account to which the P1,545,000.00 from the managers
check was deposited. Osmea countered that such use of an alias is illegal. That is but
an irrelevant casuistry that does not detract from the fact that the payee Tan as Julius
Dizon has encashed and deposited the P1,545,000.00.

The respondent Associated Bank presented preponderant evidence to

support its assertion that respondent Tan, the payee of the check, did receive
the proceeds of the check. It adduced evidence that Julius Dizon and Frank
Tan are one and the same person. Respondent Tan was a regular and
trusted client or depositor of the respondent Associated Bank in its branch at
Rosario, Binondo, Manila. As such, respondent Tan was allowed to maintain
two (2) savings accounts therein. The first is Savings Account No. 20161-3
under his name Frank Tan. The other is Savings Account No. 19877 under
his assumed Filipino name Julius Dizon, to which account the check was
deposited in the instant case. Both witnesses for the respondent Associated
Bank, Oscar Luna (signature verifier) and Luz Lagrimas (new accounts clerk),
testified that respondent Tan was using the alias Julius Dizon, and that both
names referred to one and the same person, as Frank Tan himself regularly
transacted business at the bank under both names. This is also evidenced
by the Agreement on Bills Purchased and the Continuing Suretyship
Agreement executed between Frank Tan and the respondent Associated
Bank on January 16, 1989. Frank Tans name appears in said document as
FRANK TAN GUAN LENG (a.k.a. JULIUS DIZON). The same documentary
evidence also made reference to Savings Account No. 19877, the very same








account to which the check was deposited and the entire P1,545,000 was
credited. Additionally, Citibank Check No. 075713 which was presented by
the petitioner to prove one of the loans previously extended to respondent Tan
showed that the endorsement of respondent Tan at the dorsal side thereof is
strikingly similar to the signatures of Frank Tan appearing in said


By seeking to recover the loan from respondent Tan, the petitioner

admitted that respondent Tan received the amount of the check. This
apprehension was not without any basis at all, for after the petitioner
attempted to communicate with respondent Tan on January or February 1990,
demanding payment for the loan, respondent Tan became elusive of the
petitioner. As a matter of fact, respondent Tan did not file his answer to the
amended complaint and was never seen or heard of by the
petitioner. Besides, if it were really a fact that respondent Tan did not
receive the proceeds of the check, he could himself have initiated the instant
complaint against respondents Banks, or in the remotest possibility, joined the
petitioner in pursuing the instant claim.


The petitioner initially sought to recover from the respondents Banks the
amount of P1,545,000 corresponding to the loan obtained by respondent Tan
from him, obviously because respondent Tan had no intent to pay the
amount. The petitioner alleges that the respondents Banks were negligent in
paying the amount to a certain Julius Dizon, in relation to the pertinent
provisions of the Negotiable Instruments Law, without the proper indorsement
of the payee, Frank Tan. The petitioner cites the ruling of the Court
in Associated Bank v. Court of Appeals, in which we outlined the respective
responsibilities and liabilities of a drawee bank, such as the respondent
Citibank, and a collecting bank, such as the defendant Associated Bank, in
the event that payment of a check to a person not designated as the payee, or
who is not a holder in due course, had been made. However, the ruling of the
Court therein does not apply to the present case for, as has been amply
demonstrated, the petitioner failed to establish that the proceeds of the check
was indeed wrongfully paid by the respondents Banks to a person other than
the intended payee. In addition, the Negotiable Instruments Law was enacted
for the purpose of facilitating, not hindering or hampering transactions in
commercial paper. Thus, the said statute should not be tampered with
haphazardly or lightly. Nor should it be brushed aside in order to meet the
necessities in a single case.


Moreover, the chain of events following the purported delivery of the check
to respondent Tan renders even more dubious the petitioners claim that
respondent Tan had not received the proceeds of the check. Thus, the

petitioner never bothered to find out from the said respondent whether the
latter received the check from his messenger. And if it were to be supposed
that respondent Tan did not receive the check, given that his need for the
money was urgent, it strains credulity that respondent Tan never even made
an effort to get in touch with the petitioner to inform the latter that he did not
receive the check as agreed upon, and to inquire why the check had not been
delivered to him. The petitioner and respondent Tan saw each other during
social gatherings but they never took the chance to discuss details on the loan
or the check. Their actuations are not those to be usually expected of friends
of 15 years who, as the petitioner would want to impress upon this Court,
were transacting business on the basis of confidence. In fact, the first time
that the petitioner attempted to communicate with respondent Tan was on
January or February 1990, almost five or six months after the expected
delivery of the check, for the purpose of demanding payment for the
loan. And it was only on that occasion that respondent Tan, as the petitioner
insinuates, informed him that he (Frank Tan) had not received the proceeds of
the check and refused to pay his loan. All told, the petitioners allegation that
respondent Tan did not receive the proceeds of the check is belied by the
evidence on record and attendant circumstances.




Conversely, the records would disclose that even the petitioner himself
had misgivings about the truthfulness of his allegation that respondent Tan did
not receive the amount of the check. This is made implicit by respondent
Tans being made a party-defendant to the case when the petitioner filed his
amended complaint. In his memorandum in the case below, the petitioner
averred inter alia that:
The amount of P1,545,000.00 is sought to be recovered from:
1. Frank Tan for his failure to pay the loan extended by plaintiff; and
2. Associated Bank and Citibank for having accepted for deposit and/or paid the
Citibank managers check despite the absence of any signature/endorsement by the
named payee, Frank Tan.
The claim of the petitioner that respondent Tans use of an alias is illegal
does not detract a whit from the fact that respondent Tan had been credited
by the respondent Associated Bank for the amount of the check. Respondent
Tan did not appeal the decision of the RTC.
Decision dated November 26, 1999 of the Court of Appeals in CA-G.R. CV
No. 49529 is hereby AFFIRMED. Costs against the petitioner.


G.R. No. 122796

December 10, 2001


CUENCA, respondents.
This petition seeks to annul and set aside the decision1 dated
September 26, 1995, of the Court of Appeals, affirming with
modification the decision of the Regional Trial Court of Manila,
Branch 52, in Civil Case No. 87-40930 for specific performance with
preliminary injunction and Civil Case No. 88-43946 for damages. It
likewise seeks to annul the resolution2 dated November 16, 1995
denying petitioner's motion for reconsideration.
On December 27, 1970, petitioner Petrophil Corporation (Petrophil)
entered into contract with private respondent Dr. Amanda TernidaCruz, allowing the latter to haul and transport any and all packages
and/or bulk products of Petrophil. The contract provided among
others, that Petrophil could terminate the contract for breach,
negligence, discourtesy, improper and/or inadequate performance
or abandonment. Dr. Cruz was also required to reserve the use of at
least two (2) units of tank trucks solely for the hauling requirements
of Petrophil. Paragraph 11 of the contract also stipulated that the
contact shall be for an indefinite period, provided that Petrophil may
terminate said contract at any time with 30 days prior written notice.3

Annexed to the contract was the Penalty Clause which contained

calibrated penal sanctions for infractions that may be committed by
Dr. Cruz and/or her employees.4 Petrophil also required the
formation of a Hearing Committee that will hear the offenses
committed by hauling contractors or their employees, to give an
erring party opportunity to be heard prior to the imposition of any
In a letter dated May 21, 1987, Petrophil, through its Operations
Manager, advised Dr. Cruz that it was terminating her hauling
contract in accordance with paragraph 11 thereof.6 Dr. Cruz
appealed to Petrophil for reconsideration but said appeal was
denied on June 5, 1987.
On June 23, 1987, Dr. Cruz filed with the Regional Trial Court of
Manila, a complaint docketed as Civil Case No. 87-40930, against
Petrophil seeking the nullity of the termination of the contract and
declaring its suspension as unjustified and contrary to its terms and
On March 11, 1988, the other private respondents herein, Jessie de
Vera, Marcial Mulig, Antonio and Rufino Cuenca, all tank truck
drivers of Dr. Cruz, also filed a complaint docketed as Civil Case
No. 88-43946 for damages against Petrophil Operations Manager
Antonio Santos, Pandacan Terminal Manager Crispino A. de
Castro, and Pandacan Terminal Superintendent Jaime Tamayo.8
The two cases were consolidated and jointly tried.
During the hearing, Dr. Cruz testified that she had been in the
gasoline business as dealer, operator and hauling contractor for the
last 26 years. She claimed that the termination of her hauling
contract was a retaliation against her for allegedly sympathizing with
the then striking Petrophil employees and for informing the PNOC
president of anomalies perpetrated by some of its officers and

Driver Jessie de Vera corroborated these allegations and said that

the termination of Dr. Cruz's contract was intended to silence her.
Further, he testified that before the termination of the contract,
Petrophil officials reduced their hauling trips to make life harder for
them so that they would resign from Dr: Cruz's employ, which in
turn would result in the closure of her business.
Petitioner denied that Petrophil officials were out to starve Dr.
Cruz's drivers for their support of her. They professed that the
hauling trips were reduced not because Dr. Cruz was being
punished, but because the company was assigning hauling trips on
the basis of compartmentation and not on a first-come first-serve.
Additionally, witnesses for Petrophil testified that on April 25, 1987,
there was a strike at the Pandacan terminal and Dr. Cruz and her
husband were at the picket line. They refused to load petroleum
products, resulting in the disruption of delivery to service stations in
Metro Manila and in the provinces, which in turn resulted in loss of
sales and revenues. Because of Dr. Cruz's refusal to load, the
management terminated the hauling contract.
The trial court on May 29, 1991 rendered a decision that reads:
WHEREFORE, judgments are rendered as follows:
1. In Civil Case No. 87-40830 (sic), the defendant Petrophil
Corporation is ordered to pay plaintiff Dra. Amanda TernidaCruz the sum of P309,723.65 as unearned hauling charges
and P20,000.00 as attorney's fees and expenses of suit,
without prejudice to indemnification from its officials and
employees responsible for the damage, and making the
preliminary injunction permanent.
2. In Civil Case NO. 88-43949 (sic), ordering the defendants
therein, jointly and severally, to pay each of plaintiffs Jessie de
Vera and Rufino Cuenca the sums of P64,390.00 and
P5,000.00 as unearned income and attorney's fees,

Costs in each case against the respective defendants.

In Civil Cases Nos. 87-40930 and 88-43946, Dr. Cruz alleged that
the trial court erred in not awarding actual damages from loss of
income during the illegal and arbitrary suspension of the hauling
contract. She asked that Petrophil be ordered to pay her the sum of
P309,723.65, representing the unearned hauling charges that
ended in 1990 and until said amount is paid and settled; and to
award compensatory, exemplary, and moral damages.10
On September 26, 1995, the Court of Appeals affirmed with
modification the decision of the trial court. It held:
WHEREFORE, the appealed decision is hereby AFFIRMED,
with the modification that the amount of P309,723.65, awarded
as unearned hauling charges should earn legal interest from
May 29, 1991 until fully paid.
The Court of Appeals sustained the trial court declaring that the
termination of the contract was "for cause", and that the procedures
set forth in petitioner's policy guidelines should be followed.
In this petition for review, Petrophil alleges that the Court of Appeals
erred in rendering a decision that:


On the first assigned error, petitioner contends that the courts' a
quo finding that the contract was terminated "for cause" was a
superfluity because petitioner was after all not contractually bound
to use the mode, "for cause" under par. 7, nor prohibited from using
the other mode, "without cause", under par. 1 l. It could use either.
Petitioner avers these two modes were not mutually exclusive. The
hauling contract did not state that the existence of conditions for the
exercise of one, precluded the exercise of the other. Petitioner says
it chose to terminate the contract under paragraph 11, whose
language was very clear and required no interpretation. Petitioner
insists that Article 1377 of the Civil Code,13 applicable to contracts of
adhesion, does not apply in this case.
Private respondents, on the other hand, claim that the contract did
not envision a situation where the contract can be rescinded or
terminated after the occurrence of ambivalent acts which may
qualify as cause for termination. The contract's vagueness,
according to private respondents, needed an interpretation. Further,
they contend that even granting arguendo that petitioner had all the
right to terminate the contract even "without cause", petitioner would
still be liable to answer for damages under Article 19 of the Civil
Code14 on abuse of right for terminating the contract without reason
but out of sheer whim and caprice.
Two questions must initially be resolved: (1) whether or not the
hauling contract needed interpretation, and (2) whether petitioner
was guilty of arbitrary termination of the contract, which would
entitle Dr. Cruz to damages.
On the first issue, we agree with petitioner that the contract clearly
provided for two ways of terminating the contract, and, one mode
does not exclude the other. Although the contract provided for
causes for termination, it also stated in paragraph 11 that the

contract was for an indefinite term subject to the right of Petrophil to

terminate it any time after a written notice of 30 days. When the
language of a contract is clear, it requires no interpretation.15 Thus,
the finding that the termination of the contract was "for cause", is
immaterial. When petitioner terminated the contract "without cause",
it was required only to give Dr. Cruz a 30-day prior written notice,
which it did in this case.
However, we differ with petitioner on the second issue. Recall that
before Petrophil terminated the contract on May 25, 1987, there was
a strike of its employees at the Pandacan terminal. Dr. Cruz and her
husband were seen at the picket line and were reported to have
instructed their truck drivers not to load petroleum products. At the
resumption of the operation in Pandacan terminal, Dr. Cruz's
contract was suspended for one week and eventually terminated.
Based on these circumstances, the Court of Appeals like the trial
court concluded that Petrophil terminated the contract because of
Dr. Cruz's refusal to load petroleum products during the strike. In
respondent court's view, the termination appeared as a retaliation or
punishment for her sympathizing with the striking employees.
Nowhere in the record do we find that petitioner asked her to
explain her actions. Petrophil simply terminated her contract. These
factual findings are binding and conclusive on us, especially in the
absence of any allegation that said findings are unsupported by the
evidence, or that the appellate and trial courts misapprehended
these facts.16 In terminating the hauling contract of Dr. Cruz without
hearing her side on the factual context above described, a petitioner
opened itself to a charge of bad faith. While Petrophil had the right
to terminate the contract, petitioner could not act purposely to injure
private respondents. In BPI Express Card Corporation vs. CA, 296
SCRA 260, 272 (1998), we held that there is abuse of a right under
Article 19 if the following elements are present: 1) there is a legal
right or duty; 2) which is exercised in bad faith; 3) for the sole
purpose of prejudicing or injuring another. We find all these three
elements present in the instant case. Hence, we are convinced that

the termination by petitioner of the contract with Dr. Cruz calls for
appropriate sanctions by way of damages.
Petitioner likewise contends that the lower court erred when they
applied the procedures set forth in the Policy Statement and
Guidelines17 and penalty clause.18 Petitioner argues that the
offenses in the penalty clause refer to product theft or pilferage or
gross violation of company policies on credit, security and the like,
as required in tank truck deliveries. Dr. Cruz claims, in turn, that
there was no showing that her alleged act was covered by the said
offenses, hence petitioner erred when it imposed the procedure in
her case. However, this is the first time that petitioner raises this
issue. Well-established is the rule that matters not brought out in the
proceedings below but raised for the first time on appeal will
ordinarily not be considered by a reviewing court.19 Given no
compelling reason, we shall not now deviate from this familiar rule.
On the second assigned error, petitioner contends that the Court of
Appeals erred when it imposed a tortious liability where the
requisites therefor were not established by the evidence. According
to petitioner, aside from the hearsay and inadmissible testimony of
Jessie de Vera, there is no other evidence that the termination of
the contract was done with deliberate intent to harm or for the sole
purpose of prejudicing the respondent-drivers. Petitioner adds that
the termination was an exercise of a right and directed primarily at
Dr. Cruz.
Article 20 of the Civil Code provides that every person who, contrary
to law, willfully or negligently causes damage to another, shall
indemnify the latter for the damage done. Petitioner might not have
deliberately intended to injure the respondent-drivers. But as a
consequence of its willful act directed against Dr. Cruz, respondentdrivers lost their jobs and ,consequently suffered loss of income.
Note that under Article 20, there is no requirement that the act must
be directed at a specific person, but it suffices that a person suffers
damage as a consequence of a wrongful act of another in order that
indemnity could be demanded from the wrongdoer.20The appellate

court did not err, given the circumstances of this case, in awarding
damages to respondent-drivers.
WHEREFORE, the petition is DENIED. The decision and resolution
of the Court of Appeals dated September 26, 1995 and November
16, 1995, respectively, are hereby AFFIRMED.
Costs against petitioner.