Cebu international Finance Corp. v. CA

Facts:

On April 25, 1991, private respondent, Vicente Alegre, invested with CIFC, five hundred thousand (P500,000.00) pesos, in cash. Petitioner issued a promissory note to mature on May 27, 1991. The note for five hundred sixteen thousand, two hundred thirty-eight pesos and sixty-seven centavos (P516,238.67) covered private respondents placement plus interest at twenty and a half (20.5%) percent for thirty-two (32) days.

On May 27, 1991, CIFC issued BPI Check No. 513397 (hereinafter the CHECK) for five hundred fourteen thousand, three hundred ninety pesos and ninety-four centavos (P514,390.94) in favor of the private respondent as proceeds of his matured investment plus interest. The CHECK was drawn from petitioners current account number 0011-0803-59, maintained with the Bank of the Philippine Islands (BPI), main branch at Makati City.

On June 17, 1991, private respondents wife deposited the CHECK with Rizal Commercial Banking Corp. (RCBC), in Puerto Princesa, Palawan. BPI dishonored the CHECK with the annotation, that the Check (is) Subject of an Investigation. BPI took custody of the CHECK pending an investigation of several counterfeit checks drawn against CIFCs aforestated checking account. BPI used the check to trace the perpetrators of the forgery.

Immediately, private respondent notified CIFC of the dishonored CHECK and demanded, on several occasions, that he be paid in cash. CIFC refused the request, and instead instructed private respondent to wait for its ongoing bank reconciliation with BPI. Thereafter, private respondent, through counsel, made a formal demand for the payment of his money market placement. In turn, CIFC promised to replace the CHECK but required an impossible condition that the original must first be surrendered.

On February 25, 1992, private respondent Alegre filed a complaint for recovery of a sum of money against the petitioner with the Regional Trial Court of Makati (RTC-Makati), Branch 132.

On July 13, 1992, CIFC sought to recover its lost funds and formally filed against BPI, a separate civil action for collection of a sum of money with the RTC-Makati, Branch 147. The collection suit alleged that BPI unlawfully deducted from CIFCs checking account, counterfeit checks amounting to one million, seven hundred twenty-four thousand, three hundred sixty-four pesos and fifty-eight centavos (P1,724,364.58). The action included the prayer to collect the amount of the CHECK paid to Vicente Alegre but dishonored by BPI.

Meanwhile, in response to Alegres complaint with RTC-Makati, Branch 132, CIFC filed a motion for leave of court to file a third-party complaint against BPI. BPI was impleaded by CIFC to enforce a right, for contribution and indemnity, with respect to Alegres claim. CIFC asserted that the CHECK it issued in favor of Alegre was genuine, valid and sufficiently funded.

On July 23, 1992, the trial court granted CIFCs motion. However, BPI moved to dismiss the third-party complaint on the ground of pendency of another action with RTC-Makati, Branch 147. Acting on the motion, the trial court dismissed the third-party complaint on November 4, 1992, after finding that the third party complaint filed by CIFC against BPI is similar to its ancillary claim against the bank, filed with RTC-Makati Branch 147.

Thereafter, during the hearing by RTC-Makati, Branch 132, held on May 27, and June 22, 1993, Vito Arieta, Bank Manager of BPI, testified that the bank, indeed, dishonored the CHECK, retained the original copy and forwarded only a certified true copy to RCBC. When Arieta was recalled on July 20, 1993, he testified that on July 16, 1993, BPI encashed and deducted the said amount from the account of CIFC, but the proceeds, as well as the CHECK remained in BPIs custody. The banks move was in accordance with the Compromise Agreement it entered with CIFC to end the litigation in RTC-Makati, Branch 147.

Issue:

Whether of not the Article 1249 of the New Civil Code applies in the present case

Held:

 Petitioner contends that the provisions of the Negotiable Instruments Law (NIL) are the pertinent laws to govern its money market transaction with private respondent, and not paragraph 2 of Article 1249 of the Civil Code. Petitioner stresses that it had already been discharged from the liability of paying the value of the CHECK due to the following circumstances:

1) There was ACCEPTANCE of the subject check by BPI, the drawee bank, as defined under the Negotiable Instruments Law, and therefore, BPI, the drawee bank, became primarily liable for the payment of the check, and consequently, the drawer, herein petitioner, was discharged from its liability thereon;

2) Moreover, BPI, the drawee bank, has not validly DISHONORED the subject check; and,

3) The act of BPI, the drawee bank of debiting/deducting the value of the check from petitioners account amounted to and/or constituted a discharge of the drawers (petitioners) liability under the instrument/subject check.

Petitioner cites Section 137 of the Negotiable Instruments Law, which states:

Liability of drawee retaining or destroying bill - Where a drawee to whom a bill is delivered for acceptance destroys the same, or refuses within twenty-four hours after such delivery or such other period as the holder may allow, to return the bill accepted or non-accepted to the Holder, he will be deemed to have accepted the same.

Article 1249 of the New Civil Code deals with a mode of extinction of an obligation and expressly provides for the medium in the payment of debts. It provides that:

The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency, which is legal tender in the Philippines.

The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.

As held in Perez vs. Court of Appeals,a money market is a market dealing in standardized short-term credit instruments (involving large amounts) where lenders and borrowers do not deal directly with each other but through a middle man or dealer in open market. In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer.

In the case at bar, the money market transaction between the petitioner and the private respondent is in the nature of a loan. In a loan transaction, the obligation to pay a sum certain in money may be paid in money, which is the legal tender or, by the use of a check. A check is not a legal tender, and therefore cannot constitute valid tender of payment. In the case of Philippine Airlines, Inc. vs. Court of Appeals, this Court held: Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. A check, whether a managers check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor.