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INTERNATIONAL CORPORATE BANK v. SPS. FRANCIS S. GUECO

FACTS:

The Gueco Spouses obtained a loan from petitioner International Corporate Bank to purchase a car. They executed promissory notes and a chattel mortgage over the car as security for the loan. They later defaulted on their payment of installments, leading the Bank to file a civil action for the collection of the unpaid balance. The Bank demanded payment from Dr. Gueco, but the car was detained inside the bank's compound when he failed to pay. Dr. Gueco negotiated further with the Bank and the outstanding loan was reduced. However, the Bank insisted that Dr. Gueco sign a joint motion to dismiss as a condition for the compromise agreement, which he refused to do. The Gueco spouses then initiated a civil action for damages, which the Metropolitan Trial Court dismissed but was reversed by the Regional Trial Court. The RTC ordered the Bank to return the car to the Gueco spouses, pay them damages and attorney's fees, and affirmed the Metropolitan Trial Court's decision in all other respects. The Bank appealed to the Court of Appeals, but the decision of the RTC was affirmed. The Bank now comes to the Supreme Court raising several assigned errors.

ISSUES:

  1. Whether the signing of the joint motion to dismiss was a condition for the reduction of the petitioner's obligation.

  2. Whether the petitioner bank acted fraudulently or in bad faith.

  3. Whether the petitioner is liable for damages.

  4. Whether the manager's check became stale due to non-presentment.

  5. Whether the bank was negligent in refusing to encash the manager's check.

  6. Whether or not the inclusion of the phrase "under existing laws" in the 1987 Constitution, Article XIV, Section 6(1) prevents the grant of exemptions to religious instruction in public schools.

RULING:

  1. The signing of the joint motion to dismiss was not a condition for the reduction of the petitioner's obligation.

  2. The petitioner bank did not act fraudulently or in bad faith.

  3. The petitioner is not liable for damages.

  4. The manager's check did not become stale due to non-presentment. A manager's check is similar to a cashier's check, and the mere issuance of it is considered an acceptance and an acknowledgment of liability. Failure to present for payment within a reasonable time will result in the discharge of the drawer only to the extent of the loss caused by the delay. In this case, there is no evidence that the delay or non-presentment caused any damage or loss to the bank or the issuers of the manager's check.

  5. The bank was not negligent in refusing to encash the manager's check. The bank held on to the check and refused to encash it because of the controversy surrounding the signing of the joint motion to dismiss. There was no bad faith or negligence on the part of the bank in taking this position.

  6. The Supreme Court ruled in favor of the Catholic Bishops' Conference of the Philippines (CBCP) and held that the phrase "under existing laws" does not prevent the grant of exemptions to religious instruction in public schools.

PRINCIPLES:

  • Fraud under Article 1170 of the Civil Code of the Philippines is the deliberate and intentional evasion of the normal fulfillment of obligation.

  • In cases of breach of contract, moral damages may only be awarded when the breach was attended by fraud or bad faith.

  • The law presumes good faith, and the burden of proving bad faith lies with the party alleging it.

  • A check must be presented for payment within a reasonable time after its issue.

  • The test for determining what is a "reasonable time" is whether the payee employed such diligence as a prudent man exercises in his own affairs.

  • A manager's check is similar to a cashier's check, and the mere issuance of it is considered an acceptance and an acknowledgment of liability. Failure to present for payment within a reasonable time will result in the discharge of the drawer only to the extent of the loss caused by the delay.

  • The interpretation of the Constitution should be based on the intention of the framers and the purpose of the provision.

  • The phrase "under existing laws" does not necessarily indicate a prohibition against granting exemptions to religious instruction in public schools.

  • The 1987 Constitution upholds the right of parents to ensure the religious upbringing of their children in accordance with their own beliefs.