G.R. No. 172652 , 175302, 175394. November 26, 2014.
METROPOLITAN BANK AND TRUST COMPANY, BANK OF THE PHILIPPINE ISLANDS, and GLOBAL BUSINESS BANK, INC., Petitioners, vs. WILFRED N. CHIOK, Respondent.

FACTS

Respondent Wilfred N. Chiok, engaged in dollar trading, had a practice of buying dollars from Gonzalo B. Nuguid (also known as Gonzalo Bernardo). On July 5, 1995, pursuant to a Bills Purchase Line Agreement (BPLA), Global Business Bank, Inc. (then Asian Banking Corporation) “bills purchased” a Security Bank & Trust Company Manager’s Check (MC) No. 037364 for ₱25,500,000.00 issued in Chiok’s name and credited it to his account. On the same day, upon Chiok’s instruction, Asian Bank issued two manager’s checks (MC Nos. 025935 and 025939) totaling ₱18,455,350.00 payable to Gonzalo Bernardo, debiting Chiok’s account. Also upon Chiok’s application, Metrobank issued Cashier’s Check (CC) No. 003380 for ₱7,613,000.00 payable to Gonzalo Bernardo, debiting Chiok’s account. The aggregate value of the three checks issued to Nuguid/Bernardo was ₱26,068,350.00. Chiok deposited these checks into Nuguid’s account with Far East Bank & Trust Company (FEBTC, predecessor of BPI). Nuguid failed to deliver the corresponding dollars as agreed. Chiok then requested to stop payment on the checks and was advised to secure a court order. On July 6, 1995, Chiok filed a Complaint for damages with application for a restraining order/preliminary injunction with the RTC of Quezon City against the Nuguid spouses, Asian Bank, and Metrobank. The RTC issued a Temporary Restraining Order (TRO) on July 6, 1995, directing the Nuguid spouses to refrain from presenting the checks for payment and the depositary banks from honoring them. Asian Bank refused to honor its manager’s checks in deference to the TRO. Metrobank initially refused to honor its cashier’s check but eventually acknowledged it, claiming the check was its primary obligation. FEBTC, as collecting bank, allegedly allowed Nuguid to withdraw the proceeds of the Asian Bank manager’s checks on July 5, 1995. The RTC later issued a writ of preliminary prohibitory injunction. Asian Bank pointed out that the SBTC manager’s check it had purchased from Chiok was later dishonored by SBTC due to a stop payment order based on an Affidavit of Loss. FEBTC filed a Complaint-in-Intervention. The RTC rendered a Decision on August 29, 2002, making the injunction permanent and ordering Global Bank and Metrobank to pay Chiok various amounts. The Court of Appeals, in its Decision dated May 5, 2006, modified the RTC decision, holding among others that the checks had not been paid, the TRO was valid, and the banks were liable. The CA denied the banks’ motions for reconsideration. The banks filed petitions for review with the Supreme Court.

ISSUE

The core issue, as consolidated from the petitions, is whether the banks (Metrobank, BPI, and Global Bank) are liable to Chiok for the value of the checks issued to Nuguid/Bernardo, given the underlying transaction’s failure and the TRO issued by the RTC.

RULING

The Supreme Court denied the petitions and affirmed the Court of Appeals Decision with modifications. The Court held that the checks in question (Asian Bank manager’s checks and Metrobank cashier’s check) had not been paid. Payment occurs only when the proceeds are placed at the disposal of the payee or credited to his account. The TRO, issued on July 6, 1995, was valid and binding on the banks. The banks were not justified in disregarding the TRO. Metrobank’s cashier’s check, though a primary obligation of the bank, was still subject to the TRO as the bank had notice before payment was made. Global Bank (Asian Bank) was liable to Chiok for the value of its manager’s checks because, under the BPLA, it had recourse against Chiok for the dishonored SBTC manager’s check, but this did not justify its refusal to obey the TRO concerning its own issued checks. BPI (as successor of FEBTC) was liable as a collecting bank because it allowed the withdrawal of the check proceeds despite the TRO and its knowledge of the dispute, making it liable for conversion. The Court modified the interest rates, applying a 12% per annum rate from the date of filing of the complaint until June 30, 2013, and 6% per annum from July 1, 2013, until full payment. The Court also deleted the award of attorney’s fees for lack of basis.