GR 141968; (February, 2001) (Digest)
G.R. No. 141968. February 12, 2001.
International Corporate Bank (now Union Bank of the Philippines), petitioner, vs. Sps. Francis S. Gueco and Ma. Luz E. Gueco, respondents.
FACTS
Respondent spouses Gueco obtained a car loan from petitioner bank, executing promissory notes and a chattel mortgage. Upon default, the bank filed a sum of money case with replevin. During negotiations, the bank’s representative reduced the outstanding loan balance to P150,000. Dr. Gueco delivered a manager’s check for this amount on August 29, 1995.
The bank, however, refused to release the car, insisting Dr. Gueco sign a Joint Motion to Dismiss the pending case as a precondition. The Gueco spouses refused, contending this was not part of their oral compromise agreement. After failed demands, the spouses sued for damages. The Metropolitan Trial Court dismissed their complaint, but the Regional Trial Court reversed, ordering the car’s return and awarding damages. The Court of Appeals affirmed the RTC decision.
ISSUE
The core issues were: (1) whether the signing of a Joint Motion to Dismiss was a condition of the compromise; (2) the propriety of the awarded damages; and (3) the disposition of the manager’s check and the car.
RULING
The Supreme Court ruled for the petitioner bank on the second and third issues, modifying the lower courts’ decisions. On the first issue, the Court upheld the factual findings of the RTC and CA that the oral compromise agreement did not include the signing of the Joint Motion to Dismiss as a condition. This finding, being factual and affirmed by the CA, is binding. The bank failed to prove this was an agreed term.
However, the Court reversed the award of moral and exemplary damages and attorney’s fees. The bank’s insistence on the motion, based on its standard operating procedure to preclude future claims, did not constitute the fraud, bad faith, or wanton conduct required for such damages. Its stance was a legitimate exercise of its right, though mistaken.
On the third issue, the Court held that the manager’s check, having become stale due to the bank’s own refusal to encash it during the dispute, did not extinguish the obligation. The spouses remained liable for the P150,000. The proper remedy was to order the spouses to pay the bank P150,000 upon the surrender or cancellation of the stale check, after which the bank must return the car. The original compromise agreement on the amount was thus upheld, but the condition for dismissal was correctly excluded.