G.R. No. 170984 & G.R. No. 170987; January 30, 2009
SECURITY BANK AND TRUST COMPANY, Petitioner, vs. RIZAL COMMERCIAL BANKING CORPORATION, Respondent. / RIZAL COMMERCIAL BANKING CORPORATION, Petitioner, vs. SECURITY BANK AND TRUST COMPANY, Respondent.

FACTS

On January 9, 1981, Security Bank and Trust Company (SBTC) issued a manager’s check for ₱8 million, payable to “CASH,” as proceeds of a loan to Guidon Construction and Development Corporation (GCDC). On the same day, Continental Manufacturing Corporation (CMC) deposited this check into its account with Rizal Commercial Banking Corporation (RCBC). RCBC immediately honored the check and allowed CMC to withdraw the amount. On January 12, 1981, GCDC issued a “Stop Payment Order” to SBTC, claiming the check was released to a third party by mistake. Consequently, SBTC dishonored and returned the manager’s check to RCBC. The check was subsequently returned back and forth between the banks. Following clearing house rules, the banks stopped returning the check and, as a temporary arrangement, equally divided and credited the ₱8 million between them. RCBC filed a complaint for damages against SBTC. The Regional Trial Court ruled in favor of RCBC, ordering SBTC to pay ₱4,000,000.00 as actual damages, ₱100,000.00 as attorney’s fees, and costs. The Court of Appeals affirmed with modification, ordering SBTC to pay the ₱4,000,000.00 principal with 6% interest per annum from the filing of the complaint, but deleted the award of attorney’s fees.

ISSUE

1. Is SBTC liable to RCBC for the remaining ₱4 million?
2. Is SBTC liable to pay for lost interest income on the remaining ₱4 million, exemplary damages, and attorney’s fees?

RULING

1. Yes, SBTC is liable for the remaining ₱4 million. The check issued was a manager’s check, which is drawn by a bank’s manager upon the bank itself and is deemed accepted in advance by the act of its issuance, making it a primary obligation of the bank. SBTC cannot escape liability by invoking Central Bank Monetary Board Resolution No. 2202 (prohibiting drawings against uncollected deposits) because a subsequent Central Bank Memorandum dated July 9, 1980, expressly gave banks the discretion to allow immediate drawings on uncollected deposits of manager’s checks. RCBC, in immediately crediting the amount, relied on the check’s integrity, and the check appeared regular on its face. SBTC, as the drawer, admitted the existence of the payee and engaged that the instrument would be paid according to its tenor.
2. Yes, SBTC is liable for lost interest income, exemplary damages, and attorney’s fees. The lost interest income is covered by the compensatory damages in the form of legal interest of 6% per annum awarded by the Court of Appeals. Furthermore, exemplary damages in the amount of ₱50,000.00 are warranted because the banking business is impressed with public interest, requiring the highest degree of diligence; SBTC’s failure to honor its own manager’s check necessitates setting an example for the public good. Pursuant to jurisprudence, with the award of exemplary damages, attorney’s fees in the amount of ₱25,000.00 are also awarded.