GR 176697; (September, 2014) (Digest)
G.R. No. 176697 ; September 10, 2014
CESAR V. AREZA and LOLITA B. AREZA, Petitioners, vs. EXPRESS SAVINGS BANK, INC. and MICHAEL POTENCIANO, Respondents.
FACTS
Petitioners Cesar V. Areza and Lolita B. Areza maintained savings accounts with respondent Express Savings Bank’s Biñan branch. They were engaged in the buy and sell of motor vehicles. On May 2, 2000, a buyer, Gerry Mambuay, paid them with nine PVAO checks, each valued at ₱200,000.00 (altered from an original amount of ₱4,000.00), for a total of ₱1,800,000.00. Petitioners deposited these checks on May 3, 2000. Respondent Michael Potenciano, the branch manager, was involved in the transaction, either by offering the Bank’s services (according to petitioners) or by accommodating valued clients (according to Potenciano). The checks were cleared and the amount was credited to petitioners’ account on May 6, 2000, after which petitioners released the vehicles.
In July 2000, the checks were returned by PVAO to the drawee bank (Philippine Veterans Bank) on the ground of material alteration. The drawee dishonored the checks and returned them through the clearing chain. By August 2000, the Bank was informed of the dishonor. Equitable-PCI Bank (the Bank’s depositary bank) eventually debited the Bank’s account for ₱1,800,000.00 in February 2001. The Bank claimed it informed petitioners in August 2000; petitioners denied this.
On March 9, 2001, a check issued by petitioners for ₱500,000.00 was dishonored by the Bank with the reason “Deposit Under Hold.” The Bank subsequently closed petitioners’ special savings account, transferred its balance to their savings account, and withdrew ₱1,800,000.00 from the savings account. Petitioners filed a Complaint for Sum of Money with Damages.
The Regional Trial Court (RTC) initially ruled in favor of petitioners, ordering respondents to pay ₱1,800,000.00 (unlawfully withdrawn amount), moral damages, and attorney’s fees. Upon respondents’ motion for reconsideration, the RTC (through a pairing judge) reversed itself, dismissed the complaint, and awarded damages to respondents. The Court of Appeals affirmed the dismissal but deleted the award of damages to respondents, holding that the Bank had the right to debit the account due to legal compensation, but petitioners did not act in bad faith.
ISSUE
1. Whether the Court of Appeals erred in upholding the legality of the Motion for Reconsideration filed in alleged violation of procedural rules (notice of hearing).
2. Whether the Court of Appeals erred in declaring that the respondents had the right to debit ₱1,800,000.00 from petitioners’ accounts and that the debit was done with petitioners’ knowledge.
RULING
1. On the Procedural Issue: The Supreme Court found no reversible error. The rule requiring the notice of hearing to be addressed to all parties was substantially complied with when a copy of the motion was furnished to petitioners’ counsel and the trial court acted on the notice by issuing an order setting the hearing. The alleged defect did not prejudice petitioners’ substantive rights.
2. On the Substantive Issue: The Supreme Court ruled in favor of the respondents, affirming the Court of Appeals. The relationship between a bank and a savings account depositor is that of debtor and creditor, governed by the provisions on simple loan (Civil Code, Article 1980). When petitioners deposited the checks, the Bank credited the amount to their account, making the Bank a debtor for that amount. However, when the checks were later dishonored due to material alteration, the petitioners, as indorsers, warranted the genuineness of the checks. The Bank, having paid the checks upon presentment, had the right to charge back against the petitioners’ account the amount of the dishonored checks. This right of charge-back is recognized under banking laws and the principle of legal compensation (set-off). The Bank’s act of debiting the account was a valid exercise of this right. The Court also noted that the 24-hour clearing rule was not applicable as the checks were dishonored for material alteration, a ground for return beyond the 24-hour period. The award of damages to petitioners was correctly deleted.